Overstock.com, Inc. announced the sale of a $5 million digital security in the form of a cryptobond to FNY Managed Accounts LLC (“First New York”), an affiliate of FNY Capital. The sale is intended to serve as an additional proof-of-concept of the safety and efficiency of exchanging financial instruments via a cryptographically secured, public ledger.
“In recent months the financial industry has been coming to understand the power of digital securities based on cryptotechnology and how this is going to change their world,” said Overstock CEO Patrick M. Byrne. “We welcome First New York, salute the vision of the company’s leadership, and anticipate that this could be the start of a beautiful relationship between our firms.”
Donald Motschwiller, CEO of First New York, commented, “Our investment in this $5 million cryptobond reflects our commitment to be at the forefront when it comes to adopting new technologies.”
This strategic transaction uniquely positions First New York’s proprietary front end, HYDRATrade, and Overstock’s tØ.com cryptosecurities trading platform to offer the first fully integrated CryptoTrading software suite.
In June, Byrne made history when he purchased a $500,000 TIGRcub digital bond the company issued through Entrex.net – the first such transaction in history. Digital securities are different from traditional securities in that they trade exclusively on a cryptographically protected, public and transparent ledger, using the same technology that powers the bitcoin digital currency.
The $5 million cryptobond Overstock has sold to First New York bears interest at 7 percent per annum over a five-year term. The cryptodebt is unsecured and has no covenants, however, it has both put and call provisions pursuant to which Overstock expects it and First New York may unwind the bond in the fourth quarter of 2015 or sooner.
In addition, simultaneous with the issue of this bond, Overstock is making a $5 million loan to First New York at 3 percent per annum with similar put and call terms and with cross default provisions against the bond, thus transferring the economic risk associated with any failure of this technology back upon Overstock. While Overstock may issue identical cryptobonds to other qualified institutional investors, it does not intend to make any similar loans to any future purchasers of any of its cryptodebt.
Byrne added, “On the evening of August 4 we are holding a launch party at NASDAQ headquarters to expose to the world the great strides we are making in our efforts to adapt cryptotechnology to the needs of Wall Street, of which this bond is but one example.”
The offering of the digital cryptodebt is being made exclusively to qualified institutional buyers that meet the definition of “accredited investor” and a limited number of other accredited investors in compliance with Rule 506(c) of Regulation D under the Securities Act of 1933, as amended and therefore are not required to comply with certain specific disclosure requirements. The Securities and Exchange Commission has not passed upon the merits of or approved the digital cryptodebt or the terms of the offering.
This press release shall not constitute an offer to sell or a solicitation of an offer to buy the securities described herein