Is this Kraken e-mail for real?

[The Sceptical Chymist]

I just received this e-mail from Kraken:

We have partnered with Bnk to the Future to create a rare, but limited opportunity for both large and small investors to own shares of Kraken stock. On May 20th, Bnk to the Future will offer preferred shares of Kraken stock to registered users on their platform. Preferred shares of Kraken stock can be purchased until June 20th, with a minimum investment of only $1,000.

Interested clients should register an account (If you do not have one already) with Bnk to the Future at https://bnktothefuture.com. If you already have an account with Bnk to the Future, please visit the offering page at: https://bnktothefuture.com/pitches/kraken/landing. Once registered, the Bnk to the Future platform will guide you through the investment process, including steps for compliance verification and accreditation. Any questions on the registration process can be answered at https://bnktothefuture.com/support.

We will continue to look for ways to democratize access to our equity, allowing more of our valued clients to become valued investors.

Thank you for choosing Kraken, the most trusted and secure digital asset exchange.

The Kraken Team

My initial though about this was "What the hell does Kraken need to raise funds for?".  And though I haven't visited any of the links provided, my understanding of preferred shares in a company is that they function more as a debt instrument than an equity one, which would make the bolded part in the above quote misleading.  I could certainly be wrong about that.

I haven't read anything about this in the Exchanges section, so that's why I started this topic.  If this is a legitimate e-mail and preferred stock offering, they're obviously raising money.  Are they in need of cash?  Are they in trouble financially?  I'm curious as to whether anyone knows what's going on here.

By the way, I can't stand Kraken as an exchange and don't use them anymore.  They offer no advantages over Binance and I think their website's functionality just sucks.

[figmentofmyass]

it appears to be legit---insofar as any bnktothefuture pitch is. oddly, i couldn't find any news about this in a google search.

they did announce major fundraising plans a few months ago, but this isn't what i had in mind: https://www.coindesk.com/kraken-is-seeking-war-chest-investment-at-a-4-billion-valuation

they raised $100 million in funding in february according to this: http://fortune.com/2019/02/04/kraken-crypto-facilities-jesse-powell/

i'm a bit surprised to see them turning to bnktothefuture for a $10m round. it seems pretty small potatoes. perhaps they are feeling pressured by this bull run to quickly expand and position themselves for the next bubble and their private rounds fell short of expectations?

[vit05]

I also received this email. I searched for information about this BnK and found little information about it. I found the website very strange, it does not seem to be the site of a serious company that moves millions.

But the proposal is quite interesting, I like Kraken and I believe it has enormous potential. And it's official according to Kraken's twitter.
https://twitter.com/krakenfx/status/1130615119216558081

https://bnktothefuture.com/pitches/kraken
https://www.crunchbase.com/organization/bnktothefuture

[PrimeNumber7]

Its real. In order to invest, you need to either have $1 million in net assets, excluding your primary residence, OR have income exceeding $250k for two consecutive years.

BnkToTheFuture has helped various crypto related companies raise money in recent years, including ShapeShift, Bitstamp and bitfinex, and others.

I have no idea why they are raising money. You need to sign a NDA (non-disclosure agreement) if you want to view the "pitch" on the BTTF platform. It has been speculated Kraken was using Crypto Capital, the same payment processor that Bitfinex entrusted with $850 million, and is unable to access, but I have no idea if this is true or not.

[illyiller]

I have no idea why they are raising money. You need to sign a NDA (non-disclosure agreement) if you want to view the "pitch" on the BTTF platform. It has been speculated Kraken was using Crypto Capital, the same payment processor that Bitfinex entrusted with $850 million, and is unable to access, but I have no idea if this is true or not.

Wow, that never even occurred to me. It sounds plausible. Kraken began their fundraising push around December last year, several months after those funds were apparently seized.

[PrimeNumber7]

I have no idea why they are raising money. You need to sign a NDA (non-disclosure agreement) if you want to view the "pitch" on the BTTF platform. It has been speculated Kraken was using Crypto Capital, the same payment processor that Bitfinex entrusted with $850 million, and is unable to access, but I have no idea if this is true or not.

Wow, that never even occurred to me. It sounds plausible. Kraken began their fundraising push around December last year, several months after those funds were apparently seized.

Kraken will almost certainly raise their fundraising goal based on the way things are looking.

If they are trying to plug a hole caused by crypto Capital, they will be able to do so, assuming the hole is only the $10 million they are trying to raise. Bitfinex was able to raise ~100x as much money as kraken is trying to raise.

[magneto]

My initial though about this was "What the hell does Kraken need to raise funds for?".  And though I haven't visited any of the links provided, my understanding of preferred shares in a company is that they function more as a debt instrument than an equity one, which would make the bolded part in the above quote misleading.  I could certainly be wrong about that.

My understanding of what preferred stocks are are similar to yours. As far as I know they are quite similar to bonds, given that investors will have assets liquidated for them first over normal stocks if Kraken does go bankrupt, from a legal standpoint.

I don't really understand then the notion of democratising access to their equity, given that this isn't really common stock. Perhaps there is a twist on their instrument that would make it similar to owning equity in their company, but who knows.

At this stage I think there shouldn't be any concerns as to their state financially, but their motives for raising these funds should be questioned.

[o_e_l_e_o]

I've never used Kraken, so someone correct me if I'm wrong here, but I was under the impression that CAVirtex sold shares in their exchange many years ago, Kraken bought out and absorbed CAVirtex, and all these shareholders have seen nothing in return for their investment. Are a company even legally allowed to release new shares when they are not honoring their old ones?

[The Sceptical Chymist]

My understanding of what preferred stocks are are similar to yours. As far as I know they are quite similar to bonds, given that investors will have assets liquidated for them first over normal stocks if Kraken does go bankrupt, from a legal standpoint.

Another thing I thought of as far as that goes is that preferred stock owners don't have voting rights at shareholder meetings--again, I could be mistaken, because I've only ever owned common stocks and not preferred.  I did take a corporate finance course in college about 10 years ago, but everything I learned in it has gotten quite fuzzy with the passage of time.  lol

I don't really understand then the notion of democratising access to their equity, given that this isn't really common stock. Perhaps there is a twist on their instrument that would make it similar to owning equity in their company, but who knows.

Yeah, it isn't like they're listed on any stock exchange but "preferred stock" has a very specific legal definition which I would think Kraken wouldn't twist to mean whatever they want it to mean.

At this stage I think there shouldn't be any concerns as to their state financially, but their motives for raising these funds should be questioned.

I don't know much about Kraken (again, I think they suck), but they could be trying to expand much the way Coinbase is with their attempt to buy Xapo.  That's usually why companies offer stock in the first place.  It sure would be nice if crypto exchanges would be more transparent--and obviously I'm not just talking about Kraken.  Most of these exchanges are opaque to the point of being straight-up sketchy.

[PrimeNumber7]

I've never used Kraken, so someone correct me if I'm wrong here, but I was under the impression that CAVirtex sold shares in their exchange many years ago, Kraken bought out and absorbed CAVirtex, and all these shareholders have seen nothing in return for their investment. Are a company even legally allowed to release new shares when they are not honoring their old ones?

Companies are not required to pay out any dividends even if they are profitable. Most companies will reinvest the majority of their earnings back into their business.

Companies can also issue an unlimited number of shares as long as they are authorized by the company’s bylaws. Bylawys can be changed in accordance with the bylaws, usually requiring a majority shareholder vote.

If there is a willing buyer, any shareholder can sell their shares, subject to any agreement they agreed to with the company or anyone else.

[figmentofmyass]

Wow, that never even occurred to me. It sounds plausible. Kraken began their fundraising push around December last year, several months after those funds were apparently seized.

Kraken will almost certainly raise their fundraising goal based on the way things are looking.

If they are trying to plug a hole caused by crypto Capital, they will be able to do so, assuming the hole is only the $10 million they are trying to raise. Bitfinex was able to raise ~100x as much money as kraken is trying to raise.

they raised at least $100m earlier this year from a private investment round. that's why i was surprised they were turning to bnktothefuture for such a small amount.

i guess it makes perfect sense if they just need a bit more to cover the shortfall from crypto capital.

[vit05]

Up to 5x margin & 50x futures trading

Is there any possibility of this need for funds being aimed at a greater supply of assets being offered with greater leverage? Perhaps aiming to compete with BitMex? Binance is also looking to offer a number of products of this type, and for that, they plans to create a new fund. Or is any fund raising at the moment, through exchanges, solely because they do not have sufficient liquidity?

[figmentofmyass]

Up to 5x margin & 50x futures trading

Is there any possibility of this need for funds being aimed at a greater supply of assets being offered with greater leverage? Perhaps aiming to compete with BitMex?

it's possible. a few months ago when they acquired crypto facilities (UK derivatives platform), jesse powell said "the objective we have is to build the most liquid futures exchange".

that's quite a tall order when looking at crypto facilities vs bitmex, and also considering kraken's past lapses with trading engine and order matching functionality. but apparently they do have serious plans to compete in the crypto derivatives space---perhaps because transmitting fiat currencies is becoming increasingly onerous and difficult.

[o_e_l_e_o]

-snip-

I appreciate all that, but the issue is that the CAVirtex shares essentially disappeared when the company was bought by Kraken. The shareholders received no compensation, but also no longer hold any shares. There are numerous posts over the years in this forum and on reddit about people who once held shares complaining to Kraken and being ignored or told the issue is "being looked in to" or something similar for months or years on end.

[PrimeNumber7]

-snip-

I appreciate all that, but the issue is that the CAVirtex shares essentially disappeared when the company was bought by Kraken. The shareholders received no compensation, but also no longer hold any shares. There are numerous posts over the years in this forum and on reddit about people who once held shares complaining to Kraken and being ignored or told the issue is "being looked in to" or something similar for months or years on end.

Those in my IRL circles that I spoke with are not familiar with the specifics of what happened with CAVirtex, and haven't interacted with them when they were a stand alone company.

I did some research, and my conclusion is CAVirtex was having some financial problems prior to being bought out by Kraken. CAVirtex used to be listed on Havlock, and I have been told that was truely the wild west, and you would not have the same type of investor protections you would today find on various VC platforms such as Second Market and others. If CAVirtex was in very bad financial shape, or even insolvent, the amount paid to equity shareholders could have been very low or even nominal. I was able to find a few reddit threads of someone claiming to be a CAVirtex shareholder on Havelock wanting to file a class action lawsuit, but I am unsure if there would be any merit to such a suit without knowing the specifics. I wasn't able to find the financial details about the terms of the acquisition, but I would conclude based on my research, that includes some speculation that CAVirtex shareholders that held the specific type of shares listed on Havelock did not receive anything as part of the acquisition.

[o_e_l_e_o]

-snip-

Interesting info. I've also been looking in to it a bit more, and found this reddit post from the CEO of Kraken: https://www.reddit.com/r/Bitcoin/comments/41vhzz/im_jesse_powell_cofounder_ceo_at_kraken_ama/cz60can.

It seems like he accepts that these users should have received something in return for the shares, whilst also pointing out the shares were sub par when compared to a proper VC round (as you said). However, he does then say he will reach out to shareholders in the future (that post was 3 years ago), and that doesn't seem to have been done.

Although likely perfectly legal, it seems a bit disingenuous to me to be selling fresh shares without sorting out the issues regarding these older ones first.

[figmentofmyass]

Wow, that never even occurred to me. It sounds plausible. Kraken began their fundraising push around December last year, several months after those funds were apparently seized.

Kraken will almost certainly raise their fundraising goal based on the way things are looking.

If they are trying to plug a hole caused by crypto Capital, they will be able to do so, assuming the hole is only the $10 million they are trying to raise. Bitfinex was able to raise ~100x as much money as kraken is trying to raise.

quick update on this---kraken claims they have not used crypto capital for "many years now" and thus were unaffected by the seizure. i guess the inability to service international USD wires for the past several months is just a coincidence.

Hi there!

Please note, Kraken has not used the services of Crypto Capital for many years now, so we are completely unaffected by anything involving their service.

We are currently working on bringing a new international USD funding service to our platform, hopefully we will have this available for our clients very soon!

[bitmover]

They offer no advantages over Binance and I think their website's functionality just sucks.

How come no advantages over binance? You can deposit/withdrawal fiat there (EUR). In binance the closest thing to fiat is USDT.
Most of the times I dont need to deal with fiat, but sometimes it is necessary to have an exchange like that.

[PrimeNumber7]

Wow, that never even occurred to me. It sounds plausible. Kraken began their fundraising push around December last year, several months after those funds were apparently seized.

Kraken will almost certainly raise their fundraising goal based on the way things are looking.

If they are trying to plug a hole caused by crypto Capital, they will be able to do so, assuming the hole is only the $10 million they are trying to raise. Bitfinex was able to raise ~100x as much money as kraken is trying to raise.

quick update on this---kraken claims they have not used crypto capital for "many years now" and thus were unaffected by the seizure. i guess the inability to service international USD wires for the past several months is just a coincidence.

Hi there!

Please note, Kraken has not used the services of Crypto Capital for many years now, so we are completely unaffected by anything involving their service.

We are currently working on bringing a new international USD funding service to our platform, hopefully we will have this available for our clients very soon!

Thats good to know.

I am curious how they receive and send deposits/withdraws of fiat, and hope other major exchanges can implement similar solutions.

I read they have said they are raising money to increase customer loyalty, that is they are hoping someone who invests in their stock would use their platform for a larger percentage of their trades.

-snip-

Interesting info. I've also been looking in to it a bit more, and found this reddit post from the CEO of Kraken: https://www.reddit.com/r/Bitcoin/comments/41vhzz/im_jesse_powell_cofounder_ceo_at_kraken_ama/cz60can.

It seems like he accepts that these users should have received something in return for the shares, whilst also pointing out the shares were sub par when compared to a proper VC round (as you said). However, he does then say he will reach out to shareholders in the future (that post was 3 years ago), and that doesn't seem to have been done.

Although likely perfectly legal, it seems a bit disingenuous to me to be selling fresh shares without sorting out the issues regarding these older ones first.

I don't know that any resolution would have made the news, and I don't think it would have if Kraken paid a small amount for what amounts to worthless shares.

My presumption is Kraken has a small team of lawyers who advise management on various legal issues. I cannot imagine the acquisition would have closed without a resolution that was legal and did not expose Kraken to liability. It is possible the resolution was not acceptable to some shareholders, but I do not know this would have created any valid claim against Kraken.

When multiple companies merge, or when one company buys another, it is difficult to know the financial details if you are not involved in the transaction because there is no required public disclosure. If you are interested in knowing what happened, and are an accredited investor, you can register on BTTF and ask the question. They make you sign a NDA, so I don't think you could report back. I don't plan to invest, and am not affiliated with BTTF or Kraken.

[o_e_l_e_o]

I don't know that any resolution would have made the news, and I don't think it would have if Kraken paid a small amount for what amounts to worthless shares.

True, but there are still posts being made from CAVirtex shareholders saying they haven't been compensated or even contacted by Kraken, despite assurances that both these things were going to happen. It seems as if Kraken are just hoping that over time most people will lose interest in chasing them up or forget about the whole thing. That just doesn't sit right with me, especially for them to then start offering more shares.