[GLBSE] BDK.BND (1%/week) *IN DEFAULT*

[Kluge]

As an update for investors,

GLBSE has limited BDK.BND and BDK. Dividends will still be paid. However, I am unable to raise any more capital. As such, no new BDK.BND units will be issued until the situation is resolved.

Please let GLBSE & I work this out and do not over-react.

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[Kluge]

BDK.BND will be listed on Hermes within a couple weeks. I will be making a full announcement on Hermes, soon.

Relevant: https://bitcointalk.org/index.php?topic=77343.msg928697#msg928697

[Kluge]

UPDATE: BDK & BDK.BND have been "limited" by GLBSE staff because we planned on launching a competing service in 2-3 months. Since we are no longer able to fund-raise on GLBSE, the June offering is partially canceled in that I can no longer post an open-market order. Those who reserved shares are welcome to either honor their reservation and have shares issued on Hermes, knowing Hermes will likely not have trade functionality for 2-3 weeks, or you can cancel your reservation. I am not accepting new reservations. As well, an alpha version of Hermes will be released within a few days, which all GLBSE-"limited" securities will be transferring to. This includes Zip.A, REBATE, BDK, and BDK.BND.

Dividends will still be paid to GLBSE security-holders. In roughly a month, I will need everyone to verify their holdings with me by sending their BDK or BDK.BND shares to me, which I'll keep, but then re-issue the same amount of shares to the person on Hermes. At that point, dividends will be paid exclusively on Hermes. There will be a few weeks notice before this happens. Please ask if you need any updates, clarifications, or have questions. I'm talking to ten people at a time, and forgetting what information I've given and what information I still need to give publicly. Sorry, and thanks for bearing with me.

Please read through the thread here if you need more info (feel free to skip the MPEx stuff):

https://bitcointalk.org/index.php?topic=77343.msg928697#msg928697

[nimda]

There goes all of the value (highest bid is .08) of what I thought to be my most stable asset
So to get this straight, you will stop paying dividends on GLBSE, and we will not continue to receive them unless we go through the manual transfer to Hermes?
If so, I believe that's a violation of the contract. I'm specifically interested in the last part:

"Contract Changes" -- The bond-issuer is not permitted to change this contract at any time under any circumstance. To "change the contract," a buyback must be placed...

But it sounds like you are not going to place a buyback

[Kluge]

There goes all of the value (highest bid is .08) of what I thought to be my most stable asset
So to get this straight, you will stop paying dividends on GLBSE, and we will not continue to receive them unless we go through the manual transfer to Hermes?
If so, I believe that's a violation of the contract. I'm specifically interested in the last part:

"Contract Changes" -- The bond-issuer is not permitted to change this contract at any time under any circumstance. To "change the contract," a buyback must be placed...

But it sounds like you are not going to place a buyback

As I've stated multiple times, I will still be paying dividends to GLBSE bond-holders, at least until the "hard deadline" hits which'll likely be at least 2 months out, and I'll provide lots of updates, probably still pay dividends to bond-holders after the deadline if there's more than a few bonds out. However, we're now in talks with GLBSE again to keep things listed there with all our restrictions lifted. When we transfer, then, if GLBSE, Icehill (Kronos/Hermes), and I come to an agreement, however, there will be no need for a manual transfer scheme and it can be done fairly easy, where GLBSE bond-holders get a code, enter it on Hermes, and their bonds on GLBSE will disappear, reappear on Hermes.

I don't believe the contract states which exchange the bond must be listed on. While this may inconvenience bond-holders, if significant volume remains on GLBSE, I'll always pay dividends to bond-holders on GLBSE.

[nimda]

There goes all of the value (highest bid is .08) of what I thought to be my most stable asset
So to get this straight, you will stop paying dividends on GLBSE, and we will not continue to receive them unless we go through the manual transfer to Hermes?
If so, I believe that's a violation of the contract. I'm specifically interested in the last part:

"Contract Changes" -- The bond-issuer is not permitted to change this contract at any time under any circumstance. To "change the contract," a buyback must be placed...

But it sounds like you are not going to place a buyback

As I've stated multiple times, I will still be paying dividends to GLBSE bond-holders, at least until the "hard deadline" hits which'll likely be at least 2 months out

Yes, I am talking about the "hard deadline."

I don't believe the contract states which exchange the bond must be listed on.

No, it doesn't. To clarify, I've perceived this as the upcoming sequence of events:

• Hermes opens
• Dividends continue to be payed on GLBSE
• "Shift" period from GLBSE to Hermes
• Final "hard deadline" at which point dividends are no longer paid on GLBSE. Investors who did not move their bonds to HERMES are left with nothing.

#4 violates the contract, specifically:

BDK.BND pays 1% of face value every week (Monday).

I ask mainly because I foresee a vacation (I have no problem with moving to Hermes), and hell if I'm selling out of the bond at 0.08.

[Kluge]

There goes all of the value (highest bid is .08) of what I thought to be my most stable asset
So to get this straight, you will stop paying dividends on GLBSE, and we will not continue to receive them unless we go through the manual transfer to Hermes?
If so, I believe that's a violation of the contract. I'm specifically interested in the last part:

"Contract Changes" -- The bond-issuer is not permitted to change this contract at any time under any circumstance. To "change the contract," a buyback must be placed...

But it sounds like you are not going to place a buyback

As I've stated multiple times, I will still be paying dividends to GLBSE bond-holders, at least until the "hard deadline" hits which'll likely be at least 2 months out

Yes, I am talking about the "hard deadline."

I don't believe the contract states which exchange the bond must be listed on.

No, it doesn't. To clarify, I've perceived this as the upcoming sequence of events:

• Hermes opens
• Dividends continue to be payed on GLBSE
• "Shift" period from GLBSE to Hermes
• Final "hard deadline" at which point dividends are no longer paid on GLBSE. Investors who did not move their bonds to HERMES are left with nothing.

#4 violates the contract, specifically:

BDK.BND pays 1% of face value every week (Monday).

I ask mainly because I foresee a vacation (I have no problem with moving to Hermes), and hell if I'm selling out of the bond at 0.08.

Alright. Let me update my position. I understand and apologize both for being unclear, and lazy.

Even if there is only one bond left on GLBSE, I will always pay bond-holders on GLBSE. They'll have the ability to switch if they please, and I'd certainly prefer it, but it will not be necessary.

ETA: Further clarification. While actions such as issuance of new shares (assuming contractually valid) will occur on the "primary" exchange, in the event of something like a buyback, I will pay holders of the security on BOTH exchanges the appropriate amount.

ETA2: I am not speaking for JRO, however. How he decides to go forward is his decision - so I'm only speaking for BDK & BDK.BND.

[Kluge]

Dividends paid.

Issued: 26367 bonds (2636.7BTC FV)
Interest Payment: (2636.7*.01)=26.367BTC

Next Payment Date: June 11th

[Kluge]

Fair warning -- It's probable I'll be initiating a forced buyback @ .101 in 45-120 days. CD rates will also be reduced at that time, though CDs are currently not for sale (I'm also not issuing BDK.BND, though that's also because the security's still restricted by GLBSE). I have too much OPM and interest rates have been dropping in the Bitcoiniverse far faster than I anticipated.

[Kluge]

Dividends paid.

Issued: 16367 bonds (1636.7BTC FV)
Interest Payment: (1636.7*.01)=16.367BTC

Next Payment Date: June 18th

[nimda]

I favor the argument that it's primarily a by-product of an extremely high-yield market. Nowhere else will you earn ~30-150% annual RoI with almost any credible security listed. It's thus extremely expensive (relative to most USD options) to maintain a bid order when you factor in opportunity cost. GLBSE tries to solve this by only charging a fee to the person who places an open-market order, but it's not nearly sufficient, and I don't know how they could fix this, perhaps without allowing uncovered orders again (that is, with 10BTC in your account, you can place a bid on Cognitive for 10BTC-worth of shares, another order for 10BTC-worth of Gigamining, and maybe 10BTC-worth of YABMC. It could be implemented where all other orders automatically cancel once one of your 10BTC bid orders are fulfilled somewhere, partially or in full)

You favor the theory, I practice it. I have very low amounts of BTC available, so placing a bid on something which won't get fulfilled for a month and even then only net me a few bitcents is less profitable than simply putting the money in BDK.BND

[Kluge]

Dividends paid.

Issued: 16367 bonds (1636.7BTC FV)
Interest Payment: (1636.7*.01)=16.367BTC

Next Payment Date: June 25th

[Kluge]

I'm expecting to receive quite a few coins within a week. If so, I will buyback all bonds @ .101/unit as soon as I get it, as specified by the contract. If I don't get the coins within a week, I should get them "soon." If I get the coins and initiate a buyback on a Sunday or Monday, I'll pay .102/unit (if on a Monday, I will not pay dividends that day).

BDK.BND will likely be reissued at a later time at a reduced rate. In the meantime, if I need funds, I will begin selling CDs again. I am not currently selling CDs, though I'm renewing existing CDs. Upon BDK-BLoC launching, CD sales should be handled automatically on the site, and sales will definitely resume at that time, though at a reduced rate. BDK.BND will likely relaunch a couple weeks prior to BDK-BLoC launching, which could be as soon as in two weeks, though likely in a month or two.


Cheers!

[Kluge]

6054 BDK.BND units were just bought back privately, leaving 10313 bonds in the wild.


Cheers,

Ben

[nybble41]

6054 BDK.BND units were just bought back privately, leaving 10313 bonds in the wild.


Cheers,

Ben

The contract listed on GLBSE (https://glbse.com/asset/view/BDK.BND) would seem to prohibit private and/or partial buybacks:

... Bonds cannot be sold back to the bond-holder except in case of a buyback. ...

"Buyback" -- The bond-issuer may buy back all bonds at a price of .101BTC/share at any time he wills, without warning. In this case, the bond-issuer will use GLBSE's forced buyback feature to pay .101BTC/share.

[cytokine]

6054 BDK.BND units were just bought back privately, leaving 10313 bonds in the wild.


Cheers,

Ben

The contract listed on GLBSE (https://glbse.com/asset/view/BDK.BND) would seem to prohibit private and/or partial buybacks:

... Bonds cannot be sold back to the bond-holder except in case of a buyback. ...

"Buyback" -- The bond-issuer may buy back all bonds at a price of .101BTC/share at any time he wills, without warning. In this case, the bond-issuer will use GLBSE's forced buyback feature to pay .101BTC/share.

For the record, I was the one that sold these bonds back to Kluge @ .1 each. He had shares of COGNITIVE that I really wanted so I did a swap.

The BDK.BND contract was most likely intended to mean that bond-holders should not expect or demand a buyback without a change of contract. However, there is some truth in what you say since there is some ambiguity simply due to wording ( it is very difficult to properly word an investment contract ).

However - and this is the bigger point - clearly my selling these back to Kluge in no way harms other holders of BDK debt; if anything, it helps them because having Kluge get a better deal makes it that much more likely that he will be able to honor the rest of his outstanding debt. If there's no victim, then no harm is done. Kluge is an honest guy and he wouldn't go against his word to harm his investors.

[Kluge]

6054 BDK.BND units were just bought back privately, leaving 10313 bonds in the wild.


Cheers,

Ben

The contract listed on GLBSE (https://glbse.com/asset/view/BDK.BND) would seem to prohibit private and/or partial buybacks:

... Bonds cannot be sold back to the bond-holder except in case of a buyback. ...

"Buyback" -- The bond-issuer may buy back all bonds at a price of .101BTC/share at any time he wills, without warning. In this case, the bond-issuer will use GLBSE's forced buyback feature to pay .101BTC/share.

For the record, I was the one that sold these bonds back to Kluge @ .1 each. He had shares of COGNITIVE that I really wanted so I did a swap.

The BDK.BND contract was most likely intended to mean that bond-holders should not expect or demand a buyback without a change of contract. However, there is some truth in what you say since there is some ambiguity simply due to wording ( it is very difficult to properly word an investment contract ).

However - and this is the bigger point - clearly my selling these back to Kluge in no way harms other holders of BDK debt; if anything, it helps them because having Kluge get a better deal makes it that much more likely that he will be able to honor the rest of his outstanding debt. If there's no victim, then no harm is done. Kluge is an honest guy and he wouldn't go against his word to harm his investors.

Right. I was trying to make two points -- I won't change the contract (particularly, the rate) unless every bond is bought back, and bond-holders can't sell bonds back to me whenever they want (that is, it isn't a demand deposit).

Sorry about wording it poorly. If anyone has a reasonable claim to reparations as a result of the breach of contract and can prove actual damages, I'd be willing to hear it out (keeping in mind that I still wouldn't buy back all bonds any earlier if I didn't do this deal with cyto). I'll be more mindful of what I write in the future. (thanks, Cytokine)

[zerokwel]

wording seems 100% to me

"... Bonds cannot be sold back to the bond-holder except in case of a buyback. ..."

I read that as you cannot bitch to Kluge asking for him to buy your bond back at any time. He is free to do a buyback/part buyback whenever he feels like it. At least that's how I read it. and yes I do hold some BDK,BND

So personally I don't see any breach or contract.

[nybble41]

wording seems 100% to me

"... Bonds cannot be sold back to the bond-holder except in case of a buyback. ..."

I read that as you cannot bitch to Kluge asking for him to buy your bond back at any time. He is free to do a buyback/part buyback whenever he feels like it. At least that's how I read it. and yes I do hold some BDK,BND

So personally I don't see any breach or contract.

I agree with cytokine that there was no harm, as the holder of a few BDK.BND shares myself, and I'm not opposed to private or partial buybacks. However, I don't see how you can read the contract that way. Clearly bonds were sold back to the bond-holder, without meeting the conditions listed under "buyback"; namely, that (a) all the bonds will be bought back, (b) at a price of 0.101 BTC each, (c) using the forced buyback feature. Perhaps the intent was merely to reserve the option of a forced buyback, while leaving open the possibility of other, voluntary buybacks, but in that case the contract should probably have said so explicitly.

For what it's worth, I think I would have worded the quoted clause more along the lines of "No guarantee is made that bonds can be sold back to the bond-holder, except in the case of a buyback."

[Kluge]

Fwiw, the end goal is to re-release BDK.BND @ .65%/wk (roughly 2.625% monthly, little over 40% per year - assuming you reinvest dividends -- without reinvestment, ~2.6% monthly, 33.8% annually). I intend for this to be the one and only reduction in rates, and in the contract, 6 months will be required to elapse before I recall the bond. 1%/wk is doable for now, but I'd prefer to allow allow investors to "set it and forget it," and this rate should be acceptable for many months, perhaps years. Some extra breathing room makes me happy, too.

The future BTC CD rate is intended to be 3%/32D, 6.75%/63D. The future USD CD rate is intended to be 1.25%/32D, 3%/63D. Bonds and CDs will, in some way, be allowed to convert to each other once everything's sorted out for the re-launch, which probably won't be until early August (+- a month) -- buyback will occur as soon as I get the funds I've requested back, which should have been nearly a week ago....

The BTC prime rate (minimum lending rate, reflects only BDK's opinion) is expected to be set at 3.55% per month, ~0.1267%/day. The USD prime rate (minimum lending rate, reflects only BDK's opinion) is expected to be set at 1.6% per month, ~.057633%/day.

Thus, for USD loans, a most creditworthy business can expect to pay ~51.985% annually for BTC loans. For USD loans, that rate will be ~20.983% annually. For comparison, SMB loans in the US are typically made with the business paying ~6-10% annually in interest. Meanwhile, US credit cards, which are more in line with what BDK-BLoC seeks to compete with, charge ~11-23% annually (avg is 14% or so for business cards). We'll get there eventually.