Kevin Travers

Kevin Travers is a Reporter at deBanked. Email me story tips at ktravers@debanked.com and connect with me on LinkedIn



Articles by Kevin Travers

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Coinbase Files S-1 for IPO

February 25, 2021
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CoinbaseCoinbase filed an S-1 Thursday morning, a significant step in gaining a listing on the Nasdaq. It’s like Christmas morning for the crypto-obsessed financial media, tearing into the document like wrapping paper on a new bike to pry into the private crypto-selling firm’s operations.

For starters, Coinbase was profitable in 2020, as it should be with ATH bitcoin prices. The company posted a net income of $322 million on net revenue of $1.14 billion. There was no listing price for shares, though according to Axios, private pre IPO shares to investors went as high as $373/share.

Coinbase said it had 43 million verified users, 2.8 million of which transact monthly. There are $90.3 billion in assets on the platform and $193 billion in volume traded last year. The majority of revenue comes from Bitcoin and Ethereum trading. In an age of sudden fintech SPAC IPOs, Coinbase is launching a stand-alone public offering.

The buzz on social media is over the first completely remote company listing. Coinbase stated, “In May 2020, we became a remote-first company. Accordingly, we do not maintain a headquarters.” Though someone pointed out on Twitter, Coinbase, Inc still files taxes through a San Franciscan address.

The pandemic might not be the only reason Coinbase went remote. US-based coin Ripple was recently sued by the SEC for violations of securities laws. Accordingly, in the “risk factors” section, along with a warning about the natural volatility of cryptocurrency prices, Coinbase describes the similarly ever-changing nature of crypto regulation.

“We are subject to an extensive and highly-evolving regulatory landscape and any adverse changes to, or our failure to comply with any laws and regulations could adversely affect our brand, reputation, business, operating results, and financial condition,” Coinbase said.

Another strange thing to see in an S-1 was that the form was sent to the unknown identity of Satoshi Nakamoto, the person or group that created the currency itself. Coinbase somehow sent the S-1 to the founding Bitcoin block address at:

“1A1zP1eP5QGefi2DMPTfTL5SLmv7DivfNa”


One of the risk factors Coinbase listed was the unforeseen result if Nakamoto was ever identified: “The identification of Satoshi Nakamoto, the pseudonymous person or persons who developed Bitcoin, or the transfer of Satoshi’s Bitcoins.”

Satoshi has never been truly identified beyond the initial launch of Bitcoin. Satoshi’s original block address has been sent 68 bitcoins since inception or more than $3.2 million at today’s valuation. Some other curiosities include the definitions page:

Flash Boys 2? Ethereum Bot Wars

February 25, 2021
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EthereumA whole new group of traders is colluding to beat the market. No, not Redditors or fiber-optic wielding Wall Street “quants.” Today, in both a simpler and way more complex way money can be made using bots to outbid trades on cryptocurrency markets.

According to research by Flashbots, in the past 30 days alone, $106.5 million of Ethereum (ETH) has been extracted “permissionlessly” from trades on the ETH blockchain. The problem has gotten progressively worse throughout 2020, where Flashbots researcher Alex Obadia started their search.

“After scraping the Ethereum blockchain starting from the first block of 2020, we’ve classified more than 1.3M MEV transactions,” Obadia wrote. “And found a total of at least $314M worth of Extracted MEV since Jan 1st, 2020.”

It’s called Miner Extracted Value (MEV) and Flashbots scoured millions of ETH transactions to find when it happened. Flashbots was created because of the vulnerabilities of decentralized crypto markets, like MEV exploits.

It’s stated that a simple version of how this extraction can be done is by a miner piggy-backing off existing trades, the bot can find a trade waiting to be completed in the blockchain memory pool, and “memsnipe,” creating an identical trade but raising the transaction price to complete it.

The flaw was first documented in a 2019 Cornell economics and crypto research paper.

“Blockchains, and specifically smart contracts, have promised to create fair and transparent trading ecosystems. Unfortunately, we show that this promise has not been met,” Cornell researchers found. “Like high-frequency traders on Wall Street, these bots exploit front-running in DEXes, paying high transaction fees and optimizing network latency to front-run, i.e., anticipate and exploit, ordinary users’ DEX trades.”

Flashbots updated the findings to claim that miners were rarely the culprits and that the term should be amended to Maximum Extracted Value.

ODX Merges with Fundation

February 25, 2021
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Linear Financial TechnologiesThe ODX brand from OnDeck is splitting off to combine with Fundation, forming a new SMB digital banking company called Linear Financial Technologies.

The news follows the recent disclosure from Enova that it was looking to divest ODX in addition to OnDeck Canada and OnDeck Australia.

The new firm, headed by the current CEO of Fundation, Sam Graziano, will be an online banking service provider. Linear will take on Fundation’s service of processing loans for big and small banks, reportedly processing a total of $13 billion.

“Over the years, our combined platforms have served hundreds of thousands of business customers through many of the leading business banking providers in the market, deploying modern banking experiences that their customers and front-line colleagues expect in the digital era,” said Graziano in the published announcement. “Together as Linear, we’ll have the resources to more rapidly expand the breadth of our solutions to bring more value to our clients.”

Enova will retain a minority stake in the new firm.

Square Originated $254M in Loans in Q4, Nearly a Billion For the Year

February 23, 2021
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Square in San FranciscoSquare released its Q4 earnings on Tuesday, disclosing that the Square Capital division originated 57,000 loans for $254 million.That brings them to $957 million on the year.

Just before the earnings release, Square reported they had also bought $170 million worth of additional bitcoin. After purchasing $50 million in October, no wonder the firm doubled down. Reportedly 48% of Square’s total revenue in 2020 was from bitcoin and bitcoin trading. 85% of all value added in 2020 was bitcoin-related.

Overall, Square added $9 billion in net revenue in 2020. $4.5 billion of which was Bitcoin revenue.

Pot Legalized In Garden State

February 23, 2021
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Marijuana Dispensary Sign in Springfield, OROn one of the ugliest days of sleet and rain in recent memory, it was bright for some: NJ Gov Phil Murphy signed three legal weed bills into existence Monday Morning.

After weeks of debate over taxes and penalties for those under 21, legal marijuana passed twenty minutes before the deadline to set legalization rules- Murphy’s movement to legalize pot in the Garden State nearly ran out of time.

But shortly after the Senate came to an agreement, Murphy put pen to paper. Recreational users can possess up to six ounces of marijuana without legal consequence. Users under 21 will be in civil trouble if caught, using a three-strike, no-fine warning system.

The new law also decriminalizes underage alcohol use and halts the police’s ability to stop kids if they smell like pot- they can only give out warnings. Past Marijuana convictions and charges have been made easier to expunge, with comments from the ACLU that this is just the beginning of fair and legal drug culture in the Garden State.

Rec users will have to wait until Murphy sets up the Cannabis Regulatory Commission, and for NJ’s 13 medical marijuana dispensaries to ramp up production and open their doors. The current grower market in NJ can just meet the demands of the state’s 100,000 medical consumers according to NJ.com, and as the only state to legalize in the entire DC-NYC metro area, there will be at least a slight uptick in demand.

Experts still think that new stores could open in late 2021. Until then, Murphy can at least finally say he met his goal to legalize pot in his first 100 days- three years later.

“Starting immediately, those who had been subject to an arrest for petty marijuana possession, an arrest that may have kept them from a job or the opportunity to further their education,” Murphy said. “Will be able to get relief and move forward.”

LoanMe, Liberty Tax Merger to Take on Intuit, Enova

February 22, 2021
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NextPoint Financial will combine LoanMe’s business, consumer, and mortgage lending with Liberty Tax’s tax preparation business, according to merger announced on Monday. Liberty’s “2,700+ locations in the US and Canada” will become consumer and SMB loan shops.

The new firm will also offer Merchant Cash Advances; LoanMe launched MCA funding in January and expects to fund $15 million in MCAs in 2021. Based on the acquisition prospectus, NextPoint will be a tax readiness firm, with the added suite of financial products as a value and growth builder.

Ramping up consumer, installment, and MCA lending, paired with the third-largest tax-prep business in the U.S, NextPoint expects to compete directly with Intuit, H&R Block, Enova, and Elevate.

Fintech firms are setting themselves apart from the competition as one-stop shops for everything a business needs, including MCA products. Why branch into financial services now? NextPoint found that this year alt lenders have outperformed the S&P500 three times over.

“We are a one-stop financial services destination empowering hardworking and credit-challenged consumers and small businesses,” the investor presentation reads. “To get to the next point in their financial futures.”

Intuit offers a variety of financial products, like business loans through Quickbooks Capital, alongside their popular, 60%+ market share of tax prep software. H&R began offering small $1,000 lines of credit this year, but not much more.

The team leading the new company, NextPoint Financial, will feature execs like Brent Turner as CEO, Mike Piper CFO, both keeping their previous Liberty Tax positions. Jonathan Williams, former president and founding shareholder of LoanMe, will become president of lending.

Game Stopped? Short Selling, Social Media, and Retail Investors Collided in House Hearing

February 21, 2021
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GameStopNearly a month after the GameStop (GME) stock price shot halfway to the moon, the House Committee on Financial Services gathered representatives from the trading conflict in a hearing to examine what happened.

The focus was on a struggle between big institutional money and retail, everyday investors. Armed with nothing but zero-commission investment apps, government stimulus, and with nothing to do but sit at home waiting for a pandemic to end, retail traders exploded onto the securities markets. One of the results was a dramatic rise and fall of GME at the end of January.

Vlad Tenev, the Robinhood app’s co-founder, faced the highest number of questions after the firm blocked trading of GME on January 28th. Across the videocall-octagon was Keith Gill, a r/WallStreetBets retail investor long on GME since the summer, known by some as u/DeepFuckingValue.

With his signature headband hanging in the background, sitting in a gaming chair, Gill donned an uncharacteristic suit and tie while representing himself as a stand-in for the millions of retail investors who were along for the ride.

His message: he is no expert, is not responsible for the volatility of a multi-billion dollar securities market, and after everything, he still likes the stock.

“I support retail investors right to invest in what they want when they want to,” Gill said. “I do not have clients, and I do not provide personalized investment advice for fees or commissions. I am an individual investor.”

Gill went on in his testimony to state that his posts and video appearances about GME to other investors were not trading advice and no different than talking in a bar about a stock he liked.

Before the run-up of GME, Gill had a small audience of around 500 viewers. After GME started gaining ground, Gills’s online popularity exploded alongside the Reddit stock betting forum r/WallStreetBets.

Gill gained hundreds of thousands of followers, while WSB saw a rise of 8 million members in just one week. In the end, his positions in the stock earned him $22 million, as he shared with his extended family over the holidays, “we’re millionaires.” Many were not as lucky, and some have looked toward social influencers like Gill as speculators and market manipulators.

The Congressional Committee were light on their interrogation of Gill, acknowledging the importance of protecting retail investor rights. In challenging Tenev of Robinhood, Committee Chairwoman Maxine Waters set the tone, stating: “The market volatility around GameStop has highlighted how many people believe the cards are stacked against them.”

Waters asked numerous yes or no questions to Robinhood’s Tenev, who could only respond with drawn-out statements. Overall, the fintech founder was apologetic but still insisted Robinhood did nothing wrong and does not answer to hedge funds.

“Look, I’m sorry for what happened, and I apologize. I’m not going to say Robinhood hasn’t made mistakes in the past,” Tenev said. “We’re going to learn from this and make sure it doesn’t make the same mistake in the future.”

At the height of the trading frenzy Thursday, January 28th, Robinhood suddenly restricted the purchase of GME and other “meme” stocks and only allowed selling. Demand plummeted because, despite problems in the past, Robinhood is still a favorite in the r/WallStreetBets community. Prices roller coasted downward. From a high of $468/share, the GME price dropped down to trading in the $40 range in the month that followed.

Tenev was explaining his financial responsibilities to clearinghouses as a brokerage firm.

On the morning of January 28th, Robinhood suddenly received an email from a subsidiary of the DTCC, holder of all U.S. traded securities. It asked for an increase of $3 billion to ensure Robinhood could back the explosion of GME trading, an astronomical price. Robinhood complied by shutting down buying, offering sell-only, bringing the insurance price down to more than $700 million. The firm also reached out to existing investors to raise billions in capital, yet Tenev still insists there was never a liquidity problem.

Representing traditional, “smart money” investors was Ken Griffin of Chicago hedge-fund Citadel LLC and market-maker Citadel Securities, known for its short-selling positions. Alongside was Gabe Plotkin, the founder of Melvin Capital, a hedge fund with many short positions in GME, lost $6 billion in just 20 trading days. During the crazy trading week, Melvin was offered $2.7 billion in new investment from Citidel funds after losing 30% of its value.

Citadel is also a prime market maker for Robinhood, completing many of the app’s trades. Some, including those house members lobbing questions, saw a firm that self describes its mission as “to democratize investing,” cut out the poor and give to the rich. It looked like a collaboration between a major investor making up for losses due to app trading while retail investors were left out.

Chair member Blaine Luetkemeyer, a Republican from Missouri, expressed his concern that GME had been an over shorted stock and that “naked shorting” drove the price down.

“You have stated in your testimony that you had no intention of manipulating the stock,” he said. “If you’re short selling your stock 140%, for me from the outside, that looks like what you’re doing.”

Both Citidel and Melvin Capital representatives said there was no collusion to drive the price down, no over shorting, and no buy-out when the short positions failed.

The end of Gills’ testimony, read in front of a “hang in there” cat poster summed up the hearing well.

“It’s alarming how little we know about the inner-workings of the market, and I am thankful that this Committee is examining what happened,” He wrote. “I’m as bullish as I’ve ever been on a potential turnaround. In short, I like the stock.”

Fintech Lenders Did Better Job Meeting Intentions of the CARES Act, Study Finds

February 18, 2021
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pppFintech lenders doling out PPP not only reached smaller businesses on average but played an essential role in extending PPP loans to Black-and Hispanic-owned businesses, according to a study conducted by professors at the NYU Stern School of Business.

“Fintech lenders originated much smaller loans than other lenders, suggesting they served smaller firms on average,” researchers found. “Overall, we find that, relative to other lenders, [Minority Development Institutions] nonprofits, and fintech lenders make a substantially larger share of their loans to minority borrowers, particularly Black- and Hispanic-owned businesses.”

The team of economists looked over 3.4 million PPP transactions to determine what category of lenders had the highest minority share among their loans. Ryan Metcalf, Head of Public Policy for Funding Circle, member of the Innovative Lending Platform Association (ILPA), shared the full study on LinkedIn, pointing out that six ILPA members had contributed to saving jobs.

“(Funding Circle US, BlueVine, Kabbage, Inc, OnDeck, Fundbox, Lendio) provided more than 476,000 #PPP loans totaling $16.5 billion with an average loan size of ~$30,000, median loan size of $15,000, and helped save more than 2 million jobs,” Metcalf wrote. “And that was just in 2020.”

The study found that fintech lenders did a better job meeting the intention of the CARES act. While most lenders were giving out larger loans to large firms, fintech better reached actual small businesses with smaller loans on average.

“Section 1102 of the CARES Act explicitly specified that the program should prioritize ‘small business concerns owned and controlled by socially and economically disadvantaged individuals,'” they wrote. “However, the SBA did not issue specific guidance for distributing the loans, leaving private financial institutions administering the loans to independently determine which businesses to serve first or at all.”

Instead, as has become clear, many funds went to larger firms and seemed to miss minority communities. The team compared the mean and median loan amounts for different Lenders, finding the smallest in both types were fintech loans.

Researchers put first and last names through a mathematical model to predict race because that data was not available from the majority. Then predictions were compared to the sample borrowers that self-reported race. The algorithm was 78% accurate in guessing black names, 84% in guessing Hispanic, 95% for Asian, and 99% accurate for white names.