tZERO, the global leader in blockchain innovation for capital
markets, released today the following letter to investors from CEO
Saum Noursalehi:
Dear tZERO Investor,
As I mentioned in my previous letter, we are taking proactive
steps to enhance the dialogue with our investors, and we hope you
find these letters valuable.
I would like to begin by addressing Patrick Byrne’s resignation
as the CEO of Overstock. While we are sad to see him go, I can
assure you that Patrick’s departure will have no impact on tZERO’s
day-to-day operations or the execution of our roadmap. Jonathan
Johnson, who continues to be the Chairman of tZERO’s board and
oversees our parent company, Medici Ventures, also assumed the role
of Interim CEO of Overstock. Jonathan is a great leader and a
champion for blockchain and its potential as a disruptor in a
number of ecosystems, particularly its application to the capital
markets through tZERO. Jonathan and the Overstock/Medici boards are
committed to tZERO and our long-term success, including, if needed,
financially.
Some have speculated that our interactions with the SEC may have
something to do with Patrick’s departure. That could not be further
from the truth. Patrick left the company for the reasons he
stated.
On the topic of regulation, it is important to note that tZERO
owns two broker-dealers. As part of these businesses, we interact
with a range of regulators, including FINRA and the SEC. These
interactions include two distinct strands. The first are regular,
proactive discussions aimed at providing the SEC with transparency
into, and prompt responses regarding inquires, about our activities
and progress as we develop new technologies and apply them to the
existing capital markets’ infrastructure. We believe these
recurring, often weekly, cooperative discussions are mutually
beneficial and intend to continue them.
The second set of interactions pertains to an SEC request for
additional information related to the tZERO security token
offering, which we received in February of 2018. This inquiry came
at a time when many issuers of token offerings were also contacted.
We provided all of the requested information to the SEC earlier
this year and have not received any formal follow-up requests from
them since December of 2018.
Progress Made
I am pleased to report that we continue to execute against our
strategic roadmap. Below is a list of our accomplishments since my
last letter, two months ago.
1. July 25: Successfully launched the
tZERO Crypto app on Android.
Since its launch, our app has received
thousands of organic downloads and trading volumes have been
increasing steadily. In fact, transaction volumes in August were up
over 100%, compared to July. We plan to start ramping up marketing
of the app in the coming months.
It is also worth highlighting that while
customers across several key regions, including New York, Canada
and the United Kingdom, are not permitted to use the app yet. As we
obtain additional regional licenses, we expect the geographical
availability of the app to increase – and with that, trading
volumes.
2. July 30: Announced the OSTKO
digital preferred dividend that will trade exclusively on the PRO
Securities ATS, operated by a wholly-owned subsidiary of tZERO.
This dividend, which has a record date of
September 23, has the potential to introduce tens of thousands of
new investors to the PRO Securities ATS. Given the digital
preferred shares trade exclusively on the PRO Securities ATS,
broker-dealers representing Overstock common shareholders will need
to subscribe to the PRO Securities ATS in order to allow their
clients to transact the dividend directly. As I mentioned on the
recent Overstock earnings call, introducing more investors to the
platform is a key priority and this announcement should serve as a
catalyst for enhancing liquidity.
3. August 6: Obtained an additional
technology patent enabling traditional trading systems to be
anchored into public blockchains. This is yet another strong
defensive patent for the ecosystem we are developing and
synergistic with the patent we were awarded earlier in the
year.
4. August 12: Permitted non-accredited
investors to begin trading tZERO security tokens through the PRO
Securities ATS.
All investors that create an account at
Dinosaur Financial are now permitted to trade the tZERO security
token. Since this announcement, we have seen a notable increase in
volume of investors onboarding to trade on the PRO Securities ATS
through Dinosaur Financial, and we anticipate that trend to
continue, particularly as we introduce additional
broker-dealers.
5. August 20: Added Ravencoin as our
third cryptocurrency on the tZERO Crypto app.
6. August 29: Launched technology that
allows for Dinosaur Financial customers to fund their brokerage
accounts through ACH, expanding from just wire deposits.
This should improve practicality for
investors using the platform, resulting in an increase in investor
deposits, and ultimately liquidity on the PRO Securities ATS.
7. July - August: Filed for eight
additional technology patents.
We believe our growing portfolio of
intellectual property helps to differentiate tZERO and remains a
key component to our long-term strategy of owning the security
token ecosystem. As I look forward through the end of 2019 and into
2020, I expect our R&D to produce several more patent
filings.
Overall, we are encouraged by our recent momentum and believe
that we are well positioned to capitalize on some exciting
opportunities ahead.
Our Current Priorities
Over the past twelve months we have made significant progress
building out our end-to-end ecosystem. As a result of this
progress, our primary focus has shifted from build, to growth and
adoption.
To accomplish this, we are currently focused on four key
areas.
1. Onboarding Quality Issuers
The foremost priority is to bring
high-quality security tokens to the PRO Securities ATS. Brooke
Navarro, who was recently appointed as Head of Business
Development, is spearheading this effort and has laid out a robust
pipeline of potential issuers. Expect the announcement of new
assets in the coming months.
We believe onboarding new issuers will result
in increased investor interest and liquidity, which is our second
priority.
2. Improving Liquidity on the PRO
Securities ATS
In addition to onboarding more security
tokens, another strategy for increasing liquidity is to subscribe
additional broker-dealers to the PRO Securities ATS. We are
leveraging our relationships with approximately 140 broker-dealers
through our Speedroute subsidiary.
Given the broad ownership of Overstock common
shares, we anticipate increased adoption of our platform from
broker-dealers interested in allowing their clients to participate
in the trading of the OSTKO digital preferred shares.
In addition to onboarding third-party broker
dealers, one of our wholly-owned subsidiaries has also filed the
new member application to operate as a retail broker-dealer. This
subsidiary recently submitted responses to FINRA’s questions
regarding its application and is awaiting the next steps.
3. Enhancing & Scaling Our
Security Lending Solution
By leveraging our blockchain technology, our
digital locator receipt (DLR) product provides clear and accurate
insights into pricing and inventory, which reduces costs associated
with the opaque systems that exist today. We recently completed the
market data feed portion of this product, which aggregates supply
of hard-to-borrow inventory from multiple sources. The next phase
is for us to integrate this technology into our order management
system, which allows short sellers on the demand side to introduce
bids and receive locates on hard to borrow. We anticipate that this
new product will launch next month.
4. Launching the First Regulated
National Security Token Exchange with BOX Digital Markets
Lastly, we continue to work with our partners
at BOX Digital Markets on launching the first regulated national
security token exchange through our joint venture, the Boston
Security Token Exchange (BSTX). We will continue to update you as
this progresses. We are currently aiming for an early 2020
launch.
While it has been a busy summer, I am encouraged by the
consistent progress we have made deploying our technology, forming
new partnerships and expanding our patent portfolio. We are excited
about the opportunity ahead and will continue to keep you informed
as we execute our vision of revolutionizing capital markets.
Thank you for your continued support.
Respectfully,
Saum Noursalehi CEO, tZERO
P.S. For the latest updates on tZERO follow my Twitter account,
@Noursalehi, as well as the tZERO Twitter account,
@tzeroblockchain.
Investor Notice
Investors should note that trading security tokens could involve
substantial risks, including no guarantee of returns, costs
associated with selling and purchasing, no assurance of liquidity
which could impact the price and ability to sell, and possible loss
of principal invested. Further, an investment in single security
token could mean lack of diversification and, consequently, higher
risk.
As of the date of this press release, tZERO has not authorized
peer to peer transfers of the tZERO security tokens. tZERO security
token holders may resell their tZERO security tokens on the PRO
Securities' SEC Registered ATS only through a brokerage account
established with Dino, a subscriber to the ATS, with clearing and
custody provided by Electronic Transaction Clearing, a registered
broker-dealer, and Computershare, as transfer agent. In order to
comply with and manage our obligations under applicable laws and
regulations and ensure the security and functionality of the tZERO
security tokens, tZERO may, at any time, prohibit tZERO security
token holders from transferring tZERO security tokens from Dino
brokerage accounts to personal wallets. When such a prohibition is
in effect, tZERO may permit such transfers only in extraordinary
circumstances and subject to any and all conditions that tZERO may
determine.
No Offer, Solicitation, Investment Advice or
Recommendations
This release is for informational purposes only and does not
constitute an offer to sell, a solicitation to buy, or a
recommendation for any security or token, nor does it constitute an
offer to provide investment advisory or other services by the tZERO
or any of its affiliates, subsidiaries, officers, directors or
employees. No reference to any specific security or token
constitutes a recommendation to buy, sell or hold that security or
token or any other security or token. Nothing in this release shall
be considered a solicitation or offer to buy or sell any security,
token, future, option or other financial instrument or to offer or
provide any investment advice or service to any person in any
jurisdiction. Nothing contained in this release constitutes
investment advice or offers any opinion with respect to the
suitability of any security or token, and the views expressed in
this release should not be taken as advice to buy, sell or hold any
security or token. In preparing the information contained in this
release, we have not taken into account the investment needs,
objectives and financial circumstances of any particular investor.
This information has no regard to the specific investment
objectives, financial situation and particular needs of any
specific recipient of this information and investments discussed
may not be suitable for all investors. Any views expressed in this
release by us were prepared based upon the information available to
us at the time such views were written. Changed or additional
information could cause such views to change. All information is
subject to possible correction. Information may quickly become
unreliable for various reasons, including changes in market
conditions or economic circumstances.
About tZERO
tZERO Group, Inc. (“tZERO“) is a majority owned subsidiary of
Overstock.com, focusing on the development and commercialization of
financial technology (FinTech) based on cryptographically-secured,
decentralized ledgers – more commonly known as blockchain
technologies. Since its inception, tZERO has pioneered the effort
to bring greater efficiency and transparency to capital markets
through the integration of blockchain technology. For more
information on tZERO, please visit: https://www.tzero.com/.
tZERO is not a registered broker-dealer, funding portal,
underwriter, investment bank, investment adviser or investment
manager, and is not providing brokerage, investment banking or
underwriting services, recommendations or investment advice to any
person, and does not provide any brokerage services. tZERO takes no
part in the negotiation or execution of secondary market
transactions for the purchase or sale of securities and at no time
has possession of investor funds or securities in connection with
such transactions.
About PRO Securities, LLC
PRO Securities, LLC is a broker-dealer registered with the SEC
and a member of FINRA and SIPC. More information about PRO
Securities may be found at www.finra.org.
About SpeedRoute LLC
SpeedRoute LLC is a broker-dealer registered with the SEC and a
member of FINRA and SIPC. More information about PRO Securities may
be found at www.finra.org.
About Overstock.com
Overstock.com, Inc Common Shares (NASDAQ:OSTK) / Digital Voting
Series A-1 Preferred Stock (Medici Ventures’ tZERO platform: OSTKO)
/ Series B Preferred (OTCQX:OSTBP) is an online retailer and
technology company based in Salt Lake City, Utah. Its leading
e-commerce website sells a broad range of new products at low
prices, including furniture, décor, rugs, bedding, home
improvement, and more. The online shopping site, which is visited
by nearly 40 million customers a month, also features a marketplace
providing customers access to millions of products from third-party
sellers. Overstock was the first major retailer to accept
cryptocurrency in 2014, and in the same year founded Medici
Ventures, its wholly-owned subsidiary developing and accelerating
blockchain technologies to democratize capital, eliminate
middlemen, and re-humanize commerce. Overstock regularly posts
information about the company and other related matters on the
Newsroom and Investor Relations pages on its website,
Overstock.com.
O, Overstock.com, O.com, Club O, Main Street Revolution, and
Worldstock are registered trademarks of Overstock.com, Inc. Other
service marks, trademarks and trade names which may be referred to
herein are the property of their respective owners.
This press release contains certain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. Such
forward-looking statkjkkements include all statements other than
statements of historical fact. Additional information regarding
factors that could materially affect results and the accuracy of
the forward-looking statements contained herein may be found in the
Overstock’s Form 10-Q for the quarter ended June 30, 2019, which
was filed with the SEC on August 8, 2019, and any subsequent
filings with the SEC. Overstock expressly disclaims any obligation
or undertaking to disseminate any updates or revisions to any
forward-looking statement contained herein and to reflect any
change in its expectation with regard thereto or any change in
events, conditions, or circumstances on which any such statement is
based.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190906005230/en/
Investors: Michael Mougias, +1-347-293-1248
mmougias@tzero.com
Media: Alexandra Sotiropoulos, +1-347-293-1416
asotiropoulos@tzero.com
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