Overstock.com is making the first sale of its ‘cryptobond’ securities, to First New York (FNY) Managed Accounts, an affiliate of FNY Capital.
Overstock was one of the first big names to begin accepting bitcoin for payment last year. It has since shifted focus to its ‘digital securities’ initiatives as part of its Medici project. It recently unveiled the ‘cryptobond’, based on colored coins technology, to be issued on its planned TØ.com platform. In an April filing with the US Securities and Exchange Commission (SEC), Overstock disclosed plans to issue $500 million in ‘digital securities’.
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FNY Capital is a trading firm with offices in New York and London, stating to have more than 200 traders.
The firm is the recipient of a $5 million bond bearing an interest rate of 7% over a 5-year term. It has put and call provisions allowing either party to unwind the bond by Q4 this year or earlier. Simultaneous with the bond, Overstock is making a $5 million loan to FNY at a 3% interest rate, structured such that risk arising out of the cryptobond technology’s failure is borne by Overstock.
Ironically, the sale will be celebrated by a launch party at NASDAQ headquarters in New York on Tuesday. Patrick Byrne, long an outspoken critic of Wall Street, believes that cryptocurrency technology can disrupt two-thirds of the money made there. Byrne said that the party will “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.”