Veteran Views on the Digital Age, Welcome to "Old Men, New Money" (E0)

(logo whooshing) - I'm Phil Larmon. - I'm Douglas Borthwick. - And this is "Old Men, New Money." We are going to start with a little bit of background on one of my good friends. I like to call him the OG of digital securities. He is absolutely one of the foremost experts in the space, Douglas Borthwick. Can you tell us a little bit about how you got here, your background, where you're from? 'Cause you have a very interesting story, interesting background, and again, being one of the OG's in the space, I think they want to know a little bit, how did you get here? - Well, you've got an interesting background too, Phil, but we'll start with me.

My background was, I came over from Scotland actually, in 1986, a young man into this country, Carnegie Mellon, Lehman Brothers for a couple of years doing economics research, business school at Yale, and then a long time spent at Morgan Stanley, then Merrill Lynch, then Standard Chartered, then TPI, really in the trade fi side, mostly in foreign exchange, then into trading of currencies electronically, but then discovered Bitcoin and Ethereum, thought they were very interesting, saw ICOs, initial coin offerings, thought they were illegal, found a similar minded gentleman in Israel, and got into digital securities, and actually worked on the very first IPO of a digital security on the blockchain using Ethereum, and we weren't selling a percentage of equity in the company, rather we were selling a percentage of profits in the future.

Very interesting process, took us about 950 days to get through the SEC, but we managed to do it, and then set up a website, number of YouTube videos, and ended up raising $85 million from 7,250 people. What we wanted to build was a digital securities marketplace for both digital securities and also for cryptocurrency, and we managed to do that. The company's called INX, and it's got a broker dealer license, ATS, transfer agent, and also has a, I think it's now 48 US states covered with MT licenses, money transmitter licenses.

So that's in the public space, in the private space, I've worked on maybe seven different security token offerings for Reg D, Reg S, for US and international investors, and then I've also been working on a foundation token right now for another company that I'm working with. So really worked on tokenization from many different fronts, cryptocurrency from many different fronts, and I've been very fortunate to work with some folks that have taught me an awful lot in this business. - Well Douglas, for the folks that maybe aren't as well experienced in the space, what exactly is a digital security?

So as you're explaining these things, people can have a little bit more context of like, is a digital security crypto? Is it like, is it a token? What exactly is it? - Digital security is one that custodies yourself, you could self-custed it, or you can custody it over in a qualified custodian, like a big goer in Anchorage, but it's something that the ownership is held by you, and the ownership is sent to you by either the previous owner or by the institution that issued it.

This is very different from a traditional security that you would access by E-Trade, for example, or through Morgan Stanley, it's held in your name, but it's held by Morgan Stanley. The issuer can actually see who owns the security, they can watch all of the different transactions of that security on the blockchain, or if it's on the Ether, if it's on Ether, Ethereum network, then you can find it obviously on Etherscan, so there's a lot of clarity in terms of who owns the security when they own it. When there's a dividend, it can be paid directly to you, into your wallet, and that's rather new, but it cuts out many middlemen.

But it's a security in that it follows the same rules that the SEC puts out, either under Reg D or Reg S, or through full public securities. It's just I think that the way that it transacts is instant, as opposed to two day or one day settlement now, but otherwise it's a fantastic way to, an efficient way, I believe, to trade a security that's unlike the way that we see in the traditional network. - Got it, got it, okay. - Phil, why don't you tell us your background, because I think you've been in the blockchain space as well, obviously, and we've worked together at other companies. So why don't you let folks know about yourself?

- Sure, so originally from Columbus, Ohio, I was fortunate enough to play professional football for two years in the Arena Football League. I was blessed to play college football for Jim Tressle, he's in the Hall of Fame. You can't play football forever, so once that got done, I went on and I worked for Verizon Business for about four and a half years, where I was doing Fortune 500 technology consulting, and once I'd left there, I was trying to figure out, what did I want to do, what was that next step? And so I actually invested in, an executive produced a couple films.

My first one premiered at Tribeca, my second one Sundance, and then I optioned a TV series on sports and business, because at the time, I was also developing a program called Athlete Game Plan that helped athletes transition a life after sports. And what's interesting is that, as I was going through that process myself, I was still trying to figure it out, and people would come to me and say, "Look, you look like you're having a lot of success." In my mind, I'm like, "Okay, maybe not." How are you doing it?

So, at first I was taken back, and I really didn't know, but then I started reverse engineering what I was doing, and started creating a program, talking to my peers, and knowing that a lot of other people were having the same problem. That took up a lot of my time in the moment, again, trying to find my process, but then I went on and worked for the PJ Tour, so I got another taste of professional sports, and a very large league-type experience. I did that, I was over there at BIST Development. I actually worked out of a beautiful location in the Pacific Palisades, the Riviera Country Club. Not a bad place to go to work every single day.

But then, I went and I got in the ad tech space, I wrote a book on sales and business development, and the way that we actually met each other, Douglas, was through iHeartMedia, where I was lead sales on our crypto NFT blockchain business. And that was a lot of fun, to see where these crypto, NFT, blockchain, digital securities, how is this impacting sports entertainment, right? So, I think as we go through this journey with you, our listener, Douglas is really gonna be hitting a lot of the traditional finance with his experience.

I was at Merrill Lynch for a heartbeat, but Douglas is really one of the foremost experts in this space, and I'll be handling more of this sports entertainment, the fandom. I think what's really exciting in this space is what this technology does for the fan experience. We're gonna talk about things like fractional ownership in teams, how teams are raising money, how they are actually using this to have and drive marketing messages. Because what's interesting is, when people feel like they're part of something, they will engage more. They will offer up more information. So, if they feel like, I'll give you a prime example.

Actually, Miami has a really hard time getting people to go to physical games, and I'll talk about the dolphins, because it's so darn hot, and they need to, they can't always dictate when their game is gonna be played. It's not like they can go to the NFL and say, hey, we are only playing night games ever. So, they have a hard time getting people to come out because it's 100 plus degrees, and a football game is three plus hours. But if someone could say, maybe own a portion of the team, you're more likely to go bear the brunt of that sun for three, four hours, just like you're gonna go watch your kid play little league basketball.

It's not like-- - And would the NFL allow that though? To bring the cognizant when it comes down to the ownership of teams? - What's interesting is that they've slightly started to pivot. You have a lot of the DEI initiatives where they have, there isn't a whole lot of black ownership. They have programs, it was called the Rooney Rule back in the day for coaching, where you need to make sure that you interview a certain number of multicultural head coaches so that the people are getting the same type of opportunity. And these rules and these major leagues are starting to change a little bit.

They just announced the other day that they're gonna allow private equity to come into the space, which is absolutely going to explode the value of these teams. Because there's only so many individually wealthy type individuals, but now you're introducing private equity. The value of sports has just exponentially exploded and you see it all the way down to even the minor league type levels. I'm really excited to dive into topics like these and you start looking on the entertainment side. Can someone have VIP experiences if they own parts of a movie? Can they vote on who's gonna be cast in the movie?

For a long time when I made my films, I created a process that actually some award-winning producers actually still follow is decide why are you making this movie? Are you making this because it's a passion project? 'Cause if you don't know, a lot of movies actually don't make money. Are you making this for a passion project or are you trying to make this to make money? Or the best scenario is it's both. If you're trying to just make money, wouldn't it be smart to cast people that have the largest following? And if their fans could actually invest in the film to get it funded, wow, even more.

'Cause now you start talking about this army of fans that help to market these films. Douglas, I'll take a coin out of your pocket, as you like to say, that they actually turn into chief marketing officers at the community level. So these type of things are incredibly exciting and I can't wait to dive in into more detail.

We'll have different experts that are actually doing this as well in these different verticals so they can talk about the things that worked, the things that didn't work, probably even more important, the things that didn't work, so that if you're listening to this and thinking about what can I use digital securities for or what can I use NFTs or different type of things, learn from other people's mistakes because these type of things are large investments and you don't wanna make a critical mistake.

Yeah, and I think one of the purposes really about doing this podcast, Old Men, New Money, is because we're old men and we're talking about new money. I think that a lot of folks here about Bitcoin, Ethereum, they think also about crypto scams and that's certainly been in the news lately, whether it's FTX or whatever's going on with Binance and Celsius, and there's been a whole load of scams or things that have been unfortunate for investors, but I think that people do want to learn. There are big shops getting into this now. BlackRock obviously now doing things with securitize. You're talking about fan engagement.

Watford has just talked about it and it's going to be doing a raise through Republic and INX through their cedars in the UK to sell 10% of their equity, the fans, and that's very exciting. But I think one of the things that you touched on is if you're a consumer brand, and right now you know exactly who your consumer is, their names, how much they spend, everything, but you don't know who your investors are because the investors are holding in the name of, for example, Morgan Stanley's holding the shares. And I've talked to a lot of Fortune 500 CFOs who want to know who are their investors and a digital security will give them that.

Can you imagine if you own a million shares of Nike or 500 shares of Nike, whatever it is, that now Nike knows who you are. So when you walk into a store and you want to buy a pair of shoes, maybe you have an NFT that's sent to you with a barcode that can be scanned and now you get a discount because you're an owner as well. And we call that the Insumer Model. It's both an investor and a consumer. And I think we're going to find a lot more of that. And I think a lot of brands are going to get behind that and get very excited. Now, there's been a lot of things that have happened in the digital space that maybe are a little bit gimmicky.

You'll find NFTs that are put out by this company or that company or their creative metaverse for you to go in and you can see and check out their products. These are all great on opening day, but then no one ever visits the day after. And what we're trying to do here is explain some of the things that happen in this business, what they actually mean and what that means to you, the investor or to you, just the consumer. Because I think there's a lot of jargon in this space and there's a lot of silliness.

And hopefully what we can do is really get down to the facts and allow people to really understand what they're hearing and what they're looking at. - 100%, 100%. A prime example is when NFTs just dropped, everyone was like, what is this art? What are these just icons, these logos? And I always thought that it was more, they're trying to train and get people experience using these type of technologies. It's not so much about this individual item is so valuable. Although some of them actually did skyrocket and created massive value.

I was always of the thought that this is just to start people small where there's not a huge investment, where they can just play with the different technologies, get used to seeing it, what is it? How are they being used? And then in the future, these type of things will be integrated into our lives. One of the things you touched on is these immersive experiences. As Web3, it's at its infancy now, but as we get more immersed into the Web3 environment, technologies like this is going to potentially replace, oh, you need to put in a username and a login here to get access to that.

When you're in these environments, they already know who you are, what you're doing, what do you like, what are you not? And so like anything, it's really, marketing is there to enhance our experience and not to interrupt our experience. - One thing that NFTs and meme coins do very well is building communities. And I think that companies, corporates need to understand how they can leverage these communities. When you have a huge community that's following, let's say Dogecoin, how do you leverage that? Dogecoin has a picture of a dog. If I was Petco, I'd say, if you have Doge, we'll start accepting it.

If you have a number, we'll start accepting that as payment. And now you've got all of these folks that have Dogecoin that will use it for payments. There are tremendous opportunities that are, sorry, communities that are built by these meme coins and these NFT projects. And NFT projects can turn from being an NFT project to then having soft toys that are sold at Walmart. And Pudgy Penguins, I think, is a good example of that, where it starts moving into something that's a lot more than just an NFT. It becomes something that could be used, maybe in a game that's something that could be used in a movie.

But there's all sorts of things that can happen. Now, when you talk about why don't movies have folks with huge followings, there's YouTube stars that have gained huge followings in social media that are now being recruited in to be in movies. And so we're seeing that sort of in the younger set right now, where they're becoming movie stars as well as being YouTube stars. And it's because they bring these huge communities together. There's also some things that I think aren't true about tokenization. Tokenization sounds exciting. People talk about tokenization adding liquidity.

It can for a private raise for sure, in that normally when you invest in something on a private level, like a Reg D, you invest and you're stuck in it for 10 years or until there's an exit. Whereas if it was listed on an ATS, now you have an exit after you've invested, maybe you need the money. Maybe you don't like the idea anymore and you can sell it. So I think that we're gonna delve into that. Is there really liquidity? I think it's something that's gonna be very interesting to folks. But also the fact that under Reg S, you can sell to anyone, even retail, outside the United States.

Whereas a Reg D means really only for accredited investors and really what does that mean for folks? I think that there's a lot of folks that are looking for funding that tokenization might be an exciting opportunity for them to look into. And I'm certainly working with a number of companies that are in that space that have been raising capital and quite successfully using tokenization. But again, they also have to look at the messaging. What exactly are they talking about? How do they get around the idea that this is a token rather than traditional investment? How do they go after people? How do they build a community?

How do they use things like Telegram and Instagram to get people's attention and to inform people? There are so many different aspects to doing a tokenization raise. And we'll certainly delve into these aspects as we move through the show. But we'll also talk about things like Bitcoin and how it's being used around the world. There's a couple of folks that I want to bring on that are significant in that space that have brought Bitcoin obviously to El Salvador that are now talking to other nation states about using Bitcoin.

And I think there's gonna be some great entertainment there from listening to their stories and how they've gone about really raising awareness. So there's so much that we can talk about, whether it's on the entertainment space, sports space, really current events that are happening today. And I really don't think anyone's covering it quite like we're gonna cover it. - Perfect, I absolutely agree. And one of our prime examples is I'm not afraid to ask those questions. You the listener may be sitting there saying, what the heck is Douglas talking? What is an ATS? I have no idea what an ATS is.

And that's one of our goals is to be able to pull back the curtain and have really regular speak and drop some of the jargon at some times. And if we hear the jargon, don't worry. I'll ask, what does that mean? So that it's very clear as you go through this journey with us, what are we talking about? Because the goal of communication is to make sure that everybody knows what we're talking about because it's not one of these things where digital securities are coming.

Let me tell you, they are here and they are only going to continue to grow and innovate as technology is in the just a click of a snap of a fingers is innovating at the speed of light. Again, we will touch on all these different aspects. I will ask those questions that you're thinking because I don't come from the traditional finance world. I will ask that question for you, don't you worry. So Douglas, fair to say we'll be doing this at least once a week and if there's drops of significant news, we will hop on and do special episodes. - Yeah, I think that's very fair to say.

I think that what we really want to do is not just educate in the background, but we also want to discuss obviously the moving events, the things that are happening right now. I think Larry Fink has turned around and Fidelity is saying this as well, that tokenization is coming and it's the future. And Larry's put his money where his mouth is. He just invested in Securitize, which is broker dealer ATS in the digital asset space. ICE is also getting involved, they've invested in TZERO. Republic, which is a crowdfunding platform is invested in INX.

So there's a lot of larger folks that are now getting into this space, but if BlackRock starts tokenizing all their funds, just like they did with the money market fund that's sitting there over at Securitize, then I think we can be quite sure that the whole market's moving in that direction. When I was a currency trader, we always said, don't fight the Fed. I think when it comes to markets today, you don't fight the Fink. And I think that that's certainly the way that I look at things right now. And if BlackRock wants it, BlackRock's gonna get it.

And we've already seen over the last couple of weeks how cryptocurrency voters are a tremendous voting bloc. And when you look down at the demographics of them, these aren't just Republicans or Democrats or black or whites. It's really folks from all across the spectrum that are into cryptocurrency that have decided that digital assets are the future. And the Democrats have taken notice finally, and they've turned around and they've said, you know what, we think that maybe we should be a little bit more lax, and you've seen the SEC pull back a little bit. Now it looks like they're gonna approve Ethereum ETFs.

After it looked like they were gonna be dodging that question for quite some time. Gensler certainly changed his tune when it comes down to tokens. Instead of saying all tokens are assets, lately on a CNBC interview, he turned around and said, actually, I think that they all need to have disclaimers and they need to have essentially prospectuses behind them so people know what they're buying. And I know that the blockchain DCAs obviously working on doing that sort of thing as well. So there's lots of industry groups working on that. People need to know what they're buying. And I don't think people have really known that.

And it's been a bit of a wild West out there. And we'd like to be able to explain to people what's happening, where things are going, what it actually means, what the headline means. And I think that's what Old Men New Money is about. It's about education. And it's also about getting listeners involved, subscribers involved so they can actually learn about these things. But if they're interested in them, we'll also start introducing different types of projects that are raising capital in the space and talking about them and why we think there's positives or negatives.

We'll also start talking about all of the different ATSs now, an ATS, an alternative trading system. When you trade stocks, you trade on a national exchange. If you trade something like a private security, you'll trade it on an ATS, an alternative trading system. And then there's a number in the United States. There's a Securitize, Oasis Pro, there's T0, there's INX, there's Prometheam, there's a number. And they're all very different. They're all very different in how you trade and how you custody your securities. And we'll go through those, the positives and the negatives. They've all got different investors.

Some are public, some are private. The only public one right now in all of these is INX. And it trades in Canada. But I think that there's a lot of exciting things for us to discuss. - I think you hit on something too, is this to be very clear is not a hype show. We will talk about good, bad and different. This is something where just like any new innovation, there's gonna be mistakes. I was always told back in the day by some of my elders is never buy the first generation of a car because it has some things that needs to figure out and get some of the bad out of it. So that is our commitment to you that this isn't gonna be all hype.

This is literally, I think Douglas has seen and has some more stories because he's been in the space so long of there's some things that can go very wrong, but the upside is quite good as well. - Yeah, I'm not gonna have any rocket ships. And I think that's, when you look on Twitter and you see anything with crypto, it always has a rocket ship and a moon. I don't think this is that type of show. I think what we're gonna be talking about is really the base facts of what we like about them, what we don't like about them and try to educate. And I think that's very important in this space.

And I haven't seen a podcast yet that really educates and discusses. That isn't a hype show. Hopefully we can bring that. - Absolutely agree. And you can find us on YouTube. Just look for Old Men New Money. We'll be on iTunes. So make sure that you subscribe, share with your friends, leave us a review. We wanna hear exactly what you think of us because our goal is to serve you. We're here to get the people on the show that you wanna hear from, talk about the things that you wanna know. We really want this to be a two-way conversation. So you can find us on Twitter, Instagram, all the major social platforms.

And again, you'll be able to find us on all the major podcast platforms as well. - But in saying that, I want comments. I want people to make comments. I want questions in the comments. I want people to talk about what they want us to talk about. I'd like this certainly to be a two-way street. And I think that we've got a lot that we can help folks with in answering their questions. - Absolutely agree. Guys, this is, guys and gals, and anyone that's listening, however you call yourself, we are excited to deliver this to you. And again, this is gonna be a once a week show.

And if there's breaking news, we will absolutely hop on and cover that breaking news and bring it directly to you. So again, this is Phil Larmon. - Douglas Borthwick. - And this is Old Man New Money. We'll talk to you soon. - Thank you.