Correspondence 0001140361-24-023547 from Exodus Movement, Inc. (EXOD)
Exodus Movement, Inc.
Date: May 1, 2024 · CIK: 0001821534 · Accession: 0001140361-24-023547
AI Filing Summary & Sentiment
Reasoning
File numbers found in text: 000-56643
Referenced dates: April 3, 2024
Letter
Division of Corporation Finance Registration Statement on Form 10 Filed on February 28, 2024 File No. 000-56643
Re: Exodus Movement, Inc.
Dear Ms. Bednarowski:
On behalf of Exodus Movement, Inc. (“Exodus” or the “Company”), this letter responds to the comments of the staff of the Securities and Exchange Commission (the “SEC”) Division of Corporation Finance (the “Staff”) contained in your letter, dated April 3, 2024 (the “Comment Letter”), regarding the above-referenced Registration Statement on Form 10 (the “Registration Statement”), filed on February 28, 2024. The Staff’s comments are set forth below, followed by the Company’s response. For ease of reference, the heading and numbered paragraphs below correspond to the heading and numbered comment in the Comment Letter and, in certain instances, if the Staff’s comment contained multiple parts, the Staff’s comment was separated into subparts to more effectively respond to each of the Staff’s comments. The Company’s responses are set forth beneath the Staff comments, which are set out in bold type. We are concurrently submitting via EDGAR this letter and an amendment to the Registration Statement (the “Amended Registration Statement”).
General
1. You state that you provide support for over 21,000 crypto assets. Please provide a description of your internal policies and procedures for how you determine whether crypto assets, including NFTs and staking products, are securities within the meaning of the U.S. federal securities laws. Also clarify that such processes are risk-based assessments made by the company and are not legal standards binding on any regulatory body or court.
Exodus has revised the Registration Statement to omit the verb “support” and to clarify that we provide “access to” over 21,000 crypto assets. Because Exodus does not conduct transactions in crypto assets or engage in any swap activity, Exodus does not review or analyze individual crypto assets to assess whether they are “securities” under the federal securities laws. To mitigate the risk that Exodus could be deemed to be a broker-dealer in the event a crypto asset may be determined by a regulatory body or a court to be a “security,” Exodus charges its third-party API providers (“API Providers”) a monthly subscription fee for exchanges made by persons located in the United States trading digital assets. For exchanges made by persons located outside the United States, Exodus charges its third-party providers a percentage of the digital assets exchanged. While Exodus believes that it could also charge exchanges on which persons located in the United States trade digital assets a percentage of digital assets exchanged that Exodus determines are not securities, Exodus has decided not to utilize such pricing. The Company has revised the disclosure on page 5 of the Amended Registration Statement to provide additional detail around its fee structures.
Further, please include a risk factor that addresses the specific risks inherent in your policies and procedures for determining whether or not a crypto asset is a security, and describe the potential regulatory risks under the U.S. federal securities laws if such crypto assets are determined to be securities.
In response to the Staff’s comment, Exodus has revised its risk factor, “Certain digital assets traded using third-party services integrated within our platform or other programs could be viewed as ‘securities’ for purposes of federal or state regulations and could subject us to regulatory scrutiny, inquiries, investigations, fines and other penalties,” on
page 23 of the Amended Registration Statement to make clear that it does not analyze crypto assets to determine whether they are securities.
Similarly please address how you determine that you are in compliance with the rules, regulations and laws of the jurisdictions in which you offer your products and services.
The Company reviews the laws of jurisdictions in which it operates and engages with outside counsel as necessary to ensure that it remains in compliance with applicable laws and regulations.
2. Please revise to disclose your policies related to whether you provide services for crypto assets that are securities, and, if so, how you do so in compliance with the federal securities laws and the risks to your business if you are found to be engaging in transactions for unregistered securities in violation of the federal securities laws.
The Company acknowledges the Staff’s comment and has revised its risk factor, “Certain digital assets traded using third-party services integrated within our platform or other programs could be viewed as ‘securities’ for purposes of federal or state regulations and could subject us to regulatory scrutiny, inquiries, investigations, fines and other penalties,” to make clear that, if the Company were to receive compensation based on the percentage of digital assets exchanged by persons located in the United States and such assets are deemed to be securities under the federal securities laws, then the Company could be deemed to be in violation of the federal and state securities laws, which could have a negative effect on our business, financial condition and results of operations.
The Company’s service is providing a visual interface for users to send, receive and store digital assets self-custodially. We believe that self-custody of financial assets, whether they are deemed to be a security or otherwise, is in compliance with current regulations. All other services involving crypto assets that may be considered securities, such as Cosmos and Tezos, including transactions such as swaps, staking and purchases, are performed by third-party API Providers.
In this regard, we note that your website indicates you offer staking products for Cosmos and Tezos, which have been identified as securities in separate SEC complaints.
The Company acknowledges the Staff’s comment and has revised the disclosure on its website to describe the products and services it offers in a manner consistent with the disclosure contained in the Amended Registration Statement. The Company respectfully advises the Staff that, consistent with the Company’s terms of service currently disclosed on its website, Exodus does not have any contact with, control over, or ability to take control of any assets that a user stakes. Rather, Exodus currently allows users to “stake” supported digital assets held in their Exodus wallets by participating in blockchain validation through a third-party API provider, Everstake.
3. Please provide to us a list of the each of the crypto assets material to your business, organized by the aggregate volume of transactions involving the crypto asset that also includes the blockchain on which each crypto asset exists, the volume of transactions involving the crypto asset in each jurisdiction in which you provide products and services for the crypto asset and the services you provide for each. In addition, revise your registration statement to include a table that, by volume of transactions, lists the crypto assets that are material to your business, and describe the characteristics of these crypto assets. Also disclose whether there are any jurisdictions in which you do not provide services related to any of these crypto assets.
The Company acknowledges the Staff’s comment and has provided the information requested by the Staff below and has also revised page 30 of the Amended Registration Statement. Please note that a description and characteristics of these assets is included in Item 1 under the Cryptocurrency section.
Digital Asset Blockchain(s) Exchange
Aggregation Revenue
For The Year Ended December 31, 2022 For The Year Ended December 31, 2023
BTC
Description: Store of value and payment cryptocurrency.
Bitcoin $12,279,502 $14,071,926
Tether USD
Description: Stablecoin.
Ethereum, Algorand, Avalanche, Binance Smart Chain, Arbitrum, Polygon, Optimism, Solana, Tron, Fantom, Polygon, Solana $10,562,800 $14,525,850
Ether
Description: Blockchain economy or blockchain platform.
Ethereum $6,360,680 $6,106,462
USD Coin
Description: Stablecoin.
Ethereum, Algorand, Avalanche, Binance Smart Chain, Arbitrum, Fantom, Polygon, Optimism, Solana, Tron $3,645,060 $2,478,815
The Company does not directly provide products and services with respect to crypto assets other than basic wallet functionality (i.e., users can send, receive and store digital assets self-custodially) on the Exodus platform. The Company provides access to the products and services for crypto assets that are offered and performed by the API Providers. The Company does not track the volume of basic wallet transactions, as this information is not pertinent to the Company’s business model. Rather, the Company tracks and measures the revenue generated by the underlying crypto asset. The crypto assets material to the Company’s business based on revenue are described in the table above and these digital assets are generally available in all jurisdictions in which the Exodus Platform is available.
The Company provides access to the API Providers’ services globally, with the exception of those jurisdictions comprehensively sanctioned by the U.S. Treasury Department’s Office of Foreign Assets (“OFAC”), and the States of New York and Washington.
4. We refer you to our December 2022 Sample Letter to Companies Regarding Recent Developments in Crypto Asset Markets, located on our website at the following address: https://www.sec.gov/corpfin/sample-letter-companies-regarding-crypto-assetmarkets. Please consider the issues identified in the sample letter as applicable to your facts and circumstances, and revise your disclosure accordingly.
The Company has considered the issues identified in the sample letter as applicable to its facts and circumstances at this time and has revised its disclosures accordingly. The disclosure under the heading, “Uncertainty and Volatility in the Digital Asset Markets,” on pages 8 and 9 of the Amended Registration Statement addresses Comments 1, 2 and 3 of the sample letter. The Company has revised the risk factor, “The regulatory regime governing blockchain technologies, digital assets and securities is uncertain and new regulations or policies may materially adversely affect the development and utilization of the Exodus Platform,” to address Comment 10 of the sample letter.
Cover Page
5. Please revise your filing to provide the address of your principal executive offices.
The Company acknowledges the Staff’s comment and has revised the cover page of the Amended Registration Statement. As provided in the explanatory footnote on the cover page of the Amended Registration Statement, the Company is a remote-first company and does not maintain a principal executive office but has provided its mailing address.
Business, page 1
6. Please revise to identify the jurisdictions in which you offer your platform and services and disclose the percentage of revenue earned in each.
The Company acknowledges the Staff’s comment and has revised page 9 of the Amended Registration Statement accordingly. The Company offers the Exodus Platform in all jurisdictions not prohibited by U.S. law.
In addition, we note that U.S. federal and state and foreign laws prohibit you from making available your platform or certain of its functionalities in all jurisdictions. Please disclose the methods you use to prohibit the Exodus Platform and certain of its functionalities from being accessed in such jurisdictions, and identify these jurisdictions and functionalities.
The Company uses geo-blocking technology to block the Exodus Platform’s availability in jurisdictions subject to U.S. comprehensive sanctions—currently, the Crimea region and so-called Donetsk People’s Republic and Luhansk People’s Republic in Ukraine, Cuba, Iran, North Korea, and Syria. The Company also uses geo-blocking technology to block the availability of API integrations for third-party crypto-to-crypto exchange services in the states of New York and Washington.
Also revise your disclosure in the Regulatory Environment section on page 6 to discuss, to the extent material, the laws, rules and regulations that impact your business in the jurisdictions in which you offer your platform and services. For example, you disclose on page 15 that you offer products and services in China. If material, describe the laws, rules and regulations in China regarding crypto assets and any other laws, rules and regulations that may impact your business.
The Company offers the Exodus Platform in all jurisdictions not prohibited by U.S. law, and in so doing, it reviews the laws, rules and regulations of any jurisdiction other than the United States if material to its business. As an example, while the Exodus Platform is not prohibited in China, the revenue from China-based users represents an immaterial portion of the Company’s total revenue.
7. Please identify the crypto assets you hold for your own account. In this regard, we note your disclosure on page 25 that, as of December 31, 2023, you held Bitcoin, Ethereum, USDC and “other digital assets.” To the extent that you hold your crypto assets on an exchange, please identify the exchange.
The Company acknowledges the Staff’s comment and has revised page 7 of the Amended Registration Statement accordingly.
To the extent that they are held with a third-party custodian, please identify the custodian and describe the material terms of the agreement, including:
● disclose how the custodian stores the private keys, including the percentage that are held in cold storage, and the geographic location of where they are stored;
● disclose whether your assets are comingled with the assets of other customers;
● identify who has access to the private key information;
● disclose whether any entity is responsible for verifying the existence of your crypto assets; and
● disclose whether and to what extent the custodian carries insurance for any losses of the crypto assets it holds for you.
To the extent that you self-custody your crypto assets, please revise to disclose your policies and procedures related to storing the private keys, including whether they are held in cold or hot storage, the geographic location where they are stored and who has access to the private keys. In addition, we note your disclosure on page 12 that you do not have insurance that covers your Bitcoin in the event of loss or fraud. Please revise to clarify, if true, and on page 12 that you do not have insurance that covers your crypto assets. If you do have insurance that covers your crypto assets, please revise to disclose to what extent the insurance covers the loss of your crypto assets.
The Company acknowledges the Sta
Show Raw Text
CORRESP
1
filename1.htm
April 30, 2024
CONFIDENTIAL SUBMISSION VIA EDGAR
Sonia Bednarowski
U.S. Securities and Exchange Commission
Division of Corporation Finance
100 F. Street, N.E.
Washington, D.C. 20549
Re:
Exodus Movement, Inc.
Registration Statement on Form 10
Filed on February 28, 2024
File No. 000-56643
Dear Ms. Bednarowski:
On behalf of Exodus Movement, Inc. (“Exodus” or the “Company”), this letter responds to the
comments of the staff of the Securities and Exchange Commission (the “SEC”) Division of Corporation Finance (the “Staff”) contained in your letter, dated April 3, 2024 (the “Comment Letter”), regarding the above-referenced Registration Statement on
Form 10 (the “Registration Statement”), filed on February 28, 2024. The Staff’s comments are set forth below, followed by the Company’s response. For ease of reference, the heading and numbered paragraphs below correspond to the heading and numbered
comment in the Comment Letter and, in certain instances, if the Staff’s comment contained multiple parts, the Staff’s comment was separated into subparts to more effectively respond to each of the Staff’s comments. The Company’s responses are set
forth beneath the Staff comments, which are set out in bold type. We are concurrently submitting via EDGAR this letter and an amendment to the Registration Statement (the “Amended Registration Statement”).
General
1.
You state that you provide support for over 21,000 crypto assets. Please provide a description of your internal policies and procedures for how you determine whether
crypto assets, including NFTs and staking products, are securities within the meaning of the U.S. federal securities laws. Also clarify that such processes are risk-based assessments made by the company and are not legal standards binding on
any regulatory body or court.
Exodus has revised the Registration Statement to omit the verb “support” and to clarify that we provide “access
to” over 21,000 crypto assets. Because Exodus does not conduct transactions in crypto assets or engage in any swap activity, Exodus does not review or analyze individual crypto assets to assess whether they are “securities” under the federal
securities laws. To mitigate the risk that Exodus could be deemed to be a broker-dealer in the event a crypto asset may be determined by a regulatory body or a court to be a “security,” Exodus charges its third-party API providers (“API Providers”) a
monthly subscription fee for exchanges made by persons located in the United States trading digital assets. For exchanges made by persons located outside the United States, Exodus charges its third-party providers a percentage of the digital assets
exchanged. While Exodus believes that it could also charge exchanges on which persons located in the United States trade digital assets a percentage of digital assets exchanged that Exodus determines are not securities, Exodus has decided not to
utilize such pricing. The Company has revised the disclosure on page 5 of the Amended Registration Statement to provide additional detail around its fee structures.
Further, please include a risk factor that addresses the specific risks inherent in your policies and
procedures for determining whether or not a crypto asset is a security, and describe the potential regulatory risks under the U.S. federal securities laws if such crypto assets are determined to be securities.
In response to the Staff’s comment, Exodus has revised its risk factor, “Certain digital assets traded using
third-party services integrated within our platform or other programs could be viewed as ‘securities’ for purposes of federal or state regulations and could subject us to regulatory scrutiny, inquiries, investigations, fines and other penalties,” on
page 23 of the Amended Registration Statement to make clear that it does not analyze crypto assets to determine whether they are securities.
Similarly please address how you determine that you are in compliance with the rules, regulations and laws of
the jurisdictions in which you offer your products and services.
The Company reviews the laws of jurisdictions in which it operates and engages with outside counsel as necessary
to ensure that it remains in compliance with applicable laws and regulations.
2.
Please revise to disclose your policies related to whether you provide services for crypto assets that are securities, and, if so, how you do so in compliance with the
federal securities laws and the risks to your business if you are found to be engaging in transactions for unregistered securities in violation of the federal securities laws.
The Company acknowledges the Staff’s comment and has revised its risk factor, “Certain digital assets traded
using third-party services integrated within our platform or other programs could be viewed as ‘securities’ for purposes of federal or state regulations and could subject us to regulatory scrutiny, inquiries, investigations, fines and other
penalties,” to make clear that, if the Company were to receive compensation based on the percentage of digital assets exchanged by persons located in the United States and such assets are deemed to be securities under the federal securities
laws, then the Company could be deemed to be in violation of the federal and state securities laws, which could have a negative effect on our business, financial condition and results of operations.
The Company’s service is providing a visual interface for users to send, receive and store digital assets
self-custodially. We believe that self-custody of financial assets, whether they are deemed to be a security or otherwise, is in compliance with current regulations. All other services involving crypto assets that may be considered securities, such
as Cosmos and Tezos, including transactions such as swaps, staking and purchases, are performed by third-party API Providers.
In this regard, we note that your website indicates you
offer staking products for Cosmos and Tezos, which have been identified as securities in separate SEC complaints.
The Company acknowledges the Staff’s comment and has revised the disclosure on its website to describe the products and services it offers in a manner consistent with the disclosure contained in the Amended Registration Statement. The
Company respectfully advises the Staff that, consistent with the Company’s terms of service currently disclosed on its website, Exodus does not have any contact with, control over, or ability to take control of any assets that a user stakes.
Rather, Exodus currently allows users to “stake” supported digital assets held in their Exodus wallets by participating in blockchain validation through a third-party API provider, Everstake.
3.
Please provide to us a list of the each of the crypto assets material to your business, organized by the aggregate volume of transactions involving the crypto asset
that also includes the blockchain on which each crypto asset exists, the volume of transactions involving the crypto asset in each jurisdiction in which you provide products and services for the crypto asset and the services you provide for
each. In addition, revise your registration statement to include a table that, by volume of transactions, lists the crypto assets that are material to your business, and describe the characteristics of these crypto assets. Also disclose
whether there are any jurisdictions in which you do not provide services related to any of these crypto assets.
The Company acknowledges the Staff’s comment and has provided the information requested by the Staff below and
has also revised page 30 of the Amended Registration Statement. Please note that a description and characteristics of these assets is included in Item 1 under the Cryptocurrency section.
Digital Asset
Blockchain(s)
Exchange
Aggregation Revenue
For The Year Ended
December 31, 2022
For The Year Ended
December 31, 2023
BTC
Description: Store of value and payment cryptocurrency.
Bitcoin
$12,279,502
$14,071,926
Tether USD
Description: Stablecoin.
Ethereum, Algorand, Avalanche, Binance Smart
Chain, Arbitrum, Polygon, Optimism, Solana, Tron, Fantom, Polygon, Solana
$10,562,800
$14,525,850
Ether
Description: Blockchain economy or blockchain platform.
Ethereum
$6,360,680
$6,106,462
USD Coin
Description: Stablecoin.
Ethereum, Algorand, Avalanche, Binance Smart
Chain, Arbitrum, Fantom, Polygon, Optimism, Solana, Tron
$3,645,060
$2,478,815
The Company does not directly provide products and services with respect to crypto assets other than basic wallet
functionality (i.e., users can send, receive and store digital assets self-custodially) on the Exodus platform. The Company provides access to the products and services for crypto assets that are offered and performed by the API Providers. The
Company does not track the volume of basic wallet transactions, as this information is not pertinent to the Company’s business model. Rather, the Company tracks and measures the revenue generated by the underlying crypto asset. The crypto assets
material to the Company’s business based on revenue are described in the table above and these digital assets are generally available in all jurisdictions in which the Exodus Platform is available.
The Company provides access to the API Providers’ services globally, with the exception of those jurisdictions
comprehensively sanctioned by the U.S. Treasury Department’s Office of Foreign Assets (“OFAC”), and the States of New York and Washington.
4.
We refer you to our December 2022 Sample Letter to Companies Regarding Recent Developments in Crypto Asset Markets, located on our website at the following address:
https://www.sec.gov/corpfin/sample-letter-companies-regarding-crypto-assetmarkets. Please consider the issues identified in the sample letter as applicable to your facts and circumstances, and revise your disclosure accordingly.
The Company has considered the issues identified in the sample letter as applicable to its facts and
circumstances at this time and has revised its disclosures accordingly. The disclosure under the heading, “Uncertainty and Volatility in the Digital Asset Markets,” on pages 8 and 9 of the Amended Registration Statement addresses Comments 1, 2 and 3
of the sample letter. The Company has revised the risk factor, “The regulatory regime governing blockchain technologies, digital assets and securities is uncertain and new regulations or policies may materially adversely affect the development and
utilization of the Exodus Platform,” to address Comment 10 of the sample letter.
Cover Page
5.
Please revise your filing to provide the address of your principal executive offices.
The Company acknowledges the Staff’s comment and has revised the cover page of the Amended Registration
Statement. As provided in the explanatory footnote on the cover page of the Amended Registration Statement, the Company is a remote-first company and does not maintain a principal executive office but has provided its mailing address.
Business, page 1
6.
Please revise to identify the jurisdictions in which you offer your platform and services and disclose the percentage of revenue earned in each.
The Company acknowledges the Staff’s comment and has revised page 9 of the Amended Registration Statement
accordingly. The Company offers the Exodus Platform in all jurisdictions not prohibited by U.S. law.
In addition, we note that U.S. federal and state and foreign laws prohibit you from making available your
platform or certain of its functionalities in all jurisdictions. Please disclose the methods you use to prohibit the Exodus Platform and certain of its functionalities from being accessed in such jurisdictions, and identify these jurisdictions and
functionalities.
The Company uses geo-blocking technology to block the Exodus Platform’s availability in jurisdictions subject to
U.S. comprehensive sanctions—currently, the Crimea region and so-called Donetsk People’s Republic and Luhansk People’s Republic in Ukraine, Cuba, Iran, North Korea, and Syria. The Company also uses geo-blocking technology to block the availability of
API integrations for third-party crypto-to-crypto exchange services in the states of New York and Washington.
Also revise your disclosure in the Regulatory Environment section on page 6 to discuss, to the extent
material, the laws, rules and regulations that impact your business in the jurisdictions in which you offer your platform and services. For example, you disclose on page 15 that you offer products and services in China. If material, describe the
laws, rules and regulations in China regarding crypto assets and any other laws, rules and regulations that may impact your business.
The Company offers the Exodus Platform in all jurisdictions not prohibited by U.S. law, and in so doing, it
reviews the laws, rules and regulations of any jurisdiction other than the United States if material to its business. As an example, while the Exodus Platform is not prohibited in China, the revenue from China-based users represents an immaterial
portion of the Company’s total revenue.
7.
Please identify the crypto assets you hold for your own account. In this regard, we note your disclosure on page 25 that, as of December 31, 2023, you held Bitcoin,
Ethereum, USDC and “other digital assets.” To the extent that you hold your crypto assets on an exchange, please identify the exchange.
The Company acknowledges the Staff’s comment and has revised page 7 of the Amended Registration Statement
accordingly.
To the extent that they are held with a third-party custodian, please identify the custodian and
describe the material terms of the agreement, including:
●
disclose how the custodian stores the private keys, including the percentage that are held in cold storage, and the geographic location of where they are stored;
●
disclose whether your assets are comingled with the assets of other customers;
●
identify who has access to the private key information;
●
disclose whether any entity is responsible for verifying the existence of your crypto assets; and
●
disclose whether and to what extent the custodian carries insurance for any losses of the crypto assets it holds for you.
To the extent that you self-custody your crypto assets, please revise to disclose your policies and
procedures related to storing the private keys, including whether they are held in cold or hot storage, the geographic location where they are stored and who has access to the private keys. In addition, we note your disclosure on page 12 that you
do not have insurance that covers your Bitcoin in the event of loss or fraud. Please revise to clarify, if true, and on page 12 that you do not have insurance that covers your crypto assets. If you do have insurance that covers your crypto assets,
please revise to disclose to what extent the insurance covers the loss of your crypto assets.
The Company acknowledges the Sta