Correspondence 0001140361-24-038634 from Exodus Movement, Inc. (EXOD)
Exodus Movement, Inc.
Date: Aug. 26, 2024 · CIK: 0001821534 · Accession: 0001140361-24-038634
AI Filing Summary & Sentiment
Reasoning
File numbers found in text: 000-56643, 001-42047
Referenced dates: August 12, 2024
Letter
Division of Corporation Finance Filed on July 10, 2024 File No. 000-56643 Form 10-Q for the Fiscal Quarter Ended March 31, 2024 File No. 001-42047
Re:
Dear Ms. Bednarowski:
Set forth below are the responses of Exodus Movement, Inc. (“Exodus” or the “Company”), in response 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 August 12, 2024 (the “Comment Letter”), regarding the above-referenced Amendment No. 2 to the Registration Statement on Form 10-12G, (as amended by Amendment No. 2, the “Registration Statement”), as well as the above-referenced Form 10-Q for the Fiscal Quarter Ended March 31, 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 comments 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 Amendment No. 3 (“Amendment No. 3”) to the Registration Statement.
Amendment No. 2 to Registration Statement on Form 10-12G
Business, page 1
1.
We note your revised disclosure on pages 4 and 12 in response to prior comment 2. Please revise your disclosure on pages 4 and 12 to clarify that the crypto assets you support and provide access to services for have been identified as securities in SEC complaints. In addition, please revise your disclosure on page 12 to describe the policies and processes you have in place to determine whether the services that users can obtain from your API Providers are securities within the meaning of Section 2(a)(1) of the Securities Act.
The Company acknowledges the Staff’s comment and has revised Amendment No. 3 accordingly. Please refer to pages 4 and 16.
Our Products and Services
Products Offered Directly on the Exodus Platform, page 4
2.
Refer to your response to prior comment 16. Please revise your disclosure on page 4 to provide examples of the factors you consider to determine whether supporting a fork “makes sense for [y]our business and [y]our users.”
The Company acknowledges the Staff’s comment and has revised Amendment No. 3 accordingly. Please refer to page 5.
Exchange Aggregation, page 5
3.
Refer to your response to comment 12. Please identify the exchanges and DeFi platforms that the API Provider uses for crypto asset exchanges and the jurisdiction of each.
As described in Exodus’ responses to prior comments 1 and 5, the process whereby a user connects to a third-party API provider is as follows: “Exodus users connect to the relevant API Provider, provide identifying information to the API Provider based on such provider’s onboarding requirements, and then users directly interact with the API Provider with respect to all elements of the exchange or staking service.” Moreover, “once a user connects itself to [an API Provider] and provides onboarding information based on [the API Provider’s] requirements, Exodus has no substantial role in the [provision of services].” Exodus, which in this context is a provider of a technological interface and not of the services delivered by the third-party API Provider, understands and expects that users receive from each API Provider any relevant information and disclosures pursuant to the user onboarding process and relevant API Provider terms of service, including in relation to the exchange and DeFi platforms that the API Provider uses for exchanges and the jurisdiction of each. Because Exodus is not involved in the user onboarding process and does not have a role in the transactions between the API Provider and the user, it is not privy to information about the exchanges and DeFi platforms that an API Provider uses, which Exodus understands may change or be updated from time to time, given the dynamics of the digital asset market. However, Exodus generally understands that API providers that deliver exchange services source liquidity from a number of venues, including centralized exchanges, market makers, cross-chain bridges, aggregation protocols, and potentially other types of decentralized platforms. API Providers receive jurisdictional information from users during the onboarding process and are responsible for delivering services in compliance with applicable law, including with respect to the users’ jurisdictional information disclosed to the API Provider.
Also clarify how the users are able “to identify for themselves the best pricing, liquidity and order fulfillment by searching across multiple third-party API Providers” as it appears that you provide pricing information from pricing services and that, when a user chooses to exchange its crypto assets, an algorithm, and not the user, selects an API Provider.
The Company acknowledges the Staff’s comment and has revised Amendment No. 3 to clarify the pricing information received by Exodus’ users, including clarifying that the digital asset prices and other relevant market data offered directly on the Exodus Platform are independent from the pricing information presented to users by third-party API Providers in connection with a potential transaction. Please refer to page 5. As noted in Amendment No. 3, the Exodus Platform provides users with information regarding digital asset prices and other relevant market data. Exodus does not charge users to access this pricing information. Separate from this pricing service and in connection with a potential transaction, Exodus’ users are presented with pricing information from API Providers. For the avoidance of doubt, the digital asset pricing information offered on the Exodus Platform is independent of the pricing presented to users by third-party API Providers in connection with a potential transaction. In addition, because the pricing information on the Exodus Platform is made available to any user, users may use the Exodus Platform solely for this pricing information without engaging in transactions with our third-party API Providers.
In addition, please disclose whether the user transfers its crypto assets to the API Provider in connection with the transaction, and please describe how the API Provider’s fee is calculated.
The Company acknowledges the Staff’s comment and has revised Amendment No. 3 accordingly. Please refer to page 7.
Further, as we note your disclosure that the “aggregation process starts with a pricing service (if available),” please disclose the percentage of transactions for which a pricing service is not available.
The Company acknowledges the Staff’s comment and has revised Amendment No. 3 to clarify that if a pricing service is not available, exchange aggregation is similarly not available. Please refer to page 7.
4.
Refer to your response to comments 12 and 13. We note your disclosure that you provide pricing information from Coingecko and Coinmarketcap for each crypto asset supported with the Exchange Aggregator and that “an algorithm is employed that compares the primary service’s price to the price provided by other providers to ensure that the information from the primary provider does not vary materially from other sources in order to avoid inaccurate data from a single source.” Please identify the primary and secondary providers and disclose what constitutes a material price difference. Also disclose whether the algorithm is continually monitoring the pricing information or if it happens at certain times per day. Also describe how you determine which price to display when a material price difference is identified.
The Company acknowledges the Staff’s comment and has revised Amendment No. 3 accordingly. Please refer to page 5.
Services Offered and Performed by Our API Providers, page 5
5.
Refer to prior comments 11 and 15. You disclose that an updated list of your API providers is available within the Terms of Service located on your website, but the URL you provided in the June 9, 2024 response letter does not appear to include an updated list of all of your API providers. In this regard, we note that Section 1.5 of the Terms of Service provides examples of the APIs that provide services on your platform but does not include a complete list of your API providers. Please revise to disclose where users can find a list of your API providers and include here the table that you provided in response to prior comment 11.
The Company acknowledges the Staff’s comment and has revised Amendment No. 3 accordingly. Please refer to page 6. The Company has also revised the Terms of Service to incorporate a list of all API providers in as an appendix. The revised Terms of Service is available at the following URL: https://www.exodus.com/legal/exodus-tos-20240219-v29.pdf.
Fiat on and off-ramps, page 6
6.
We note your revised disclosure on page 6 that users may buy crypto assets with fiat currency through bank transfers, credit or debit card and Apple Pay and that users may sell crypto assets for fiat currency and transfer the currency to their bank account. Please disclose how your platform communicates (i) the fiat currencies that users may use to purchase crypto assets, including the cost of purchasing the crypto assets, and (ii) the crypto assets that users may exchange for fiat currencies, including the amount of fiat currency the user will receive for selling the crypto assets.
The Company acknowledges the Staff’s comment and has revised Amendment No. 3 accordingly. Please refer to pages 7-8.
Also identify the jurisdiction of the exchange or exchanges that the API Provider uses to purchase and sell the crypto assets.
As described in our responses to Comment 3, “once a user connects itself to [an API Provider] and provides onboarding information based on [the API Provider’s] requirements, Exodus has no substantial role in the [provision of services].” Accordingly, Exodus is a provider of a technological interface and not of the services delivered by the third-party API Provider. Because Exodus is not involved in the user onboarding process and does not have a role in the transactions between the API Provider and the user, it is not privy to information about the jurisdiction of the exchange or exchanges that the API Provider uses, which Exodus understands may change or be updated from time to time, given the dynamics of the digital asset market. However, Exodus generally understands that API providers that deliver exchange services source liquidity from a number of venues, including centralized exchanges, market makers, cross-chain bridges, aggregation protocols, and potentially other types of decentralized platforms.
In addition, please disclose the mechanics of how a user sends, receives and exchanges crypto assets and fiat currencies, including whether the user transfers its crypto assets or fiat currency to the API Provider in connection with the transaction.
The Company acknowledges the Staff’s comment and has revised Amendment No. 3 accordingly. Please refer to pages 7-8.
Staking, page 6
7.
Refer to your response to comment 17. Please revise the table on page 7 to clarify what you mean by the disclosure that, for VeChain and Algorand, unstaking is not required.
The Company acknowledges the Staff’s comment and has revised Amendment No. 3 accordingly. Please refer to page 9.
Elevate Technology, page 7
8.
We note your revised disclosure on page 7 that “[c]urrently products do exist to permit users to migrate from fiat currency to digital assets; however, they often have poor user interface/user experience (“UI/UX”) designs and require numerous transactions to move between different types of digital assets” but it appears that one of the ways you facilitate transfers of crypto assets is by giving users access to third-party exchanges. Please clarify how the use of your platform differs from the use of third-party exchanges, and clarify what you mean by your disclosure that “[t]he Exodus Platform is asset agnostic, meaning [that you] have the ability to operate properly irrespective of the type of digital asset as opposed to asset or blockchain specific platforms that limit users to a particular asset or blockchain.”
The Company acknowledges the Staff’s comment and has revised Amendment No. 3 accordingly, including to remove the disclosure that other products “often have poor user interface/user experience (“UI/UX”) designs,” to provide additional detail on how the use of the Exodus platform differs from the use of third-party exchanges and to clarify what is meant by referring to the Exodus Platform is asset agnostic, including noting that the Exchange Aggregator functions without requiring an intermediate digital asset. Please refer to pages 9 and 10.
Digital Asset and Stablecoin Holdings, page 9
9.
Refer to your response to comment 18. Please disclose the percentage of private keys that you hold in cold storage. In addition, please disclose whether you have policies regarding the percentage of private keys you hold in cold storage and, if so, provide disclosure regarding such policies. In this regard, we note your disclosure on page 10 that “[a]s of March 31, 2024, [you] held approximately 15% of wallets in cold storage.”
The Company acknowledges the Staff’s comment and has revised Amendment No. 3 accordingly. Please refer to page 12.
10.
Refer to your response to comment 19. Please revise your disclosure, including the table on page 10, to show the amount of USDC held and the splits between fiat currency and crypto assets, including USDC, held at each quarter.
The Company acknowledges the Staff’s comment and has revised Amendment No. 3 accordingly. Please refer to pages 12 and 13.
Human Capital Management, page 10
11.
Refer to your response to comment 20. Please revise your disclosure on pages 10 and 11 to disclose whether your non-U.S. independent contractors are paid in fiat currency or crypto assets. In addition, please disclose the material terms of your agreement with TriNet, including (i) the term of your agreement with TriNet, (ii) the termination provisions of your agreement with TriNet, (iii) the administrative fee you pay TriNet for its services and (iv) whether the administrative fee is paid in U.S. dollars or bitcoin. Also disclose how and when Gilded Inc. values the bitcoin that you use for employee compensation and whether any fees that you pay to Gilded Inc. are paid in fiat currency or crypto assets.
The Company acknowledges the Staff’s comment and has revised Amendment No. 3 accordingly
Show Raw Text
CORRESP
1
filename1.htm
August 26, 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.
Amendment No. 2 to Registration Statement on Form 10-12G
Filed on July 10, 2024
File No. 000-56643
Form 10-Q for the Fiscal Quarter Ended March 31, 2024
File No. 001-42047
Dear Ms. Bednarowski:
Set forth below are the responses of Exodus Movement, Inc. (“Exodus” or the “Company”), in response 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 August 12, 2024 (the “Comment Letter”), regarding the above-referenced Amendment No. 2 to the Registration Statement on Form 10-12G, (as amended by Amendment No. 2, the “Registration
Statement”), as well as the above-referenced Form 10-Q for the Fiscal Quarter Ended March 31, 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 comments 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 Amendment No. 3 (“Amendment No. 3”) to the Registration Statement.
1
Amendment No. 2 to Registration Statement on Form 10-12G
Business, page 1
1.
We note your revised disclosure on pages 4 and 12 in response to prior comment 2. Please revise your disclosure on pages 4 and 12 to clarify that the crypto assets you support and provide access
to services for have been identified as securities in SEC complaints. In addition, please revise your disclosure on page 12 to describe the policies and processes you have in place to determine whether the services that users can obtain from
your API Providers are securities within the meaning of Section 2(a)(1) of the Securities Act.
The Company acknowledges the Staff’s comment and has revised Amendment No. 3 accordingly. Please refer to pages 4 and 16.
Our Products and Services
Products Offered Directly on the Exodus Platform, page 4
2.
Refer to your response to prior comment 16. Please revise your disclosure on page 4 to provide examples of the factors you consider to determine whether supporting a fork “makes sense for [y]our
business and [y]our users.”
The Company acknowledges the Staff’s comment and has revised Amendment No. 3 accordingly. Please refer to page 5.
Exchange Aggregation, page 5
3.
Refer to your response to comment 12. Please identify the exchanges and DeFi platforms that the API Provider uses for crypto asset exchanges and the jurisdiction of each.
As described in Exodus’ responses to prior comments 1 and 5, the process whereby a user connects to a third-party API provider is as follows: “Exodus users connect to the relevant
API Provider, provide identifying information to the API Provider based on such provider’s onboarding requirements, and then users directly interact with the API Provider with respect to all elements of the exchange or staking service.” Moreover, “once a user connects itself to [an API Provider] and provides onboarding information based on [the API Provider’s] requirements, Exodus has no substantial role in the [provision of services].” Exodus, which in this
context is a provider of a technological interface and not of the services delivered by the third-party API Provider, understands and expects that users receive from each API Provider any relevant information and disclosures pursuant to the user
onboarding process and relevant API Provider terms of service, including in relation to the exchange and DeFi platforms that the API Provider uses for exchanges and the jurisdiction of each. Because Exodus is not involved in the user onboarding
process and does not have a role in the transactions between the API Provider and the user, it is not privy to information about the exchanges and DeFi platforms that an API Provider uses, which Exodus understands may change or be updated from time
to time, given the dynamics of the digital asset market. However, Exodus generally understands that API providers that deliver exchange services source liquidity from a number of venues, including centralized exchanges, market makers, cross-chain
bridges, aggregation protocols, and potentially other types of decentralized platforms. API Providers receive jurisdictional information from users during the onboarding process and are responsible for delivering services in compliance with
applicable law, including with respect to the users’ jurisdictional information disclosed to the API Provider.
2
Also clarify how the users are able “to identify for themselves the best pricing, liquidity and order fulfillment by searching across multiple third-party API
Providers” as it appears that you provide pricing information from pricing services and that, when a user chooses to exchange its crypto assets, an algorithm, and not the user, selects an API Provider.
The Company acknowledges the Staff’s comment and has revised Amendment No. 3 to clarify the pricing information received by Exodus’ users, including clarifying that the digital asset
prices and other relevant market data offered directly on the Exodus Platform are independent from the pricing information presented to users by third-party API Providers in connection with a potential transaction. Please refer to page 5. As noted in
Amendment No. 3, the Exodus Platform provides users with information regarding digital asset prices and other relevant market data. Exodus does not charge users to access this pricing information. Separate from this pricing service and in connection
with a potential transaction, Exodus’ users are presented with pricing information from API Providers. For the avoidance of doubt, the digital asset pricing information offered on the Exodus Platform is independent of the pricing presented to users
by third-party API Providers in connection with a potential transaction. In addition, because the pricing information on the Exodus Platform is made available to any user, users may use the Exodus Platform solely for this pricing information without
engaging in transactions with our third-party API Providers.
In addition, please disclose whether the user transfers its crypto assets to the API Provider in connection with the transaction, and please describe how the API
Provider’s fee is calculated.
The Company acknowledges the Staff’s comment and has revised Amendment No. 3 accordingly. Please refer to page 7.
Further, as we note your disclosure that the “aggregation process starts with a pricing service (if available),” please disclose the percentage of transactions for
which a pricing service is not available.
The Company acknowledges the Staff’s comment and has revised Amendment No. 3 to clarify that if a pricing service is not available, exchange aggregation is similarly not available.
Please refer to page 7.
3
4.
Refer to your response to comments 12 and 13. We note your disclosure that you provide pricing information from Coingecko and Coinmarketcap for each crypto asset supported with the Exchange
Aggregator and that “an algorithm is employed that compares the primary service’s price to the price provided by other providers to ensure that the information from the primary provider does not vary materially from other sources in order to
avoid inaccurate data from a single source.” Please identify the primary and secondary providers and disclose what constitutes a material price difference. Also disclose whether the algorithm is continually monitoring the pricing information
or if it happens at certain times per day. Also describe how you determine which price to display when a material price difference is identified.
The Company acknowledges the Staff’s comment and has revised Amendment No. 3 accordingly. Please refer to page 5.
Services Offered and Performed by Our API Providers, page 5
5.
Refer to prior comments 11 and 15. You disclose that an updated list of your API providers is available within the Terms of Service located on your website, but the URL you provided in the June
9, 2024 response letter does not appear to include an updated list of all of your API providers. In this regard, we note that Section 1.5 of the Terms of Service provides examples of the APIs that provide services on your platform but does
not include a complete list of your API providers. Please revise to disclose where users can find a list of your API providers and include here the table that you provided in response to prior comment 11.
The Company acknowledges the Staff’s comment and has revised Amendment No. 3 accordingly. Please refer to page 6. The Company has also revised the Terms of Service to incorporate a
list of all API providers in as an appendix. The revised Terms of Service is available at the following URL: https://www.exodus.com/legal/exodus-tos-20240219-v29.pdf.
Fiat on and off-ramps, page 6
6.
We note your revised disclosure on page 6 that users may buy crypto assets with fiat currency through bank transfers, credit or debit card and Apple Pay and that users may sell crypto assets for
fiat currency and transfer the currency to their bank account. Please disclose how your platform communicates (i) the fiat currencies that users may use to purchase crypto assets, including the cost of purchasing the crypto assets, and (ii)
the crypto assets that users may exchange for fiat currencies, including the amount of fiat currency the user will receive for selling the crypto assets.
4
The Company acknowledges the Staff’s comment and has revised Amendment No. 3 accordingly. Please refer to pages 7-8.
Also identify the jurisdiction of the exchange or exchanges that the API Provider uses to purchase and sell the crypto assets.
As described in our responses to Comment 3, “once a user connects itself to [an API Provider] and provides onboarding information based on [the API Provider’s] requirements, Exodus
has no substantial role in the [provision of services].” Accordingly, Exodus is a provider of a technological interface and not of the services delivered by the third-party API Provider. Because Exodus is not involved in the user onboarding process
and does not have a role in the transactions between the API Provider and the user, it is not privy to information about the jurisdiction of the exchange or exchanges that the API Provider uses, which Exodus understands may change or be updated from
time to time, given the dynamics of the digital asset market. However, Exodus generally understands that API providers that deliver exchange services source liquidity from a number of venues, including centralized exchanges, market makers,
cross-chain bridges, aggregation protocols, and potentially other types of decentralized platforms.
In addition, please disclose the mechanics of how a user sends, receives and exchanges crypto assets and fiat currencies, including whether the user transfers its
crypto assets or fiat currency to the API Provider in connection with the transaction.
The Company acknowledges the Staff’s comment and has revised Amendment No. 3 accordingly. Please refer to pages 7-8.
Staking, page 6
7.
Refer to your response to comment 17. Please revise the table on page 7 to clarify what you mean by the disclosure that, for VeChain and Algorand, unstaking is not required.
The Company acknowledges the Staff’s comment and has revised Amendment No. 3 accordingly. Please refer to page 9.
5
Elevate Technology, page 7
8.
We note your revised disclosure on page 7 that “[c]urrently products do exist to permit users to migrate from fiat currency to digital assets; however, they often have poor user interface/user experience (“UI/UX”) designs and require numerous transactions to move between different types of digital assets” but it appears that one of the ways you
facilitate transfers of crypto assets is by giving users access to third-party exchanges. Please clarify how the use of your platform differs from the use of third-party
exchanges, and clarify what you mean by your disclosure that “[t]he Exodus Platform is asset agnostic, meaning [that you] have the ability to operate properly irrespective of the type of digital asset as opposed to asset or blockchain
specific platforms that limit users to a particular asset or blockchain.”
The Company acknowledges the Staff’s comment and has revised Amendment No. 3 accordingly, including to remove the disclosure that other products “often have poor user interface/user
experience (“UI/UX”) designs,” to provide additional detail on how the use of the Exodus platform differs from the use of third-party exchanges and to clarify what is meant by referring to the Exodus Platform is asset
agnostic, including noting that the Exchange Aggregator functions without requiring an intermediate digital asset. Please refer to pages 9 and 10.
Digital Asset and Stablecoin Holdings, page 9
9.
Refer to your response to comment 18. Please disclose the percentage of private keys that you hold in cold storage. In addition, please disclose whether you have policies regarding the percentage
of private keys you hold in cold storage and, if so, provide disclosure regarding such policies. In this regard, we note your disclosure on page 10 that “[a]s of March 31, 2024, [you] held approximately 15% of wallets in cold storage.”
The Company acknowledges the Staff’s comment and has revised Amendment No. 3 accordingly. Please refer to page 12.
10.
Refer to your response to comment 19. Please revise your disclosure, including the table on page 10, to show the amount of USDC held and the splits between fiat currency and crypto assets,
including USDC, held at each quarter.
The Company acknowledges the Staff’s comment and has revised Amendment No. 3 accordingly. Please refer to pages 12 and 13.
6
Human Capital Management, page 10
11.
Refer to your response to comment 20. Please revise your disclosure on pages 10 and 11 to disclose whether your non-U.S. independent contractors are paid in fiat currency or crypto assets. In
addition, please disclose the material terms of your agreement with TriNet, including (i) the term of your agreement with TriNet, (ii) the termination provisions of your agreement with TriNet, (iii) the administrative fee you pay TriNet for
its services and (iv) whether the administrative fee is paid in U.S. dollars or bitcoin. Also disclose how and when Gilded Inc. values the bitcoin that you use for employee compensation and whether any fees that you pay to Gilded Inc. are
paid in fiat currency or crypto assets.
The Company acknowledges the Staff’s comment and has revised Amendment No. 3 accordingly