Bcause

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Bcause
Bcause.jpg
Founded 2013
Headquarters Virginia Beach, VA
Key People Fred Grede, CEO; Thomas Flake, Founder; Tom Hammond, Chairman of the Board; Scott Early, Director
Employees 27
Twitter @Bcausellc
Website Bcause.com

Bcause, LLC is a cryptocurrency startup headquartered in Virginia Beach, Virginia. It offers cryptocurrency "farming" services, acting as a data center for bitcoin and other miners. It has also applied to be a Designated Contract Market (DCM) to trade futures and options on cryptocurrencies.

Overview

Bcause is a start-up that is developing what it terms "the world’s first full-stack cryptocurrency ecosystem," including mining, spot market trading, and derivatives trading and clearing.[1]

Company History

Bcause was formed in 2013. In March of 2017 the company chose to enter a business partnership with Connamara Systems in order to develop Bcause's software platform.[2]

Based in Virginia Beach, VA, and Chicago, IL, Bcause was originally planned as a platform to offer bitcoin options as a hedging tool. Later, the founders identified potentially profitable opportunities in providing infrastructure and services for bitcoin mining as well as offering logistical and support services to both retail and institutional bitcoin miners at its data center. By February 2018, Bcause was running thousands of mining rigs for clients in Asia and the U.S. in an old beverage warehouse in Virginia Beach. [3]

Bcause applied to the Commodity Futures Trading Commission in September 2016 for registration as a designated contract market to trade bitcoin futures.[4] As of May 2018, the application was pending approval. [5]

Bcause was one of 20 companies chosen to exhibit in the Innovators Pavilion at the 33rd Annual FIA Expo in Chicago in 2017. The Innovators Pavilion showcased startup companies providing forward-thinking solutions for the futures, options and cleared swaps industry.[6]

Nasdaq and Bcause announced on March 13, 2019, that Bcause would use Nasdaq’s matching engine, clearing and market surveillance tools through the Nasdaq Financial Framework platform to operate a spot cryptocurrency market. Bcause planned to launch its spot market within the next few months.[7]

Bcause filed for bankruptcy in April 2019. Despite this, the company told Coindesk in early May that it planned on tentatively launching cryptocurrency spot trading services on May 23, 2019.[8] By May 23, the company had not launched spot trading services. During that time Fred Grede and Bill Boyk were quietly removed from the company's website.[9]

Funding

Bcause announced that it had closed Series A funding from SBI Holdings in October of 2017, and SBI took a 40 percent stake in the company.[10]

A filing on April 30, 2018 with the U.S. Securities and Exchange Commission stated that starting the previous October Bcause had taken in $5 million of equity investment.[11]

In October 2018 Bcause announced that China Health Checkmate, an investment group managing family office assets and Asian-Pacific institutional funds, had agreed to be a "substantial" equity holder to help Bcause open its exchange and work on an Asia initiative to create new exchanges and asset-backed payment products.[12][13]

Virginia Beach granted Bcause $500,000, based on the company spending at least $64.8 million in capital investment at its 84,000-square-foot rented space at 5465 Greenwich Road.[14]

A review of the Bcause website on May 29, 2019, confirmed by a telephone call indicated that Frederick J. Grede, Chief Executive Office; Tom Hammond, Chairman of the Board of Directors; Scott Early, Director; and William Boyk, COO and CRO, had recently left the company. All four had previously worked for the Chicago Board of Trade.[15]

Bankruptcy and Liquidation

Bcause Mining, LLC, the mining affiliate operating in Virginia Beach, Virginia, filed voluntarily for bankruptcy court protection under Chapter 11 on April 11, 2019 in order to reorganize its debts. Unsecured creditors included a Virginia power company ($1,459,267.38), the U.S. Customs and Border Patrol ($737,041.90), landlords, and staff.[16]

The bankruptcy pleading was prompted by an order from a Virginia state court that the company pay amounts due Wesco for equipment and services related to the farming operation that would have led to the immediate garnishment of Bcause's bank account. Bcause continued to provide farming services to its mining customers. It laid off most of its staff in both Chicago and Virginia Beach as it abandoned its plans for futures trading and clearing.

Over the course of the next months, it became apparent that the three farming customers that provided 97% of Bcause's revenues would not renew their farming agreements with the company, which were due to expire in November 2019.

The company continued throughout the period to work on its plans for a spot bitcoin market. Bcause secured a commitment from its exchange software provider, Nasdaq, to license its trading software to a newly formed subsidiary, Bcause Secure, provided that it was paid all amounts in arrears and provided an advance license payment, totaling more than $1.2 million. Bcause asked the court for permission to sell Bcause Secure to a group of investors consisting of the company founders and other insiders. The court ordered Bcause to market and then try to auction Bcause Secure.

In July, Bcause began to buy defunct bitcoin miners from SBI, its largest customer and largest shareholder, refurbished them and began mining bitcoin for its own account.

As the company's financial and commercial prospects did not obviously improve during the course of the Chapter 11 bankruptcy U.S. Federal Bankruptcy Court Judge Janet Baer ordered the company into Chapter 7 bankruptcy on October 8, 2019, as a result of which, the company's assets would be liquidated under the direction of a trustee. The sale of Bcause Secure was allowed to proceed since bids were not due until October 11. Acceptance of any bids and disbursement of any funds from the sale of Bcause Secure would be supervised by the bankruptcy trustee.

Key People

  • Frederick J. Grede, Chief Executive Officer
  • Tom Hammond, Chairman of the Board
  • Scott Early, Director
  • William Boyk, Chief Operating Officer and Chief Regulatory Officer
  • Mike Adolphi, Chief Technology Officer
  • Thomas Flake, Founder and Chief Marketing Officer

References