Willy Woo Calls Out Strike’s Jack Mallers For Risky Lending Practices
The post Willy Woo Calls Out Strike’s Jack Mallers For Risky Lending Practices appeared on BitcoinEthereumNews.com. The Bitcoin analyst said payments firm Strike’s new lending product ‘rehypothecates’ customers’ collateral. Bitcoin analyst Willy Woo got into a spat with Strike founder and CEO Jack Mallers over customers’ assets being lent to third parties to boost profits. In an X post, Woo pointed out that Bitcoin payments firm Strike’s new terms of service for its lending product allow it to rehypothecate customers’ funds. Rehypothecation is a practice where an institution reuses assets that have been pledged to it as collateral by clients, using those same assets as collateral for its own borrowing or financial activities. Strike’s terms of service say the “Lender has relationships with one or more capital providers who provide funding to Lender in order to provide the loan to you.” The company said in May that user funds are held in segregated accounts by itself or its partners and never rehypothecated. Woo said, “In Strike, re-hypothecation is absolutely happening. This means higher risk with no ability for customers to make an assessment on that risk due to the lack of disclosure.” However, Woo did make clear that Strike is not engaging in recursive rehypothecation, a much more dangerous process in which customers’ assets are loaned and re-loaned several times. That kind of arrangement hurt crypto badly, for example, when the Gemini exchange’s Gemini Earn product took customers’ assets and loaned them to Genesis, which in turn rehypothecated them to Alameda Research, “who then bought bags of shitcoins and got liquidated,” Woo said. “Each hop adds more risk, the trades are riskier, and also the entity can mishandle the collateral or steal it (FTX/Alameda did both).” Mallers Fires Back Mallers responded that Strike only works with “vetted capital partners” and that Woo’s claims were “disingenuous, and at times borderline false.” He agreed to publicly disclose all…
The post Willy Woo Calls Out Strike’s Jack Mallers For Risky Lending Practices appeared on BitcoinEthereumNews.com.
The Bitcoin analyst said payments firm Strike’s new lending product ‘rehypothecates’ customers’ collateral. Bitcoin analyst Willy Woo got into a spat with Strike founder and CEO Jack Mallers over customers’ assets being lent to third parties to boost profits. In an X post, Woo pointed out that Bitcoin payments firm Strike’s new terms of service for its lending product allow it to rehypothecate customers’ funds. Rehypothecation is a practice where an institution reuses assets that have been pledged to it as collateral by clients, using those same assets as collateral for its own borrowing or financial activities. Strike’s terms of service say the “Lender has relationships with one or more capital providers who provide funding to Lender in order to provide the loan to you.” The company said in May that user funds are held in segregated accounts by itself or its partners and never rehypothecated. Woo said, “In Strike, re-hypothecation is absolutely happening. This means higher risk with no ability for customers to make an assessment on that risk due to the lack of disclosure.” However, Woo did make clear that Strike is not engaging in recursive rehypothecation, a much more dangerous process in which customers’ assets are loaned and re-loaned several times. That kind of arrangement hurt crypto badly, for example, when the Gemini exchange’s Gemini Earn product took customers’ assets and loaned them to Genesis, which in turn rehypothecated them to Alameda Research, “who then bought bags of shitcoins and got liquidated,” Woo said. “Each hop adds more risk, the trades are riskier, and also the entity can mishandle the collateral or steal it (FTX/Alameda did both).” Mallers Fires Back Mallers responded that Strike only works with “vetted capital partners” and that Woo’s claims were “disingenuous, and at times borderline false.” He agreed to publicly disclose all…
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