Shalini Nagarajan

Core Scientific was lent millions by top traditional finance institutions, a move that helped the cryptocurrency miner thrive and build out its business.&nbsp;



BlackRock and Apollo Global Management are among a group of creditors that lent the miner $500 million by purchasing its convertible notes, a <a href="https://cases.stretto.com/public/X217/12024/PLEADINGS/1202401182380000000128.pdf" target="_blank" rel="noreferrer noopener">court filing</a> published Jan. 18 showed. <a href="https://www.bnnbloomberg.ca/blackrock-apollo-among-creditors-lending-500-million-to-core-scientific-1.1874321" target="_blank" rel="noreferrer noopener">Bloomberg</a> first reported the news on Tuesday.



The miner managed to raise capital as BlackRock snapped up $38 million of convertible notes via subsidiary-managed accounts in August 2021, the report said. Apollo acquired $33.6 million between April and August that year.



They also contributed $17 million and $6.1 million respectively towards debtor-in-possession financing (DIP) last year, which would allow Core Scientific to continue running during bankruptcy.&nbsp;



The creditors, referred to in the court filing as an ad hoc group of DIP financing lending, also included Gullane Capital, multi-strategy investment firm Ibex Investors and ICG Advisors.



“The members of the Ad Hoc Group are either the beneficial holders of, or the investment advisors or managers to, funds and/or accounts that hold disclosable economic interests in relation to [Core Scientific],” the filing reads.



Other members holding Core Scientific notes are MassMutual, Corbin Capital Partners, Jordan Park Group, Kensico Capital Management, Marsico, Sabby Volatility Warrant Master Fund and Toroso Investments.&nbsp;



The largest creditor was Ibex, which lent Core $97.9 million in April 2021 and another $10.1 million towards the DIP loan.



Core Scientific <a href="https://blockworks.co/news/bitcoin-miner-core-scientific-to-file-bankruptcy-stock-tanks-30">filed for bankruptcy</a> last month after the company warned its cash resources would be exhausted by the end of 2022. Crypto miners struggled last year amid rising energy prices and broader macro trends affecting cryptoasset prices.



Earlier this month, the miner decided to <a href="https://blockworks.co/news/core-scientific-to-switch-off-celsius-miners-freeing-space-for-other-clients">free up hosting space</a> by letting go of bankrupt crypto lender Celsius as a client.



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Apollo Global Management

Top TradFi Institutions Lent Millions to Crypto Miner Core Scientific

Casey Wagner

<div id="highlights-block_61a94c355533f" class="highlights">
 <ul>
 <li>Flourish Crypto allows RIAs to access the growing digital asset market </li>
 <li>The platform now offers ethereum in addition to bitcoin in response to growing demand for more tokens </li>
 </ul>
 
</div>



MassMutual’s investment platform Flourish Crypto has added ethereum to its suite of assets, giving registered investment advisors (RIAs) greater access to the digital asset market, the insurance giant announced Thursday.&nbsp;



Flourish started about three years ago as Flourish Cash, a management solution that now works with about 420 RIAs around the country and represents more than a trillion dollars in total end-client assets. Flourish Crypto <a href="https://cms.blockworks.co/massmutuals-flourish-crypto-to-give-rias-direct-bitcoin-exposure/" target="_blank" rel="noreferrer noopener">launched</a> in September 2021 first with bitcoin as RIAs continued to express interest in digital asset investment opportunities. 



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“We started speaking with advisors about a year ago, and the change in demand over the last year has just been staggering,” said Ben Cruikshank, head of Flourish. “Today, virtually every single firm we&#8217;re speaking with is saying ‘we would like bitcoin and we would like ethereum, and we would like your perspectives on what&#8217;s coming next.’ I just can&#8217;t underscore enough how radically That conversation has changed really in just six to 12 months.” </blockquote>



Flourish Crypto has onboarded dozens of RIAs with an average assets under management of around $1 billion. RIAs generally have a difficult time accessing the crypto market on behalf of their clients because tokens cannot be traded on traditional brokerage platforms. The Flourish product has filled a significant gap in the market, Cruikshank said.&nbsp;



“We watched as crypto became a multi-trillion dollar asset class, we watched as 10s and 10s of millions of Americans are opening accounts or buying and selling cryptocurrencies,” he said.&nbsp; “And largely, when we spoke to RIAs, they felt like they were completely just left on the sidelines — that this whole crypto world was just moving past them.”



Flourish Cash helped the Flourish team start to understand the RIA community and build a cryptocurrency platform that met their needs, Cruikshank said.&nbsp;



“It is built with the flexibility they need around trading, transfers, regulatory and compliance considerations and integrations, client support, you name it,” he said. “We kind of customized the crypto solution for the adviser world so that RIAs could access crypto so that they could bring it to the client so that they can eventually help millions of millions of new Americans get what is often their first exposure to crypto.” 



<h3 class="wp-block-heading">Regulatory uncertainty</h3>



As different regulatory bodies in the US <a href="https://cms.blockworks.co/gensler-says-centralized-regulation-is-path-for-crypto/" target="_blank" rel="noreferrer noopener">continue to grapple</a> with how to approach and oversee the digital asset space, compliance issues have been top of mind for many RIAs, Cruikshank said. The US Securities and Exchange Commission (SEC) is the primary regulator for the RIA community, but the SEC has been fairly unclear about what the guidelines are around digital assets. 



“As an advisor being regulated by the SEC directly, making sure what you&#8217;re doing is in the lines of what your regulators are comfortable with is really, really important,” Cruikshank said.&nbsp;



In response to the uncertain regulatory environment, Flourish partnered with <a href="https://www.globenewswire.com/Tracker?data=QUXoa5aEC0WHNIU-He3Jso7AyQWkfSEndoA0Hmpbs8bJbia-xuv9IWeOR3SaGFioCEDrycopxto2hjWS2uMbcfjpQQG9wkDABa1FbIDZD4I=" target="_blank" rel="noreferrer noopener">Perkins Coie LLP</a>, an international law firm specializing in the financial technology, blockchain and investment management space, on a whitepaper that discusses regulatory and compliance considerations for RIAs looking to engage with cryptocurrencies. 



“If you think back to all the reasons that advisors cannot adopt crypto today, uncertain regulatory and compliance landscape is often one of the top three things on the list,” Cruikshank said. “Fortunately, we think there is certainly a path forward.”



In terms of what is next for Flourish Crypto, it is difficult to predict which tokens or cryptocurrencies may be added to the Flourish Crypto suite in the future, Cruikshank said. The SEC has determined that neither bitcoin nor ethereum are considered “securities&#8221; for the purpose of federal securities laws, but it is unclear how other tokens may be classified in the future. 



“Until there&#8217;s more regulatory clarity, you&#8217;re not going to see advisors adopting things too far out on that spectrum,” Cruikshank said. “With regards to additional tokens or additional cryptocurrencies, it is a slow but steady and very careful and very regulatory-first type of expansion.”



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Bitcoin

MassMutual’s Flourish Crypto Adds ETH, Releases Regulatory Blueprint

Sam Martin

<h2 class="wp-block-heading"></h2>


<div id="highlights-block_6154e0881ed24" class="highlights">
 <ul>
 <li>Flourish Crypto will give independent Registered Investment Advisers (RIAs) a simple, secure and compliant way to offer direct bitcoin exposure to their clients</li>
 <li>The MassMutual-owned firm aims to provide RIAs with the flexibility needed for trades, transfers, billing and integrations to open up an emerging asset class to a new demographic of investors</li>
 </ul>
 
</div>



Today, there is immense competition in the field of wealth management with robo-advisors, trading firms and other competitors constantly expanding their product offerings to compete with traditional independent Registered Investment Advisers (RIAs).



Historically RIAs have been forced to sit on the sidelines and watch capital flow out of their sphere of control, but Flourish Crypto — the digital asset partner to Flourish Cash — intends to change that by allowing RIAs to take part in the rapidly emerging crypto industry.



Flourish Cash, a cash management account for individuals and RIAs that yields 0.24% in an FDIC insured account, currently handles over $1 trillion in assets under management. Roughly 400 RIAs currently use their product offerings.



As a subsidiary of insurance giant MassMutual, Flourish Crypto hopes to empower these RIAs to offer their clients exposure to digital assets.&nbsp;



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“Investment advisors are really left with three choices when their clients ask them how to gain exposure to digital assets,” Ben Cruikshank, head of Flourish, told Blockworks. “Either recommend an investment vehicle that often trades at discounts or premiums to NAV with high management fees, tell them to go to a retail exchange where they would no longer generate any revenue for managing their money, or simply tell them it is not an option.”&nbsp;</blockquote>



Initially bitcoin will be the only asset available for trade, but the hope is to make ether available to clients over the coming weeks.



Based on overwhelming feedback from potential users, Flourish opted to vet different custodial providers to take ‘physical’ possession of their clients’ crypto assets.



This is where Paxos comes in. As the custodian for Flourish Crypto, Paxos is required to hold all customer assets bankruptcy-remote and separate from corporate assets. Paxos is one of the few companies in the crypto industry that meets both <a href="https://paxos.com/2021/03/02/paxos-is-first-company-to-secure-soc-2-type-2-certification-across-suite-of-crypto-products-and-services/" target="_blank" rel="noreferrer noopener">SOC 1 Type 2 and SOC 2 Type 2</a> standards, and the first company to secure a <a href="https://www.dfs.ny.gov/reports_and_publications/press_releases/pr1505071" target="_blank" rel="noreferrer noopener">New York State Department of Financial Services Trust Charter for Digital Assets</a>, in 2015.&nbsp;&nbsp;&nbsp;



In addition, a vast majority of retail exchanges today do not provide 1099’s to their users in order to help them file their taxes. This is also where Flourish feels they can differentiate themselves and open up crypto to an entirely new demographic of investors, according to Cruikshank.



Tim Corbett, CIO at MassMutual, said in a statement released today: “We decided that it was imperative to invest in cryptocurrency itself and to begin to lay the groundwork for ways we can incorporate it into our business. This includes offerings and technology initiatives across the company, such as today’s launch of Flourish Crypto — a cryptocurrency investing solution built for Registered Investment Advisors (RIAs) and their clients.”



It’s not only MassMutual that sees the opportunity for crypto and RIAs.&nbsp;



Matt Hougan, chief investment officer, Bitwise, <a href="https://cms.blockworks.co/qa-why-bitwise-believes-indexing-is-a-superior-crypto-strategy/" target="_blank" rel="noreferrer noopener">previously told</a> Blockworks that the financial advisor market is a huge opportunity for the digital asset industry and growing fast.



“By most estimates it’s as large as the institutional market, and it’s many times larger than the self-directed retail market,” said Hougan. “It’s a hard market to serve in that it requires education and support and a national distribution team, but I do think the crypto industry has perhaps been overfocused on the institutional market and not on the advisor market, which built a huge swathe of the ETF ecosystem into the multi-trillion-dollar market that it is today. That’s one fact that I think is not commonly understood.”

MassMutual

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