Mallers says no bitcoin rehypothecation at Strike — but what about re-pledging?
Jack Mallers suffered social media blowback this week after a viral tweet accused his company, Strike, of rehypothecating the bitcoin (BTC) backing its customers’ loans.
Mallers quickly denied the allegation, and to his credit, updated loan terms to clarify that “Your bitcoin is never rehypothecated on Strike. Never has been, never will be.”
Nevertheless, a private lending fund manager claims that Strike, like almost every other BTC-backed lender, still allows securitization and re-pledging of BTC-backed loans.
According to David Seroy (who suspects that Strike is similar to many other BTC-backed USD lenders), the company might still be securitizing and re-pledging bundles of BTC-backed loans — even after Strike’s revision this week to restrict BTC rehypothecation per se.
According to the private money lender, companies like Strike often bundle consumer loans into a securitized portfolio and pledge that bundle to access cash in a new, business-to-business loan.
Pledge, re-pledge, or transfer of BTC collateral
Seroy doesn’t characterize this common practice as anything nefarious, but rather a type of load-balancing tool for Strike’s balance sheet.
“When Strike needs more cash,” Seroy explained, “they simply pledge some IOUs and draw more money. When there is a lull in borrowing and Strike has too much cash on the books, they pay back some of the cash.”
Still, the complex financialization of loans has some customers concerned.
Strike’s revised loan terms retain Strike’s right to use loan customers’ BTC “for the purposes of or in connection with a pledge, re-pledge or transfer of BTC collateral to one or more capital providers during the term of this agreement, without notice.”
Read more: Tether thinks Jack Mallers will keep focus on Twenty One’s BTC, not USDT
Per Mallers’ promise this week, the terms specify that this BTC will not be “further re-hypothecated or on-lent to third parties.” Mallers also posted the revision to the original, viral tweet, inaccurately blaming Strike for rehypothecating.
Protos has reached out to Strike for comment and didn’t receive an immediate response.
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