February 7, 2022 – On today’s podcast we welcome special guest Ben Errez, GreenBox POS Co-Founder and Chairman. GreenBox POS is a fintech company offering blockchain ledger and smart contract token technologies to create seamless payment processing solutions.

On the show, Ben discusses:

  • The macro case for the global digital payment market
  • His thoughts on crypto, digital currencies and stablecoins
  • Details about the company’s stablecoin offering
  • A rebuke to a recent short seller report on the company
  • And more

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Welcome investors to The Absolute Return Podcast. Your source for stock market analysis, global macro musings and hedge fund investment strategies, your hosts, Julian Klymochko, and Michael Kesslering aim to bring you the knowledge and analysis you need to become a more intelligent and wealthier investor. This episode is brought to you by Accelerate Financial Technologies. Accelerate because performance matters. Find out more at accelerateshares.com.

Julian Klymochko: Excited to have Ben from GreenBox POS on the show today. They’re stock trades under the ticker symbol, GBOX on the NASDAQ. So, Ben welcome. I do want to kick things off, just giving a brief overview of your career trajectory. I went over it. Very briefly you spent over a decade at Microsoft. One of the largest tech companies in the world. You had stents at other large tech companies. Can you discuss your career history and some of the key experiences that helped you become a founder?

Ben Errez: Yes. Thanks. So interesting that you say trajectory. Trajectory is usually the before picture, not the after picture. And you know, just last week I celebrated my 61st birthday.

Julian Klymochko: Oh, happy birthday.

Ben Errez: So, I would say I’m in the middle. Not before, not after. We been making the case for being a founder, I think a founder or an entrepreneur in general is something that you’re born with. Life prepares you through its motions and lenses for certain roles. And it’s up to you to take the left or the right road when you get to the fork. And you know, things happen for a reason. And if you move in into that direction, that is consistent with your overall plan, you will be a founder of something. And I have the opportunity be a founder, several types in my career. You asked about my background, so why don’t we start with the first job that I had out of my Navy career with the Israeli Navy.

And that was part of the founding team at Intel. I wasn’t the first one, but I was part of the first 120 people, and we were sort of the startup team. I had an opportunity to work on the design and manufacturing of the first CPUs, commercial CPUs, the eighties, and others worked on the first quarter, make memory chip, the 27 to 64. Both of these components went later on in collaboration with IBM into the first personal computer. And that I think actually is my claim to fame. After my service with the Intel, I set up my own tech startup. Ran that for about four years and then sold it to IBM Israel. Worked with IBM and within this context for two additional years until I was, I don’t want to say stolen, but moved from that position into Microsoft, I was part of the founding team at the office at Microsoft.

And again, another claim to fame. I started with Microsoft before windows and before office. And I managed the engineering of that division on the international versions of office for about 14 years. And they worked for three years on Bill Gates initiative then called the Trustworthy Computing. And it was one of the first four people in that group. So obviously my name is on every publication that group ever published before its foundation. And today I think they have a little more than a thousand people. In 2004 I left Microsoft and attempted retirement for the first time, turned out I’m pretty bad at retirement. I tried it a couple of times in my career unsuccessfully. So that was the first of which. Very quickly I set up a consulting firm and focused on projects that interest me both on the engineering and technology side and on the capital market side. A little bit later on run that for about 12 years.

At that point my son made the cut for the U.S. Olympic Team in Kayaking and was working towards the Tokyo 2020 games. And he thought that Seattle is not the best place for him to practice in the winter for the Olympics. I thought we were going to Hawaii and actually got a business license in Hawaii. But he said, no, you’re going to San Diego. And I was a good helicopter parent of course changed my plans. And we said, okay, fine. We’re going to San Diego. And I attempted retirement for the second time. I bought a sailboat and started thinking about learning to sail and things like that. And that obviously helped for about three months. At that point I met my partner and co-founder of GreenBox, Fredi Nisan.

I met him right when I was asked to be the first managing director of the alumni foundation, Microsoft Alumni Foundation in California. And immediately decided that this is what I need to do without knowing what it actually is. We did figure it out at that point. But I knew that he and I were meant to do something together. So, I moved from the alumni position to the GreenBox position. Very quickly we identified what it is that we wanted to do. We both came from vast experience in both technology and capital markets and went on the hunt for an interesting problem that we could fix. And you know, nobody else could think about it the same way that you know, of course this is a very arrogant position to take which I think comes with the job of a being an entrepreneur.

You always have to think that you can come up with solutions to existing problems that are unique and valuable and have material impact on a particular space. So, we focused on payments. Fredi just did an exit in the payment business. He had an ERP and the POS company called Brava which he sold. And we were both available. We happened to meet of all places at the Synagogue Art Auction and immediately decided to figure out what it is that we could do better than others.

We took the bet on blockchain, right from the start. We have never considered anything else and within blockchain payment infrastructure, and within that focusing 100% on blockchain ledger. We like the idea of basing something as sensitive as payments on an infrastructure that cannot be modified and is fully transparent. And we thought this is an amazing beginning. Then we added on top of that. The other features that come with blockchain in general and those include the privacy, reliability, extendibility. Being able to do transactions, settlement and authorization, regardless of geography or time zone or business holiday schedule or anything like that. And we were very intrigued with that solution. Now, at the time when we started there was one other system available, infrastructure, not payment named Sequence, and we didn’t subscribe to Sequence as a solution.

We thought the government involvement in it was too invasive and the direction was not proper. And we decided to build our own and turned out that this was one of the most amazing and critical decisions that the company ever took, because at the time that we finished building that infrastructure and we’re ready to launch our first commercial platform, Sequence died, and it died because of lack of fun

ding and took away with it, the entire competitive map. And here we are all by ourselves standing with amazing opportunity. So, we launched in the beginning of 2019, the first generation of our platform. And within the first year, we did a little over 170 million in volume of business, which we thought was pretty cool for first year, first version, first generation deployment. We liked it a lot. We just to put things in perspective, though, I would say that we’re doing more than that per month today, but at the time it was a big deal.

So that was generation one. Very quickly we moved to a generation two planning for international expansion by adding crypto and forex capabilities that was in April of 20. And in January of 21, we added in our generation three platform, capabilities along the banking side business by adding a white label offering. Complete the blockchain solutions for banks under their own logos and the interface and for their own Rolodex and clients and users. And then also as part of all of these advantages we added Coyni. So, I think we’ll probably have a separate conversation about Coyni, but I would just say that Coyni is very, very unique type of stable coin offering because it comes as something that sprouts out of a transactional ecosystem because it has that background because it knows how to connect to gateway system.

It is a perfect combination of a stable coin with its properties, you know, instant transactions and instant liquidity and cross-border capabilities and the push to card technologies. Together with de-risking capabilities of traditional gateways. And knowing that there is funds that are used to purchase tokens, let’s say using credit cards, et cetera, are already preauthorized using the traditional ecosystem. Operating like that is a very, very unique advantage for Coyni. And the second aspect of Coyni is of course, the fact that it’s aware of consumer protection principles and can be reversed. It’s the only cryptocurrency that is undoable. And we think that the upcoming regulatory oversight for the space, this will be part of what will be required of stable codes. So, we are very, very excited about where stable coin is today and where it’s going and our participation within this space. And I’m sure we’ll talk about it in the coming questions.

Michael Kesslering: Absolutely. And just to back up a little bit on the payment market, what’s some of the macro case for the global digital payment market today for investors?

Ben Errez: Yeah, so a lot of unique uses exist today. I can mention a few of them but before I do that, I’d like you to recognize that this is the nature of money being digital or traditional minted currency. It has similar functions, both of them need to be custodial and transactional. Custodial, meaning they have to have an agreed upon value that is intrinsic and backed up by minted currency in 100% verifiable and auditable ecosystem which by the way, sounds like a trivial property, but no stable coin has that today. The other thing is being transactional, meaning you have to be minded to consumer protection principles, and you have to be able to undo bad transactions. And again, no crypto methodology exists today to allow for that.

Now with regards to uses. So, let’s take one interesting example, which is forex, foreign exchange transactions. This is a regulated activity, which involves not only being licensed to do money transmission between point A and point B, might be within the same jurisdiction or cross border. It’s obviously always utilizing different currencies. And maybe in the future also include virtual and be at currencies at the same time as part of the forex transaction. To do all of that digitally and instantly you can only do that using stable coin. Of course, not all stable coins are created the same, right? If you look at Tether, for example, which is the largest stable coin today, 97% of it is not custodian. No one knows what is the cash that is backing that coin, in fact, it’s unknown, big mystery, the biggest mystery in this space today.

Julian Klymochko: Yep.

Ben Errez: Also, to the extent that it is transactional, it’s not reversible. So, if you use it to buy something that turns out to be not delivered or delivered improperly or for any reason you didn’t like it and you wanted to return it, there’s no way to force the return using that coin. Circle with USD another interesting example. It is only backed up at 61%. So, its custodial function is questionable. Also, Circle is involved in utilizing this stable coin for lending under D-5. And to do that and especially for the purpose of returning or providing higher returns on stable coin deposits that they use for lending that’s a typical banking function. You can’t create new coin to pay for the interest that you paid for the deposit without creating a custodial backing forward in dollars.

So, meaning if you print without custodial backing, you are minting and minting is protected, the holy grail of the space, right? No one is allowed and shouldn’t be allowed to mint dollars, it’s a function that is solely reserved for the U.S. Government, and we would like to keep it that way. You have a problem there, now consider that the entire stable coin industry, which today is approaching 140 billion a year is about 90% the combination of these two points, right? USDP plus USDC combined is just over a hundred billion, right? A hundred and ten, it’s a very large number out of the total value of the space. And by the way, this is just the beginning, right? If you look at what the visa is saying about the space, the opportunity there is in the many trillions, they estimate over 120 trillion. So, the opportunity is vast. I think once the regulator actually provides the metric by which we can compare one stable coin to another coin will be head and shoulder above the rest and will provide the value that we all already know and see from the inside that it contains. And hopefully that will be reflected in shareholder value to of the benefit of the company and its shareholders.

Julian Klymochko: So, you’ve spoken quite a bit about Coyni GreenBox, stable coin offering. I just wanted to get a sense more of the basics behind Coyni. Can you tell us what the strategy is there? How it works? You did speak about the competitive advantages, say verses Circle Solution and Tether as well, but could you give us just more background, like can investors access it currently? Is it up and running? Things of that nature.

Ben Errez: Sure. So earlier on this call, I mentioned that the generation one of our payment interest structures in the beginning of 2019 was a deployment that was entirely based on blockchain. So, I would tell you that what is hiding behind that definition is the fact that, that conversation between the payee in the payor, even on that early version of our ecosystem, always included a set of instructions, right? Sort of an agreement between the two parties saying you pay this and then you will get that for it. And if you didn’t, then you don’t get that. Essentially, we took this set of instructions and then encapsulated it into what is called smart contract. And by utilizing smart contract, that the byproduct of is issuance. We created a scenario where we are on an immutable unchangeable infrastructure, but a at the same time, the issuance itself is a derivative of that infrastructure, and therefore can be reversed. This is the biggest difference between the architecture of Coyni versus all of the rest. Also, because it is smart contract-based issuance, Coyni can behave in a very interesting fashion that all other currencies will have to do a complete change of architecture to be compatible with or to emulate that or commercially compete with it. So, first of all, Coyni is a centralized stable coin. All other coins are decentral, they’re all on Ethereum. It costs them money to operate. What’s called the gas cost on Ethereum, Coyni does not have that cost. Coyni operates on a blockchain infrastructure that is hosted by a commercial federal bank by a signature bank. And therefore our auditors can attach themselves as a node into that ecosystem and with our permission can scan the system and count in real time, the number of tokens in circulation, they also have the capability via the same system and the same bank to inspect the number of dollars in the custodial trust account that is held by the bank in favor of the ecosystem, not the company and therefore the auditing, the attestation that provides the certification of compliance and stability to the ecosystem produced by this national auditor.

In our case, Arminio. This attestation can be provided real time. Take the counter example with the Circle where the attestation is provided by Grand Thornton once every 30 days. And you never know if you just caught the system like in mid flat, right? Some coins coming in, some coins coming out, and you never know where you are in the process where in the Arminio signature GreenBox process, you have that in real time, we don’t issue unless the funds already exist in the custodial account, we then get back license to issue or print more tokens, and then we deliver these tokens to the E-Wallet or client. That’s a very big advantage. So, the scenario where some of your money is being used for unregulated or uncharted operations like lending or investments or things like that, that cannot happen with the Coyni infrastructure. It’s very, very important. So, in terms of the basic two functions that I would expect to see in every digital replacement of minted currency, being custodial and being transactional and doing so with no risk, I would say that there is no other choice other than Coyni. There is no other choice, and that’s the basis of our commercial positioning and differentiation on the Coyni platform.

Michael Kesslering: One other thing that we came across with regards to the company was, but last year there was a short seller named the Bear Cave that release a bearish report, no pun intended on the stock. Do you have any comments on the report or any rebuttals to that?

Ben Errez: So, we specifically didn’t want to keep that report as part of the conversation and did not react to it. And I don’t think that it would be wise of me to react to it today. However, there were some shareholders and analysts that did do some rebuttals. Pretty accurate rebuttal which I stand behind 100%. I think they did a good job in refuting some of the assertions in this short report. However, I think that the impact of the short report is still felt in the market today. I think it creates a difficult stock to be in. I think it creates a value that for the company that is so ridiculously unfair, I would say that the company is choosing in a big way to buy back its shares. we began buyback program in August or September of last year, and we just allocated $10 million additionally for a buyback program and executing on it in a big way. Unfortunately, I’m only allowed to do that in small quantities. I have to buy into the spread. I can’t buy in the last 30 minutes of every trading day, but to the best of my ability, I accumulate as quickly as I can. We already bought more than 2 million shares back and intend to buy much more. And remember the entire short pressure on the stock is just a little over 2 million shares. So, I intend to do my best to retire this entire position. I think the most dramatic representation of that scenario is that, you know, we are a company with the 200 million or so market cap today, but with a hundred million dollars cash in the bank, it’s almost an [Inaudible 00:28:33] deal, right? That you can buy the company out of its own cash.

Julian Klymochko: Right.

Ben Errez: Which is very interesting situation to be in from an investment perspective. So, I choose to be the barbarian at the gate and buy my own shares.

Julian Klymochko: Right.

Ben Errez: If you guys old enough to remember the movie.

Julian Klymochko: Yep.

Ben Errez: But I think that at some point the market will recognize that this is a special opportunity and will react accordingly. And in that context perhaps the upcoming filing of an S-1 for Coyni together with the re-announcement of the dividend to green book shareholders that is coming up very, very soon, probably within the next couple of weeks hopefully that will reposition the market more in favor and more in line with the company and its objectives.

Julian Klymochko: Yeah, and it’s certainly an interesting position that you guys are in with respect to your cash balances, not quite the story of RGR Nabisco, KKR, F. Ross Johnson, that whole drama, but thankfully it’s not.

Ben Errez: Wow. Nice Trivia pick up there.

Julian Klymochko: Yeah and given your reaction or lack of reaction to the short report, I think that’s always the best course of action can be a distraction. And the best way to deal with short sellers is just to execute. And it looks like you guys are on the execution path. What can investors expect on a go forward basis from GreenBox, just to wrap things up?

Ben Errez: So, we are on a very aggressive path of acquisitions. We don’t know when our acquisition of a Transact Europe will be completed, and this is because we need the approval of the governing body, the central bank of Bulgaria to approve that transaction. We’re hoping to conclude that very soon probably in the next few weeks. And the completion of that transaction is very important strategically for the company, both in terms of the licensing capabilities in Europe, but also in terms of being able to process low and medium risk portfolios right from the start. We already started onboarding large volumes onto that platform and anticipation of the close. But we project that this acquisition in particular and others that we have lined up for the year will take us to a substantial volume, business volume per month, perhaps north of a 500 million per month.

So, we projected the publicly doing about 6 billion this year in volume of processing. But I think with the completion of the acquisitions that we have lined up. We have a potential of looking at doubling that’s figure. I’m not projecting right now, formally at doubling of that figure. I’m just saying it’s in high likelihood. And being in that level of execution for the company is very important because it puts you in what I coined as an escape velocity, right? It puts you in the same order of magnitude as the performance of one of the largest operator in the space, which is Circle. We will be at the same size or the same adoption in utilization levels as Circle. Circle as you know is working on an IPO at four and a half billion, if that ever happens.

Julian Klymochko: Right.

Ben Errez: That’s the plan, so if we are operating at the same order of magnitude, maybe being a younger company, we’re worth half of that in terms of coin. We definitely think that Coyni is a multibillion dollar play for the company, maybe a billion dollars out the gate. And if you remember that Coyni is a majority equity control by GreenBox, maybe to the level of the 75, 80% of it, controlled by GreenBox. Then that piece alone, which sits on the GreenBox book as a free clear asset definitely queue the valuation map for the Gbox stock even further, right. If one asset is worth four times the market cap, what a beautiful acquisition target. So, we don’t want to be an acquisition target. GreenBox is not for sale.

Julian Klymochko: Right, right. Well, I mean, the stable coin business certainly seems very exciting with what you have going on at Coyni. You look at the competitive environment and the lack of transparency behind Tether. I think if we can get some competitors in addition to Circle, as you guys are working on, I think that’s a fabulous thing for the payments ecosystem, the crypto asset ecosystem, just because too many people rely on Tether and it’s this massive tail risk to the entire sort of defi financial system. So, kudos for the team at GreenBox for pursuing that. Investors are interested in taking a look at the stock. The tickers symbol is GBOX trading on the NASDAQ. So, Ben, thanks for coming on the show and talking to us about all of the initiatives that you guys have going on at GreenBox POS. So, thank you and wish you the best of luck.

Ben Errez: Happy to be with you today and thank you for your time and interest.

Julian Klymochko: Thank you as well. Bye everybody.

Thanks for tuning in to the Absolute Return Podcast. This episode was brought to you by Accelerate Financial Technologies. Accelerate, because performance matters. Find out more at www.AccelerateShares.com. The views expressed in this podcast to the personal views of the participants and do not reflect the views of Accelerate. No aspect of this podcast constitutes investment legal or tax advice. Opinions expressed in this podcast should not be viewed as a recommendation or solicitation of an offer to buy or sell any securities or investment strategies. The information and opinions in this podcast are based on current market conditions and may fluctuate and change in the future. No representation or warranty expressed or implied is made on behalf of Accelerate as to the accuracy or completeness of the information contained in this podcast. Accelerate does not accept any liability for any direct indirect or consequential loss or damage suffered by any person as a result relying on all or any part of this podcast and any liability is expressly disclaimed.


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