UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
☒ANNUAL REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2024
☐TRANSITION REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission File Number 001-41168
FOLD HOLDINGS, INC.
(Exact Name of Registrant as Specified in Its Charter)
(Address of Principal Executive Offices) (Zip Code)
(866)365-3277
(Registrant’s Telephone Number, Including
Area Code)
Securities registered pursuant to Section 12(b)
of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common stock, par value $0.0001 per share FLD Nasdaq Capital Market
Securities registered pursuant to Section 12(g)
of the Act:
None
Indicate by check mark if the registrant is a
well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not
required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes ☐ No ☒
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirement for the
past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.
See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,”
and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ Accelerated filer ☐
Non-accelerated filer ☒ Smaller reporting company ☒
Emerging growth company ☒
If an emerging growth company, indicate by check
mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant
has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or
issued its audit report. ☐
If securities are registered pursuant to Section
12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction
of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error
corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s
executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
As of June 28, 2024, the last business day of
the registrant’s most recently completed second fiscal quarter, the aggregate market value of the registrant’s voting securities
held by non-affiliates was approximately $51.3 million, based on the number of shares held by non-affiliates and the last reported sales
price of the registrant’s Class A common stock as of that date.
As of March 28, 2025, there were 46,888,876 shares
of common stock of the registrant issued and outstanding.
Documents Incorporated by Reference: None.
INTRODUCTORY NOTE
FTAC Emerald Acquisition Corp. (“FTAC Emerald” or “EMLD”)
was originally incorporated in Delaware on February 19, 2021 as a special purpose acquisition company formed for the purpose of effecting
a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, or other similar business combination with one or
more businesses.
On December 20, 2021, FTAC Emerald consummated an initial public offering,
or IPO, following which their units began trading on the Nasdaq Global Market, or the Nasdaq, and upon separation, their Class A common
stock and warrants began trading on the Nasdaq.
On July 24, 2024, FTAC Emerald and Fold, Inc. (“Fold”)
announced that they entered into an Agreement and Plan of Merger (the “Merger Agreement”) by and among FTAC Emerald, EMLD
Merger Sub Inc., a wholly-owned subsidiary of the Company (“Merger Sub”), and Fold, pursuant to which, among other things,
Merger Sub will be merged with and into Fold with Fold surviving the merger as a wholly-owned subsidiary of the Company (the “Merger”
and, together with the other transactions contemplated by the Merger Agreement, the “Transactions”).
On February 14, 2025, we consummated the previously announced merger
pursuant to that certain Agreement and Plan of Merger, dated as of July 24, 2024, or the Merger Agreement, by and among EMLD, EMLD Merger
Sub Inc., a Delaware corporation and a direct wholly-owned subsidiary of EMLD, or Merger Sub, and Fold, Inc., a Delaware corporation,
or Legacy Fold. Pursuant to the terms of the Merger Agreement, we effected a business combination with Legacy Fold through the merger
of Merger Sub with and into Legacy Fold, with Legacy Fold surviving as the surviving company and as our wholly-owned subsidiary. We refer
to this as the “Merger” and, collectively with the other transactions described in the Merger Agreement, the “Business
Combination”. In connection with the closing of the Business Combination, or the Closing, we changed our name to Fold Holdings,
Inc. and changed the trading symbols of our common stock and warrants from “FLDD” and “FLDDW,” to “FLD”
and “FLDDW,” respectively. In connection with the Closing, any units (which were trading under the symbol “FLDDU”)
that had not yet separated, were separated into their component share of common stock and one-half of one warrant to purchase one
share of our common stock, and ceased trading. In addition, in connection with the Closing, we reclassified all of our outstanding Class
A common stock as common stock.
Unless the context indicates otherwise, the terms “we,”
“us” and “our” refer to Fold Holdings, Inc. and our consolidated subsidiaries, references to the “Company”
refer to the historical operations of EMLD prior to the Closing and to the combined company and its subsidiaries following the Closing,
and references to “Fold” refer to the historical operations of Legacy Fold prior to the Closing and the business of the combined
company and its subsidiaries following the Closing. Because we closed the Business Combination after the end of our fiscal year, this
Annual Report on Form 10-K principally describes our business and operations following the Closing of the Business Combination, but includes
the financial statements of EMLD and related Management’s Discussion and Analysis of Financial Condition and Results of Operations,
which describe the business, financial condition, results of operations, liquidity and capital resources of EMLD prior to the Business
Combination, and disclosure in “Item 14. Principal Accounting Fees and Services” relates to fees paid in respect of EMLD’s
financial statements. Substantially concurrently with the filing of this Annual Report on Form 10-K, we will be filing an amendment to
our Current Report on Form 8-K, initially filed on February 14, 2025, which will include the audited financial statements of Legacy Fold
for the year ended December 31, 2024, or the Legacy Fold Audited Financial Statements, and related Management’s Discussion and Analysis
of Financial Condition and Results of Operations. Interested parties should refer to our Current Reports on Form 8-K for more information.
The information included within Part I of this Annual Report pertains
to Fold Holdings, Inc. The financial information included within Part IV of these financial statements relate to legacy FTAC Emerald.
TABLE OF CONTENTS
PART I
Item 1 Business 1
Item 1A. Risk Factors 15
Item 1B. Unresolved Staff Comments 67
Item 1C. Cybersecurity 67
Item 2. Properties 68
Item 3. Legal Proceedings 68
Item 4. Mine Safety Disclosure 68
PART II
Item 6. [RESERVED] 70
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 75
Item 8. Financial Statements and Supplementary Data 75
Item 9A. Controls and Procedures 76
Item 9B. Other Information 76
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 76
PART III
Item 10. Directors, Executive Officers and Corporate Governance 77
Item 11. Executive Compensation 86
Item 14. Principal Accountant Fees and Services 98
PART IV
Item 15. Exhibits and Financial Statement Schedules 99
i
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this Annual Report, which reflect our
current views with respect to future events and financial performance, and any other statements of a future or forward-looking nature,
constitute “forward-looking statements” for the purposes of federal securities laws. Our forward-looking statements include,
but are not limited to, statements regarding our or our management’s expectations, hopes, beliefs, intentions or strategies regarding
the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances,
including any underlying assumptions, are forward-looking statements. The words “anticipate,” “believe,” “continue,”
“could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,”
“possible,” “potential,” “predict,” “project,” “should,” “will,”
“would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that
a statement is not forward-looking. Forward-looking statements in this Annual Report may include, for example, statements about:
● our ability to recognize the anticipated benefits of the Business Combination;
● the potential liquidity and trading of our public securities;
● the implementation, market acceptance and success of our business model;
● our ability to scale in a cost-effective manner;
● developments and projections relating to our competitors and industry;
● our future capital requirements and sources and uses of cash;
● our ability to obtain funding for its operations;
● our business, expansion plans and opportunities;
● the size of the addressable markets for our products and services;
● the outcome of any known and unknown litigation and regulatory proceedings.
The forward-looking statements
contained in this Annual Report are based on our current expectations and beliefs concerning future developments and their potential effects
on us. There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements
involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or
performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties
include, but are not limited to, those factors described under the heading “Risk Factors”. Should one or more of these risks
or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those
projected in these forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether
as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
ii
Summary of Risk Factors
Our business is subject to
numerous risks and uncertainties, including those highlighted in the section title “Risk Factors,” that represent challenges
that we face in connection with the successful implementation of our strategy. The occurrence of one or more of the events or circumstances
described in the section titled “Risk Factors,” alone or in combination with other events or circumstances, may adversely
affect our ability to effect a business combination, and may have an adverse effect on our business, cash flows, financial condition and
results of operations. Such risks include, but are not limited to the following:
iii
● Unfavorable media coverage could negatively affect our business.
iv
● Our management has limited experience in operating a public company.
v
PART I
Item
1. BUSINESS
Company Overview
Founded in 2019, Fold is a pioneering bitcoin
financial services company dedicated to expanding access to bitcoin through a comprehensive suite of consumer financial products.
Fold was formed with the goal of creating a modern
financial services platform that allows consumers to accumulate, save, and use bitcoin to accomplish their daily and long-term financial
goals. Fold offers consumers an FDIC insured checking account, a Visa prepaid debit card, bill payments, and an extensive catalog of merchant
reward offers. Fold also partners with third-party service providers that offer bitcoin exchange and custody services. By integrating
bitcoin across traditional financial services, Fold aims to serve as a key point of entry for consumers to engage with and integrate bitcoin
into their everyday lives.
In addition to enabling customers to accumulate
bitcoin through its rewards program, the company itself actively invests in and accumulates bitcoin for our treasury. Fold believes that
bitcoin is a superior asset to hold, offering long-term value preservation and growth potential compared to traditional fiat currencies
or other investment vehicles. This strategic allocation underscores our commitment to maximizing stockholder value and positioning Fold
at the forefront of the emerging bitcoin economy.
Fold products and services are available in the
United States through the Fold mobile app.
Our Products and Services
Fold is among the leading gateways to earning,
buying, and living on bitcoin. We offer our customers a comprehensive suite of financial service products tailored to meet the needs of
our customers seeking to integrate bitcoin into their everyday finances.
Banking and Payments
Fold offers a free FDIC-insured checking account
that supports direct deposits, bill payments, and the ability to receive paychecks up to three days early. Fold is not a FDIC insured
bank, and the FDIC-insured checking accounts are offered through Sutton Bank. In 2020, Fold partnered with Visa to launch a bitcoin rewards
debit card, the Fold Visa Prepaid Card (the “Fold Card”). The Fold Card is a prepaid debit card linked directly to a customer’s
Fold checking account. Customers can order a Fold Card for free and use it anywhere Visa is accepted to make purchases, pay bills, and
earn bitcoin rewards.
Rewards Network
The Company offers bitcoin rewards to its users
through the Fold Rewards Program. This program allows the Company’s users to earn promotional credits (“rewards”) denominated
in bitcoin by engaging in various qualifying actions. For purchases made with the Fold Card, customers can earn up to 1.5% back on rotating
spending categories, mortgage, rent, and bills, as well as up to 15% or more on card-linked merchant offers. In addition to Fold Card
rewards, customers can earn up to 20% back in rewards through our expansive catalog of merchant offers at top merchants. Fold’s
expansive rewards network includes top offer aggregators and direct merchant relationships to maximize inventory and exclusive rewards.
Customers can also earn rewards for other types of behaviors such as referral bonuses, sign-up bonuses, spinning a daily rewards wheel,
and other behavioral actions that the Company chooses to incentivize. Both the amount of rewards earned and the qualifying actions that
are eligible to earn rewards change from time to time at Fold’s discretion.
1
Rewards are valued either as a percentage of a
transaction (i.e. 1.5% back) or as a flat amount of satoshis (“sats”), which is a subunit of bitcoin (i.e. 25 sats). There
are 100,000,000 sats in 1 bitcoin. For rewards valued as a percentage of a transaction, Fold calculates the value of those rewards as
the US dollar value of those rewards multiplied by the USD-BTC exchange rate at the time of the transaction based on the USD exchange
rate of one bitcoin on the Coinbase exchange. For example, assume a user earns 1.5% back on a $100 purchase when the USD-BTC exchange
rate is $50,000 per bitcoin. In that scenario, a user would earn 3,000 sats (($1.50 / $50,000) * 100,000,000 sats). Rewards are then credited
to a user’s account at the sats value (in this case 3,000 sats), regardless of future changes in the USD-BTC exchange rate.
All rewards are earned immediately upon the performance
of a qualifying action by the user, but not all rewards are immediately available for redemption. The redemption criteria for rewards
varies by the type of qualifying action or transaction as outlined in the terms and conditions of the Fold Rewards Program. For example,
rewards earned on the daily spin wheel are available for redemption immediately, while rewards earned via certain qualifying spend transactions
on the Fold Card are subject to a 30-day settlement period before becoming available for redemption, a policy that is in place to prevent
fraudulent activities.
Per the terms and conditions of the Fold Rewards
Program, rewards are subject to adjustment for chargebacks, returns, refunds, or other circumstances. In addition, rewards are subject
to expiry if users fail to maintain an active account for more than twelve consecutive months.
A user may redeem rewards by making a request
to withdraw them to a personal bitcoin wallet, either to an external bitcoin wallet or to a user’s bitcoin wallet at the qualified
custodians used by Fold. Users can initiate a redemption request at any time, but redemption requests are fulfilled by Fold approximately
once per week as a batch fulfilment. To fulfill rewards withdrawal requests Fold sends bitcoin from our Rewards Treasury to the user’s
bitcoin wallet address, which they provide during their redemption request. In the future, Fold may offer the ability for users to redeem
their rewards for other goods and services but has no immediate plans to do so.
Customer rewards are valued in bitcoin as of the date the rewards are
earned, and therefore we try to match the cost basis of those rewards with the cost basis of our Rewards Treasury. To do so, Fold typically
purchases bitcoin once per day in an amount that approximates the amount of rewards earned by customers on that day. Our goal
is to always maintain an amount of bitcoin in our Rewards Treasury equal to or greater than our customer rewards obligations. We monitor
the balances of our Rewards Treasury and customer rewards obligations on a daily basis to ensure that we have appropriate reserves to
fulfill customer obligations. In the event that the balance of our Rewards Treasury were to fall below the balance of our corresponding
customer rewards liability, Fold may utilize excess bitcoin reserves from our Investment Treasury to fulfill customer liabilities. Fold
purchases bitcoin for our Investment Treasury on an intermittent basis when we have available discretionary cash balances to do so.
Custody & Trading
Fold partners with Fortress Trust LLC, a Nevada-chartered
trust company (“Fortress”), and BitGo Trust Company, Inc., a South Dakota-chartered trust company (“BitGo”) (collectively,
the “Bitcoin Service Providers”), to offer eligible customers the ability to buy, sell, store, and withdraw Bitcoin through
Fold. These Bitcoin Service Providers are both qualified custodians, meaning they are qualified under applicable state banking, payments
or trust laws to custody digital assets, that offer institutional-grade custody, liquidity, and security solutions for digital assets,
specializing in multi-signature wallets and cold storage services for bitcoin. Additional information with respect to the Bitcoin Service
Providers’ respective qualifications under applicable law can be found online at https://fortresstrust.com/licenses, with
respect to Fortress, and https://www.bitgo.com/company/licenses, with respect to BitGo. Fold does not directly hold or control
any of its customers’ digital assets.
Fold utilizes both Fortress and BitGo for the
purpose of providing operational redundancy in the event of technical or regulatory limitations at one or the other. In addition, certain
states are supported by only one of the two Bitcoin Service Providers, and those states can change from time to time based on the licensing
status of each provider.
To access Custody & Trading products,
Fold’s customers are first onboarded to the Fold app through the normal onboarding process, which includes Know Your Customer (“KYC”)
checks by Fold. Customers are then onboarded to either BitGo or Fortress based on the state they live in. Customers also undergo KYC checks
by the Bitcoin Service Provider to which they are onboarded, and they are required to accept the terms and conditions of the Bitcoin Service
Provider to which they are onboarded.
2
Once a user has been onboarded to both Fold and
the Bitcoin Service Provider, they are able to interact directly through Fold’s mobile application to buy bitcoin via spot trades,
recurring trades, direct deposits, and by rounding up spare change on Fold Card purchases, as well as the ability to deposit and sell
their bitcoin. Each of those transactions are executed by the user through Fold’s mobile app and processed via the Bitcoin Service
Provider to which the user is assigned. Refer to the following section for further details.
How Fold Users Access Fold Products and
Services
In order to access all Fold related services,
users must first download the Fold app from either the Apple or Google app store. Upon using the Fold app for the first time, users are
prompted to provide certain information for account creation and verification and to accept Fold’s user terms and conditions. Once
Fold completes a review of a user’s initial application, the user is then granted access to the Fold platform. From there, users
can utilize the following services:
Fold Pre-paid Debit Card
Bitcoin Buying and Selling
● Users can purchase bitcoin in several ways, including:
3
4
Gift Card Buying
Rewards
Daily Spin Wheel
Account Settings
Industry Overview
Bitcoin
Introduced in 2008, bitcoin is a trustless decentralized digital currency
operating on a peer-to-peer network. Bitcoin is built on free and open-source technology which ensures secure and transparent transactions.
As of December 31, 2024, bitcoin remains the largest cryptocurrency by market capitalization, with significant trading volumes across
global exchanges. Over the first 15 years of its existence, the adoption rate of bitcoin as measured by the annual increase in the total
number of users has exceeded that of the internet over the first 15 years of the latter’s existence.
To date, the primary business models within the
bitcoin industry have focused on exchange services, bitcoin mining, and exchange-traded products like ETFs. Bitcoin financial services
such as those offered by Fold are part of a fast-growing market opportunity to expand bitcoin’s scope into traditional investment
and financial use cases relevant to consumers’ everyday lives, such as saving, investing and making payments.
The bitcoin industry is dynamic and rapidly evolving,
offering substantial opportunities alongside significant risks. Continuous monitoring of technological, regulatory, and market developments
is essential for stakeholders to navigate this complex landscape effectively.
5
Banking and payments
The banking and payments industry encompasses
a broad range of financial services, including traditional asset custody, wealth management, digital payments, and emerging fintech solutions.
The banking and payments industry is undergoing significant transformation driven by technological advancements, changing consumer behavior,
and regulatory developments. While the industry presents substantial growth opportunities, stakeholders must navigate various risks and
challenges to remain competitive and compliant in this dynamic landscape. Continuous innovation, robust risk management, and adherence
to regulatory standards are essential for sustained success.
Macroeconomic trends impacting our market
The following macroeconomic factors as they relate
to bitcoin specifically impact our business:
— Awareness: The
perception of bitcoin as a legitimate and secure asset class and technology by the general public plays a crucial role. The pace and effectiveness
of continued education and awareness will impact adoption rates.
— Regulation: The
global regulatory landscape for bitcoin, including clarity around legal status, accounting and tax treatment, and other compliance requirements
will significantly impact its growth. Favorable regulations can encourage adoption, while restrictive measures can hinder it.
— Institutional Adoption: Increased
participation by institutional investors, including hedge funds, mutual funds, corporations, and nation states can drive market confidence
and liquidity, supporting continued growth. Recently launched spot bitcoin ETFs sponsored by large financial service firms have seen significant
inflows, introducing bitcoin to a large pool of new investors and further legitimizing bitcoin as an asset appropriate for institutions.
— Political Environment: Bitcoin
has entered the political conversation in the United States and abroad. As a global leader in innovation and new technologies, we
anticipate the United States political environment to become increasingly favorable for our industry.
— Monetary Policy: Central
bank monetary policies, especially in terms of interest rates and quantitative easing, can influence bitcoin adoption. Low interest rates
and expansive monetary policies that lead to currency debasement often lead to a search for alternative investments like bitcoin.
— Technological Innovation: Advances
in blockchain technology, improvements in scalability (e.g., bitcoin’s Lightning Network), and enhanced security protocols can increase
bitcoin adoption and integration into various financial systems.
We expect each of the above, among other factors,
to contribute to the pace of acceptance of bitcoin and an increase in the addressable market for our products and services. The timing
of these events as well as the potential occurrence of other unforeseeable events that impact our industry is uncertain and may have a
direct impact on our business.
6
Our Customers
Fold caters to one of the most valuable customer
segments in the world. Our current core customer demographic is just entering their financial prime (83% are between 25-54 years old)
with a strong financial position (80% have prime credit and 65% make over $100K income per year). This demographic is on the cusp of some
of the most important financial decisions of their lives: starting families, starting businesses, buying homes, preserving wealth, and
making long-term financial plans. Select customer demographic information based on historical company data and customer surveys from 2022–2024
includes:
Despite the relative financial strength of Fold’s
core customer base, Fold is able to service other customer demographics no matter where they are on their financial journey. Our FDIC-insured
checking account and prepaid debit card provide a lower-risk, responsible way for any customer to navigate their financial lives compared
to high interest-rate credit products.
Our Strategic Partners
We have strategic partnerships with a number of
third-party service providers to operate certain of our products and services, including:
Marqeta, Inc. (“Marqeta”) — Marqeta
powers the modern card-issuing platform that enables Fold to create, distribute, and manage customized payment cards and financial products.
Marqeta serves as the program issuer for the Fold Card.
7
Visa U.S.A. Inc. (“Visa”) — Visa
is a global payment technology company that facilitates electronic funds transfers, primarily through credit, debit, and prepaid cards,
enabling secure and efficient payments worldwide for Fold. The Fold Card can be used on the Visa Network (“Payment Network”)
to spend funds wherever Visa is accepted.
Sutton Bank — USD
funds deposited in the Fold Checking Account and available to fund purchases using the Fold Card are held at Sutton Bank, an FDIC-insured
bank. As long as specific deposit insurance requirements are met, Fold customer funds held at Sutton Bank are insured up to $250,000 by
the FDIC in the event Sutton Bank fails. Fold does not directly hold or control any of its customers’ USD funds.
Bitcoin Service Providers — Fold
partners with Fortress Trust LLC, a Nevada-chartered trust company (“Fortress”), and BitGo Trust Company, Inc., a South Dakota-chartered
trust company (“BitGo”) (collectively, the “Bitcoin Service Providers”), to offer eligible customers the ability
to buy, sell, store, and withdraw Bitcoin through Fold. These Bitcoin Service Providers are both qualified custodians, meaning they are
qualified under applicable state banking, payments or trust laws to custody digital assets, that offer institutional-grade custody, liquidity,
and security solutions for digital assets, specializing in multi-signature wallets and cold storage services for bitcoin. Additional information
with respect to the Bitcoin Service Providers’ respective qualifications under applicable law can be found online at https://fortresstrust.com/licenses,
with respect to Fortress, and https://www.bitgo.com/company/licenses, with respect to BitGo. Fold does not directly hold or control
any of its customers’ digital assets.
Merchant Networks — Fold
partners with a number of merchant offer wholesalers and direct merchant relationships to offer gift cards, card-linked offers, and other
affiliate offers from time to time. Fold has established an extensive partnership network across multiple vendors to provide customers
with an extensive number and quality of merchant offers, and we regularly review new and existing partnerships to optimize our offers
network.
Our Strategy
First Mover Advantage
Fold has identified what we believe to be a unique
opportunity in the market to provide bitcoin-native specialty financial services that are currently underrepresented by incumbent financial
service providers. Fold’s products are built on bitcoin, for bitcoiners, by bitcoiners. In contrast to exchanges with hundreds of
cryptocurrencies, capital-intensive mining businesses, and high-fee ETFs, Fold provides a user-friendly, low-barrier entry point to bitcoin
via financial products that users are already familiar with. Our product offerings are also diverse, offering customers more utility than
just an exchange product.
As an early entrant to this space and the first
company to launch a bitcoin rewards debit card program, Fold has accumulated proprietary data on customer spending, saving, investing,
and product needs that can be leveraged for further penetration within our existing user base as well as to expand into new customer demographics.
We have invested significant resources to form deep relationships with partners, customers, and industry participants while building a
reputable brand name in the bitcoin market.
Bitcoin Treasury & Accumulation
Strategy
In addition to our core operating business, Fold
has adopted a bitcoin treasury strategy that aligns our corporate goals with the products we offer to our customers. We consider bitcoin
to be an important strategic reserve asset that, due to its finite fixed supply, has the ability to mitigate inflationary trends. Bitcoin
is a unique store of value with a finite fixed supply, which we believe provides price appreciation potential for bitcoin in both the
near- and long-term. We believe that the adoption tailwinds powering bitcoin’s growth over the last 15 years will continue
with potential to accelerate, providing attractive value growth opportunities.
8
As of December 31, 2024, Fold has accumulated more than 1,000
bitcoin in our Investment Treasury, and we plan to continue to accumulate bitcoin over time. We view our bitcoin holdings as a long-term
strategic investment and not as a trading asset. We believe holding bitcoin on our corporate balance sheet has the potential to provide
stockholder value for several reasons:
Price appreciation: Bitcoin
has experienced meaningful price appreciation over the past decade, significantly outperforming the S&P 500, US treasury yields, and
other traditional investments over the same time frame. We believe bitcoin adoption will continue to grow rapidly over the coming years,
which has potential to provide an opportunity for continued price appreciation.
Inflation hedge:Bitcoin,
with its capped supply, has the potential to serve as a long-term hedge against inflation. We expect central banks to continue to devalue
fiat currencies over the near term through inflationary monetary policies.
Diversification:Bitcoin
often shows low correlation with traditional financial assets like stocks, bonds, and commodities, offering diversification benefits to
the overall portfolio.
Liquidity:Unlike
traditional financial markets, the market for bitcoin operates 24/7, offering constant access to liquidity.
Enhanced brand perception: Companies
investing in bitcoin may be viewed by certain consumers as more forward-thinking, appealing to progressive, tech-savvy consumers and investors.
Balance sheet management: We
believe building a solid balance sheet with potential for growth will provide a solid foundation for us to better operate and grow our
business over time.
These factors suggest strategic benefits for Fold
incorporating bitcoin into our financial strategies, aligning with modern financial trends and technological advancements.
Flywheel Effect
We expect demand for bitcoin financial services
to continue to increase over time, and Fold has positioned itself as a first mover to benefit from this acceleration. As the bitcoin network
expands, we believe demand for our services will grow, fueling a cycle where we build more financial products to meet consumer needs,
further increasing our cash flows, our bitcoin treasury, and the bitcoin holdings of our customers. This flywheel, powered by aligned
incentives and our first-mover advantage, positions Fold to capitalize on Bitcoin’s rapid growth and increasing value.
Our Growth Strategy
Fold aims to grow alongside the emerging bitcoin economy.
9
We believe we are in the early stages of realizing
the full value of our existing platform. We seek to capitalize on the structural advantages of being a first-mover, customer-centric and
built-to-scale platform as we continue to grow our business and customer base.
Marketing
Demand for bitcoin financial services is accelerating
as more participants enter the market. Despite this growth, there remains a significant gap in available solutions with the exception
of Fold.
Fold has capitalized on this opportunity by marketing to and building
a valuable customer base characterized by high credit scores, strong earning potential, and high lifetime values. Fold has achieved this
with customer acquisition costs of less than $10 per user compared to industry averages of over $300 per customer for traditional financial
service providers.
Our customer acquisition strategy relies primarily
on paid and organic online advertising and social media. Fold also relies on television (streaming and linear), paid search, organic web
traffic, and email marketing. Referrals and spend incentives drive incremental acquisition and engagement. Our marketing content is produced
and edited by a lean, experienced, in-house team, well-versed in tailoring messages for our target segments.
Product marketing efforts are aimed at increasing
member engagement, through-funnel conversion, and retention at a low cost. Our customer acquisition channels combine a mix of online and
offline, as well as paid and unpaid, channels. They include marketing affiliates, sponsorships, radio, direct mail, organic web traffic,
email marketing, and online advertising, among others.
Our primary strategic growth initiatives are as
follows:
1. Continue Fundamental Execution
We remain focused on enhancing our bitcoin financial
services platform by continuing to invest in product development, sales, and marketing. We believe these efforts are key to expanding
our user base and strengthening our partnerships. We also aim to optimize customer lifetime value (“LTV”) through new products
and features, enhanced retention strategies, and optimized pricing models. We expect our scalable platform, built through strategic investments,
to continue to deliver operational leverage as we grow.
2. Proven Acquisition Channels
Fold’s growth to date has been predominantly
fueled by organic word of mouth, partner co-marketing, and active social engagement which have contributed to low customer acquisition
costs (“CAC”). We believe these channels will continue to play a critical role in sustaining our growth trajectory. To further
accelerate expansion, we plan to increase investments in paid marketing and affiliate opportunities, with the objective of maintaining
low CAC while enhancing the LTV per user.
3. Expand Relationship with Existing and
New Rewards Partners
We are dedicated to deepening our engagement with
existing and new rewards partners and co-marketing with them to reach new audiences. By leveraging our partners’ platforms and customer
bases, we can introduce Fold’s bitcoin financial services to more users, driving further adoption and creating mutual growth opportunities.
This collaborative approach will help us unlock new customer segments and increase brand visibility.
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4. Expand Financial Services Partnerships
We will continue to seek partnerships with adjacent
businesses to provide financial services to their customers, expanding our reach and enhancing our product offerings. By integrating our
bitcoin financial services with traditional financial products, we can offer a comprehensive suite of solutions that adds value to our
partners and their customers, further embedding Fold into everyday financial activities.
5. Align with the Bitcoin Brand
Fold aims to align its brand with bitcoin, one
of the fastest growing and most recognized brands globally. Our goal is to make Fold synonymous with bitcoin in the mainstream, positioning
our product as the go-to solution for bitcoin financial services and transactions. By closely associating with the bitcoin brand, we aim
to enhance our visibility and credibility, driving broader adoption of Fold among consumers.
6. Global Expansion
While we do not have immediate plans to expand
our bitcoin financial services platform to a global audience, we recognize the significant opportunity presented with expansion outside
the United States. Through enterprise partnerships and direct expansion, we expect to be able to tap into new markets and meaningfully
increase our addressable market, laying the groundwork for future growth.
7. Pursue Strategic Acquisitions
We will opportunistically pursue strategic acquisitions
that enhance our scale, enable entry into new verticals, and add complementary capabilities to our platform.
Competitive Landscape
Fold operates in a unique segment within the competitive
landscape, specializing in bitcoin financial services for the rapidly expanding segment of individuals incorporating bitcoin into their
financial lives to build long-term savings and access new financial opportunities. Unlike traditional financial institutions that lack
the infrastructure to serve these customers, and cryptocurrency companies that we believe are geared towards speculation, trading, and
gambling, Fold aims to align itself with bitcoin’s potential to grow wealth, which is a key factor of bitcoin’s consumer appeal.
Financial Platforms
Across our product lines we compete with various
traditional financial services providers like Block Inc., Robinhood Markets, Inc., and PayPal Holdings, Inc., who have recently introduced
bitcoin-based products and services. These companies have varying business models and focus areas and offer an overlapping but limited
feature set, which includes buying and selling bitcoin but not the full range of bitcoin-based financial services offered by Fold.
Rewards Cards
We also compete with other consumer cryptocurrency and cash rewards
cards, such as the Venmo Credit Card, Gemini Credit Card, and Discover Cash Back Debit Card. Forbes recognized the Fold Card as the best
crypto rewards debit card for maximizing rewards for 2024.
Regulatory Environment
We operate in a rapidly evolving regulatory environment
governed by U.S. federal and state laws. These regulations cover most aspects of our business, including consumer finance and protection,
privacy and data protection, banking, and payments. Other relevant laws include those prohibiting unfair and deceptive acts or practices,
alongside public policy and general principles of equity, which may apply to our banking and payment activities. These laws and regulations
impact our business directly and indirectly, mainly through our partnerships with Marqeta and Sutton Bank, which provide our customers
with deposit accounts and debit cards, and with the Bitcoin Service Providers.
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Fold has established a robust Customer Identification
Program (CIP) with the primary objective of forming a reasonable belief that we possess accurate information regarding the true identity
of each of Fold’s customers. Our services are exclusively intended for individuals aged 18 years or older in the United States
with national or residency status. To enhance our CIP processes, we have partnered with Sardine.ai, a third-party provider specializing
in supporting Know Your Customer (KYC) services, fraud detection, and sanctions screening efforts. Fold recognizes the dynamic nature
of the financial landscape and is committed to maintaining a robust risk management framework. We employ a sophisticated risk rating system
that continuously evaluates user profiles to enhance our security measures. This dynamic risk rating is subject to adjustments based on
a combination of transaction monitoring rules, news alerts, and ongoing sanctions screening. Our risk rating framework is designed to
adapt to changes in user behavior, transaction patterns, and external factors that may impact risk exposure. Our system regularly reviews
transactions against predefined monitoring rules to identify any unusual or potentially high-risk activities. Additionally, we actively
monitor negative news alerts that may have implications for a user’s risk profile.
The following summarizes certain aspects of the
various statutes and regulations. This summary is not a comprehensive analysis of all applicable laws and is qualified by reference to
the full text of statutes and regulations below.
Anti-Money Laundering (AML) and Sanctions Laws
Although Fold is not directly subject to the Bank
Secrecy Act or other regulations related to anti-money laundering, our relationships with Sutton Bank and the Bitcoin Service Providers,
together with our obligations under applicable sanctions laws, require us to comply with AML requirements. This is because both Sutton
Bank and the Bitcoin Service Providers are considered “financial institutions” subject to the Bank Secrecy Act. Because we
act as an intermediary between our customers and Sutton Bank and the Bitcoin Service Providers, we must take certain actions to facilitate
their compliance, as described below.
Fold is required to stay updated with constantly
changing AML regulations, including those set by the intergovernmental organization the Financial Action Task Force, local laws, and our
partners. As a mobile application, we face significant challenges, such as remote onboarding of our customers, which makes it difficult
to verify the identity of customers submitting applications for the Fold products thoroughly. In addition, the high volume of transactions
both in our debit card and bitcoin buying and selling makes it difficult to monitor transactions for AML purposes. To mitigate these risks,
Fold has implemented a risk-based approach Anti-Money Laundering program to measure customer identification practices, monitoring (real-time
monitoring) and escalate questionable activities, and maintain records to prevent illicit financial activities in our platforms.
As for counter-terrorism financing, Fold ensures
that it adheres to all OFAC regulations and ensures that no transactions are involved with a sanctioned country to the best of our ability.
Fold is dedicated to maintaining a high standard of compliance with international regulations, and our proactive approach to sanctions
screening is an integral part of our commitment to prevent any engagement with sanctioned individuals or entities. We prioritize the safety
and compliance of our platform to ensure a secure environment for all users. As part of our commitment to regulatory compliance, we proactively
conduct screening against the Office of Foreign Assets Control (OFAC) and sanctions lists for all users during the onboarding process.
This screening is performed using the data points provided by users during the registration phase.
Our automated screening process aims to identify
potential matches with individuals or entities listed on sanctions lists; information such as IP address and true location is used at
this phase to ensure compliance with all OFAC regulations. In addition to the initial screening conducted during onboarding, Fold is committed
to maintaining a vigilant and ongoing compliance posture. We perform continuous OFAC and sanctions screenings on all users with a daily
frequency. This proactive approach ensures that our platform remains current and aligned with the latest updates to the sanctions lists.
FDIC Banking Regulation
Our bank partner, Sutton Bank, is a member of
the FDIC and thus is subject to federal regulations designed to ensure its safety and soundness, as well as banking regulations established
by the State of Ohio where it is chartered. Due to our relationship with Sutton Bank, many laws and regulations that apply directly to
Sutton Bank indirectly impact us (and our products), and our partnership with Sutton Bank is subject to the supervision and enforcement
authority of the FDIC and the Ohio Department of Commerce.
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Fold complies with all FDIC rules regarding the
display of statements concerning FDIC standards on our website and our application. We ensure that no information regarding the FDIC logo
and insurance is misrepresented to our customers as we are a financial services platform and not a FDIC insured bank.
State Money Transmission and Virtual Currency
Laws
As noted above, our Bitcoin Service Providers
are considered “financial institutions” under the Bank Secrecy Act and the regulations thereunder and are each required to
be registered as a “money service business” with the Financial Crimes Enforcement Network, an agency of the U.S. Treasury.
In addition, they are subject to state laws related to money transmission, which may require them to be licensed in individual states.
Finally, certain states have adopted laws or regulations that are specific to virtual currency-related activities within that state or
with residents of that state. For example, in 2014 New York adopted regulations requiring firms engaged in virtual currency-related activities
with New York residents to become licensed and to be subject to regulations and supervision imposed by the New York Department of Financial
Services.
We do not provide bitcoin related services to
customers resident in states where neither of our Bitcoin Service Providers has the required license.
Consumer Financial Protection Bureau (CFPB)
Regulations
The CFPB oversees financial institutions to ensure
adherence to federal consumer financial laws. We are required to stay abreast of CFPB’s constantly changing rules and regulations
to safeguard consumers and ensure that our marketing communications on social media, blogs, and websites are not considered deceptive,
abusive, or unfair.
Clear and Transparent Communication:
● Regularly review and update content to stay compliant.
Regular Audits:
● Work with our bank partners to conduct regular audits.
● Identify and rectify any potentially unfair or deceptive practices.
Timely and Understandable Documentation:
● Provide consumers with clear information about their debt and rights.
Staff Training:
● Regularly train staff on non-discriminatory practices and policies.
Fold has aligned its policies with CFPB regulations
to protect consumer rights and maintain compliance with our banking partners. Our team keeps current with CFPB changes and collaborates
closely with the legal team to promptly implement any necessary adjustments. Noncompliance might lead to severe consequences, including
financial penalties, damage to Fold’s reputation, and potential loss of our banking partners.
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Privacy Protection Laws
Fold is dedicated to safeguarding user privacy
and adheres to regulations such as the Gramm-Leach-Bliley Act (GLBA), California Consumer Privacy Act (CCPA), and General Data Protection
Regulation (GDPR).
Intellectual Property
We use various methods to establish and protect
our intellectual property, and rely on intellectual property laws in the United States and other countries, along with contractual measures
to do so. Our key strategies include the following:
Trademarks: We have registered
trademarks related to our name and logo to protect our brand in the United States and other countries.
Trade Secrets: We implement