Kodak pt 4: Kerrisdale Capital’s blistering crypto pre-mortem for Kodak

  • Part 1: KodakCoin announced, stock price rockets
  • Part 2: KodakCoin restrictions, the KashMiner scam
  • Part 3: KodakCoin presale, prehistory, hot takes and harsh realities
  • Part 4: Kerrisdale Capital’s crypto pre-mortem for Kodak
  • Part 5: The KodakCoin ICO Light Paper
  • Part 6: KodakCoins on sale, and the Reg A+ escape route
  • Part 7: The KashMiner that never was



Kerrisdale Capital is a hedge fund. They buy and sell on the basis of extensive research. Today they released their report on Kodak — Eastman Kodak Company (KODK): Gone in a Flash — detailing Kodak’s ridiculous KodakCoin offering, and their even worse and blatantly fraudulent KashMiner, to explain why Kerrisdale just shorted them.

This is a startlingly well-researched, fabulously readable and unremittingly brutal report of just how comprehensively buggered Kodak is. It’s an amazing slice of journalism and I wish I’d written it. (I’m quoted in it, and the book gets a mention.)

Obviously, they’re shorting the stock, so they’ll be as negative as they reasonably can be. But even given that, the writeup is relentlessly evidence-based and fully cited. It’s over-the-top because the facts are.



The first page is a blistering rant that I’d be proud to have posted here:

A dying relic of American manufacturing licenses its brand to a blockchain project and immediately creates over $300m of value. Along the way Kodak board members conveniently grant themselves shares the day before the announcement, a stock promoter with a checkered past is engaged for PR, and a group of German copyright trolls reinvent themselves as blockchain-enabled image platform managers.

… The use of blockchain in operating an image copyright platform accomplishes nothing. KODAKOne intends to utilize smart contracts and a crypto-asset to solve the problem of copyright infringement, but the business idea is flat-out silly. Cryptographically hashing an image into a blockchain doesn’t prove the provenance of intellectual property, a blockchain does not reduce the resources necessary for copyright enforcement, no photographer would rather be paid in KODAKCoins over real money, etc. KODAKOne is little more than a moribund company’s hollow attempt to chase the ICO craze. It’s a PR stunt – a distraction that will pass when the company reports earnings and reminds investors of its distressed financial position.

… Potential ICO proceeds and royalty payments from KODAKOne do not change the high probability of these events. Rather than dreaming of a “new economy” for photographers, shareholders should be concerned about an eventual wipe-out. We view the equity as worthless, implying downside of -100%.

The proposed KodakOne stock photo site is a “transparent attempt to capitalize on speculative mania.” It does not offer a novel solution to an “unsolvable problem.” Cryptographic hashes of photos on the blockchain and a photo-centric private currency achieve nothing — “This is all unsubstantiated hype designed to entice investors.”

KodakOne began as an aspiring copyright troll, Ryde GmbH — who warned that you might be ruined by a copyright suit, so they kindly offered to check over your website and send you a bill for your infringements! This turned out not to be a winner. Ryde and Wenn Digital’s RydeCoin ICO didn’t work out either, so they pivoted to KodakCoin.

KodakOne’s pitch is simple — “digital copyright infringement, combined with a lack of market transparency, is resulting in lost revenue for photographers.” The business model is automated copyright trolling:

We can get a photo, lock it into our blockchain, then we can sort of assign the IP to the individual, then we can look through the entire internet and find where that photo is being used, and if it’s not being used correctly, then we can reach out to them with an automated system

This is not how copyright works — if you don’t own the actual copyright, you can’t make a claim. (Which is why copyright trolls tend to threats of legal ruination, as in Ryde’s original pitch.) They seem to be relying on photographers not understanding this.

The KodakCoin offering is just ridiculous. As I am quoted: “There is no reason any professional photographer would take Kodak-branded magic beans over actual money.”

The tokens appear more saleable than I or Matt Levine thought — 506(c) tokens can be exchanged after one year … but only until there are 500 accredited or 2000 non-accredited holders. (The same loophole Uber uses to sell their stock without being a public company.) But no photographer is going to use this thing.

Like all good cryptocurrency entrepreneurs, the KodakCoin team turn out to have an extensive track record in scams and fraud — in this case, securities fraud. Cameron Chell, leader of the team, has been banned from a Canadian exchange for securities fraud, and has formed several businesses with people also convicted of securities fraud.

KashMiner is dismissed forthwith — one heading states straight-up that “Kodak KashMiner is a scam” and another that it’s a “racket.” The scam is detailed much as I set out previously — you are startlingly unlikely to come out ahead on this thing, and there’s no way they couldn’t have known this when they promoted it.

These deals are desperation on the part of Eastman Kodak — their financial position hasn’t improved any since their last bankruptcy, they’re middling at best in the few profitable businesses they’re still in, they have cash on the balance sheet but half of it is stuck outside the US, and they can’t possibly avoid tripping debt covenants before the middle of next year, if not sooner. The numbers are set out in detail.

@Buttcoin on Twitter welcomed Kerrisdale Capital to “the Fraternal Order of Buttcoin” (warning: salty language) for this report. Kerrisdale gracefully accepted: “It’s an honor, thank you.”

If I have one qualm, it’s the statement at the start:

Blockchain and cryptocurrencies are exciting technologies with the potential to disrupt many industries; their use in media rights licensing by KODAKOne will not be one of them.

You’ll see reports like this say that “blockchain” is clearly bogus in their industry, but must have unspecified applications in some other industry.

I’d like to see more bravery on this point — you can say that “blockchain” is useless in a field and leave the false balance behind.

Or just summarise all the evidence to date — Blockchains are a terrible solution to a problem nobody turns out to have. That works. Feel free to steal.

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6 Comments on “Kodak pt 4: Kerrisdale Capital’s blistering crypto pre-mortem for Kodak”

  1. Credit where credit’s due on that line to Zak Korman as quoted by the World Economic Forum.

    “Blockchain attempts to solve a problem that you didn’t know you had: the problem of the trusted intermediary. As a programmer, I’ve never gone on Stack Overflow and asked, “I need to design a system that works like a database but guarantees no one can control it, including myself.” …as an individual consumer, I’ve never thought, “What I don’t like about this product/service is that it has a trusted intermediary.” These things just don’t come up.

    Satoshi had a reason to need these features….Those who have taken up the blockchain’s cause seemingly feel no such need. Removing intermediaries is now the goal itself, and we’re supposed to be happy about that.

    So count me out. Blockchain solves a problem that no one actually has, and the people who tout blockchain as a game changer don’t seem to understand that. The hype is bound to continue, but I hope we wise up to the limited utility of blockchain sooner rather than later.”


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