As opposed to the last post, this post will be much more technical in nature. It still involves a mysterious, rapid increase of money. Which I think is pretty interesting. That said, one can’t always sizzle with gun smuggling and fake Harvard MBAs!
Keeping this as brief and digestible as possible, the majority of this post is related to a few of $CUBI’s SEC filings.
The first, is this filing. I find this filing to be fascinating, and compelling, because the SEC asks not only for highly specific information regarding CBIT, but also asks questions about the banks loan book and liquidity. The government does not usually like to ask questions about a bank’s liquidity (subscription needed), because it is cannon fodder for people like myself, who are already highly suspicious of $CUBI.
Demand Deposit Account. Definition:
“A demand deposit account (DDA) is a bank account from which deposited funds can be withdrawn at any time, without advance notice.”
Omnibus Account: Definition
“An omnibus account allows for managed trades of more than one person, and allows for anonymity of the persons in the account. Omnibus accounts are used by futures commission merchants. Transactions within the account are carried out in the name of the broker, protecting the individual identities of the two or more people invested in the omnibus account. The broker managing the omnibus account typically has the ability to execute trades on behalf of investors with funds inside the omnibus account. Trades are made in the name of the broker, although trade confirmations and statements are provided to customers within the account.”
For the purposes of $CUBI, the omnibus account holds all of the CBIT money currently on the network in the form of CBIT tokens. Customers Bank only transfers money to a client’s DDA account when money is moved off of CBIT. When transfers are made between entitities on CBIT, all Customers does is record the change of ownership (maybe on a spreadsheet, google doc, who knows?), inside of the Omnibus account, and no physical money changes hands. The CBIT money is just parked in the single Omnibus account while the tokens are moved around inside of the CBIT network. Only when money flows back to client’s DDA, and the customer wants to get access to their money, does money move out from the omnibus account.
It wasn’t until the SEC asked, that $CUBI agreed to start reporting the amount of funds in the omnibus account. Gotta give credit to the SEC when it’s due.
In $CUBI’s own words, (same filing, response to comment 3)
“On most days, it is expected that customers will burn or redeem their CBIT tokens for U.S. Dollars in their DDAs after concluding their transaction activity on the CBIT platform. There were no balances held in the Omnibus Account in customers’ name as of June 30, 2022 and December 31, 2021.”
Which brings us to $CUBI’s most recent quarterly report, for the quarter ending 9/30/23.
“The deposits from customers participating in CBIT include the omnibus deposit account established for the CBIT instant payments platform, which had an outstanding balance of $1.2 billion and $23 thousand at September 30, 2023 and December 31, 2022, respectively.”
For the previous quarter, ending June 30, 2023, the omnibus balance was $914.9 million.
Before that, the omnibus balance was $254.7 million, quarter ending 3/31/2023.
12/31/2022, as noted above, the omnibus balance was $23000.
Fact: Customer’s Bancorp, in their own filing to the SEC, says they expect the balance in the omnibus account to be zero on “most days.”
Fact: Ever since the quarter ending, March 2023, you know, that time when banks such as Signature, Silicon Valley, and Silvergate all blew up? And then $CUBI became the last crypto bank standing? Ever since that time, the balance in the Omnibus account has been skyrocketing. From zero, to $1.2 billion.
Fact: Before the March 2023 crisis, when $CUBI was one of several crypto banks, the omnibus account was behaving as Customer’s expected.
Just one quarter, it could be a coincidence. That’s why I looked at the other quarters. Three quarters in a row of increasing amounts, is solid evidence that the balance in the omnibus account has been rising steadily. The timing is also almost perfectly in sync with when $CUBI became one of the last bank’s to take crypto money.
There’s no real reason that I can think of why an entity or entities would start parking money on CBIT, reflected in the balance of the omnibus account. It doesn’t seem to make a lot of sense. As $CUBI says themselves, the expectation is that clients will want their money in their own DDA so they can withdraw it, you know, on demand. You wouldn’t want to leave so much money in a place you can’t immediately access it. The only purpose of CBIT is to quickly send money and then have it back in your DDA. And that’s according to $CUBI!
It will be interesting to see the balance of the omnibus account going forward. If trends hold, the balance will increase again.