Fold Holdings (FLD) risk factors, FY2024 10-K

Risks Related to our Business and Industry

1. 01Our operating results have and will significantly fluctuate, including due to the highly volatile nature of Bitcoin
2. 02As a result of these factors, it is difficult for us to forecast growth trends accurately and our business and future prospects are difficult to evaluate, particularly in the short term
3. 03We are subject to an extensive, highly-evolving and uncertain regulatory landscape and any adverse changes to, or our failure to comply with, any laws and regulations could adversely affect our brand, reputation, business, operating results, and financial condition
4. 04Our relationships with bank partners in the United States may subject us and our partners to additional regulatory scrutiny
5. 05We may be subject to additional regulatory scrutiny due to the recent bankruptcy case of Synapse Financial Technologies, Inc
6. 06Changes in card network rules or standards could adversely affect our business
7. 07We operate in a highly competitive industry and we compete against companies with greater financial and other resources, and our business, operating results, and financial condition may be adversely affected if we are unable to respond to our competitors effectively
8. 08If we are unable to compete successfully, or if competing successfully requires us to take costly actions in response to the actions of our competitors, our business, operating results, and financial condition could be adversely affected
9. 09If we cannot keep pace with rapid industry changes to provide new and innovative products and services, the use of our products and services, and consequently our net revenue, could decline, which could adversely impact our business, operating results, and financial condition
10. 10Loss of a critical banking or insurance relationship could adversely impact our business, operating results, and financial condition
11. 11Any significant disruption in our products and services, in our information technology systems, or in blockchain networks related to our business, could result in a loss of customers or funds and adversely impact our brand and reputation and our business, operating results, and financial condition
12. 12Our or our third-party partners’ failure to safeguard and manage our and our customers’ fiat currencies and Bitcoin could adversely impact our business, operating results, and financial condition
13. 13Bitcoin held on behalf of our customers is stored in one of three places: (1) directly at Fortress; (2) directly at BitGo, or (3) at BitGo in a sub-custodial arrangement with Fortress
14. 14As of December 31, 2024, 1% of Fold customer Bitcoin was held directly at Fortress, 22% was held directly at BitGo, and 77% was held at BitGo in a sub-custodial capacity for Fortress
15. 15Our and our customers’ Bitcoin could be subject to risk in the event of an insolvency of one of our Bitcoin Service Providers
16. 16With regards to Bitcoin held on behalf of our customers, approximately 95% is retained in multi-signature cold storage wallets at any given time, while the remaining assets are held in hot wallets used to facilitate customer withdrawals and other real-time operational needs
17. 17If we fail to retain existing customers or add new customers, or if our customers decrease their level of engagement with our products, services and platform, our business, operating results, and financial condition may be significantly harmed
18. 18Our operating expenses may increase in the future and we may not be able to achieve profitability or positive cash flow from operations on a consistent basis, which may cause our business, operating results, and financial condition to be adversely impacted
19. 19If we do not effectively scale our business, or are unable to maintain and improve our systems and processes, our operating results could be adversely affected
20. 20Our services must integrate with a variety of operating systems. If we are unable to ensure that our services or hardware interoperate with such operating systems and devices, our business may be materially and adversely affected
21. 21Our strategy and focus on delivering high-quality, compliant, easy-to-use, and secure Bitcoin-related financial services may not maximize short-term or medium-term financial results
22. 22Due to our limited operating history, it may be difficult to evaluate our business and future prospects, and we may not be able to achieve or maintain profitability in any given period
23. 23Disputes with our customers could adversely impact our brand and reputation and our business, operating results, and financial condition
24. 24We may from time to time make acquisitions and investments, which could require significant management attention, disrupt our business, result in dilution to our stockholders, and adversely affect our financial results
25. 25Our business could be harmed if we are unable to accurately forecast customer demand for Bitcoin and to adequately manage our Bitcoin balances, including the Bitcoin balances we maintain for our own account or Bitcoin balances that may be maintained for use in our rewards program
26. 26Our investments in Bitcoin are subject to volatile market prices and risks of loss
27. 27If we fail to develop, maintain, and enhance our brand and reputation, our business, operating results, and financial condition may be adversely affected
28. 28Our long-term success depends on our ability to develop products and services to address the rapidly evolving market for payments and financial services, and, if we are not able to implement successful enhancements and new features for our products and services, our business could be materially and adversely affected
29. 29Key business metrics and other estimates are subject to inherent challenges in measurement and to change as our business evolves, and our business, operating results, and financial condition could be adversely affected by real or perceived inaccuracies in those metrics or any changes in metrics we disclose
30. 30Unfavorable media coverage could negatively affect our business
31. 31Our products and services may be exploited to facilitate illegal activity such as fraud, money laundering, gambling, sanctions violations, tax evasion, and scams. If any of our customers use our products or services to further such illegal activities, our business could be adversely affected
32. 32Our compliance and risk management methods might not be effective and may result in outcomes that could adversely affect our reputation, operating results, and financial condition
33. 33We may suffer losses due to abrupt and erratic market movements

Risks Related to Bitcoin

1. 34Due to unfamiliarity and some negative publicity associated with Bitcoin products and services, confidence or interest in our platforms may decline
2. 35Transferring Bitcoin on the Bitcoin blockchain involves risks, which could result in loss of customer assets or our proprietary assets, customer disputes and other liabilities, which could adversely impact our business
3. 36A temporary or permanent blockchain “fork” to Bitcoin could adversely affect our business
4. 37Future developments regarding the treatment of crypto assets for U.S. and foreign tax purposes could adversely impact our business
5. 38Our tax information reporting obligations with respect to Bitcoin transactions are subject to change
6. 39The nature of our business requires the application of complex financial accounting rules, and there is limited guidance from accounting standard setting bodies on certain topics. If financial accounting standards undergo significant changes, our operating results could be adversely affected

Risks Related to Government Regulation and Privacy Matters

1. 40The regulatory environment in which the consumer finance industry operates could have a material adverse effect on our business and operating results
2. 41Bitcoin is subject to regulatory authority by the CFTC. Any fraudulent or manipulative activity in Bitcoin occurring through our products and services could subject us to increased regulatory scrutiny, regulatory enforcement, and litigation
3. 42If we or our third-party providers fail to protect confidential information and/or experience cybersecurity incidents, there may be damage to our brand and reputation, material financial penalties, and legal liability, which would materially adversely affect our business, results of operations, and financial condition

Risks Related to Third Parties

1. 43We rely on our program agreement with Sutton Bank to offer our Fold prepaid card product. If our relationship with Sutton Bank were to end, the ability to continue to offer our card product would be affected, which could affect our financial and business results
2. 44We currently rely on third-party service providers for certain aspects of our operations, and any interruptions in services provided by these third parties may impair our ability to support our customers
3. 45We rely on our agreements with Fortress and BitGo to offer our Bitcoin-related services. If our relationship with either Fortress or BitGo were to end, the ability to continue to offer our Bitcoin services would be affected, which could affect our financial and business results
4. 46Our customers enter into agreements directly with Sutton Bank and our Bitcoin Service Providers
5. 47We are subject to risks related to the banking and financial services ecosystem, and to our banking and crypto service providers specifically
6. 48Any change to the Bitcoin Service Providers’ fee schedules could adversely impact our business
7. 49We are subject to economic and geopolitical risk, business cycles, and the overall level of consumer, business and government spending, which could negatively affect our business, financial condition, results of operations, and cash flows
8. 50We depend on major mobile operating systems and third-party platforms for the distribution of certain products. If Google Play, the Apple App Store, or other platforms prevent customers from downloading our apps, our ability to grow may be adversely affected

Risks Related to Intellectual Property

1. 51Our intellectual property rights are valuable, and any inability to protect them could adversely impact our business, operating results, and financial condition
2. 52We may be sued by third parties for alleged infringement of their intellectual property rights
3. 53Our platform contains third-party open source software components, and failure to comply with the terms of the underlying open source software licenses could harm our business

Risks Related to Our Employees and Other Service Providers

1. 54The loss of one or more of our key personnel, or our failure to attract and retain other highly qualified personnel in the future, could adversely impact our business, operating results, and financial condition
2. 55Our culture emphasizes innovation, and if we cannot maintain this culture, our business and operating results could be adversely impacted
3. 56In the event of employee or service provider misconduct or error, our business may be adversely impacted
4. 57Adverse economic conditions may adversely affect our business
5. 58We are a remote-first company which subjects us to heightened operational risks
6. 59Environmental, social and governance factors may impose additional costs and expose us to new risks
7. 60Changes in U.S. and foreign tax laws, as well as the application of such laws, could adversely impact our financial position and operating results
8. 61Our ability to use our deferred tax assets may be subject to certain limitations under U.S. or foreign law
9. 62If our estimates or judgment relating to our critical accounting estimates prove to be incorrect, our operating results could be adversely affected
10. 63We may be adversely affected by natural disasters, pandemics, and other catastrophic events, and by man-made problems such as terrorism, that could disrupt our business operations, and our business continuity and disaster recovery plans may not adequately protect us from a serious disaster
11. 64We might require additional capital to support business growth, and this capital might not be available

Risks Related to Being a Public Company Following the Business Combination

1. 65The market price of shares of our common stock may be volatile or may decline regardless of our operating performance. You may lose some or all of your investment
2. 66We do not intend to pay dividends on our common stock for the foreseeable future
3. 67If securities or industry analysts do not publish research or reports about our business or publish negative reports, the market price of our common stock could decline
4. 68Our issuance of additional shares of common stock or convertible securities could make it difficult for another company to acquire us, may dilute your ownership of us and could adversely affect our stock price
5. 69If we are unable to implement and maintain effective internal control over financial reporting in the future, investors may lose confidence in the accuracy and completeness of our financial reports, and the market price of our common stock may decline
6. 70Our management has limited experience in operating a public company
7. 71Changes to, or changes to interpretations of, the U.S. federal, state, local or other jurisdictional tax laws could have a material adverse effect on our business, financial condition and results of operations
8. 72If the perceived benefits of the Business Combination do not meet the expectations of investors or securities analysts, the market price of our securities may decline, which could contribute to the loss of all or part of your investment
9. 73We cannot assure you that our securities will continue to be listed on Nasdaq in the future. In order to continue listing our securities on Nasdaq, we must maintain certain financial, distribution and stock price levels
10. 74Future resales of our securities may cause the market price of such securities to drop significantly, even if our business is doing well
11. 75We may issue additional shares or other equity securities without your approval, which would dilute your ownership interest and may depress the market price of our securities
12. 76Fluctuations in operating results, quarter to quarter earnings and other factors, including incidents involving customers and negative media coverage, may result in significant decreases in the price of our securities
13. 77An active market for our securities may not develop, which would adversely affect the liquidity and price of our securities
14. 78Our organizational documents provide that we will indemnify our directors and officers, in each case to the fullest extent permitted by Delaware law
15. 79We are an “emerging growth company” and, as a result of the reduced disclosure and governance requirements applicable to emerging growth companies, our securities may be less attractive to investors
16. 80Anti-takeover provisions contained in our Charter and Bylaws, as well as provisions of Delaware law, could impair a takeover attempt
17. 81These provisions, alone or together, could delay hostile takeovers and changes in control of us or changes in the Board and management
18. 82Our business and operations could be negatively affected if it becomes subject to any securities litigation or stockholder activism, which could cause us to incur significant expense, hinder execution of business and growth strategy and impact its stock price
19. 83The Public Warrants have become exercisable for shares of our Common Stock, which exercise could increase the number of shares eligible for future resale in the public market and result in dilution to our stockholders
20. 84We may redeem your unexpired Public Warrants prior to their exercise at a time that is disadvantageous to you, thereby making your Public Warrants worthless
21. 85A 1% U.S. federal excise tax may be imposed on us in connection with our redemptions of our shares in connection with redemptions pursuant to the Business Combination