Warning: A Massive Ponzi Scheme Hidden in Plain Sight.

We may have just discovered a massive

scam in the crypto ETF world. And this

has to do with understanding the

difference between a distribution rate,

what's actually happening in the

underlying fundamentals of a Bitcoin

related ETF. Now, this gets complicated,

but if this is actually what's going on,

which we think it is, I think the

company that's putting this together

could be subject to a multibillion

dollar lawsuit when all of this ends up

going hoopy dupy. Right now, off of just

this one ETF, which has approximately

$4.83 83 billion under management. The

company takes a 99 basis point fee,

meaning the company earns from this ETF,

from what could be a pretty nasty scam

and a fraudulent advertisement in my

opinion,

is raking in nearly $50 million a year

in fees.

But they better put some of that $50

million aside if what's going on really

is shady, shady, shady. Let's take a

look at this as a lot of people we know

aren't going to understand what's

actually going on here. It's ticker

MSTY.

Now, here is basically an ETF that

promises to pay you dividends by selling

options on an underlying stock. In this

case, MSTY sells options, puts, and

calls on an underlying equity known as

strategy, MSTR, and we're all familiar

with that. The fund doesn't actually buy

MSTR directly. Instead, what the fund

does is they hold cash and options. Now

what's really interesting about their

cash and options and this is sort of the

first thing that bugs me is when we go

over here to distribution details

uh we could see sort of a history of

distributions which is nice but not very

useful because we mostly want to know

what's going on now. What do we think

our next distributions are going to be?

That's the most important part. The next

distributions.

The other thing that and and this is the

the little sussy part or that starts

getting you know that started intriguing

my interest thinking okay what's going

on here actually when we actually jump

into the top 10 holdings we see cash

great we got a $1.3 billion in cash

that's fantastic we've got a billion

dollars in treasuries for due in 2026

great short-term treasuries that's

fantastic very low risk very low risk

Treasuries here, a lot of cash. That's

great. Uh, and then I see call options

here, but I noticed that the market

value of these call options is positive.

And that got me thinking because folks

during my live stream in the comments

are saying, "Oh, but Kevin, you know,

they they sell puts and calls." Okay,

but these are bought calls because the

market value is listed as positive. So,

where are the sold calls and sold puts?

And then I realized what they do. When

you download all of the holdings, you're

actually going to find that the market

value of the sold options is considered

negative.

Therefore, their uh waiting in their

fund is actually considered negative.

So, you have, and I separated these out

a little bit because I made some notes.

You have these sold puts, for example,

that have a negative 9% weight in the

fund because they're well, they're sold

options,

uh, that don't show up in the top 10

holdings for the company. So, even

though technically the company is

legally disclosing correctly that yeah,

their top 10 holdings of positive value

are cash and treasuries and call options

that are bullish. Micro Strategy for

September 19th, for example, they have

$47 million of call options at $390.

They're $90 for September 19th. It's

close to the Fed day here. $410 options

for October 17th at $33 million. Those

are bought calls. And when you go jump

on over to what Micro Strategy is doing

right now, it's at 340. So we're about

$50 to $70 below that price for those

bot calls. That's because Micro Strategy

has been on a recent downtrend. Now

there is a historical precedent for this

sort of downtrend happening at uh Micro

Strategy while the level of Bitcoin or

the valuation of Bitcoin is actually

going up. Now, it's not the most

bullish, but it's not a scam. It just is

what it is, right? Take a look on screen

here. What do you have? Uh, you have a

uh previous 2020 cycle where Bitcoin

prices moved up while at the same time,

Micro Strategy was trending down. Now, a

downtrend on Micro Strategy is

problematic because it means you're

going to lose money at MST.

Why? The question is when? Because after

all, the company is disclosing all these

cash assets to you and they're

disclosing a 90.8%

distribution rate. But Captain, if I get

a 90.8 distribution rate, you know, what

do I care if it goes down? I'll just

hold it forever.

The question isn't the 90.8%

distribution rate. The question is, what

is that? How long does it take you to

get a 90% distribution? And who gets it?

The old people in it or you? That's

where there could be a smoking gun of a

scam and we need to talk about it. We'll

also talk a little bit about the

underlying fundamentals of Micro

Strategy, uh, including what's been

going on with their premium. So, we'll

be talking about that. It is also worth

quickly reminding you that this morning

we shouted out snowflake that it could

rally up towards 20%. That was our

target today. It went just over 19%.

A big move and we called this in the

pre-market where it was nowhere near the

levels it is now. And if you want to get

that, make sure you join the meet Kevin

membership. You pay once, you get all 10

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coupon code

>> bullish catalyst.

>> Yes, the coupon code is bullish

catalyst. So, what's potentially going

on at MSTY? And how do they come up with

this distribution yield? and is it a

really big scam? Well, let's first

understand what's going on. So, the

company has puts that they sold at 375,

395, 385, 410, and 390. All of these are

upside down. So, when they sold these

options, they collected a premium.

When they collected that premium, they

then distributed that premium, which

means that premium has already been

given away. Now, they're left holding

the bag on sold puts that are upside

down. Basically, a sold put means

they're going to have to buy $445

million of Micro Strategy at $390 unless

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they're going to have to burn a lot of

the cash that they have here, and the

underlying value of MSTY will probably

go down. you need MSTR to recover

because they've already paid out the

premium. Their hedge is the premium that

they get on their options, but they've

already given that a working. So,

whoever buys it now is holding the bag

on these options that are way upside

down. But it's not just sold puts to the

tune of $800 million that are upside

down. I mean, these 390s right now, 342

divided by 390, the 390s are down 12.5%.

They've got $800 million of these that

are upside down. Okay, this strategy

works great when the market is going up.

When the market is going up, fantastic.

Great. You can make money. The question

is how much of these premiums are they

distributing because whatever they're

not distributing and hopefully they're

holding some for future months but the

bag is growing. Take a look at this

here. You have these call options. Okay,

you have sold call options. We know

they're sold because you have a negative

notational value here. We have sold call

options at 372, 362, 37, 357, 365.

Great. Those you get your premium.

Fantastic. And if Micro Strategy goes

down, no problem. But look at the market

values of these. We've got sold calls

here of maybe $5 million, less than $5

million of sold calls here. In fact, we

could just do the math on it really

quickly. The sold call options that are

going to be in the green are $5.9

million. The sold puts that are red are

worth $800 million that are upside down.

Then we have purchased call options. So

purchase call options are, you know,

make money when Micro Strategy goes up.

These purchased call options are $33

million at 410, 7.9 at 385. You get the

idea. We're going to add this all up

over here and we've got purchase call

options that are upside down to the tune

of $48 million.

So basically the bought calls are upside

down. They barely have any sold calls

and the sold puts which made them most

of their option premium which they can

then pay out as a distribution yield is

also way upside down. Now, why then, if

all this crap is so upside down, do they

show a distribution rate of 90.88%.

This is because people generally don't

understand how annualization works. So,

I wrote it down over here. If GDP grows

at 82% in a quarter, you can multiply it

by four and get a GDP growth rate of

about 3.3%. and that's your annualized

rate. You're just taking what happened

in that one quarter and multiplying it

by four. Well, in the case of MSTY, what

they're doing is they're going to say,

"Hey, we just sold a bunch of put

options. We made, let's say, 7.5%

on on our yield or on, you know, on on

options premium. And we're going to

distribute that. And then we're going to

multiply that distribution by 12.

And that's how you get to about 90.8%.

Okay. So, when they give you this

distribution rate, it's actually just a

30day

premium that they earned. It doesn't

tell you anything about how much money

they're losing after getting those

options premiums. And then they're

telling you that, hey, well, if we

continue to get premiums like we did

last month, we'll be able to pay you

90.88% 88% over the next 12 months. So

they're telling you, hey, we could if we

keep doing what we did last month, we

made all this premium, we'll pay you out

90.88%. This is great. This works

fantastic in a bull market. But right

now, people who are buying it right now

are buying into a major bag. The sold

puts that are upside down and the call

options that they bought that are upside

down. You're buying into that bag while

being misled that they might potentially

pay out 90.88%.

How do they figure that? Here you go. It

says it right here. The distribution

rate is the annual rate at which an

investor would receive if the most

recent distribution

which includes option income remained

the same. Ah, interesting. Now, what

happens if we don't include options

income? Well, the 30-day SEC yield

represents the net income, which

excludes option income. So, we know

they're upside down on their options

because they disclose their holdings. We

know they're upside down on those, but

they paid out option premium

nonetheless.

And they're taking that option premium,

multiplying it by 12, and telling you,

"Oh, if we did this forever, we could

get you a 90% return." The SEC is like,

"Dude, we don't know that it's

sustainable." that you could actually

return 7% per month and do that for a

year. So, we want you to disclose to

investors how much money you're actually

making without that options premium

because you are holding a bag. And even

the SEC yield doesn't tell you about the

bag they're holding. And the misleading

part is the biggest bag that they're

holding doesn't even show up in the top

10 holdings. you actually have to go

into the spreadsheet and scroll all the

way to the bottom to find where they're

losing money on nearly a billion dollars

of sold puts. Now, all of this could be

fine if the market goes up. And this is

the thing. This is how market bubbles

work is when the market is going up, all

of these crazy financial products work

great. People make a crapload of money

and they're like, I'm a genius because I

invested and I got all this money back

so rapidly. Yes, that works when the

market is going up. But what's happening

right now is people who are buying MSTY

today are buying thinking they're

getting a distribution yield of 90% when

what they're really getting is a giant

bag of SH9T.

Now, I want you to understand something

else that's going on right now. Bitcoin

treasury companies outside of Micro

Strategy hold $18 billion of Bitcoin or

about 4.7% of outstanding supply. The

problem with this is about 1th3 of

Bitcoin treasury companies are upside

down right now on the Bitcoin that

they've bought. That's the problem.

Also, you're getting into this cycle

where Michael Sailor isn't able to raise

as much money as he wanted to. He

previously told us that he would not

issue any shares of Micro Strategy under

a 2.5x premium. Well, two weeks later,

what did he do? He issued 900,000 shares

and changed the rules or the

interpretation of the rules. Micro

Strategy is currently trading for just a

1.39x

premium. Now, we can speculate that, you

know, maybe the best time to buy Bitcoin

is when Micro Strategy goes belly up and

all the debt is liquidated and that's

going to be the best time to

fundamentally buy Bitcoin. But that

really is a topic for a different video.

The point of what I'm saying here is

that the premium on Bitcoin at Micro

Strategy is in decline right now, which

unfortunately has the risk of

accelerating the downtrend of what's

happening on MSTY, the YieldMax product

that makes YieldMax nearly $50 million

while not advertising their bag and

instead just advertising an annualized

options premium payout that most people

just aren't going to understand That is

a big risk. Now, all of what I'm saying

is available on their website, but just

understand how flywheels of momentum

work. When the price of of Bitcoin goes

up, Micro Strategy tends to go up. That

is not happening right now. We're

getting a divergence. The price of Micro

Strategy is going down while the price

of Bitcoin is going up. That happened

last in 2020 and 2021. It's a little bit

of an omen. In addition to that, uh you

are usually seeing Bitcoin go up. Micro

Strategy go up, they issue more stock.

As you issue more stock, you buy more

Bitcoin, which leads Bitcoin to go up,

which leads to rising stock prices. When

charts go up, people buy. People feel

safer when charts go up. The reality is

you should feel safer when stocks are

going down because you're buying them at

a cheaper price. Except for at companies

like MSTY because you're buying into a

big bag that could go to zero. This

isn't like, oh, we have all this money

and if we close it down, you know, we'll

give you all the money back. They could

literally end up massively upside down

because they're playing options and

options go to zero. That happens. So,

you have to be aware of that. Now,

something to remember is that we're

potentially entering a flywheel at Micro

Strategy that isn't great right now,

where as the stock price of Micro

Strategy goes down, you can't fund raise

as much. Michael Sailor's last fund

raise raised only $47 million, which is

a fraction of what he wanted to raise

and is a bad omen for his ability to

keep fundraising. Eventually, you get

low stock price to low fundraising,

which is where we are now. That

eventually becomes a no fundraising.

Then it becomes concern over existing

debt and the dilution that's happened at

Micro Strategy. And then you get more of

a compression in Bitcoin value and

premium. But that could actually turn

negative when it comes to actually

paying the debt back in 2028 and 9 and

30 or otherwise via the vehicle, you

know, the the vehicles that Michael

Sailor has set up, which leads to less

support for Bitcoin. Unfortunately,

these sort of plays like MSTR or MSTY

both create great support for Bitcoin on

the upside. unfortunately probably

frothing it up, but they create really

big risk on the downside because you

actually have a a legal opportunity to

blatantly mislead people who don't

understand. Now, I'm not trying to say

that