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Show Summary
In this conversation, Sam Smith shares his journey from traditional finance to the innovative world of tokenization and blockchain through his venture, Pinx Global Markets. He discusses his extensive background in real estate, the transition to alternative assets, and the potential of tokenizing real estate for global investors. The conversation delves into market dynamics, compliance challenges, and the future of fractionalized real estate investment, emphasizing the efficiency and accessibility of blockchain technology.
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Investor Fuel Show Transcript:
Sam Smith (00:00)
We absolutely, we could do that right now. By the end of day, I could have your house tokenized and available for anyone to buy. Yeah, I mean, it’s not at all pie in the sky. One of the things that’s very attractive to me is having been through the regulatory bodies and audits and everything else that goes into listing securities or creating free trading securities. What would take us, you know, six months to do?through a market like this takes us an hour and half to do.
Dylan Silver (01:57)
Hey folks, welcome back to the show. Today’s guest, Sam Smith, has a background in traditional finance and now has a new venture, Pinx Global Markets, which brings assets like stocks, commodities, and even real estate on chain, tradable 24 seven, borderless and transparent. Sam, welcome to the show.Sam Smith (02:20)
I appreciate you having me.Dylan Silver (02:21)
It’s great to have you on here, Sam. I always like to start off at the top of the show by asking guests how they got into real estate. I know you have a on-chain asset, right? But I wanna talk about real estate first. We were talking before the show. You have a background in real estate as well.Sam Smith (02:41)
yeah you know i’m kind of a jack i think i have a bit of a master on the finance side but i’ve been involved in real estate manufacturing entertainment sports teams well and gas main i’m a bit of a junkie but you know it’s is like money it’s liquid so it can go anywhere and you know a little bit dyslexic i think anyway i started off with ⁓ an idea when i was about nineteen years oldAnd I driving back to the Midwest from down south and a friend of mine overnight in a car ride said, you know, it’d be great to buy a duplex. Like, yeah, because, you know, half the duplex could, you know, pay the debt. We didn’t know it was called a mortgage. Pay the debt. And the other half could be profit. Said, oh, yeah, then we can take those profits, roll it into the next one. Yeah.
And that was the beginning of my financial journey before I got into private equity and investment banking and everything else. It started off with an idea on a car ride to buy a duplex. Over the next morning, I actually had a bunch of papers laid out on floor and figured out how we buy things. And about time, I thought I had a good plan at the age of 19 years old. I started calling the real estate agents and having conversations with them and realized, oh, I need to be able to get a mortgage.
and had to figure out what a mortgage was and how to do that. That was the beginning of my journey. I started off in the idea of duplexes. You fast forward, I ended up doing 30, 35 single family units. I’ve done some apartment buildings, 18 and 20 units.
⁓ I’ve also done a little bit of construction, a little bit of development later on. I was in the background on the development, but it was the largest green construction project in the country at the time. It was about 110 million.
I’ve also had, you know, warehouse space and industrial space. I’ve had a little bit of strip retail. So I’ve been around the real estate block a little bit, but I would say my forte really isn’t in rehab, remodeling or development or construction. It’s more on the finance side and be able to recognize when a deal makes sense.
Dylan Silver (04:47)
Now coming from that background, underwriting these deals, you talk about multiple different segments of real estate, everything from small multifamily to larger multifamily to niche markets within there. You were talking about retail, but then you talked about some green energy as well.When did this type of alternative asset, tokenization, come into your mind? I’m thinking this is a totally different almost foreign entity compared to brick real estate.
Sam Smith (06:08)
Well, it wasn’t quite that much of a leap because I started in real estate, but right after college I went to work as a licensed broker in the securities industry and learned about capital formation and securities in the markets. And several years after that, got more into the public markets and reverse mergers and IPOs and amalgamations, consolidations, and all of the shuns that we mentioned.So as I’m going through and working deals in several different industries and real estate, whenever we look at a deal,
It’s kind of a cornerstone because we know we can post real capital against it. Real estate doesn’t go anywhere. It’s always there. It’s always collateral. So always look forward to the deal. So it’s just it was kind of a growth trajectory from the idea of buying a duplex at 19 to understand how finance works and how real estate plays into a deal. But right about 2017, I was in a couple of oil and gas deals, had some real estate and a couple other projects and Bitcoin hit $20,000.
And I’m like, what? Because a few years before that, somebody approached me, hey, you want to buy some Bitcoin? And my research on Bitcoin told me that if I ever want to get a hotel room in Guam, that I can use Bitcoin. I’m like, well, that’s not going to happen, so I don’t need any Bitcoin. I don’t remember what it was. It maybe $100, $200 or something like that. I mean, it was silly. But when it hit $20,000, I’m like, all right, we need to figure out what this is.
and did a little bit research on it and creating as much understanding as we possibly could, and said, you know what, let’s go ahead and trade Bitcoin for oil. So we had oil properties and there were a ton of Bitcoin millionaires, newly created Bitcoin millionaires. So, well, okay, well, we’ll take Bitcoin in exchange for oil interests or…
It could have been real estate. If we had a real estate project, we were willing to take Bitcoin for real estate. In our case, it was oil. And put together a pretty fantastic program. wow, you know what? These guys can actually step into the real market. They’re not out there with imaginary money. They can purchase real assets. But what we ran into was, how do you find these people? They’re just wallet addresses. And… ⁓
Dylan Silver (08:24)
Yeah.Sam Smith (08:28)
That was kind of eye-opening for us. Like, so wait a minute, they’ve got all these assets accumulated, but nobody knows who they are, where they are, where they keep them, or anything else. So that was really kind of curious for us.And we played around with couple ideas and such and kind of went by the wayside. And as 2019 rolled around and the SEC and FINRA really dropped some hammers on some of the broker dealers and the red tape and compliance just got to be ridiculous. like, man, there has got to be other markets for trading. So we stepped back into the crypto markets, the blockchain. And we’re like, you know, how can we put, how can we put
securities or assets on the blockchain. And it took about three years of diligence and research and understanding and about time we thought we had our fingers on it. We encountered something that we really hadn’t before and it’s because when I gave you a list of some of the industries I’ve participated in, real estate, oil and gas, manufacturing, sports teams, those are all traditional, right?
Well, if you want to get involved in some fast moving industry, go to technology. So, finance moves fast enough, but when you’ve got technology combined with finance, fintech, my gosh, it moves fast. So by the time we were setting up our infrastructure, rules would change. So we’d have to redevelop the infrastructure. We’d to change the jurisdiction. I we had to really move around from place to place, and even when we picked up licensing and such, the licensing requirements would change. So it got to be a moving target.
But anyway, we pursued this just because we recognized that there’s an entire globe of buyers, of people, of investors, of backers. And we also recognized that the rules are different from one jurisdiction to the next, and there’s one place where there really aren’t any rules, and that’s in the ether. So, we ran that direction.
Dylan Silver (11:01)
Yeah.When we talk about tokenization, right? As a real estate guy, my mind goes to real estate, right? But there are so many possibilities and
Ways for folks to use this to make it borderless also to make it transparent we were talking before the show about something like you know title work and you know seeing the original chain of ownership without any confusion there
It is interesting though, right? That there is a little bit of this… I don’t want to say fear, because that might be the wrong term, but there’s this caution that people have with jumping into this. And at the same point in time, as you know, there’s more and more time that goes by.
there’s more honestly desire for this throughout the world, right? How many people would love to invest in stocks? How many people would love to buy, let’s call it fractionalized US real estate, maybe with multiple people? Are there other, you know,
companies or folks in the industry who are who are kind of leading this charge along with you or do you feel like you’re kind of out there on your own taking taking the arrows in the back for everyone else?
Sam Smith (12:23)
I know that there is quote competition out there at the same time. They’re kind of missing the mark ⁓ And I can explain that a couple ways butWhen the blockchain first came around, ⁓ the tech guys understood its value. And when I first heard of it, I kind of heard what it was, in one ear out the other, but I didn’t appreciate the value of it. I didn’t understand how the technology would change the world, and it will. We’re in the wild west right now. This is the beginning.
But the tech guys understood that and were like, wow, we can do a lot with this. And there were a number of groups that jumped in and started doing some finance work. The issue was these were younger guys who didn’t have the market experience and didn’t understand compliance or regulation or anything else. So they ran down the road and honestly got shut down for one reason or another.
Flip side of it is you’ve got guys from more my generation of background who are going, wow, there’s a lot of value in this. And what they’re doing is they’re putting that same technology into an old system. So they’re essentially inventing or recreating the mousetrap again. So we’re actually in the middle of that because we’ve got…
the core group that understands the technology, the core group that understands the compliance side. And what we’ve done is taken that middle position because we’re not reinventing the mousetrap, but we also understand how we can actually deploy this technology. We’ve seen a few groups come out here. In fact, we were in front of them, but they went and pulled the trigger before we did. They introduced tokenized stock. And some of them are kind of in that middle ground.
But most of them are on this side and they’ve just picked up the licensing and went through the registration and the other steps so they could actually do what they’re doing. What was interesting was we saw these groups came out with the exact same stocks we did. So they’re like, okay, well we get a free look then. Let’s see how it plays out. It played out really well. I mean, they came out and it was fire because everyone was excited about it. But one of the things that…
Dylan Silver (14:21)
Yeah.Sam Smith (14:28)
there’s an argument this way or that way on is whether this market should be pegged or unpegged to the fiat market. So should the price on the stock market match the price of the token? And I mean there you want to spend some late nights with some drinks and going back and forth and speaking on theory.You know, some say, well, you know, it’s the market, it’s a true representation of the price. And as a guy from that space, I’m like, well, it’s the representation that’s being put out right now, and it does have some market sentiment attached to it. Whereas I view it more along the lines of you put it out unpegged and let the natural market forces of supply and demand work and dictate what the price of that is. You know, also, just let the market choose which…
Dylan Silver (14:53)
Yeah.Sam Smith (15:17)
which Securities is actually interested in. But anyway, I’ll run forever if you let me talk. But I was gonna say, ⁓Dylan Silver (15:23)
I’m sitting here taking in the knowledge herethe the idea of pegged versus unpegged I’m curious I would have I would have said you would have gone towards peg because being the traditional Having the traditional background when I think of unpegged. I’m thinking of well what what happens if you have You know something that’s maybe artificially low just because you know there may be less interest in you know
company that may not have the glitz and glamour in the United States.
but maybe doing really large business. Like I’ll use an example, I’m a real estate guy, DR Horton, right? DR Horton is one of, if not the nation’s largest builders, but if we put it on a token, there might not be tons of people looking into DR Horton, because it’s not Nike, right? So I’m curious to get your perspective on that type of thing. Well, what happens if a stock like a DR Horton tied to a token is now super low, because people are just not interested in it?
Sam Smith (16:47)
Sure. Right.gonna buy it. I’m gonna buy it because now it’s a discount. But that’s kind of the point is I’m not the only buyer out there. You know, it creates a lot of arbitrage opportunities. But let me kind of, you know, split the idea here in a direct listing versus an indirect listing. So an indirect listing means we’re putting out a representation that already exists on the market.
And all we’re doing is pointing to who they are and what they do. Here’s our financial statements, here’s our quarterly reports, and all the information is available. And I’ve got to believe that just about everybody around the globe has heard of Apple. So, yeah, yeah, we like Apple. The question is, well, why do they buy it?
They buy it because it’s cool. They buy it because they expect it to appreciate. Do they buy it because it pays dividends? You know, do they buy it because they’re trying to build a position because they’re going to trade with their buddy for DR Horton stock? Who knows? People buy for a number of different reasons, but in that indirect scenario, all we’re doing is taking a look at who they are because they’re already reporting. In more of direct scenario, like a real estate play. We’re buying an apartment building. In an apartment building buy,
It’s going to be information that’s provided to the token holders via the market, a direct listing. Information taken from the project itself, represented to the market so the token holders can make a decision on what they want. Hey, I like this project. They’re opening the doors, they’re already pre-leased to 90%. I think this is going to be a good one. And I’m a traditional real estate guy, so I believe it’s going to improve by, you know,
1.75 % a year in value and I’m looking to sell it downstream. But there are going be market forces at work. The market forces at work. know, the unwritten rules that actually move values. And those market forces, when this project has been sold and built and completed and cash-flow and such, you’re going to have chaos in the market. And the chaos in the market is the token holders.
Dylan Silver (18:50)
rain.Sam Smith (19:13)
because Tom who bought that token had some life event, life altering event and now needs to sell that position. So when he sells that position, the crypto market is going to go to an automated market maker, which means he can sell it any time of day, any day of the week from Ingo. ⁓Dylan Silver (19:30)
want to ask you a granularquestion about this idea.
If someone is buying or selling a crypto, a different token, outside of Pinx global markets, right, in most cases, I’d say, as far as I’m aware, in almost all of the cases, there needs to be someone who’s going to come ahead and buy that token, or they need to be on some type of a platform that is buying it back at a market price.
So when we take that idea and we apply it to something like tokenization of stocks, would folks be able to sell it at any point in time for quote unquote the market value, whatever it is that is determined at that time by the platform, or would there have to be a buyer lined up and saying, I’m willing to purchase it at this price?
Sam Smith (20:15)
So I’m gonna give you three answers to that question. One is through our market anyway, when the tokens are sold in that real estate project, they go to your wallet. We don’t touch them. We don’t have any custody of them. They belong to you. And you may put them on a cold drive and throw them in your safe or you may keep them on your phone, but you own those tokens. okay And if you decide to…donate them to charity and charity has a wallet you can straight transact that way so you can send them over. Two other options just come to mind. One is a book entry system. So this is a feature that we have built into our market that we haven’t deployed yet. But the book entry system is a list of buyers and sellers. And it works just like a level two quote on the market where
This is everyone who’s willing to buy, what they’re willing to pay. This is everyone who’s selling, what they’re willing to sell for. And it’s a matching system. Just the same, you can go in there and say, hey, I want to sell, and this is the highest price for this much, yeah, I’ll go ahead and sell to them. So it’s more of a mechanical approach, but you can actually shop the buyers and sellers. It’s a book order system. Alternatively, we have the Automatic Market Maker. And it’s a constant curve formula, which basically means it starts with assets and parity and established price.
and the price adjusts based on supply and demand. So if somebody bought or sold, it’s going to change the price of the pair in the pool. So you can observe that and if it hits the price you’re looking for, then at any time of day or night, you can click the button and you can sell into it.
Dylan Silver (21:53)
got you. Is there any debate or sentiment out there among folks who are in this space that hey we should be going leaning towards this one direction, hey we should be aiming for you know more liquidity, people should be able to sell when they want versus no we should only sell when they have a buyer who’s willing to ⁓ pay that certain price.Sam Smith (22:12)
No, because part of it is, well I’ve done some overseas interactions, in fact we do a lot of them ⁓ this way, via Zoom and such, but been local many times, but as Americans…And from an American perspective, we are not the most patient people. So when we want to sell, we want to do it now. You know, we don’t want to see the listing go stale on the market for 90 days. We want it sold in the next two weeks. And same with the buy. When you want it, you know, Amazon, why do you think they jump through hoops to get it to you the next day? Because you don’t want to wait a week for it to arrive. So just in my experience.
You know, the conversation has largely been that, yeah, we want it now. We want to be able to sell now. We want to be able to buy now. We want instant gratification. We want to be able to move. So I don’t think I’ve heard any blowback about, it should remain in the system it currently exists.
Dylan Silver (23:08)
have a totally unrelated thought. I’m curious to get your feedback on this. You’re talking about, know, I want this instantly, don’t want to wait 90 days for this. I’m a Texas realtor. We’re seeing, you know, time on market.being longer than it was in previous years. And I’m thinking about how many international investors are looking at real estate all over the country. But I’m also thinking about how many people that are US citizens as well would like to become investors. Do you think at any point in time, or is this pie in the sky thinking, that people could potentially, next five years,
start selling their home in like a fractional tokenized way to people both domestically and internationally.
Sam Smith (23:53)
We absolutely, we could do that right now. By the end of day, I could have your house tokenized and available for anyone to buy. Yeah, I mean, it’s not at all pie in the sky. One of the things that’s very attractive to me is having been through the regulatory bodies and audits and everything else that goes into listing securities or creating free trading securities. What would take us, you know, six months to do?through a market like this takes us an hour and half to do.
It’s horribly efficient and about anything to be tokenized but in your scenario the question I’d have is okay well the same question I ask this question all the time well why would somebody buy the fractionalized share of that house you know what is the benefit they maybe they’re just looking for appreciation maybe they know Texas populations growing so they expect ⁓
some inflationary effects where the value is going be higher so they can sell the tug, maybe that’s it. Or maybe it’s a rental property and what they’re looking for is their 164th of a percent participating interest in that. But yeah, mean, about anything can be tokenized. Is it marketable? Does it make sense when people buy it?
Dylan Silver (25:07)
I continue this conversation and dive into some of the granular aspects of multifamily properties. I’m thinking about people being able to buy a specific door in a quadplex even. But we are coming up on time here, Sam. Where can folks go to reach out to you to learn more about Pinx global markets?Sam Smith (25:18)
Mm-hmm.Well, we’re on all the social media channels. And most of all, on YouTube, there’s some pretty good educational content there, as far as what the market’s doing. Also just some general content on the crypto community and blockchain and some of the technology behind it. But we’re also on Instagram. I believe we’re on Facebook and Discord and X and all these places. But best place to go is just Pinx, P-I-N-X Global.
on your web browser. It’ll pull up the market. Right there you’ve got an opportunity to take a look at what we’re doing and here in the next month or so we’re going be introducing a few more lines of products. In fact, think I mentioned before we got on the cast that we’re actually going to tokenize some property in Dubai and see what the appetite is for that. But check us out and keep a follow on us.
Dylan Silver (26:15)
Sam, thank you so much for coming on the show here today.Sam Smith (26:18)
Well, thanks for having me. I appreciate it.
