- An off-chain transfer is an edit to one company's internal ledger: no coins move on a blockchain and no transaction hash exists, so only the company keeping the ledger can confirm it happened.
- Until a withdrawal reaches an address the recipient controls, the balance is a claim on that company, and when FTX failed in 2022 such claims became dollar amounts fixed at the bankruptcy-date price.
- Datavault counted 1,309.04 credited bitcoin as an asset for four reporting periods and now books the payment as a receivable from Scilex: a balance counts as yours once it reaches an address you control.
A company can watch 1,309 bitcoin appear in its account and conclude, a year later, that they never counted as payment. Datavault AI (Nasdaq: DVLT) reached that conclusion on 20 October. The buyer, Scilex, had agreed in September 2025 to pay $150 million in bitcoin for 15 million shares and a warrant for 263.9 million more. It then "credited" the coins to Datavault at a venue called Biconomy, and Datavault's SEC filing says this happened "through an off-chain transfer". When Datavault asked in June 2026 to withdraw bitcoin, the withdrawal didn't complete, and it still hadn't when the company filed on 26 October. The next day its stock lost half its value.
You may have made a small off-chain transfer yourself. Send bitcoin to a friend on the same exchange and it lands in a second, with no fee. Nothing was actually sent. The exchange took the amount off your row in its database and added it to your friend's. That edit is the whole transaction. In crypto it is the routine way coins change hands inside one company, and the coins themselves, if the company holds them, never leave its wallets.
The bitcoin credited to Datavault arrived the same way.
Soren has made a career of the gap between a trade agreed and a trade delivered. In that gap one side has paid and the other hasn't. With him you'll take apart Datavault's filing, then your own balances.
"Show me your bitcoin," Soren says. You open your exchange app and point at the balance at the top: 0.05 BTC. "That's the exchange's number. I asked where the bitcoin is," he says.
What changes when bitcoin moves off-chain?
You can't point to it, and neither could the exchange, at least not to coins that belong to you alone. When you bought, the exchange added a line to your account. The coins stayed in its own wallets, pooled with everyone else's. A 2020 explainer in the Georgetown Law Technology Review describes the routine: when a customer buys or sells, "the corresponding amount is debited or credited on the exchange's internal ledger". Your balance is your share of the pool, by its count. Every trade on the exchange is the same edit. The buyer's row gains bitcoin, the seller's row loses it, and no coin goes anywhere.
Your transaction history answers for him. Near the top is your spring deposit from a laptop wallet. It carries a network name, a count of confirmations and a long string of letters and digits, the transaction hash. Paste that string into any block explorer and the payment appears, signed by your key and sitting in a numbered block that thousands of computers agree on. Below it is the 0.01 you sent your friend in March. That row has a date, an amount and a status, and nothing you could paste anywhere.
"That one was free because it never went anywhere," Soren says. No key signed it and nothing went out for miners to pick up, so there was no fee and no block to wait for. Your exchange changed two numbers in a table it owns, and it could change them back. "Fastest settlement in finance, mostly because nothing settles," he adds.
Bitcoin's ledger can be checked by anyone and quietly edited by no one. An off-chain transfer swaps it for a ledger with a single keeper. You skip the fee not because the exchange is generous but because you've skipped the network.
With it goes the one witness the exchange doesn't employ.
Why can't anyone outside check an off-chain transfer?
You point out that your friend saw it arrive. "Your friend saw the same app you did," Soren says. Both screens are drawn by the exchange from its own records. No hash exists and no outside network has a copy, so every route to checking the transfer leads back to the company that wrote it. An auditor confirming the balance ends up asking the same company.
A credit becomes checkable at one moment, when coins leave the venue on-chain for an address the recipient controls. Then a hash exists, an explorer shows the coins arriving, and the key that can move them belongs to the person who was paid. The CFTC, a US regulator, drew that line in October. Its notice on exchanges that lend to retail customers treats a coin recorded only on the exchange's internal books as not yet delivered.
"So what do I hold after each kind?" you ask.
| Off-chain credit | On-chain delivery | |
|---|---|---|
| Who authorises it | The venue, by editing its records | The sender's private key |
| What anyone can look up | Nothing outside the venue's app | A transaction hash on any block explorer |
| Who confirms it | The venue | Every node on the network |
| Cost and speed | Free and instant | A network fee and a wait for blocks |
| What you hold if the venue stops paying out | A claim against the venue | Coins at an address you control |
Every question about a credit has the same answer: the venue. That is why a credit costs nothing, and it is also where all of its risk sits. Delivery moves the risk rather than removing it. From then on it belongs to whoever holds the key.
Not every off-chain payment depends on a keeper. A Lightning payment also skips the blockchain, but the coins behind it sit in a channel recorded on-chain. Either side can close that channel and take its share back to the chain without the other's consent. "That's clearing done properly," Soren says. Payments net away from the main record, and settlement on it can still be demanded. An exchange credit has no exit like that. Every way out runs through the venue's withdrawal queue.
Shares sold for a ledger entry
"Now a company that let the venue answer everything," Soren says. Datavault's 8-K, the form a listed US company files to report a major event, sets out the dates.
The agreement itself was signed in late September. Scilex would pay about 1,328 bitcoin at a fixed spot rate. For that it got the shares and a pre-funded warrant, which is a right to more shares with almost the whole price paid up front. What arrived, in two credits that autumn, was 1,309.04 bitcoin on Biconomy's books. That shortfall, the filing says, reflects cash Scilex had advanced earlier.
By the end of January 2026, Datavault had sold 491.431 of the credited coins back to Scilex for about $40.5 million in cash. They went back the way they had come, off-chain. In June it asked to move bitcoin to an outside account; the withdrawal hasn't completed, and the filing gives no reason. On 20 October the audit committee and management concluded that all four sets of financial statements filed since the deal "should no longer be relied upon". Datavault filed six days later, after the market closed.
"Count what crossed a blockchain," Soren says. You go back over the dates and find nothing. Two credits came in and a batch went back out, all inside one company's records, and the only money that changed systems was the cash Scilex paid.
Datavault's filing states no remaining balance, but its own numbers leave about 817.6 bitcoin credited to Datavault, worth some $65.8 million at the 28 October price of $80,481 if coins stand behind the credit. Nobody outside Biconomy can confirm whether they do.
Why does the payment become a receivable?
"And the shares?" you ask. "They stay issued. What changes is what Datavault can say it got for them," Soren says.
Control settles it: an asset is something a company controls. Datavault concluded that the credited bitcoin "did not meet the requirements for recognition as a digital asset". So the bitcoin came off its balance sheet. What remained of the deal was Scilex's obligation to pay. Money a buyer still owes for shares is a subscription receivable, and under ASC 505-10-45-2 it generally sits as a deduction from shareholders' equity, not as an asset. The shares count in full; the payment counts on arrival.
Scilex's cash payment changes meaning too. Datavault's old accounts showed it selling bitcoin to Scilex. In the corrected ones the payment isn't for bitcoin at all, it's Scilex paying down what it owed for the shares. The filing says the money "should reduce the subscription receivable due from Scilex".
Shareholders feel the change in book value. The shares and the warrant are still out there, but the equity behind them grows only as Scilex pays cash. Each share now stands for less of the company's net assets than the old accounts said.
The correction runs back through four balance sheets. Datavault expects it to cut total assets by $92.2 million at the end of 2025, with smaller cuts at the other three quarter-ends. Its crypto gains and losses get reversed too. None of it is final yet, and the company says its findings are "preliminary, unaudited and may be subject to change".
The bitcoin had been holding up another judgement as well. When management concluded that Datavault could keep operating, it counted the bitcoin as a source of cash. The filing now calls collection from Scilex "uncertain", so management is reassessing that going-concern conclusion. It hasn't said where the review will land.
"Auditors call it recognition. I'd call it permission," Soren says. A payment is finished when the person paid can move it without asking anyone. Until then the payer, or the bookkeeper in the middle, still has a say in whether it happened.
What is a balance you can't withdraw worth?
You redo the sum on the credited bitcoin and stop at the word "if". "Leave it in. Until it's withdrawn, that's a claim," Soren says. Claims get paid all the time, in his experience, and what matters is who pays and in what.
Usually nobody has to find out. If you can't withdraw bitcoin from an exchange, the cause tends to be dull. The common ones are an identity check, a daily limit, wallet maintenance or a deposit sent on the wrong network. Each of those comes with a stated reason and an end. A request open since June with no reason is another kind. The filing's own list of risks names it: "the outcome of efforts to collect amounts from Scilex or obtain the cooperation of Biconomy".
For a keeper that failed, Soren goes to FTX. When it filed for bankruptcy in November 2022, its customers' crypto balances didn't come back as crypto. The estate turned them into dollar claims at filing-day prices, about $17,000 a bitcoin. By March 2025 bitcoin traded about five times higher. The Block worked out that a claim for one coin was worth roughly a fifth of one. The estate expected to repay 118% of each claim in cash, a good result for a bankruptcy and a poor one measured in bitcoin.
The filing doesn't say Biconomy has failed, only that the withdrawal hasn't completed. FTX shows where a credit ends up in court. If a venue fails, a judge decides whether its customers get coins back or a figure in dollars. A venue's terms of use weigh heavily in that ruling. Read them while you can still leave.
The rows in your history with no hash
"Go back to your history and sort it," Soren says. Every row with a hash happened on a chain, and every row without one happened in the exchange's database. Even the hashed rows only take you so far. Once your spring deposit reached the exchange's address, your balance became a credit like any other. A deposit hash proves the coins arrived, not that they're still there for you.
Only a withdrawal that arrives turns a credit back into coins. A small test withdrawal proves the venue pays out small amounts, which is the cheapest promise it keeps. A withdrawal the size you'd need on a bad day tells you more. So does the wait. If one sits in "processing", note the date and ask why in writing. Notice, too, any offer of something other than coins: cash, a different token, a product that pays interest while you wait.
A company that reports bitcoin can be sorted too. If you own shares in one that holds a bitcoin treasury, look for addresses it names that you can check on an explorer yourself. A figure it reports about its own holdings comes from the ledger's keeper, like a reserve number a venue publishes about itself. Datavault's stood through four reports before a withdrawal tested it.
Credits are how crypto moves inside a company. On an ordinary day they cost nothing and save a fee. What a credit is worth gets tested on one day: the day you ask the keeper to let the coins go.
Datavault asked in June, and as of its last filing it is still waiting.
Find the transaction hash for a small bitcoin buy in the simulator. There isn't one in Trade History: the fill is a ledger row with no coins behind it, which is all an off-chain credit ever shows you. On a real exchange, sort your history into hashed and unhashed rows. How much of your balance came in on the exchange's word alone?
