On The Brink with Castle Island - Weekly Roundup 01/06/23 (DCG vs Gemini, SBF's plea, India's crypto framework) (EP.385)

Episode Date: January 6, 2023

Matt and Nic return for another week of news and deals. In this episode:  A call for on-chain archeology Nic's scuppered NYE plans More news from the FTX crime family Who is SBF's mystery bail benefactor? SBF pleads not guilty SBF is prohibited from moving further FTX/Alameda assets SBF had four meetings with White House staffers regarding pandemic preparedness New inductees into the Bad Boys club Nic's pickleball confession We revisit the 42 yard field goal challenge The Bahamas regulators wrangle with Jon Ray regarding FTX assets The SEC steps in to stop the voyager deal The House fails to elect a speaker NYDFS fines Coinbase $50m for deficient compliance DCG and Gemini's wrangle India's new crypto framework What's happening with the institutionalization of crypto? Content mentioned in this episode: Sean Judge on Medium, Reasons to remain bullish after a year in crypto hell Sponsor notes: Talos powers institutional access to the entire digital assets ecosystem via a single-point of entry. Connect directly to your preferred prime brokers, lenders, investors, custodians, exchanges, OTC desks and more, or meet them on Talos. Get started at Talos.com Subscribe to the Coin Metrics State of the Network newsletter

Brought down by bad mortgage investments, Lehman, which has 25,000 employees, will be liquidated. The federal government loans American International Group, AIG, $85 billion. This is a different kind of market, and the Fed is asleep. The federal government is stepping it to stabilize Fannie Mae and Freddie Mac, the two mortgage giants that have been threatened by the housing crisis. The Bank of England has pumped 75 billion pounds more into Britain's ailing economy with a new round of Concentuteease. You print a couple trillion dollars, and all of a sudden, people start to worry. So out of this worry, we have something called a Bitcoin. Bitcoin.

Welcome to On the Brink. I'm Matt Walsh. And I'm Nick Carter. In this episode is brought to you by Coin Metrics. And here is the Metrics Minute. Here are some data points. Coin Metrics think will impact crypto in 2023. Postmerge Ethereum. There is one million eth of staking words accumulated and locked up on Ethereum's consensus

later layer set to be unlocked for withdrawal early spring. How about that? There to an option. The share of total eth gas used by L2s tripled in 2022 for Bitcoin. The Bitcoin held on the Lightning Network rose from 3,000 to 5,000 regulation. There is a focus on stablecoin regulation here. After a record 7 trillion in stable coin value was settled in 2022, real world assets, Maker Dow put 400 million into short-term treasuries and 100 million into investment-grade corporate bonds.

and voted to work with a bank to allow mortgage loans on commercial real estate properties. That's your metrics minute. Glory days of on-chain forensics right now for coin metrics. Just salivating. They're salivating. Yeah, we definitely need. We need so much more on-chain archaeologists, on-chain archaeologists.

There's some all-stars on-twin metrics and outside of coin metrics that are just tracking some of these nefarious activities that the FTX people have been up to. And good God. we should have been using these on-chain tools before this all happened. That would have been the secret. Yeah. The trick was to know prior to the enormous collapse that FTCS didn't have the funds. That's the crazy thing.

It was kind of an open secret that FTCS didn't have the cold wallets. But nobody knew or cared or talked about it. I guess, I mean, maybe that would have been good to know if you were like investing in FTCS, that how's your wallet architecture? Yeah, it didn't make any sense. It didn't make any sense. All right, this episode is also brought to you by Talos. If you know anything about trading digital assets, you know Talos.

Whether you're on the buy side or the sell side in Tradfai or a crypto-native firm, all of the liquidity aggregates on Talos. You can trade via the API or the web-based GUI, and you can connect and interact with prime brokers, lenders, investors, custodians, exchanges, OTC desks, and more. The leadership team has led technology teams with some of the largest businesses in the world, the most sophisticated asset managers and trading providers. That's why all the big names in the industry aggregate on Talos.

Head over to Talos.com. That's T-A-L-O-S dot com to learn more. So there was a lot of news this week and very few deals. A bunch of news. Yeah, you don't really do deals, you know, heading into the holiday season, right? So a little quiet. Two deals, I guess. Okay, should we just do the deals?

Why don't do the deals? And then we'll, uh, there's a lot to talk about this week. Good God, is there a lot of news. Yeah. How is your new year? Um, well, actually, we got rugged on our new year's plans. Oh, yeah? I didn't tell you this.

So the plan was to rent a yacht as one does in the city of Miami. And, well, actually, we were going to rent two yachts. One of them just straight up didn't show up. So where did it go? It didn't appear. And in Miami there was like a yacht charter limit. I think you know only have 13 people. So we had like 20 people.

So seven people had to just not take the yacht. Oh, that's brutal. What did they do? Well, I was in that group. Oh, you were shot. I sacrificed. Yeah. For the greater good.

And it's Miami. So you can't just go to like a casual Irish pub. They don't have those down there. That would be my idea of a fun New Year's. Then you just don't. I'm not aware of Irish pubs, but yes, so I affected altruism and elected not to take the yacht, and we were able to pivot successfully, so always have a plan B. But, yeah, there was no yacht New Year's Eve celebration for me.

Very sad. Oh, I took a jump in the ocean on New Year's Day. Did you really? I did, yeah. That's freezing cold. Oh, it was in North Carolina, actually. Oh. But it was still not warm.

Was that a tradition or just you wanted to go in the sea? I just feel like it was a cleansing experience. Needed to get some of the stink of 2022 off of me. I don't know if it worked. There's a lot of bad boys. The stink is following us. At my alma mater, St. Andrews, the tradition was to jump into the North Sea on the 1st of May at dawn. So like 4 a.m. North Sea, Scotland.

That's cold. Nude, by the way, nude. Okay. Horrible tradition. awful. I hate that. Yeah, I don't know if that tradition is going to sustain. I'm really happy. I don't have to do that anymore. Well, we're back. So it's 2023. I think this year is going to be a lot brighter,

but we got to take out the trash first. I'd imagine there'll be fewer deals in the first quarter than in maybe the first quarter of last year. There's a lot of garbage to dispose of in the industry. We're getting there. Yeah, we're getting there. It's actually happening pretty quickly, I would say. Well, why don't we start with some deals of the business? week and then we'll get into the news. Okay, first up core scientific bankrupt Bitcoin miner. They raised 17 million in debt financing from BlackRock. And the other one this week is an apt-dose-based wallet called Momentum Safe, M-safe, for short. They raised $5 million in seed financing from Jump Crypto as well as Circle Ventures, Coinbase Ventures, and Shima Capital. So two deals

this week. So, all right, we're just going to, are we hitting the bad boys right? off the bat here. Cue it up. It's all bad boys all the time over here. Okay. Cue it up. Yeah, bad boys. What you're going to do? What you're going to do when they come for you? Bad boys, bad boys. What you're going to do? What you're going to do when they come for? This first line item in our newsletter you have listed as FTX crime family news? Yeah, I think I just, I don't want to call it like FTCX the company. I don't want to refer to any of the executives that ever worked at executive at FTCS is ever having like led a business because you were just you were working for a crime family and so I like it all of the news here is from the FTX umbrella crime family there's capos there's capos that have turned states witness and then there's capos that have not turned states witness there's competing families there's there's all sorts of intrigue here

and there's a lot of news I'm trying to think of a godfather or like a good fellow's pun and it's just not happening for me today. I was looking through YouTube for a lot of Godfather clips, but the problem is it's sort of, you know, they're all very like pro-mafia when you really think of it. It makes it like a cool thing. Crime is not

cool, especially not crypto crime where you steal from, you know, grandparents and pensioners and places like that. That's not cool. Yeah, maybe Hollywood shouldn't have glamorized crime. Crime is bad. Do you have any theories on speaking of Hollywood, one of our friends,

I don't know if he was public with this, so I guess we won't say his name, but he has a theory that the anonymous signer that was part of getting Sam out of jail on the Bond was maybe a Hollywood studio. I think that's a pretty good theory. That's the first I'm hearing of it, like James Cameron. Yeah, or, you know, like one of these Warner Brothers or something. Maybe you get access to the film rights if you put up the Bond. I mean, that sounds insane, but, you know, crazier things have happened. Things are insane. Well, it could be like George Soros. I mean, there's other crazy names that could be out there, too.

Who knows? Put the tinfoil hat on. I am curious. So I guess that is one piece of news that this mysterious benefactor that vouched for Sam will not be named. Is that correct? The judge has agreed to not name the bail benefactor for Sam. So Judge Kaplan has said, Without prejudice, which I need to brush up on my legalese, but I believe that means that it can be, people can put in motions. People can file motions to get this revealed and they'll have to have a court date in the inner city press. Who's been a great follow on Twitter filed a motion immediately to try to get the two names, but they're still a secret. The judge did not disclose that and the government did not push them to disclose it. Okay, what else happened?

So Sam pled not guilty. So actually, you were right. You said he wouldn't plead guilty. I said he would. I just don't know how you plead guilty if they're throwing a hundred years at you. I mean, you can't plead guilty. You have to take a shot here. I mean, if the government's offering 20 years, maybe you plead guilty and you hope you get out a little bit sooner on good behavior. But I don't know how you might as well fight it. And, you know, that doves tails into the next thing. I'm sure he's negotiating here, but he's going to have astronomical legal bills.

And if he wants to fight this, I think it's going to be, you know, 10 plus me. million dollars worth illegal fees. So onchained data has shown wallets that are linked to Sam, where he's publicly been on Twitter saying that this is his address, moving money. So there's $68,000 moving to a Seychelles, no KYC exchange on the 28th. He went to Twitter to deny that he was responsible for moving the funds, even though, you know, it looks like during this whole sushi debacle, which is a whole other side show where is Sam, Chef Nomi, he was out there disclosing his public addresses, turns out you can pretty easily track those. So as part of this hearing, Judge Kaplan ruled that SBF is prohibited for moving Alameda or FTX funds. And there's reports that in

the courthouse, SBF was gesturing wildly to his lawyers with a pen trying to get them to protest this ruling because you know he's just washing money here and he's just trying to cobble as much together as he possibly can. And it looks like the footprint is extensive. It's on all sorts a different blockchain, Solana, Ethereum. If you take the Ethereum address and you put it on other EVM chains, you can see that it's places like Polygon and Avalanche. So this guy's got a lot of money moving around here. I'm astonished that wasn't part of the bail condition in the first place.

Should have been. Yeah. So actually, on the plea, I didn't know how these things worked. But our courthouse, Autoshei, Martin Schrelli, who's actually been really clutched throughout this process, explained that you can actually plead kind of at any time, even during the trial. Yeah.

And that there's kind of an ongoing negotiation. And so you would never or rarely enter a guilty plea right off the bat. But this doesn't mean that it's going to trial. He could still plead later. So, you know, one of the things that might make him more inclined to take a deal here is that Dan Freeberg, who's the top regulatory executive, he was at Fenwick, I believe, before. He has turned state's witness. So he is going to be testifying against.

Sam put him in the camp with Caroline Ellison and Gary Wang. I'm sure there'll be others that come to light here, but he is, he's got to have some stuff on him. All right. There's so many FTCS crime family news items. SPF apparently had four meetings with White House staffers. What do you think they talked? What do you think they talked about? So apparently it was about pandemic preparedness of what would that make sense? You know, why not have a offshore crypto exchange executive come in and advise the White House on pandemics? Makes sense.

Yeah, well, I mean, he probably knows a lot about pandemics, yeah, I don't know. There weren't there weren't any like qualified people to talk about the pandemic. Bring in Sam. We want to get his general views on the pandemic. Yeah. That makes sense. Incredible. What else?

The Department of Justice has seized. $465 million worth of Robin Hood shares that SBF purchased with client funds and pledges CloudRow to BlockFi. Well, I think it's a good idea that they took them. I think the DOJ should seize as much as they possibly can here because you've got places like the Bahamas trying to seize money. You got hackers out there trying to do things. You got Sam probably moving money. So DOJ should, I'm sure they're already doing this, is just hire a bunch of on-chain blockchain, forensic companies, try to find all the money and try to rustle it together.

I mean, then you get crazy things like this radium project, which is a project on Solana. It looks like the total number of tokens that they said they had was not actually the total number of tokens because Sam or someone close to the project printed a bunch of them out of thin air and was funneling them into the FTX criminal umbrella. It's how many different permutations of fraud do we have here? Yeah, it seems like all of these tokens in the FTX orbit were basically the supply was being manipulated. And no one was checking that the on-chain reality matched the promises made or the white paper. This is a chronic problem in the crypto industry that the reality of token issuance is just not anywhere.

It's not the same as what is set about tokens. Look, that could be a piece of legislation if it ever hits. the house this year. I mean, token issuers need to be honest about their promises. It's not the first time we're talking about this. Hester Purse's safe harbor proposal has language in there around token disclosures. You would have vesting schedules. You'd have who owns the underlying. So these are not new ideas. The SEC is known about this stuff for, you know, what was it? Three years ago, Hester Purse had the original safe harbor proposal. Yeah, and it's not the first time we've seen this kind of promises broken.

in terms of issuant schedules. You'd think the transparency of blockchains would help us here. I mean, this is, you know, look, this is what securities regulation is all about, is making disclosures and then sticking to the things you said you're going to do. Do you know that the chairman's schedule is still not current on the SEC's website? Hasn't been updated since the summer. Speaking of transparency, yeah.

Where's IEX? Where is IACs and all this? I have no idea where IEX is in all this. other bad boys news are friends at three arrows capital the famous fraudsters Kyle Davies and Suu they were subpoenaed on Twitter today we're recording this on a Thursday subpoenaed via Twitter by the Supreme Court of Singapore and then Davies was subpoenaed by the US bankruptcy judge out of New York the two are still fugitives presumably it looks like in Indonesia which by the way has an extradition treaty with

Singapore they do have a shiny new treaty Yeah, so there actually is precedent for this in the U.S. Folks have been subpoenaed on Facebook, on LinkedIn, of all places. Imagine that. Get an in-mail. I wouldn't even know. I don't. I know.

That's the thing. A LinkedIn message, I actually would not see that subpoena. It's like, do you need help marketing your company? How many of those do you get a day on LinkedIn? LinkedIn is a very stressful place. I don't go there. And yes, indeed, people have been subpoenaed on Twitter before in the U.S. As for Singapore, I don't know.

but this was the Supreme Court of the Singapore that okayed it. And at that December 2 hearing, counsel for the creditors already made the point that they weren't cooperating or communicating. So look, if you refuse to talk to, you know, anyone involved with this process and then you go on a press tour and you tweet aggressively, yeah, I mean, this is kind of what you can expect to happen.

It's actually not impressive. none. So maybe they should have spent less time chirping at us and more time getting their affairs in order. Well, now their new thing is chirping at all the DCG people and, you know, DCG is its own, you know, mess. They've got a lot going on there. But the total fabrications out of the three arrows guys, it's hilarious. They're saying, hey, Sam was on the board of Genesis. It's like, yeah, he was on the board of Genesis digital assets, which is a mining company that has nothing to do with DCG, you total moron. Yeah. I mean, the common thread is that it's everyone's fault but their own.

They are unable to take any responsibility. And it's Sam's fault. It's Barry's fault. It's always someone else's fault. I wonder if they're going to be as vocal on Twitter now that Twitter is being used against them in the courts. Genesis was conspiring to dump Luna. It's like, all right, so say that there was this big transaction where the Luna Foundation Guard wanted to build up a Bitcoin reserve and they bought the Bitcoin with UST from Genesis. do they just expect Genesis to hold on to a bunch of UST and not like sell that off?

It's just it's comical. It's called risk management. Yeah. So I think they might be a little quieter from now on. That's a blessing. That's nice. Yeah. Yeah, that is nice.

We could use some people being a lot quieter in this industry as things just shake out. There's five other bad boys. Actually, three of them are boys, two of them are girls to bring into the club. And I guarantee you that no one's ever heard of these people. Okay, shoot. Yeah, so the SEC has charged the creators of some random thing called coin deal, which I've never heard of. They defrauded investors for $45 million from January of 2019 to 2022. So, like, this was an ongoing thing.

I guess a bunch of it also happened in Canada. So the five people that are charged are Neil Chandran, age 51, Gary Davidson, age 68, living in Nevada. Michael Glassby, age 71, living in Palm City, Florida. Linda Knot, age 57 from Oklahoma City, and Amy Mosul, age 55 living in Palm City, Florida. These are the oldest people to ever be inducted into the Bad Boys Club, and it just shows that crypto crime does not discriminate by age. We got senior citizens defrauding people at the age of 71 in Palm City, Florida. This is not just crypto cowboys that are 20 years old.

Good for them finding enriching activities in their retirement. Actually, I have a confession to make. I lost at pickleball this week to a team consisting of two 70 plus-year-olds. You lost? And it wasn't close. I lost 11-1 with my partner, who I won't name out of respect. You played two-on-two pickleball and you lost to a 70-plus, to a pair of 70-plus-year-olds? Yeah, husband-wife team both in their 70s, and we lost.

11 to 1. We were trounced. How does that happen? Is it just better technique or did they out hustle you? Well, so in pickleball, athleticism is less relevant. It's more skill-based. I'm also not very good. And they were extremely skilled, dare I say. So look, I was trying to make them run around the court, trying to lob them. But yeah, we were thrashed. I mean, people might not know it, but you are a pretty athletic guy. Thank you for saying that, man. You do Barry's boot camp. I'm a little bit surprised at I mean, you're not a good field goal kicker. That's true. That's true.

I think I probably could kick a 42-yard field goal today if I tried. I doubt it. It's actually, I learned from last time it's very hard. It's very far. I mean, it's insane far. There's no, so was the bet, like, it was this three years ago that we said you could not kick a 40-yard field goal? Was it 40?

42, and I lost that bet. Yeah, you couldn't kick it. I mean, it came nowhere close. It was not even going to be good from 20. No. Well, I think I, I think I got it from 30 or 25 to 30 in the end, but yeah, it wasn't at all close. So yeah, Pickleball also, it's a growing sport, but it's not one in which I am competitive.

So yeah, senior citizens can do, they can win at fraud and at pickleball. Oh, interesting. Well, I've never played pickleball, so I don't, you know, part of me wants to just bash you for losing two pair of senior citizens, but I just don't know how hard that sport is. Well, they're grinding all day on the courts, right? and so you can play for hours on end without really getting winded. So they actually do achieve a very high level of skill. Well, I guess that's a productive use of your time.

I mean, you could be doing that or you could be just defrauding people. And the SEC doesn't like it when you defraud people. Turns out neither does the New York Attorney General, Latisha James. So she has filed a civil lawsuit on Thursday against Alex Mischinsky, co-founder of Celsius for defrauding investors out of business. billions of dollars. Yeah, so Alex Machinsky, one of the kind of starring characters of the fraud explosion of 2021, 2022. Here's what I have to say about that. Bitcoin cannot go up again until they are all accounted for. SBF, the three hours boys, Mishinsky, Doe Kwan. So we have one out of

five right now. There's still a few outstanding. So yeah, we need to bring them all. to justice. SBF is going to be like an October date. That'll happen within the year. Three hours, I think it probably took a while. I mean, there's just a lot of events announced there. Doe Kwan. Is he still in Serbia? Where is he? Where's Doe? Doe Juan. I don't know. We hardly ever talk about Doe Kwan. The walls are closing in on all of them, which is encouraging. This is just going to be the year of introspection, healing, recovery. So I am encouraged by that. But yes, we do need to purge them all for this industry to recover. I remember having this thought in my mind about two years ago when Celsius was really

ripping and he was making all these absurd statements, just thinking that it kind of sucks to be in an industry. This is going to be like a real institutional industry and that guy is going to be like running one of the biggest companies. That just doesn't seem possible to me. Turns out it wasn't. Yeah. I mean, and that's the thing.

It's like if you are an actual institution, how can you participate in industry that's Riven by fraudsters. You can't. So this is our obligation. Speaking of fraudsters, or market manipulators, maybe, Avi Eisenberg, this guy who is manipulating all sorts of defy

protocols, including mango markets, he's in jail in Puerto Rico till trial. So Sam got off on Bond. He's like sitting at home waiting for his trial. Avi Eisenberg is in a Puerto Rican jail, which I'd imagine is not very fun. I mean, if given the choice, though, I would go Puerto Rico over Bahamas

10 times out of time. Well, it's not like top five worst jails in the world, but Sam was in like, wasn't he in like the sick bay or something? I mean, technically Puerto Rico is the territory of the U.S., although the U.S. isn't exactly known for its innovation in prisons. I think the Bahamas is going to be territory of the U.S. after this is all said and done. They came out and said that they had, what,

$2 billion worth of customer funds or $3 billion? Turns out they had like $2 million. How do you get that wrong? Yeah, so that was absolutely insane. they're fighting so the Bahamas regulators I guess whoever's in charge of the FTX bankruptcy over there is wrangling with John Ray CEO of FTX and they claimed to have billions of dollars in assets John Ray released the wallets that the that the Bahamas seized from FTX and there's like two million dollars of Ethan there hundred and some million dollars of FTT which presumably not really

worth anything and then some other garbage So they're off by orders of magnitude. Why would you lie about that? Yeah. The Bahamas regulators are not covering themselves in glory here. I don't understand that for the life of me, why you would come out and say you have that much and then just not have it.

It's just, what, did you not expect people to say, all right, let me see? The whole thing has been so mismanaged, and we still need, I mean, there is a injustice that occurred, which was that 100 million was siphoned out of that, death irresponsibly, extrajudicially to Bahamian citizens or people that bought KYC. So that needs to go back too. We need to figure that thing out too. I mean, the discovery on this case is going to be mind-boggling. If they get all the emails that Sam was sending, I just can't imagine all the stuff.

I mean, you're going to have politicians embroiled in this. You're going to have venture funds embroiled in this. You're going to have all these D5 projects and L-1s, all these shady deals that were happening with the protocols, this thing's going to get ugly for a lot of people. Yeah, if it goes to court, I mean, I assume that it won't. But if it does, I don't, Sam doesn't track me as the most careful emailer. No, but even if he pleads in like six months, it's going to give them enough time to go in and just find all of these, you know, capos in the FTX organized crime family are going to emerge.

It's like, oh, I didn't realize that guy was a fraud. Turns out he is. Yeah. So let's transition here to Voyager. So Voyagers, of course, the bankrupt crypto lender, they had a deal initially to sell parts of themselves to FDX Alameda. Then Binance U.S. stepped in. And it looked like the contours of the deal was a $20 million payment plus the assumption of $1 billion in change of customer deposits. Unclear that they were like paying for those.

It was unclear what that deal structure looked like. And the SEC has objected to this purchase, basically saying that it's unclear, you know, A, what the deal looks like, be where all the money's coming from. And my guess is that finance US is not going to be allowed to buy this asset. Yeah, I mean, I understand that those are all

pretty valid questions. What I don't understand is why FTCS wasn't subjected to the same level of scrutiny when they took a controlling stake in IEX. That just went through. I don't, the FTX IEX thing doesn't make any sense. I don't understand

why this Voyager deal with FTCX the original deal there before it was revealed that FTX was a fraud, why that was allowed to sail through. I don't know. And if Binance is doing it through Binance, U.S., and getting scrutiny in terms of parent org, you should have imagined it would have been the same for FTX and FTX U.S. Yeah, I agree. I agree with that. We need answers from IEX.

That's what we need. Well, Brad Katsuyama is on Twitter. He hasn't been answering much. Gary Gensler probably knows some answers. Well, the House is not, they don't have a speaker yet. So the Speaker, so can you imagine? So the House Financial Services Committee has subpoena power, presumably. Can you imagine if there's some sort of a middle road compromise where the Democrats throw in with the Republicans and say, look, we'll back McCarthy, but only if you don't do subpoena.

Yeah, I mean, something insane. I mean, this doesn't happen. When was the last time the House wasn't able to elect a speaker? It's like 1923 or something. It's like it's been a long, long time. So here we were getting all excited about all the stuff the house was going to do this year and the house is not in session because they couldn't find a speaker. There's some very pro-crypto people on both sides of the aisle that I would love to see as the speaker of the house.

I just can't believe it. I don't know. It's not like I knew anything about that procedurally. No, I feel like I know too much. All right. Other news. So New York DFS was out at the third. this week. So they find Coinbase $50 million plus made them spend an additional 50 in compliance

for failure to conduct sufficient background checks in violation of anti-money laundering laws. So kind of unclear all the details here, but it looks like there were some deficiencies in their compliance program. Stock was up like 10% on the news. So the market sort of perceived it as a bullish thing it looks like. Next up, Vald with the D. the collapse Singapore crypto lending company, they rejected a buyout offer from NXO, citing a lack of visibility into the solvency of the acquirer, which is probably a fair objection to make. There is not a lot of visibility. Yeah, if you think whoever is buying you is insolvent, that's generally a pretty good reason not to do a deal, I guess. Have you kept up on this

three commas thing? So three commas is this like crypto trading service where you can plug into all of your exchange accounts. And the FBI is investigating it now because there is a massive data breach there where a bunch of the user data was leaked and being sold on the black market. It's been unauthorized trading of over $20 million already. And I guess the interesting wrinkle on top of this is that Alameda slash SBF, that's the largest external investor in the business. That business is not worth anything anymore. If you think about that from the perspective of an FTCS creditor, like, one of these customers that lost all the money, you're hoping that the venture book is worth something. But when something like that happens, that's a blow-up.

Yeah, add that to the list of Alameda balance sheet assets, which is probably worth zero. We actually announced that deal. Do you remember on the show? Three comments. I do remember remarking about it. Yeah, the billionaire club or whatever. Yeah. Well, the elsewhere in bad news, the Federal Reserve, the OCC, and the FDIC, released a joint statement about crypto asset risks to banks. We kind of already knew that these organizations didn't like crypto. I would say maybe some of the regional Federal Reserve banks have different views, but certainly the OCC under the current leadership and the FDICR could be characterized as crypto hostile.

And this letter basically discourages banks from touching crypto. in any way without expressly prohibiting it. Yeah, it doesn't prohibit it. It doesn't say that there's any systemic risk to the banking industry. I mean, this is obviously on the back of Silvergate, which looks like Silvergate had $8.1 billion of customer deposit withdrawals. And the bank deposits have plunged 68%. But, I mean, notably, they still have, they're still very solvent.

It looks like Silvergate still has plenty of cash, more than enough cash to honor. withdrawals. That's the difference between being a bank and being FTX. You know, banks, they, you know, maybe liquidity crisis, but still ultimately solvent at the end of the day. Yeah. So they sold off some debt. They took huge losses.

They've marked down that. Remember, they bought the Facebook assets, the Facebook DM assets. They've marked those down to zero. They're not going to launch their stable coin anymore. No, but they're still, they're still kicking. So obviously the banking sector was impacted by this. and I guess if you're the Fed, the OCC and the FDIC getting out a statement or risk, like, hey, be careful. We don't encourage this is probably what you'd expect after something like this happens.

So there was a lot of wrangling between the WinkleVos Brothers and DCG and Barry Silbert this week. Yeah, so, I mean, I don't know what to make of this. So to kind of set the table here, Gemini Earn was a product, an interest-bearing account, product at Gemini. It ran on top of Genesis. Genesis owes Gemini $900 million. DCG is entangled with Genesis, obviously. DCG assumed the three arrows capital loss that Genesis had. So that's a promissory note back to the company. And this is sort of a big staring contest at this point it looks like with proposals going back and forth. Cameron Winklevoss took to Twitter and kind of what scores strength on Barry Silbert saying that he was negotiating in bad faith stalling.

Barry came back and said, we actually got you a proposal on the 29th and we haven't heard anything from you. So I don't know what to make of it. Yeah, really hard to understand. The public campaign suggests that negotiations aren't going well. But yeah, more to come on that, I'm sure. Looks like Genesis did a 30% reduction in force today. So there's a lot of talented people going to be out there and hopefully they find homes in the industry. There's been a lot of talent, certainly, at that organization over the years. Next item, we have India. Historically relatively unaccommodating for digital asset regulation.

They've said they would prioritize a framework for the global regulation of unbacked crypto assets, stable coins, and defy. So that actually seemed. fairly negative for crypto as far as I understand it, at least in India. But so what, they're going to come up with a framework for like the world? What is that? Is that mean? Why would we follow that?

So they have a 30% tax on crypto gains and a 1% deduction on each crypto transaction, whether or not that's a gain. So that's really punitive. You'd imagine that that just discontent. garages people from touching the asset class. I mean, we're going to live in a world a year from now where there's clear visibility on who regulates the spot market in the U.S. You've got a bunch of banks and broker dealers will be more comfortable moving into

these markets. And we're going to sit there and listen to India with a here's our global proposal for how to regulate crypto. Thanks, but no thanks. So, yeah, this actually seems pretty negative crypto, at least in India. Interestingly, India per capita is one of the most crypto-penetrated. nations in the world. Oh, yeah. And, you know, it also seems like one of the most hostile regulatory policies for crypto in the world at this point. What do you make of this news that the COO of Gemini, Noah

Perlman, has left? And the Bloomberg article is all around how Gemini and DCG are embroiled in this big fight. But it made no mention of the fact that this guy was apparently in the board of directors of Farmington Bank, which is that bank that Romick Aurora led the deal for FTCS in to, you know, put money into this, like, the small, one of the smallest banks in the history of the country and take a huge stake in it and then put $84 million in deposits into it. Seems a little fishy. Wow. Yeah, you have to imagine that played a part in the departure.

Yeah, I mean, I think it's certainly more relevant than any argument going between DCG, right? Yeah. I think that's like the main story. Pretty odd that that wasn't covered. So in content this week, our partner, Sean Judge, wrote a good article, Reasons to Remain Bullish After Year in Crypto Hell, which is a really comprehensive list of basically institutional fores and large asset managers,

energy companies, luxury companies, retail facing public companies getting into crypto in force. So we'll put this in the show notes. I thought this is a great article. Yeah, I mean, if you just run through this list in terms of the big companies that have made moves in the space, Fidelity, BlackRock, Goldman, Boney, City, CME, NASDAQ, NASDAQ, American Express, KKR, Hamilton Lane, Citadel, Apollo, Brevin Howard, Millennium, Meta, Google, Stripe, Conoco, Philips, Exxon, Shell, Nike. Walmart, Chipotle, you go down this list and you say, all right, well, they all came in, you know, in 2022. I don't think we'd be talking about Bitcoin at 16.5 and the industry on its knees. I think we'd all think that this thing was off to the races. But that's what a little bit

of garden variety fraud will do to you. Yeah, this level of uptake, meaningful, not just proof of concept, but actual investment, product development. This all occurred. In 2022, one of the worst years in crypto history, being overlooked, I would say, by the market. It does also, I mean, if you remember 2017, institutional development basically stalled. No, there's nothing going on. All these banks were doing private chain things back then. Yeah, 2018, you know, really. Those conversations, you know, the internal champions were shouted down and the internal developments on the institutional side stalled.

This is the opposite. that this is an acceleration through a bare market, through the collapse. So lots of reasons to be optimistic here. Yeah, I think it'll be a cleanup here. There's still some stuff to clean up here. But the foundation is being laid. I think if we can get a little bit of clarity here on the regulation of the spot market and whether or not these tokens are securities or commodities,

just get some clarity, some rules of the road. That's how we really move forward as an industry here. And then that'll enable a bunch of these things that are, you know, people want to build that they just don't feel like they have regulatory clarity on. I mean, I've been on calls all day today, you know, speaking to entrepreneurs. And I've probably had three different calls where the entrepreneur said, well, we just don't have clarity on that issue. And so we're just not, we're not pushing that product at the moment. Yeah. There's a lot of that.

So if the house can go ahead and select a speaker, that would be great. Please do that. I mean, just how hard is that? apparently pretty hard it's like seven maybe it'll maybe it'll be resolved by the time we release this but there's been seven votes already yeah all right so i think that's it there's the first uh first rip of the year a lot of news there's a ton of news this week yeah hopefully more deals than less news next week but uh i don't know we live in interesting times the wheels of justice are turning i've gotten a couple requests for updates on the turkey situation i'll give a more extensive update

in the weeks to come on that issue. I hear you. There are substantive updates. Looking forward. It's been communication and some hostility, I would say, with my neighbor about the topic. I thought you were going to say with the leader of the turkeys, like a kind of a deal had been struck with the turkeys? No, definitely not.

They don't listen to reason? No, they've moved to the roof. They're like, they're like climbing up onto the roof. They're feeling way too comfortable. It's a negotiation. It's, yeah, there's a lot to talk about there. So we'll leave it there. We will see you on Monday for a new episode.

Have a safe and healthy weekend.