On The Brink with Castle Island - Weekly Roundup 02/23/24 (ECB's very bad blog, more bad boys, 3ac boys latest) (EP.505)

Episode Date: February 23, 2024

Nic and Matt are back for another week of news and deals. In this episode:  Wireless outage in the US Russia's space weapons and Rods from God  Will the market like the cubes once again?  Brink nation farcaster update  Our ETH ETF skepticism Circle leaves Tron Revolving door between SEC and biglaw Whip Emmer's letter to the OMB The ECB's very bad, no good Bitcoin blog Reddit hold Bitcoin and ETH  SBF's photoshoot Latest on the 3AC boys The SEC's mysterious ETF correlation analysis Content mentioned in this episode:  ECB, ETF approval for bitcoin – the naked emperor's new clothes Rep. Emmer letter to OMB over Bitcoin mining data request NYMAG, 'They are very comfortable lying' 3AC update Sponsor notes:  The Coin Metrics Team will be hosting a Data Challenge at ETH Denver! Learn more about the event & register for it here. At the Crossroads: Bitcoin ETFs & Coinbase In Coin Metrics State of the Network Issue 247, we zoom into the latest developments with Bitcoin ETFs and Coinbase Q4 2023 earnings

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 Concentive easing. You print a couple trillion dollars, and all of a sudden, people start to worry. So out of this worry, we have something called the Bitcoin.

Bitcoin. Welcome to On the Brink. I'm Matt Walsh. And I'm Nick Carter. And this episode is brought to you by Coin Metrics. And here is the Metrics Minute. Today's Metrics Minute. We're talking about Coinbase's Q4 earnings.

Coinbase announced it's Q423 earnings last week, reporting a total revenue of $954 million, which was a strong beat on consensus expectations of $820 million. transaction revenues that Coinbase saw a rebound growing by 64% year every year. Seven-day trading volumes climbed to $3.5 billion in the lead-up to the ETF launches, which were matching levels seen during the FTX fallout. The asset mix of trading volume shifted with assets other than Bitcoin Ethereum contributing to 42% of total trading volumes.

Subscriptions and services accounted for 39% of Coinbase's total revenue. Staking revenue grew by 28%. percent of the corner. In other news, the coin metrics team will be hosting a data challenge at each Denver. So participants will be asked to create a data viz that answer is an interesting question about Ethereum using corn metrics data details in the show notes. That is your metrics minute. A data challenge, huh? That sounds pretty cool. I'm also actually one of the judges for the data challenge. Wow. Yeah. Is it a hard question? I think the question is just, create something interesting. So you could say that's a hard question. Interesting. All right. Well,

you mentioned the Coinbase earnings. I am continually amazed at how poorly understood that stock is. I mean, huge beat. The stock in After Hours was up like 15%. And it seems like the Masari analysts are better at covering Coinbase than the actual sell side analyst right now at this point. It's kind of crazy. It's an unloved stock by the cell side. That's for sure. yeah it's uh you know that was q4 so it'll be interesting to see what q1 looks like because obviously the etf was approved in q1 and coinbase is the custodian on a number of those so uh elsewhere um i was risk i was returned to the 90s today uh in that my uh mobile phone stopped working for seven or eight hours that's disconcerting so you thought you were getting sim swapped i thought

i was being sim swapped i told you i was being sim swapped And there's not really that much you can do. I was basically, my plan was to go to the AT&T store and tell them I was being sim swap. Turns out the whole network was down. It was interesting because I had to make plans with people assuming that neither of us had connectivity. So it's like going back in time, you have to basically say, let's meet at this location at this time. And then you just have to show up and trust that they'll be there. Just crazy.

That's how things used to be. That's how it used to work. Those were the days. You know, you just show up somewhere. If they don't show up, you give them like a 20 minute, you know, I'll stick around for 20 minutes. And if not, I guess we're not meeting up tonight. It was surreal. It was amazing.

Maybe we should go back to that. I don't know. Anyway, do you think it was a cyber attack on our infrastructure or our infrastructure is just completely crumbling? My guess is that someone just messed up something on an upgrade. But, you know, there was that story last week, I think it was. that there was this imminent threat to national security. And for about five hours, we didn't know what it was until it came out that the Russians are apparently putting nukes in outer space, which doesn't sound great.

But my mind immediately went to our connectivity infrastructure, like internet infrastructure in the U.S. as sort of the national security threat. Yeah, you know, I was hoping when they said it was space weapons, I was hoping that it was the tungsten rods. Are you familiar with this? Yeah. Rods from God. Yeah, we've talked about this, I think.

but yeah, remind me what those are. All right. So this is a furloughed U.S. government plan to create, basically you park a bunch of tungsten rods that are the size of telephone poles in space. And they're just floating around orbiting the Earth. And within 15 minutes, they can target any location on the planet. And they don't have any explosives or ordinance in them.

It's just a very heavy rod. Of course, tungsten being about as dense. as gold. It's approximately 19.3 grams per cubic centimeter, if I'm not mistaken. And they just carry so much kinetic energy based on the reentry. It's over Mach 1 that it would be like a devastating weapon. I think not as high yield as a nuclear weapon, but higher than any conventional explosive. Rods from God. And so the idea would be that the United States would drop those on our adversaries in lieu of a nuclear weapon? Is that the idea? Yeah, and I think it would be less detectable because, you know, when you detect a ICBM or nuclear launch, like satellites can pick that up.

But I think if you're just releasing a rod from orbit, that's much harder to apprehend. Can you imagine trying to get one of those things into orbit in the first place? Well, yeah, I think that's part of the problem. I mean, it's very heavy. A telephone pole size, tungsten rod. So, did you see that this week, Midwest tungsten released a pyramid-shaped tungsten? Really, new shape.

New shape, yeah. They're innovating over there. I mean, there's a lot. I think didn't they release a credit card, or were they thinking of or a business card maybe? Well, there are business cards. The CMS business cards are on tungsten cube, or tungsten wafer's.

Yeah, I mean, Midwest tungsten guys, It's a real innovation in shapes, shape design. You know, the price of the Bitcoin keeps on going up here, and you're entering the phase where there's probably going to be a leverage buyout attempt here on Midwest tungsten at some point during this cycle. I think the cube buying is going to recommence. I think it's high beta exposure on Bitcoin. Or maybe we'll come up with a new, like, pointless thing to buy.

But I still like the, I like the cube still. I like the cubes as well. Well, it was a busy week. I watched the first two episodes of Dynasty about the Patriots on Apple TV. I highly recommend that. What did you learn? Well, so far, all the viewer has really learned is that they won the Snow Bowl and that they're on their way towards their first Super Bowl. I'm excited to see because I have a feeling that there's six Super Bowl wins in the upcoming episodes.

So on the Brink News, we have a thriving community. on Farcaster, Warpcast.com slash channel slash on the brink. Unfortunately, I have not been able to restore my credentials. There was an intervention from the dictator of Farcaster, Dan Romero. There was. Did he set you up? So there was an attempt was made. An attempt was made.

Something was reset. I still can't get in. But I think we're getting closer to me. being able to, but it's still just you holding down the fort on there and the rest of Brink Nation. But I can't believe you can't get in. I can still read the comments, which is good. So just canvassing the latest ones. Michael Cameron says, at 25 minutes in, in I think that acquired podcast episode, there's a JPM

payments ad talking about the product embedded banking. talk about blockchains and treasuries. He says, Jamie Diamond hates public blockchains because he wants the business for himself. Interesting take. True. Other comments, Alejandro says Best Pod. Thank you. And there's a lot of commentary on the intro. It's a divisive intro. People don't like it. Some people like it. It's very divisive. We also have this great, there's someone actually built a website here. It's called Bripto Blog. So it's like crypto but with a B. It's kind of a play on

Bro. And this is iTuner.eath. He made a basically a repo that has all of our shows, which is really cool. So you can filter it by Castle Island. He has got a couple other blogs up or other podcasts up there.

But it's almost better than our Libson page. He has every show we've ever done indexed on this. Yeah. Our our online presence for on the brink is pretty bad. Another comment on here, Q stake says, is not the ETH-EF,

a similarly inferior product as the Bitcoin ETF as compared to just holding BTC? Capital allocators could just buy Bitcoin before. I don't know. What do you make of that? Well, I think there's a very large registered investment an advisor channel that has proven to be very active so far on these Bitcoin ETFs. And I think it would be no different on the Ethereum ETF, even if it doesn't have staking.

I think just as a form of exposure, you have a $7 trillion channel that doesn't really own any ETH at this point. So you'd have to think that there would be something coming in there. And there's also a lot of back and forth on the Farcaster app here for on the brink around whether or not we think that the Ethereum ETF is going to happen. Let me just reiterate. I think if you interpret the law, it should happen. but I just don't think that the SEC operates that way.

I think there's two votes against the Bitcoin ETF, and all it takes is one more, and Gensler could be that one more. So I expect that it will not be approved on time. Yeah, I mean, we received an avalanche of criticism for our skeptical stance on the ETH, which is not a normative stance. That's just us describing what we think the probabilities are.

That's not us saying what we think should happen. as you say based on the letter of the law I think there should be an ETH ETF I mean you've ETS for all kinds of crazy stuff all sorts of weird niche commodities that have small markets right and so I think there should be one but it's just that we don't think it's that likely

but the prediction markets say otherwise so we'll see well it's another busy deal week let's kick it off here first one up is hack VC this is a blockchain focused venture fund They raised $150 million for the latest funds. So congrats to Alex and team at Hack. Next up, we have Alt Layer, their protocol to launch rollups.

They raised $14.4 million from PolyChain and HackVC. Then we have Chainway Labs. This is a Bitcoin Zero Knowledge Rollup. They raised $2.7 million from Galaxy, Digital, Delphi, and others. It's Bitcoin Season 2 here. It's happening. EigenLayer, they're in Ethereum re-staking protocol. There raised $100 million from Andres and Orowitz.

That was the biggest deal of the week for sure there. Next one up is Inco. This is a privacy-focused layer one blockchain. They raised 4.5 million from 1KX, GSR, robot ventures, and others. Then we have superfluid and asset streaming and distribution protocol. They raise 5.1 from Fabric, Multi-coin, iOS, and Circle. Then we have singularity. This is a D-5 protocol that raised 2.2 million from Gumi Cryptos, Laser Digital, and others.

Then we have base DGEN, their project building on the base blockchain. There is 1.5 million from one confirmation. So base DGN is actually, this is the native token of a channel on Farkaster, actually. So I know you don't know this because you're not actually on Farkaster right now. But DGN is one of the first channels on there, and it appears that they have their own token and one confirmation invested in it, $1.5 million. So I guess you can have a token associated with these channels. Just, you know, food for thought.

Look, it's not for lack of trying, okay? I have made several attempts to get on a forecaster. And from what I understand, my early credentials are lost forever. And so I have lost out on the airdrops and the NFTs that I guess early forecaster holders, users were entitled to, which apparently were material. All I'm trying to do is post. I just want to post, but I'm stymied. All right, maybe about this time next week.

And the last one up this week, the last one up is Helius. This is a blockchain node infrastructure provider in the Solana ecosystem. They raised $9.5 million from Foundation Capital, six man ventures, chapter one, reciprocal, and others. All right, so news this week, some pretty interesting items. A lot of it is policy focused. Let's start with Circle, in kind of a shock move, well, I found it to be abrupt,

they decided to stop supporting USDC on the Tron blockchain. And I don't know if anyone used USDC on Tron, but you can't anymore. It's over. Well, USDT on Tron is by far the most popular stable coin at this point. It's huge. Yeah, I think there's more tether on Tron than Tether on Eath, actually. So I have no idea what was behind this decision. Could be that there wasn't a lot of usage.

Also could be that the SEC is suing Justin Tron and his array of companies and Circle is trying to go public in the United States and has to go through the SEC. And so maybe this has something to do with that? Yeah, there wasn't much explanation in the post. But if I had to guess, I would say de minimis change because USDC is not really used on Tron. If you had told me that Tron would still be a thing, years ago when that white paper, which was PlayDarize came out, I would have told you that no, it won't be a thing. But it is very much still a thing. I mean, it is honestly remarkable.

And it did achieve product market fit with Tether, with stable coins, EMs. It's weird that, you know, I talk to people about this stuff, especially in D.C. and they just don't acknowledge that Tether on Tron is real usage or they think it's all fake or made up. It's not. I mean, it's real. people are using this all over Africa. Yeah, in emerging markets, it's the de facto digital dollar, and that's just fact. And of course,

we don't have on the ground data. We're actually working on a secret project to get this data. We are. I don't want to reveal too much, but we at some point in the next quarter, we'll be presenting this data, maybe. So we're on a mission to find out

what people are doing, especially with Tether on Tron in EMs. So don't worry, rest assured. We're going to figure this whole thing out. It's fascinating, but it really just shows you the first mover advantage. So you have the deepest liquidity and then you just have a blockchain that was faster than Ethereum for this use case.

And it doesn't really matter. Alex Thorne has put out some really interesting research and thought pieces on this that, you know, it doesn't really matter if the blockchain itself is not that stable or if it can be double spent because ultimately the dollars can't. And so if Tether has the dollars, if Tron goes down, they'll just posit. It's not like you're going to run off with the dollars. So in a lot of ways, it doesn't really matter around the settlement assurances and whether or not the blockchain itself is resilient in the same way that like a Bitcoin or an Ethereum is. It's just being fast is actually what matters there. Yeah, that's absolutely correct. The blockchain ledger is just indicative. I

I mean, it is not even the true ledger, the true ledger of where the transactions are occurring is kind of internal to tether, I would argue, because they obviously have discretion in terms of who can transact and who can't. There are seizures and freezes. So if the blockchain goes down or halts, I mean, it doesn't matter that much. I mean, it kind of matters. But you could run a stable coin on, you know, you could write out IOUs on pieces of paper. You could run a stable coin that way. So the individual blockchain is kind of incidental. All right.

So let's move on to our next story. This one is a legit exchange. What a great name. Have you ever heard of a legit exchange? This is my first time hearing, but based on the name, I'm forced to conclude that it's legit. It is legit. I like what they're doing over there because what they're doing is they are proactively suing the SEC. They're seeking a declaration that the secondary market sales of digital assets

that they're contemplating on their platform are, in fact, not securities, and they're suing the SEC in the state of Texas, which is, I have not seen that before. Yeah, that is a legit thing to do. So thank you. And I guess the precedent that was set in the Ripple case presumably should help there, I'd imagine. Well, it's interesting. I'm, of course, no lawyer, but usually you sue the SEC after they do something to impair you. And I guess you could, I guess you would argue, and I'm sure they are arguing that just not having the clarity is impairing their business. And so they are seeking an affirmative declaration that the SEC won't go after them.

I guess in the same way that the SEC has gone after Coinbase on these secondary market sales of digital assets, which, you know, Coinbase and I think most of the, most of the crypto universe here would say these are not security sales. And legit exchange is just forcing the point in court here. Well, another interesting piece of news on the SEC, Ladin-Layden-Stewart. who led the SEC's crypto unit and their actions against Coinbase and Ripple is actually leaving the SEC to join a big law firm White and Case in their white collar division to lead the crypto group. So basically switching sides here. I know some people were complaining about this and saying, oh, it's unfair that you can, you know, take the prosecutorial role and then switch over to the private sector and then defend the same people. It's like racketeering or something, but I support it.

Any brain drain from the SEC to the industry, I fully support. Well, I mean, you just think about this from the perspective of a company in the crypto industry that is getting harassed by the SEC here. All of a sudden, this Layden Stewart character ends up being like the normal one draft pick for a lawyer, I would think, on a case like that, right? Knows exactly what's going on, knows how they think about things, knows how the SEC presumably has, has broken the law in some of these cases too. Like, you know, we go back to debt box time and time again, but the SEC actually fabricating evidence in order to get a temporary restraining order. My guess is that if it's happened in debt box,

it's probably not the only time it's happened. And so someone like O'Aid and Stewart would have a really good pulse on just how the SEC operates. And, you know, White and Case will probably do a lot of business with this, you know, aquire of sorts. elsewhere in policy news house majority web tom emmer who is dialed in on the needs of the crypto industry has sent a letter to the OMB regarding their uh quote unquote emergency order to get miners to disclose their data to the EIA and uh we're going to put that in the show notes there's actually I think there's going to be a big stink raised around this because it is really

invasive and I think it carries really significant penalties if miners don't comply. So this story is not over yet. No, and this is kind of just an egregious overstep of the administrative state here. So good for Emmer for jumping out. This is the type of issue that you should have a lot of support for, I would imagine, in the house at the moment, because it's clearly an overstep. I mean, you don't see the, yeah, you don't see the federal government going after. Christmas light operators and demanding, you know, step by step breakdown of how much energy they spend. Yeah, and calling an emergency is also just, as we've said, it's wrong because there's no emergency. There's no rolling blackouts that are being caused by Bitcoin miners. Bitcoin miners

definitionally source cheap power. Definitionally, that means they're not buying the same power as, you know, residential consumers in urban cores because that's expensive power. If the power is cheap, that means it's underutilized. And the halving is coming up. That's going to reduce, my guess, the energy expenditure of the Bitcoin network by about a third. Some hash rate will fall off post-having. So I know the claim was that the Bitcoin price going up means that miners are going to stack on A6 and, you know, it's going to increase the energy expenditure of the Bitcoin network, I don't see how any of that materializes into an emergency situation. So I think that justification is totally wrong. I listened to a good podcast this week is the Empire podcast, and they had

Fred Tielan who runs Marathon, I believe the largest publicly traded mining business at this point. And he did a good job of talking about some of the things that we've talked about in the past in terms of energy offload and the Erkot grid and how these miners are actually very pro-social to the energy grid overall because they can actually shut down during times of overuse. So a lot better off than just telling people who live in Texas to shut off their AC when it's 110 degrees. Totally. And I think the more you understand the nature of these grids, I understand that power is a

fundamentally local resource. It's not something it's portable indefinite distances. You understand that miners are locating themselves in kind of cold spots for power. consumption. And as you say, I mean, I wrote an entire paper about this. They're able to curtail during demand spikes. They're able to become effectively real-time power traders and shut off when there's a scarcity event, which means the power can go to the hospitals and the end users where it's needed. And we have plenty of evidence that this happens. Like whenever the weather is bad in Texas, when it's cold in Texas, Bitcoin hash rate is affected by that because the miners are

offline. So all you have to do is just consider the actuality, the real facts around Bitcoin mining, and it looks much more benign than people think it is. So elsewhere in policy news, maybe we should have this section be called I'm hearing things because I have some things to report that I'm hearing. What are you hearing? I'm hearing that Elizabeth Warren's bill, the anti-money laundering bill, which is totally unworkable and would effectively be a crypto ban, a lot of back and forth in Senate banking around whether or not this is going to get marked up. I think it's like a 50-50 at this point. You know, one day it's, this is probably going to get marked up.

One day, hey, it's not immediately going to get marked up. But what I am hearing is that there is another bill in the House, which would basically be a Warren bill being introduced by Sean Kasten, who's a Democrat out of Illinois, who apparently takes his directions from Elizabeth Warren too. And I think that this bill would have no shot of passing. the house, but interesting that Warren's tentacles are reaching into the great state of Illinois and Sean Kasten, who again, I don't know anything about other than it sounds like he is copying, pasting Elizabeth Warren's bill for a house version.

Well, that I think is disconcerting, so we'll keep listening and hearing and we'll report to you what happens there. I did up to laugh this morning because the ECB wrote a blog post entitled ETF Approval for Bitcoin, the Naked Emperor's New Clothes. It's the same authors that wrote a post after the collapse of FTX, basically saying the Bitcoin was done. I don't remember exactly what they said. And Bitcoin is up over 100% since then, and it's certainly not dead. But this didn't stop them taking a victory lap of sorts,

even though they've been definitely wrong in the matter. and they actually hit, I think, almost every pain of the fud dice in their blog post. You remember the fud dice? Oh, of course. We need new fud dice, by the way. So there's just so much in here. Basically, they think Bitcoin's inconvenient, slow and costly, quote, no one uses it. It's not a suitable investment, according to them.

This has no social benefit, they claim. they say mining is bad and consumes a lot of resources. They say that the price is manipulated. And the actual claims made in the blog post are not very interesting because it's the same thought basically that's been trotted out for well over a decade now. But what I thought was interesting was if you actually look at the references that they're using to support their assertions, it's insane. The references are insane.

So they're citing Forbes, like random news articles in Forbes, random news articles in Bloomberg. They're citing articles in the Canadian Globe and Mail. Like this is just like very generic news articles they're citing to make the point. And they cited a paper called Price Manipulation in the Bitcoin ecosystem. It was written in 2018, so over five years ago. and the paper is about Bitcoin price action from 2011 to 2013 on the Mount Gox Exchange that claims Bitcoin was manipulated from get this $100 to $1,000.

So that was over a decade ago. And they're using that price action from the Gawks Exchange where I don't actually think there was manipulation. I know people claim there was, but I think it was just a classic mini bubble, which was minuscule compared to we see, you know, Bitcoin moves thousands of dollars in a day now. So they're complaining about a move from $100 to $1,000. They're using that price action from over a decade ago to claim the Bitcoin price is

manipulated today in 2024 when it's a completely different market. I mean, unimaginably different. And it's just so astonishing that they would use such a low-quality citation to make the claim that Bitcoin price is manipulated. I mean, I honestly couldn't believe it when I saw that was one of the references. It got community noted almost immediately. They cite the infamous paper Griffin and Shams. Is Bitcoin really untethered, which is the, I think now basically debunked or certainly

false claim that tether causes the price of Bitcoin again based on ancient data, based on a mistaken analysis. I mean, this like academia to policy pipeline where academic, that don't understand Bitcoin write these crazy articles where they hallucinate things about Bitcoin basically make up excuses why it went up to avoid engaging with the reality that people want Bitcoin, right? So they have to make up all kinds of other explanations about fraud and manipulation. Those articles get this veneer of respectability because they're in proper journals, like the Griffin and Shams paper was in the journal of Finance, which is actually the best finance journal,

which is insane. And then these policy people use that. And assume or believe that the general public will listen to them because they're using academia to justify it. But if you actually read the articles, you don't need to be like an academic to read the article and understand that it's baseless. You just need to be a serious person that knows how crypto works, how Bitcoin works. And it just bothers me so much that there's this academia policy pipeline, which basically just fake, the equivalent of fake news in academia gets laundered. and then these actual policy claims are made on that basis. It's incredibly irritating.

The ECB, is that even a real thing anymore? I mean, come on. I'm going to laugh when Bitcoin outlast the euro, and I'm 100% sure it's going to. I don't think the euro will see the end of this decade, and I know Bitcoin will. Oh, I mean, I think that's a safe bet. I'd be shocked if the euro still exists in the Euro 2030.

Yeah. So, I mean, look, this is the second most important central bank in the world. And they're spreading like very generic fight against Bitcoin. I mean, they could just ignore it. Like they look extremely weak doing this, if you ask me. All right. So something just hit the tape here, which is very interesting. Reddit is going public.

They filed their S-1. It just became public. And in that S-1, it says that the company has invested excess cash reserves into Bitcoin and Ethereum and may continue to do so in the future. That is in their S-1, which is, was filed about 13 minutes ago to the SEC. Steve Hoffman, way to go. This is people taking a page out of Sailor's playbook here.

This is taking me back to 2020 when there was a flurry of publicly traded companies that started putting balance sheet in Bitcoin. And I mean, those news items kicked off the bull run back in the day. Tesla did it, Square, of course, Microstrategie. maybe the same thing's happening now. Very small position. They also bought some Maddock apparently, much smaller position than their BTC or Eith.

But, you know, this is a development here. And Reddit has been trying to do things in this industry for a while. Obviously, the securities regulator is going to hamper some of what they have, you know, are trying to do around points and things like that. But very forward-thinking company as it relates to public blockchains. So bad boys section, little bad boys update for Brink Nation. Cue it up. We got three bad boys.

Yeah. Boys, 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 you? All right.

So, yeah, actually the full compliment of bad boys is being discussed here today. So first up, uh, Doquan will be extradited. the U.S. Montenegro court has ruled. Where's he going? There's a question. Like what state? Yeah.

Is this Brooklyn MDC? I don't know. Did you see the picture of Sam this week? Good God. That was rough. He's not looking good. Is that where Doquan has to go? Can you imagine if they met in prison?

It seems like that's the, that's where he'll be prosecuted in New York. It could literally happen. Maybe they'll be cellmates. Oh my gosh. So Doquan is coming to the U.S. This has been going back and forth. I mean, this guy, I continue to really have a different view of Doquan versus SBF and the Three Arrow's guys. I've said this time and time again on the podcast. But I think this guy actually thought what he was building was going to work. Now, what he did after it was clear that it was going to collapse, I think is what's going to get him in trouble. He did a lot of damage, though, because now everybody has PTSD about it. it and I'd probably get in trouble for saying this, but, you know, we did an Athena podcast a few weeks ago, full disclosure, we're Athena investors. And everyone has such outstanding PTSD from UST Terra that they hate every new interest-bearing instrument on blockchains, whether it's

Athena, whether it's an interest-bearing stable coin based on treasuries. Everyone's fighting the last war. They're convinced that it's the next UST. Yeah. He did a lot of damage. People are reflexively, look, skepticism is good, but people are reflexively riding off the whole sector because of the U.S.T. thing. Even though U.S.T. was a uniquely stupid thing. And we can say that because we were skeptical of it publicly. We can. So in any event, looks like he will be tried in the United States. In other bad boy news, Sam Bankman-Fried had a really bad photo shoot this week. I don't know what else to say. It was a picture of him and a bunch of other inmates.

And he looks like he's lost 30 pounds. And then he had to go into court, I guess, yesterday. And it was announced that he dropped his lawyers. So I don't know if he dropped them or they dropped him. But he'll be represented by new counsel. His lawyer now is the same lawyer that represents Alex Machinsky. And so he had to say, I'm okay with the fact that there's potentially some conflict here because FTX did business with Celsius.

But he'll be represented by. Maschinsky's lawyer during his sentencing, which I guess is coming up within a month, I think. Lastly, on the bad boys front, there's a new article by Jen Weechner at New York Mag. Vietchner, I believe. The Etchner. Sorry. So Jen wrote a great article back in the day about the Three Arrow's Boys and explaining that they committed fraud.

They didn't just blow up the hedge fund. Okay, let's be real. they stole from people. And those facts haven't really surfaced because there hasn't been really a trial about it. I mean, Suu was jailed for contempt of court, but they haven't faced any real repercussions. And this article is about them basically dodging the liquidation, dodging jail in the case of Caldavies, actually. and it was about how much Suzu liked jail, or he claimed to, which, as I said, is the most nuclear form of cope I've ever heard in my life. But he maintains that jail is actually a cleansing experience.

Part of this article said that there was a photo shoot for this circus show of an exchange that they tried to launch with Mark Lamb and the CoinFlex guys. And it was a $30,000 plus dollar expense, and it was paid for by the estate of CoinFlex. So these guys continue to find a way to siphon off money from retail. All these people that lost money on CoinFlex, all that money that's supposedly trying to come back to you, well, just shave a little off the top for the three arrows, guys. Just some of the most despicable humans in the industry. Yeah, I mean, the title of the article is, quote,

they are very comfortable lying. And so, yeah, they plundered the CoinFlex estate with Mark Lam. By the way, fun fact, I ran into Leslie Lamb, who I think was technically the CEO of CoinFlex. at token 2049. And she was like really nice to me for some reason. She must not listen to the podcast. I don't think she was paying attention.

I don't think she knew that, you know, were some of the louder critics of these guys. But so they have, I guess, abandoned that business venture. And they're now doing the ox exchange or token ox. Ox to it doesn't really seem to do anything but it looks like these guys are just going to keep doing their various schemes and hopefully

at least they're hoping that they somehow come back into respectability which hopefully never happens well the article was quite good because it basically goes into detail on what it takes to be a fraud and misrepresenting your assets to your lenders constitutes a fraud there's a great quote in there from someone

at blockchain.com about how it was clearly fraud against blockchain.com. Obviously, this is the case against the U.S. lenders as well, which three hours defrauded in massive size. And so this will catch up to them. The fact that they were raising capital under the name Warbler Capital, one of these like sub accounts that they were managing in the U.S. They didn't have the permitted authority to be raising capital from U.S. investors that way.

So, you know, it'll take some time, I guess, to clean it up. But I don't know where these guys actually are. It sounds like Kyle's been doing some time in Portugal. Yeah, it's a weird bug, I think, in the criminal justice system, that it's so difficult to coordinate across from country to country. And it seems like Tenaio, the liquidator is having a hard time. And it seems like these guys, you know, have been able to bankroll themselves with whatever residual assets they have.

But I remain confident that, you know, a fraud of this magnitude versus U.S. firms and investors will eventually catch up to them. And even though it's been years at this point, I think justice will be served eventually. Other odds and ends here, Coinbase had a really thoughtful letter, I thought, to the SEC supporting this grayscale Ethereum ETF application. So it was like a 2830 page essay,

basically, just going through the facts and circumstances, really thoughtful. So we'll put that in our newsletter as well. It's also, you know, people haven't been able to recreate the correlation analysis that the SEC did on the Bitcoin ETF, it seems like. So I wonder why the SEC, for Bitcoin even, I wonder why, and obviously we know that the futures is correlated to the spot and bitwise and Fidelity have done great reports on that. But I wonder why the SEC wouldn't just open source the data and let people recreate it. All you're talking about doing is putting a bunch of numbers in an Excel spreadsheet and allowing people to down. download it and run the correlation on their own.

I mean, Excel has a correlation function, so how hard could it possibly be? I know how to do it. I could do it really quickly. You know, just toss it on there. Make it public. When I did my master's, we had to do correlations by hand. That's tough. I remember having to do that. Yeah. I don't think I could do that anymore.

Very annoying. Yeah. And computing variance by hand, things like that. I don't think it should be hard. How could it not be recreated? It's very simple. Well, they just haven't put out the data set. And so, you know, you wonder if they got it wrong, but there have been these cases.

Remember the old, was it the Reinert-Rogoff paper back in the financial crisis days where there's actually just an Excel error? You know, there's. Really? Yeah. Well, that would be very amusing if the SEC had gotten the data stream wrong. And actually, correlations, it is, it's quite possible to make a lot of mistakes. with correlations because you need to use returns as opposed to prices. And if you use raw price data, you get very high correlation numbers.

So I don't think they made a mistake. But if they had and found very high correlations and then approved on that basis, that would have been extremely funny. Yeah, I think the bigger point here is just that if the data could be open source, then why wouldn't you do it? It would seem like it's in the public's best interest. I mean, the SEC chairman's calendar is, it comes out every few months, which, by the way, the latest month came out. I think it's, we're still in like October of 2023.

Of course, Better Markets had another meeting with the SEC and Brad Katsiyama from IEX had another meeting. What is Brad Katsuyama at IEX up to here? Yeah, I mean, they were FTX adjacent, right? FTX is on the cap table there. Yeah, they did an equity swap. So FTX and IEX were pursuing a registration in the United States, and we're talking about a safe harbor under the same kind of apparatus that Prometheum got greenlit, the special purpose broker-dealer type of strategy.

So there are some minutes. Well, they're pretty white on minutes, but there's a document that says everyone from FTX and everyone from IEX who's in that room with the SEC and that they were discussing a safe harbor application. Yeah, I haven't really seen IEX phase. any fallout for their involvement at all, which seemed to have been fairly, they seem to have been pretty intertwined with FTX. Let's talk about it. Yeah.

I mean, that guy can get a meeting, though. Him and Dennis Keller are from better markets. They can get a meeting. I mean, on the ETF, I think the correlation analysis, everyone is very focused on that. I think that's not a bar that other commodities have to necessarily meet. That seems like a quite a hard test. And generally, I don't think that is the prerequisite at all. But it seems like we're held to a much higher standard.

Yeah. I mean, we are really in the minutia of an ETF application, if that's what we're talking about. Yeah. All right. So I think that is it for the week. Can we make a pledge that you'll be on Farcaster on the Brink Channel by this time next week? There will be another attempt.

I will. And if I run into them at ETH Denver, I will harangue them and demand the restoration of my credentials. Well, it's a user error. It's really nothing that the Farcaster team did wrong. In my defense, I wasn't onboarded in the normal way. I think it was onboarded via Zoom call. Yeah, that's how all the early users were onboarded.

I didn't realize that Farcaster would be an important social network. So, yeah, my fault, I guess. But I'll get on there. All right, everyone. That's it for the week. Have a safe and healthy weekend and we will see you on Monday.