On The Brink with Castle Island - Weekly Roundup 07/01/22 (GBTC ETF denied, Bitcoin rationalism, CoinFLEX) (EP.331)

Episode Date: July 1, 2022

Matt and Nic return for the news and deals in another tumultuous week.  Matt is snubbed by Coin Metrics Nic gets sort of cancelled on Twitter by the Bitcoin hardliners Nic is not a Bitcoin Maximalist Is there a positive, non-maximalist vision of Bitcoin? BlockFi update Our case for wallet-based passwordless authentication CIV's 3AC takes from last week start to be independently confirmed What trade kicked off 3AC's issues? We reminisce over the stolen bike saga BVI and Singapore regulators act on 3AC Coinflex loses money on Roger Ver's BCH trades Matt's Roger Ver story Matt's prior Up In the Air career Grayscale's GBTC ETF application is denied Grayscale sues the SEC Compass mining leadership departs Solana launches a phone North Korean hackers allegedly hack the Harmony bridge for $100m Razzlekhan may have actually hacked Bitfinex The Crypto Queen is on the FBI most wanted Content mentioned:  Nic on Medium, Setting the Record Straight Sponsor notes: 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.

of 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 is all about Bitcoin mining. Despite Bitcoin's recent price action, hash rate has been hovering at 250X a hash,

not far from the peak in May. The recent difficulty did drop 2.3%, the second largest decline of the year. each top high-end Bitcoin mining machine now costs $1.50 a day more to run compared to last year. And at its peak, the S-9 machine, which is now basically an unprofitable territory given industrial electricity rates, at peak, it generated nearly 80% of Bitcoin's hash rate, that one machine on its own. That's the coin metrics. Metrics Minute. They've got a Q2 mining data special. Highly recommended. Can we talk about coin metrics for a minute? So we share an office with coin metrics.

They're growing really fast. There's like people in that office that I don't recognize every day. They're hiring a lot of people. They had a happy hour this week. Didn't get the invite. I think you might have even gotten the invite. You're not even in Boston. I was invited.

Yeah, I got contacted by three people in the industry saying, oh, I didn't see you at the happy hour last night. Where were you? I didn't know about the happy hour. I mean, I hate to see. Maybe because I am the one that reads the coin metrics metrics minutes, so I'm sort of getting a bit of credit for that. You could read it next week. I mean, I'm on the board of directors of the business with you.

I feel like I should get the nod for a happy hour. Probably. Yeah. We can work that into the corporate charter. It's just you really, you figure out where you stand with some of these companies. It's difficult. And, you know, people don't know this, but you're like the shadow third.

co-founder of the business. I mean, the business, like, started. Like, I was a pretty big part of it, you know? It was hatched in our office, really, the business side, at least in 2018. So, I don't know. Someone at Coin Metrics, I would like, I would like to be apologized to. That's going to be hell to pay. They have a, like, a soccer team.

You could join that. I heard that the soccer team's pretty good. Yeah, I heard it's pretty good. You might not make the team. No, I don't want to play soccer What are you kidding? I mean, I'll show up and support the game But I'm not

Softball Soccer is the sport of the future And it always will be I would play softball I would play on their softball team Yeah, softball would be great Yeah I'd play on their hockey team

Tim Rice is a big hockey guy I think he still skates Yeah So it's another week of chaos I mean When are these going to stop being Like just all bad news Bears weeks

Because this is another week Of pretty bad news I was talking to another investor this week, and I said, you know, sometimes it just feels like you wake up and you just get punched in the face all day. And that's kind of what this week was. Yep. And that's even without getting sort of soft canceled on Twitter, which also happened this week. Well, let's talk about that first, I guess. So you wrote a piece, basically clarifying that you've never been a Bitcoin maximalist, which seems to have been a surprise to a lot of the anonymous Bitcoin maximalist accounts on Twitter. So why did you do that? well yeah so we announced our investment dynamic i mean look listen brink nation knows where we stand you and i we've done 330 episodes of this show 300 do you know how many hours of content that is i don't know several so of course we've made our feelings very abundantly clear and sort of if you looked at our website once you'd know what it is that we do we've been around for four years our website has been up the whole time.

I mean, when I first met you, you were obsessed with Monaro. You weren't even, like, Bitcoin wasn't even your top coin. That was meant to be a secret. Yeah, our 2017 Christmas party, you gave us a choice of sweaters. And I went for the Monaro sweater. I think you went for the Bitcoin one. I had a Bitcoin one. There was also an Ethereum option.

I don't know if anybody in the office took out. I think Kevin went with the Ethereum one. I think David might have gone with the Bitcoin one. Yeah, he was Bitcoin. And I went Minero. I thought Minero is a useful tool, to be honest. I just sort of realized that it wouldn't take over. You know it was a really fun experience back in the day,

buying Monero from Dan at CMS, now at CMS, but then at Circle. You ever want to talk about a white knuckle OTC trade? Go buy some Monero back in 2017. Well, because Fidelity had involved reading out full, length public keys over the phone. Like, yeah, more than just that. Yeah, there was a big process. Yeah, those were the days.

So, and it turns out we're still back at the same prices that we were at in 2017. But so anyways, I took us off track. So you wrote this piece that basically says that you are not a Bitcoin maximalist and you're setting the record straight. I mean, I've never, I've literally never self-identified as one. Not once have I said, I'm a Bitcoin maximalist. never. And people that know me know that. I think the only people that don't know that are like random people that happen to follow me that maybe came into crypto in the last year or so, the class of 2021. And they just didn't, they sort of thought that maybe I was like just a professional bitcoiner, like some full time like content creator or something that never sort of like bothered to look beneath the surface and see what it is actually do. And so they were maybe got whiplash when they're like, oh, you know, would why is he investing in a, Wallet-based sign-on company.

I see co-investing with Andreessen. But, you know, if you'd followed anything that we've done, you'd follow this show, just followed carefully, done the most cursory amount of research. You'd know what it is we do. I mean, to be clear, we're not a Bitcoin-only fund that, you know, you couldn't really put this amount of capital into Bitcoin-only startups.

You just couldn't. I'm sorry. And we've never been a Bitcoin-only fund. Now, we do invest in some Bitcoin-only companies, So we are definitely doing our part there, but we're not exclusively doing that. So, yeah, those people got really, really mad. And I wrote a piece basically saying, I don't believe in their ideology. I think they're denying reality.

There'll be more to come on this, to be honest. I think it's up to me to sort of lay out a positive vision of Bitcoin that completely departs from the sort of fantasy vision that the maximalists believe, which is based on total delusions. And I can expand on those at some point. So maybe it's on me to be like, okay, given my much more moderate stance, what's the positive vision for Bitcoin here that fits in the other interesting stuff that we invest in that I sort of understand and believe in? So yeah, I made that clear. They don't like me. That's okay. I don't sort of need anything from them.

They're not RLP's. They're not the people that we talk to in terms of building companies. Typically founders are really pragmatic, realistic people. And I don't really owe them anything. I don't monetize my audience. So as far as I'm concerned, the sort of laser-eyed maximalist crew are mostly irrelevant to me.

So I'm kind of moving on from any membership in that cohort. So that was the first time I'd seen you get canceled online. So that was in any other week, that would have been the number one story. It's happened before soft. I mean, it's the same kind of just like this, like, you know, a few hundred people and they just have it out for me.

they don't like that they think I'm an elitist. I guess they call themselves the plebs. So it's sort of like infiding that juxtaposition. But yeah, I mean, like they don't like the my dad works with the World Bank. I don't know what that has to do with anything. What does that have to do with anything? Like the World Bank, the people I've talked to over there are actually pretty pro-Bitcoin. It's a development institution.

So the bank is kind of interested and spreading like an American view of property rights, right? That's kind of the whole point is, you know, development finance, spreading American markets philosophy globally, taking a long-term investment perspective. So they're definitely not overtly hostile to crypto, to stable coins to Bitcoin. The IMF is. Now, if I, you know, was like IMF adjacent, maybe that would be a problem. That would be tough. It would be a contradiction. I like someone photoshopped our portfolio and put, I believe they put the World Bank, Goldman Sachs, a bunch of

Pfizer or Monsanto. Yeah, a lot of people were unironically reposting that, which was cracking me up because it's like, this is the level of intellect we're dealing with. Some of the things that we sit on the board of Pfizer and Monsanto. Oh, man, the internet is so fun. The other thing you did this week was you hosted Blake King, who's a power markets engineer at Galaxy. I talked about Bitcoin mining, transforming energy grids. So that was a well-received podcast.

Yeah, Blake is super, super smart. I sort of view it as my role to help, you know, give a microphone to these really sharp people that, in this case, in part of the mining miniseries, like I would say Sean Connell, that was another episode that we did that really helped him get established. I hope Blake gets an audience. He deserves it. He's one of the smartest people. He used to work for Urquat. Now he works on the mining side of Galaxy. So these kinds of people that have expertise in power and, you know, also understand Bitcoin mining, really valuable. I'm going to do another episode with him. We just didn't have enough time. But yeah, people like that one. All right. So let's hop into some deals of the week. And let's start it with the one that somehow spurred all this controversy, which is shocking.

It's an awesome deal. So Dynamic, which is a company that is building a wallet-based authentication. So basically picture a world where you don't need to have passwords on the internet. And it's secured by private key infrastructure. We're really excited about this. They raise $7.5 million from Andresa and from us from Circle Ventures and from others. So congrats to Itai and Yanni. I'm sure they did not anticipate the wave of controversy that spun up as a result of this

announcement. Yeah. I mean, did dynamic expect to be the subject of a new battle line in the civil war between the Bitcoin maximalists and the moderates? People were like, why are they doing a token? It's like, no, it's a subscription software business. Yeah. I've just realized that a lot of people out there don't understand what venture capital is.

They don't understand. They were accusing us of partnering with Andresen. It's like we're co-investors. Like if you both own Toyota stock, are you partnered with Morgan Stanley? No. You just both are co-shareholders. I really like the guy. I really like the team at Andreessen.

I don't know. People in Bitcoin space don't like them. They don't do a lot of Bitcoin deals. But Chris Dixon, one of the most thoughtful people in the space, like one of the big reasons why I got so excited about blockchains. And they did do Bitcoin deal. recently. They did a lightning startup, David Marcus' company. But yeah, dynamic is really cool. Our views on the startup obviously haven't changed. We were supporters. I actually did write about the case for Dynamic a little bit in that medium piece. Basically, you know, Web 3, I think,

is sort of like a really nebulous term, but wallet-based sign-on makes all the sense in the world. If you use a password manager, which you probably should, you're basically storing cryptographic information for all your passwords. So you're already doing the private key management model. Now, and if you've ever used like MetaMass to log on to anything, you know, it's a much better flow than doing the password, you know, like log on with, you know, storing your credentials with Apple or Google or Amazon. Like you have more freedom. You have much more discretion. ability to control your own identity. So it really does vest the power back with the end user and it really alters the topology of the internet. I think it's an immensely positive thing. Yeah,

it's not built on Bitcoin. That doesn't like that's it's completely, you know, orthogonal. But yeah, I think that's like the one of the biggest wins of Web3 actually is logging on with your with your key material. I think that'll be absolutely huge. I totally agree. All right, let's move on to some other deals. So Robin Hood shares spike this week on a report that FTX is looking to buy the company. The reports were later denied by FTX, but they halted trading. So a lot of things in play from FTX right now, including apparently Robin Hood reportedly. Next up we have Flowdesk.

They are a French digital assets financial services firm. They raise $30 million from EuroZO AgLei Ventures, ISIA, and others. Next one is peak. I think it's called peak. It's P-E-A-Q. I believe that's peak. A provider of infrastructure and tooling for decentralized applications, they have raised $6 million from fundamental labs.

Then we've got Kiko, which is the French blockchain analytics business, a lot of French deals today. They raise $53 million from 8 Roads, Ravaya, Alvin, and others. Next is PollySan, a digital asset infrastructure company. They raised $53 million as well. from Cowan Digital, Brevin Howard, and GSR. Then we've got Dylan and Ian Makalinau. They are the brothers behind the stable coin swap platform on Solana called Sabre.

Wow, that's alliterative. They raised $33 million for a fund focusing on Solana, Defi. Do you think that they should have just named this, like Makalinao Brothers Fund or something? It would have been a lot easier to say for you. That was like the hardest deal announcement I've ever read. Yeah, congrats to Dylan and Ian McAulaynow. Next one up is Azuro. This is a Dow focused on sports gambling.

They raised $4 million from hypersphere and nosis. So we don't invest in gambling stuff, but it's kind of surprising to me that gambling on blockchains isn't more pervasive. Like, why is there no global lottery system that is like really popular? I know that there are lottery systems on Ethereum. I mean, the sort of shit coin casino, sorry to, I don't mean to swear. That's sort of like the global gambling system, right? I guess, but it's not like a just a, I'm talking about just a pure play lottery,

like a mega million style thing. It seems like that would be trivial to build on a blockchain. You know, certainly illegal, but I'm surprised it doesn't exist. There's definitely been fair lotteries that have been proposed. I believe, I think some of them were created. You're right, they never really caught on. Next up we have Unizun, which is a centralized crypto exchange. They received a $200 million performance-related capital commitment from global emerging markets.

What is a performance-related capital commitment? That's an interesting one. I don't know. Our intern is putting increasingly exotic contents in these announcements. He's testing us because one of these days he's going to get something by us and it's just going to be a completely made-up deal. I'm pretty sure that's SPAC from last week. There's no evidence that that's actually true. Yeah, I'm certain that he's going to sneak something and just read it and make it sound ridiculous.

Next one up is Cryptoys. This is an NFT startup. It is focused on children and they raised $23 million from Indrisen and others. So NFTs for kids. then we have opi crypto uh targeting 100 million they've raised 50 million for a fund of funds vehicle focusing on early stage crypto managers now does opi stand for overpowered that's in gaming speak is that's what op stands for overpowered is that a thing in in sort of like gamer land yeah okay i'm not a big gamer it's like if there's like a you know a specific gun in a

game that's like too good you would say oh that's op got it well that's probably what it is fun piece of sort of gamer jargon for you right there that might be what it is all right so let's talk about blockfi and we're actually taping this uh the day after we originally taped because you had to hop on a flight and i'm glad we did because a lot's going on so there's this report from cnbc around an ftx takeout uh that had a dollar amount attributed to it that zach quickly came on to twitter and said that's not the deal. And then there was a report that led in it has a competing offer. So we, we don't have any news to break, obviously, on this podcast, and we'll wait for the company to do that. But I guess the thing I just want to emphasize here is that, you know, there's a lot of people on Twitter that

are kind of in an outrage around reported and rumored offers here. And just to be clear, like all of these things that are being contemplated at BlockFi, whether it's raising additional capital or looking at a variety of M&A opportunities, they all would put the depositors first. And so I think people can really, you know, calm down here. Yeah. You may be wondering why the roundup is late because normally we go 6 a.m. Fridays. We're actually quite good about that. I'm sure a lot of people have a routine that involves the roundup being out at 6 a.m.

on a. And we've failed those people. Do you think people do? Oh, I mean, people tell me all the time, like, oh, I always fold my laundry to the roundup or whatever. So I know the people are incorporated into their routines. Yeah. So there's somewhere out there, there's members of Brink Nation that are devastated because we're three hours late. But we did this because everything was changing so much with BlockFi yesterday.

Things were happening. A lot of updates by the minute. and we figured we would just let things settle so that we could cover the news today, but it turns out there basically isn't any news. So there's no real new developments to report. Regardless of whether there is an injection of capital or an acquisition, it's clear that the Blackfite team is putting depositors first. They're still processing withdrawals.

So people are kind of referring to this as a scandal. You know, they're trying to go after. people associated with BlockFi. To be clear, none of these scenarios involve harm to retail depositors. The system has been functioning as laid out from inception without interruption. The whole system has been functioning. Now, that's not the case with some of these other lenders, but BlockFi is not them. They're not homogenous. Yeah, this is just a situation where the whole industry is taking a hit here, certainly the lending desks all look like they're at various stages of stress and you can't just throw them all together. So that's what we know right now. And I'm sure we'll be talking about this

next week. We sort of made some waves with our three arrows take last week. But I'd say a lot of these things are starting to come to light. And a lot more will be coming to light in the coming weeks. So might have some new listeners this week. That was our number one podcast episode of all time. Turns out the trick to getting attention. All you have to do is just relentlessly trash other funds in the industry. Well, for a good reason, these guys are trashed. These guys are some of the worst actors in the space. Run it back.

I'm not going to run it back as aggressively, but some of the malfeasances are coming to light. So just some things that have happened this week, three arrows guys have been silent. I'm sure they wish they could be silent and on the run, but it sounds like they might be in Singapore. Voyager Digital, which is the Canadian exchange that lent them, I believe, 15,250 Bitcoin and $350 million of USC unsecured. They filed a notice of default this week.

We'll probably get some more information out of that around the onboarding and what Voyager was getting in terms of diligence back from Three Arrows. Regulators in the British Virgin Islands have come out. Three arrows had reportedly redomiciled an entity from Singapore earlier this year. Sounds like there are some shenanigans there. Regulators in the BVI have ordered the liquidation of that entity. The monetary authority of Singapore has reprimanded three arrows for providing false information to them and also exceeding the AUM threshold of their license.

I'd be, frankly, I'd be shocked if the monetary authority of Singapore doesn't have more to say on this matter in the coming weeks. F.S., which is Tom Lee's advisory shop that does research, they put out a report basically calling this a giant Ponzi scheme and the fact that they were defrauding their lenders and they were borrowing from folks, that they took money from commingled venture products. So all this is coming to light. You had Khyber Network and a couple of other projects come out and say that their treasuries are being managed by three arrows and they're going to have a negative impact there. So this is going to unravel over weeks, I'm sure. Well, it seems like basically everything you said or implied, frankly, that I said is being now very much corroborated with all these subsequent developments. Yeah, I think we're going to continue to learn more information.

There's a lot of things that are still out there that people aren't really talking about and, you know, some pretty serious allegations. So we'll see. but, you know, I've calmed down a little bit from last week. Yeah. I mean, the damage they cause is just significant, and it's really going to hurt. They do have a yacht to liquidate.

We'll see what happens there with the yacht. There's a very expensive home that's just popped on the market in Singapore in case you're interested in buying a $50 million house at fire sale prices. I think Alameda should get that house. They're going to end up owning it, yeah, along with it. Yeah, along with half the Baja Bahamas and all the remaining lenders in the crypto industry, too. The part that continues to perplex me is, so they were big in this trade, and they knew that it was going to unravel. Like, they knew.

So Kyle had come on this podcast and basically said that, and this is the part that I cut, and I don't regret cutting it. You're getting heat for that, Matt. You're getting heat. I'm getting heat, but look, we're not trying to blow up people's fun. in the moment and certainly I didn't know it was fraudulent. So we've had other investors come on this show and they've actually inadvertently said negative things about other funds. And so then they'll follow up and say, hey, can you cut that? Of course I'm going to cut that. I'm not trying to do any gotchas. I can't believe we're learning how the sausage is made on this show. So Kyle came on and I asked him

about the the gray scale trade that they by that point, they were public with owning 6% of it. And I asked him what his views were on the premium. And he said, well, you just have to look at the new subscriptions to know that this is going to trade a discount at some point. Most close-end funds do. So if you knew that, like why were you not trying to get out of that? And the only thing that I can think of is that the next leg of the trade was already on and that they were already kind of too deep in it and they were borrowing too much money and they just couldn't close out of that position. And they were sort of pot committed to just going all in on the Ponzi. That's actually a great use of pot committed. And I go back and I look at it. I look at

this video by the way. So we record the podcast with a video, but we don't use the video. And it was me in that, do you remember, I, do you remember I had that? Yes, I have the video. So lest anyone accused me of fabricating this. It's all in the video. It was a deep fake audio. Yeah. And so I was in this, I was like, where was I? Like my background was all weird. And I was in this, we worked. Remember when I was in that we worked during the beginning of the pandemic right by my house because we couldn't take the subway to work. And so I got this little small we work and my bike got stolen and it just brought back all these memories of the we work stealing my bike. That was the early narrative on this show. Yeah. So for those of you who are

new listening to this, so I was in a we work at the beginning of the pandemic because I was living in a very small place with the kids and stuff. And so it couldn't work at home. So we got this we work because we couldn't go to the office. And my bike got stolen. in one day. And I was like, hey, you know, there's a security camera right here. Like, what are we doing here? Can they just see who stole the bike? And it turns out that the security camera was cut for like six minutes, the exact six minutes. You could see my bike and not see my back. It's like, all right. So this is like a inside job. Can we, can I have a new bike? Just nothing. We work in South Boston, man. That was, that was a classic on the brink episode to episode narrative. That was just

time. No justice. I still just yeah. No justice, no peace. That was a happier time. You know, things were looking good back then. Yeah, I was like, who's this new fun three arrows? These guys are so smart. They did. They seemed very smart. I think they still are smart. These guys are super thoughtful. They weren't smart enough to pull it off. So wow. Yeah, that's going to continue. I'm honestly impressed at the relative speed of the BVI. and Singapore regulators here. I don't associate BVI regulators with rapidity or assiduousness, but here they are. Well, I mean, this is like bigger than, this is going to be a bigger scandal than a lot of things that have happened in Tradfire over the last 20 years.

So I think this will be one where folks get on it. Monetary Authority of Singapore is no joke, so they'll be all over this. So speaking of on the brink is ground zero for these. I know you know where we're going with this one, Matt. Okay, let's get into this one. On your conscience, be it. So CoinFlex, speaking of recent on the Brink episodes, this was like a month ago, Coinplex?

I really, I really liked that episode. We're going to have to go back and listen to this one. So Mark Lamb did our show just weeks ago, and turns out CoinFlex, they had a, stable coin, there was like a synthetic position. They had a large client default on a $47 million position. Turns out this client was none other than Roger Verr himself. Bitcoin Jesus. The Roger Verre. He turns out he's still around and he's D-Gen margin trading Bitcoin cash on an obscure exchange and defaulting also.

So in the year of our Lord, 2022, this guy is still longing Bitcoin cash with leverage. Needless to say, it's caused, it's but a hole in CoinFlex's balance sheet, now they're issuing. This is just so, I don't know, this is hysterical to me. They're launching recovered value USD token, RVUSD. It could also be Roger's initials. I mean, it could be. This is, I don't know. The whole thing is just extremely humorous to me.

I don't really take any pleasure in that. But, you know, I don't know, newer members may not know. But Roger Ver was like one of the chief antagonists of Bitcoin during the block size wars, totally turned against Bitcoin, supported Bitcoin cash, and obviously has now been reduced to gambling with leverage on these small exchanges. So I've got a Roger Rivera story for you. So I'm at the consensus. What was the year that Gavin was on stage and said that Craig Wright was Satoshi?

Was that like 2016? 2016, I believe. Okay. So I was at consensus sitting with Hadley Stern, who used to run, who's run like the Bitcoin stuff over at Fidelity. And Roger Vare is sitting in front of us. And so he turns around and start talking. And we're like, oh, like really looking forward to this panel. Ended up being the panel with like Gavin coming out.

It's like, Satoshi is Craig Wright. And that was last time I was named Roger Verre. But all of us were like, oh, my God. Did Roger look convinced at the time? I think everyone was just shell shocked. They were like, hold on, what? Like who? Craig Wright?

I've never heard of this guy. Oh, really? Okay. Yeah, no one really knew what was going on. But it was a much smaller event back then. So it was like, it was almost like being at a banquet or something. It was a very small side auditorium. It wasn't like consensus is now.

But, and I think Vatalic might have been on stage, too, if I recall correctly. It was just such a weird thing. Wow. Yeah, I guess Roger Ver is now going D-Gen long on Bitcoin Cash on CoinFlex. Yeah, I saw some people comparing me to Roger Burns. To be clear, I'm not trying to take a fake version of Bitcoin and, you know, replace. I'm not trying to change Bitcoin anyway. But, yeah, Roger Verge is a monumental sort of figure in the history of the

crypto industry. And I mean, look, I take no pleasure in him or the exchange losing money, but this whole thing is just kind of absurd. Yeah, I mean, this is a crazy story, but I don't know. We'll see what happens. The idea of launching a recovery value token, as crazy as that sounds, that's been done plenty of times. Bitfinex did it successfully. They did it completely successfully after their big, big hack, and everyone that bought those received the full sort of par value back. Let's follow up on Celsius. So Celsius is, I don't know, there's not much I can really say about Celsius, to be honest with you. We've sort of, we've known about Celsius, but we never really dug in from an investment perspective.

We never really got too close to those guys. I'd say we sort of kept away because there was always a lot of smoke. It was incredibly sketchy. I don't know if we talked about on this podcast, but we certainly talked about it in general. They had their ICU. They had the weird association with Moshe Hokka. they were putting once we found out that they were deploying user capital into sketch a defy things because they kept on losing funds in hacks then it became very clear that this thing

was sort of not going to do well when I found out actually for me the red flag was when I found out that they had a big mining operation which now they can't sell and is now is not making a lot of money it's like well you're taking client funds you're deploying it into mining which is like a pretty illiquid thing you know you're not going to be able to liquidate those A6 on short notice when market conditions turn. That was when I knew that there was something wrong. And, you know, clearly the, I don't know, depositors here to Celsius are probably going to,

they'd be lucky to see, you know, a hundred cents on their dollar back. Yeah, I agree with that. So they've hired bankruptcy attorneys, and there's a story that leaked this week that said against the advice of their lawyers, they're hesitating to file Chapter 11, and they came out with this weird feature

called Engage Hoddle mode, which they're trying to say, shows that folks want to lock up their account and give it another go, which just seems weird. FTCS apparently looked at the deal and didn't go forward on it. There's another story that Goldman was involved, and my view on that is that there's no way on earth that Goldman is looking at this from a principal perspective. That's just completely ludicrous, but it's not ludicrous to imagine that Goldman has some clients that may want to look at the scraps here.

I think what's really That doesn't sound very good though For the depositors to be honest with you I think there's probably deals to be made here Where there's liquidations There's sort of aggressive funds that could come in And haircut depositors But it looks like that's a pretty ugly situation

Yeah that one's a mess And and yeah Chapter 11 I guess this restructuring I was supposed to liquidation I don't know if there's really a going concern there at the end of the day though. No, I think that would have to go into, what is the other one, Chapter 7? Chapter 7.

Yeah. Back in my restructuring days, there used to be Chapter 22. That's when you get Chapter 11 and you come out and you just do it again. Oh, Chapter 2. That's because that's kind of what that would be, right? Like who's going to trust one of the, yeah. Well, restructuring joke. See, that's right.

That's what people don't know about you. This was your prior career was just the up in the air job. You go around and you fire people. Yeah, unfortunately, that's true. So I have seen a credit contraction in my past. We're going to need one of those in this industry. I mean, there will be. I mean, if you just think about the market structure for crypto investing,

there aren't really secondary funds right now. So just think about how many crypto funds are just not going to raise another fund or crypto hedge funds that did illiquid deals that desperately want to be out of them. You could be a secondaries player here and you could be making a killing. right now. And the other thing that crypto doesn't really have is like turnaround private equity firms. A lot of other industries obviously do. So it's sort of the this downturn is highlighting some of the fragility in the asset management category in crypto. Maybe those do exist, but they're just waiting for another 50% leg down before they step in here. All right. Well, let's talk about grayscale.

The SEC, I think owed them an answer by July 6th. And I would have would have thought, you know, based on what we hear from the way the SEC operates, I would have thought that he would have been working his staff straight through the holiday weekend, to be honest with you on this. But it looks like they got it out early and they got those denials out on the 29th of June. So maybe he's giving, do you think Gary Gensler is letting his staff take the 4th of July off? I mean, that's a federal holiday, right? Yeah, but I mean, I hear that those people work like 100 hours a week. Are you allowed to? as an agency, not take a holiday?

I don't know. I mean, he's got a lot of, any time that you have an exchange traded product that's Bitcoin related, you need to put together like 182-page denial. That's laborious. That is a lot, yeah. Think about all the people working on Ripple.

It's a lot of work to say surveillance sharing agreement, surveillance sharing agreement a lot of times, but they did do that. What was it like 78 times? So it turns out they want surveillance. sharing agreement, I guess. I think if I had to just codify the denial, it was we don't have oversight over the spot market and we're in a turf war with the CFTC. And until we get the spot market and we get the exchanges to come in and register with the SEC, you can't have a Bitcoin

ATF. That's basically what it said. And to be clear, that's a crazy town kind of objection. Silver has plenty of ETFs, right? They don't have oversight over the silver spot market. Same with gold, right? So this is a political thing. Their excuses they're making are just contrived. It's obvious, I think. But either way, denied once again now. Grace Gill is suing them. So Grace Gill is suing under the Administrative Procedures Act. It looks like that's going to be a long stretch, though. I mean, that could be a 12 to 18 month type of lawsuit. And then even if you win the lawsuit, it's not like you win it and they just say, okay, here's your Bitcoin ETF. You kind of go back to the start and they reconsider, based on your administrative procedures argument,

they reconsider your application. So that's a, I don't know if that's probably not going to work if I had to guess. So here's the thing. Let's say that lawsuit does work probably by that time by summer of next year. There is some legislation that determines which agency gets oversight over the spot crypto market. and we have hashed that up. Maybe it's the SEC, maybe it's the CFTC. I think we'll probably have clarity at that point over who governs what.

And then that probably would pave the way for an ETF. So I think that would probably happen before the resolution of this lawsuit. That could happen for sure. You could also see something like Gensler getting another position in it opening it up that way. I mean, it sounds like it's probably going to be done at the end of the year. Gensler's gunning for that. So maybe he gets that. And then maybe you get a new head of the SEC.

So no surprises there. It's just incredible to me, the extent to which GBDC has been a wrecking ball in the industry. So it's remarkable. I mean, it's a, yeah, now it's a, so it's a 35% discount closed end fund. This thing is just, that's tough. I mean, and they're getting 2% fees based on the nav, not on the discount. So it's a cash cow, but it's just a, there's a, $120 million a year in fees.

$2.20 a million. Ooh, wow. More news. Binance is launching Binance Institutional, enterprise-focused liquidity and execution services. Binance is one of those

companies still expanding through the bare market. Yeah, it's a good time to be a profitable exchange in this market for sure. There's a big controversy at Compass mining. I don't really know what's going on here.

So Compass is like a mining marketplace. The CEO and the, and the CFO have resigned, the company lost one of its hosting facilities. The hosting facilities said that they weren't paying their bills, but they said they were. So I don't know what's going on here, but it's a big story. It's a mess. Compass had some miners in Russia, I believe, which that's not new information, but that probably wouldn't have helped. I think they're having a dispute with one of their hosts over power prices.

They're increasing everywhere, unsurprisingly. and that's causing a lot of trouble with hosts. So, yes, leadership has resigned. Next up, Salana Labs. All right, I didn't expect this one. This was sort of crazy news. They are launching a mobile phone called Saga. I'm just going to tell you right now that I will buy this.

I knew you. CMS would say something like, We like the phone. Yeah. Yeah. Yeah, MS would say. Well, I have, I mean, we don't put this on video, but I have all sorts of trinkets behind me. I have a CASA node.

I've got this other Salana node thing. I don't even know what that is. I've got any hardware. I've got a block clock. I mean, this feels like this could be, I guess I'd have to use it as a phone. Maybe I just use it as like a desk phone or something. So I have some jokes about the phone. All right.

Hit me. So, you know, I looked at the specifications, and so the phone is free to use, but it doesn't work for long stretches of time. You know, so three days out of the month, it doesn't turn on. Is that a joke because the blockchain goes down? Yeah, that's a joke about the blockchain. That was funny. And it requires, you know, 12 terabytes of solid state memory to operate. That's good.

So that's fake news. feel like I could work to my delivery a little bit. Anyway, it's a real phone. I guess you'll be able to store your keys on it and do salon of transactions. I actually don't really know what the purpose of the phone is.

It doesn't matter what the purpose is. It's just a crypto trinket. And I'm here for that. Why do we not sell crypto trinkets? So we have promised so we have a lot of new listeners. My goodness. We had promised members of our official

on the brink community on gm.xyz a digital trinket but we haven't created it yet oh i haven't even told you this i had a little meeting of the minds with our merch guy oh yeah yeah we met um we met in person um had a little had a little outdoor drink and he had a really good idea that we should do three items every quarter and that we should almost do it as like a drop okay three out physical items yeah like three three things and and maybe one of them can be a salina phone well we probably should refresh our merch i mean it's a little stale and we haven't created any digital trinkets at all no we haven't we'll get on it so i didn't second last piece of news maybe horizon which is a bridge on the network harmony was exploited to the tune of a hundred million

basically these bridges are just getting hacked left, right and center. So this was traced to a North Korean hacking group by a Leptic. Was it really? So these North Korean hackers, man, like, how did they even hear about Harmony? They must have been fans of Defi Kingdoms. They're playing Defi Kingdoms. They're playing DeFi Kingdoms. Does this mean you lose all your DeFi Kingdoms like in-game assets?

Does that's, does that, I think those were, you know, those were worthless already, man. Were they? Well, I think it had sold off. I thought Defy Kingdoms was porting over to Avalanche. Did they get stuck on the bridge? So, yeah, I don't know. But if, look, if you've got fictional coins in the bank in Defy Kingdoms, North Korea has got them now.

North Korea just has an arsenal of Nd MDSS right now. These guys are going to be. They've got World of Warfcraft gold. They got Ruincape. That's like in their version of Fort Knox. Yeah. Do they let these guys play in like global gaming tournaments? Because they have all the in-game assets.

Yeah. How do you stop them? They're going to be a powerhouse in the metaverse. They're going to roll up with just all the coolest gear day one in the metaverse. North Korea is just such a fascinating place to me. Because I'd imagine that most people, in North Korea don't have like access to computers, but they have elite hacking groups. And so do they just choose people early on in life and just like just decide that they're

going to be part of these elite squads and and teach them? How does that work? Well, maybe they just find who the best puzzle solvers and doers of crosswords are like with the enigma. Yeah, they just yeah, maybe. Just see who's the best at doing crosswords. What I want to know is to the extent there's NFTs, which are redeemable for like real experiences, and they successfully hack one of these NFT exchanges, do they then, can they compel Nike to like send them all the shoes? Yeah, or what if it's for like, hey, you get to go to the Super Bowl? Yeah.

It's like, here's your chance to leave North Korea. Does the army of North Korean hackers get to go to like the dummy Levato, NFT dated, you know, concert? It's crazy. I mean, you'd have to imagine that some of these. North Korean hackers are just sitting there and just seeing what it's like. You get these Americans that are spending all their money on like stupid trinkets online. Meanwhile, we're like hungry.

It's just what a weird world. I think they probably feed the hackers the best. Probably. I would love to hear from a defector on one of these hacking teams what it's like working in the trenches, hacking exchanges all day. Yeah. It's doing, you know, fishing scams on MetaMask. there was an article this week about these jokers that hacked bitfinex yeah nothing like super new but it just

i'm starting to think that they actually very much were part of it i initially thought that they weren't and that they might have just met someone who later sold them the um sold them the private keys but i don't know these they might have been a little bit smarter than i thought really because yeah we all kind of thought that they were just sort of patsies, that they weren't really the hackers themselves. Razlkan. Yeah. So does this suggest that they may have actually done the hack themselves? It's unclear.

It's unclear. But it's just much more detail. I mean, the type of thing that is going to add to the movie, like, what a strange, strange story. So speaking of hackers and so on, here's late breaking. Just popping off the presses. The Southern District of New York U.S. Attorney's Office says they're adding Ruha Ignatova to the FBI's 10-Mas-Wanted fugitives list, aka Crypto-Queen of the One-Coin scandal.

So they haven't caught her. Wow. They have not caught her, but she is on the fugitives list now. One coin is something that most Americans have probably never heard of, but it was a huge, huge scheme. Yeah, $4 billion. I mean, there's just so many of these enormous Ponzi's that are kind of unknown. And has that been all liquidated?

I think that they probably still have some of the funds. I mean, there's probably some experts out there tracing the wallets that can find her using the funds to buy mojitos and stuff. Crypto queen. She's probably hanging out with Joe Lowe. Yeah, Joe Lowe also at large, also at large. and soon to be joined by some of our Singaporean pals over here. Do you think so? No, I don't think so. So I don't know, are we allowed to just spread crazy rumors on this podcast?

Honestly, gloves are off. I think we can. This is crypto winter. We can say anything. So apparently Joe Lowe is in Shanghai. That's what I heard. Oh, you heard Joe Lowe is hanging out in Shanghai? Because there's no extradition.

Well, that wouldn't surprise me if you pay someone off. You could probably do that. Yeah, I think you can live there as kind of a fugitive. So the problem is if the Three Arrow's guys lost Chinese counterparties, a lot of money, maybe they wouldn't be able to hide out there as future. Well, take it to the bank that they did. You'd be hard pressed to find a country where there's not a high net worth individual that got that sales pitch.

So best of luck to the FBI with their pursuit of Ruha. Honestly, I'm impressed. Like, shouldn't it be hard to be an international fugitive these days? Like, don't we have sort of like facial recognition all over the place? Yeah, you'd think so. I mean, Whitey Baldra was gone for like 20 years. That just seems so crazy. And he was in Santa Monica.

He was kind of in plain sight, right? Just incredible. Like, there was a Boston sports bar like a block and a half away from where he lived. And he used to go there and watch the games. And people didn't recognize him. Right. Wow. He's incredible.

And he didn't have like facial reconstruction surgery whatsoever. So it's like, yeah, maybe Kyle Davies, he'll move back to Boston. He'll live in Melrose. Well, look, who knows, man? Maybe three arrows are going to make good on all their commitments. Oh, yeah. They'll make it all back with one trade. Just one last trade.

You know what it would take? It would take Starkware being worth more than the U.S. economy for them to get out of that trade. But like, this is Cryptoland. I'm not writing that off as a possibility. That could happen. Yeah, I mean, honestly, that would be the best thing for the industry at this point. Someone's got to save us. So I think that's all the news for this week.

That's all for this week. I'm sure we'll be back with more news next week. But hang in there, folks. If you haven't been through a bear market, this is what a bear market is like. A bare market with a liquidity crisis on the lending side. nothing's changed about the underlying thesis here. Just keep calm and get through it. Yeah, that's why they say Hoddle,

which stands for hold on for dear life. If I'm not mistaken, just kidding. It doesn't stand for that. But yeah, hold on for dear life. I will say this is the time I was on the phone with someone before we started recording, and we were talking about the consolidation going on in the industry right now. Five years from now, we'll look back

at some of the largest businesses. and some of the moves that they made this week, next week, and the week after, and just say that that's when they ran the table. That's when they started to get aggressive. They started to consolidate the market. It's when they took a decisive action. They were just calm when people were losing their minds. And that's what it's going to take to be one of the biggest businesses in the next cycle.

Yeah. If you have a healthy balance sheet right now, you are looking around and licking your lips. And it really shows if you've acted countercyclically and prepared yourself for a situation like this, you can just scoop some incredible bargains. Absolutely. I mean, there's a lot of panic selling. There's also a lot of force selling right now. So that applies to cryptocurrencies, but that also applies to equities. And it also applies to private equities as well.

And so, yeah, be greedy when people are fearful and vice versa. I mean, I've never seen the level of fear and disloyalty. I mean that I'm seeing right now. So good time to go shopping. Get out there and enjoy the 4th of July. Take your head off of uh take your head off the prices and uh enjoy it. All right. Try not to lose any fingers with the fireworks. All right, everyone have a safe and healthy fourth and we will see you on Monday.