On The Brink with Castle Island - Weekly Roundup 08/04/23 (SEC vs HEX, Base and BALD, Curve hacked) (EP.442)

Episode Date: August 4, 2023

Matt and Nic are back for more deals and news. In this episode:  Nic's early Do Kwon experience Reflecting back on Terra/Luna  The SEC charges Richard Heart and HEX  Is the SEC's case against Richard Heart flimsy?  Does the SEC deserve praise for coming after HEX?  Kyle Davies thinks he's immune from prosecution because he gave up his US citizenship Who's behind the BALD rugpull?  Implications of the Curve hack  We look at Tether's asset portfolio  Kenya suspends Worldcoin operations in the country Is there an account firm choke point?  Ethereum future ETFs are filed Judge Rakoff dissents from the Torres doctrine  Content mentioned:  CIV white paper on Cryptodollars Sponsor notes:  STATE OF THE NETWORK: Decoding the Digital Dollar — Unraveling the Risks of Stablecoins In our new special insights report, CM lays out the key fragilities of stablecoins and how on-chain and market data can help monitor these risks for the future of digital dollars to materialize

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 to Britain's ailing economy with a new round of Concentuteeasy. You print a couple trillion dollars, and all of a sudden, people start to worry. So out of this worry, we have something called a Bitcoin. 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. For this Metrics minute, we're looking into Stablecoins. Coin Metrics has a new report on Stablecoin risks. According to the coverage universe, the market cap of Stables is around $120 billion, rising from just a few billion in 2018. In March 2023, as we all know, circles UCC stablecoin experience a DPEG due to the failure of Silicon Valley Bank, trading as low as 87 cents. In December 2017, Tether traded a premium of 10 cents on the dollar during market

volatility. Investors sought a safe haven. The report profiles other DPEG events. One thing that's not that well known is the fact that Tether issued supply differs from the true number of tethers in circulation. During the June 2022 lunar crash, Tether's free float supply was $65 billion compared to the nameplate supply of $75 billion. So you need to look at the free float numbers to get to the bottom of it. That is your metrics minute. Pretty good report there by coin metrics. I like that one a lot. Those guys are doing a lot around stable coin risk and they have

a software product in that category. So definitely encourage anyone to go check that out. metrics.io. Yeah, stablecoin's becoming something that I think the rating agencies are going to start to care about. You know, it's not a small market anymore. It's a big thing. I mean, 120 bill. And if the U.S. could get its act together around the stable coin bill, it'll be a much bigger market. I mean, you want to see PayPal enter the space? That's what it'll take. We need that stablecoin bill. So I have some big feces around stable coins that I have developed in recent days. Oh, nice. Another white paper? I think we need another white paper.

Honestly, I was rereading our old crypto dollars white paper. We had an ill-fated attempt to rebrand stable coins. Didn't work. I think stable coins is better. People are afraid of crypto. Stable coins is stupid because I didn't, whatever. Anyway, crypto dollars didn't work. We had a great white paper in June 2020. The supply of stable coins at that time was like $6 billion. It was nothing. I think it aged really well. Castle Island. Dot V.C. Slash crypto dollars. It's still there.

That could have been the type of report that said, hey, there's this thing called Luna, and it's the best new stable coin ever. We did mention Luna. You should buy something. We mentioned it in there. The supply was under a million dollars of UST at the time. Man, people should have listened to.

And I remember I talked to Doquan in the course of writing that report, and he was like, yeah, you know, UST is getting all this usage in Korea because there's this app called Chai and people are buying retail products with Terra on this app. Wrong. That was a lie. That was determined to be a lie. But I didn't know at the time.

Lying to you for that research paper was the least of his issues. At the time, I was like, I was pretty baffled by the whole. whole thing. I'm trying to remember what I wrote in the paper, but it just didn't make any sense. And I was, to be clear, I'm on record as having been a Luna hater. So I fully am claiming credit for being against Luna. And yeah, it never made any, it didn't make an ounce of sense at all. A lot of smart people, like, you know, that's the problem of being smart is you can justify anything. you can kind of twist yourself in rhetorical knots and do all these mental gymnastics

to try and make concepts which are incoherent work. And that's what a lot of smart people did around Luna. Yeah, I'm really happy I was middle of the bell. Yeah, it's mid-curve that thing. Doesn't make sense. Shouldn't work, didn't work. All right, well, not a busy deal week again.

I guess we're in the summer doldrums here. We have one deal. We have one deal. All right. What is it? It is Orbital, is a London-based payments firm solving stablecoin access. Speaking of stablecoin, solving stable coin access for enterprise corporates. They've raised five million pounds.

What that is in freedom units, I couldn't tell you. Five million pounds in a round led by Golden Record Ventures with participation from New Form Capital, GSR Ventures, and Pissolion. All right. So congrats to the Orbital. That's the deal. Well, I want to start this off with some SEC appreciation this week. So there was two enforcement actions. I'll hit the first one quickly here.

The SEC has charged 18 individuals in Utah over a $50 million crypto fraud case. Never heard of this one, but good job. And then the big one, which is long overdue, the SEC charged Richard Hart, who started the Hex Protocol, which maybe you can explain to me what the heck this thing was. But this guy raised over a billion dollars in an unregistered. security's offering for this hex thing, which as far as I can tell is vaporware. And this guy was just flaunting all over social media, uh, expensive cars and jewelry and all sorts of stuff. This appears to be the most slam-down case. The SEC has ever brought. It's actually not. It's actually

not. Believe it or not. How is it not? There is, so here's why it's not. I'm not going to defend Richard Hart. Here's like a weird fun trivia thing. The first live stream I ever did, I shouldn't even say this. The first live stream I ever did as like a personality or whatever as a pundit, Richard Hart was in that. Really? Yeah. Well, that's fine.

I've been on panels of people that have been convicted. Remember I did that Harvard thing? He certainly did. Actual criminal on stage with me. This was 2017. He hadn't become a full-blown scammer at that point. But I was very weirded out by him. I mean, he's an incredibly strange person.

He had the big candlesticks, and he was sitting on a throne. The whole thing was strange. So here's why a few lawyers, crypto lawyers, looked at the SEC case against him and actually thought it was a little flimsy. Believe it or not. I mean, I think they'll still win,

but parts of it are a little questionable. His whole marketing strategy was to take investor money buy luxury goods, cars, watches, is the world's largest diamond, apparently, and flaunted on social media. There was no secret about it. There was no subterfuge. He just openly did that. And it was very obvious and known what he was doing.

So I think there was kind of a case to be made that it was very clear that buyers of hex, pulse chain, whatever, were getting nothing in return. And they were just funding his ridiculous. lifestyle. Now, is that an actual defense? I don't know. But in this case, it's not like those other scams where it's like the founder, you know, is secretly buying Louis Vuitton and kind of claiming that there's something real going on. In this case, he was just clearly taking money from the pot and buying luxury goods. I think they have them dead to rights. He was promising that this thing was going to be better than Ethereum.

There was all sorts of promises here. But, I mean, how did this thing get so big? Like, what pocket of people were paying attention to this guy? Yeah, I mean, the hex, weirdly, I've followed the hex situation quite closely. I think I'm just obsessed with the kind of anthropology of scamming or something. I have been the whole time. But Hex reached a very different audience than the sort of normal people on Crypto Twitter. they would do direct mail campaigns.

A lot of it was focused at working class people. I mean, it's incredibly insidious. I would say one of the worst scams that's ever happened because of the demographic of people that they targeted, which is people that didn't have a lot of experience in crypto, knew that there had been life-changing money made in crypto, but hadn't ever done anything in crypto, before and then he relentlessly marketed to do this demographic basically not like crypto novices

especially working class folks in the US so I mean incredibly bad for the world that this happened just a total dirtbag and this is what you have the SEC for so we talk a lot of smack about the way they've come down on the actual the good guys in the industry but this is one they should be pursuing. I mean, the Hex tokens down like 99% plus from peak. So to be clear, they're late to the game. Again, hex was an obvious fraud from literally day one. It was obvious, okay? And you didn't have to be a genius to see that. People often ask, like, why do you, why do, you know, influencers not, you know, call out the frauds? First of all, because there's no upside in doing it. I mean, there basically isn't any.

Second of all, by calling out the fraud, you call attention to them. And it ends up being used as marketing by the fraudsters themselves. So if I had, I was aware of hacks. If I spent months, you know, lambasting hacks, that would have been used by their community and by Richard Hart as marketing for the project. Like, they would have been used to galvanize them and get support. So there's literally no upside in doing it. And even by acknowledging the fraud, you actually help market the fraud.

So that's why now people are going to be doing a postmodern and be like, oh, where was crypto, Twitter on this? Look, it was obvious. It was a fraud, completely obvious. But there's absolutely no upside in actually dissecting it and going through it. There just isn't any. SEC should have acted, you know, credit to them. They should have acted years ago. Yeah, it's a good point.

I mean, $1 billion raised is just an incredible, that's a good point. a staggering amount of money. I mean, the amount of paper wealth destroyed, and it's very hard to actually account this properly, the amount of paper wealth destroyed was more than Luna. Yeah, believe it or not. All right. Well, let's move on to some other rogue bandits here. Three Arrows Capital co-founder Kyle Davies has filed something with a U.S. bankruptcy judge overseeing the bankruptcy and liquidation of Three Arrows Capital, just another criminal organization. And Kyle Davies says that he renounced his US citizenship in the year 2020, therefore U.S. laws should not apply to him. Good luck with that one. Yeah. You know that expression you may not be interested in politics, but politics is interested in you?

It's like that for the long arm of the law. Yeah, I mean, well, when you raise capital from U.S. investors illegally, you know, warbler capital comes to mind, starry night. When you defraud, when you raise under false pretenses. That's fraud is fraud. Usually the government does care about fraud. Yeah. The US government uniquely considers the entire globe its jurisdiction, and that includes Bali or Dubai or wherever he is.

So stay tuned on that one, but I have the feeling that we're going to be speaking about three hours capital more in the future here. You know what it amazes me? When you look at the claims, that claims trading for all the various bankrupt entities out there that we lost in the year of our lord 2022. FTX claims are trading at like 30 cents on the dollar or something. By far the very worst ones in every single one of those dashboards is three errors. And the claims are trading at like

five to seven cents on the dollar. And it just shows how much capital they incinerated and how much of a misallocation it was because there's just nothing residual that's left there. Yeah, that doesn't surprise me at all. I have not seen those claims. I'm actually, you know, this FTX process is probably going the best out of all these bankruptcies. John Ray just on the scene here. Yeah, I mean, the claims actually do reflect the fact there's some value there.

It's actually pretty remarkable. Seems like they pick the right guy to run that process. All right. So I'm going to need some help dissecting this next story here. So this is a strange one. So Coinbase's new L2. which is called base, that launched, not really launched at scale. So it was released, but all the tools to access it aren't really built out yet.

So you really had to be pretty sophisticated to get on board this thing. But last week, it sort of went live, kind of. And a bunch of assets, a bunch of meme coins started to pop up, including one that was called bald. And it ended up being a rug bowl. So basically someone, some developer put in liquidity, yank the liquidity, the rent off with the money. And what's interesting here is that some of these on-chain forensics people on Twitter

have come out and done a bunch of research into who this scammer could be. And there's some pretty interesting evidence that whoever it was had some affiliation with a bunch of Alameda projects. And so, you know, there's nothing that's full-blown proving that this was a specific individual, but the type of person interacted with the OTC desk at Alameda was involved in a bunch of the same projects. So it looks like whoever did this rugpole could have been in the Alameda orbit. And then, of course, you jump to the speculation phase here, and there's been a number of articles

written this week that could this have been either Sam Bankman-Fried from his parents' baseman or wherever he is to Sam Tribuko, who, you know, Lord knows where that guy is. he's out riding a boat somewhere. So I'm really interested in what Matt Levine has to say about bald. I don't know if you would talk about it. But basically what happened was the deployer added liquidity to the pool. It was a meme coin trading on base. And it was the most liquid early meme coin.

And so it got a lot of traction. And then the deployer pulled the liquidity. So the question is, is that market manipulation? Probably yes. But I think it's actually probably more of a gray area. just adding and subtracting liquidity from a pair, you know, that alone, I think, maybe doesn't constitute more. It's kind of in the eye of the balder. So anyway, that's just an interesting thing that I'd like to see analyzed more. But yeah, in this case, the deployer made around, actually

didn't make a lot of money, around $5 million they made by rug pulling this liquidity pool. And as you say, yeah, people think it was an Alameda. I mean, the former Serum Twitter account was showing bald. The wallets seem to have been controlled at some point by Alameda affiliates. People think the fact that the bald account used the word nor means that it was Sam, because apparently Sam liked to use the word nor. It's not an uncommon word. They were the first voter on sushi proposals, so clearly they were in the Alameda orbit.

but I don't think it could be Sam because he doesn't have access to the internet in an unrestricted way right now. And he doesn't have a smartphone. So could he have pulled this off from like a Motorola razor flip phone? If so, most incredible heist of all time. I mean, this would be great for the Michael Lewis book. But yeah, it's hard for me to imagine that Sam Bangman-Fried did a rugpole made $5 million from like a flip phone. That would be the most incredible thing ever. It's just odd though because if you're in an Alameda executive and you are striking a deal with the prosecutors,

engaging in more criminality is the last, should be your last priority. So I don't see the upside for Sam Trubucco if he's working with the prosecutor is trying to determine his future for him to engage in such a blatant act of marketman. and in such a public and visible way, especially on Coinbase's chain. Coinbase will now be very motivated to find out who did this because it's kind of a PR debacle for them too, that right away. You're looking at scams and rug pulls on their all too. Yeah, I feel very similar with Sam Trubuco. I mean, there's no world where the U.S. government isn't all over Sam Trubuco right now, and he's going to be a a key witness, I would imagine. There's been nothing to come out publicly on that, but the amount of scrutiny on him must be off the charts right now. He will be testifying at that trial. You can

almost assure it. So I don't see how it makes sense for him to do it. But there's probably, you know, another, what, 10 Alameda executives that, you know, we probably don't even know their names, some of them. And maybe it's one of them is sort of where I come down on this. Yeah, I said this on Twitter and honestly, I don't buy this story that there were like three bad apples at Alameda slash FTCS and everybody else was an innocent lamb. Frankly, I think if you went to work for FTCS and you moved to the Bahamas to work for an offshore exchange, you knew what you were getting into pretty much. I'm not saying you knew that the whole thing was a gigantic fraud, but you knew that they were operating on the edges of the law. So I think it attracted people with that specific attitude.

So frankly, I think far more members of the Alameda FTX apparatus should end up in prison. And if it's just one or two, I think it's travesty. Because I think there was adverse selection, as in they specifically attracted people that knew that they would be skirting the law and working in a gray zone and had this cowboy attitude and were just defy, DGEN types that had no regard for the nation's laws. So frankly, I think we should end up with it. two dozen folks in jail here and I'll be dissatisfied if it's just Sam. That's a that's a hot take. I tend to agree that the senior echelon had to have known. I think there's all sorts of executives

over there that justifiably probably had no idea. They just weren't close enough to it. But once you got into a certain- I don't believe it. I don't believe it, Matt. You don't believe it. Come on. They probably had a shared notion doc and one of the subtitles was just fraud. Just do fraud. I don't know. Fraud plans. I see the world a little bit more nuanced. I think there are certain roles there where you had to have known, and there were certain roles, you know, customer success, even some of the compliance roles where, you know, look,

if you're working for FTXUS and you're in one of those senior roles, you probably didn't have any concept of how bad it was. You can't just declare yourself the nuanced one and me the non-newanced one. I'm nuanced. You can't just seize the moral high-grounded argument by saying you're the nuanced one. Well, your argument is fine. Everyone should go to jail. That's fine.

I'm just saying we should have like fair trials. Not everyone. Yeah, no, fair trials for sure. Fair. Okay. All right. Let's broaden the net. Bring some trials.

All right. I can get on board with that. I have a couple corp dev slash, you know, head of MNA slash head of product, people that I think very strongly definitely knew what was going on. So elsewhere and incomprehensible news. the curve hack was insane. Yeah, so explain this to me like an eight-year-old, please. Oh, dear. Okay, so this was, this was everyone Sunday. Every defy person, their Sunday was ruined by this.

So, uh, curve, it appears had, uh, so curve was a blue chip defy protocol, for sure. They hadn't been exploited in three years of operation. So this is a big shock. And it shows that smart contract risk is a real thing, even for the most blue chip protocols. So it looks like deep in their release history, their Viper compiler had some kind of bug in it. And that was exploited to drain the pools. Viper being a solidity alternative language. Right, a programming language.

And around 30 million was. hacked, if I'm remembering correctly, and 24 million rather. So the specific vulnerability was a re-entrancy bug, which if you ask me what that means, I couldn't tell you. And here's the weirdest thing of it all. I mean, there's a lot of oddness there. The Curve founder had apparently used his own units of Curve, which appears to be like a huge portion of the protocol, to borrow stable coins with which to buy a mansion in Australia. So using defy protocols to borrow stable coins backed by his curve tokens to buy physical real estate, apparently in Australia. And now he's facing liquidation as the price of curve falls, given that curve appears to be, you know, on the brink of destruction.

So there's an effort on, there's kind of a war going on now where some, I guess, sort of activist shortseller types realize that he's a four-seller at a specific liquidation threshold, which is kind of the problem of defy is that your liquidation thresholds are public. And so there's some short-sellers trying to run the stops on him and liquidate his literal home. And then there's some friendlies that are trying to, you know, save his house. So this whole thing, I was not aware of the real estate angle, but this seems completely insane. I mean, this guy's a real dope for taking out that loan. This is like a peak of the market type of thing. You take out a $100 million loan against an asset that you create. I mean, this guy is so high on his own supply.

Just sell the curve. How about that? Don't do some complex financial engineer. Like, come on. Yeah, I mean. So what are the defy protocols going to do? do like work with a bank in Australian foreclose on his home. How is that going to work? But as you point out, this is a mainstay protocol in the defy space. So I mean, it'll be

interesting. This was some of the older pools that were compromised here. So none of the newer ones, but not that it really matters, to be honest with you. This was like some of these asset pools were like metronome and a bunch of assets that barely trade. So it was a very, very obscure hack. whoever did this was just really zoned in. Yeah, super sophisticated hacker. Of course, I immediately think it's probably the North Koreans, but who knows? Whoever did it went deep into the documentation

and the release history to find this vulnerability. And it really shakes confidence in Defi at a time when defy is already pretty much up against it. If Curve can be hacked, that kind of implies that any protocol could be Avey Uniswap compound. It's really not a good development for the space. And there's some implications for Ave, too, because there's a lot of interaction between Curve and Ave, right?

So, yeah, Ave is probably seen some... Systemic in a way. I mean, that's the problem with defy composability is... Of course, it's great when it works, but when someone goes wrong, you have composed problems that percolate. So if you build protocols on top of protocols, if one of the underlying protocols is exploited, the whole edifice starts to crumble. So there's a plus and a minus to compose ability.

So speaking about hacking, this just happened a couple hours ago. So we're recording this at around 4 o'clock on Thursday. So Ilya Dutch Lichtenstein, I think that's how he say his name. He's one of the Bitfinex hackers who got arrested with his wife, Razl Khan. He just pled guilty. And I think the wife is, I think she's scheduled to be in court, but maybe the Trump arraignment is going to push that back. So he pled guilty to the Bitfinex hack.

The original hack was 2016. It was for around $70 million that eventually grew to over $4 billion at peak market prices. I was kind of surprised that this guy didn't have more to say. I mean, I guess he was the hacker. But if you just asked me on the day he was arrested, if he was sophisticated enough to pull this off, judging by his resume, I would have said probably not. Like, I would have thought that he was working with a more sophisticated group,

but he is, at least he's taking the fall here. Yeah, I mean, the DOJ is saying that it was him that was the hacker specifically, as opposed to him being tasked with laundering the funds. So, I guess he's going to jail. He faces a sentence of 20 years in prison. His wife, Heather, is looking at a maximum of five. You met her, right? Yeah, she was at the Topper Wizards party.

She into Bitcoin? I guess she is. Yeah. So what happens to the money now? Does the U.S. government just give this to Bitfinex? Yeah, I mean, shouldn't it go to the recovery right holders or something like that? I mean, a Bifenex issued a token, which was like an entitlement, something to do with the token trading on the possibility of a recovery.

So that's why they did the Leo token, right? So, um, well, hang on. no, Leo was out, there were two episodes. Leo was crypto capital. Leo was after the crypto capital. Okay. Bifenex loves to plug holes with new token issuance. I mean, people thought FDX, for a while, people thought FDX was going to do that.

Yeah, it doesn't seem like they will anymore. Credit to Bipfinex are pulling that off twice and getting hacked, completely hacked up and issuing a token, plugging the hole and keeping on chugging. But you would think that the U.S. government would, really have to return this money, right? I mean, I'm sure Bitfinex would be willing to pay them a fee for finding the perpetrator. But it's interesting because of course, Bitfinex is affiliated with tether and the U.S. government has been at odds with tether over the years. Bitfinex is not licensed in the U.S. but I mean, it is their money. I do think you have to give it back. But that,

on the other hand, the U.S. government seized Silk Road hacked coins and they're just keeping the money, right? That's true. But Silk Road doesn't exist. anymore. Yeah. So I guess the timing didn't work out for, well, yeah, was there, there was no such thing as a Silk Road or were they Gawks? We're getting our facts wrong. Were they Gox hacked coins, the ones that the U.S.

government's liquidating now? They, they were Gox coins, but I think Silk Road coins were also recovered in the, because they were recovered off of Ross Albrecht, right? And those the government just auctioned. kept the money. I believe that's right. I mean, what is the US government doing auctioning these coins? You've got to hold on to these things.

So speaking of Tether, actually, they had their attestation come out. And they are, I think Tether is the most profitable per employee company in the world. That would be my guess. I mean, they're also sneaky, one of the largest holders of U.S. debt in the world. So, yeah, apparently they have more treasuries than like most. nation states. They got 55 bill in U.S. Treasury is another nine bill in reverse repos. And then here's some funny stuff.

Look at the balance sheet. They got 3.2 billion precious metals because why not? They have 1.6 billion in Bitcoin. To be clear, they didn't buy as much Bitcoin as they said they would. Yeah. Instead with their retained earnings, they'd be buying some amount of Bitcoin. They're buying less than they said. would. So, you know, Bitcoiners, you should hold their feet of the fire here. And they've

2.3 billion in other investments, God knows what that is. But, you know, overall, healthy balance sheet, I would say. And they actually have, in terms of their, you know, cash that have been paid out to dividends, actually keeping that on the balance sheet. So they have now a bit of an equity buffer, too. Yeah, it's a remarkable business. Just definitely the most profitable business in the crypto space. I don't know how long they're going to be able to maintain this status quo where they have 100% of the net interest margin. I think they will face competitors who pay out some of the underlying yield. I mean, that's already happening. And we'll see if they react to that and they start passing along interest to holders.

Well, speaking about buying Bitcoin, micro strategy announced this week that they will be selling an additional $750 million in stock. and they're going to use it to buy Bitcoin and do a bunch of other stuff with it. Just unbelievable. This trade is just incredible for this guy. This is going to either be the, they'll write books about this one way or the other, I guess. But so, as we all know, micro strategy is working as a quasi-utif here, right? Where if they're trading it kind of a premium to the value of their Bitcoin, then they do an out-the-money offering, there must have been some market indication that there is a ton of demand for their stock.

Well, it's either that or he's looking at a future where Bitcoin ETF comes out and he's not going to be able to do this anymore. So Quinn Thompson of Maple, a friend of mine, has been publicly saying that there's an interesting pair trade, which is actually short micro strategy long GBDC. Because micro strategy appears to be at a huge premium. Of course, GBDCs at a huge discount to the Bitcoin. So you must imagine that ETF comes out that's not at all good for microprudging. strategy. I mean, their entire approach is obsolete at that point. Yeah, I saw a bunch of Twitter analysis implying that that was a good trade as well.

I don't know. I don't think you want to be going short anything in the crypto space right now. No, but it's a pair trade. So you're delta neutral. Yeah. I don't know. GPTC, if you do anything other than just hold it in an unlevered way, I think it just explodes on you and you don't make it to the next cycle.

GBDC is the widow maker trade. Many have tried to ride that bowl and most have failed. Yeah, that thing is just don't mess with that thing. The thing's like touching an alligator. It's toxic. I mean, it's not toxic to hold it. If you can afford to hold it in a way that you're not levered, I mean, people that are holding it in their IRAs and stuff,

it's like if you don't have to sell it, then eventually it'll come back. I mean, I saw it in the early days when I was first getting into Bitcoin is the smartest people in my life once they would encounter Bitcoin, all they would talk about is just how it wasn't going to work. And so they'd just go down these rabbit holes of like, well, North Korea is going to get all the hashing power. Or, well, they didn't understand like the difficulty adjustments. So they'd go down like a three week like rabbit hole on that.

And it's just, you guys, just stop stressing about it. Just mid-curve it. So Kenya has suspended World Coin from operations in the country. Apparently World Coin is pretty big in Kenya. I don't really have a lot of hot takes on WorldCoin. I'm just comfortable to just sit back and see how this goes. Well, they can't call a World Coin anymore.

They're going to have to call it 201 out of 202 country coin. Well, I don't think it was ever going to get to North Korea anyway. Or it's not even in the U.S. You can't get your World Coins. It's an American. I think if Gary Gensler maybe gets another job, maybe you get World coined in the U.S. The orb was in Miami. There's probably more than one orb.

An orb was in Miami. I was very tempted to go visit it, but I can't legally collect my coins, I think. Yeah. I can't really see you being a orb scanner. No, honestly, I'm actually, I'm not prudish about the orb. I've already surrendered my retinal virginity to, clear. Yep, same. So they get my eyes every time I go through. I'm not happy with that product. Increasingly, I mean, it's good when it works, but a lot of times the line it clear is just way too

long. So I think we need clear two, which is $500 a year. That's it. That's the innovation, clear two. And it's right next to clear one. So you give the clear one people the treatment that the generic line or upper is good. It's just they keep on, but they keep on coming out with these new things. I just did the global entry one and that was a whole rigamarole.

It took me like four months to get an appointment but I finally got it. I'm going for my appointment on Friday, aka tomorrow, and I think there's a chance I fail because I've been

to too many weird countries. Oh really? So I think they'll be like, well, explain this. Explain this trip. I don't know. what to tell you. Oh, interesting. Yeah, mine was quite easy. They just asked me, have you ever been arrested? And then, nope. Little known fact, you can fail your global entry application. Yeah,

I'm sure. Does happen. Well, did you read this KPMG thing? I did not. So I just like the headline. I did. Okay. It says Bitcoin's role as an ESG imperative. Discover the ESG impact of Bitcoin and the misconceptions that it may pose to the market. Was this a good report? It was very brief, but yeah, they hit all the key points. Bitcoin helps grid flexibilization, flexibilization, flare gas mining is a thing. Bitcoin miners can co-locate with renewables. It's true. Does this mean Bitcoin mining is an ESG imperative? No. However, on this topic, prod to announce I have a paper coming out. I put my academic hat on again. and it's on basically comparing Bitcoin as a load resource,

flexible load resource to other industrial load types. So that'll be out maybe even in a real journal soon. Yeah. Let's go. All right, that's great. Well, I applaud KPMG for writing this. This is a... I'm glad they did.

I mean, it shows that leadership has some desire to... Some heterodox thinking going on over there at KPMG, it would appear. That said, though, the major accounting firms are so out on crypto, it's unbelievable. Well, it's because Elizabeth Warren's sending them letters telling them to be out on it. Yeah, so that worked, by the way. So there's accounting, banking choke point, then there's accounting choke point, which few people are covering, but is absolutely happening. And it's a very clever strategy because if the big four don't service you,

then you go to the smaller boutique firms, and then that gives Elizabeth Warren even more ammo. to be like, these are fly-by-night CPA firms. They're not credible. It's like, well, yeah, because you scared away the big ones. Yeah, it's crazy. So, not great. They rumbled us. They rumbled us.

All right, well, the last thing I have this week is, what's going on here with these Ethereum futures ETF proposals? There's something in the water here. I think people are thinking that these could be viable. So there's something like six or seven of these things on file right now. There's a flurry of them this week. So you've got gray scale, Bitwise, Van Nuys, roundhill, velocity shares, pro shares.

I think there's a few others. But I'm starting to think that we're going to get into Ethereum futures ETF here pretty soon. Yeah, I'm very curious to find out if the SEC actually said anything or if the issuers are all just watching each other, like sprinters on the starting line and one of them twitched and then they just all jumped. Well, I have a naked speculation that I might as well share. So if you saw Gensler, I actually think you have a picture of this. So Gensler was on Bloomberg last week.

And I immediately ran over and sat down in front of the TV in our office. And one of the things that he said that was interesting in that Bloomberg interview was, I don't, he basically, I'm paraphrasing here, but he said, I don't make the rules. We have a five-member commission when he was asked about the Bitcoin ETF proposal. That suggests to me that he views it as potential outcome here that three of the commissioners would vote for Bitcoin ETF proposal. And I think that that would.

mean, purse would vote for it. Mark Uwaita would vote for it. And potentially, I would, I would guess if there was going to be a third, it would probably be Crenshaw, because she seems to be the most technologically, you know, astute. So let's just say for the sake of argument that I'm right and that Crenshaw is going to vote for the Bitcoin ETF proposal, then she probably would also vote for an Ethereum futures ETF proposal, because you have a Bitcoin futures ETF proposal. That was kind of an easy one.

Everyone got on board with that. So maybe there is a world. Maybe if you're the sponsor of one of these potential products, you just say, all right, well, I'm taking my bet that the Bitcoin spot proposal goes through. And if it does, then there's probably a pretty good chance that Crenshaw would be on board with the futurist product. And maybe they, you know, they just take a run at it. That is baseless speculation, but that could be one path here. I think if you at the point in your career

where you know the names of all the SEC commissioners it's like what happened you know I know but they're coming they're yeah they're coming for us you got to know you got to know the actors so okay last thing actually we forgot to talk about dissent in the courts

so the Luna case in front of Judge Rakoff apparently a bit of a departure from the Torres doctrine I guess in the Ripple case. The judge in this case held that basically all the Luna's, terrors were securities. They did agree that the tokens themselves did not embody the securityness,

but they felt that the way that all of the lunas and the terrors were marketed made them de facto securities contracts, which I think that actually kind of comports with the Ripple decision, frankly. the judge in the ripple case was saying it depends on the nature the way that these tokens were marketed to buyers in the nature of those transactions. The judge in this case and the terrorist case is saying, yeah, look, Luna was being nakedly promotional. And so whenever anyone bought it, whether retail or institutional, however they bought it, that was effectively a securities transaction or an investment contract. Yeah, I'd agree with that. I guess my bigger point on this one is just that are we just going to do this for the next few years?

We just have these random courts taking an opinion on the facts and circumstances of whether or not things are securities or not. Or would it be a better idea to just have comprehensive legislation, let Congress do it, and save a lot of money? So why don't we just do a market structure bill? Some commentators, including from the very regrettable Bitcoin Maxi crowd, felt that this kind of made the ripple decision invalid. Not true at all.

Not true. Both judges agreed that the tokens themselves were not the investment contract, but they could be wrapped in investment contract, which I think does undo a lot of the SEC's positioning here. And yeah, where does this get reconciled? Well, maybe at the Supreme Court, it would be much for expedient if we did it through Congress. If you're listening, please reconcile.

Get in touch with your politicians in the House of Representatives and urge them to support the market structure bill. That's what I would say. All right. Well, that's it for the week. I think that's it. Everyone have a safe and healthy weekend and we will see you on Monday.