On The Brink with Castle Island - Weekly Roundup 10/20/23 (ETF race heats up, NYAG v Genesis/Gemini, Crypto illicit finance fake news) (EP.462)

Episode Date: October 20, 2023

Matt and Nic return for another week of news and deals. In this episode:  The Cointelegraph SNAFU  The NYAG sues Gemini, Genesis, and DCG  The FTX trial isn't going well for Sam  The latest with FTX clawbacks Elon files an amicus brief in a case against SEC Sen Warren's latest anti-crypto letter  Chainalysis debunks the WSJ's false narrative about crypto financing for Hamas Larry Fink supports Bitcoin now  We profile the Silk Road hacker Content mentioned in this episode:  Nic interview with Bermuda Premier David Burt Chainalysis, Correcting the Record: Inaccurate Methodologies for Estimating Cryptocurrency's Role in Terrorism Financing CNBC, The secret life of Jimmy Zhong, who stole – and lost – more than $3 billion Sponsor notes:  Coin Metrics STATE OF THE NETWORK — Exploring Supply Transparency  In this joint report by Coin Metrics & Bitcoin Suisse, we explore token supply and ownership dynamics in digital asset markets

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 Conjecturee easy. 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. All right, this Metrics Minute, we're looking at a joint research report by Coin Metrics and Bitcoin Suisse. Bitcoin's a liquid supply surged at 6 million or 30% of the total supply as of summer 23, with 4 million units of Bitcoin not moving for over five years. 1.8 million bitcoins have literally never moved.

So long-term holder confidence is pretty much at an all-time high. When you compare Bitcoin in Ether, Ethereum shows a larger portion of supply actively circulating, as opposed to Bitcoin. This kind of makes sense given ETH's use as defy collateral and a medium of exchange for NFTs. USDC, on the other hand, has only 10% of its supply held for over a year. percent frequently changes hands. More on the supply dynamics in this joint report from coin metrics and Bitcoin suites. That's your metrics minute. Good metrics minute there. So a huge podcast week, head of state on the podcast. You sat down with the premier of Bermuda, David Burt, talked about Bermuda's approach to digital asset regulation. And then he tweeted about you. He tweeted about,

he tweeted a picture. He put it a picture. I mean, so it was pretty funny. I mean, you know, went to the office, the Bermuda White House, basically, I forgot what it's called. I think the cabinet building. And there's a photographer who snapped photos of us doing the interview the whole time. It was an excellent interview. The guys all in on digital assets. Yeah, no, the premiere is great. And Bermuda is really kicking off as a domicile, both for large crypto companies and for startups, especially with an emphasis on stable coins now. You'll see more stables issued out of Bermuda. I think they're getting the attention they deserve.

They've been more conservative. There were questions for a while as to why Bermuda didn't land FTX, and Bahamas did. They have a bit of a rivalry in why Bahamas landed FTCS. I think Bermuda, their more conservative posture was very much vindicated, obviously. And they have a really sophisticated regulator through the reinsurance business on the island. It's a big hub of reinsurance.

So whatever they're doing, it's working. And, yeah, listen more about it in that episode I did with David Burt. Yeah, they do look very smart for not taking FTCS. It sounds like FTCS was looking at Bermuda as one of their final locations and settled on the Bahamas, but very smart move. I will note that he's, David Burt is not the head of state because technically Bermuda is a British territory, I believe. Really?

Part of the UK. So this is, so he's, but he is the head of the government. Yeah, he's, I mean, that's an island by itself. That's, he's in charge of it. Very much by itself. Very much by itself. Very strange place. I would love to go.

You'll get the, we just got to do more deals there. More deals in Bermuda. That's a ticket. All right. Let's do it. All right. it was a busy deal week. Let's start off. Vergo Group, which is a Canadian crypto exchange. They raised $5 million from water drip capital, Skyline, Nexport, and others. Canadian crypto exchanges

talk about just, you know, having a bad run. That's an interesting bet because Canadian crypto exchanges are very heavily regulated now. As they should be. Because of Quadriga was a meltdown. A lot of exchanges quit Canada because they found the requirements too burdensome. And then most of the big exchanges in Canada all merge with each other. Yeah. So it's been a lot of consolidation. It takes a lot of guts to try and compete with that, especially given the regulatory barriers to entry and the very consolidated monolith. Well, Canadians are tough people.

Next up we have squads, labs, a developer of multi-sig products on salon at they raised 5.7 mil from placeholder, multi-coin, salon adventures, and jump. Then we have Sin Futures. This is a perpetual futures exchange, a decentralized one. They raised $22 million from Pantera, Susquehanna, and Hashke. Then we've got MyShell, a Web3 AI platform, what that means I couldn't tell you. They raise $5.6 million from Hashke, Folius, and OP Crypto. Next one up is Fileverse. This is a Web3 file management system.

There is $1.5 million from Nosis chain and Factor. Then we have Elyxer, a decentralized market making protocol. There is 7.5 million from HackVC, NGC, Blackcelerate, and Angelus. Then it's Darewise, a Web3 gaming platform. There is $3.5 million in a token sale to Anamoka and GameFi. Next up, BitGo has acquired Height Zero, a crypto wealth management platform. That's a pretty interesting one. by these TAMP platforms, these asset management turnkey platforms, definitely will be a big feature of the crypto market.

And then the last one up is the DTCC has acquired so currency for $50 million. So currency is one of these enterprise blockchain tokenization plays. So that's kind of interesting to me. DTCC is a consortium, so it's owned by its members, and historically has not been very acquisitive. So $50 million doesn't seem like a lot. in the grand scheme of things in terms of a big kind of buyout acquisition, but for a consortium, that's a pretty meaningful step. So my guess is that there's going to be a bunch more tokenization of real world assets on the horizon there. So I don't know where to start this week. I mean,

the ETF chatter is never ending. It seems to be heating up from an already very active position. What's going on with the ETF? I don't know. The ETF, I'm getting the feeling that this is going to happen in a pretty, pretty meaningful way. So there is, there seems to be a lot going on behind the scenes. So last Friday, the time elapsed where the SEC could appeal their loss to gray scale on the Administrative Procedures Act. So they decided not to appeal. Now, what happens now to gray scale is totally unclear to me. And there's a lot of back and forth with lawyers on this. It's not that they just automatically get approved as an ETF. But gray scale has five, filed an S3 to list their GBT product under the 33 Act.

So it's not like a net new Bitcoin ETF application, but this is interesting and the SEC will definitely have to react to it. But then you're starting to see some of these other sponsors that have filed for, for these ETFs put amendments forth and update their prospectus. So Fidelity put out an amendment, ARC and 21 shares who have a joint application. and they also amended their proposal. You know, it's adding details. It's adding details around like risk of Bitcoin mining, consuming a lot of electricity and stuff like that.

It's adding some details around how custody works. So the impression I have from reading these amendments is that there's back and forth happening with the SEC and these sponsors. And then Gensler gave an interview to Bloomberg where he said that the agency is working with eight to 10 sponsors and they're back and forth on their proposals. And he had, the language was interesting. He said it's, it is a security. You know, it's packaging up this Bitcoin, which is a commodity, into a security. So he was almost like laying the foundation for here's why we're going to approve it, if you read between the lines. So I don't know.

My sense here is that by the January arc 21 shares deadline, I actually think we're going to have a Bitcoin spot ETF. Yeah. I think it's very safe to say that it will be buy. or within Q1 of next year. Now, there was a big rumor this week. What was that Monday that happened? Did you see that? It was like Coin Telegraph tweeted out that BlackRock has been approved

and Bitcoin just ripped for like 90 seconds there. So we got a preview of the rally, the ETF rally, which appears to be what, 10%. So now we know. I guess, but Bitcoin's up 5% this week. week. So maybe there won't be as big of a huge spike when this is finally approved. It seems like information is trickling out and the market is factoring in that there will be a Bitcoin ETF. You know, Nick, markets are efficient. I don't know if you were aware of that.

I mean, the fact that markets reacted to this headline doesn't mean that they're not efficient. I know. It's a Bitcoin. It's a Bitcoin-having reference. Right. So, you know, the funny, I don't know if it's funny. kind of tragic thing about Grayscale's ETF application is they may win they may win this long battle but it might be a completely

pyrick victory because of the same time they may be in bankruptcy or their parent company I don't know so the New York so what you're referring to is the New York Attorney General's

office today so we're recording on a Thursday has sued Gemini Genesis DCG as well as a number of individuals that were affiliated with those companies in relation to allegedly defrauding customers stemming from the mountdown of the Genesis lending operation. There's a pretty long complaint, I would say. What's your take on this? I read it. It's pretty damning, actually. So the thrust of the complaint is that Gemini misrepresented the risk of there. earned product to their clients, to the people depositing into that product.

While they were in, you know, having knowledge of information that the people that they were themselves lending to were not credit worthy, aka Genesis. And so they basically, the complaint is that Gemini lied about how safe the investments were. while knowing that basically Genesis was losing money and getting hit by three arrows and Alameda and things like that. So that's the Gemini complaint. The Genesis complaint is more complex, but also has to do with the fact that they basically misrepresented their solvency to Gemini.

And the one, I don't want to say smoking gun, but the one really bad, I would say that's in the complaint is this promissory note that Genesis used to shore up their balance sheet after they took a huge loss to I think it was to three arrows and so they had a huge hole

in their balance sheet from battle finance in three hours and they created this accounting fiction to fill the hole which was this loan from a related party from DCG to Genesis 10-year loan, 1% rate of interest. So kind of an off-market loan from a related party.

So that didn't really fill the hole, obviously, but in an accounting sense, it did. Because then they were able to take the Genesis, the newly repaired Genesis balance sheet and showed that to third parties, including Gemini. And now the hole was somewhere else, which was opaque to the third parties, it gave us with DCG itself.

And there's a line that I'll quote here, which is, I think, the crux of it, quote, starting in July 22 and continuing multiple times for a week until November 22, Genesis Capital provided reports of Gemini, the list of the value of Genesis Capitals, quote, current assets. Now, a current asset is one that can be reduced to cash or cash equivalents within the course of one year. These reports fraudulently categorize the promissory note as a current asset. even though it was payable 10 years later. So basically they misrepresented the nature of this promissory note and its accounting status. And that to me is a very clear and evident kind of piece of wrongdoing.

So I have no idea what's going to happen here. I don't even know what recourse is being sought, really, whether it's fines or something. Morris. But having read this, I think it looks really, really tough for both Genesis and Gemini, frankly. So it's, you know, it's kind of an interesting case because all of this was sort of in the open, right? Everyone in the industry knew, and it was public information that there was the promissory note from the parent. I guess the new information, at least in this filing, but has come out before, is around just the accounting definition of it.

And my guess is that the argument on the DCG side would be, well, we could have made that a current asset if we had to. We would have just liquidated a bunch of Bitcoin, probably could have like wound down GBTC and liquidated that. So it'll be interesting to see what the rebuttal is there. But I don't know if this is like a smoking gun in my opinion. I don't know. Well, yeah. I mean, it's also weird because the complaint seeks to get, you know, disgorgement of the gotten gains. There's no ill-gotten gains.

No, it's not, these guys aren't like, it's, say what you will about DCG and Genesis. It's like none of these people like ran off with money and are living in Bali right now. It's like these guys were genuinely trying to operate a business. And to be clear, I know a lot of the people that worked Genesis in the past. And I really feel for them because this is a very tough situation. Genesis itself is basically done. Like it's not operating anymore. Yeah, it's not operating.

And that was really the only, that would have been the only way to like make this money back for Gemini earned customers is to keep some semblance of Genesis up and running, try to keep this together, and then start to pay back or do some sort of an equity deal with DCG. But now that's looking less likely. Yeah, I mean, so there's no old gotten gains. So I don't really know what the recourse sought is going to be just barring the principles from engaging in securities transactions in New York, I suppose.

But yeah, I mean, I do worry that this is going to be one of those things that tips DCG itself into just dissolution. I wouldn't be surprised if three months from now DCG basically had been sold off for parts. It's possible. I mean, there are definitely some valuable parts there. So we'll see what happens. We'll be monitoring that one. But all in the drama of the crypto industry, huh? This is just another thing.

I think I've said this on the show before, but the events the last 18 months make me feel, like I literally feel, I figuratively feel like I'm in an artillery bombardment. I know it's not the right time to make this analogy. I feel like I'm in an artillery bombardment in a foxhole and all my friends are in foxholes nearby and one by one by one. they keep getting vaporized. Yeah, it really is like a video game.

I guess we're still here, but it doesn't feel great because so many people that I like and respect have been obliterated. Yeah, that's all said. That's well said. Yeah, I feel similarly. Well, let's talk about some of the real bad guys, FTX. So, I don't know. This case does not seem to be going well for old Sam here.

Oh, yeah, no. I mean, it's not even clear if he's able to mount a defense. Like, he's not even willing to testify, it seems, without some kind of jumbo dose of Adderall. Is that the problem? Yeah, it's interesting. They don't make Adderall big enough. So first they kind of started this week by saying, well, we're not sure if this is the defense now I'm speaking about. We're not sure if Sam is going to testify because he's not getting enough Adderall. So he's getting one dose of Adderall when he leaves. the jail in the morning, but it's wearing off. So he's not coherent enough to testify. And then they let the jury leave the room at one point. And there was a question from the judge to the defense, when are you going to start to mount the defense and how long is it going to take? And the answer was, well, if we make a case, it would start on X date. So it seems like now they are going to, and it looks like it'll be on the 26th that maybe the defense will start the afternoon of the 26th. But I don't know what you're going to do. I mean, it has been revealed that Sam is a complete sociopath here. I don't know what other conclusion you can arrive at other than this whole thing was fraudulent from the start,

and he has convinced himself in his diluted utilitarian brain that what he was doing was actually right. Yeah, I kind of thought there was a case to be made that maybe things started well at Alameda and FTX, and then over time kind of the fraud developed. But it seems like from literally day one, this thing had a hole in it and they were pilfering the assets. I mean, it doesn't seem like, it doesn't look like they meant well and it just happened to go bad. It looks like they meant ill. And the thing was rotten from the start. Rotten from the start in the tech didn't even really work.

So there was no clawback ever. So there was no like the mechanism that they were going out to the CFTC and saying existed did not exist. So there was no concept of a clawback on this exchange. Obviously, the way they treated margin was completely convoluted, and they had the allow negative just to siphon money off to Alameda. But there's all sorts of other revelations here. I mean, you have Romnik out there pitching Apollo, knowing that there's a huge hole here. There's so many people in the loop on this. They had this guy, Kahn, who apparently has government protection, but he got like a $3.5 million bonus from the company once it became clear.

He knew about the allow negative. so Sam was paying people off. It's crazy. I mean, Barbara Freed out there on email asking for a million dollar donation, but put it in the Shad's name, not Sam, because of the optics. There's so many rodent people. I mean, the fact that Alameda had negative equity the whole time, the thing that astonishes me, I still can't believe it,

is they were running the worst operation ever, and they still had the arrogance to go to D.C. and preach. that it was somehow better than established ways of doing things. Crazy. Their risk engine was better than the CME. And he would go on TV and just brag about the quality of his risk management. I mean, it's a complete inversion of reality. It shows you what money can buy.

It's, I mean, he had that guy Mark Wedgin, who I think was associated with the CFTC and then maybe the DTC. But he was representing the company. They got like really powerful people to represent them in Washington. They wrote legislation that almost got passed. I mean, maybe it almost didn't almost get past, but they wrote legislation that kind of made the rounds and it kind of sucked all the air out of the room in D.C. For a while.

It's crazy. I don't want to hear any more of this FTX 2.0 thing. It's any, there's obviously no tech there, but it's like, what are you going to relaunch? Well, fair enough. So the news from the debtor's front is kind of a little convoluted as well. Looks like a 15% clawback for funds they were withdrawn in the preceding nine days before the bankruptcy. So overall, a 90% recovery for customers.

But that doesn't mean 90% of all assets. That means of all recovered assets, presumably. Yeah, this is going to be messy, I think. So they're saying they're going to target a 90% recovery. But the way to do that is that you look at all the withdrawals that happened from nine days up until the bankruptcy. And then you pull back 15% of that from people. So they're going to be going out to, like, U.S. venture funds that have taken Salana

Eith Bitcoin off the exchange in the week and a half before and already sent it back to their LPs. Paid it out. Yeah, distributed it back out. And then they're going to say, actually, we need 15% of that back. That's going to be a total mess. I believe if you're a small fish, you're kind of exempt under the threshold. Sub 250K.

Yeah, but otherwise, they'll be suing people that had big withdrawals, right? They're going to start suing individuals and funds. Frankly, given how porous and just shambolic, the whole organization was, of course, there were people that had quote-unquote inside knowledge of the pending bankruptcy. So the kind of moral justification for a clawback does make sense, right? Like there was a universe of funds and then it shrank meaningfully and it shrank on the basis of who had insider information. So it makes sense to me that they should actually target the broader universe of funds

there, including funds that went out the door shortly before the bankruptcy. see. Like that makes sense. It's tough. It's going to be in litigation, I'm sure. I mean, it's definitely a good argument that, well, hey, we just, you know, crypto exchanges, maybe there are hedge funds that are in and out of those things. So I think you could make an argument that it's just normal due course business for some of these customers. There'll definitely be lawsuits here. Yeah. So one, you know, clearly a lot of people knew Sam or had conduits to him or FTC's principles. and so they could have asked, hey, how bad is it really?

Should I withdraw, whatever? He would have said, keep it on, put more money on. It's also prudent risk management when, you know, the Alabama made a balance sheet is leaked to be like, okay, I'm out of here. Yeah. So there's also a very benign story as to why you would have been pulling your funds. I mean, it's the story as old as time. Cryptexchange looks shaky.

You pull your funds. We've been trained to do that. Yeah, don't stick around for that. I mean, it's trained you on the Tradfifide. model too. Yeah, like withdraw first, bank run first, ask questions later. Exactly. So that's the FtX news. There's a bunch of interesting stuff going on just at the SEC writ large that I want to touch on here. So Elon Musk and Mark Cuban filed an amicus brief. Is it amicus or amicus? I don't know. It's Latin. I would say amicus. So they filed an amicus brief basically in support of an

overhaul to the SEC's administrative procedures that allow for in-house judges at the SEC to preside over cases that are brought by the SEC itself that prohibit defendants from the right to a jury trial. So that has nothing to do with crypto, but those are two really high-profile people that are coming out very, very publicly that the SEC has a massive overreach in place. And it's just another data point on how that organization is being run right now. Yeah, good for Elon signing. on to that. You know, one thing I learned from the Elon book was his law about like every regulation comes from a human being and that human being has the name. So you should interrogate

every role in regulation. Oh, interesting. Yeah. I forgot. I've been, I've begun putting this into practice now. When I run into a rule that doesn't make sense, I find out who created the rule. It's usually someone that worked for Elizabeth Warren. Yeah, it's usually a Warren staffer. and they did the rule. Speaking of her, why don't you set this one up? Oh, man. Okay. So Warren has written some horrible little missive yet again. That's what she does. That's her hobby. It's writing these awful letters. It's signed by a lot of people. They're concerned about the usage of crypto to finance Hamas. This apparently is based on press coverage from the WSJ alleging that there are sort of, let's say, 90 million or so worth of

Bitcoin or crypto or generally that had flowed into Hamas wallets. And she's basically asking the Treasury and the White House to look into this and presumably do terrible things to the crypto space. So, and this is signed by a lot of senators and representatives like a lot. The problem is the whole thing is based on a lie. That's the problem. It's actually completely factually inaccurate. It's based on a gigantic fabrication. It's just not, it's fake news.

So, chain analysis, it took, by the way, we need to figure out, we need to appoint like some industry people to be the first line of defense here. I thought that's why we had trade groups. Chan analysis came to the rescue and just did a detailed report.

And turns out, what's the dollar amount that was actually sent to Hamas? It looks like it was sub a million. It looks like it's in the kind of, or $500,000 range. It's incredible. And can you compare that to the banking sector and all of the financing that was going into Iran via the traditional U.S. banking sector?

Like funds that the United States government literally billions of dollars that we sent to Iran. So chain analysis looked at this. It seems like WSJ, my guess, is that WSJ journalists were using Liptic software and just got the whole thing wrong. because they credited it to Elliptic, this $90,000, $85 million figure, they credited that to elliptic. I don't think Elliptic would make a stupid mistake like that. Basically, the mistake was conflating a intermediary, the total volume going through an

intermediary with the volume that was actually ascribed to the single entity, which had been the one that was tagged as Hamas or terrorist finance. So they were conflating a tiny subset with the volume. the much larger superset. And so they credited this to elliptic in the WSJ. That's where this all came from. Chainalysis looked at it and they said, hang on, you are taking all the volume flurring through this entity,

which looks like an exchange or some sort of OTC desk. And the real amount is much smaller, probably less than a million dollars. That's a huge, huge delta. Sub a million versus 85, 90 million. A huge difference. I mean, it's inexcusable, really. It's crazy. I mean, it's really infuriating some of the people that just blindly jumped onto this. A lot of, a lot of senators and congressmen. Yeah. It caused a huge storm with breasts. And it's like,

I think it's so perverse. You see this slaughter that happens in the Middle East and your first reaction is, how can I weaponize this from my anti-crypto animus? Right. Like, it's absolutely inhumane. It's crazy. It's barbaric. It's not okay, what are we going to do about it? It's how can I advance my domestic pre-existing policy concerns by using the club of terrorist financing against people I personally dislike when the reality appears that crypto is not a meaningful way that these entities get financed. It just doesn't appear to be a case. Not to mention that Hamas specifically said they don't want Bitcoin donations. Because because they're too traceable.

Like that's the status quote. They're on record saying that. It's, uh, we're really starting to find out who our enemies are here. So, you know, Stephen Lynch would sign anything from Elizabeth Warren.

If Elizabeth Warren told Stephen Lynch that he needed to just walk out of his door in South Boston, keep on walking into the ocean, he wouldn't think twice. He'd just do whatever she said. Um, but, you know, you have someone like Jake Ochencloss,

who's a really smart guy, uh, also in the Boston area. He signed this thing. It's like, do you even do any research, dude? Like, what is going on here? How are these people just blindly following Elizabeth Warren? Yeah, think for yourself, guys.

I mean, I'm very disappointed at WSJ itself. I demand a retraction. I'm officially demanding a retraction. Look, the press hasn't covered itself in glory these past few days, but this story was huge. The Crypto Finances Hamas story was huge because it lets you take this incredibly emotional thing and blame it on local crypto bros, you know?

I mean, I can't believe it. But yeah, I think it's completely irresponsible to WSJ to do this, clearly without meaningful fact-checking. I'm feeling that is there a medium post coming this weekend maybe from you? I don't know. I feel like we need some central place to send people to understand that this is all a total farce. I'm upset. I'm heated about it. As you should be.

It's crazy. All right, so what else happened this week? Mark Andresen put out the techno-optimist manifesto. Nothing about crypto in there, but got a lot of the tech journalists all up on a frenzy. Do you read that one? I thought it was great. I also find it funny that a lot of the journalists that report, quote-unquote, on tech, hate tech. How is that like even allowed?

If you look at TechCrunch, everyone that works at TechCrunch hates technology. why do they work for tech crunch? Why do they have that job? Why are they professional haters? Why don't you go do something else? It's a report on something that you like. Completely inexplicable. What are they achieving by doing that?

Yeah. I can't stand this paradigm where it's someone that's the reporter on a certain beat is there because they're a full-time professional critic of the beat. It's not a journalist. Yeah. Nathaniel Popper. So the other. thing that was kind of interesting this week. So BlackRock CEO Larry Fink was talking on Fox business.

And I noticed that he always says crypto, but that's because he doesn't think he can say Bitcoin. Did you catch that part? Is it like Voldemort? What's going to happen if he says it? Well, he says, I have to say crypto because we have a Bitcoin ETF application on file. So I think he's just treating it as if there are securities, but whatever. So he's he who's calling crypto a flight to quality. So they were asking him about the big run up on the rumor that Black Rock got approved. He said, I don't think it's a, I don't think this is like a rumor situation. I think there's just a flight to quality happening. So this guy is turning into a great marketing person for the movement here. Yeah. I mean, BlackRock struggled with Bitcoin

for many years. They struggled around the ESG piece. And you know, I don't know what changed. Did Bitcoin's ESG footprint change or did BlackRock's view on ESG change? Well, I think the whole state of Texas trying to shut up. out BlackRock might have had a little impact on their ESG views, don't you think? Sadie Ramcoe joining the board probably helped. Probably did help. All of a sudden, you don't hear as much about it. You don't.

But also, the reality of Bitcoin mining is that it's, you know, pretty useful to the modern grid in transition. So the reality on the ground is also changing. Yeah, it's quite different. I think it's, I'm very glad we have Larry Finca's an ally. You don't want him to be in any of me. I'll take it. No, you don't want that guy.

He's one of the top ten most powerful people in the country. It's great to have him on the team. All right, so if you read one thing this weekend, I would recommend reading this CNBC article. It's called The Secret Life of Jimmy Zong, who stole and lost more than $3 billion. And this is the guy who hacked the Silk Road. And he had all of those coins in his house.

He was slowly kind of using them over time. and he was living lavishly down in Atlanta, Georgia. He had a big lakehouse with a stripper pole. He was flying friends on private jets everywhere, never had a job. And everyone was kind of like, oh, well, he tells us he was early in crypto. He was, in fact, early on crypto. He was 2009 in the Bitcoin space, which is crazy. And he got taken down by one of these on-chain forensics.

So back to our Elizabeth Warren comment here. only like the worst criminals these days are using public blockchains to do their crimes because everything you've ever done is traceable forever on the Bitcoin network. And so it caught up to them. These IRS investigators are no joke. They're very talented and they have software from Chanalysis and others behind them. And they caught this guy. And he's from what I understand, he's only been sentenced to a year in jail.

It's like maybe a year and a half in jail, which seems like not that much time. when you look at it as $3 billion, his lawyer was arguing, well, look, if you caught this guy, he didn't really damage anything with the U.S. government. I mean, at the time, that was worth like $60,000, the Bitcoin. So the government would have taken that $60,000 and they would have sold it off and, you know, made $60,000. Now the U.S. government, since Jimmy did us a solid here, has $3 billion worth of Bitcoin. So let's get him out of jail a little bit early.

It was their argument. So this is a very strange. because he got caught because he reported a theft against him? Am I getting that right? So, yeah, it's a weird story. So he reported a theft against him, and there was a, he had it on camera. So someone came into his house. I'm wondering if it was maybe him.

They never caught him, but somehow word got out that that had happened. But simultaneously, I think the IRS had identified some moves. in the Silk Road coins that went to an exchange and they subpoenaed the exchange and the exchange was able to say it was Jimmy Zong who controlled the address. And so I don't think it was purely the theft of the Bitcoins that Jimmy had reported that got him caught. It was really the on-chain sleuthing, but they triangulated it. And so the IRS agent came to the house and said, look, we're here to help you with the case that you reported, show us around. And in doing that, they were able to find all sorts of interesting things. They later came back with a search warrant

and they found all these computers. So this was before hardware wallets. So he was storing the stuff on like offline air gap computers. Yeah. I mean, credit to him for actually, because like most people that steal a large amount of Bitcoin never managed to spend it, right? Because they would feel that would likely dock them.

He actually did spend some amount of bit to his credit, I guess. I don't know if that's the right thing to say. The funniest part of the CMBC article, was where the body cam footage from, I guess, the officers that investigated the crime or something, body cam footage shows that in his house he had a metal case with a million dollars in cash in it, which was used to impress a woman. And the officer asked him, did it work? And he says, nope.

And the officer says, it never does. It's like, oh, man. This poor guy. He just wanted love, man. He just wanted love. Yeah, he seems like a very, I don't know, he's... He seemed like an affable gentleman. Yeah, I don't have, like, malicious feelings towards this guy

and the way that I would have towards, you know, like the guy from FTCs who stole, you know, $10 billion. He just liked to party. He really liked a party. Georgia football fan. Yeah, he liked to, you know, go to the bar and take his friends on nice trips. You know, by all accounts, a good guy. Jimmy Zong, well, he's going to get out of jail in a year and a half.

He's going to have no money, but he's going to have a lot of skills. I mean, this guy is the type of guy who is sophisticated enough. They say that he doesn't even have a mouse. Can you believe that? He knows all the shortcuts. He had Cassaceous coins that was part of the evidence. Yeah. I mean, this guy can definitely work on like an L2 or something.

This guy will be totally fine. No, he'll land on his feet. So that was a good read for the weekend. Man, what a week. This just feels like every week that we have an Elizabeth Warren piece is just, you know it's just going to be, the next 48 hours are just going to be insane. That would put me in a terrible mood. Terrible.

Yeah. So I'm not happy about it. All right. Well, I think that wraps it for now. All right. We have a busy slate of podcasts coming. We've really upped our game here on the interviews. So we're going to keep them coming.

Have at least one, maybe two next week. So we'll keep it rolling. Have a safe and healthy weekend. We'll see you on Monday.