On The Brink with Castle Island - Weekly Roundup 10/27/23 (PROOF Act, WSJ/Warren Hamas scandal, ETF chatter) (EP.465)

Episode Date: October 27, 2023

Matt and Nic return for a big week of news and deals. In this episode:  Has there been a vibe shift?  Sen Tillis and Hickenlooper introduce the PROOF Act Is there a lack of crypto-native auditors?�� Liz Warren's plan to interfere with crypto audits  What's going on with the WSJ, Warren's letter, and Hamas' crypto donations?  The WSJ is refusing to update their claims  ETF momentum is picking up  What explains the move in Bitcoin this week?  SBF is going to testify  Content mentioned:  Sen. Tillis' office, The PROOF Act introduced Jeff John Roberts in Fortune, The Wall Street Journal and Liz Warren double down on the Hamas crypto canard Nic's WSJ/Hamas bounty campaign Elliptic, Setting the record straight on crypto crowdfunding by Hamas Elizabeth Warren letter to the White House   Sponsor notes:  Coin Metrics STATE OF THE NETWORK — Navigating the Liquidity Landscape: Insights into Digital Asset Markets  In Coin Metrics State of the Network Issue 230, we examine trends in liquidity and volume across centralized and decentralized exchanges

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 Concentive Easing. You've printed a couple trillion dollars, and all of a sudden, people start to worry. So out of this worry, we have something called the 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 today's Metrics Minute, we're looking at trends and volumes and liquidity across the market. Bitcoin this week searched at 35K. It's highest since May 2022 amid ETF speculations. Coin Metrics's trusted spot volume across-covered assets decreased this year, moving from 40 billion daily to around 10 billion daily at the moment.

Looking at liquidity, Coinbase's Bitcoin order books show bid ask depth within 2% at around 10 million. At Binance, you're seeing a decreasing trend in liquidity. The 2% bidass volumes stand at around 15 million down from 30 to 40 million at the start of the year. Looking at Dex's, there has been a noticeable decline in uniswap volumes since the start of the year. The trend is dominance and stable coin is stable coin pools at Dex's. More in the coin metrics state of the network. That's your metrics minute. What a week, man.

What a week. It's been intense. We're in the pirate ship. It's a pirate ship and we're shooting out of the pirate ship. This is great. There's no more friendly fire anymore. Crypto industry is coalescing. Mutual enemies brings us all together.

I know. It's so great. We don't have to have our inter-crypto, warfare anymore. We're shooting outside. No more circular firing squad. The PVP era is over. And I'm here to tell you that we're not in a bear market right now. The price of Bitcoin is up over 100% this year. The catalysts are all lining up here. I don't want to hear anyone say, well, you know, bare market. We're not in the bear market. It's over. Officially, you're declaring it. It's over. I don't think I've ever, we'll talk more about

some of these catalysts over the course of this podcast, but the vibes have shifted. Animal spirits are activated. This is not a bear market. There has been a vibe shift. Certainly there's been a vibe shift. Deals are happening. I don't think we have ever been busier. We're super busy, yes.

And I don't know. I don't know if we can call it a bowl market. Is that? Are we getting ahead of ourselves? But things are moving. Things are moving big time. Also, the podcast, how many podcast episodes do we have in the can right now? We have a lot.

We have some really good ones coming up. We did some good ones this week as well. Yeah, this week was good. I sat down with Amanda Tuminelli from the Defi Education Fund, talked about all sorts of, like, deep dive on the regulatory. Defy Education Fund is doing some awesome work. There's an IRS comment period happening right now that was extended by two weeks. So the deadline was going to be the 30th.

And this is a really important one. So everyone should pay attention to this. Go listen to that episode if you have the time. This is the broker provision. So this came up in the infrastructure bill around defining node operators and software developers on public blockchains as brokers, which is totally unworkable. And during the infrastructure bill, the folks that actually inserted it came to the conclusion that it was unworkable. And then at the 11th hour, there just wasn't the time to retract it. And so it was kicked over to the IRS.

I kind of feel bad for the IRS to have to deal with this because it's very unworkable. I mean, you'd be in a situation where data companies that run nodes theoretically could be classified as brokers. If you're sitting at home and you're running a Bitcoin node or an Ethereum node, you'd be a broker under these rules. So it's really important to get your comments in and just say how you're affected by this. I think it's illegal. I don't think that this will hold up in a court, but it's really important to get the word of. there and to say how you're affected. So if you're at a company and you're running nodes or you're an open source developer, you are impacted by this. So listen to that podcast. I think it's

critically important to get your thoughts out there. And there's thousands of these comment letters that have already gone into the IRS. So the website was down for a little while, I guess. It's a very important issue. And you were busy this week. You also interviewed Mike Higgins of Hidden Road. Hidden Road. Yeah. Hidden Road's up to So we're an investor in Hidden Road. They are a credit intermediation platform dealing with institutions. So they're in the prime brokerage space. They launched a big new product with the folks at crossover markets, which is called Route 28.

A new way to trade, I would say. So this market structure is evolving, this idea of having exchanges that hold client assets. That's becoming something that is going to be a lot less prevalent in the market going forward. So really enjoyed that episode. Takes forever to get someone from Hidden Road to come on your podcast. We led their Series A like a year ago, and I've been trying to get them to come on. Well, back in a compliment there, but glad that we got it done. But Higgins did a great job, I thought.

He is very good. He's very good on that pod. And then other Castle Island news, we didn't get a chance to talk about this last week, but U.S. Senators Tom Tillis, Republican out of North Carolina, and John Higginlooper, who's a Democrat senator out of Colorado, they introduced a new bill. It's called Proving Reserves of Other Funds, the Proof Act. It's bipartisan legislation.

It would establish strong safeguards for commingling of customer funds on exchanges. So it's basically requiring a monthly proof of reserve. You worked on this. You were actually quoted in the press release of this legislation. Yeah, I'm very excited about it. So yeah, I was actually consulted on the legislation, which is very cool. As it turns out, if you just write a bunch of blog posts about something, you end up sometimes writing legislation. That's the thing that can happen.

So, you know, we passed a law in Texas. That is an effect now, the Texas law, HB16666. Now, on the heels of that, we're seeing federal legislation in Texas. introduced specifically asking for proof of reserves. Shout out to Alex Thorne also, who helped on this. And Alex named the act. He came up with the proof name. Did he really?

Which is with an acronym. Proving reserves of others funds. Proof. So it follows the contours of the Texas bill as well. It asks for monthly proof of reserves and audit coverage. if there aren't auditors available, then it also has a provision allowing for non-audit firms to supervise. So obviously I think this is immensely positive. Frankly, I think it's something that even sort of anti-crypto folks in Congress should support because it's a pro-regulatory measure.

It demands more transparency and better housekeeping practices from exchanges. So to me, it's a total no-brainer. And a lot of exchanges are already doing proof reserves. So I don't think it's that much of an additional lift. So I have one concern about this bill. So I was speaking to some of my auditor friends. You might not know, but now I have auditor friends, friends who are auditors. I didn't before we started Castle Island, but it turns out you spend a lot of time with people that audit things.

Post-FTCS, you end up actually spending an enormous amount of time with these people. a little known fact. However, what I'm worried about is that you're just not going to find third-party auditors that are willing to take on this work. And what I'm hearing off the record from a bunch of these audit firms is, why would we do that? You know, we cut Elizabeth Warren's going to be sending out nasty emails to us. The SEC is going to be all over our business. It's just too risky to touch this stuff.

So to the extent that you get these audits, I think they might cost a lot. Yeah, that is the main problem with proof reserves. I would say is that our beloved senator from Massachusetts has been harassing the audit regulators and asking them to ask the big audit firms to not do crypto-native audits. So that's a weird thing that's going on. People don't even know about that. She just finds new ways to screw with the industry constantly. She's going to the PC.

What is it, the PCAOB? So she's harassing these poor guys. And, you know, I don't know if you know this about auditors, but they tend to be pretty conservative. They're not like the life of the party type of guys. They're pretty good. Like, they'll go golfing with you. I know some fun auditors. I don't know a ton of fun auditors, but a letter from Elizabeth Warren is enough to get them to not audit you.

This is true. So there are some boutiques, I will say, that are kind of brave and they've said we will support crypto firms. But as of right now, the big four are not providing coverage to firms that are doing proof reserves. So I agree this is a problem. Hopefully the bill changes this by creating a market for this kind of audit. But yeah, that is one of the big outstanding issues with POR. So more to come on that. I don't know if that legislation has any chance.

At this stage, I couldn't tell you if anything has any chance. Yeah, I would say statistically. a piece of draft legislation, obviously depending on who introduces it, has a kind of a sub 5% chance of becoming a law, just if you look at the numbers. But I got a good feeling about this one. So all right. So why don't we move on to some deals? We have an insane amount of deals this week. So back to my comment on us being back, we're back. Our deals are now powered by Masari. Is that right? Masari is now doing the deals? Yes. So big developments in the Castle Island newsletter front and the on the brink podcast front. The fine folks at Masari reached out and

they said, look, we love the deal section, but you're missing deals. So apparently we've been missing deals. So we got hooked up to this Masari Enterprise product, which I would highly recommend. We got a bull market, prices up, go buy yourself a Masari enterprise, and you're going to get all the deals and a bunch of other stuff, really cool charting tools, a lot of end-depth analysis on D5 protocols and all sorts of public blockchain. So everything you're about to hear is in that package. So let's kick it off. Blockade, which is a Web3 security firm. They raised $27 million from Ribbitt Invariant. Next up we have NASD, a company building asset insurance on Cosmos. They raise 3.3 million from polychain, borderless, circle ventures, and winter mute.

Asset issuance. Asset insurance, not... Issue. Issuance, sorry, not insurance. Yeah, I can't read. Next one up is Nocturn. This is an Ethereum privacy protocol. They raised $6 million from Bain Capital Crypto, polychain, hack VC, bankless ventures and robot ventures. Next, we have AAA, a digital currency payments company. They raise $10 million from Peak 15 and others. Next is Beluga, a Web3 onboarding company that raised 4 million from FinCAPital, Anagram, Dispersion, Borderless, and others.

Then you have Virtual Labs, a zero-knowledge privacy company that raised 1.2 million from OP Crypto, NIR, and others. Next one is Rye Media. This is a public blockchain-focused healthcare data platform that raised $9 million from RW3 Ventures, White Star, Blockchain, and Blizzard. Then you have Forge, a Web3 gaming company. They raise $11 million from Bitcraft, Makers Fund, and Anamoka. Shrapnel, which is another Web3 gaming company, raised $20 million from Polly Chain, Griffin Gaming, Franklin Templeton, Brevin Howard, and others. Then you've got Ryder, Web3 Wallet Company. There is $1.2 million from Oak Grove, the Bitcoin Frontier Fund, and Mani Bali. Then you have Anbatow Labs.

This is a Hong Kong based trading platform that raised 3 million from Kronos, Cherry, Crypto, Mechanism, XBTO, and Matrix Port. Then we have A EERA Protocol, a Treasury Management Protocol. They raise $8 million in a token sale from Bain Capital Crypto. And the last one is Sticks. This is an OTC Secondaries Platform that raised $2.7 million from Pesallion. I was hoping I wouldn't get this one. Pasolian? No idea.

Salyon VC, Big Brain Holdings and others. There's Pasalian. Well, congratulations to everyone that did a deal this week. Wow, that was a busy week. So I don't even know where to start this week. I mean, there is the sort of ongoing Wall Street Journal slash Elizabeth Warren Letter scandal. Should we start there?

Yeah, I guess I'm assuming that everyone has a little bit of context here, but that's probably not a safe assumption. I was talking to someone who's in the industry yesterday and asking them a question around a certain politician that signed. this and they said, I'm not up to speed on this. So I actually think we should step back and explain what happened here. So why don't we just start with the Wall Street Journal report from a couple weeks ago? Yeah. Actually, let's start before that. So there's a lot that's occurred. And if you've read my tweets at all this last week, I am on a crusade, okay, to get to the bottom of

this. And just to be clear, I'm very upset with the Wall Street Journal, which is a shame because I actually really liked them. I think normally their coverage is quite good, which is why I think it's very bad that they've kind of fumbled the ball on this one. So obviously we all know that earlier this month there was an attack on Israeli civilians by Hamas. Before that, Elliptic came out with a report in July of this year saying that PIAJ, which is kind of a Hamas affiliate, had received 93 million in funds. based on addresses that were disclosed in an Israeli counterterrorism seizure order.

So that was the first thing. Then Bit OK, which is a different blockchain analysis firm, they claimed that Hamas had raised $41 million based on addresses disclosed in two other Israeli counterterror seizure orders. So there's three orders by the Israeli. intelligence that list a bunch of addresses mainly exchange addresses and they basically ask for these addresses to be immobilized so that's kind of where all this data is coming from originally so just keep that in mind who I'm like out of

breath next up you have the attack on Israel I think on the seventh then shortly thereafter the Wall Street Journal releases an article basically saying that Hamas is funding themselves with crypto to the tune of $93 and $41 million. So in the aggregate, $130 million, which is a huge amount of money. It would be very significant in Hamas's budget, if true. Surely thereafter, Elizabeth Warren writes a letter, quoting that $130 million, dollar figure with no caveats whatsoever, just quoting that figure as a fact. And this letter is signed by over 100 members of Congress, and it only cites the Wall Street Journal article.

And the letter basically asked the White House and Treasury to get more aggressive in cracking down on crypto. So that is sort of the background. Then questions start to emerge as a in terms of the quality of the data. So chain analysis releases a blog basically suggesting, without referring to these sources directly, suggesting that the data is not correct, it's overstated, and that the data quoted by elliptic and bit okay is including a bunch of service providers that Hamas may have been using. So chain analysis, basically suggests that not all those funds that are flowing on the blockchain to those addresses are actually terrorist financing related. Following that, people started to make a lot

of noise online about the Wall Street Journal article. And Elliptic releases a follow-up article yesterday, basically entitled Setting the Record Straight on Crypto crowdfunding by Hamas, also saying that the WSJ and Elizabeth Warren in her letter misinterpreted the data and they overstated the amount going to the terrorist. Overstated by a pretty wide margin. Yeah, significantly overstated. Bit OK also releases a clarification

on their own methodology on Twitter. That's kind of where we stand. The Wall Street Journal then received a ton of flack online. They refused to update. the story. They refused to retract it. And in fact, one of the journalists in Talley returned to Twitter after a multi-month hiatus and dug in his heels and basically stood by his analysis, even though his main source for the article, Elliptic, had released that blog saying, you guys have vastly overstated the numbers here. And then there was a Senate hearing today

and multiple senators and witnesses continued to question the veracity of the data. That's kind of where we stand. No, I guess the question is how can we triangulate on what the real number is? It seems like Bit OK and this Wall Street Journal article, they have ascribed the Hamas address to effectively an exchange.

So it would be the equivalent of someone has an address on Coinbase and you just look at all of Coinbase's holdings, which is obviously incorrect. I mean, you're going to see a lot more crypto transactions going into an exchange than a single address. So how can we figure out what the actual number is? So as of right now, we don't know what the quote-unquote real number is. Remember, all of this comes from addresses that the Israeli intelligence services asked to be immobilized. They listed a bunch of addresses, and then the blockchain analytics firms went and just added up all the volume.

flowing through all those addresses. It appears to be the case that not all that volume had to do with Hamas or their affiliates. We don't know what the real number is. We think it's a very small fraction of that. It's also worth noting that early this year, Hamas specifically said they don't want to collect Bitcoin donations anymore because they're too easily tracked. And also, Binance and Tether have been freezing funds. Right. So the crypto donation mechanism for Hamas is not working for them. So the idea that they would have collected 130 million in donations seems pretty far-fetched. Given that they specifically said don't use crypto to donate to us, whatever their other means of collecting funds, that's what they're focused on.

So we don't know what the real number is. So earlier today, just now, I actually launched a bounty campaign. So I'll post this in the show notes as well. It'll be pinned on my Twitter. But what I want to do is to get to the bottom of the matter because I don't think the WSJ is going to do it. So we are doing 21 bounties of $500 in Bitcoin. And hopefully we can get a real number.

So sort of the aggregate chain analysts out there, I'm inviting them to look at all the addresses released by the Israeli intelligence service and determine what the real number is. I mean, we'll see if it's possible or not. But what we need to do now is come up with a better estimate because the WSJ has kind of been unwilling to do that or revise their data at all. Now, the reaction of this Ian Talley guy, the reporter, for the Wall Street Journal is frankly baffling to me. It seems actually deeply unethical to just dig in your feet here when confronted with the evidence that is very contrary to what you put out there.

So he's using a software tool in elliptic and the company itself is coming out and saying, you got this wrong, but he's just digging in his feet and standing by his report. You know, it's like he's fearful that he's going to lose his job over this or something, but your job as a reporter is to report the facts. And he seems intent on just not reporting the facts. Yeah, I mean, it seems like his motive is to not rock the boat. What he really should have done was release a new article once the Warren letter came out, where to be clear, the Warren letter is entirely unsupported by the data.

And it doesn't make any caveats whatsoever, which are necessary in this case because there's an imprecision in the data. There's a lot of ambiguity in on-chain data, and it's not epistemically responsive. to look at all the flows and say we know that specifically it's $130 million that went to Hamas. That's just not a responsible way to do things. So the WSJ should have hedged, caveated more, and they should have reacted to their article being the sole source for this significant letter that's going through Congress and will likely inform government policy. But they didn't do any of that. All they did was react to the criticism on Twitter and just stand by what they.

wrote and it looks like the WSJ leadership is also standing by it, which I think is pretty unacceptable. Now, it's important to remember the backdrop of why Warren is doing these letters. And so Warren is publicly raising money from her constituents saying that she is running the anti-crypto army. That's an actual thing that she is putting out there publicly. And there's a flyer that says, I am mobilizing an anti-crypto army. She has legislation that is actually getting some traction from what I understand around pretty heavy-handed AML policies that would be enacted down to the D-5 protocol level, very unworkable. So she's pushing this legislation. Keep in mind, Elizabeth Warren has only passed one bill ever. So she's only ever come up with legislation. It was

something around a prisoner of war bill recognizing POWs or something. It was not in the financial services space. So she's been highly ineffective at ever passing legislation. She sees this as a potential to actually get something done for once in her career. And that's the backdrop here. And so she has leaned on 20% of Congress to put their names on this stuff. And it's crazy to me that no one did any work on this. They just got strong-armed by Elizabeth Warren. I mean, you have people like Jake Ochencloss, who's a Democrat who's historically been

very open-minded on the topic of emerging technologies, just slaps his name on this thing. It's really a scandal that no work was done by the 20% of Congress that just hopped on board this letter. Yeah, and if I was a signatory on the letter, I'd actually be pretty disappointed. Clearly, the letter is not actually supported by the body of evidence that we have. And a lot of these people signed it, I suppose, without really digging into the underlying data. The whole thing depends on this one World Street Journal article, which depends on this one source. And the originator of that data elliptic has now said, you're misinterpreting the data. So the entire basis the letter has been undermined.

The people that signed the letter, if it were me, I'd feel pretty hard done by. And I would wonder, okay, maybe I shouldn't be signing Elizabeth Warren's letter in the future because she's clearly willing to be loose with the facts for her ideological agenda. Yeah, I mean, you got these people got completely played by Elizabeth Warren here. and it really reflects poorly on anyone that signed it. So, I mean, I wonder if we'll see some public defections from this letter in the coming weeks. I certainly hope so. The pressure is not going to go down.

The industry is officially mobilized on this topic. Yeah, I think what the WSJ thinks is that we're just going to forget about this and move on, but we're not, okay? We are going to continue pushing for the truth until we get to the bottom of it and whether it's through my bounty program or just through the work of the sort of open source crypto community, we're going to find out what the truth is and keep pushing. In the meantime, there have been some great articles written about it from much more intellectually honest people like Jeff John Roberts of Forbes. We're going to put, sorry, Fortune. We're going to put this in our show notes as well. I thought a really good article that he wrote about the uses of crypto in terrorist finance.

And, you know, we're not saying that there's no bad people that use crypto. Like, certainly this does occur. It doesn't appear that it's at the magnitude that's being represented in the popular press. And also, when criminals use crypto, there's a permanent record of these transactions, and there's numerous ways to interdict that as well. Tether is actively freezing addresses. Binance is freezing addresses. So there's often, you know, intermediary.

that are able to actually interrupt these transactions. So it doesn't appear that it's actually that useful way to finance terrorism. And, of course, it's a reality that the bulk of the way the Hamas funds itself is through other means. That's just a fact. Think about it this way. We've long said that really at this point, only the dumbest criminals are using public blockchains to do crime because it's not an ephemeral thing.

So you do a transaction and it is on chain forever. So if you're an individual in the United States trying to send Bitcoin or Ethereum to Hamas, the address that you send it from will forever be tied to that donation to Hamas. And so you could be doing something 15 years from now and the government would be knocking on your door once they've come up to speed on that transaction. And it won't take 15 years. Trust me. The U.S. government is all over this stuff. It is scary how good some of these people are. So that's one thing.

The other thing you have to consider is just the practical reality. of Hamas getting a Bitcoin donation or an Ethereum donation. To your point, you need to change that into a currency. And so you'd be taking that to a cryptocurrency exchange. You know, the reputable ones will have a pretty serious AML policy in place. Sure, you could find a disreputable one, but then beyond the cryptocurrency exchange, you actually have to get that into Fiat of some sort to buy the guns or whatever you're going to do with it. And so then you're talking about interfacing with the banking sector, which is another just difficult thing.

especially for a crypto exchange. So what we've seen here is that actually just staying within the banking sector proves to be the easiest way to do it. And you've seen countless enforcement actions against banks that are actually just, you know, inadvertently supporting these terrorist donations. So I continue to say this is a, I'm excited you're doing this bounty

because it is a minuscule percentage of total fund flows going into this organization. We're not denying again that illicit finance occurs with crypto, but it appears that the attention that's levied against the crypto space for illicit finance flows is very disproportionate to the magnitude of those flows. And as you say, Hamas had an account with Barclays. Do you see Elizabeth Warren saying we need to ban all banks because of that? No. There is a there's ultimately a tradeoff that you have to make between you know, financial instruments and the level of privacy available to them and the amount of illicit activity that can happen. And I don't think you can stamp it out to zero, even though

that would be nice. You just need to use the best tools available. And in crypto, we have plenty of good tools to interrupt illicit flows. That's just a fact. All right. So we're going to keep an eye on that. That's definitely the top story of the week. But maybe actually the top story of the next few weeks is going to be this Bitcoin spot ETF proposal. So we continue to see momentum here. All the sponsors are being very tight-lipped around what's happening. Bitwise has amended their spot ETF proposal. A lot of folks have done this already. So you get the impression that there's a lot happening behind the scenes here. The Bitwise ticker is now public. That is B-I-T-B. It seems like momentum is picking up here. Yeah. BlackRock also apparently

got a ticker, BTC, which then was withdrawn and return and Bitcoin was moving pranically on the news. Either way, it does look like we're kind of at the finish line in terms of the ETF. So there's a few interesting things. All of these sponsors are going to have to go out and buy Bitcoin to seed their products. And I think there's a big question on when that's going to happen if that is happening, if that's part of this run-up here. My suspicion is that not all of these sponsors have gone out and done that yet. And so I think it's going to be really interesting to see how spot Bitcoin reacts in the next few weeks here, because you're going to have the sponsors that need to buy spot Bitcoin as inventory. And then you're going to have

these market makers that actually have to deal and spot in order to do the hedge-leg of certain transactions here that will come to life. So I think you'll actually see a little bit of a liquidity crunch here in the spot market. So I'd say this is going to heat up here pretty soon. And that's not even factoring in the retail demand for this product, which I think there's going to be a lot of. Yeah, I will admit I was taken aback by the move this week in Bitcoin. I think there was some discussion out there in the traded chats I subscribed to to some entity that was writing calls, was selling calls. And maybe selling them naked as opposed to them being covered calls and that entity being blown out.

But we'll admit, I don't fully understand that. Yeah, I'd really like to have someone on at some point who can talk more about the options market. Galaxy has put out some good coverage on this around just looking at what's going on in that options market as an indicator. Deribate increased margin requirements this week, which may signal that there are certain participants on that venue that might be short gamma. in this environment. But again, I don't know.

This is going to be kind of an interesting squeeze here, if there are players that are short gamma into what could be one of the biggest bull runs in the history of Bitcoin. Yeah, so my theory is that some of the move was based on basically short covering, for lack of a better word, and maybe some entity blowing up on leverage.

But of course, some of it was just pure enthusiasm for the ETF. So I have a who knows where this is going to go. I have a theory on the ETF. I don't think Gensler is going to go for this ETF. Expand on that. So there's five commissioners and three out of the five is enough to get something approved. And we know that two of the commissioners have already historically voted in favor.

They have dissented on the past denials. It's Hester Purse and it's Mark Uwaita. So all you need is one more. And so if a Crenshaw, for instance, votes in favor of the Bitcoin ETF, then you're going to get a Bitcoin ETF, and it'll be three to two. And at that point, I think it's possible that, and I don't have any knowledge of this, so I'm completely spitballing. I think it's very possible that you get a Bitcoin ETF approved, but then you get the chairman of the SEC himself dissenting and potentially even writing a dissent.

And if I was Gary Gensler and I was in the pocket of Elizabeth Warren, that's probably what would do. So because it might, Gensler might perceive it as too politically costly for him to actually personally sign on to the ETF, he could dissent while still allowing the broader SEC to approve the ETF. Yeah, I think that's the face-saving move. That's sort of walking back on the, the graceful path is saying, okay, well, you know, this is a democracy. These are the rules. Three out of five wins a day. still think that crypto is all scams and frauds. And I am preserving my optionality that in a re-election, a Democrat re-election, where Elizabeth Warren continues to be super powerful, I have a shot at being Treasury Secretary or I have

a shot of being in the cabinet for some future administration because I didn't rock the boat on Elizabeth Warren's pet issue. In my mind, if you're a political player, which Gary Gensler is, that's what you do. You say, all right, you know, it's approved. but here's my lengthy dissent. So in FTX news, Sam, Bickmanfried took the stage today, or I guess is testifying as a witness in the trial. With no jury.

With no jury. So my understanding here is the judge wants to do a dry run to make sure that there's no shenanigans. And then once the judge is satisfied that the testimony will be functional, the judge will allow the jury to hear it maybe tomorrow. Yeah. God bless this inner city press guy, Matthew, what's his last name? Matthew Russell.

He's doing a great job. So the below by below here is they're not talking about the broad swath of what they'll talk about when he's in there with the jury. It's specifically around interactions with Friedberg, the lawyer, and Kansan, the other lawyer. So it seems like they're taking out a little mock trial on the fact that Sam wants to just pin this on the advice of counsel. defense and then there'll be some sort of a huddle up and the judge will say what is and what is not allowed but it's very clear that sam's defense here is just going to be oh well Dave friedberg or

whatever this guy's name is told me to do it dan friedberg yeah so that's kind of a strange thing um i think the court's probably about the busiest it's ever been apparently you have to get there at around 5 a m if you want to get a prime time seat it's um in this interstate City Press guy did a podcast with Jason Calcanus this week, and he talked a little bit about how he's actually the only one that has the ability to live tweet this. I guess he has some special status amongst reporters because he's there for all the whole thing. You know, he's always there. And so he's the only one that actually gets to bring in his electronic devices, which is talk about an advantage. Yeah. So, I mean, I'm glad for our productivity's sake that this

thing wasn't actually live streamed in the end. And the good news is that the judge is very entrusted in this being an expeditious trial. So we're almost at the finish line. We're almost there. So you get a lot of developments on spot. You got bad guys going away. We'll put this in the show notes too and in our newsletter, but there's a big tweet storm around the OpenX CoinFlex slash 3AC partnership and how there's all sorts of shenanigans around the 3AC.A. you guys actually just siphoning off money from CoinFlex investors, which is just crazy. I mean, just when you thought that these guys could not get more devious, they're back at it. Yeah, I saw that as well.

It looks like they have also purloined funds that rightfully belong to the CoinFlex creditors. So maybe not that much of a surprise that they continue to, you know, siphon funds from places that are not their property. Someone on Twitter asked me if I would do anything differently about my podcast episode with Mark Lam, who was the CEO of CoinFlex. And I think that's a valid question. We had him on the podcast. It was before he did this 3AC nonsense.

So I couldn't have asked him about that. But one thing that I do wish I went a little bit deeper on was just how the exchange itself functioned from a margin perspective. Because ultimately, that's what did in CoinFlex. They just allowed Roger Vary to run. negative margin and blew up the whole exchange. So that probably could have been better detailed. Yeah, the coin flex collapse was actually kind of similar to FDX in some sense, but it wasn't Alameda that was allowed to run a huge negative balance. It was Roger Veer. Right. But it was kind of the

same story in the end. We've also had Kyle Davies on the podcast. So I've got two bad boy scalps on the podcast. Yeah, those are your those are your, on your conscience be it. Yeah, it's yeah. I mean, if you interview hundreds of people some of them are going to end up being felons. It turns out, yeah, it turns out. Statistically. Two out of 500

interviews have turned out felonious people. One is still on the run. Yeah. Where is Kyle? Yeah, Kyle, are you listening? Yeah, Kyle is somewhere in Bali. We think. All right, next up, we have Fireblocks. They have hired Peter Mattoon. Peter Mattoon is one of these kind of big hitters in the

compliance space. He is a former New York Department of Financial Services regulator. He will be leading the compliance efforts over at Fireblocks. That's a big hire. Yeah. And also we have MasterCard. They've partnered with Moon Pay to offer Web 3 payment services. And then this was kind of an interesting development. Cynthia Lummis, a Republican senator out of Wyoming and French Hill, who's a Republican representative out of Arkansas, they've sent a letter to the DOJ, urging them to basically just act quickly on whatever charges they're bringing against Binance and Tether. And they're tying this into Hamas funding, which, again, I haven't seen evidence that Binance or Tether is being used for that. It's quite possible, but I'd love to know what's actually going on there.

Yeah, I'll give them credit in the letter. They did say that the WSJ analysis is probably overstated, but nevertheless, they zeroed in on finance and Tether. And it's kind of funny because Tether already freezes addresses pretty actively in response to law enforcement. So I guess the question is, what more do they want them to do? Because Tether is already complying with that. Right. As I also presume Bynances.

Yeah. Again, I have no idea. I thought that was interesting that Lummus is. is the one that's actually writing the letter, but we'll see. So any plans for Halloween? So I know that as an, I'm an old person now, I'm 31 officially. I don't think you're really meant to dress up at this age, but I'm going to be Freddie Mercury from the Live Aid concert in 1985.

Oh, that's electric. Yeah, you kind of look like the mustache. I could see that. Yeah, so I kind of look like Freddie Mercury. already. So I also did learn a few bars of Bohemian Rhapsody on the piano. Wow. That is so you're going to be hit in case I'm called into action. You know, I'll be I'll be ready to blast on that. Now do you have the chest hair to pull that off? Um, I don't know that's appropriate question for the podcast, but the answer is no. I don't at all because I mean go look at a picture. I mean, that guy's chest hair was like he was

bursting out afro on his chest. Yeah. So. I don't know if you can buy chest hair from, but yeah, I don't have any. Yeah, you're going to have to figure out what to do there. But that's a pretty good. That's a pretty good one. I've had some good ones in my day. I'm less of a dresser upper these days, but in my, in my younger days. What were your, what were some of your prior costumes?

I was a Chilean miner one year. Do you remember the Chilean mining situation? They got stuck in a mine. I do. While the, while they were stuck, right? You dressed up as a minor. Yeah, yeah, it was while they got out, though. Just as well they were.

They did get out, so that was good. They got out. They were safe. What else was I? I went as Tiger Woods one year when he got in that big car crash. I had like my full golf gear and I had blood streaming down my face. That was a good one. But no black face.

Definitely not. Definitely not. Those were probably my two best ones. Last year I was Guy Fierry when I had my, my blonde highlights. Oh, that's a good one. Yeah. Well, he's a lot bigger than you are, though.

He's much larger, yes. So Halloween, yeah. Not my favorite holiday, if I'm being honest. Yeah, what age is it no longer permissible to go trick-or-treating? That's the question. Well, I don't know. Probably like 10, but 10 or 11. But now I go trick-or-treating again, now that I have kids.

And that's a whole different ballgame. I mean, you have people tossing you beers. it's a whole that's actually a fun part of it yeah it's so are you the house that has the jumbo snickers or like what's your attitude to the candy um we're kind of middle of the road candy like whatever's available at cvs type of we're not we're not going like king size with anything we don't probably stick out it's not not a full blown bull market yet so well i don't know it kind of is a full blown bull market so maybe we will rethink that but yeah we're just the regular size. Next year.

Next year. Yeah. Just remember, there's a lot of people here in the startup community that think that we're in a bear market. Guys, we're not in a bear market. It's the bull market is over. I formally declare that we're back. Okay. All right. So with that, we will direct, this show notes will be important. So go through the show notes and get involved in this Wall Street Journal thing. If you're on James Slooth, do some, do some work. I'm giving out 21 bounties of $500 each in Bitcoin. I need entries. I need at least 21 entries. So get on it. And will high are we going to highlight the winners? Are we going to, it's a great way to get a job in the crypto space. Yeah. Yeah. Yeah. You know, I mean, I'll be rebroadcasting the winning entries. So go for it.

All right, everyone. Have a safe and healthy weekend. And we will see you on Monday.