The Wolf Of All Streets - Binance Settled - Is This the End or Beginning? | Crypto Town Hall

Episode Date: November 22, 2023

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mario norfolk wants to speak i don't know if i should i don't know if i should accept that as a speaker okay i'll let him on i'll let him on you're so fast today that you had to talk to yourself for like three minutes brand who do you think is going to get co-hosted next what's's your guess? What's your bet? Even though you were here first, I think they're going to give it to Mario, even though you were here first. I think so. It's like Gary Gensler meeting with SBF

and not meeting with Brian Armstrong. Even though Brian Armstrong was first, it depends who you know and who you pay and how many followers you got. This is not a fair process. I agree. It feels like it's Mario plus. Yeah.

Also, you know, the thing is that it's Mario's team that add the co-host. So I'm just thinking maybe I can quickly add you as a co-host and we can. You know, that used to be my Twitter account, the Crypto Town Hall. You know, it was my podcast account that we converted over. I feel like I should get some sort of preferential treatment. I've just got this anxiety that as soon as you say in the WhatsApp group, as soon as they say, you ready, I fucking jump so quickly so that I can be co-host. Most days I'm demoted to speaker.

Some days I'm actually demoted into the audience. I'm just glad that I can actually be... It's just nice to be up here sometimes. Look, Mario, where's Mario? We need somebody. We need another co-host. Mario, can you talk or did we mute you finally? He's requesting to be a speaker and I'm contemplating. You know, Rand, right now, you literally can mute everybody

and just talk for like hours if they don't call us. There we go. I've just done it. I just muted everybody. I just muted everyone. Scott, did you see how that happened? Drunk with power. I know, you're drunk with power.

I know the feeling. Do you see how Mario just became co-host, even though you've been here for the last 10 minutes while he's been in the infrared chamber, and he's co-host and you're still speaker? It's hard to be the other guy, you know. I find it so unfair when I sit there slaving away, doing a space at like 2 in the morning my time,

and then I get treated like just a nobody. You did carry water. Yeah, you did carry water for all of us yesterday. And to be honest, you said, hey, we need to do a space. And I was like, I need to go see the Trolls movie with my kids. I would have rather been on, on here. Scott. I mean,

trolls movie during the week, bro. On a school week, on a school night. Okay. Yeah. But this is a, this is a,

it's an off week for the kids because of Thanksgiving. So it's just like one of those brutal weeks, as you know, where the kids are around and, uh, got to fill their time. So yeah, I committed to,

I didn't know we'd have a double spaces in the day obviously yeah when do you work though like i'm just like in between looking after the kids and like you know being in bahamas and that's where you actually get time to work don't you have like a youtube channel and a newsletter and like i don't even have a producer man i do it all is your producer still missing well he's not missing but he's in jail in Louisiana yeah it's insane is he still in jail yeah yeah i mean he could like cross the border from uh mexico to the united states he's a uh estonian and israeli citizen he told them when they asked him at the border which he crosses all all the time, his visa was in order. They just did the normal questioning. They said, what are you doing here?

I'm visiting friends and I'm pet sitting. And they said to him, pet sitting is work. You're on a travel visa. Come over here. And took his phone away, took his computer away and didn't say a word to him for five days. And then three o'clock in the morning they woke him up put him in cuffs put him on a plane flew him to louisiana by the way we didn't know any of this till after flew him to louisiana put him in a correctional facility for ice uh with like 50 south americans who are all asking you know who are all asking for uh safe harbor in the united states whatever and he's just like a guy sitting there and it's now been three over three weeks. Uh, I guess when you're a, you know, once they detain you at the border, he even proved them.

He wasn't getting paid to pet sit. Once they detain you at the border, if you're not an American citizen, you have literally no first amendment rights, no due process. You have no rights at all. We've heard cases of this taking six months to a year where you just sit there hearing nothing and then one day they give you your ticket home. It's literally insane. Glad that's not me, bro. I love the United States.

I'm the biggest fan of the United States. I'm a much... That's a crazy story. Me too. Me too, Ryan. Me and you have something in common finally. Yeah, I mean, you know what I love the most about the United States is I love Janet Yellen and specifically, specifically, specifically, I love it when she just, when she calls Binance Binance.

So I don't know. Is that like finance? Some people do say finance. Just listen to this. The Justice Department has secured felony guilty pleas from the world's largest cryptocurrency exchange, Binance. Actually, it's Binance. Binance.

Binance. Binance. Binance. And let me be clear. Is it Binance or Binance? Is it Finance or Finance? I don't know. You tell me. Can we talk a little bit about what happened yesterday?

Can we just take stock of what happened yesterday? Can I ask? Yeah, we should. But Mario, I actually do legitimately want to know. You did Spaces for hours, right? Yesterday, I mean, did you unpack anything or was it largely covering an analysis? Did you say, did I unpack anything? I did have a space for four hours. I think the conclusion, most people agreed. I think some people are considering it a win for Binance. Others

are considering it a win for regulators. Except David Silver doesn't agree. David Silver wasn't happy at all, so you might want to go to him afterwards. But it shows it was somewhere in the middle. And I think that, for me, it shows that they did the right thing. I think they held someone accountable that's made mistakes, that's too entrepreneurial. But at the same time, they did it in a way that wouldn't harm the industry. I just think we cannot ask for anything better.

Anyone that says Binance didn't do anything wrong and they got away unscathed is just – it's hallucinating. You know, paying $4 billion, whatever it is, 3.8, 4.2, it keeps changing. $4 billion is – I don't know how they're going to afford it considering how much reserves they have. I think they have like 3.9 billion reserves, and they've got to pay – the first payment I think has to be done within 30 days. The first billion and then one of – But it could come down uh apparently it could end up uh being lower brand might know more about it but based on certain metrics and i think they can pretty easily pay that first i think they've already transferred the money into into different accounts and i think it was

i think that that's that's what happened. I tweeted something earlier. I don't know how many people saw it. And I think it probably summarized what you just said. I said, as industries progress and mature, different types of leaders are required to drive them forward. In the beginning of an industry, mavericks are required to take risks. And as they progress, a shift is required to a more conservative driver. CZ was the ultimate leader for our industry for that time.

He was a true leader, a maverick, a visionary, and a fast innovator who took the required risks that drove the adoption and critical mass required to make this industry indestructible by the authorities. He was always transparent and humble. He took calculated risks for all of our benefit, and he ultimately paid a fair price. I believe his work was done and that the new leadership is as suited

for the next phase as he was for the last one. CZ should go down in history alongside Vitalik, Satoshi, Brian, and others as one of the most instrumental people in the history and success of our industry. CZ, thank you, my friend. We appreciate everything you did and the sacrifices you made for all of us. I don't know how you guys feel about that. I think that's consensus, right?

And I think that that's the big difference here. And CZ himself many times discussed the early days of trying to do this when there was not even an attempt at regulation and how wild west it was. You know, I always reference this great sort of analogy he made about the early days of the automobile. When people first got cars, there was only a few on the road. It didn't really matter. Obviously his cars became more popular. They needed to put in lanes and eventually seatbelts and regulations and speed limits. And I think, you know, he was just out ahead and refused to wait for regulation to catch up. I'm not saying he didn't do anything wrong. I don't really know the details.

But it's always sort of been, I think, the base case here that Binance did a lot of crazy shit in the early days. Tether, a lot of people have likened it to probably as well. But I've always kind of pointed to the fact that in the last few years, they've been under regulatory spotlight like nobody else. And I can't believe that Binance was doing anything particularly illicit over the past couple of years. We've seen Tether obviously, you know, come above board and be very transparent, in my opinion, others disagree about their reserves and things. And I think that he was just too early and a bit

relentless and kind of pushed the entire industry forward. He's going to take the hit for it. It seems like a big win for anyone on everyone on his back. And you can see that. I mean, it's nothing like SPF, who was an outright fraud and stole everyone's funds. Right. But I mean, you can see the outpouring of sort of like favorable sentiment towards him from the industry. A lot of people you wouldn't have necessarily expected sort of saying,

hey, thanks for falling on your sword for us, buddy. The bull market can go on, you know? Let's just talk about a couple of things that I just want to get out the way. First thing is SEC still have an open case against him. This all started with – Gary got cuffed yesterday, dude. I don't know what anyone's thinking, but the fact that he's not on stage with them, he had to just be boiling.

All right, well, let's maybe just pause there. I do have a lot of other questions, but let's maybe just pause there. I want to take it to the lawyers and I want to take it to the panel and I want to ask, how do you feel about it? Go to David, Ryan. He was pissed yesterday.

He was on a boat. His connection kept cutting out, so he couldn't express how pissed off he was so maybe this is even though lawyers even though when their phone is cutting out they still charge you i'm back on land i just want to say it's really funny that scott outdatted me yesterday because i went on the boat while my wife took the kids to trolls so now like i just feel like a horrible parent on top of everything else. If it makes you feel better, I was on the boat for five days last week. We didn't talk about kids, but go ahead.

You know, I think that we're seeing a lot of people, and I think this is going to be, be very careful what you wish for when God wants to punish you. He gives you exactly what you wish for when God wants to punish you. He gives you exactly what you ask for. All of the people thanking CZ today and all the crypto OG who are giving him a lot of love. I think that, you know, the difference between SBF and, you know, what's going on with CZ today is CZ is now going to turn into the biggest rat in history. He sold his soul. He's going to turn over all of the information that the government wants. And we're going to see now the government go through all the transactions, see all of the money. Their monitoring is going to completely gut Binance transactions, you know, moving forward. It's good for the industry in the long term.

And I said this yesterday. It's a good thing long term, but they're not getting the punishment they deserve up front. But more importantly, this is going to be the largest ratting of people who think they were safe from scrutiny. And everyone and there was one particular person uh in the crypto og original who was giving love to cz yesterday who himself spent time in jail he was giving a lot of love and all i was chuckling to myself was i'll bet he was trading and not paying taxes on binance international and who do you was he american is he american and who do you think the who do you

think is going to use all of the information that binance turned over now all of the but hold on but but wait wait wait i have i actually have uh janet yellen i have janet yellen's um uh speech yesterday and i didn't hear what you're saying i didn't't hear that in what she said. What she said was that they're going to, they have to go back and let's just listen to it. Let me just play it very quickly. I hope you guys can hear it. OFAC's settlement agreement assesses a penalty of nearly a billion dollars. Binance is also required to report the suspicious transactions it has failed to report to date. So they're required to report

suspicious transactions that they failed to report. And to establish an effective anti-money laundering program to support the global AML CFT regime. So put in AML and KYC. And the settlement agreements subject Binance

to increased scrutiny for five years. Increased scrutiny for the next five years. Through a third-party monitor overseen by FinCEN, who will ensure Binance's complete exit from the United States. They don't say that they're going to hand over all transactions. They will be able to access Binance's systems, transactions, and accounts, and will review and report on all actions included in the settlement agreements. I mean, I don't know if you read that as if you said they're going to go back and review all like

all the old transactions I'm not I'm not sure that that so you're you're using the press conference the devil's in the details and it was in the attachment d where they go in and they talk about what the consent degree does and what binance has to do with the monitor for the five years including access and monitoring all of the records they have to go if the devil's in the details here all of the information is going to be at the disposal of all of the u.s regulators and that's what going to be insane amount of information no no no i i can't believe that that there wouldn't be a huge uproar and there wouldn't be a huge panic about this if if all the old americans now would have their records uh submitted to the u.s government and the tax the tax uh the tax authority at all i just can't

imagine but none of the americans kyc'd ever because they weren't allowed to right so i mean i i'm not saying it's not possible for them to find, but I very seriously doubt that your average American, and by the way, I mean, from every lawyer I've spoken to, David, maybe you disagree, but the onus was always on finance to not allow the American. There's no real fault with an American trying to use finance, correct? Yeah. Scott, if you want to just jump off the stream to change your pants because you're shitting yourself so much, I understand.

This is like a one percenter as far as these things go. You mean you're asking for a friend, right? No, asking for a friend. I mean, everybody, I obviously used Binance until probably 2021, you know, with a non-KYC account. And I don't even think it needed a VPN, but probably with a VPN back then. I think everybody did. Exactly. I think there were a ton of people who used VPNs moving even more recently. But the whole thing is here, these consent decrees and these exhibits, they're very different than what the quick statements at the press conference were. The devil's always in the details here.

And the SEC is now going to be able to have access to a lot of information that wasn't as part of the monitorship. The key thing here is what access the monitorship is going to have moving forward. And I think it's going to be a lot more intrusive. This is going to be a full proctology exam of Binance. And for people who think that this is the beginning, not the end, again, good for the industry long-term. Very good for the industry long-term. Wouldn't that have been true

if it was a long, drawn-out lawsuit too? Wouldn't Discoverers have pulled all this stuff out too? Yeah, I mean, 100%. That's why turning it over, this is why CZ is going to be the biggest. CZ is going to go down as the biggest rat in history. He's doing this to save his own skin and he's going to turn what is the incentive for him not to if he violates the the deal of work the cooperation agreement and it's the cooperation agreement which again he has to fully cooperate i'm quoting from the documents in any and all

matters relating to the conduct described in his plea agreement, including the facts in any individual or entity he referred to therein. He's got his obligation to, he's going to roll on everyone and everything because it's to his own financial benefit, it's to the company's financial benefit. This is just the start of a pouring out of what OGs would say is their private confidential information. And for that, I say, at least that's a good thing that's going to come out. There's going to be a lot of people. Question.

Very serious question. If you were Justin Sun, where would you go now? I would make sure I was on my private plane in a non-extradition country, but apparently that didn't do much for CZ because he agreed to leave his non-extradition country. I didn't know this until yesterday, to be fair. Apparently, there was an enhanced law enforcement agreement, so the UAE wasn't as safe as a non-extradition country, as some people claimed, but I'd be in a very non-extradition country at the moment. So let me read you something. Let me read you something actually very, very interesting.

So this is a transcript of CZ. This is specifically when he was talking to the judge about wanting to go back to the UAE while he awaits sentencing. The irony is he is being sentenced on February 23rd at 9 a.m. SBF is being sentenced on February 23rd at 9 a.m. SBF is being sentenced after him because SBF is being sentenced only on the 28th of March. So the irony is that CZ and SBF, CZ is being sentenced ahead of SBF.

But I found this very, very interesting. So he's obviously being advised by really smart people who understand how the inner workings of the justice system work. And I read you this. It says, this is CZ. It says, Your Honor, I just want to say one thing. I want to close this issue. So I want to take responsibility and close this chapter in my life. So it's very simple.

It's a simple mindset for me. I've not caused problems before. I've not been a criminal. I've not been in a courthouse before. So all of this is new to me. To be very frank, before I came, I was a little bit scared. In most countries, you go to a country, you know, you don't know what's going to happen. So I was impressed with you, your knowledge, you know, being in this courtroom hearing, having your honor explaining the little and every little detail to me. All that is very reassuring, actually. So before I come here, that is not meant to me.

And also is the issue with the UAE I was given. I was offered citizenship, so I took it as an honor. I do not want to leverage to say protect you. I do not want to use that. I do not want to use the papers that way, implying he doesn't want to use his UAE citizenship to avoid being extradited to the US. So I want to address issues myself.

I have the full intention to come back here and close this issue. Otherwise, I wouldn't be here today. So I start the issue. Let's start the issue there. And the court eventually said, we'll allow you to live in the UAE. You reside in a residence and you'll maintain

and let your lawyers know that you don't change until you let your lawyers know. I think it's a practical matter and the pre-trial office can correct me. He's now in the UAE until the 23rd of Feb where he'll be sentenced.

Question, how much jail time is he going to serve, if any? Lawyers, I'm turning it over to you guys. Let's start with David. The maximum, David, I think the maximum is just going to give you a heads up. The maximum is 18 months. Less. Very little.

They're going to use the deal. He's going to have, at most, he's going to spend eight months in a golf camp. Cool. Go ahead. Hey, this is Kristen. Hey, so I do think that he could potentially serve upwards of 18 i was listening to i don't know if you're familiar with kit adleman she's a partner with haynes booth and so there are these things called upward departures so i think they actually

have left it open for him to stay or to to be sentenced to greater than 18 months now do i think he'll actually serve that long no okay cool um who else has got lawyered what are you thinking yeah no i agree i think the incentive here is probably to just go with the deal um there's a very very different perception here let's look at spf versus um cz you know like i think people that CZ had a lot of opportunity in his career to mess around and take people's money and enrich himself and didn't. Or at least for the most part, we don't know all the facts but certainly not to the same extent that some other players did.

And I think that hopefully the way that he's handled himself and the way that he's dealt with the authorities and made a deal, you know, oftentimes they will respect that. And especially hearing his language with the court, the way he respected. Guys, can you hear me? Yeah. Yeah. I thought we were done.

Now we all have like PTSD faking it to ourselves. Let me just give it. Lawyer, give me a number. Six months. Yeah, Ryan. I have no idea, man. I'm not a lawyer. But yesterday's conclusion, to give you a recap from yesterday,

I think most lawyers, because we had too many lawyers yesterday, I think I had like 10 in total and all of the ones we've had on the show before. And the conclusion was most lawyers thought it'd be, you know, pull an Arthur Hayes, who just sit in a nice house and be under house arrest with limited abilities to go out for a walk or for a run. So that was the most lawyers thought that's going to be the case. But, you know, we had one of the lawyers give an example, said, Murray, if you look at, you know, historically, billionaires, it's very rare for billionaires to end up in jail. Not impossible. And SBF is a part of a very small minority. And he used that as an example to say, hey, you know, it's very, very unlikely that CZ could end up in jail.

So that's from yesterday's base. Just one clear point on that. And CZ made this yesterday. And I did actually respect this. CZ very clearly said yesterday, unlike others, clearly talking about someone, I have not been accused of stealing money. And that is the only thing he's allowed to deny because he has to agree with everything else in the plea agreement. And he very clearly, and that was clearly done by his lawyers in a very clear negotiation with the regulators, that he has not been accused of stealing any money. And I got to tell you, I was shocked by that. And I'm happy about that. Well, I want to dig into this. I want to dig into this a little bit. So let's look at the charges that they've got CZ on. And

let's actually ask ourselves some very tough questions. The charges that they have him on specifically are around AML and money laundering. So let's just quickly go through it. I'm not going to go through all the charges, but one is failing to stop Americans and maybe even promoting Americans is one of the charges, right?

The next charge is, I think probably around the same vein, failing to maintain adequate AML policies. And the third charge was allowing people in sanctioned countries to transact on the platforms and they quoted specifically countries like Iran. I want to just ask you a question. When they talk about Iran,

we immediately think bad people evading sanctions and potentially using this for weapons. But what about how many of the people that actually traded on Binance who were Iranian, how many of them were just innocent Iranians who just wanted to try and get money out of the country and maybe just wanted to shelter themselves from, you know, failing country, failing currency, bad government, et cetera, et cetera. And how much of that do you think was really, really, really knowingly aiding terrorist organizations or knowingly assisting in the transfer of funds knowingly, knowingly? I mean, unknowingly, I'm sure banks do it all the time, but how much of it do you think that they turned the blind eye to knowingly that this was actually a terrorist organization? Brad, I think that it brings a bigger point.

I can't answer the question, but I hope people do. But CZ himself repeatedly said that the large majority of finance users were simply using it as a wallet with very small amounts of stable coins and effectively using it as an opt out of the banking system, especially in those kind of countries. The reason why I'm asking you this is because to me, in 2017, not KYCing customers in 2017 and 2018 is not really a crime. It may have been done, but I can't put my hand on my heart and tell you that I feel that that is a true crime because I don't think it was done with criminal intent.

I think it was done with ambitious growth intent, small company mindset, and lack of systems and processes. That's how I feel about the lack of AML and AML systems. And knowingly allowing Iranians to transact, to be honest, I think that's why we all got into crypto, so that everyone, so we can have free finance that is devoid of government sanctions, that is devoid of government barriers and stuff like that. This is why we all got into crypto.

This is why we all love Bitcoin, because the governments can't tell us what they're going to do. Now, look, I don't like and I don't enjoy the thought that maybe this money was used for terrorist funding. But also, in my mind, I can imagine that they did not know at all that money was moving between terrorist organizations. And when they talk about Iranians and other sanctioned countries transacting, I suspect that most of those transactions were actually

just innocent people living in – I mean, I have a lot of Russian friends, and they hate this war. And, you know, by the mere fact that – and they buy crypto all the time, does that mean that anybody who is trading crypto in Russia is evading sanctions and funding terrorism? Absolutely not. And so I wonder how much of it was we really turned a blind eye to terrorism and malice and how much of it is the U.Ss just needed a scapegoat and they needed to close this chapter before we move on to the etf which is by the way what i want to talk about next um uh i wonder how much of it how much of it is next uh kristen i see that you did you you're commenting what do you think no i just started to say i agree um wholeheartedly that i think the timing of it

uh is particularly interesting and i think this kind of clears um wholeheartedly that i think the timing of it uh is particularly interesting and i think this kind of clears things out now right um i think that's that's the sentiment that i've heard a lot is this needed to happen then you fall on the sword so that we could move forward and i don't know that i think it's exactly bullish it doesn't necessarily feel completely bullish to me but i think i think that's a good take we'll we'll get there because i do want to i do want to take it to that to talk about what this means for the past but let's just really go i just want to go to it and just how i just want to get a feel for everyone else to see what the consensus is let me let me let me tell you one other thing as well that that i think i'm

not sure if this is what david meant so in cz's post he says do not allege so he says I am proud to point out that in our resolutions with the US agencies, they do not allege that Binance misappropriated any user funds. Do not allege that Binance engaged in any market manipulation. Now, Mike Alfred and Travis were on the space yesterday. And they said they're still, I think it's Mike. He said there's still a possibility, guys. It's not over. That when they get access, the monitorship, get access to all the books, they could find more crimes within their financials. Now, I think that's highly unlikely after a five-year investigation.

But then the lawyers… Why would Binance make that deal? Yeah, yeah, exactly, exactly. That's exactly what I want to say. But then the lawyers pushed back and said Binance would never… Like, this tweet went through the regulators, went through the lawyers. If these two claims were true, then he wouldn't have permission to say this. If that was part of the settlement where these things are true and they're just going to forgive them or they haven't found out about them yet.

And CZ would not make such a statement. So the belief that there could be more under the hood. And I think it was Mike. I don't want to put words in his mouth, but there could be more under the hood is not the case. And I think this is a very important statement that he's made there that it is over there isn't anything else and and it's you know the comparison between binance and ftx is uh is dead and the other thing as well that was mentioned yesterday is the politicization of this the politics of of the israeli gaza the israeli hamas war that that played a key role in this deal why because if you look at yesterday's press conference that you know the focus afterwards with the questions was hamas and it was mentioned about um iran using binance and and i think they mentioned

that leads me to probably the next point let's actually talk about the next point so i think that there's a lot of pressure in the u.s um to do something to show that you know that they're doing something against this evil force which which is called crypto and stuff like that. And I think that they've now done what they needed to do. And even the worst of the naysayers, I even think that Elizabeth Warren must be satisfied now because she was begging and asking for something to happen. It took credit.

She sent a tweet that was like, I told you that I asked them to do this. Correct. And I think maybe let's pivot to the next part of the conversation, which is that, is this, I want to play you something. I want to play you something. I think that

this is quite an important clip. Just give me one second. I'm trying to quickly find it. Here we go. IRS criminal investigation, as well as CFTC Chairman Venom and his team for their extraordinary partnership in this matter. In just the past month, the Justice Department has successfully prosecuted the CEOs of two of the world's largest cryptocurrency exchanges in two separate criminal cases. So in the last month, they prosecuted both of them. Why are they rushing? Why all of a sudden in the last month, why are they rushing?

Because there's an ETF deadline imminent and they want to clean the industry and they want to make sure that they've got everyone's support. And maybe the olive branch to Elizabeth Warren is, look, you guys approve the ETF. You and your puppet Gary approve the ETF. And we will take action against Binance. And that's the quid pro quo. Just one kickback on that. I mean, they all serve the same master like it's not like

it's not like here the doj you know and merrick garland merrick garland gary gensler they serve the same master those are political appointees so i don't think there's one to the other i think that either it's a strategy from the top down or it's a which i believe it's a strategy from the top down i do think the goal of what work you're you believe is going to the conclusion is what you believe it's going to be is going to be they're cleaning out the space to do the etfs and we're going to see some more crypto friendly uh legislation moving forward they needed to clean out the space. But don't think that for a second, DOJ, SEC are in a turf war about this. Everything's being coordinated from the top down. I agree, Dave. I mean, you're not, we're not saying, Ron, that we think that the SEC is over, right? That's not what you think?

Well, I mean, the SEC went after Kraken two days ago. I don't think anyone believes that the SEC is done. I don't think they're done with finance either, but I think they've been neutered as regard to finance, especially with the DOJ not claiming commingled funds. You know, I think what you're playing with now is like, if you were to liken this to a game of chess,

you, you playing with pawns now, you know, like when you're talking about the doj versus the sec case like it's a pawn versus a castle or something it's like you know it's like come on after the doj case the sec case is like a little pawn that's what it is and you know after coinbase kraken is like i mean i i think that the kraken case is absolutely ridiculous and the reason why it's absolutely ridiculous is because it's the same case that they took against Coinbase.

The only thing is that Coinbase is going to resolve their case before Kraken resolves their case. And then they're going to go to the judge with the Coinbase ruling and say, look, you know, here's the ruling and our circumstance is exactly the same. So, you know, I think we're playing the chessboard with pawns now as opposed to playing it with big pieces. That's the way I feel. The only thing I say, there's,

I said this yesterday, it's ironic that Binance resolved their issues and Coinbase is a strictly legal standard right now. So forget all the legalese and all that. Coinbase can be resolved. There's no nefarious acts alleged against Coinbase.

Kraken doesn't have that because of that co-mingling issue, whether it's important or not. That co-mingling issue is a factual issue. So they can't get out on a strictly legal standard. So from a very 10-second perspective, you just went from Binance being the big bad wolf, which I agree with you, to now Kraken has a small factual issue, but they can, they're gonna be able to continue with that small, that co-mingling issue is a bad issue,

but it can be done for a variety of good things. That doesn't mean they did anything wrong, but it's a fact-based issue. But here now, Kraken's going to be the last one standing. It's just that no one saw this coming six months ago, that Kraken would be potentially the last exchange standing fighting an SEC battle. That, to me, is a little humorous. No, but you're not getting it. You're not getting it. BlackRock doesn't own a share in Kraken.

BlackRock only owns a share in Coinbase. No, but that's my point. The cases are going to continue. This isn't about shares. It's just, to me, ironic. I don't normally stand side-by-side with Jesse Powell. On this particular issue, I'm with you guys. You know, this is the

worst thing left. This is good for the industry. Again, long-term, everything that's happened in the last 30 days is good for the industry. I know we don't want to that's happened in the last 30 days is good for the industry. I know we don't want to deviate on Kraken, and I don't mean to dominate this, but yesterday, I think on one of the spaces, we were talking about Kraken briefly, and the co-mingling issue was unique to Kraken or that it wasn't in Coinbase. And so when I went back and read the Coinbase complaint, they do actually very briefly allege co-mingling. And so maybe I read this wrong, but is that everyone else's take as well, that the co-mingling was not something that they

alleged on the part of Coinbase? Yeah, I think that's correct. Right. And I think that that's a big differentiator. And so kind of shocking how quickly that was overshadowed by the finance news to some degree and how little the market, I think, has reacted to any of this. I think that the market's just not scared of anything that the United States has for it at this point. I mean, I think that's very clear. Price Action says that. But yes, I think you're 100% correct. Co-migrant is a huge, huge claim. I mean, that puts you in the more like SPF than the CZ camp. And

it's not really even rocking the market or being discussed. I agree with you. I mean, I kind of know how Jesse's been running that business. I mean, obviously, I'm not their accountant, so I haven't seen their books. But Jesse's run a clean, clean, clean shop in that business. I'd be very surprised if they managed to catch him or something like that.

Yeah, with the co-mingling as well, there's different degrees of co-mingling. So, for example, if you're holding all your client funds in a client wallet, and then as you're allowing for trades to happen, your centralized database balance reduces and some of those funds become funds that are owned from clients to owned by the exchange. And you kind of run these side-by-side databases that kind of determines ownership. And so sometimes those in building your financial systems and controls, maybe in the early days, they would have spent some operational because they thought some of those fees

or some of those funds belonged in fees. And so that murkiness over time, eventually you'd expect to crack an exchange like cracking all coinbase to have really really tight systems and controls and everything over over that and then audit on top of it but these are the types of things that are challenging in in the growth of the industry and even even another technical point as well um like for example you were talking around about KYC versus funding terrorism. Here's what I think the regulators want next.

They want the re-onboarding of every single customer that has an account with every single exchange. Because the reality is you can take on Iran customers, Iranian customers. What you can't do is you can't take on any company, individual or organization that is on the sanction list. And if you take on a customer, you need to ensure that they're not, you know, funding terrorism or... I don't think that's the case. I don't think that's the case. No, it is. You have to do a risk-based approach and you can attribute high-risk customers. And high-risk customers means you need to do due diligence on every single transaction and make sure you understand the exact source of funds, the exact source of wealth, and ensure that you've gone down three layers.

Now, most people can't be bothered to do that. So they just decide we're not take on any of those customers. The sanction list is not, there are some countries where it's a blanket ban, like North Korea. You can't deal with any of them. But most of the sanctions, if you read like the UN sanctions, the OFAC sanctions, the UK sanctions, they relate to specific types of people, specific type of activities and specific types of financing, and then having a really robust process for risk categorizing, which means you have to have so much more data than any exchange is collecting on their customers right now. So you can't comply until you start asking all the things that banks ask for when you open a bank account. And I think to go to Simon's point, it's really important. How is Binance going to transform itself from being a no KYC from back in the day to a liberal, libertarian, anti-government run company to surviving a federal monitorship 24 hours a day? David, they agreed to that. I don't think, I mean,

I don't know any American to trade without KYC on Binance for literally years. I think I really do believe that. It costs way more than KYC. That's the thing. Our industry thinks that compliance is KYC. It's what you have to do when you open a bank account.

How many trades are you going to do each month? What source of funds? What source of wealth? Can you determine the exact source of this? How did you obtain the wealth? What country you're from? What nationality you're from? Are you dual partnership, dual citizenship?

If you're trading more than X amount every month, can you provide the additional document of where you obtained all of the things? The way you know whether a company's complying in our industry unfortunately is a function of how many people hate that company when you're complying you're like the banks and everyone hates you because you have to ask so much and that's only going to get worse and it's going and then you've got to screen every single transaction that's where every single exchange is going and in order to in order to get there they're going to have to re-onboard every single customer. You're going to see every account that you have right now, you're going to be asked

to provide unparalleled amounts of data because every bank is going to shut down every account with every exchange until those omnibus accounts can demonstrate that they're complying with all these requirements. and everyone's just going to become a bank in the end. Nicole? Yeah, I just wanted to make two quick points on the conference the other day because I thought it was a pretty good indication of kind of policy from the administration going forward. One thing that I thought was really interesting was obviously having the head of the CFTC up on stage and Gary Gensler nowhere to be seen. And a lot of the cryptocurrency bills coming out right now, you see a lot of power going to the CFTC. And while the SEC is clearly going to

have a place, it's not this market where the SEC has full control like they're trying to make it seem like. So I thought that was pretty interesting. You had the CFTC head up on stage and Gary Gensler is nowhere to be seen. And then the other thing I just wanted to point out was it was a lot less hostile than I thought it was going to be. They really cracked down on using crypto for illegal activities. But one of the direct quotes I heard from the head of the CFTC was that Americans want to hold these assets. And it seems to me like it wasn't a full attack on crypto as so much of it was, hey, we cracked down on this bad actor doing bad things. Don't do that in the United States. But I thought overall, it was a lot more positive than I thought it was

going to be. I thought it might be an attack on the entire industry. It's not what we seem to have gotten. And I think that's the opposite. It's the opposite. That's what we seem to have gotten and i think that's the opposite is that's why i wanted to mention i think the most important thing everything we're talking about now has nothing to do with crypto we've moved on on how this impacts crypto we're just talking about cz and binance and not only is this not an attack i think this dispels all the claims that the government's trying to kill crypto i think this is if they wanted to kill crypto binance was their best example simon you remember this remember when we talked about these conspiracy theories i remember very clearly that discussion we had and you're like if the government wants to cripple crypto binance and tether would be their two targets there's nothing with tether

at least not yet and binance they did the opposite in trying to protect the industry and do things the right way um so my yeah that's on that point mickle well yeah on the other point i completely that excludes the sec when i said when i said, that excludes the SEC, just to be clear. Yeah, the one point I was trying to make was right. I think there are factions in the government who would love to kill crypto. I think that's very clear, but it looks like those voices aren't necessarily winning. And the path we're really moving forward is, hey, let's get rid of the bad actors. Let's get rid of the bad activity and help this industry actually prosper in the

united states while that's not happening at any quick rate i just thought the narrative and the language used yesterday was a lot less harsh than i expected it was it became as soon as the question started immediately shifted to hamas i'm like fuck trying to get out of politics and we are back to hamas so it just became very political very quickly which is again a good thing for us and their focus is moving away from trying to harm crypto and to hamas and to ai simon yeah the next the next question for binance and i do believe that they're going to become you know a good international company if they can get past having those um compliance people from doj inserted into their company. They're going to have the most robust AML program out there of international exchanges. Now, their first job

is to ensure that they're not dealing with US customers because they're not going to be a money transmitter. They're not going to be regulated in the US anytime soon. Then their second job is, where are they going to be regulated? Because if people are putting funds in the US anytime soon. Then their second job is where are they going to be regulated? Because if people are putting funds in the platform, they need to know who they're accountable and what type of regulations. Now, Financial Action Task Force has told the world you've got to have a virtual asset service provider regime. My understanding is Binance parent is in Seychelles. Seychelles does not have a virtual asset service provider. So now Binance, although they are registered with, I think they've got like 15 different types of money service registrations in there, but they're going to have to pick a base

in order to progress because customers are going to demand, if things go wrong, what type of bankruptcy laws are we dealing with? Who holds the money? Are they segregated? These are the things that, and I believe that they will have a world-class team with all of their money solving all of these issues if they've not been solved already. But the final question of what I think is what is the future of Binance is who is going to take, who is going to put finance through their audit, their virtual asset service provider regulations and licensing. And a jurisdiction will take that on and see this as an opportunity.

They'll probably dedicate virtually half of their regulators to solve that, become a niche player, take on the industry, and become the country that can regulate these types of institutions and have a good virtual asset service provider regime that's what i think comes next cool guys ryan scott yeah peter i mean i think i think the uae is going to fill that gap to be honest i think uh i mean it's pretty it's pretty obvious that the UAE and that area is trying to fill that gap. It's a great opportunity for a country. Just dedicate half your regulator to solving the problem for this company.

And then everyone will come and follow and just be amazing, world-class regulations for this niche sector that no one really knows how to deal with. It's a great opportunity. I would just be like, just back to the other point. I would just be very sorry, Peter, right after. I would just be very surprised if Binance made this deal, if there's something horribly nefarious still in the books and they're concerned about the monitor i think that they uh they only make this very specific deal if they believe that they can uh move forward and operate or we wouldn't have had i mean literally cz fell on his sword right you're talking about the guy potentially going to jail we can pretend that this four billion dollars is coming from binance that's effectively cz's money right and so i just really believe that they've probably divulged anything that they think

from the past could be what do you mean i had i had a question for you and peter about the markets what that means for the markets because now we've got the clouds of of spf and binance um kind of clearing so before asking though about the markets when you say fell on his sword can you elaborate on this because what god i mean the guy showed up voluntarily yeah but but that's because did he have a choice what's the alternative be on the run for years and years uh there's plenty of people who would probably choose that alternative i don't think we know so we know some of them uh you know some of them are being found in the airport in singapore the allegations they are very different to what cz is facing

about like the three ac guys and such who have just not cooperated with anything that's happening are being found in the airport in Singapore. The allegations there are very different to what CZ is facing. The 3AC guys and such who have just not cooperated with anything that's happening and have just sort of remained. But maybe they didn't get the same opportunity as CZ. Again, if you got the opportunity, if you want to end up maximum 18 months in jail, maximum, and you get outscott free and they take a bunch of your money

or you be on the run for the rest of your life. I think it's potentially a favorable deal. I don't know what his psychology is behind it, but I mean, the guy has also an extremely vested interest still in the success of Binance moving forward, right? It's not like he's divesting. He's still going to make a ton of money if Binance does well. I just don't think, maybe I'm wrong, but I just don't think this deal happens unless it provides an exceptionally clear path forward for Binance as a company. I don't think that they make this deal. And then six months later, you find out that they were like committing insane criminal acts that the government had no idea about. I just don't see that.

I imagine that they- He does a good job positioning them to be an institutional client, right? You think about this, as they have to give up these records six to 12 months down the road, they will probably have the cleanest history of anyone. Right. They'll have done the bad stuff. It'll have been investigated. I think they will get people more comfortable using them than any other institution.

Right. They will go towards the institutional investors and say, one of the things you've been worried about in the past is how much of our activity was criminal activity, how much was bad behavior, et cetera. We've now had six months to a year since the settlement to be fully investigated. You can feel comfortable on our platform. So I think- Peter, isn't that like, it's like SVB, right? I mean, SVB was the worst bank, completely collapsed. And then when the government stepped in and said, we'll fully back you, everyone said, well, this is arguably the safest bank right now.

Right. And I think it sets them up to reposition themselves. It gets them ahead because as an institutional investor, people are always going to be wondering, what are they sitting on? What are they back? What's hanging back? And again, it's not going to be today. They're going to have to go through some period of investigation. They're going to have to go through. I'm sure they're going to root out some sort of, you know, chains that are nefarious, but that's all said and done. They'll be able to move on and say, we are clean. And I think that I'm sure they're going to root out some sort of, you know, chains that are nefarious. But that's all said and done. They'll be able to move on and say, we are clean. And I think that will be their sales pitch to people is, we've gone through this.

We are now the cleanest place. We know, we understand, we're following the rules, we're monitored. You as an institutional investor can be comfortable with us. And that's where you get away from all these small trivials. Josh, Frank, weren't you saying basically the same thing this morning when we talked to our show, and you've actually seen the actual evidence. It's not anecdotal because you have the data, right? Well, I mean, I don't know.

I mean, it's... Well, you've talked about the hedge funds and how aggressively they pulled back. Yeah, I mean, a large number of, as I mentioned this morning, a large number of the top 100 hedge funds by AUM were trading crypto in 2021, early 2022. Primarily that was being done with the partner's capital, it wasn't being done with outside capital. And it was being done on a number

of exchanges. I think primarily it was being done on FTX, Coinbase and Binance. But once FTX collapsed, these funds got extremely concerned about counterparty risk. Every single fund that I know of, you know, almost every single fund, you know, maybe there's a couple of exceptions where, you know, they're primarily market makers, but that's really prop trading firms on the hedge fund side itself. You know, everyone basically, you know, was like, wait, we got to take a step back here. I don't want my money on Binance. And everyone really stopped trading. You know, almost every single large traditional hedge fund stopped trading spot crypto, you know, a few people are trading, you know, they're trading with Coinbase, ODC, Bitcoin, or, you know, they're trading CME, CME, but, you know, everyone is petrified,

you know, not even to put LP capital, not even to put outside capital, but everyone is petrified not even to put LP capital, not even to put outside capital, but their own capital on Binance at this point. And I think this will move us in the right direction towards resolving that, but it's going to take years for these guys to get comfortable with counterparty risk as well.

I mean, I think that Binance now becomes the cleanest offshore shop, the biggest and cleanest offshore shop. And I read a I think that Binance now becomes the cleanest offshore shop, the biggest and cleanest offshore shop. And I read a tweet earlier that says, there's a great result. CZ is out of action for three years. That's the deal.

Three years, he comes back. Binance is arguably still going to be number one, number two, and number three in three years. Specifically, Richard's watch is, I mean, Richard comes from a compliance background. He's from a risk management and compliance background, and specifically in countries like Singapore. So, you know, in the right hands to make the shop fully compliant,

you've now got the biggest exchange, which is almost fully compliant, and that's the outcome. Now, Sunny, yes, I'm very keen to hear your views here. If you were CZ and you knew what the outcome was going to be at the onset and you basically knew this is how it was going to end, you were going to pay a $4 billion fine, you were going to get up to a maximum of 18 months in jail, but you would still remain the majority owner of an exchange, and today is the best

exchange, and you get to keep the majority of your cash. Question, would you have done it? Depends on the prison. Listen, let's ask the question now. You know it's between zero and 18 months.

Seems like a no-brainer to me. No-brainer if you don't have a family. No-brainer. I don't have a family. I don't have a family. It's not a no-brainer. They wouldn't let you biohack in prison.

Scott, hold on. You spend over 50% of your life working as a prisoner to working and making money. Here you're saying you're getting between zero and 18 months. Yeah, I agree with you. I would do it. Simon, would you do it?

Simon doesn't. If I wanted to have done it it i would have done it already and the reason we're a lot smaller than the panel we have to be clear here right i'm not saying i would commit a crime i'm saying if you had a binary trade of being worth 30 billion dollars and coming back to a functional business in exchange for six to 18 months in a very cushy i'm not yeah now i'm gonna get fucking edited that was a disaster that was literally a disaster don't don't feel bad lawyers i asked the same question yesterday and lawyers i asked the same question as ryan and lawyers made the same mistake as you scott and then they realized hold on hold on mario to be clear i would not commit the crime it has to be

yes decision you're saying would you if you're saying if i was single and without a family and would take six to 18 months for a lifetime of being a multi multi-billionaire then i would do it i literally couldn't take that deal fast enough okay now we've seen that we've seen that down four billion dollars or 4.5 billion dollars whatever the number is and probably he paid i reckon probably 100 million in legal fees to get to this point plus he paid 175 million in bail um and now there is the potential of the ftx clawback so i mean i don't know if it's real but the people are talking about the fact that binance may have to pay $4 billion if I'm not mistaken back to FTX Liquidator if the

clawbacks are successful. Am I correcting my analysis here? That's what they're going for. But I think the actual amount is more like $2 billion. Oh, I'm just saying.

Simon is speaking. I call you Simon. Should I go down? more like 2 billion um oh yeah simon answered you right simon's speaking yeah simon's i'll call you simon i'll call you simon should i go down uh yeah drop down and let me join you down and back up i hear simon iran may have to go down but yeah go ahead yeah i think this is more of a personal preference now whether whether you know you're happy to be with your mind with your brain for 18 months and nothing else uh or not and and my vote is definitely not fuck that like i'll be depressed what if prison was a hyperbaric chamber or biohacking studio that you could never leave for 18 months would you do that oh a hundred percent

a hundred percent so it's just a matter of our priorities and what prison is right if i can go to prison and maybe like uh get extremely jacked and in super shape and I have the internet, you know, whatever. Hold on. First of all, it's not 18 months. I need a co-host to invite. First of all, it's not 18 months. It's up to 18 months. It could be zero.

It could be six months. It could be three months. It's up to 18 months. It's not 18 months. Second of all, you know, like there's prisons and there's prisons, bro. Like, not like, months. It's not 18 months. Second of all, you know, like there's prisons and there's prisons, bro.

Like, not like, you know, some prisons are prisons. Can you, can you, Ryan, can you, can you answer another question,

Ryan, if you don't mind? The question I asked earlier, the, the market, sorry to pivot so quickly, but I don't want to forget it and then we,

we end the show without asking. So now with, with FTX, remember how, I can't remember which show it was and someone mentioned that we talk about

trying to find the clouds of FTX and Binance still above us. And now SBF will be sorted. That's going to be a big plus for the markets. That was about a couple of weeks ago. And then Binance is the only one that's left. Now with Binance finalized, along with SBF, both found guilty. In terms of the markets, does that move a lot of weight off our back,

especially when talking to the traditional guys? I mean, I think the market should have exploded on this news. I'm actually quite confused as to why the market didn't explode on this news. The biggest gray cloud in the industry. The market's just waiting for an ETF. The market's waiting for an ETF. And the Kraken news is actually bad in theory. How bad is the Kraken news?

I know we talked about it earlier. It's tiny. Come on. Kraken's tiny. Kraken's irrelevant. I think, like I said, it's also just nobody cares anymore. You know, if that Kraken news had dropped when the original Binance and Coinbase news had and the market was getting rocked

and every altcoin named passively dropped 30%, that's just not the market we're in anymore i just thought i'd throw in that binance just launched 50x leveraged bonk futures so uh you know if we think uh the act is totally being cleaned up. You know, it might take a little while. Yeah, on the case study, by the way, of going through an issue, people talk about Tether a lot. But remember, Tether's already been through its CFTC DOJ action. It was just the first one. And it revealed everything.

It said you fraudulently opened a bank account. You lent money between Bitfinex and tether um you know you can go back and see all those cases they've already happened um and by the end of it they figured out how to fix their issue um and they started doing all the reporting and now everyone's still looking for the audit but tether is a case study of going through the shit and then coming back having fixed that issue and still dominating to be number one so even even if you look at exchanges like bitstamp what 20 2013 it was like the end of the world they got hacked for five million dollars then since then, they figured out all their security issues, came back. And you have these resiliency if you can get past it.

And then that builds all the experience of never again, no more. Cool, guys. I think we've covered it well. Ryan, Scott? I think so. I agree. When Ryan, Scott, I think the guard ran. No, I'm saying I think

we've squeezed the juice out of the lemon. There's nothing left. Yeah, I love... What I'm used to is like whenever you guys think it's all done, you just go quiet.

Like none of you rap. It's like just silence. I'm like, all right, cool. I think they're done. It's too much. I have like a six-second silence timer. Silence for four to six seconds

means they're done. Guys, we'll see you again tomorrow. I think we've covered it well. And it's a shame that the market is not responding as we hoped scott are you surprised that the market didn't respond well no oh shit you're i forgot you're not co-host sorry man i mean that was savage that was like the old days i was meeting i was meeting everyone else for you to wrap up go ahead i'm i'm not surprised at all. I think that the market is... Okay, I didn't do that one.

That was ran. That was ran. I promise you that was ran. I'm sure it's not Nast. It's not the host. Just killed that man. It wasn't me. It wasn't me.

It wasn't me. He's enjoying the powers. Have a nice day, guys. Have a nice day. Bye, guys.