The Wolf Of All Streets - BINANCE VS FTX | Binance US Withdrawals HALTED | DOJ | CryptoTownHall

Episode Date: June 9, 2023

Join Ran Neuner, Mario Nawfal, Scott Melker and the guests of the today's Twitter Spaces: Bruce Fenton, Mike Belshe, Travis Kling, Haseeb Qureshi, Bill Barhydt and more! Crypto Town Hall is a new daily Twitter Spaces hosted Scott Melker, Ran Neuner & Mario Nawfal. Every day we discuss the latest news in crypto and bring the biggest names in the crypto space to share their opinions. ►►OKX Sign up for an OKX Trading Account then deposit & trade to unlock mystery box rewards of up to $10,000!  👉 https://www.okx.com/join/SCOTTMELKER ►►THE DAILY CLOSE BRAND NEW NEWSLETTER! INSTITUTIONAL GRADE INDICATORS AND DATA DELIVERED DIRECTLY TO YOUR INBOX, EVERY DAY AT THE DAILY CLOSE. TRADE LIKE THE BIG BOYS. 👉 https://www.thedailyclose.io/   ►►BITGET GET UP TO A $8,000 BONUS IN USDT AND GET MASSIVE DISCOUNTS ON TRADING FEES! 👉 https://thewolfofallstreets.info/bitget    ►►NORD VPN  GET EXCLUSIVE NORDVPN DEAL - 40% DISCOUNT! IT’S RISK-FREE WITH NORD’S 30-DAY MONEY-BACK GUARANTEE. PROTECT YOUR PRIVACY! 👉 https://nordvpn.com/WolfOfAllStreets   ►►COINROUTES TRADE SPOT & DERIVATIVES ACROSS CEFI AND DEFI USING YOUR OWN ACCOUNTS WITH THIS ADVANCED ALGORITHMIC PLATFORM. SAVE TONS OF MONEY ON TRADING FEES LIKE THE PROS! 👉 http://bit.ly/3ZXeYKd  ►► JOIN THE FREE WOLF DEN NEWSLETTER, DELIVERED EVERY WEEK DAY! 👉https://thewolfden.substack.com/   Follow Scott Melker: Twitter: https://twitter.com/scottmelker   Web: https://www.thewolfofallstreets.io   Spotify: https://spoti.fi/30N5FDe   Apple podcast: https://apple.co/3FASB2c   #Bitcoin #Crypto #Trading The views and opinions expressed here are solely my own and should in no way be interpreted as financial advice. This video was created for entertainment. Every investment and trading move involves risk. You should conduct your own research when making a decision. I am not a financial advisor. Nothing contained in this video constitutes or shall be construed as an offering of financial instruments or as investment advice or recommendations of an investment strategy or whether or not to "Buy," "Sell," or "Hold" an investment.

All right, we're good to go. Scott, how are you? Good, buddy. Bring me up as co-host so we can get you guys up. I already sent you an invite. Bill, I've sent you an invite. Dave, all of you have an invite via DM. Dave's already up. Bill, it's in your DMs and Rand will be joining us 30 minutes after the show ends, as usual. Yeah, perfect. So sometime in 7 hours cool mate so I heard that we're going to be doing a series on what's happening in crypto because it's just getting more and more interesting is it a sitcom or documentary

no no it's similar to billions it's just going to be called thousands because you know there's no billions anymore in the market it's going to's gonna be called hundreds i have to say uh that was just a joke i used to joke that we were a community of thousand errors very impressive but um i have to say man listen you kind of warned me in advance uh that once you start covering news and going down the breaking news rabbit hole and you're

on spaces and committed every day that would become all all consuming but i don't know how you do what you do man i had no absolute idea we obviously had this conversation yesterday and i would say that i've spent 20 of the 21 last hours not sleeping having conversations in the background about all the things that we've been talking about this week it's insane it's crazy the amount of connections and people reaching out to you from the spaces and the amount of and then you're in a position where you get all this information but you just don't know what you can and cannot share i share nothing yeah the loose lips sink ships right um it's but more more importantly i think it's just very um difficult and a weighty responsibility to carry it with you and decide how to you know proceed

obviously so pretty crazy man you should see ftx is everything we're going through now on on steroids and ftx was meant to like i've obviously we've covered we've done a lot of shit since like from from trump's indictment we're covering that live to the first indictment to um a silicon valley bank twitter files the list goes on like all this crazy shit we've done to this day still nothing compares to ftx because it was the intent because i've never done it before either so that was like the first time i'm um you know acting a pretend pretend journalist and then you get all the shit you don't know what to share and like things you say could impact the market very heavily i still got people pissed off at me um because of the things that we mentioned in those spaces even though it ended up being accurate and you'll go through this again like i didn't expect for us to go through this shit again

like this is uh this is everything we're going through this week is maybe the the sec action okay that makes sense the doj and binance caught me by surprise uh to an extent because we've been people been talking about it for a long time um but then then the story of yesterday the the to have another reg a u.s regulated entity um get bailed out is unexpected and not sure what you can or cannot share, Scott. But also I want to mention one thing is there's a story I've mentioned before. I had, there's a gentleman I know well, he's an ex-regulator, very well-respected guy. And we met a couple of times to bring him in as an advisor to IBC and get his advice.

And then he was telling me that he got offered a few times for over a year, year and a half, offered to be, I think, chairman of Binance. And he's rejected constantly. And I'll go to him. I'm like, man, it just doesn't make sense. You're rejecting an offer from Binance to be chairman. I understand if some random exchange, et cetera,

but we're talking about Binance here. He's like, Mario, look, all people in the traditional world are telling me to stay away. Regulators are eyeing Binance and expect to see things soon. And I'm like, yeah, I'm sure they are. And Binance did some things wrong a few years ago.

And he's like, I'll look into it again. We met again six months later, same discussion. And then we met again after FTX. Again, I gave him the same advice. I'm like, hey, this is Binance. We're not talking about ftx here and um i don't want to meet him again he just sat down this time so i don't want to meet him i'm like bro he's like mario you're free for a meeting no man look i'm busy yeah i mean we all know obviously that brian you know first of all i was friendly with katherine coley i've said she was the first person i ever interviewed on the podcast literally um and i was sad to see her go at that time and

then obviously she somewhat disappeared and it became this grand mystery and then brian brooks only lasted about two months there right uh and both of them have somewhat you know if anyone's dug through their their commentary it's been that they just didn't feel like they had transparency that they needed and that obviously they just weren't comfortable that they weren't really in charge and seemingly kind of both exited. And so I'm not surprised that somebody reputable that you know would have stayed away from that situation

even after just seeing that. Yeah, I mean, if you think about it, guys, if you think about it from that position, you think you think to yourself look we always knew there's a risk that a lot of these tokens are unregulated securities we always knew that there was regulatory uncertainty so what is the upside for someone coming on board like this the risk is so big you know you think about that the risk is you you're associating yourself with an industry that you know isn't hasn't been clean hasn't been clean from the start and outside is maybe a couple of extra bucks you know what i mean it's it is quite a quite a big trade-off i must say that i spoke to our research team earlier this year when bnb was like a 330

bucks or something and i said you know we're just we're speaking and i said guys i think we should sell all our bnb and we actually did and the reason why we sold, I actually did it on one of my shows. I said, I love Binance. I love BNB. I think it's a great token. I think the exchange is unbelievable. But when you have an exchange that's the market leader and has 80% market share,

and you know that the only way from there is actually down because you knew that the regulatory attacks were going to come. You knew that the regulators were going to have a feel down Binance. And so your upside was very, very, very limited. And your downside was all the way down

to wherever it goes. If there's criminal, if there's DOJ charges and whatever else. So I kind of get it. The risk return profile wasn't aligned. Yeah, true. But then it can only go down relative to the rest of the market.

But if the entire market goes up still still, the argument you've made, you can make it for Ethereum or Solana or Ethereum, a protocol that has a big market share as well. Actually, I remember very clearly when I did the show. The whole show was I sold my BNB and I bought Coinbase. I think BNB was like $300, $330 and Coinbase was in the $40s. And I did a show around selling BNB and buying Coinbase. And this is exactly the thesis that I used on the show. I said, I'm selling BNB because I think the upside is very limited. It's the biggest in the world. And when you're the biggest in the world, chances are you're probably going to lose market share. If you don't lose market share naturally, you're going to lose market share out of regulation, regulatory tax. And then I thought, who would be the biggest custodian? Who would be the biggest winner in this legal battle? And I think that long-term,

Brian Armstrong, because he's run such a clean show, he's run a cleaner show than probably any other, I'm not going to say any, but most other exchanges in the world. And so if this industry is going to survive, and I have no doubt that it will, then I think that he's got the highest chance of winning the biggest prize. And when I looked at the two market caps,

for me, it was kind of like a no-brainer. I'd say, look, if I do believe in crypto, and I do believe in crypto exchanges, then my bet's going to be coinbase i asked cc the same question i think cc aren't you worried that you know as the biggest one you're going to get attacked and you know aren't you worried that you're not going to continue to grow and he came and he said well um exchanges are about liquidity and network effects. And we have the network effect of Binance. And I remember thinking to myself, it's a good answer, but it doesn't satisfy me.

And I mean, at the time, we got completely out of BNB. We got completely out of BNB. And I mean, I'm not saying, by the way, I'm not saying that it's the end of the race at all and maybe i'll be proven wrong but i'm just saying from a risk return profile it just didn't make sense let me ask you another question something before we open it up get a market update and open it up to the panel there's something you said yesterday which is something i said in 2018 at least internally and that's we're never gonna see the same thing we saw in 2020 2021 we're never gonna see it again now that regulation is finally here. But then the narrative was the same back in 2018. Do you still stand by

those words and what makes it different this time? Yes, I definitely stand by it. We'll never see another bull market like the one we saw in 2017, 2018. And certainly we're not going to see it. We got another bull market in 2021. I'm not saying we'll never get another crypto bull market because i actually think we're going to have many many crypto bull markets but i just think that they're going to be very different it's going to be different health i think the moves are not going to be as big i don't think that we're going to have um uh 10xs and 100xs i don't think that we're going to have VCs buying in. Mario, let's just, between us,

and I'm sure we can talk pretty openly. I'm very open. I'm very transparent. It doesn't make sense. I definitely believe that VCs should make outsized returns for taking outsized risk. And I definitely believe that the smartest VCs

should be allowed to buy into early rounds. And when the company becomes liquid, they should be allowed to sell some of their tokens at huge premiums. But what I don't believe is that the time from investment to realizing the return should be one week. And this, I mean, right. I mean, this is, i'm glad you're bringing

it like sorry to interrupt but this is one of the the thing i got a lot of slack for saying this i was with on stage with simon dixon prior to ftx prior to everything in the early days this i said the same thing the the the incentives are so misaligned the way that that vcs and then the vc lockup is right anyone doesn't know anyone new to crypto let me just give the basics and i'll let you continue but what happens in in the traditional vc world is vcs invest early okay so they get the opportunity to make outsized returns you got a bit of feedback sound uh right um but then there's a lockup period there's no liquidity there may never be a liquidity event so the company could boost boom in valuation but then never list and then

collapse afterwards so that's how the traditional v world works. You invest and you wait years before you possibly get a liquidity event. In crypto, what happened is that you'd invest as a VC and you get a liquidity event within days or weeks because the token lists immediately. And there's an immediate unlock for most of these VCs, for most of the projects. And I don't blame the projects, and I don't blame the VCs. I think it's more systemic. The reason I say this is projects that don't offer that immediate lockup, they just struggle to raise the money as quickly

or they get the same valuation. So then some projects don't want to offer that lockup, but they see everyone else doing it, and they do it as well. Really good projects didn't, and so I respect them. And that VCs, a lot of of vcs just one last thing a lot of vcs resisted from from from having that unlock but then when they see all other vcs get that unlock and sell it and cover their principles so you put it let's say put in half a million dollars in a project then they unlock they give you 10 of the tokens use they'll and there's a 10x you make that 500k back and then

the rest of it is all pure profit that's the model that was significantly flawed and led to herd mentality no that's one of the models that was significantly flawed in this market and that's why we need some kind of of regulation and listen we're guilty of it we will be bland we we bought into many everyone is we bought into many projects because we had access, because we have a research team, because, because, because. And we got lots of these liquidity opportunities. We really did. But I think what I'm trying to say is that we will see a bull market,

but we won't see a bull market where tokens do 10x and 100x. And I don't think we're ever going to see another bull market where meme coins that knowing that that knowingly go out into the market and say we have no use case this is a casino we'll go to five six seven hundred million dollar market caps over a weekend or over a week period i think that those days in the next bull market will be finished and to be honest it's it's great let's. Let's get down to business. Let's get down to actually making sure this technology is going to be used as opposed to getting people to use ERC-20 tokens that anybody can mint

with no use case and have money flowing in and out of there and wreck anybody that comes into the space. Let's just get down to business, guys. Honestly, let's just get down to business. All right, Scott. We're done with our rant. Maybe give a market update and a news update. I've got a panel. But we should come back to that later because I think

you wildly are underestimating human growth. I agree with you. I'm not as optimistic as Ryan. Pepe is literally happening like this month and we're talking about it's not going to happen again while regulators are scrutinizing. I think that I do agree that it will not be the same whereas if you remember in 2017 everything went up 50 or 100 x at the same time in the bull market or in waves i think that what we'll see in the future is these sort of pockets like we've seen with metaverse

summers or nft summers and d5 right where uh things and things, where we have very select groups that go up. But anyways, the market update is boring, but I would say that boring is probably good considering the news cycle that we're in. Bitcoin at 26, 631, flat, Ethereum 1847, stocks, I mean, literally everything is just flat, boring, and that's fine because, listen, I think we should just go ahead and set the table and get into this because we have everybody that we need to continue this conversation. David Bailey is here. We dug in very deep yesterday and largely based on his tweet, which I'm going to go ahead and pin up in the top of the nest right now, which said,

major custodian about to declare bankruptcy without last minute bailout. Take your Bitcoin off exchanges, even Bitcoin only platforms. Right. And then obviously, as we discussed that death, getting a million calls, as we talked about in the background, the news eventually broke that afternoon. Mike, welcome. Mike Belch is here, the CEO of Bitco, that Bitco was buying Prime Trust. Now, listen, everybody was sort of positing that Prime Trust was the custodian being discussed. Everybody danced around it, and nobody gave the name. Well, now we obviously, now we can discuss whether it was actually at risk of bankruptcy or whether they're going to be insolvent or what the story was there, why BitGo decided to buy them, whether this is simply a maneuver to improve BitGo's business, Mike, or whether it was actually a bailout. We can get

all those things. But clearly, there was some resolution, I think, to this story. Mike, you there? I'm here. Hi. Hi, man. I think last time we spoke was a consensus, but not this year. I think we sat down. And so a lot's happened since then. I think that the market has dramatically changed. I think we should start to just dig in to the basics. I mean, maybe even just set the table. What is the role of the custodian? What is Prime Trust's core business? What is your core business and why does it matter? Sure. So yeah, let me describe what BitGo does a little bit. Then I'll try to describe a little bit what Prime Trust has been doing a little bit. And then we can talk about

the events. It's funny, I get into this Twitter spaces here, which I don't do very often. And this Prime Trust bailout, and I kind of hear those words and it makes me cringe a little bit. It's not quite how I see things. But obviously um it's not quite uh how i see things but um obviously it's been a strained time for our industry and what matters most is that like we're able to keep stability and you know make sure people have their money um so let's talk about what a what a custodian is a custodian is is a guy that does safekeeping it's actually a pretty simple job um i give you the money, you give it back. Qualified custody, which is what BitGo does, is the idea that we do that in a regulated context

where we never commingle assets between clients. We do some reporting around it. And then from a legal perspective, no matter what happens to the custodian, your assets are your assets and never get tied up in bankruptcy. And there's probably some people on this call that are still feeling the sting of the Mount Gox bankruptcy, which is now nine years ago and still not settled. FTX, we'll see how long it takes to get assets back to clients, but it's going to be years, right? Bankruptcy is a really painful, painful process. So the role of the custodian is to kind of help with all this. It's an independent party. It's part of a critical mitigation of risk in trading and markets. And you

find custodians in a number of roles in traditional asset classes by quite a bit. So BitGo's got four trust companies around the globe. We have BitGo Trust New York, that's a New York state charter trust. By the way, DTC, which holds all of the equities of the US trading system is also a state chartered New York trust company. We have a South Dakota trust in Sioux Falls. We have a Switzerland trust company and a German trust company, Regulator Boffin, coming soon in Singapore and Dubai. So in regards to what we do, we tend to hit institutional players. And I've been in this space now over 10 years, and you hear this, not your keys, not your coins. I totally agree with that. And for the retail folks that are on this call, you should be figuring out a little

bit about how to manage your money and how to take ownership of it. And if you don't need it on an exchange, and if you don't need it in a wrapped form, and you're not using it on DeFi, you should absolutely pull it back to safety when you can. And then there's still a real need for institutional side. And this is where all of us want to have trading markets and businesses participate in crypto and digital assets. And when you're talking about businesses, well, you've got to have business continuity, right? Businesses are interacting with people and whether it's somebody that's just a t-shirt vendor that takes payments in crypto,

they've got a bank account, right? And traditionally they would have a bank account where they receive money that they get from the products that they sell. If they're doing that in crypto, they're receiving money again from the products that they sell. And typically a business would have an ability for multiple people to be on the account. If something happens to the CEO, the CFO can step in. There's controllers and auditors and things. So when you're looking at institutional finance, whether it's at a small business level or a major financial institution, you always have a need for this custody component. You don't just give it to the IT guy to put a ledger in his desk drawer.

By the way, there's far too much of it that does happen even to this day at edge funds across America. But this is the product line that BitGo has been pushing. So we tend to hit businesses. We've got about 1500 clients around the globe. And a lot of times, those are kind of B2B2C context. So we work with other businesses. They are the front lines to their clients for whatever business they're carrying out. It could be a payment system. It could be a broker dealer. It could be an exchange.

We provide hot wallets where they can hold direct custody themselves, where we hold one key and they hold two. And then we do a lot of custody these days as well, where we hold all the keys for business contexts. So that's what BISBO does generally mike sorry it's ryan speaking just uh a question about regulation of custodians in in the united states where i take it that you guys are domiciled are you guys regulated and if you're regulated like what regulations actually apply to you how do they bring in crypto regulations or how do they bring in old world regulations into crypto? Yeah, we're heavily regulated. So here in the US, we have state charter trust licenses, like I said, in both New York and in South Dakota. So these are two different companies or two subsidiaries. Sometimes we take clients into

New York. As you know, New York has some special rules around crypto that started with their BitLicense. The New York Trust entity that we have allows us to provide products and services to New York residents. Most of our work we do through South Dakota. And, you know, sometimes people ask, like, why South Dakota? And you may know that, like, in general, companies incorporate their businesses in delaware because delaware has the best uh laws for for corporations in the u.s and south dakota happens to have the best laws for trust companies in the u.s so there's a ton of trust companies in the u.s out of south dakota um so what we do who regulates you is it is it the sec is it ofAC? Is it the CFTC? Who's the regulator that you guys are speaking with?

So we are regulated in New York under New York DFS. We're regulated, of course, by FinCEN. All of us are. And BSA applies to all of us individually and as businesses. Let me ask the tough questions, if you don't mind. First, Mike, appreciate you coming on Spaces. I know you rarely do this. So why acquire Prime Trust? Right.

So Prime Trust? Right. So Prime Trust has been, in some ways, a competitor to BitGo. They've built up a business. They do a slightly different business model. And they've got a number of clients that we could add into BitGo's team. Look, we're going to obviously apply the BitGo platform and carry that forward for clients. A couple of things we wanted to do here. First off, for the people that are clients of Prime Trust, we want to make sure that they have a strong go forward platform and BitGo can provide that. As a custodian already, we can kind of consolidate these and run them very efficiently

between each other. And I mentioned this B2B2C. So the features that we offer our clients for how they can go to market as a B2C firm are many. And then Prime Trust offers some slightly different ones. They've got more direct ability to take retail, on-ramping of fiat and crypto at small numbers. That's something that we haven't done. So we're not a retail company. We don't want to be a retail company, but we want to make sure that we're providing good service to those that are building B2B2C companies. And we can add some real important pieces to our platform. Mike, I'll ask you just another question so so based on block versus block works his piece they needed uh 25 million dollars um what can you share in terms of how prime got to this position

and that's the first question and then the second question they lost most of their customers we're talking about it yesterday so why acquire them rather than just let them to be honest and i'm going to be brutal but just let them die out yeah um well first off i haven't seen the blockworks article um they basically spent too much money and you know we're we're still in process with with prime trust so as you know we're going to obviously go do an exhaustive look and And our intention is to make a safe landing for everybody through this process. I'm not sure I'm able to say yet exactly what things we're going to find. I'm hoping that it's not going to be anything unexpected, but we will deal with it as it comes. And then why buy it? You're right. They've lost some clients and obviously so the the price is is cheaper as a result of that um but they still have a healthy business and actually we think we can grow it and

um using the combination of what bitco has with you know the pieces that they have and the client base they have we we actually think it makes business sense so um yeah they ran out of money they spent too much you know it's actually a pretty common thing. BitGo has been in the crypto space for 10 years. We've been through four crypto winters, kind of ups and downs. This is one of the most treacherous business climates to survive through. You got to be ready for the biggest highs. You got to be ready for the lowest lows. And they kind of keep going in alternating fashion. So there's been a lot of management that hasn't survived that i wouldn't you know i wouldn't say that just because you've done it a few times you're you're just always out of the

out of the woods for the future but um you know not everybody's navigated it super well um i think you know from the investment side you know this latest crypto winter macro winter whatever you want to call it you know there, there's hundreds of companies in the crypto space that are running out of money right now. And they've got about six to 12 months of roadmap left. So like Prime Trust was one of the bigger ones that ended up running out of money. But hopefully other than that, it's actually not actually a really serious problem. And we think we can turn this around. And Mike, they raised nine figures 11 months ago or 12 months ago correct and it's a lot of money to run out of they they were spending at a ridiculous rate spending but by spending on what advertising expansion uh just just blowing the money i mean

you you've the the biggest cost that goes into any business is people. And they just way, way overhired. So, look, I don't want to get too much into detail of it, but they really did spend a lot of money. And I don't think the team there would mind my saying that the management team had not managed that well. Right. I mean, they fired their CEO in November. Right. So, it's not altogether surprising that during that period, there were some issues. Yeah, that's right. Look, the things that I've seen so far are just surprising. I mean,

I wouldn't have run the company that way. And Jor, who's come in, I think has done an admirable job in the last six months of really turning that around you know they had to do a few different cuts of people um to kind of get the ship back to a semi-righted place um and it's been admirable so um you know they're working through it it's it's really just like yeah you spend that kind of money and then you hit a big downturn and if your revenues are not solid because you tied them too much to just transactional revenue, you could find yourself in a very bad place. So Mike, I'll ask you and we'll move on right after this one or two more tough questions. And we left the toughest ones to the end. There's been rumors and we tend not to mention rumors here unless we can verify

that, but is there holes in the balance sheets that you guys have found as you do your due diligence we're going to go through this and and we won't take this thing if we can't have all clients be righted so um you know if there's any holes that are there like you know maybe there'll be a different uh um a different outcome here but no no we don't have um uh it doesn't make business sense for somebody else to come in and fill a hole uh if you know that's just money down the drain right um so i wouldn't be talking here if there was some you know big insurmountable problem um that's uh that that was going to make it not work um so i don't know if I'm answering your question enough. I actually don't, we haven't done enough diligence to know that everything's perfect. We do know that they were spending a lot of money. There's some management issues that you're concerned about. So the way you approach these is, I've now got a team of legal, financial,

regulatory auditors that come in where it's going to be a heavier diligence than what you would normally do because you're picking something up that you got to really understand what the risks are and what risks are we assuming as we go through it. And that has to add up in a way that still makes business sense. And the previous question you just asked me was like, well, why would you do this? And it's because, well, wait, we do see the ability to do this. Bitco's got a strong custodial team. Our compliance team is fantastic. So we can absorb this in and start to make it really efficient. But of course, that's only true if there's no big hole or- Yeah, the reason I asked this and beyond just

rumors, the reason I ask this is having raised $ million dollars last year, we're in the midst of a bear market for them to be, you know, a year later to be $25 million in the red, um, just seems very surprising. Um, so I'm sure you guys will do proper due diligence and, um,

and, um, you know, wish you guys all the best with the outcome, Scott. Just real quick on the spend that they were doing i mean the monthly burn that was coming through like last summer i mean it's just it's just shocking and it's just being spent on garbage on just way too many people that you didn't need and

the market's collapsing around you just just mismanagement i mean really so uh you look at these numbers like who would do that it makes no sense so i you know it's why they had to make some management changes hey Mike, can you speak to the process of what happens if a custodian does go bankrupt? As I've tried to do a little bit of research into this, it seems like it's very complicated, much more complicated

than you would think. Would users have access to their funds if a custodian went bankrupt, or would it be encumbered or locked up in a bankruptcy process uh until its conclusion you know i wish i were an expert on this so custodians don't really go bankrupt very often um you know this is a place where i'm going to sidestep a little bit but the the regulators can really help forget about crypto like people where if the custodians of size are allowed

to participate in digital assets, I'm not talking about oversized participation, but just a little bit. Instead of having a few relatively small and up and coming custodians, if we had just some good medium size and larger size able to participate with some of the load of the digital asset work that's happening in the United States, end investors, retail investors would be much better protected and none of this would happen. All right. So typically custodians don't take risks, right? And because the traditional firms can't participate because the regulators are locking everybody out. Instead, smaller firms are having to take on that job and the market structure doesn't exist. So they're having to build the bridges for how to make that happen.

And building the bridges, it takes time to get the risk out, the counterparty risk, the market risk, all these pieces. All right. So we don't usually see custodians go bankrupt, which is why you're asking a very good question of like, what's going to happen? I think we're going to see a little bit of it's variable based on kind of which state it is. So this, if prime trust were to fail, that'd be Nevada, right? If it were one of BitGo's entities, it would be those. And then what's the process? I mean, I think it's going to be, there's going to be a significant kind of legal look

at that. Good news. Look, the books and records will show whose assets are whose. I think where the segregated assets are found, it'll take a little bit of time. I think it'd be measured in months that those assets would be returned. And then the creditors would only be fighting over the non-customer assets. So the big difference here between a custodian and like an exchange, when you deposit, and by the way, we talked about Coinbase. I also think Coinbase is a generally

good actor. They've been building over 10 years. There hasn't been market structure. So this isn't intended to be a criticism. But when you deposit at Coinbase, it's not going into a trust company. They do have a trust company, but it's not going into the trust company for general deposits. It's going into Coinbase. And if for whatever reason, the next day Coinbase gets shut down, whether it's SEC stuff, whether it's a failure or a hack, who knows, all the assets that were deposited at the exchange will be tied up in the bankruptcy. This, of course, exactly what's happening at FTX. Now, FTX was not a US firm, but the same principles apply. So anyway, I wish I had a perfect legal answer.

I think it's going to be complex. With a qualified custodian, it's much faster for the segregated accounts to get returned back to the proper owner. But of course, there's going to be a little bit of a look at it. The thing about a qualified custodian is the regulator has a regular look at these companies. So we have an ongoing dialogue with our regulators. They know how we do our books and records. If they had to come in and take over, they know roughly what they would see and what the quality of that, of what they would see is, which allows them to be able to quickly split like, okay, here's the client assets that are separate. And there's never been, by the way, a custodian fail

in the US ever where segregated customer assets didn't go back to the customer. It just doesn't happen. So it just doesn't happen that they get tied up with the custodian's assets. So the good news is that whatever failures there are at a custodian will be completely penalized just on the investors of the custodian. Hey, Mike, when you started, you sort of pointed out that you didn't like the term bailout, which is fair. Blockworks obviously used it in their article as well, just referencing it. Why do you take issue with that being the terminology? Was this more, as I kind of hinted at the beginning, a strategic business decision? Were they actually not

at risk of being bankrupt as was reported by next week? I mean, look, their business model wasn't working and they were running out of money for sure. But we're able to, and if they were healthy, would we have done this deal? No, we probably wouldn't. They probably would have been looking for a much bigger valuation and probably it wouldn't make sense for us to do it. But with where it's at, we're able to do it. But with where it's at, you know, kind of we're able to do that. The thing I don't like about the bailout is, I don't know, it puts a negative shadow across

everything. And what I hope that people are going to hear out of what's happening now is like, look, we're going to make this thing work. And if you're using prime trust, it's going to be purely an upgrade on the other side of it. So maybe this is me reacting from a business business side of like i want to make sure the business goes well um which is not intended to be entirely selfish but i recognize as at least partially selfish um i mean that's why we're doing it is to go make the descent for uh charity obviously yeah so um anyway that's uh i uh look and then the other part of this which i think is good, is that if the industry is able to kind of capture these things and not have financial institutions go down, it actually signals a lot of strength. In spite of the bombs exploding around Binance and Coinbase and Ripple and all that other lawsuit stuff, look, there's a lot going on. I think several of you have been here all

the way for the last 10 years. Back 10 years ago, it was primarily just Bitcoin. We were all talking about what happens when you finally run into the battle between the government and digital assets. And if there's one message I get out to all the Twitter folks that are listening, we are all on one team. The team, it's not like Bitcoiners versus altcoiners. Like they're coming after Bitcoin too. And it's about money and it's about power and it's about freedom. And, you know, so right now there's some cases that are around, you know, a number of these, you know, in the secondary chains. And I'm not trying to comment on the strength or weakness of it. I think there's some legitimacy to, you know, what you guys were talking about earlier. But, you know, we as an industry have to pull together and make sure that we keep all this stuff going. And we want anybody that's on the digital asset side to be winning these cases with the SEC, because you might think you're safe with Bitcoin, but you're not. You know, that's just the next step. Can we dig into that a bit more? Because that is definitely a very, very, very clear belief in this space and one that I also refute.

But I would love to hear your take on that. Well, my take is, again, money and power kind of overlap. And we have a brand new model here. And there's a lot of people making money on the traditional financial system. And it's got its strengths and weaknesses. The good news is that software has invaded into the financial system for the first time. We've crossed the modes, the regulatory modes, which kept software out. Now we've got innovation. It's a global scale. So it's no longer partitioned neatly by nation's borders. These are problems that have never been solved before.

And so now there's a new way to do it. And there's a fight going on for who gets control. And it's not so much about, is it a digital asset? Is it Bitcoin? Is it a store of value? Is it a smart contract? No, it's about power. So we have to have these fights. It's great that the fights are happening now because they happen sooner or later. And if they're going to happen, I'd rather be in the fight and go figure out what happens next than not be. But this is a big shakeout that's going to happen in terms of figuring out what the rules of the road are going to be. And although Bitcoin has so far been unscathed through this, it will be the next step because we're talking about a major financial upheaval and that's a major shift of power. And of course, people that are in power don't give up power

without a fight. So anyway, I think kind of bringing it back, the ability for our industry to bail out or merge together with other small firms to make sure that clients and investors are safe is awesome. If we can continue to do that, regardless of where your own personal financial net worth may be tied, whether you're part of the XRP army or the Chainlink Marines or whoever else, we can be fighting together actually to help make change in the digitalization space. And yeah, I think it's important. David, jump in. Yeah, my only question, Mike, first off,

I'm very glad you're stepping into this deal and kudos for picking up the torch here. I think a three-month lockup or some period of time where users couldn't access their funds would be a major black eye for the entire industry. And so thank you for taking the chance here. The one question I have and concern is, let's say, for whatever reason, BitGo decides to step away from this and there is that lockup period. Is there also a clawback risk? Could a custodian be subject to a clawback risk similar to how FTX users are? And could you see basically people who have no idea that their funds are connected to this

and are seen several hoops away um uh it's still be affected i mean like you're getting into a really complex legal question i don't know what i've seen from the legal procedure i mean as you know like bitco didn't work with ftx prior to the collapse but the new management team you know they needed a custodian after the collapse and so they moved all the assets over to BitGo. I get a little bit of look at what's going on and, of course, read the news like you do. I don't know. The bankruptcy code appears to be maybe the one thing that's more antiquated than our financial markets, frankly. The good news, it doesn't happen as often.

So I think it's less pressing to have a smooth transition on bankruptcy code, but it's really complicated. So I'm just not expert enough to be able to give you actually any answer that wouldn't just be pretty wild speculation. But yeah, bankruptcy, it's a mess. And it's also different in every state. And of course, it's federal. It's a mess and it's also, you know, different in every state. And of course it's federal, right? It's a mess. It's a very different picture though, right? Because in FTX, customer deposits were a claim on the company, whereas trust accounts are not property of the company. They're separate. And so I don't believe you're going to have that risk at all. The only

risk is if there's a fraud, there's no allegation of fraud, just to be clear, then that's a different story. But I have a question for you, Mike. So you have a non-binding term sheet, prime trust is losing money, they've lost a lot of customers. Who's providing the liquidity bridge to ensure they can continue operations? And when do you expect the definitive docs to be signed so the deal is actually completed? To some degree, I get into a deal.

I got to kind of keep quiet a little bit. I don't want to have this call be affecting any negotiations or things that we have to discuss later. So I'm mostly going to sidestep it. But as far as I know, they are able to operate right now just fine. And we are obviously going to go into diligence and try to run through this process as quickly as possible, because I think that's the thing that we do to get the best business on the other side of it. So you were buying, was it customers or capability? You alluded to the fact that they have the ability to access a retail account base. Their largest customer was Binance and they provided a fiat ramp to Binance and Binance has issues. So it doesn't look like there's much revenue there. So if you could be a little bit

more precise on what exactly were you buying customers or some kind of capability or some type of new market opportunity? This is acquiring the whole thing. So it's a full company purchase. I mean, the motivation, the central motivation that animated the deal. It's a combination. I mean, it's everything, right? So look, there's people over there. There's some good people in terms of the team. There's some good clients. There's some business. There's some capability. And we can take all of that and we can run it more efficiently than they can. So that's the main thing. And then how we navigate this path, look, we're just getting started on it. So number one, want to make sure we shore up the

business so that it can kind of continue. And I think we'll get there pretty quickly and then there'll be some uh machinations to affect the combination um and uh hopefully in the end we have just like a stronger product and service and like everybody forgets that we had this call and um it's off the races do you need regulatory approval on this transaction yeah of course i mean uh anytime that you're doing a change of control of a regulated financial institution, the regulators have to be part of it. We don't anticipate any problems. We've already spoken to regulators.

Regulators are usually pretty sympathetic because they also, you know, they take a lot of pain if something fails. Mike, let me ask. So the reason you seem a bit hesitant, there's just one question I've been asking permission to be able to ask it to you, and I finally got permission. So there's rumors, and, you know, those are rumors,

but the sources give me enough confidence to at least ask the question. The rumors are that one custodian has lost the private keys to one of their wallets. We don't know who it is. We don't know more details. And this is unconfirmed. Have you heard those rumors? And are you deep enough in the DD to know whether this could apply to Prime Trust?

I've heard the rumors too, but I don't know where that is. I can tell you it's not Biko. We spend a lot of time making sure that we got those things nailed down and figured out. So look, we've got more diligence to do to make sure that we know everything that we need to know. And I anticipate we'll be able to get through this all. And last question, how deep are you in the DD? That's the last question. And by the way, I want to, again, give you a massive shout out

for coming up and having these discussions. This is the transparency we need in the ecosystem. So hats off to you. But last question, now that I've taken my hat off for you, is how deep have you gone into the DD? Well, we're just getting started, right? So, I mean, it's early. And as I alluded to before, diligence is a complex topic.

And we're doing coordination meetings now of really getting some pretty big teams involved. Mike, I don't have any more questions. I think it was a really interesting conversation and one that I appreciate. So, you know, you've got more BitGo fans here in the audience now. Any more questions from the audience? Yeah, I think there's a 100% chance that everybody wants this to go through,

wants this industry to proceed with confidence and in all of our, obviously, platforms. And the best news is that this goes off without a hitch and this is far in the rear view and that BitGo continues to be the reputable, incredible company that they are, which I think we all expect. Mike, I know you had one more thing to say,

but then also then I want to jump to Bill Barhyde after Mike, you finish up here because Bill, Abra obviously is listed as one of the current clients of Prime Trust. So yeah, I was going to ask Bill, are you feeling more or less comfortable after this discussion, including my last question? And let me see if you've blocked me yet.

You have not. Cool. By the way, you know, Bill and I have known each other since, I don't know, 25 years, I guess, back to all the way to Netscape. So, I don't know, we didn't see each other for a very long time and suddenly we found ourselves in the crypto space on a seven or eight years ago together. Um, and Mike, if you guys didn't step in, I'll ask the last question. Sorry, but if you guys didn't step in and prime trust, if the rumors were true earlier rumors that prime trust would not survive next week, if prime was to fall, um, and none

of this is a hypothetical that is behind us now, uh now assuming all the dd goes well what does that mean for the ecosystem and i'm asking that question because i'm seeing it in the audience questions and for the audience there's bottom right corner that purple circle that's where you put your questions but i've seen people are confused like mario is how major is this how how large are they because i know they've gotten a lot smaller over the last few months and years um and what does that mean for the ecosystem if the deal does not go through? And I'm talking about worst case scenario, which seems like it's behind us. Well, look, I think the rumors are always, they get a little bit more dramatic and more worried than they need to be. So first off, the rumors are probably worse than anything else.

And then in terms of how bad would it be, Prime Trust is a significantly smaller custodian than BitGo, pretty much by every measure. Now, if you were at that company and it failed, hopefully it would be an orderly unwind. So remember we had Silvergate Bank, which was the first bank to fail? We... It didn't...

I know them very well. We were the first ones. One of the executives came on this show before anyone was talking about Silvergate and went through questioning, and then that led to the fall of the dominoes. So me and Silvergate go back, and they don't like me.

I mean, look, I've said it before. I mean, the problem that Silvergate had, they were victims of their own success. We had 100% of the trillion-dollar asset class Look, I've said it before. I mean, the problem that Silvergate had, they were victims of their own success. We had 100% of the trillion dollar asset class running its banking through Silvergate Bank, a little tiny San Diego state bank. What we should have had is instead of 100% at one bank, we should have had 1% of money flowing through 100 different banks. And then that never would

have happened. But anyway, that was an orderly unwind, right? And I suspect it's still ongoing. I don't know. I haven't heard of any significant problems there. And I would anticipate that if prime trusts were to fail or if anybody else failed, it's probably an orderly unwind process. The regulators would step in. Now, this is not FDIC insured assets, right? So if money's missing, that's where you run into problems. But if your job has been done right and you have segregated assets, then there's absolutely no reason why it should be anything other than orderly and just taking a little bit more annoying time and not too long. Hey, Bill, we're not going to talk about the olden days at Netscape again, but I would love to hear about your take on what's happening here.

Obviously, as we mentioned in the space yesterday, a year ago on the website for Prime Trust, they had 16 named clients, huge names, Strike, Kraken, etc. Well, now it was down to six and they put a big strike through Swan. We had Corey here yesterday and said he no longer does business with them. He was up earlier. You do. So I'd love to get some context. Yeah, sure. So first of all, I think this is a great potential outcome

and so I think it's great that Mike was in a position to come on and give the details so kudos Mike thank you for doing that we used to use Prime Trust for custody going back over a year ago I guess we don't do that anymore Prime Trust is not a in-house technology platform they outsource custody to We don't do that anymore. Prime Trust is not an in-house technology platform. They outsource custody to our blocks, I believe, solely, I think.

Anyway, as we changed our product roadmap, we brought most of that in-house to manage ourselves. So the extent of our relationship with Prime Trust right now is ACH wire processing. And so we don't leave any amount of money on the site. And we have other providers that are able to process wires for us. So we wouldn't really miss a beat if they were to go offline. We have redundancy there. So look, I also know Jor, the interim CEO. I think he did inherit a mess.

And to his credit, he's done what he can to right the ship within reason. And like I said, it doesn't really impact Abra one way or the other, given that we have redundancy on wire processing, except to say that I think it's better for the crypto space if there's a good outcome here for everyone involved. And assuming there's no glaring holes in the balance sheet, it sounds like they're on a path to doing that. So we should all go ahead. I was 100% aware.

Go ahead, Rand. Sorry. I'm struggling to see who's actually affected yet, because if I look at the client list, it was like Abra and four others, including Swans. But if you're saying that Abra's hardly a client and Swans no longer a client, who is Prime Trust actually servicing? Well, I would speculate that a lot of clients are trading shops, hedge funds, folks that were probably difficult to bank in the crypto space who probably don't want their names on a website. So like I said, my pure speculation is it's probably a bunch of clients that don't want to be named in the hedge fund world or are probably difficult to bank otherwise. But I really have no insight into that. Bill, you said that they custody with Fireblock. So Prime Trust was effectively a pass-through and they were just a third party that was connecting their clients through to actually custody at Fireblocks?

That's my understanding. I don't think they had any in-house technology. Mike may know better than I now that he's been digging in, but I was not aware that they had any in-house physical custody capabilities as it relates to crypto at all. That is correct. So they were using WalletPub. So Fireblocks often gets lumped in as a custodian. Remember, Fireblocks is not a regulated firm. So they provide wallet technology.

I think sometimes they may take all the keys. I'm not entirely sure how they they how they fully operate, but They're not they're not a qualified custodian, but they are a wallet platform and Are you aren't trusted? Yeah, that's my understanding as well Perfect Mario, did you want to talk about finance? Yeah, man For me, this is the the story that worries me the most hold on before before we talk about binance yeah man like the for me this is the the story that that worries me the most hold on before before we talk about balance i want to jump in here just before we

finish on on prime trust mario you mentioned that you heard rumors that a custodian lost keys in those rumors of the custodian losing keys do we know what the the numbers are is anybody throwing around number like dollar values and there's more to the rumor and it's it's a pretty concerning rumor but i can't share more especially on a public stage but you know if it's not prime i'm feeling comfortable because my only guess would be prime trust and i'm sure mike would do the proper due diligence um but i'm sure like all i can say is that if mike spots this i'm pretty confident the deal won't go through but i'm also pretty comfortable that mike knows the room already

as he said and he's even though it's early in the due diligence process you know these things don't don't take too long to spot and i'm sure they would have been discussed early so i'm pretty comfortable that this rumor is safe. Yeah. Look, again, on one side, you can't spread FUD, but on the other side,

you have a responsibility to talk about things because what I considered FUD prior to FTX, almost all of it became true, including that, you know, we had information about that media company that turned out the CEO

was getting paid by Sam. Remember that? Can't remember who it was. Who was it? The Block. The Block, yeah. We knew about this months ago because someone gave us a whole data room which included this information, but we didn't mention it and then obviously it turned out to be true. So either way, look, we know that Prime is not as big as it was. Mike came here

transparently and I think it's – look, for the market, I don't think it will hit the market as some people might be worried. Again, Prime is not as big as it was. But at the same time, from a reputational perspective, if things don't go through or the rumors are true, reputationally, it's just going to be such a big bruise on the on the eye another bruise on the eye especially during the time when the sec is doing what they're doing in the doj so i hope it's not true i'm sick of this shit happening this is a us regulated entity and um you know i applaud mike for stepping in and i hope the deal goes through and we move on and and keep focusing on on binance happy with the answer and you know press me more happy with the answer and you know press me more happy happy with the happy with the answer i think it's very answered very well uh yeah binance halting well not halting withdrawal but i guess they lost their banking partner if you read the statement from binance it sounds like their

banking partner um has been warned either by their compliance or by uh outside parties to say that you know given what you know now about the allegations of the SEC against Binance, possibly you should unwind your relationship with them. And that comes on the heels of Paxos also saying that they've completely unwound their relationship with Binance. And I think that Binance have now warned that they're going to become a crypto-only exchange

in the US and that they won't have fiat on-ramps and off-ramps within the next week. And they've told customers that they should act accordingly. And if they're going to withdraw, to just be patient because the banks are closed. Right, right. Does CZ need to go to court in the US? Because some people said yes, others said no. Does it need to personally appear?

Well, as far as I understand, no. As far as I understand, it's procedural in this case and i think you can send your lawyers i think that's what i understand i'm not that's my that's my understanding as well too he does not have to physically show and travis what do we know so far about the uh doj's investigation what's what has been leaked so far and what has been made public oh i mean you know i think as soon as the cftc report i mean look dude there's been rumors for i think years i mean i think you can find doj binance articles going back multiple years but then you know i think that the rumor mill around that has cranked up over the last however many months. I think when people saw the CFTC complaint that was filed against Binance at the end of March, you sort of dive into the details of that and you go, okay, this is definitely looking like OFAC violations, right? And the CFTC complaint, if you remember,

Binance senior compliance officers were making jokes about funding Hamas. I remember that. That was one of the more concerning points that came out of it. Yeah, right. So even with the CFTC complaint, people look at that and they go, okay, DOJ is definitely all over this because this is looking like serious OFAC violations that the United States just takes dead ass serious about this kind of stuff. And then there's been Bloomberg articles. You had another big piece of this was the Bitz Lotto exchange. If you remember that getting shut down by doj i think that was at the end of january i remember the the doj did a press release a press conference about bits lotto and the crypto community was like poking fun at the doj because they did a press conference about a crypto exchange that none of

us had ever heard of and then you find out like two weeks later through Chainalysis, blockchain forensics, that the number one destination for assets from BitsLotto was Binance. I think the number was $700 million total that went from BitsLotto to Binance. And so, again, like a lot more evidence there then the sec uh uh complaint comes out at the beginning of this week and it's just incredibly damned right i mean it's just stunningly just what what does it mean if the the doj takes action against binance how serious is this and obviously it just depends on what the allegations are what evidence they have but what does that mean for binance because looking at BNB's price and looking at the markets, it seems that this either hasn't been factored in or it has and it's been expected for a long time and it's not really as serious as some people make it out to be.

Yeah, so you can't look at BNB price action to try and gauge what's going on here because BNB is a completely manipulated token that does not have real price discovery. You can't trade BNB anywhere in real size other than on Binance, which is a very crucial difference between BNB token and FTT token. FTT was liquid on Binance. When you just think through the concept of like, I'm worried about an exchange's solvency, I'm holding that exchange token, I want to sell it, but I have to go to the potentially insolvent exchange to sell or short said token, you can see how that just doesn't make any sense. And that's a big difference between BNB and FTT. But BNB does not have real price discovery. It does not at all.

And so I think the likelihood that you see a BNB price collapse is really going to be a function of how hard the DOJ goes. And I think that's anybody's guess. Folks that I've talked to that are pretty familiar with the kind of regulatory criminal, the way these sorts of things work in the United States have already been very surprised that a DOJ action has not already been brought. People don't really understand what they were waiting for when CFTC came out at the end of March. You look at the details of that complaint, you go, okay, looks like there's a big DOJ OFAC problem here. SEC comes out, okay, now they really have them dead to rights on OFAC violations, really, really dead to rights on OFAC violations, really, really

dead to rights guilty. And then, so now everybody's just kind of waiting on DOJ. And it's like, you know, I think you, you just sort of think through goalposts. And I think at one end of the goalpost, you have a slap on the wrist that would look something like, uh, uh, Arthur Hayes and BitMEX, you know, it would be a hundred million dollar fine, you know, this sort of thing. I think that would, that would be the most lenient part of the goalpost. I think that's very unlikely to happen. And then on the most punitive end of the goalpost, it would be you log into Binance.com and you get the DOJ seizure logo, right? You get the American flag and the bald Eagles or whatever. They've seized binance.com they issue an arrest warrant for cz cz's in um dubai dubai does an extradite you know cz can't ever go to any country again

that has extradition to the united states because he's like a wanted man basically and then tbd on you know i think that's kind of the far right end of the spectrum and i don't know how to weight the likelihood. And then obviously you've got everything tween. It does. One more thing I'll add. None of it. Yeah. One thing that I think is seeming increasingly more likely, and you saw, I think a week or so ago,

an article that came out about the potential for CZ to step down. Looking into the SEC complaint, in my opinion, it is a done deal that CZ is not going to be running Binance.com a year from now. That looks like a done deal to me. And I think one of the reasons why that article came out talking about the rumors of him stepping down is because he has probably already offered that as part of some settlement with the Department of Justice and TBD on whether or not they're going to take it or whether or not they're going to say that's not enough. We want to shut this whole exchange down. I don't know. But, you know, it's too damning. It's just it's too egregious when you look into the details. And Travis, those those Richard Tang taking over rumors emerged before the SEC move against... We've had whispers

about Binance expecting the SEC investigation or the allegations or the charges. The SEC charges. Forever, but they knew it was imminent according to some sources, even though CZ tweeted that they're surprised they didn't see the charges, etc.

But just going back to the... It's worth mentioning, I just want to say, you know, Cheng Ping was lying in that tweet, and he lies incessantly publicly. That's important to point out. This man lies incessantly publicly. Bruce, do you disagree or or you agree with the thumbs down what lies well he lied about that the fact that the fact that he didn't know that the sec complaint was coming i mean i mean lies about all kinds of things he well no he said he said he said we haven't read the complaint yet it's been posted and we haven't seen it yet. You think he was lying about that? Oh, I mean, he's obviously been in discussions for a long time.

No, but you just said he lied about that tweet. Do you think he lied about that tweet? I would need to go back and look at the exact wording. Well, then you should have looked at the exact wording before you say that. You don't accuse somebody of lying before you know your facts, dude. You should have looked at it before. Are we going to do it then we gonna do and then no no here's how it works travis when you accuse somebody of lying and you say that i mean it's a lie and then i say do you think it's a lie you don't say i'm gonna go back and look at the tweet you need to you need to already substantiate that when you

accuse somebody of lying you need to have it substantiated already and you didn't so don't accuse people of lying let me ask service another thing you mentioned about the bnb and this is so we've had a lot of a lot of rumors about binance back when ftx was collapsing and i'm sure everyone heard a bunch of these rumors we tended to be hesitant of even talking about those rumors back then and we we mentioned some of them but you you talked about bnb's price action and not having any price discovery um can you elaborate more on this and and do you think that the price the bnb's price could be superficial and i'm starting to look into those uh those allegations just because we're deep down into

that rabbit hole now and after seeing the cftc complaint and sec's charges? Well, I mean, the number one factor for BNB is that you cannot trade it in size, not on Binance.com. What size? So what size is, you know, what size are you talking about? Well, just go to CoinMarketCap, pull up Binance, BNB token, go to the markets tab and have a look for yourself.

And I think it trades, I think 2% of the daily volume trades on KuCoin. So you can get like 2% of it. You can trade, you know, not on Binance basically. I had no idea. And so it's just, it's just, yeah, it's just not real price discovery. And another thing I'll mention here. Not in a single trade, right? I mean, having that for 24 hours is 2%. You're not saying you can pull. Not in a single trade, right? I mean, having that for 24 hours is 2%.

You're not saying you can pull 2% in a single trade. That's exactly right. Yeah. And without getting into too much detail, I mean, I've traded this market full time for five. You have traded many, many billions of dollars of cryptocurrency in my life from a quantitative perspective as well to lots of proprietary statistical models, automated execution, all this kind of fun stuff. I also talk to guys all day that are multi-cycle crypto investors with a quantitative bend or perspective to the way they approach the markets. There is consensus that BNB trades very strangely, very, very strangely. When you dig into looking at the open interest profiles versus the funding rate profiles versus the CVD profiles, it is a very unnatural

set of quantitative data around BNB token. And if you just about like how much two-way flow do you think bnb token has had over the last six seven months it's been very one way there's been a lot of guys that don't want to hold bnb or don't want to hold nearly as much as they have held uh and it's been my case that shangping has been catching that and it's also my base case that he's been bidding BNB with customer funds. I do not think he has all the customer funds on Binance.com. There's too much smoke around this whole thing for there to not be any fire. And he knows that by any means necessary, he has to protect BNB's price action because if that token collapses, this is all over. So he is willing to dig himself into a whole Sam Bankman Freed style because if he doesn't, it's all over anyways.

So the walls are definitely closing in around Changping right now. And I think it's probably going to come down to what happens with the DOJ. Okay. So Travis, before Dave, you jump in. One thing I promised myself to never do again is to be worried about speaking about the big guys in a negative light just because it could impact our business. So I learned that after FTX. Remember the days FTX was sacred and even though everyone saw red flags, no one really talked about them because we're talking about SPF, the Jesus of crypto in Washington. And I don't want to do that again. But at the same time, I do want to stick to what we know. I've had, you know,

we've done spaces on Binance and we have our concerns and we've had reputable people come up and just mention very valid concerns. But I'm still, you know, I've always had confidence in CZ and Binance. Two questions I have. Number one, you're talking about

the trading activity of BNB. Can you just dig into it a bit further, what you're referring to and who you've spoken to and who else has been concerned about this? And number two is, does anyone know how long CZ's been in Dubai? I know he's been here for a long time. Bruce, you probably know. But has he left Dubai? Has he traveled outside of Dubai?

When was the last time he was in the US, for example, or Canada or Europe? Does anyone have any idea? Obviously, I'm not implying anything just me being curious yeah there's no i'm referring to other people that are active traders that take a quantitative approach to this market that like me have spent you know a number of years looking at esoteric quantitative data associated with specific crypto assets to try and glean actionable insights from that quantitative data. I've taken that approach to this market for multiple years. I've traded many billions of dollars of crypto from that approach. I talked to other guys, exact same seat, and there's consensus among that group that the

quantitative data is just strange on BNB. There's a number of different things around that. I mean, one simplistic thing to look at is look at market cap divided by trading volume and look at that for BNB versus other tokens. I mean, BNB is an enormous market cap. What is it? Number three, number four, whatever it is, right? I mean, it's enormous market cap. Trades very little volume relative to the other size cryptos around that amount. So when you look at it on a multiplier effect, something looks weird. And then if you just dig further, like I said, into the open interest profiles, into the funding rate profiles, into the CVD profiles, you know, and without getting into, you know, too much minutia

around quantitative trading of crypto assets. But it's just, it's completely unnatural. And everybody else that looks at the data feels the exact same way. And does anyone have, I've got more questions for you, Travis, but does anyone have any clarity on CZ having left Dubai? Bruce, do you know? I'm friends with them. I've seen him in Dubai many times. I know he lives in Dubai. Bruce, do you know? I'm friends with him. I've seen him in Dubai many times. I know he lives in Dubai. I don't get into where people are or what their personal stuff is,

but I think he's been public about being in Dubai. Yeah, we know that one, yes. Which makes sense, by the way. There's thousands of people that are, there's thousands of entrepreneurs that are moving to Dubai. Bruce, I'm a Dubai person. I never knew Dubai had no extradition laws. That one, that's, call me stupid, but I never knew that.

I doubt it's about, I think the appealing thing about Dubai is that, you know, it's a regulatory and friendly environment. You can actually talk to the regulators. They're clear. They want to work with business. They want to welcome business. They view business and investors as their partner. Let me go back to Binance, if you don't mind.

And Travis and Dave, I'm going to give you the mic as well. Feel free to interrupt me, Dave, as well. But the question to the panel, and obviously I'm going back and forth with Travis, is about I always look at the inflows and outflows as an indicator of the health of an exchange. Because obviously you said we can't look at the BNB token for valid reasons. I had no idea 98, just under 98% of the trading volume the BNB token for valid reasons I had no idea 98 just under 98 percent of the trading volume of BNBs on Binance again call me ignorant but had no idea was that large so the next question and that's pretty pretty crazy but the next question is

and the inflows and outflows out of Binance, how do they look? Anyone? Yeah, go ahead. I think Dave, you were jumping in. Yeah, I mean, it's really, that statistic is really misleading. The 98%? Okay, please elaborate. Yeah, and the reason, well, for two reasons, actually. First, look, it's significant. But remember, Binance allows you to trade bnb

bnb as a base currency against all the other assets on their platform so it's just like when you look at bitcoin volume bitcoin volume is not what coin market cap says because you can trade a lot of other tokens on many exchanges with bitcoin as a denominator you really need to look at the numerator trades and i don't think anybody breaks that out. So that's thing number one. It's really important to understand that because in crypto, in digital assets, and frankly, what assets will trade like in as we approach 20 years from now, I don't know when in the next 20 years, but I think all assets trade in pairs. And so you need to look at the target currency or the target of the asset that you're looking at. So if you look at BNB, I was just doing some math. Right now, Binance on the order books, if you'd compare the order book on KuCoin, Bybit, OKEX, and Binance, both on the buy and the

sell side of the market for a couple million dollars, BNB, Binance is about two-thirds of the liquidity, which is incredibly significant. Don't get me wrong. Travis is not wrong about that. Most of the bids and offers are there. The other thing that's interesting about the order book for a million or $2 million is it's reasonably symmetrical, not indicative of someone needing to push up the price. It's not like an underwriting situation. Now that said, obviously in size, I think you'll find that the only bid in size is probably on Binance. I think Travis Mayberry will be right there, but I have absolutely no data about that. The data and the order books are pretty consistent and there's a fairly healthy data. As far as Travis's point about it being strange, I think there's probably truth to that.

But the thing he cited is totally, it's just a terrible fact for that argument. And that's because the vast majority of BNB is being used by people who hold BNB. So they get the cheapest tier rates on Binance where all the institutions are trading so well dave what dave my my point was that there's not price discovery in bnb token outside of binance that was my point okay so when i so when i wake up in the morning and bnb token is whatever bnb's tokens right and then joe how fair is that price how do i How real is that price relative to the price of Bitcoin, relative to the price of Ethereum? that the important point to me is Binance's market cap is very high relative to its market cap. The amount you could trade

before you punch through the top of book liquidity is dramatically lower than other tokens. Dramatically. So one to two million dollars you can do within half a percent or so. You get to $10 million, it's 5%. To put that in perspective in Bitcoin, I mean, we have

clients at CoinRoute who trade Bitcoin all day long. You want to trade 10, 20, $30 million. You're talking basis points if you're smart about it, if you use the right algorithms. And even the order book is only at $10 million is basically well less than a percent. Ether is slightly less liquid than Bitcoin, but still, Binance is an entire order of magnitude less liquid. And considering where it is. So Travis is not wrong, but I think that you need to understand that part of that is because of the dominance of Binance. Now, I personally think just like in March of 2020, before March of 2020, BitMEX at 80% of the derivative volume, and then that is no longer true. And then FTX was becoming a reasonably large percentage derivative volume, and that's no longer true. I suspect that volumes will migrate

to where people feel safer with their assets and with better technologies. But the truth is that the BNB token right now, a huge percentage of it is being used basically to get discounts on your Binance trading. And that is, however you want to look at that, there's value there. Now, the only question that I have for you, Travis, because I think it's a really important question, is where's the data that suggests that CZ has a hole in his balance sheet that he needs bnb to pledge his collateral elsewhere yeah that was my next question as well the biggest the x world sam and company stole lost gambled away whatever eight to ten billion dollars of dollar collateral and then plugged to the hole with manufactured FTT that wasn't being

used by anybody that was from treasury. And that's why when FTT collapsed, FTX collapsed, because it was accepted as good collateral. There is no version of the reality where any firm, including Binance's own, or CZ's own trading firms, should be able to post BNB without a massive haircut because of what you said, Travis, to dollars. So if in fact BNB is being used as collateral, then that is a very, very large red flag. But the point that I'm making is it's if, and I don't know that answer. And I know you and Mike Alford both believe that that's happening. And frankly, it's a serious accusation. I am not saying you're wrong. Once again, I'm just curious, what do you know in terms of BNB's use as collateral? Because that's really

the essence of the issue. Yeah, no, I think most people on this space know this. My point of reference for this is as the 18th largest creditor in the FTX bankruptcy, had the large majority of our funds assets that were on FTX at the time of collapse. Never in my wildest dreams would I would have thought that Sam Bankman Freed would do what he did. The collapse happened the way it happened. We were right in the middle of it and a few weeks later i started looking at the setup uh with chengping and with bnb token and with binance smart chain all the weird stuff going on with binance smart chain inexplicable uh wallet movements token creations nobody can get none of the none of the the blockchain forensics Nobody can get none of the blockchain forensics guys

can get much of a handle on BSC. You look at Binance pegged, BUSD, the weirdness that was going on there. And on December 9th, I wrote a tweet thread, got pretty good traction, said not trying to fear monger, but it has to be said. If you have assets on Binance or Binance US, take them all off now. Don't wait. Also, if you're holding BUSD, you should sell that immediately. This is coming from a guy that lost

a ton on FTX because I misjudged the exact same setup. And I said, I don't know how much hard evidence there is against Binance at this point, but I don't know how much hard evidence there is against Binance at this point, but I don't know how much hard evidence there was against FTX six days before its collapse either. That's my point. I can't put together some rock solid blockchain forensics wallet movement proof that Changping is using customer assets and that there's a hole in a balance sheet. I cannot do that right now. But nobody could have done that prior to the FTX collapse. So you just look at the magnitude of the smoke around this whole thing over the last six, seven months, the allegations that have come out, oh, as it turns out, BUSD did have a billion dollar plus hole in its collateral multiple times over a multi-year period to the point that Paxos fucking peaced out. Paxos is out.

It's like more than half their business was that. And we can't do this anymore. Right? Well, the regulator had something to do with that, Travis. Maybe you know or have more context, just to be clear. Because obviously, I mean, they came after Paxos for BUSD, coincidentally not for USDP, which was Paxos' own stablecoin. But I'm not clear that Paxos decided to back out or whether they were forced out. Okay. All right. Well, but it's not... Binance admitted to a billion plus dollar collateral hole in Binance PEG BUSD.

They admitted that. It's in a Bloomberg article with commentary from Binance. What does that? I was going to, if you can explain, Travis, you start to paint a picture. You start to paint a picture with all of this. Then you include the CFTC complaint, you include the SEC complaint, and you paint a picture of wildly commingled funds. It's just a big fucking slush fund back there, the exact same way that Sam Bankman-Fried was

doing it at FTX. The exact same way. There's just not good books and records in segregation, and there's a mountain of evidence that is piling up that that is the case. A lot of smoke, no fire. Yeah. I mean, look, Travis, I want to be really clear. I am not defending Binance here. I am not attacking them either. I'm just trying to understand. And so there are two big differences first of all uh alameda lost a shit ton of money uh and it was pretty clear that they lost a shit ton of money we all understand it and what what you didn't know what we didn't know and look i didn't lose money in anything seriously because our company doesn't trade but i personally was fooled too so i am not going to complain or second guess anybody saying this. I want to be really clear. I feel horrendous for

all the people that Sam screwed. But the real question here is the ultimate cause of FTX going kaboom was there was a massive hole, multiple billions of dollars relative, which way outstripped their revenues. And they plugged it or tried to with a shit coin that had no liquidity. Now, if Binance is incredibly massively profitable, which they are, the question is, have they spent or lost money well in excess of that profitability? And are they plugging that hole with BNB? And, you know, look, the best thing for everybody would be an orderly transition of Binance, probably with much less market share, with much more disclosure, et cetera. We're not going to lie about it. But it's really important to understand those things.

And frankly, the point that I take away from what you're saying and and it is really critical what you're saying is it these are the questions that have to get answered and if they don't get answered just just arm waving around regulators being bad actors mama doesn't answer those questions and i think that's your point more than anything else yeah dave the question after you're seeing what you've seen now with the sec, with the CFTC and the leaks with the DOJ, and obviously we've all heard the rumors during FTX's collapse. How concerned are you, Dave? Very. But my concern is not for the health of digital asset industry, which I think is…

I'm talking about just Binance. Yeah, I'm very concerned. Look, Scott and I talk all the time, and there are two things in the crypto world that I absolutely can't stand. Both are real problems, and we agree. One is hero worship for the people who got there and people getting too big for their britches and doing things. And I really equate that to the opacity, which is what Travis and Mike, Alfred and others are really focused on. That opacity is incredibly troubling when you're in the market leading,

you know, the highest volume, of course, whether or not your volume is real or not is a question, but it's very, very troubling. But there are a lot of people who are trading there. A lot of our clients are trading there. A lot of people who are trading there a lot of our clients are trading there a lot of other people are trading there and so the concern is obviously real and and i think based based on the comment travis made about smoke i mean yeah you know you have to be concerned it's also very concerning that people like cz become the face of the industry so that it gives regulators who are acting in bad faith and politicians who have an agenda to basically, as Mike Belshi so eloquently said, the anti-freedom agenda. They get to personify freedom in such a bad light. That's actually my biggest single concern here.

The other thing is on meme coins, and we can talk about that ad nauseum, but as far as finance is concerned, yeah, there's serious concern because of the reputational risk to the industry. And do you remember, guys, the discussion about the proof of funds after FTX and the whole Merkle tree concept, and Binance was leading the charge. Binance, I think Kraken, Jesse, was on the stage and was talking about it as well. What has Binance offered since? Because this kind of discussion about the proof of funds kind of died down over the last few months.

That's because people pointed out that we really have not gotten proof of liabilities in any exchange. And a proof of funds, which, by the way, you can't even go with these rabbit holes, is effectively impossible on its own. But then when you try to add liabilities or what they view as assets and liabilities, it becomes literally effectively impossible. And has anyone looked at the inflows and outflows at Binance? Does anyone have any clarity there? I know I remember the numbers back in FTX, but have we seen any outflows in the last few days since the SEC announcement? They have not been significant relative to what the proof of reserves number is. Were you asking about outflows, Mario? I have the data right here.

The news broke on June 5th, $1.2 billion out of Binance. June 6th, $701 million. June 7th, $783 million. June 8th, $224 million far 176 million so about 3 billion total and that's from 63 billion down to you know mid 59 billions total so not a dramatic percentage of their assets and seems to be that the tap is slowing but they're definitely i mean was about 3 billion total this week in um outflows from for memory back in ftx we saw inflows into binance because everyone kind of initial outflows and then kind of started moving to inflows because everyone started trusting binance as the only exchange rather than having self-custody does anyone remember the numbers then and how it compares yeah there was like three billion in one day i think because he

cc tweeted about it i was having dinner with him at the time with a group of other people and he mentioned it and he said like hey we're the time with a group of other people, and he mentioned it. And he said, like, hey, we're just having dinner, a bunch of crypto people, Bitcoiners, and we had $3 billion in assets or something like that over, I think, a couple day period. So, I mean, I think it's important to note that they have had stress tests. And the accusation that they're the same as FTX is a super, super serious accusation, because you're basically saying that it's not just paperwork violations, as are alleged, but outright theft and fraud. You know, in FTX's case, Sam stole six billion or so of customer money. He stole it. He took it right out of the customer money and he put it in his own account, which he called Alameda.

I mean, Bruce, some of it was literally being deposited directly into Alameda when consumers thought- Yeah, Alameda is Sam and the customer money went to Sam. You know, Alameda when consumers thought... Yeah, that Alameda is Sam and the customer money went to Sam. You know, Alameda is Sam. He stole customer money. It doesn't matter if he, like, made a bad trade or bought Lambos with it or bought his parents' houses or all three. He stole it.

So the allegation that CZ is doing the same, he's just stealing money out of the customer accounts and putting his own is a serious accusation I think you'd need to put out for. Well, hold on, Bruce. I want to just say that, I mean, I think you're right, and I want to just say, you know, I don't believe that CZ is doing it. But it wasn't the SEC's allegations against him that they moved money to an entity owned by JAL. Yeah, but was it

customer money? That's Merit Peak, correct? Yeah, but was it customer money? That's merit peak, correct? Yeah, I was trying to read through that, and it doesn't say it's customer funds. You know, the regulators do this. You know, I think Travis said, where there's smoke, there's fire. You know, there's been smoke around Tether for years.

You know, regulators do FUD. Remember the huge, huge announcement that the New York Attorney General said? They said, Tether does not have the funds that they said they had. It's not back to the dollar one to one it's not back it's fake and it was this huge news and there was all this fun a big market drop and then that then the actual suit came out was like 153 dollars on a nine billion dollar asset i mean it was like it was like it was like 10 minutes interest or something because of how they moved the account out. It was prorated.

Some absurd nonsense. So, you know, I don't know. It's thrown around like this idea that everything's a scam, everything's fraud. I think we have to differentiate between, you know, these kind of paperwork violations where it's, well, I mean, Eric Voorhees was just saying the other day, somebody said, you know, unregistered securities are fraud. That's not necessarily true. That's not necessarily true. It's a paperwork violation. They may not be lying to anybody. Just because something's illegal doesn't mean it's immoral. You know, it used to be illegal to harbor runaway slaves. You know, the law is not morality, but it's also not clear. So if somebody gets a bunch of paperwork violations, oh, you didn't fill out this and you didn't fill out that, I think it's a mistake to just lump them all together and say, oh, it's all scams. They're all fraud. They're all crooks. They're

all Sam. Because there is differences. There is big, big, big differences. There's differences between Coinbase and Binance. And there's certainly differences between all of these companies and FTX and everything else. I think I agree with you. We're just making the point that we don't know what we don't know. Obviously, we know that FTX was a real... Sam literally took the money and tried to invest the money for his own personal

gain and had big losses. I just wanted to make the point that that... And usually when you have these things, by the way, typically when you have these situations, and they've happened many times, they happen with the chairman of the largest regulator, Bernie Madoff, who was a massive, famous fraudster.

There's an HBO documentary about him. He was a head regulator, head of the largest securities regulator in America. He was the chairman of it. And he defrauded people out of billions. He had all kinds of fraudulent stuff stuff but when you're doing these fake statements and fake assets pumping them up that's a common trick that that predates crypto by decades that's been done a long long time by a lot of people but typically when that happens and you have anything

resembling a bank run on those assets or you know bernie madoff's thing fell apart when a couple you know wealthy uh people used to handle people fell apart when a couple, you know, wealthy people used to handle people like these Steven Spielberg, famous wealthy people, they started saying, hey, I hear this is shaky, can I get my money back? And then he's robbing new depositors to give old depositors their money that they think they have, you know, in in this industry, that would be like the equivalent of fake Bitcoin. But, you know, Binance has been through stress tests like that, if the $3 billion withdrawal and the things like that, if the money just wasn't there, if it was all stolen or fake,

there's a much, much, much, much higher chance that it would have collapsed just like it's happened with FDI. So Travis, that's the point I wanted to make. And I don't get, me and you would kind of wrap it up, your final thoughts on Binance and the market conditions and wrap up the space with that. But Travis, last question that I have, not sure about Ryan and Scott, is Bruce's point is the point that I've been making for a while, is that Binance has gone through the stress tests and it survived and it came out stronger than prior to FTX. So doesn't that make it a lot less likely that they did even close to what Sam did? And obviously, if they did what Sam did, they wouldn't be here today. But if they did, at least maybe in the old days, they did some of it or they used customer funds, then we would see Binance in trouble back when the outflows kicked in during FTX.

Yeah, look, I hate to make this point, but I'll make it anyway. In reading the SEC complaint, a large part of the problem with FTX was that it was basically Lord of the Flies. There was no controls. There's basically a bunch of kids running around with ledgers, doing whatever they want, putting everything

into a Google sheet. That was the state of affairs and how FTX ran the business. One thing that we've learned from looking through the SEC and the CFTC complaint about Binance is that this is a very tightly controlled operation. The people at Binance US basically could do nothing. Everything was being controlled by Binance Global. And say what you will about, okay, this is illegitimate and they're breaking the rules and they're wash trading and all this stuff. But very, very clearly, these guys know how to fucking run a business. Now, are they breaking rules? 100%. Are they misrepresenting things to their customers about

how much trading volume is on Binance US? 1000%. And clearly, they're going to have to face up to the things that they fucked up. But the question of, is Bin binance ftx they could not be more different i agree um travis would you agree with hasim's assessment no no no of course not no i'm no no i think there's orders of magnitude more smoke around binance at this point than there was around ftx immediately preceding its collapse. Isn't that because of FTX though, Travis? I mean, we wouldn't be having this conversation without the context of FTX and seeing what happened there. I'm not necessarily disagreeing, but I think that ever since FTX, the spotlight and scrutiny on this industry is dramatically higher. So that would happen. The chatter of Binance being under investigation

by the SEC, the CFTC, and the DOJ, those are multi-year rumors. And when you look at the allegations, they've got accusations of violations in those complaints that go from 2018 all the way up through this year you just go to let me let me ask you this try to go to the sec complaint and control f 2022 and i think there's 150 mentions of of of 2022 and you can go in there and you can read

all of the different uh uh things that they were doing in 2022 that are also looking like they were a violation. Travis, let me ask you this. You're a sophisticated player. You've been in this market for a while. What in the Binance complaint surprised you? Well, nothing, but I think very, very poorly of Changping. So nothing.

Okay. So you basically knew. You knew they ran their own market maker. You knew that they were wash trading on Binance US. You knew that, you know, blah, blah, blah. They are moving. I did a podcast. I did a podcast with Pab in 2018 where I was talking about this stuff. Right. So my, my, but that's, that's kind of my point is that we sort of knew what we were getting with

Binance. Anybody who was looking at Binance would be like, well, I can't believe that the U.S. employees didn't have control over stuff. It's like, are you paying any attention at all to how this company runs? People, by and large, understand what they're getting with Binance. So these, you know, oh, BNB is a security. Everybody kind of understands what they're getting. I think I can't. It's a very different story with FDX.

I think I agree with Asibio. I think we all knew what Binance was doing, and I think we just thought we wrote it off to the fact that it was probably a young business which was going to fix up its controls. And I think we all took comfort in the fact that later on in binance's life they actually did fix up their controls and i think certainly the the perception that i got is that the market was like okay you know maybe in the beginning you listed altcoins too quickly maybe you ran you know market making whatever else but hey you've not seen up your act and i think there was a point in time where cz actually um you know you could feel the pivot right you could feel that he pivoted to being more, we want to become the most regulated

exchange in the world with the most licenses in the world, you know, that was like the scenario. So I think I agree with Asimia that, you know, I think we all But that, yeah, but that outward state, that outward facing stance was completely disingenuous. Read that. Did you see the Tai Chi document?

Did you see that fucking thing? We learned about that in 2020. That's insane. They put together a PowerPoint presentation on how to be shady as fuck. Can you tell us more about it, Travis? Just so anyone that's not aware.

Somebody just drop a link. I don't know how to do that. They just put a link to the slides. I'll do that now, but just tell us, what in the slides did you find most concerning? I mean, just the... I can summarize it very briefly.

I've got to drop it in a sec, but I'll summarize the Tai Chi document. So basically, this was a proposal for a regulatory strategy to Binance back in 2020 that basically said, create a US subsidiary, basically create it as a fig leaf and claim that all of your US trading is going to be congregated there and use that as a way to deter the SEC, the DOJ, whatever, from going after you. Instead, they're going to go after the US entity, but then you can still go through the back door and try to serve US clients. This is a very intentional strategy that was proposed to Binance.

According to the SEC, they did not actually adopt this strategy formally. So the person who made this proposal, Binance said, that's interesting, but no, we're going to do something else. But then they kind of did it anyway, according to the SEC. So that's known as the Tai Chi strategy. So essentially, they used a separate entity to the U.S. entity to go around U.S. regulations and still serve U.S. customers. Is that correct, Asim? Yes, which is Binance Global.

That's the main exchange that has a vast majority of the liquidity. And that's obviously illegal. That's breaking multiple laws, correct? Yes, that's circumventing, basically circumventing US regulations and US laws, under the very intentional pretense of if we have this US sort of puppet entity standing in between, they're going to go after that and not- And your thoughts on that, Haseeb? I mean, again, we knew about this in 2020. This all leaked, I think, through CNBC three years ago. So every single exchange has done it. I mean, OKEx has OKCoin. 4B has some US thing.

Anybody who's looking at this and is surprised isn't very deep in this industry and doesn't really understand how these companies think. It's the exact same counterpart of what US companies would do when they try to go into China, is they would try to create some kind of Chinese subsidiary that can directly face the Chinese government. It's not an uncommon strategy in principle. Now, did they do it the right way? No. And were they, you know, to be clear, there's a lot of stuff in there that we learned that Binance is doing that is super, super illegal, like sanctions violations and, you know, banking Hamas or whatever, that kind of stuff.

No question they are going to face the music on that. And they should. But also, 100%, 100%. But also anybody who is surprised that Hamas is in there under their, you know, no KYC to Bitcoin program is just out of their minds if they don't think that

there are also terrorists and bad actors who are using a non-KYC exchange. And for a long time, Binance was the largest non-KYC exchange. Yeah, I would agree. I'd say, would you agree, and as we wrap this up and get final thoughts from Corey on this, would you agree, Hasib and Travis, that the most concerning aspect of all this, of the CFTC investigation and the SEC documents think it's the sec uh the sec documents is binance co-mingling funds but we just don't know when how much we just don't have enough

clarity to know how concerning it is is that a fair statement maybe travis you could take that one yeah i mean i mean the ofac stuff is super serious because of the implications as to the severity of the enforcement actions that go along with that right like it's like this is the kind of thing that the u.s government will potentially shut down binance.com for and i don't know exactly what that's going to look like i have no idea what the timing is i don't know how to weight the likelihood of that i mean i think i think you know not to get like, like any time you start trying to drill down into this, the like kind of the tinfoil hat, like conspiracy theory type of thing, like I think naturally comes pretty quickly because

if you're being honest with yourself, how much gray and black market Russian and Chinese money do you think is on binance.com? What's the over-under on that amount of money? It's not $10 million. It's not $100 million. It would be my base case, it would be billions of dollars. So this is the size of an issue here that reaches up into geopolitical ramifications that go to the highest level. You think about the US's relationship with Russia right now, you think about the US's relationship with China right now, and if there's billions of dollars of gray and black market money from Russia and China on Binance.com, that makes what happens with Binance.com a big deal.

This is a big deal with serious geopolitical ramifications. And I don't know how else you can think about that. So, Travis, what do you think? How do you think this plays out? And I mean, you sound pretty negative and you sound like you've been signing alarm bells on Binance for a while, just walk me through the next two years or three years and how this plays out in the next two to three years. I don't know whether or not the DOJ wants to shut down Binance.com or not. I don't know. And it's really just pure conjecture on my part. And this is what I'm about to say is complete

conjecture. But if I was going to read into the actions of US regulators towards Binance, let's say over the last couple months, starting with the CFTC investigation, and then the lag in the time period between the CFTC and then the SEC, and then looking at how dead to rights it appears that the U.S. has Binance.com on OFAC violations, completely dead to rights on OFAC stuff, which means the DOJ case should be open and shut, right? With the Bits Lotto and with everything that's come to light there. And then you go, well, why haven't they brought action yet? And I don't know the answer to that. And I don't. And are they trying to are U.S. regulars trying to incite a bank run on Binance.com. And then with blockchain forensics, they can get a sense of like,

okay, this is where this money went. This is where that money went. Then they can connect those wallets to potentially whatever, bad actors or just gray and black market money in different parts all around the world. That's just so much speculation. Of course it's speculation.

But also the US isn't the center of the world. I mean, they may just so much speculation. Of course it's speculation. And also, the U.S. isn't the center of the world. I mean, they may just leave the U.S. It's not baseless speculation. But like your Russian claims, for example, there's a whole other world outside of this weird American-centric thing that says, okay, whatever. There's a whole bunch of the world that does do business with Russia and China, and they may just do what a lot of sensible companies are and just say, we're going to

shut down in this authoritarian crap hole that used to be a free country and we'll go where their opportunities are. And they'll just wall off the U.S. and shut it off. And you're saying Binance.com, you know, Binance.com already, if you go to the website, it already says this isn't available for you if you're American. You know Binance US is where they may have more hooks. But I don't know. I mean, I think that they- Well, that's not a word back violation. That's just a geofencing type of stuff.

But we know from the documents that Binance.com had an entire program around letting high value US customers continue to trade on.com. It's all over the Tai Chi document. It's all in the complaints from the SEC. Ryan, I'll kind of wrap it up with a question for you. You've been pretty objective whenever you covered Binance. I'm in a position where I don't think Binance, I'm not going to say shouldn't be compared to FTX,

but I don't think we have enough to compare it to FTX and what Sam did. Is there aspects of what Sam did that possibly CZ did? It's possible maybe in the old days, but I don't expect us to see a big hole that hasn't been filled. However, I do think there's enough smoke for significant legal hurdles for Binance.

And what will happen for Binance in the next few years, I think it will continue to be here. It will be weaker. We'll have other players play a big role. I think we'll have maybe a big exchange from one of the TradFi guys come in and take a chunk of that market share. But I tend to be more optimistic.

What do you think, Ryan? I agree. I think this plays out do you think, Ryan? I agree. I think this plays out. I think there's lots of penalties. I think maybe Binance US becomes a casualty, a war casualty. But I think Binance.com is going to continue as a great business.

Scott, are you there or you got too much background noise to give us your final thoughts? Oh, yeah. I cut out. Let me speak on your behalf uh look guys binance is a scam it's not going to be here anymore i've been saying this for the last couple of years everything's a scam bitcoin will win uh pretty accurate yes scott cool all right well i got it this is for the record so he doesn't get cancelled this is not

what scott would say and his thoughts are going to be similar to what me and ran said he said he can't even hear me so i could just cancel him right now otherwise look great show really appreciate everyone travis bruce thanks for staying till the end travis it's just such a pleasure to have you on stage um and and dig into i know you you know you have a position that not many share some people don't share it because they don't think it's accurate others don't it because they're just too worried to share it, to even imagine it, or because they've got their own biases. And I think it was a good discussion. I think you and Bruce going back and forth and Haseeb and David was really interesting.

So it was a good discussion. I really enjoyed the Prime Trust discussion earlier with Mike. I know it was a boring discussion for some, but if you know the full story, that's being able to speak to a company like bit go about an acquisition that's in progress with rumors flowing around and being able to discuss the rumors with them um is gonna be uh it's gonna be like drugs for the press it's probably waiting for the space to end so they have the recording so i'll end the space i'll let the

press enjoy the recording thank you so much for everyone and we'll see you again to monday because rand and scott as i said are too lazy to do weekends thank you everyone thanks for for rand and scott for making this happen bye