The Wolf Of All Streets - Breaking: DOJ To Announce Binance Settlement Today | Crypto Town Hall

Episode Date: November 21, 2023

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Scott, someone needs to get fired. You wrote it, didn't you? No, of course. Are you being serious? You did it. I know you did it. That's the worst tweet I've seen. We are back for another packed day.

We will update you. We will update you now on everything from the war, because we are talking about the war here, to you, local news. Yeah, the news anywhere you are in the world. Anywhere you are in the world, we're going to the war here, to you, local news. Yeah, the news anywhere you are in the world. Anywhere you are in the world, we're going to update you on that. You, local news. Today in Armenia, they are looking for

a peace deal with Kazakhstan. Cracking Spellbrong is in trouble with SEC. Let's just guess. Great. I don't know who did it. Whatever. Oh, I know who did it now. And this is one of our best writers. I don't know who did it so fine whatever oh I know who did it now and this is one of our best writers I don't know what the hell they were on

I just found out who did it someone that does my tweets as well they're beasts no joke no way they did it let me what are you gonna do let me send it

it's gonna be fun I enjoy this shit this is where I let out my all my negativity since childhood I let it out on my team members when they make mistakes like this. That's how I am a good manager. That's healthy.

That's healthy. It is, yeah. That's why I have a very high turn. Yeah. How are you? Yeah. So if you ever need to hire, just come look at people leaving my company. They've been trained in everything and then they leave actions at 3 p.m. Eastern Standard Time. I think last time they did that was Bits Lotto.

Very exciting. But hold on. So that's the Kraken. What is Kraken facing? So this is different. So Kraken, very similar SEC enforcement action, civil as Coinbase, although it did sort of loosely, I think, mention a commingling of funds or assets in the Kraken, which I don't believe it was in Coinbase. between the DOJ and Binance, then Bittrex and Global announced that they're going out of business. But now, just as we were talking, I have to find it. It's not in our breaking news,

which we don't really haven't done in a while. But I saw it somewhere on X that there's going to be some DOJ enforcement action announced. I'll find it. Yeah, they said that at 3 p.m. EST today, they're going to make an announcement it's lotto part two or you think something yeah no no no no this is much more serious because this one could it be binance it could be um i'm not saying it is though i don't want to fud

but it could be binance the reason is that actually yellen's involved in this one i mean you're talking about the treasury secretary also coming out and talking. So I'm not fudding and I don't have any details, of course. I mean, this is all pretty new, but they are talking about some pretty big action here. What about maybe you can kick it off with just an overview on the $4 billion. I read it briefly on Bloomberg, the $4 billion. Is that just a rumor? So let's just quickly go through this one. It says a lineup. Attorney General Merrick Garland, then Secretary of Treasury Janet Yellen, then the Deputy Attorney General Lisa Monaco and CFTC Chairman Rostan Benham. So, I mean, if you read between the lines here, this has got something to do with the CFTC Chairman Rostan Benham. So, I mean, if you read between the lines here,

this has got something to do with the CFTC. There's no SEC here. The Deputy Attorney General is on, the Attorney General is on too, and Secretary of the Treasury Janet Yellen's on. So, and to quote them, it's to announce significant action at 3 p.m it's not action it's significant action i don't know i mean maybe i'm reading too much into the into the the the

fine print here i don't know if if that makes sense but i mean something is happening now probably worth noting that the bloomberg article yesterday came out about the $4 billion on Binance. And what the article effectively says is that it seems that the U.S., that there might be a settlement in the Binance case, which is around, it says more than $4 billion to end the case. Now, it also says in the same article, it says, negotiations between the Justice Department and Binance include the possibility that its founder, Chao Peng Zhao, would face criminal charges in the U.S.

under agreement to resolve the probe into alleged money laundering, bank fraud, and sanctions violation. So that happened. And also, we saw $4 billion exactly on the move in Binance. I don't know if that is what it is. But, I mean, yeah, this is the thing. My researchers have just said, hold on, my researchers have just said,

following the investigations by Tether, OKEx, and the US Department of Justice. Okay, so my researchers have just pointed out something. They're saying by Tether OKEx and the U.S. Department of Justice. Okay, so my researchers have just pointed out something. They're saying that Tether tweeted something that says, following investigations by Tether OKEx and the U.S. Department of Justice, Tether voluntarily freezes $225 million in stolen USDT. They're saying it could be linked to that. I don't think it's linked to that.

I think it's something much more significant. So that is the binance story now i don't know if we're gonna get um if we're gonna get uh um uh what's his name uh john john reed stark on because he talks about the mechanics of what this is it's called deferred prosecution agreement my understanding as a lay person around a deferred prosecution agreement is that we don't prosecute you. The reason we don't prosecute you is for two reasons. One is if we do prosecute you, it's going to shut down your enterprise. And two, if we do prosecute you, then it is going to hurt many innocent third parties, like the Binance customers.

And so generally, the DOJ could do this instead of, they could say, look, you pay $4 billion, maybe or maybe not, CZ comes to the US and faces some kind of criminal charges, maybe similar to what Arthur Hayes did. And then after that, Binance continues to operate and you pay the $4 billion and we move on. So this could be around that. I don't know.

I'm not sure if anybody else has got any opinion here. Well, we have a number of lawyers. So go ahead, Carlo. Yeah, good morning. I'm on a little bit of a break from court, but I did want to pop in while I'm on a break. Interesting development. I commented yesterday about it. I just I don't see the likelihood that he would agree to do this, but anything is possible, especially if it will spare the company. But I can't see a scenario in which the company will be able to continue to do business

in the United States under any of these proposed arrangements. You know, the best case scenario would be a straight up civil forfeiture agreement where they just don't prosecute, accept the payment in lieu of prosecution and call it a day. The other options that were just discussed, of course, will be pay the restitution and forfeiture amount, agree to a lesser charge. But that's going to require a plea and an admission of guilt or this deferred prosecution agreement, which is basically pretrial diversion. They're going to have to make some admission of guilt and they're going to have to agree to certain terms and conditions. And once they satisfy those conditions, they avoid prosecution. But all in all, it just, I don't know.

But why, Carla, why wouldn't he accept it? Wouldn't someone do anything they can to avoid criminal charges, to avoid going to jail? Or there's a possibility of going to jail? He's not a United States citizen. He lives overseas. He's not indicted yet. He may think he has a case. He may think he may have some strong footing. Who knows? But isn't the likelihood of winning against the federal

government extremely low? Yes. Yes. The odds are generally stacked against you once you've been indicted. So I agree with you. It would be collectively in the best interest to avoid criminal prosecution. But the way that article was reported, we just don't have enough information because they're saying that they would agree to pay the $4 billion and still be criminally prosecuted. So I'm unclear whether that means a deferred prosecution agreement or whether that means some kind of a plea to a lesser charge. And the fact that they're offering this, doesn't that mean like for them not to want to harm Binance customers? I don't know if I'm not hearing you Mario, did you jump in?

Yeah, can you hear me? I don't think I can hear you. Mario is talking. Yeah, yeah, yeah. Sorry, thank you. Yeah, yeah, so just leave, please don't come back. So my question though is if they're doing this Carlo, doesn't that mean, you know how we're always calling it a witch hunt against crypto? But if they're making an offer like this, doesn't that mean they don't want to harm crypto? And they just, you know, it's just the law doing what it's meant to do? one scenario under which they make the DPA with two subsections.

One is if it will cause a collapse of the corporate defendant and trigger a litany of unintended consequences to the global financial marketplace and innocent third parties. Now, you could say that this would cause a global financial crisis if you have a $1 trillion industry basically get smacked by the DOJ, right? And I think the DOJ doesn't want to be seen to be doing that. That's a possibility. Yeah, that is certainly a possibility

because there would be severe collateral consequences to something as big as Binance being taken down. Now, if the government feels that this payment would be satisfactory justice for what they've done and what they're alleging to have been done in the United States, sure. It's a compromise that could spare a massive crisis with respect to global crypto markets because Binance is number two in the world. I wish I could stay in the conversation, gang. I will try to jump in later. That's right. Yeah, jump in later, Carlo. But yeah, Joe, question for you is that

how common is this? How common is it for them to make an offer like this? Without surprising to me when I write it on Bloomberg, but then again, I'm not an expert. Sorry to be, sorry to be. Something just got published on the Department of Justice's website. It says cyber scam organization disrupted through seizure of nine million dollars in crypto i don't know if

it's related to that but that just came out on their on their website so the department of justice announced the seizure of nine million dollars worth of tether pegs the us dollar dc's funds were traced to cryptocurrency addresses allegedly uh associated with an organization that exploited over 70 victims through romance scams cryptocurrency cryptocurrency confidence scams, which are widely known as pig butchery. So I don't know if... Widely known as what? Something similar was reported last week. I'll have to dig for it.

But that was the first time I'd heard the pig butchery quote, which is why I know that I think there's a follow up on something previous. And maybe, Ryan, you were asking a good question earlier and you said, I wish John was here. followup on something previous. And maybe Ryan, Ryan, you were asking a good question earlier and you said, I wish John was here. John Reed Stark was here. Well, John is here.

Do you want to ask a question again for John? Well, I mean, maybe John, maybe you can give us some insight into, into when a DPA is, is, is when the SEC and why you think that the SEC is actually doing a D, not the SEC,

the department of justice, DOJ is talking about a DPA and maybe the department of justice doj is actually doj is is talking about a dpa and maybe also just help us read into this where where we have jan you know in terms of who's speaking you have janet yellen you have uh attorney general merrick garland you have deputy attorney general lisa monaco you have cftc chair roston uh ben Like, are we reading too much into this, or should we be reading into the names that are on this list? Gee, well, yeah, I can't tell you for sure. It's always tough to handicap these things. I mean, there's one Bloomberg report, which, you know, I read, and the reporters on that report, I think, are very responsible.

I've worked with some of them before. So we have this idea of a DPA. You know, I've worked with the Department of Justice on DPAs before. It seems to me, OK, they've gotten a little more popular maybe since Arthur Anderson, because that was such a bad call by the Department of Justice when they charged Arthur Anderson and then the whole company just fell apart and is gone. And then ironically, the public company accounting oversight board is now working out of their headquarters.

So we've been reading about this tension for the Department of Justice. We don't know if it's true or not, but we've read about this tension that on the one hand, they're worried about binance's customers they're worried about the impact on the marketplace if they were to initiate a criminal case against binance but on the other and on the other hand also binance is apparently cooperating with them with doj to some extent providing them with critical information regarding perhaps incidents of terrorism sanctions evasionasion, and other crimes, even ransomware. So on the one hand, justice wants to maintain that sort of stability and

doesn't like the unanticipated consequences when you sue a giant financial firm like Binance. But on the other hand, you have the allegations contained in the CFTC action and in the SEC action, which are quite scathing. I mean, they essentially allege a vast global criminal enterprise orchestrated by a few people. And the SEC went so far as to seek an emergency asset freeze, which is the biggest they've ever done in history. So there's a lot of extraordinary things happening with respect to Binance. So what do I think about a potential DPA? I did put out a very detailed post on Twitter, X, whatever you want to call it, explaining all the issues that come up when you do a DPA. And to me, the most significant

is the fact that it typically involves a very extensive monitorship. Like, not only do you have to make all sorts of admissions with respect to facts, and making those kind of inculpatory statements can have tremendous collateral consequences for the CFTC action, the SEC action, and any of the private actions that are out there. These are admissions that anyone can use for any purpose and it's rare I don't think I've even ever seen it in the DPA that those admissions can't be used in other actions that's why the SEC always has that neither admit

nor deny in their settlements because they don't they give up that collateral damage that collateral potential in those cases so having a monitor i've worked on a lot of cases which involve a monitor and the monitor gets unfettered access has to report quarterly to places like doj or if it's a monitor for the sec to the sec and if you screw up with that monitor all bets are off. So, and I don't know that any crypto firm has ever had that sort of scrutiny. You know, a 24-7 financial colonoscopy, 365 days a year by an independent firm that's all up in your business in every way, shape, or form, and you're paying those fees so i think that's a fairly onerous expectation i would expect a very given the allegations of the cftc complaint and the sec

complaint i would expect a comprehensive monitoring requirement so i i have my doubts whether this will happen maybe the other lawyers on the call disagree but i just have my doubts about it. Joe? Yeah, thanks for having me on. So let's go to the first question. How common is this? And there was some research that's been released periodically from NYU Law School that shows there continues to be a dramatic rise in the use of NPAs and DPAs. And to give you some color to that, between 93 and 2001, there were only 11 recorded cases they were able to find where there were DPAs or NPAs that were used, non-prosecution

agreements. That number, the following 10 years, went up by like five or six fold, you know, close to 100 examples. And in the previous 10 years, you're getting to 150 examples through the whole country, right, that are documented and publicly reported. So it continues to be sort of a trend that you're seeing. And, you know, take that for what it's worth. I do agree with sort of John's comments. And I would go a little bit stronger. I actually am very skeptical of the reporting.

You know, I know John sort of vouched for the reporters that put this out. But, you know, you've got unnamed sources. You know, I try to review the exact language, you know, because that's important to respectable journalists that are publishing this stuff. And, you know, they're using terms like, you know, sources close to the investigation or sources with knowledge. I'm very skeptical that this leak came from anyone at DOJ. I would put money on it that it came from someone within Binance's orbit or related to Binance's orbit. And, you know, potentially it's an effort to front run what is actually a breakdown in negotiations and a breakdown in any agreement

and anticipated charges. That's my view. What do you mean? What do you mean a breakdown in any agreement or any charges? Are you insinuating that they may that that you think that maybe they were in discussion the discussions broke down and now like i'm just trying to work out the logic of how you go from yeah that's my that's my speculation i mean some good news ahead of the bad news yeah absolutely if you were well i don't know if it's good news i mean if it's an untenable agreement if you had the opportunity as Binance to paint this as nothing more than a shakedown or, you know, some sort of, you know, oh, they wanted $4 billion and we're going to fight it. Why wouldn't you do that? Why wouldn't you, you know, if you weren't going to actually, you know, agree to the onerous terms that John just outlined, you know, the financial colonoscopy, which does not seem to be acceptable to Binance,

why wouldn't you want to get ahead of it, get that out, let it know, let it be known that this is coming to sort of hopefully soften the blow when the news does eventually break. That's my view. Yeah. You know, speculation. Yeah. Joe, Joe could be right. It's difficult to know. One thing I think Joe will tell you and I'll say is that when your defense counsel in these matters, you'll ask for anything. You'll ask the SEC for a 21A report instead of a case, you know, where the SEC just can put out a report of the findings of their investigation and not actually file a federal action. You'll ask for an NPA. You'll ask for a DPA. You'll ask for anything short of actually having to have these criminal charges filed against you and risk prison. You know, now remember, that's a big thing to understand here,

is that the DPA, this is typically, suppose you have a corporation that's been reorganized or has had some wrongdoing, and they really want to make things better for the shareholders, better for their employees, better for the marketplace, and they want to get rid of all the people that have done anything wrong. That's the kind of company that will do a DPA, because they still have to cooperate with respect to all of the individuals. So that's why these lawyers can't really represent the company and the individuals together, though they do it all the time, because the individuals are still in peril after the DPA with the company. It's just an effort by the Justice Department to let this business sort

of keep going to avoid, again, the anticipated consequences and the unanticipated consequences of a seismic event like a criminal prosecution of a major financial firm. But trying to guess as to which side, I mean, I don't think these leaks came from the Department of Justice. That would really shock me. I think that, you know, in my experience of, again, being an instructor at Quantico at the FBI Academy, being a former criminal prosecutor myself, a former enforcement lawyer, I can't think of a single time in my entire career that I ever leaked anything with respect to any investigation. And when it comes to something as sensitive as this,

I would think that would apply exponentially. So I would say- So just to be clear, John, are we- Just in order to defense people. Go ahead. So just to be clear here, because I think a lot of people were celebrating the Binance potential news yesterday

as a win for the crypto agency. Binance pays their fine, moves on, operates as a functional business, and we get a better resolution than maybe some people expected. But the implication here is that this is just a Bloomberg story leaked probably from somebody who has a vested interest in that being the perception of what's happening. And we shouldn't draw any conclusions. Absolutely. I mean, I think that I wouldn't draw any conclusions at all from the league sorry john um i would just say that's exactly it right i mean that was the perception when the story this is just going to be a slap on the risk it's not a

big deal four billion dollars finance that's for finance that's jump change um you have to think why would who would have a vested interest in getting that story out there? It's certainly not DOJ, in my opinion. I know. It just seems curious if the action being announced by the DOJ today at 3 p.m. I guess curious timing, but it doesn't seem like there would be much benefit to that leak 24 hours in advance. But then again, maybe the announcement's coming quickly behind it for that reason. Yeah, I just don't see this kind of like strategical leaking. You know, again, having worked in law enforcement for 20 years, I just,

I think it's something you see on TV, but in the real world, it spins out of control and it's stupid and you can go to jail for it. So, you know, and they just scare the bejesus out of you when you are beginning as a staff attorney, as a prosecutor about that idea. But I think what bothered me about the information about the deferred prosecution agreement was that there seemed to be this idea, and you're right, that, you know,

hey, this is just going to pay a fine. It's not. That's why I put up that exhaustive tweet. I know Mario hates when I put up these tweets that are 15,000 words. But in my mind, it's important to understand the scope and comprehensive nature of the typical deferred prosecution agreement and the paradigm that they work under, which is that a company really wants to do better and is going to shed any individual who has done anything wrong and fully cooperate and be up and running. This would be a very, very significant agreement subject to a lot of scrutiny.

And remember, it goes before a judge as well. And you never know. The judges are typically not that active when it comes to these agreements, but there haven't been that many of them to know for sure. And you know if you were to get, for example, Judge Rakoff, right, Joe, in New York, you can expect some scrutiny of that agreement because he's scrutinized SEC agreements along the same lines. So talking about this as being a slap on the wrist, pay the $4 billion and move on, I think people really got that wrong in the initial reactions. Yeah, John, I mean, I know it's speculation, but Rand kind of alluded

to this before. It's a pretty much an all-star lineup coming to make this announcement at three o'clock. I mean, is your feeling that this is probably Binance related or are we going to get completely blindsided here by something we have no idea about? Bitlazo. I have no idea. Bitlazo. I know because last time it was literally Bitslado, but I can't imagine you bring Janet Yellen in for the Bitslado announcement, right? I don't know. I don't know. I can't predict that. Yeah. You know, one thing I can tell you for sure is that no one understands just how many people are cooperating in these crypto-related investigations because you're dealing with a lot of lawyers and consultants and accountants who,

if you walk up to them and threaten them with prison time, which I've been in the room when that happens, they will sing like canaries, okay, 100% of the time because the idea of prison is anathema to someone who's, you know, spent most of their life doing professional consulting, professional counseling. It's one thing when you're dealing with a company and the insiders who are true crooks, but it's another when you're dealing with the lawyers and the accountants. And you saw it in FTX, you know, it was an easy prediction to make. I remember Joe and I both said that, that there were going to be lots of cooperators. So in these circumstances, there are loads and loads of cooperators. It is easy to find people to cooperate.

You line them up. You meet them one by one. You can say, hey, you got five minutes to tell me whether you're cooperating or not. If not, move on. We'll start with the next one. And that's true. The movie, the depiction in Law and Order in the movies of that type of scene is absolutely 100% true. And I've been in the room for a lot of those.

Quickly, there's a slight, at least this is coming from the block. It says USAG Merrick Garland, Treasury Secretary Janet Yellen will announce separate but related cryptocurrency enforcement actions at 3 p.m. Eastern. That's going from Bloomberg. What does that mean, separate but related? It means that, I guess, probably DOJ and Treasury will have separate charges maybe against the same person. I mean, it's a bit vague, but that they're not the same. There's a reason that both of them are there.

Was the last Bitz-Lot or whatever it was, did it have separate but related as well or no? I don't remember. Honestly, I can't see that. I mean, when you have Janet Yellen, that could mean that OFAC, the Office of Foreign Assets Control, could be involved. And that has to do with money laundering, with payments, with making payments to terrorists, with lack of internal controls relating to money laundering, to anti-money laundering. So that could be why Treasury's involved. I hate to speculate, especially on this kind of call, because we really are just only guessing. But I would sense that when Treasury's involved, it's probably OFAC. Go ahead.

Yeah, I was going to, yeah, yeah. Sorry, just, no, sorry. I got muted. Yeah, so how common is it for Janet Yellen to be on those conference calls or big podiums? I don't know. In my experience, the Treasury secretary in all the years when I was at the SEC and we filed many, many joint prosecutions with the Department of Justice and we had lots and lots of press conferences for those things. It was rare that Treasury was there. It was usually the SEC, DOJ, the various U.S. attorneys' offices, sometimes FINRA, the financial regulatory authorities, sometimes the state authorities. Because remember, these cases are always an alphabet soup of cooperative law enforcement and regulators. There are always lots and lots of cooperative law enforcement and regulators. There are always lots and lots of players. And when you have one of those press conferences, a representative from each place is always going to show up.

So how often did actually was Treasury in? I can't think of too many. I mean, typically, again, it's the financial criminal, the FinCEN, the Financial Crime Enforcement Network, OFAC. Those are all treasury organizations, and those all have to do with money laundering. And if you remember, the SEC case does not really have any sort of money laundering claim, anti-money laundering claim in it. I've always felt like the SEC carved out that sort of claim from their case against Binance, leaving it for DOJ. And the reason I thought that is because I remember bringing lots of cases at the SEC where if there's any problem with AML, you can just roll it into an internal controls violation and plead all sorts of facts relating to AML violations. So not lots of cases, but the ones that I worked on, it's just this general, hey, it's an internal controls problem. Whether it's AML, whether it's

accounting, you can throw anything into that basket, into that bucket. But I always thought it was interesting that in a 76-page complaint that the SEC filed, there really wasn't any mention of money laundering violations when the Reuters report and the CFTC action talked a lot about that. So there could be some money laundering at three o'clock if I were- It also says, as an update to that, just reading what's being reported by the news, that the DOJ will now quote crypto sanctions actions. So who knows?

And that could align. That might have to do with, again, those OFAC rules for strict liability. If you're making payment to a terrorist and you're violating the sanctions acts, there are multiple sanctions acts. Then, you know, those violations, once you've got them, are like shooting fish in a barrel because there is not really much of a defense. I noticed John Deaton is on the call. Whoever those people are, they should hire John Deaton because you're talking strict liability. It's very challenging. I mean, it feels like the, not to be tinfoil hat, but it's like they're rolling out the all-star team for the anti-crypto army here to make a big announcement all at once to put us back in our place a little bit. Maybe.

It's more just whoever works on it gets out there. announcement all at once to put us back in our place a little bit. Maybe. Maybe. Well, it's more just whoever works on it gets out there. Lisa's been very, very clear. I know Lisa Monaco. She's been very clear. Her message is a little different than what the FBI would really want her to say. She says, look, if you're using crypto to commit a crime, you're going to get caught. The FBI would say the opposite.

I was at the FBI just two weeks ago and had a meeting with a bunch of FBI agents. Okay, hold on. Whoa, whoa, whoa. DOJ to announce Binance settlement in press conference today. Boom. Boom. Okay. Real news. Wow. Real news.

Holy shit. Hold on. It'd be sarcastic. No, no. Real news. DOJ to announce Binance settlement in press conference today. What's the source? DBG. What's that? Bloomberg. Well, that's big. And that is the good news.

Could be the good news that we were looking for. But it is interesting, John. I was going to... Sorry, I was going to say... Just two seconds. Sorry, just two seconds. So can you read it again,

Ryan, slowly? Can you say it again? DOJ to announce Binance settlement in press conference today. Source is Bloomberg. It's big. I was going to say, it's always interesting

when we had the initial SEC enforcement actions that the Coinbase and Binance actions were rolled out basically within 24 hours. It was a Monday and a Tuesday. Now we see the Kraken on Monday and now Binance on Tuesday. So it doesn't feel coincidental the way things roll out. Scott, do you mind if I just jump in quickly?

Can you, D10 and others, Silver's here, we've got Lawyer at ETH. What does that settlement mean for the industry? What does it mean for Binance? I know John and Joe touched on it already. It looks like good news to me. Are you surprised? Should we wait to see what the settlement is? It's good news for the industry.

We don't know what the details look like, but it's always good when settlements are made. Randy, you've got a hot mic, right? Yeah, sorry, go ahead, Lloyd. Yeah, it's always good when settlements are made, and it'll be very interesting to see what happens. We can always think about how we feel about this once we know all the information,

but much rather see settlements than sabers rattling for the industry. Deaton? John Deaton, you there? I mean, I agree with Joe and John that I'll be shocked if there's like a deferred prosecution agreement. I couldn't imagine operating with a hammer over your head in an anti-crypto world that we live in in the United States. And so I would expect to see a full settlement, but maybe I'm wrong. Guys, I think that Binance has shut down

the US ambitions ages ago. I don't think that they have. I think that they can't. Yeah, they were crushed. I can't imagine. The market is responding, but just just quickly the market is responding pretty positively it's up to 36 it was at 36 point let me see 36.5 now 36.9 guys let's put the pieces of the puzzle together let's put the pieces of the puzzle together number one this article came out

yesterday number two this this thing came out today saying doj to announce Binance Settlement in press conference today. Number three, in that article, it said that negotiations between the Justice Department and Binance include the possibility that standard Chao Peng Zhao would face criminal charges in the US. we had $4 billion transferred from the transferred for $3.9 billion to an account in Binance, literally an account, $4 billion or $3.9 billion was transferred in one transaction of Tron using Tron blockchain into a Binance account. Now, we know that that could be redeemed and that could be paid as USD from the Binance account. So, I mean, you're kind of seeing that, you know,

it looks like maybe they've settled and the $4 billion has been paid. Now, the interesting question here would be what happens to CZ? Was CZ a sacrificial lamb so you know you know did they did they have to sacrifice cz i don't know i mean i'm just i'm just speculating here what do you mean what do you mean by but a bit goes up to 37k now what do you mean by by sacrifice well i mean again i'm only going um what is uh and binance including the possibility that it's found a chopping job which face criminal charges in the US. So maybe they'll say they said, Look, let's pay the $4 billion. Let's

keep finance alive. Let's keep the industry alive. And let's and look, what we know is we know that CZ is going to have to go and face the music in the U.S. And maybe it's a situation like the Arthur Hayes situation where Arthur Hayes knew exactly what he was getting into before he went back to the U.S., you know? So hold on, you still think he'll still face criminal charges in the U.S.? That was the speculation. I mean, this is a legal impossibility.

It always bothers me, and I wonder what Joe and John think of it. But when you charge a company with fraud and then you don't charge an individual with fraud, it always strikes me. I've never brought a case like that in all my career. But people do it. Justice Department does it sometimes. The SEC does it sometimes. I find it, like I said, a legal impossibility. How can a corporation commit a fraud if a person didn't commit that fraud? So it strikes me if you've got all these

all-stars showing up at three o'clock, somebody is going to be arrested or has been arrested or is cooperating and somebody is going to go to prison. I don't think you get up there just to talk about a civil settlement of that amount when when and you don't allege any fraud. But again, I'm just guessing. But that's what strikes me. I don't know. Maybe Joe or John disagree or David. No, I agree. I mean, corporations act through their agents and employees. So you necessarily have to have an agent or an employee that was acting in furtherance of whatever they're accused of. This is just kind of sad to me. I mean, it really is. I've been doing this a long time.

I've sued Kraken. I've sued Coinbase. I've sued Binance. I've sued Gemini. If this is the end and this is after all of the piles of shit people have swam through since the creation of these exchanges. And at the end of the day, all these guys created a moat and aren't going to be held responsible. I think it's a sad day. Look, it's good for the industry long term.

But hold on, David, we don't know what the charges are. Will they be made public if the settlement is reached? Yeah. I mean, look, if there's a settlement, if it's all going to be public, I'm just presuming, you know, the way these are all reading, if this settlement is reached? Yeah, I mean, look, if there's a settlement, if it's all going to be public, I'm just presuming, you know, the way these are all reading, if this really is just a $4 billion slap on the wrist. I mean, I remember that day when the Bizlotto thing came out, we were all taking bets

on what the announcement was going to be. I was hardcore that it was going to be Binance that day. We were disappointed. This will just be, I mean, I filed on behalf of my clients over the last five, six years, hundreds of whistleblower cases against almost all of the main players in crypto. You know, the amount of things we were promised, I mean, even just from the ICO days and the original, you know, Mt. Gox days.

I mean, all the OGs are getting out of the space. If this is just a $4 billion, they created the mode and paid it, I'm going to be really disappointed today. And I'm not saying that's bad. It's good for the long-term of the industry, but it's a sad day for people who were believers in the US government for doing the right thing. It really gives a lot of the people who are on the conspiratorial side of this that do the crime and just pay the fine people. They got what they wanted. If that's really the end of this today, I hope not. I hope, you know, I still say this, Elizabeth Warren's chief of staff going to the White House and taking this job, John Donenberg,

if he really capitulates, because it's his new position that's really going to run the White House playbook here, I can't imagine this is what all of the Biden people were and all of the Elizabeth Warren and all of the other anti-crypto people want to see. I just can't believe that. I mean, I don't want to believe that, but maybe it is. David, I'm very skeptical. I mean, go back. You know, the CFTC is going to be there as but maybe it is. David, I'm very skeptical. I mean, go back, you know, the CFTC is going to be there as well at this conference. And you got to remember in their

complaint, they make specific allegations about Binance employees aware that they are being used to launder money to Hamas. They have that quote in there from a signal message that we see the crime, but we close two eyes. You know, if. If that is true and the government agrees to this and just completely ignores that, man, there are real problems. Yes. Alex, go ahead. I was going to say, look, I'll first off say

I am not a lawyer. There's obviously a lot of guys up here who know the technicalities far better than i do but like looking at it more from the street media angle and like one we all know doj does have like a history of sort of playing up announcements again we keep referencing the biz lotto thing i think the thing that's like interesting to me is if someone had actually been arrested at this point like we'd know about it every someone involved in crypto gets arrested or taken down even in a foreign country or something like it leaks very quickly through

whisper networks and onto twitter and things so like i definitely don't think like that you know cz has been taken into custody anywhere and that's what this announcement is going to be um also kind of great does seem insane that like they would be agreeing to a settlement given what they've alleged so far but also going back and looking at like the leaks yesterday which i totally agree did not come out of the doj side it would make no sense for DOJ to leak it. It definitely feels like a strategic ground softening by someone on the Binance side who wants to make the news not shock the markets and things. It's weird. It both seems wrong, but at the same time, all of the evidence on the ground to me points to, yeah, that's just what's happening. Let's play out the scenario. And again,

it's just a scenario. But if in the event that they announce that there's a $4 billion settlement, finance continues to run under the DPA thing. But CZ goes to the US and faces the music in terms of criminal charges. What happens to the markets? It's not happening man there's like tz's not throwing himself on the on on the pyre to like save but hold on a second i mean i mean he's not agreeing hold on a second hold on a second tz could probably get to keep his shares in the business he goes and does and i'm just again i'm not saying that's gonna happen just playing out the scenario um He goes and does time like Arthur Hayes did time. And I mean, just to be clear on Arthur Hayes' time.

That was house arrest, right? That was house arrest. That was house arrest. I mean, let's just quickly talk about what the house arrest was like. So he had an amazing house in Miami, which is worth a couple of million dollars. He had a gym at the house. He was allowed to play beach bats on the beach between certain times and certain times. He got his body into shape.

It was probably a year of this house arrest. Friends in Miami said that they saw him running around Miami because he was allowed out between the hours of X and Y. And I mean, don't quote me on what X and Y is, but he was allowed out in the hours of X and Y. Yeah, it doesn't sound like such a bad deal, to to be honest, like Yeah, cool. Let's do it. Let's I'll go I'll do my eight months or nine months or do the one year house arrest. Still have full internet. Full internet, I

can probably still actually even be in contact with you guys. This way I get to keep the shares Binance continues to be a powerhouse. We closed down the U.S. operation. And yeah, that's great. I mean, I don't know. Sounds like a good deal to me. Joe? Yeah, just one other possibility.

We're speculating here because we still don't know. I know that Scott read the Bloomberg article, but I haven't seen it about it being a reference to the Binance settlement. There was that that announcement yesterday from Tether and OKEx about the two hundred and twenty five million that was frozen of Tether in coordination with the International Human Trafficking Ring. That was, you know, referenced. So, you know, that might be the press conference. That might be the whole whole story there. We don't we don't really know if it's binance so just take it with a grain of salt yeah you know the way these things no no what do you mean we don't know if it's binance scott didn't you just read that it is about binance well but he's the implication is that bloomberg

could be inaccurately reporting ah okay it's not you don't know so you know there's too many indicators let me tell you how some of this stuff works from my perspective. When you're in government and a big event happens that's really negative, like the war that's going on in Israel, okay, and you're seeing these big articles about Hamas getting money from terrorism, word comes down from the powers that be very quickly, we need to do something about this. And it comes down to the Justice Department. It goes to all the different regulators. And everybody gets together very quickly to say, and they've already been getting together in all sorts of joint task forces,

to say, what are we going to do about this? This is an immediate concern. And it's a very complex and critical issue coming all the way from the White House, from everywhere. What are we going to do? And I think this press conference will first and foremost address that issue. That would be my guess as far as what the objective of this press conference is, is to really hone in on this idea of terrorists using crypto to commit heinous acts? I can tell you exactly what it says on the Bloomberg terminal, if you'd like. It's not huge, but Joe, it'll give you. Yeah. It says, DOJ to announce finance settlement and press conference today. From Bloomberg, U.S. Attorney General Merrick Garland will hold a press

conference at 3 p.m. Eastern to announce separate but related cryptocurrency enforcement actions, the department justice said in a statement. The announcement will involve a settlement with Binance, according to two people familiar with the matter. The Justice Department is seeking more than $4 billion from the cryptocurrency exchange as part of a resolution of a years-long investigation, Bloomberg News reported Monday. So this still is Bloomberg reporting, right, without the clear source. But just to be clear, that's a screenshot of a Bloomberg terminal. And notice, Scott, it mentioned multiple actions, separate but related actions is in plural. So I think Joe pointed out is probably accurate.

I think we're about to see the height of how bad crypto is coming from the administration on multiple accounts, money laundering, the funding of terrorism, the Binance situation, all of that. I think it's going to be a multitude of issues. And what does that mean for the...

Shouldn't that be extremely... Oh, Travis is coming up. Shouldn't that be extremely good for the, but Scott, isn't that, shouldn't that be extreme? Oh, Travis is coming up. Shouldn't that be extremely good for the market? So I'm sort of confused. It's like, this is one of the last things that hangs. Wait,

did you say Travis is coming up? Yeah. Travis is coming up. This is like, you understand that this is like, this is heaven. We have a full, we have a full panel.

I'm not sure. I mean, you, you understand the last missing person is, this is like the second best thing to see. Go ahead. You understand that this is Travis's moment. This is the moment.

He's here. Hey, Travis. What's up? This is it. All the tweets, all the time, all the,

all the, it's like when you're an Olympian and you run like the 100 in a couple seconds and you've been training your whole life and you just get your few seconds. So, Travis, let me interview you like they interview an athlete at the end of the race. So, Travis, was the race, was the tweet all worth it? Are you feeling good about the outcome of this? Do you think $4 billion is enough? We don't know yet. We don is enough? We don't know.

We don't know. I mean, when I read the – you read the Binance article yesterday and some of the things that they leave open there around whether or not Changping is going to be able to continue operating this business, what's going to happen with the rest of the management team. Obviously, you've already seen a lot of turnover in the management team over the last year anyways. But in an outcome where Changping

steps away entirely, the DOJ installs monitors, which the Bloomberg article talked about yesterday, and the exchange doesn't collapse in the process, that's very bullish. It's very bullish. It's going to clean up. You're going to feel a lot better about the foundations of this ecosystem. Yeah, I mean, it's a little hard to imagine

what Binance's role in the ecosystem will be assuming what I just said comes to fruition. Changping out, rest of senior management out. Maybe not rest of senior management out maybe chopping maybe chopping i think look i think after he also we should try and get his name out it's not changping it's chopping um so i think we should try and get the name right and maybe he's out and he goes and faces the music in the u.s or maybe he's just out of binance and doesn't need to face the music but we don't have an industry collapse and that for me is one of the biggest things

that we were worried about. I mean, ultimately after this, there's only one more domino that is part of all our previous cycles that still might collapse or could collapse. And that's Tether. And we've seen that Tether is very, very, very resilient. And so like, this is like the last of the,

this is the last, last, last, last, last of the, um, of the, of the, of the dominoes. Some would say, uh, I mean, some would say that DCG potentially qualifies there, but that's conjecture. I mean, I mean, DCG is nothing. There's a lot of people who are concerned. Honestly, DCG is nothing. Yeah.

It's nothing compared to Binance. We also haven't even, we also haven't even mentioned, which is so crazy when you look back on the way that we've talked about things in the past that we haven't even talked about Kraken today, which in and of itself, at any other point in the cycle, would have been the biggest news ever. And it's completely being sort of disregarded, right? Yeah, I don't know. It struck me as a relative non-event. Yeah, but it wasn't a non-event when the same thing happened to Coinbase. And this one mentions

potentially co-mingling of funds from what I read. I don't see it as a non-event. I posted another maybe 20,000 words on it today. Again, Mario, I know you love the long posts. I think it's worth reading and looking at what that case is all about. It's just the continuing regulatory onslaught from the SEC. They're going after every single intermediary. There's just going to be no one left. It's not a scarlet letter maybe, but there's no one left. John, I have a question for you. Why, and I'm trying to figure this out.

It's a head scratcher for me. You've got the all-star panel that everyone's referring to today at the press release. You've got CFTC there. Why why isn't the sec there why aren't they on the lineup that seems conspicuously absent i was wondering because they're not a criminal organization because they're not yeah neither is cf neither is cfpc yeah but the charge you know the charges the charges that were brought up that were were brought against finance, were brought against finance by the CFTC. They're also brought by the SEC. SEC is suing them as well.

The only thing, yeah, you're right. Joe, you're right. It strikes me as a glaring absence, but probably because of what I said before, which is the SEC action just left the money laundering to elsewhere, left the terrorism-related charges, the sanctions evasion, those kinds of related actions, those kinds of related charges, which would fall under the rubric of internal controls, left that for DOJ. So maybe because they already had their day with Binance. Remember, it's incredibly unusual. In fact, I would say it's unprecedented that the criminal case and the SEC case, if there is a criminal case against Binance, which it sounds like there's going to be, that they weren't filed

contemporaneously. Historically, every single case I ever brought in the 20 years that I brought cases at the SEC, when there was a parallel criminal component, you brought them on the same day at the same time and you had a joint press conference about it. Occasionally, on the rare occasion, sometimes the FBI would call and say, this guy's running we're going to have to arrest him and charge him tonight sorry um i know you can't get your ducks in a row so we would file maybe a week or two weeks later that happened maybe once or twice but what we're dealing with in this situation is the sec i think they came back from that Voyager hearing when Binance was going to buy Voyager and the SEC showed up and said, you can't let that happen to the judge. And the judge

said, why? And the SEC said, because Binance is a market manipulation enterprise. And the judge said, well, that's a bunch of hearsay. You haven't filed anything. And I think the SEC went back and said, we got to do something. And they brought their case against finance, a very serious case involving the asset freeze. And so they've had their day. They've brought their case. They've already been litigating. Remember, they're in active litigation with a very, very careful and thoughtful judge here in the district court in D.C. So maybe they just don't want to be in front of the limelight answering questions when they're in the middle of litigation in front of the limelight answering questions when they're in the middle of litigation. John, can I ask something else?

Maybe the FTC has less complaints about it. Go ahead. Something quickly, just a point of order. Why does the DOJ do monetary settlements for criminal charges? How does Binance paying United States government $4 billion resolve anything? Because they're a mafia. I want to hear John say it. Because they're a mafia like every other fucking government in the world.

I mean, do you need John to tell you that? The US government? No, but really, I mean, why is that? Guys, guys, do you prefer they take criminal action and hurt the industry? I don't get it. We're complaining they could harm the industry. I'm perfectly happy. I'm perfectly happy with that being the industry. I don't get it. We're complaining that could harm the industry. I'm perfectly happy. I'm perfectly happy with that being the case.

I just want to understand where the thinking comes from. Like every other government in the world is a mafia organization. No, no, no. Scott, I disagree. I don't get it. Hold on. That's just ridiculous. So if they

take action and harm the industry, or they're a mafia, they want to destroy the industry. If they don't take action, so they protect the industry and hold someone accountable, or they're a mafia because they get taken money. There's two ways to get it wrong by the looks of it. Yeah, the lens is incorrect here, guys. I appreciate what you're saying, and I sometimes believe the same thing about the government. Also, I can't believe they do these asset forfeiture actions. I think they're completely wrong and contrary to what the Constitution requires. But remember,

the SEC can collect a $50 billion penalty, but we'll never see a nickel of it. The SEC is not self-funded. It's funded by Congress. So all that money just goes into the U.S. Treasury whenever the SEC collects anything. There's no bounty program. It doesn't matter how much the SEC collects. It's not going to matter to their budget. They don't have any financial investment. Yeah, I was asking more specifically about DOJ. When it turns criminal, civil, I understand you pay your fine, right? I mean, that's how things work at almost every level. It just feels strange. And Mario, I'm not saying I'm not happy about it. Don't get me wrong. I'm just saying it feels strange that paying a sort of arbitrary amount

to the government resolves your criminal charges. So I think there might be something deeper here, which is that CZ side. I don't think that happens, though. I don't think you say, hey, let me pay $4 billion instead of going to jail. I just don't think that happens. It's certainly, you know, remember, DOJ prosecutors are human. They want to bring people to justice. They don't want to make these kinds of deals. And that goes from the top all the way to the bottom. It's a very independent organization, although you have political appointees who certainly have their own agendas. But it's certainly, I can speak personally at the SEC, you're always, remember, that's only civil fines, only disgorgement and other kinds of always, remember, that's only civil fines,

only disgorgement and other kinds of penalties. Right. That's what you have to go for. That's my point. That's what you have to go for. It just feels like, I mean, the United States spent $4 billion since I asked you the question about the $4 billion. I'm with you. I get that. I get that. I guess, but my guess is that there will be, all these people are not showing up at this press conference without some sort of arrest warrant for somebody. I certainly wouldn't let my boss show up. I was also a counselor to the director of enforcement for two different directors of enforcement while I was chief of the Office of Internet Enforcement. And I would not be showing up at a press conference when someone wasn't going to jail for something.

So you're saying there will be an arrest warrant, it's unavoidable for CZ, is that what you're saying? Oh, I don't know for CZ, I'm just saying somebody has already been arrested or somebody has already pled guilty. But who is there? But is there someone other than CZ? I don't know, I don't know. Yeah, but John, the bigger question is really not necessarily CZ, it's not necessarily, you know't know. Yeah, but John, the bigger question is really not necessarily CZ. It's not necessarily, you know, what is going to be announced in terms of a, you know, a restitution penalty settlement today. But the key question is, what are the state and the books and records

of Binance? And regardless of whether CZ is there or not, I cannot believe a settlement agreement would be entered into, which would not at least give doj your point you know the full rights to a colonoscopy of finance which to me uh whether he's there or not right that presents a systemic risk to the industry yeah that would be the most pathetic settlement i've ever seen if it doesn't have a monitorship you you find somebody four billion dollars and then you don't set up a monitorship i mean we we at the sec we find people a hundred thousand don't set up a monitor ship. I mean, at the SEC, we find people $100,000 and set up a monitor ship. So I can't imagine. What does it, what does it, so two questions, and this is more of a market question.

Why do you think the market is not reacting as positively as I would have expected if there's a settlement? It went up to 37K. We had the same news yesterday. We had the same news. The news was presented yesterday, even though it's being confirmed today. Well, what happened to the market yesterday? It wasn't the same, it was pretty stagnant. I was just saying, even though it's being confirmed today. What happened to the market yesterday?

I was just saying that the philosophy of going after charging a lot of money. I mean, so putting someone in jail doesn't disincentivize the shareholders and the directors generally from malfeasance and it doesn't take the, the just doesn't discourage any of the profits. So even criminally, when it's a company you know a massive financial hit is more of a deterrence in many cases than saying you know your patsy goes to jail and you can keep operating all right i agree with that and i agree with that in principle but uh i would say that if if it's really cz that's at the forefront that would uh be a pretty major

deterrent to anyone at finance but i But I agree with you. Go ahead. I have spent some time thinking about this because this is one of our key client questions. What systemic risk does Binance have to the markets? And if you were to ask me at the start of the year, if you looked just specifically at Bitcoin, because it's easy to calculate,

Binance made up 85% of Bitcoin's trading volumes. That's globally. So it was massive. So if something happened to Binance made up 85% of Bitcoin's trading volumes. That's globally. So it was massive. So something happened to Binance, it actually has a huge systemic risk to the market. But since that point, you know, since all this regulatory action and the end of the fee holiday at Binance, its market shares fall into 30%. So the answer is increasingly less systemic risk over time. And, you know, let's say Binance got arrested

or something happened today or tomorrow. It might rock the market a little bit, but I think this is a reason why the markets are just kind of shrugging off and not paying too much attention to it. James, sorry, finish off. off yeah i'll say that and that you know people are now distinguishing between an individual like sam bangman freed and what the crypto market represents there's two different things a centralized entity and a decentralized one question though does that essentially confirm that there is no witch hunt

against crypto otherwise they wouldn't settle? Yeah, I mean, I think so. If there was a witch hunt against crypto, we wouldn't be seeing the impending launch of a Bitcoin ETF. You know, I think now we just got to distinguish between what passes the Howey test and what doesn't. I mean, that's really hard. I can't do that. I have to disagree with that. I mean, that's a really hard, I can't do that, but it's clear that- I have to disagree with that. I have to disagree with that. I think actually the Bitcoin spot ETF

is their sort of face-saving ability to throw the industry a bone while they still go after everything else on the other side. I mean, it's, you know. Yeah. And Mario, I think the Kraken enforcement action yesterday, we can say that it's shrugging off quote unquote good news. We don't know the good news. It's also shrugging off bad news. There's just

news is not moving the market. I think at this point in either direction that Kraken news, you know, if it had come alongside Coinbase and Binance original enforcement actions would have definitely, definitely done so. Dave, I see you give it all kinds of thumbs ups, downs, hundreds. What do you got? What do you got? What's the before Dave speaks, because it takes a while for him to unmute. What's the market look like? If Dave is speaking, I can't hear him. What's the market look like, Scott? I mean, somewhat flat. I think it's just not not reacting. I mean, we can say yeah, it's up from 36, 6, 37. I mean, that's the implied volatility of Bitcoin at any given five minutes.

So I can't draw any conclusions. And was Dave speaking, by the way, and I couldn't hear him? I didn't hear him. Dave, can you speak? Yeah. Yeah, while Dave is trying to speak, just for the host. Hold on. Just for the host, please admin or co-host Scott or Ryan so we can get one of them up because the panel is full.

Go ahead, Dave. Dave. Okay, you is full. Go ahead, Dave. Dave. Okay, you're back. Go ahead. But it's not. I've been sitting here watching our order book viewer. We take an aggregated book. We're just looking at Bitcoin tether, looking at all those things. The amount of times that the market has been backward with massive imbalances in both directions over the last half hour. I've been taping some of it to try to do a demo. It's been huge.

Volumes are large. There's lots of cross currents. The point is that there are stories in both directions here. You know, there's the Kraken story. There's the Binance story. And the Binance story, no one really knows. I mean, we don't know what the monitor ship. I mean, John is right.

I mean, there could be severe issues and people don't know what it is. Obviously – Dave, can you just explain to us again what is monitorship? What does it include? What does it involve? It's like BitMEX, when they settled, lost – they went from the dominant exchange, which Binance is right now for derivatives, to an also rent. And there's lots of people.

Dave, you keep cutting in and out, unless it's only for me. So while, Dave, I don't know if you can fix your internet connections, because it's hard to- I think he's in a car or something, yeah. Yeah, yeah, yeah. But in the meantime, and I'm... Yeah, go ahead, Dave. While we're carrying on, while we're carrying on, just two things. One is I'm going to go live on YouTube later

and actually trade the announcement. So if the market dips, maybe buy it. If the market spikes, I don't know, we'll play around. And how long is the announcement? I'm going to go live in about three and a quarter hours and the announcement's in about four hours, if I'm going to go live in about three and a quarter hours and then it's in about four hours if I'm not mistaken. So if anybody wants to join, the second thing is there's someone in the audience, I think it's Marshall Long. He said that I corrected Travis on pronouncing

Chao Peng Giles incorrectly and I also pronounced it incorrectly. So I wonder if he wants to maybe come up and just tell us to pronounce it. No, he's not here. He was here earlier. So just quickly, guys, and Dave, not sure if your mic is back. You're talking about monitorship, what that involves. And is it fair to conclude that essentially the DOJ kind of threw Binance under the bus and CZ potentially under the bus without trying not to harm crypto in the meantime, which is another way of looking at it is that the big players right now, we've said this before,

the big players right now and over, the people, the players that built the industry had been picked off one after the other. Tether's probably one of the few left standing. And then you've got the triad fire guys coming in and taking over that market share. Is that a fair conclusion from everything we've seen over the last over the last year because it seems like this almost seems like a conclusion to an incredible

Lord of the Rings try a trilogy except unless tether something happens with tether Otherwise, we've just kind of finished off with with all the bad users Ryan mentioned earlier This internet is better we have two dave your mic is the worst days yeah yeah dave uh yeah dave your your mic is bad but that i want to go with that same question to simon because simon we've been doing we've been covering this since the early days and uh one of the few i remember a few moments on the show and one of them is when you were talking about the three big players left it was dcg tether and binance uh dcg obviously in progress but in my opinion it's been priced in binance it's kind of coming to a conclusion in three hours if hasn't already

and tether's the last one standing um so the same question asked dave want to get your thoughts on it simon yeah it does feel when we look at it in retrospect, there has been some kind of management of trying to, you know, the most sceptical we could say is a complete attack on the market and a trad fight takeover. At the same time, it does feel like they've been managing somewhat of an orderly wind down. So they've been trying, you know, if you look back at the last year or so, remember when they first started talking about Binance, their biggest fear was making or what they said was their biggest fear. We don't know what they say, what they say and do and mean are the same thing. But they did say they wanted to and they were scared that it might cause a bank run and create systemic risk.

And that would be massive harm to investors, as we saw in FTX and all the others as they start being dependent upon each other. So to me, it does feel like you've got bullishness in that there will be additional investor protections. There will be segregation of custody. There will be securities disclosure in our sector moving forward. And there will be Bitcoin, which is a commodity and decentralized that doesn't need to mess around with all that stuff. And all of that's becoming clearer. I think there's still questions around what is staking in the US. Is staking as a service going to be treated differently to staking on chain? Digital currency group, I think that's going to work through its legal process.

But if there is going to be a transition for GBTC, or whether it's going to be an unwind of GBTC, it looks like they want an ETF at the same time. So to me, it does all indicate that there is an industry here. Bitcoin is going to change the world. If we could have shut it down, we should have done it in cycle one. We tried it in cycle two with the regulatory crackdown. That didn't work, and Bitcoin just kept getting stronger and stronger. So if you can't beat it, join it, and let's let our traditional players and make sure that we can remove all these conflicts of interest.

If you really read between the lines of Kraken, it's still not clear how the SEC wants people to custody, have trading, have leverage, and how you separate all these functions within the cryptocurrency sector. So to me, this is just one stage closer of US deciding what it wants. It doesn't want these international players.

And I still do think it's going to try and implement some kind of regulations that makes DeFi or things like Tether unworkable by just saying, if you engage with anyone in the US, then you need to meet these requirements, which are impossible to meet under the existing rule without being registered in the U.S. and then how that could break the whole DeFi model because then you have to distinguish between the geolocations and I think that's always been their plan they were just looking for the right time to do it. Yeah quickly John Deaton is there anything new in this Kraken we haven't really talked about it in this Kraken action that we saw yesterday from the SEC, I didn't get a chance to read too deeply into it. I did see a mention of funds potentially being commingled, which we don't believe saw in Coinbase.

But is there anything new here? Is it more of the same? It's mostly more of the same, except there is $33 billion alleged to be commingled with customer funds that led to accounting errors because in their financial statements, they say. And I didn't get through the complaint. There seems to be, you know, with the Coinbase case, I think they also have an element of primary cells where that's almost, you know, alleging that they're the issue or it's a primary cell as opposed to a direct cell as opposed to a secondary cell. So the SEC has tweaked their... Because of Ripple, right?

Right. No, exactly. They've tweaked it. And the most interesting thing to me is, you know, this is now in the Northern District of California. And so you have, you know, two pending cases, Dragon Chain in Seattle, which is the Ninth Circuit, and you have Northern District of California in the Ninth Circuit. And of course, you have the Ripple and Coinbase case in the Southern District of New York. I personally believe that the SEC is very concerned with the Coinbase motion to dismiss before Judge Felia, which the oral argument is January 17th. I think it has real teeth. Usually a motion to dismiss, I give it less than 10% chance. And I think this one has real potential, maybe not on the staking side of the house, but I think it's possible, whether it's major questions or Judge Fellier says in blind bid-asked secondary market sales, how he just doesn't apply as a matter of law. I'm not saying that's going to happen. I'm just saying that it's got more teeth than people think. And I think that they're worried about that. And there's a reason this was filed in California. So they're hedging their bets by basically a spray and pray approach around

the country with different districts. Perfect way of saying it, hedging their bets. They're not feeling, I don't think they're feeling real good in front of Judge Velasquez, just like they weren't in front of Judge Torres. So we'll see. Right. I guess the question is why bring the action if they feel that they're going to lose? But I think, you know, if they do it with different wording, it's sort of an updated version of what they were doing with Coinbase. So that would make sense. Yeah. And I think the Ninth Circuit, I think there's forum shopping for a more friendlier type judge,

more friendlier type jurisdiction that has different appellate case law. And so, you know, I think we're, you know, the thing about it, just imagine Kraken paid $30 million thinking they were buying peace a year ago from here on their staking element. And then they get sued anyway. So it's, you know, the anti-crypto agenda is in full swing. Yeah, that you're right on that. It's rare that the SEC brings one case, settles it and then brings another one. But you have to think that Kraken had to know that that other case was coming. I don't think they were blindsided.

But it's unusual. You usually't think they were blindsided. But it's unusual. You usually bring it all in one shot. But all bets are off. The rules are different. As far as form shopping, I did that all the time. I tried to pick out the right venue. Federal venue means what state. But everybody's got a different opinion on that when you actually start going through the calculus. So typically, the way it ended up with me with a lot of our cases was which was the most convenient for our witnesses and the most convenient for the lawyers. Maybe some of the lawyers are on the West Coast. You do have Judge Rakoff's decision, right, John, that in the Southern District that's pretty compelling, the Tara motion to dismiss decision that Judge Rakoff wrote.

Yeah, but you got to remember that's a motion to dismiss where in the complaint, it was alleged a mass marketing effort that would have reached secondary users. And in a motion to dismiss, as you know, John, you have to assume all the allegations as true. And so I've always thought that the Judge Rakoff decision is not that inconsistent as everyone made out to be with Judge Torres. And Judge Torres, even in her interlocutory appeal denial, said, just allege enough facts to prove that secondary market transactions with XRP are. And so, you know, the programmatic sales. That seems inconsistent, John, right? Like it doesn't really make a whole lot of sense.

What facts would change the dynamic where you don't know if you're buying from the original issuer? I mean, it seems like the logic would hold to all secondary market sales. I know she has that footnote in there, but how do you reconcile that? Well, I mean, we had affidavit saying that we submitted basically that she referred to in her decision stating that people were buying XRP who were unaware of Ripple, unaware of Ripple's existence and buying it for other reasons. Right, but that would be true for any token, right? You could always get affidavits for any token that's saying that the buyers on Coinbase or other platforms don't know who's behind the token.

Well, I guess what I'm saying is I think that the industry celebrated the Torres decision as an industry wide. But when you read her decision in the interlocutory appeal denial, she really limits it to the to the to the facts. And and I think that when you look at the Doquan and the UST and all that and you look at the different evidence that's alleged and was in Ripple that they're not that inconsistent. I mean, I know a lot of people disagree with me, but, you know, that's my view on it. Well, but doesn't she, John, doesn't she seem to say, don't use my decision as precedent? That's what I thought was the strongest message in that interlocutory appeal decision that she made. Yeah, she just basically, and remember, she even-

Because the decision made entirely on facts and circumstances. Yeah, she just basically, and remember, she even tied it to the facts of the case. So I'm not sure that they were form shopping when they went to California because of that interlocutory appeal, but you might be right. It might just be that they might've just said, you know what, let's just try somewhere different. We're not in the mood. Or it might have been a matter of convenience, which, because again, so many people have so many opinions as to where you should file a case when you're the federal government, because you really can go anywhere. We filed a lot of our cases in D.C., and every time we won five different motions for change of venue, there's no way to change venue in a federal SEC action. There's always good reason to keep it there. Yeah, well, I think when you look at the way the first hearing went with Judge Felia, when you look at a Uniswap decision, I think the SEC intentionally wanted to stay out of Southern District of New York on this cracking case.

But I could be wrong. And there are other legitimate reasons to file it. And elsewhere, as John articulated. Yeah. Yep. Go ahead, Dave. So I don't want to comment on the legal debate, because honestly, you know, that's above my pay grade. Go ahead, Dave. bigger than normal. We're seeing the CME futures and the Bitcoin futures trading at $600 premiums to December. It was between $300 and $400 yesterday, and the math says it should be around $120, so in terms of the interest rate calculation. So you're seeing interesting flows all around. Volumes are generally higher, and there's lots of speculation because people don't really know

what will happen. The question that Mario asked earlier, I think is important, is will Binance be degraded in any way in their operation? Will matter to global liquidity, but at a bare minimum, certainty is what markets like, right? Markets like certainty. I think someone said that before. So assuming we get a definitive conclusion there, that will matter. As for the Kraken case, I mean, I'm not nearly as utopian as Simon. I think that the big deal there is, well, I fully agree that commingling customer funds is a bad idea and applaud lots of efforts throughout the industry to stop that practice and to do things like Hopper and Bitco are doing together and many other, that is a good thing to happen. The fact is, without understanding what's a security and

without rules that could actually work, it's going to go nowhere. The real issue with all of those litigations is the major questions doctrine. And I'd love to hear what the lawyers say about that because Congress has been rather loud. There are bills that have gotten out of committee. It's pretty clear what a lot of people think, but there doesn't seem to be the ability to get anything passed, at least not in this election year. So I think a lot of it's going to come down to that and also the Coinbase motion to dismiss, which usually has no chance. But in this particular case, a lot of people on this panel think that it actually has a chance and how that will impact all of this simon no simon before can i ask a separate question scott i don't understand why the market is not celebrating this i know you guys touched on it earlier because there's no

clarity yet and there's still some bad news overhanging i mean cracking what's about right not bad news is expected news like you really think mario i think when you when you think of the market you have to understand that we're in this this range situation now new money is waiting right and the money that's recycling inside of the crypto markets is uh is indeterminate right now. I mean, none of this stuff is obvious. I mean, let's just see what happens at three. Every time people have bought the rumor to the news over the last few months, they've gotten burned. And I mean, burned badly. And so be very careful. I don't think that a lot of people are going to jump

in with both feet saying, okay, everything is there. What was the source of the first story, the $4 billion one yesterday? Bloomberg. Bloomberg is the source for both of them. Yeah, Mario, your mic is also rough. Yeah, your mic is rough. Whatever language they use about according to people close to the matter that prefer to remain anonymous or whatever like that. I mean, I think the price action around it is because, yeah, you still just don't know like, you know, what the outcome for Binance is going to be.

I mean, you don't know whether or not Changping is going to continue to be able to run this company. You don't know what the fate of BNB. Why does that matter? The crypto- Travis, Travis, is my mic better? Yeah, you're better. Yeah, so why does that matter? Why does the market care if CZ, and I really like CZ, and I hope it can still run the company, but why does the market care

if CZ can run the company or not? The market just wants to know whether there's going to be systemic risk or not. And by the looks of it, if this rumor is true, the systemic risk has been taken out of the equation. Yeah, because I think you still don't know what the end result of Binance is going to be. And Binance is a very big part of the market. It's a very big part of the alts market. I mean, we don't know. I mean, they have a proof of reserves number that's out there. You know, you can decide whether or not you believe what that is. If you believe that number, that's a very, very big number. what percent of Binance customers' assets are gray and black market money that are going to get spooked if the DOJ then has a team full of people looking at Binance all the time, and then that money moves,

and then what happens there? So I think there's just sort of this knock-on effect of the fate of BNB, I think, is still probably quite uncertain here, too. It does kind of seem like we're setting up for like a larger version of what happened with BitMEX, just a bigger version of that. And BitMEX kind of faded into obscurity. But nobody, you know, they had all of customers money and there wasn't a collapse around that and that um and that may end up being the same case for binance now a very big difference was that there was no bitmex coin so you could imagine like if there was a bitmex coin there was the fifth largest crypto and then

bitmex's fate ended up being what it was well then like you know what would happen to the price action around right bitmex like ftt right i mean ftc still exists yeah but that was a collapse right i mean you i mean you guys have been hearing me ramble about this now for nine months or some shit right like uh there was always these different paths around and there was always a path i mean you you can many times i came on here and I said, my base case is not that this thing collapses FTX style. It was just that the risk of that was much higher than would be comfortable to keep your assets on that exchange. And I think it's, you know, it's looking more and more likely that that's right, that it's not going to collapse FTX style. But being the fate of BNB, it's like, you know, I mean,

Changping steps down, they pay a $4 billion fine. There's DOJ monitors installed for the next however many years on this thing. You see a mass exodus of withdrawals from the fund because people don't want to be watched by the DOJ anymore, which would make all the sense in the world. And then the volume just continues to dry up and continues to dry up. And, you know, that's a positive scenario. I think Binance being, I was gonna say, I think Binance being slowly marginalized was always the best situation. And we've seen that already. Right. So, you know, not the best situation for Binance,

and especially if they have not done anything wrong, that would be quite tragic. I mean, it feels like Binance US was murdered with no due process just by, you know, passive, passive accusations. That's unfortunate. But for the industry as a whole, seeing, you know, CME futures pass Bin finance and open interest is something that people should probably be celebrating yeah so yeah but it's hard to know what they're all i mean i mean i've talked about this on here before too right you're starting to imagine what the next bull cycle is going to look like you know it looks like we're you know in the second or third inning of one or whatever the you know at the beginnings of a new bull market. And specifically as it relates to alts, Binance is such a critical epicenter for alts that trying to imagine what the next alt bull market is going to look like, you have to take a view on what's

going to happen with Binance. And so there was these three paths, right? The first path was status quo. Binance catches some slap on the wrist, but it continues to operate more or less status quo with it continues to have its same dominant market position. That's already looking less and less likely, like the outcome. Second position is their dominance uh is hit considerably and they do this

kind of fade into uh obscurity type of thing like bitmex and then the third was like an ftx style collapse and it seems like we're narrowing in on that second outcome and again trying to imagine what all like it's like where's the liquidity going to go where's alt trading going to go you know where market makers you know you got the dwfs of the world that are instrumental in pumping small caps that are you know a big part of uh sort of manufacturing the reflexivity that starts new bull cycles like it's like if they can't do that on centralized exchanges like where is that type of price action you to go, going to emanate from? So I think it's going to be interesting to watch. Yeah. Another thing we didn't even mention today, Travis, is that for people who started in 2016, 17, like me, there was no Binance.

We all traded on Bittrex, right? And Bittrex US disappeared and now Bittrex Global yesterday announcing that they're winding down. Interesting. Simon, go ahead. Yeah, I was just going to say it does feel like we're moving to a world of less systemic risk in our sector, which is a good thing. I mean, if Binance did actually go down and it was in dramatic fashion, I'm sure there'd be a lot of players that would take down with it and we'd see um a cascade but maybe many have also hedged against that but i think the fact that nothing really happened because if you think about it i mean maybe david silver thinks differently because he's always on the other side of suing um but kraken's always been considered like a good player in our market um and so that

was shocking news i I think I obviously I have to say that because I'm a shareholder for the bias out there. But but people view the same as Coinbase, by the way. And you know, so I don't think that people have necessarily changed their bias as a result of SEC enforcement action. But yeah, I mean, a headline of commingling client funds is different to unregistered securities offering, I think. So, you know, that's quite a dramatical headline in terms of the difference with what they're saying with Coinbase. So we'll see what happens there. But the fact that it didn't really affect the market, I mean, you know, Kraken's a 2011 exchange. They were a really important player.

But I think the fact that we're just getting this diversification is good. But speaking of flow, I've got a question I'd love if anyone can actually answer this. Whose bank account in the end does that $4 billion actually end up in? Is it going to be DOJ and they'll use it for more enforcement? Does it go up to Treasury? I don't think there's any restitution or so it won't go to any victims or anything like this. Does it end up paying off some of the interest on U.S. debt? Does anyone actually know the flow of funds and where that ultimately lands? Anybody know the answer to that question?

John? Yeah, David's got his hand up. The $4 billion is going to pay 15 minutes of the interest rate on U.S. debt. Yeah, you know, there's some odd federal agencies out there that actually get to raise their fees. And as a result, all they have to do, like the post office a result they all they have to do like the post office right all they have to do is raise the price of the stamp to get more money in their budget but it's not like that with doj so i the the money as i understand it just goes into the treasury i'm not sure exactly how it's rooted um but you know and as far as the the kraken lawsuit goes i i do kind of agree with John Deaton that there are a few differences,

but it's generally the same as Coinbase. I think that commingling is a serious allegation. The chief compliance officer there is an old friend of mine. We started together at the SEC Enforcement Division. His name is CJ Rinaldi. He's absolutely 100% honest guy guy an incredibly capable lawyer with extraordinary experience so i i think that there's if there is any possible legality to this going through if you've got cj in there if you see cj resign then i think it's time to jump ship yourself but so long as cj is still working there i think there's hope in the sense that they're trying to do the right thing, that I know CJ would walk away the moment he saw something that wasn't right or that he even a hint of anything that was wrong. So if that means anything to anyone.

Yeah, but I'll jump in following that one up. How ironic would it be if Binance resolves its issues today? There's a big difference between the Coinbase and Kraken case. Because of that commingling allegation, there's no legal way that Kraken will be able to dismiss this case. That case is moving forward. Kraken would now be the bad boy of U.S. exchanges. I mean, contrary to what Simon was saying, you know, it's not just the, you know, they were, even if they were perceived as the good guys legally, they're going to have to go fight this as a brawl all the way down. I don't agree, you know, with John and, you know, even who was saying or Dave, Dave, you know, when they were saying the motion to dismiss with Coinbase, even with teeth, you're looking at like a 80% failure rate on that motion to dismiss. And 20% is historically a wild increase in the typical result.

But at the end of the day, Kraken now, if Binance really resolves itself today, which God help us all, if that's the case, I can't believe it. But if that really does, Kraken's going to be the last one standing, being the ones defending themselves and what they did. And I've said this for a while. You know, my first lawsuit against Kraken was probably in around 2015. My first Coinbase was in 2014. There is a lot of difference in the skeletons in the closet from the old days to what's happened in the last three, four years. And there's a lot of things that in all of these crypto exchanges from way back in the day, there are bodies that were buried euphemistically that, you know, they can be those bodies can be dug up and used by the SEC, DOJ, CFTC, FINRA, FinCEN, and go after these guys for

a lot of dirty deeds that aren't necessarily happening today. So at the end of the day, it just would be ironic if Kraken was the last one standing with a legal problem. It would. Dave, go ahead, and then we'll go ahead towards wrapping after this, because we're going to get the actual news this afternoon and be able to unpack it. Go ahead, Dave. Yeah, I just wanted to point out something. You were talking about, you know, how good it was that the CME, you know, open interest passed Binance. I mean, sort of. Understand that the bid offer spread on the CME is somewhere in the neighborhood of 20x the bid offer spread on whether it's Binance or OKEx or Deribit or whatever, you know,

basically significantly higher trading costs involved with trading on the CME. And for those who want to understand why a spot Bitcoin ETF matters so much and how investors are being so badly harmed by futures ETFs, right now, I just did the calculation, the spread to December from November, which is expiring on Friday, which means the futures ETF has to roll either today or tomorrow or the day after, is now at 1.7%. That's literally 1.7% in a month. You can do the math compared to interest rates. That just doesn't make any sense. But that's pure cost or pure drag to investors. The CME basically is not a perfect venue. It's a venue that has significant issues in terms of liquidity and frictional costs. It doesn't mean that it's not a good place to trade. I mean, hell, Kornrath has a ton of clients who trade on the CME

and, in fact, arbitrage this stuff. But the fact is, is let's not lionize the way those markets work. The overseas markets, while they have their issues that people are trying to resolve, are much more efficient. I agree. I was just speaking more broadly on the fact that the American institutional interest may be outweighing, you know, retail interest. Oh, clearly, clearly, clearly true. Yeah. And one last point about Kraken. I mean, David, I mean, you know, look, I understand, you know, from a plaintiff's bar perspective,

you know, there's all sorts of things. But at the end of the day, the real question is, with commingling of funds is a bad process. I have been talking about that, Jesus, for the six plus years that I've been in the industry as a bad idea and a conflict of interest. The real question is, has anyone been harmed by it? Has anything been lost? Kraken doesn't really operate a derivative exchange, and I don't think they offer leverage anymore in the main exchange. Obviously, if it's Kraken futures are being coming, well, that would be a huge problem. But it's really a question of investor harm. And something

that I tweeted about this morning, you know, back to, you know, Congressman Davidson is all of these lawsuits. I mean, in the DOJ's case, you know, they are basically going after something that, well, it's not investor harm, but it's, you know, obviously harmful to finance terrorism. That matters. But in a lot of these SEC actions, there are technical violations with no investors being harmed. And I think that that's a distinction that really does need to be taken up. Lastly, one positive point is on Tether. There was a story this morning that I haven't heard anyone comment on where the DOJ thanked Tether for cooperation in a money laundering case. And that may seem small,

but depending on what happens this afternoon, that could be a big deal because that's literally the one domino in the system that worries, that's even bigger than Binance, is if Tether falls, is there an outlet for people in Argentina or other places to transfer money, but more importantly, to buy off? So I'll leave with that. One way to think about that comparison is Tether's, I think Tether's frozen 1500 plus addresses. So it certainly seems like the Department of Justice, whenever they want an address frozen, it's really easy for them to do that. And you could kind of compare that to this this monitorship concept. It was talked about in the Bloomberg article. John and some other guys up here have have talked about this concept. And like if that ends upicit money movements on Binance will just end up sort of like Tether with, you know,

1,500 addresses and, you know, they just had a $225 million freeze, which was, I actually saw the stat that that $225 million tether freeze yesterday, I didn't look this up, but I just saw in a tweet, was the same as the aggregate of all tether frozen combined ever before that, which is like a crazy stat, assuming it's true. But I just think that that's probably a decent way to just think about comparing those two things and those two entities with what the future might be. We're going to go ahead and wrap after Simon. Go ahead and give us your final thoughts and share whatever you got. Yeah, I was just going to bring something in that may have slipped through the cracks at small, but also just on the Tether side.

Again, I think this reiterates our ongoing debate around that I think stable coins are a significant improvement in terms of the tools and capabilities. For those that say we don't want stable coins because of anti-money laundering, it just shows that I think being able to freeze $225 million for human trafficking and be able to see that on chain and everybody be able to detect that, I think is an improvement on what can be hidden within the banking system. But so, you know, that's that one. And one thing that did just slip through because there was so much out there, but the SEC did, there was an announcement

that the SEC has approved Celsius to reorg as a mining operation but rejected putting any other type of assets and then doing staking. And so that's led to the group that was meant to be doing the reorganization, Fahrenheit. They're no longer going to be doing the reorganization. Oh boy, we'll have to unpack that one another day. Yeah, we're going through our doing the reorganization. So we're kind of going to unpack that one another day. Yeah, we're going through our Voyager situation now. Terrible.

Sorry to hear that. Yeah, there was one more like very slight piece of breaking news here from Forbes. Binance CEO CZ in discussions to step down as criminal investigation ends. But again, I think we'll wrap now and unpack this all either later or tomorrow. So crazy. It's a seemingly never-ending news flow on this, but we will have our clarity in about three hours. Thank you, everyone. All of our guests, amazing to have such incredible experts to really unpack this for us.

We'll see you all if we decide to go on later. I think Rand said he's going on YouTube. Otherwise, see you all tomorrow. We'll have a lot to talk about. Thanks. Bye, everyone.