The Wolf Of All Streets - ByBit Hacked. Chat With @KasuFinance | Crypto Town Hall

Episode Date: February 21, 2025

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Good morning, everybody. Happy Friday. Welcome to Crypto Town Hall, which I know you missed desperately over the last four days. Carlo, who's here. Good morning, Carlo. Good morning. Good morning, Scott. I mean, you texted me and you said, is Crypto Town Hall finished? And then you said, I miss saying good morning, Scott. And here we are. Sadly, guys, Ran and Mario are way too important and famous and wealthy and established to grace us with their hosting duties when I am away. And I went away with my wife for our 13th wedding anniversary. And basically, you know, that meant that there was nobody here to do my job. So you guys were the, you were punished.

I'm sorry. I was punished. We didn't have the show. We have a lot then to unpack here on a Friday. Parlo, I'm glad you're here because the sec dropping charges against coinbase the topic here this was reported this morning to me this is just massive news although expected that it's sort of the final blow to the gary gensler regular regulation by enforcement era. This was certainly the biggest case alongside Binance that was brought by the SEC, in my opinion, and one of the ones that absolutely rocked the market specifically

for altcoins because we were basically forced to wait for a determination on what was an unregistered security and what was not. If this case is truly being dropped, then, well, that gives a lot more clarity or at least something to interpret. So what do you make of this, Carlo? It is a great day for crypto, and it is long overdue. I have maintained for a long time that it was probably a huge blunder for Gensler and the sec to go after the biggest most compliant and most desirous of having a conversation about how to further comply uh centralized exchange in the world u.s base they brought this suit and it just was ludicrous to me to begin with that they would have done this. The optics were terrible. And now, as predicted, they're backtracking,

and there's a reset at the SEC. And this is a good thing for the sector. We're not done yet. We still need to achieve much-needed regulatory and legislative clarity, but getting this lawsuit out of the way, and again, it needs to be approved by the commission, which Scott, I think that we should expect to see a resounding vote in favor of dismissing this lawsuit, which opens the door now to getting the regulatory clarity we very much need. So we can't we can celebrate it as a huge win, but obviously we still need legislation. Right. I mean, we still need a market structure to tell us exactly what these assets are. So we can't say today that just because this is being dropped, none of these things are unregistered securities. Well, I think we're going to continue to see the regulators themselves, CFTC and SEC, sort of repaint the lines on the playing field of what they want to police and how they want

to police it. I think yesterday's announcement that they are launching this fraud task force on the SEC side is a clear indication of the direction they want to go, which frankly should have been the direction from day one. They should not have gotten bogged down in this debate about whether these things are investment contracts or not. They should have been looking at these things from the perspective of outright fraud to begin with. And now that tone is being reset. So legislative clarity is going to take a long time. And I don't expect that people in this sector who want to come back to the United States and want to build are going to sit on their hands and wait for definitive legislative clarity. I think they're going to parse out from the regulatory agenda what is now within the bounds of behavior. And they're probably going to see this as a very positive indicator that

the United States is open for business again when it comes to crypto. James, are you up? You've been going from listener to speaker can you speak I can speak yes I'm so happy you showed up we've got our track team of legal experts here today of lawyers I mean what do you make of this obviously you were listening to Carlo anything to add there well it's just a really great day uh justice takes a long time in our system. And I know it's been very, very frustrating for a lot of people in the space. But crypto tokens are not securities. There can be a small exception to If the token carries with it rights against the issuing entity for dividends or things of that nature, almost all tokens don't have that. And so therefore, in my opinion, crypto tokens are not securities and have never been securities and so these cases against uh coinbase and the other exchanges um were misbegotten in my view should never have been brought and have caused a whole lot of

cost uh you know to a public company in coinbase's case but to these other companies you know tens of millions hundreds of millions of dollars. Kevin Patton And I think they were premised on a faulty logic under the law. Now, that's not to say that an issuer, when they sell tokens to somebody in the first instance, if their contractual obligations going back and forth, then you have an argument that there might be an investment contract. But in any event, it is a shame that it took so long to get to the right place. I think this does signal that you will see the dismissal of the

cases against the other exchanges, Kraken, Gemini, and others. I think it is unfortunate for those exchanges who decided to settle before seeing the outcome of the election in November. I think that was a mistake on their part. But I think the Ripple case is the one that people will now focus on how is that going to be resolved um where will there be a settlement will that settlement involve some discussion of the disposition of that 125 million dollars uh that's being held in the escrow uh you know is it possible i'm asking a question i'm not giving an opinion is it possible thatipple gets some of that money back? But in any event, I think that that case, too, will will be dismissed or settled pretty soon. Scott may be jammed up lawyer.

I was worried that I was the only one there so you know we have that awkward silence but yeah no i think this is this is fabulous it's exactly what you'd expect when sort of the other regime was trying to shoehorn their um their goals into a legal system that didn't really make sense and i agree that most things are not securities i think that what's interesting to me now is you have to go back to first principles, right? Like, we don't need to shoehorn this. We need to write new laws. And then it's a question of, okay, what sorts of tokens are there? And then what sorts of tokens in those branches of types, what claims are we making?

And what sorts of information should people have if they're going to buy those things, right? So if it's a shit coin and you're like, oh, it's, you know, we've got vesting schedules with VCs and you all can screw yourselves. Then, you know, you've got limited information and we can work with, we can talk about what needs to be shared in those cases. If it's a meme coin with no promises made, maybe much fewer, you know, especially for calling them collectibles. But I think what we need is a whole bunch of new rules that go back to first principles in terms of, okay, when are we lying?

When is the truth important? And when should we hold people to that legally? I'm excited to see how that all unfolds over the next maybe few years. I also want to say one more thing while I'm on stage, which is very off topic, if I can. But since Scott seems to be off. We are hostless.

We are hostless. So the cat's away, the mice will play. Kanye on Polymarket now has a 69% chance of launching a token. And I'm mildly interested in that. What I'm more interested in the question is when something jumps from 13% to 70% on Polymarket, do we think that that's usually insiders or is that, is it so it's a $12 million market? Is it such thin liquidity that the chart can move on rumor so easily? I'm interested to hear what people think, but Scott's back as well. I'll

have to stop with that. We're still talking about it. Can you guys hear me now? Yes. Am I showing you the speaker or co-host? Co-host. Co-host. We had a little brief coup while you were gone. Yeah, I heard you guys. I was talking. Luckily, you guys are smart enough, Carlo, that you must have seen Lawyer's Hand up because I was trying to call on Lawyered and then I thought he couldn't talk. You guys get the gist. So I don't know exactly what I missed. I came back and I started hearing you guys talking about Kanyeye so you required my moderation yeah i briefly said that i i think we should go back to first principles and think about which tokens their

types of tokens there are and what rules should exist and then when you left i said kanye's poly marketed up to 70 all of a sudden um for dropping a coin in february so that's what we need he's got to do something he's gonna have to do something yeah that uh he uh that i mean as a as an aside apparently he did not have a prenuptial agreement with his wife and he's literally the guy who wrote the song bold digger that said we want prenup we want prenup something that you need to have when you leave your ass you're gonna leave with half uh so you're gonna need to launch token go ahead alex sorry i was just hoping you were gonna sing the whole song for us there, Scott. I would say, Lord, I think to your question on the polymarket trade, I think it's just herd mentality, right? Like everyone's always trying to get ahead of everyone else and like watching the news.

This is actually one of the things that cracked me up around the election with where they were like, we don't need news or polling anymore because polymarket will predict. And I'm like, what do you think people betting on Polymarket were basing their bets off of? It was off of news reports and polling data coming out. It's circular, I guess. Yeah. But to the main thing we're talking about here, look, I think the really still difficult question when it comes to these sales and things is, look, I'm going to agree with everyone else. Crypto tokens

inherently are not securities in almost all cases. The flip side to that is the vast majority of crypto token sales that have been done by the, you know, what I'll just call original issuer. And I'm just, I know that's a specific term, but I'm just going to use it here. I think probably has been unregistered sales of securities. If you look at how they were conducted, the promises that were made, that kind of thing. People will move past that. It's easy enough to structure and figure out a way not to. But I think the really interesting question is, it's about the fraud of things, right? So we're talking about like meme coins, obviously, are not securities.

But meme coins are very often sold in incredibly shady and not borderline, over the line fraudulent ways where you're pretending like you're putting the information in the marketplace. But in fact, there is a cabal of insiders doing things. There are market makers prearranged to manipulate the price. There's going to have to be, not even necessarily just from a regulatory perspective, but from a reality of the market and people being willing to engage in the long term and make it feel less like a casino where you're getting ripped off and more of a casino where you're having fun or whatever. That's going to be the challenge that's got to get dealt with. Actually, I would argue that's the easier challenge. If people are out there committing

fraud and you have an SEC and a DOJ that's less focused on arguing about whether Uniswap is an exchange or not, or a brokerage, you can focus on the fraud. The problem is the laws as they're currently constructed make, I think, both issuances of these things and secondary transactions of these things, securities. And right now, it actually isn't easy. Like, you know, I have these conversations with, you know, would-be token issuers all the time. It's really not easy to structure something, even that you don't want to be a security in a way that is, like, safe under the current law. If you're doing a utility token, the network that you're billing utility for, even if you're going to market the token as just a product that works on that network, well, the value of that product goes up with the success of the network and the

success of the network is subject to your managerial efforts. Even if you're just trying to do a meme coin, if you want to do any advertising around that meme coin, people want to know who the team behind the meme coin is and they want to know, do you have celebrities or KOLs or stuff that's, again, arguably managerial efforts to like promote the meme coin. And, you know, it's reasonable to expect that the value will go up in conjunction with those efforts. So I think we really do need, you know, hopefully this could be accomplished with a market structure bill, but we really just need to redo the rules. And that seems more difficult and more urgent than like, yeah, we can go after the fraud, bad actors. That's a clear enough target. Yeah. I think the biggest challenge with the fraud and the bad actors is simply the scale of it. And this is what I think,

if you want to take the generous interpretation of why the SEC and other agencies put the approach that they did. If you want to assume that they had any good faith in it, it's because the scale of it's too great. And so hitting the intermediaries and the choke points was the only way to counter that and to try and put pressure on them there. I think they could have done that in a better way. We're definitely seeing a climate and a change in the winds with Senator Loomis and the Senate Banking Committee sending a letter to Treasury requesting production of records and insisting that there will be no privileges that will be asserted, which seems to open the door for maybe a bit of probing into choke point 2.0. And we're seeing the Trump administration aggressively moving to gut and to let go several administrative judges

who have kind of been the intermediary between people getting access to the judiciary when it comes to relief from aggressive SEC actions. I wanted to bring to the table this to consider. We had FTX during a climate of extreme regulatory oversight, and now we have had what has been characterized as mean coin crime season during a climate of reduced regulatory oversight as we're kind of in this transition period. And touching on the issue of fraud, especially from my perspective as a criminal defense lawyer, fraud doesn't care what the temperature is outside, whether it's hot or cold, fraud is going to continue to carry on. And the real dilemma for the sector is this balance between more centralized or more decentralized

ecosystem. And in either scenario, whether we're overly regulated or we've got less regulation, it seems that the consumer ends up getting burned. And until we as a sector really take responsibility for educating and looking out for what I would characterize the collective self in the sector, we're going to continue to see bad behavior. And if we don't take that initiative, then we are just begging for the regulators to come back in and do it for us. So this is a great day for crypto, but it's a harsh reminder that we could really swing back the other way if we don't clean up our house. Can you guys hear me now?

Yes. Yes. Okay, perfect. We have some breaking news that we're looking for confirmation, but Zach XBT apparently has confirmed that Bybit official, speaking on fraud, Bybit's hot wallet was just hacked. A multi-signed $1.5 billion worth of ETH was withdrawn to the new address and is currently being sold. We're looking more deeply into that. Obviously, this is

just coming out as breaking news. But wow, $1.5 billion would be quite a bit of Ethereum for a hack to be said. That would be the biggest heist in human history. We just can't catch a break, man. We just cannot catch a break.

I'm just curious. How do you even spend any of that? What's the point? They're going to negotiate something. I don't even have $45 billion in a hot wallet. No, I don't mean like Brewster's millions. Like, how do you do it? I mean, like, this person's going to get caught.

It seems like you're better off robbing a lot less and then having cash, right? Like, why would you want... Let's all just really hope they don't use Tornado Cash. But I do just like... These guys are pretty good, even with Tornado Cash, of finding you. Especially ZachXBT.

Love these big heists. I don't know. I think it's... You might just see it sit in cold storage for a while and someone will do their OTs. I'd be really surprised if this just disappears without really good tracing. What does anyone else think? Yeah, look, the forensics and the white hats that are working on behalf of law enforcement are pretty damn good these days. You combine that with what AI can do as far as unscrambling these mixers. I think there's a high probability

they'll track it down. They'll track it down to IP addresses. If it's an overseas player, that makes it a lot more difficult, but there certainly can be efforts to lock up these funds, issue forfeiture and seizure notices to the wallet address. And then it depends on how they bridge this stuff. If they bridge this to another token, like we've seen in other scams, where that token can get locked up as well, you could have a potential situation where they can't liquidate this money. But again, man, it's just stunning to me how these major, major platforms don't have their security and their protocols uh in place it seems this is all allegations scott but it's just so scary

and it just reinforces you really got to be very mindful of where you keep your money when it comes to uh custodians yeah i don't the comment about tornado, I don't think you can effectively launder 1.5 billion in crypto right now. Like I just think that is too large a number. There's no tool out there, but, but, but in terms of like wanting the little guys to have privacy, the like fallout from them using one of these privacy tools is like a really good talking point for the people in DC that, you know, we need to sort of fight against and convince that privacy isn't the enemy.

Great. Well, we're going to get that chance because we're going to get that chance, Scott, because Roman's case is going to trial on the tornado cash issue very soon. And that's one of the big issues in contention. Can you prosecute a technology provider for what people do with it? And what does that do to the person who actually wants to use things like Tornado Cash for legitimate purposes like anonymity versus criminal enterprises? This is a very hotly debated issue right now. Yeah. Does anyone know if, I assume bybit is way well capitalized to even like

that this isn't going to impact any of their users is that is that right do you guys think they've got enough money the other question is what insurance today i mean they probably don't have 1.5 billion dollars worth of insurance, but most exchanges are insured to some extent against this type of crime. Yeah, it's a large amount. Pretty wild. I mean, as Zach said, I think that would literally be by far the largest hack or security incident like this in history, crypto or otherwise. I'm sorry for the gaps here in posting. We're trying to do some research and figure this all out. If you measure it at the time of the hack, the previous biggest was the North Korean hack of the Ronin Bridge with the Axie Infinity assets, and that was about 650 million.

So this is almost three times that size. Interestingly, I guess I should look at the daily chart. I'm trying to figure out. We haven't seen a massive dump in Ethereum's price. I guess it topped today at $2840 or so, trading now at $2720. Yeah, it's dropping now a bit down to like $2700. I mean, $1.5 billion would be quite a bit of selling. But to your point, I think this will be mitigated. I can't imagine it's customer funds.

But if something like that were customer funds, this would be one of those situations that would rock the industry. Luke, you were one of the people that actually sent me this. I had it sent by about five people at the exact same time. What are your thoughts here? Yeah. Hi, Scott. Hi, everyone. This is some interesting timing. It's two o'clock in the morning here in Australia, and I've kind of rubbed my eyes, climbed up onto the computer to join the chat here and just saw that post and thought, well, this is interesting. I'm watching in real time the trading as well, and obviously the market's taking a little bit of a hit. But, yeah, I mean, if we look at previous episodes where these kinds of things have happened,

often there'll be some kind of negotiation for recovery. These people will probably, it depends what their actions are now. If they're actually legitimately just trying to dump it wherever they can, then it'll get frozen, there's no doubt. If they're just withdrawing it all and putting it somewhere else, then they'll probably have a negotiation and get paid some kind of settlement, hand it all back and then move on.

I'm sorry, guys. I'm just having horrible glitches here as we're, we're trying to kind of plow plow through this, but Luke, I tend to agree. John Dean's here. What's up,

buddy? We've got the whole family up here. I said, now, you know that we really have our full legal team. What's up, buddy? We've got the whole family up here. I said, now you know that we really have our full legal team. If we got John on stage, it's a wrap. What's up, Scott? How's everybody doing? We're good, man. We were talking about, obviously, the SEC dropping the case against Coinbase.

Oh, poor Scott. You're glitching so bad. The SEC news. I know. oh poor scott you're glitching so bad the sec news i know if the sec news drops on coinbase now we have this potential bybit hack so feel free to speak on any of it well listen my concern has always been the same which is going from one extreme to the other you know And we're at a very important point in crypto. And Carlos' comments were 100% on point, that we have to take care of our house and our industry. Listen, one year from today, it's going to surprise everybody, but it's going to be in full election mode again. The midterms are coming, and there are more Republicans up for.

Republicans, the 13 Democrats. Your mic just muted really bad. Yeah. Can you hear me? Yeah, that's good. from now, basically. And Senator Warren, my political opponent in the last election, will be the, if the Senate turns and flips to Democrats, will be the chairman of the Senate Banking Committee. And so we have to make sure that we really take care. You know, I know there's a lot of talk about legislation, but stablecoin legislation obviously needs to be done. We need to make sure that it's outlawed to commingle funds for consumers and that, you know, hypothetically, Coinbase goes into bankruptcy.

Their customer accounts don't get considered Coinbase's property. It's customer property. There's a lot of things that we need to do to make sure that we don't blow this opportunity. And so, you know, unfortunately we went from, you know, the knee of the government on the neck of the industry to, you know, this meme coin frenzy, you know, by political leaders and everything else. And it's a real concern and shame on us if we don't clean house ourselves. Yeah, just, guys, an update I just pinned up in the nest from Arkham. One billion outflows from Bybit.

1.4 billion to ETH and STETH outflows from Bybit. The funds have begun to move to new addresses where they're being sold. So far, 200 million in STETH has been sold. That's a massive amount. For Lido, given that you can use that to vote on stuff it makes the narrative of where actually white hat heck is trying to help out a little bit harder to defend than if they're uh if they're actively selling that aggressively doesn't it 200 million is a very big number. Dwayne. Hey, good morning. I'm not a lawyer, but I was just actually going to ask the panel here,

do you really think that there's enough time in order to get clarity, at least from a legal at least from a regulation standpoint for crypto like in regards to the role of the SEC and the FCC here? And, you know, you know, even looking at who's enforcing what. And another thing I was wondering as well is when you're looking at altcoins here, if we look at some of the cases that the SEC has provided over, you know, like, for example, with pump crews, when it comes to equities, it seems that in some, you know, in some instances here that you can actually rug pull and you can actually rug in some uh you know in some instances here that you can

actually rug pull and you can actually run pull your you know your customers so i was wondering you know if you guys have some comments on that and how you know basically how you see this moving forward if there's really enough time to get these sorts of things rectified so that there's some more uh stability at least um you know to the market? I think from a regulatory perspective, we're already seeing that. We are in a little bit of a power vacuum because we don't have confirmation yet of the new SEC chair. But in the interim, Hester Peirce and what she's doing with her task force, I think, is setting the tone for where this regulatory agency is going. And I think we're going to see the same thing with the CFTC. We're just in a

little bit of a power vacuum right now. And on the broader conversation, yeah, legislation is more difficult because it gets bogged down in a lot of political debate and a lot of things get thrown into bills that don't belong there. And we don't have a functional legislative branch right now. So I think the regulators are going to step in and probably send a message to the sector that it is safe to come back on shore and build again, but without clear definitive legislation and even some court intervention to clarify how these things should be treated with respect to the Howey test and how I think it needs to be revisited by the Supreme Court and we need a new standard. We're still going to have a bit of ambiguity, but I think the regulators have gotten the clear mandate this time around and they're going to treat this sector differently.

Yeah, I think that that's relatively clear outside of the hacks and such. Go ahead, Zach. I mean, I. Now I can't hear Zach. Can you guys hear Zach? I have no idea if it's my glitches or general glitches. No, it's bad. It's bad connection. Okay. Amateo, go ahead. Is this better? I think it was better. Okay, Zach, yes, that's better. Go ahead.

I was going to say that the devil is very much in the details, though, about how they treat it differently. I agree it's going to happen, but, you know, at the sort of nearer end of the spectrum, they could just provide sort of some legislative the securities laws to allow people to do stuff that they actually want to do with crypto right in the RWA space to allow securities to trade on chain to clarify, you know, rules for DEXs. I think we need a lot of upheaval. And I think it's there's a big political question about how far they'll be able to go. Takes me 30 seconds just to lift my mic each time. Yeah, I just want to go back to the hack situation. It takes me 30 seconds just to lift my mic each time. Hey, Matteo, go ahead. Yeah, I just want to go back to the hack situation monitoring.

We got an official message from Ben at Bybit that essentially there was a cold wallet transfer to their warm wallet about an hour ago that the transaction was must, and all signers saw the must UI, which showed the correct address and the URL was from safe. And thus the signing of the message was to change the smart contract logic of our ETH cold wallet. And the resulted hacker took control of the specific ETH cold wallet

and transferred all the ETH to the address. So initially, when it was coming out of a multisig, I had to wonder if this was an inside job at Bybit. But looking at this announcement, probably something like the North Korea style hackers, but very, very conspicuous hack. So essentially, to just explain that, they sent a transaction that made it look like it was coming from their multisig. And so it was completely covert in how it was seen. They approved that transaction because it appeared like it was requested from the multisig, and it actually gave them control of the multisig. And then they were able to use that to deploy out all of the funds, which they're now transferring out. They said that it's an isolated incident to this specific wallet. I'm sure they're locking

down everything else. I think we all hope that they're plenty well capitalized to handle such a loss, but there's going to be some fallout for this. And it's going to take some time to actually expose this and see where everything shakes out. I imagine this spooks the market for some time and, you know, a couple steps forward with the Coinbase news today and a few steps backwards with this hack, which is going to be affecting quite a few things. Yeah, this is going to be an interesting one to track. I'm really shocked that Ethereum is still at $2,700 if over $200 million has already been sold.

Seems like this would have had a much more dramatic effect on the market, but maybe that hasn't been absorbed yet. John, I want to ask you a question since we have you here. Quite have alluded to this before. We have this sort of moment right now where we have maybe two years, not even, because it's going to be election season again, and obviously everybody's going to focus on campaigning and not necessarily on legislation. We have this situation where, worst case scenario, if the Senate flips, Elizabeth Warren would once again be the chairman of Senate Financial, right? I mean, we're not, we're far from in the clear

right now from a reversal of some of these policies. Very far from the clear. And once we get into midterm season election, you'll even see candidates now jockeying for that crypto money, basically, you know, leveraging their potential vote. Things are going to get held up. This is what's unfortunate. amount of Bitcoin and everybody's pushing for the Bitcoin, you know, reserve where the United States is going to, you know, literally increase our deficit by spending money to buy the actual instrument that is a hedge against the devaluation of dollars. We need to eliminate that nonsense and focus on the market structure bill, the stable coin bill, and making sure consumer protections are in place for centralized exchange customers. That's what we need to focus on.

The person who had the question of, you know, is it the CFTC? Right now, you've got FinCEN, Treasury, CFTC, SEC, all these agencies, tentacles into financial instruments. We need to make it clear who's in charge. Let's legislate and quit the comment by Carlo of a new Howey test. Let's address that. Let's stop pigeonholing 1930s statutes and 1946 case law into modern day blockchain technology and artificial intelligence. So we have maybe 150 days that really do something that can be long lasting that Senator Warren and the Brad Shermans and Maxine Waters and all the others who, you know, oppose this industry, that they wouldn't be able to just come in and flip flop easy. If we pass meaningful legislation, then we can do some real good. And I just hope we focus on that.

We need more John Scott, more John. We all know that. So, John, where are you going next? Come on, man. Can we get the like inside here? And what's that? What's the plan? I don't know.

Listen, man man when i'm sometimes i'll be honest with you when i was running for office i felt like the candidate that nobody wanted but the candidate that everybody needed because i'm not an extreme person i don't you know i'm not a a huge trump guy but that doesn't mean i don't support the same type of policies i certainly support deregulation and securing the border, but I'm also worried about consumer protections and things that we need to make sure that people who have 10, 15 grand of their fucking life savings or whatever, not thrown down the drain because we didn't put in laws that protect them, such as making sure that if you have a bankruptcy, that consumer funds don't start paying off

creditors of other people. That's their money. That's their funds. One for one reserves, making sure that you can never commingle customer funds with the company's own capital, things like that. We have this real chance right now to do something really, really good and meaningful. And let's just hope that that they do it. You know, maybe I run again. Maybe I don't. But I just hope that, you know, we stop focusing on, hey, let's push a Bitcoin strategic reserve and, you know, print dollars to buy Bitcoin. I'm sorry.

Listen, I got 80 percent of my fucking net worth in Bitcoin. That would be great for John Deaton, but that's fucking stupid, man. Let's focus on things that really could have a meaningful impact moving forward. Sorry. Sorry to rant, but you asked. That's what we're here for. I agree. Absolutely. Absolutely. Go ahead, James. Well, I, of course, agree with everything John just said. I was looking back at something here.

What we have is a kind of a crypto stew, a lot of cooks in the kitchen. So the president has formed this mega group of interests with the cryptos Czar, the Presidential Working Group on Digital Assets, the Crypto Council, the SEC Crypto Task Force, the Senate Subcommittee on Digital Assets, and the House Subcommittee on Digital Assets. Maybe that's a good way of getting there. I don't know. But people need to understand this is not one of those things that can be accomplished with an executive order. It's got to go through this meat grinder of legislation. And the worst thing that can happen is for various crypto tribes to be fighting each other about this legislation. If there was some way that everybody could get together on the crypto side who are interested in seeing crypto innovation flourish and have some unity in terms of what the

focus and objective is instead of attacking each other during this process so that we confuse the politicians about what we want, you know, then all bets are off and we may not get anything out of the process. So my only point here is unity is really called for now. It's not happening, though. Not right now, I should say. So I think we had this perfect moment of unity where there was the common enemy, right, which was obviously the last administration. And the crypto lobby came together and raised record-breaking money to basically oust that administration. But now, from what we're hearing every time we bring someone up who's a lobbyist in Washington

or crypto, now it's every man for himself in the self-interest of each company or platform or group that's lobbying. Right. I mean, very clearly what Ripple is spending money on, for example, right now is not the same thing as a Bitcoin maximalist or an organization would want. So we have this very disjointed lobby that I think eventually becomes Lord of the Flies. James, I don't know if you have an idea, but how would you possibly get these lobbies together when they have such separate interests now that we're there?

Well, I don't know. That's why I'm not in politics. But maybe one way is to separate very clearly this whole idea of a Bitcoin reserve or a digital asset reserve or a stockpile, whatever that is or should be, leaving that to the side and just focusing on, hey, these crypto tokens are not securities. So who's going to get responsibility for regulating it so that we have reasonable investor protections like John Deaton was talking about? It would seem like logically we could agree on something like that if we set aside the, hey, I want my bag represented in the digital asset stockpile, if we just set that aside for a few minutes and try to get a market structure deal done, maybe there's a way. So I definitely disagree on the comments here on the SBR.

I think if we were to look at what are the initiatives that the entire industry, in my view, should be able to get behind, there are three of them. One of them is a stablecoin bill. I think, by and large, using crypto rails to move US dollars in a private fashion, not in the form of a CBDC, makes a ton of sense and really will move the ball forward for DeFi and is both good for crypto and good for the United States because it's a buyer for treasuries and it's good for dollar dominance, etc. I think more or less everyone can agree on a market structure bill. Whatever you think the rules should be, the current rules don't work and we need some sort of regulatory clarity about token launches and the ability to move securities on-chain,

I think, by and large. But then, look, I don't like what Ripple is doing. I think the idea of a digital asset stockpile doesn't make a ton of sense where the government is buying bags. But the idea of the United States government having some exposure to Bitcoin as a neutral commodity, the way that we have exposure to gold, I think makes a ton of sense. It helps legitimize the entire sector. I think that's a fairly neutral strategy. And frankly, it'll move asset prices up, right? The government monetizing Bitcoin will create a lot of energy that will be useful to the rest of the industry. And I think that's very different than the government buying,

you know, what looks like, at least on the current laws, a security, right? I think that, like, people lobbying for their specific bags that are created by a specific company doesn't make a lot of sense. But I would put the SBR right up there with stablecoins and a market structure bill as something that really should be a central priority for the digital asset industry. Hey, Scott. I think it is for the digital asset industry. I think, John, you were just saying like as a whole politically for the country, it's not the most important thing, correct?

Well, here's the thing. We have to focus on what we agree on. Now, again, I have 80% of my net worth in Bitcoin, right? I made that publicly disclosure. So, of course, made that publicly disclosure. So of course it would benefit me, but you can't expect Donald Trump and all of these politicians to go down the rabbit hole of Bitcoin and be able to stay. They're going to sit there and say, well, you know, diversification, that makes sense. And they're not going to sit there and focus on, well, all these other details.

And so you're going to get Ripple and XRP holders wanting on there. You're going to got Cardano wanting on there. And there's going to be this fighting about something that people will never agree on. But we can agree on a market structures bill. We can agree on a stable coin bill. We can agree that consumer funds

should always remain consumer funds in case of a bankruptcy. We can agree on those things. So let's get the things we agree on first, focus on them, and then come back. I don't want to talk out of school, so I'll be careful about what I say here specifically. But having been involved in some of these conversations, I think you're not giving the administration enough credit on this issue. I think there are a lot of people around Trump that really do understand the difference between Bitcoin and this other stuff and are already quite far down the rabbit hole. I mean, you know, just public examples, look at things that Scott Pesenta said

about Bitcoin, look at how Howard Lutnick talks about Bitcoin, RFK Jr., all sorts of people in that orbit. I think this absolutely is something we can get across the finish line and either writing it off as a political impossibility or, you know, framing it as this is just pumping our bags and not good for America. I mean, that I strongly disagree with. I think it would be quite good for the country for a number of reasons, right? In order to back our debt, in order for geopolitical sort of advancements relative to our rivals have been stacking gold in order to become a leader in the digital asset industry. And just a lot of the Bitcoin is in America. Like now, I think really is the time for an SBR.

Are those the same people that pushed that stupid ass Trump coin? Does that include Eric Trump, who said it's a good day to buy Ethereum today? It does. It does include Eric Trump does believe in Bitcoin. He also did stupid shit like you're mentioning, but there are people, Eric Trump is not part of the administration. The people I'm talking about are in the administration. Okay. Listen, like I said, it's good for John Deaton. So if it happens, you know, I'm going to be a lot fucking more wealthy than I am today. It's also good for America. Okay, well, and the point is, can you get legislation, can it get done, or are we going to focus on that before we focus on the other things?

We're going to try our best to get it done and get the Cynthia Lemus bill across the line. All right, so you're going to convince enough people in the Congress that we're going to print dollars to actually buy. Not sure if you've, I'm not sure if you've read this in the LMS bill, but it doesn't involve printing dollars. Okay. Well, I'm just going by what people are pushing and I'm saying I'm someone who really not the Bitcoin act is not very long.

You could, you're a lawyer. I think you can read it and it has nothing to do. I can read it. But what I'm saying is that anybody who's pushing the strategic Bitcoin it. The market structure bill will happen. There just is the political will for it. Nobody wants the current SEC rules. I think the SBR actually is more of a time-sensitive priority. All right. Well, listen, we can agree to disagree, but there's many things that need to be done before the strategic Bitcoin reserve. And good luck getting the next chairman

of the Senate Banking Committee if the Senate flips to agree. That's the point I'm trying to make. What are the odds of that? What are the handicap right now that the Senate would flip? Obviously, the House would more likely flip than the Senate. I've been thinking about that, Scott.

And I think that explains a lot of Trump's very aggressive economic agenda of late. I think he's forcing with this tariff agenda, the issue of trying to get the economy to have volatility now in the short term, and then adjust that volatility with a forced rate cut and the printing of more money and liquidity into the cycle so that consumer sentiment is positive going into the midterms. So I think he's probably, from a strategic standpoint, looking at short-term pain in order to avoid long-term liquidation in the midterms. Yeah, I mean, it makes sense for everything to be a sprint. Very rarely does a party keep both houses

when they have full control at the midterms. It just doesn't happen very often in history. And he can't do it without good consumer sentiment, because if the midterms are in the face of very poor consumer sentiment, as we're seeing right now, that could be disastrous. Yeah, I'm trying to dig in still more here in the background on the Bybit hack. Still, honestly, I think the biggest story of the day will remain the Coinbase effectively

being let off the hook here by the SEC, which we all know should have been the case from the very beginning. I mean, any final thoughts on SEC and Coinbase before we move on here? Anyone? Perfect. Well, I think we've covered the bulk of the news here. I invited Luke here at three o'clock. Was it three o'clock in the morning? Did you say in Australia? Three? Time is it? Yeah, it's around 2.30 at the moment now, Scott. I'm such an asshole.

So, yeah, like, obviously, I really like I, you know, long, long, long ago, I started talking to you guys and Luke and I have been old friends. And I just want to give them the opportunity to talk about it and i was like it's 10 15 a.m eastern standard time but actually it'll be like 11 or 11 15 by the time you go on but i would really love to just give you your you know 10 15 minutes to talk about it so it had to be a three of the board at your time so dude maybe first of all i'll change the title as you're talking to give people the link to the account. But maybe you can just give us the TLDR on TASU. Yeah, sure.

Thanks, Scott. I appreciate the chance to be here. And look, that's just the joys of being in Aussie. You know, we are so far removed from Europe and America. I used to live in the States. And whenever I'd talk to Americans, like, oh, my God, Australia is so far away. It's like, yeah, it's a 14-hour plane flight, but, you know, it's worth the trip.

You should come and visit one day. Look, so just a quick introduction to myself. My name's Luke Lime. I'm a founding partner of Faculty Group. We're a Web3 venture studio that have been in the market for some time now. There's a market maker, VC, incubator, accelerator, dev house, marketing firm, kind of all rolled into one.

About two and a half years ago, I embarked on this journey to build Casu. It's essentially a blockchain private credit borrowing and lending platform, not unlike Maple Finance or Centrifuge or Goldfinch. However, one of the key differences that we have is we partnered with an Australian fintech and software as a service provider called Appseum. They're multi-award winning Australian government grant recipient and backed firm that essentially provide an invoice management system,

accounts receivable system for leading accounting firms around the world in the US, Canada, the UK and Australia. So tier one economies, they handle around two, two and a half billion dollars of transaction volume annually. And we're meeting and sort of talking with the owner of AppSium. We identified a need for capital because one of the things that they were doing was offering their accounting firm clients and clients of the accounting firms the ability to pay their invoices over a period of time. And we built CASA with the idea to essentially democratize access to that opportunity, provide anyone who's got USDC or stable coins in the market to participate as a lender to what would usually only be sort of institutional grade

lending. And so this is what we've done over the last two years, building it. And we literally just launched on Wednesday on base, built on base, and looking forward to start to roll things out. I think there's a lot of appetite for this kind of product in the market. I think just looking at the general market conditions, people aren't really too sure where things are going. It's been one of the most unusual cycles I've certainly seen. We've had a lot of really bullish news, and as a lot of the co-panelists here have been discussing the Trump administration and some of the actions being taken there and ETFs and all of those strong signals being sent to market.

But on the flip side, you also see a really different altcoin cycle in terms of memes and where liquidity sinks are actually occurring. And so I think that there is probably some PTSD from some sectors of the market, certainly from me, having been through a couple of cycles. You never really know where things are and you probably, if you're a little prudent, want to de-risk and de-risk into stablecoins as you're sort of moving through. And so Casio was really built with that in mind, able to provide a safe haven for stable coins with significant yields.

We're looking at between 12 to 25 percent APY, all totally sustainable and all occurring off chain with these accounting firms. So we're really resistant to the crypto cycles and even some of the macroeconomic cycles as well, to some extent. It's an interesting conversation to have today when talking, first of all, you launched on base, but when talking about the SEC sort of dropping this charges against Coinbase and clearly a more favorable regulatory environment, I've got to imagine that that makes this easier for you, right? Because we've had conversations over the years and it was like so hard to do something like this yield was a four-letter word and the regulatory environment everywhere was so content it's it's been a minefield scott i mean there are a lot of lawyers on this panel right now and i've

you know i've had my fair share of dealing with lawyers over the past couple of years in multiple jurisdictions so we could really get a good handle on what we were able to do and how we were able to actually engage with market. And we've actually, through this process, even with a pretty conservative outlook, and this was pre-Trump, pre-Gensler, sort of exiting the SEC, and a bit of a hawkish overtones of the SEC, and even with the AS hawkish overtones of the SEC. And even with the ASIC here in Australia, we've taken a very conservative approach to it, but we've managed to work out a pretty innovative structure whereby any retail lender,

essentially anywhere in the world, including the US, non-accredited, non-sophisticated lenders are able to participate in this. So we've spent a lot of time trying to figure out how to make that possible. I think I heard John talking about commingling of funds between operational capital and customers' capital with exchanges, for example. Well, we don't commingle funds at all with any funds. So when you lend, in a in an isolated sort of bucket essentially to to the end borrower um so this is not like a registered fund uh we don't need to go down that pathway but yeah look it's been it's been a challenge and it's been quite a struggle because

it's obviously something you're very mindful of you need to do things in the regulated way and compliant wherever possible i mean i value I value my freedom here in Australia. I'm fully doxed. I don't really want to have any chains on me, frankly. And so we've made every effort to ensure that doesn't happen. And I think with this new administration coming in, certainly just makes us all breathe a little easier. I mean, if they can get away with launching their own Trump meme coin,

then I think it's kind of, it's like a bull to a flag with a lot of other bad actors in the space. So if you're a good actor, you're probably less of a target. That's for sure. Yeah, I'm obviously on the website right now. So listen, the difference is that in the past, yield in crypto was effectively, well, we know what CeFi did. We don't need to talk about that. But obviously, most of it's coming from DeFi, right know what CeFi did. We don't need to talk about that, but obviously most of it is coming from DeFi, right? So on-chain. When I read through the site here, obviously doing this

for everyone, I understand it, but to give them the words, right, you have kind of a number of different ways, 12 to 20% APY professional fee funding accounting firms, financing the invoices of high credit where the accounting firms in US, Canada, UK, Australia, proprietary technology that reduces debtor days by up to 50% before lending a single dollar, thereby significantly reducing risk to lenders to unlock higher risk adjusted yields to keep going, you know, 14 to 25% for taxation funding for diversified businesses, 12 to 20% whole ledger funding, accounting, and law firms. I mean, this is clearly a shield that's being created in a different manner. So maybe you could talk about how this is done, how you sourced that, and how you came up with this novel.

Yeah, absolutely. And look, I think this is one of the sort of key, you nailed a few points there. And one of the key differentiators here is, and I don't want to throw shade on anyone else in the space, because obviously everyone in RWA is forging a path forward that's really important. I think this is a really important sector. And we've had sort of the road paved by some of the incumbents here, centrifuges and maples and gold finches of the

world, particularly in the private credit space. You go outside of private credit and you have the Ondos and so on. We're not really competing with Ondo. They're offering a liquid product. They're really only offering access to treasuries. And so you're getting very low yields, but it's safe and it's liquid. So that's obviously got a very strong value proposition. What we're offering, as you've identified, is access to incredibly high credit worthy borrowers. We're talking about accounting firms in T1 economies that some of these have been in existence for many years, going back to almost a century for the oldest, you know, Baker Tillies and so on of the world with huge volume. The biggest client in the US of our joint venture partner, AppSum, that I mentioned before is essentially, you know, $800 million of work on their books.

And so they have all these clients and they have the need to cash flow these clients. And so we provide that solution and allow anyone who has stable coins to access that. But before people lend, and I think this is one of the key areas to look at as well, with most of the RWA platforms, your money essentially goes into a black box. You deposit your funds. You don't really see what happens after that.

You just wish for the best and hope that, okay, they're being deployed properly. The actual end borrower is doing what they should be doing and so on and so forth. And we've seen some pretty disastrous outcomes. And I think just in the last three or four years, there's been over $200 million of defaults with just the top five or six RWA platforms. And again, not throwing shade, it's just the nature of the business. All these RWA platforms are doing is taking a traditional banking lending model and bringing it on chain. So they're essentially saying we have some borrowers, we're going to DD these borrowers, make sure we establish

and understand who they are, they're bona fides. We have lenders, let's take their money, connect it with the borrowers, we'll take the delta, whatever that is there, and that's how we make our money. But then there's the risk of the borrower defaulting. I think one thing that is a little different with us is that the software stack that our joint venture partner, AppSum, has is a world-class software stack that apart from managing all of the invoicing, it reduces the admin overhead of these accounting firms by about 50%. It reduces the debtor days, which means the time it takes for the accounting firms to collect on their invoices by about 50% as well. So,

essentially what's happening is by reducing the amount of time it takes for them to collect their funds, we're reducing the risk and the exposure as well. So, we're actually de-risking the debtor book before the funds are actually lent. So, it's a higher quality of yield, even though it's a higher actual nominal value, like you're getting 12% to 25% because we have a pretty sophisticated tranching system in place with senior, obviously, at the lower end of the yield and junior at the higher end. But we have this very transparent, very robust structuring in place, which is unlike anything in market. And there's a level of transparency there. We haven't gone live with the user dashboards quite yet,

but probably within the next two to three weeks, there'll be user dashboards that go into granular detail about exactly what's happening with the money and the status of all of those funds at any particular point in time, essentially real-time covenant reporting, which is unlike anything, not just in crypto, but in the traditional finance space as well. So I'm pretty excited about it. Yeah. And obviously there's a token associated, right? KSU.

Maybe talk about the token, obviously what what it offers what's the utility yeah no absolutely i mean our experience with faculty group you know we're a team of around 100 uh globally we've been involved in a number of projects over the last sort of six or seven years in advisory capacity and token economics has been something very close to our heart so this is something we took really seriously i think it's pretty fair to say that you look at coin gecko the 15,000 tokens that are listed out there most of those tokens don't have any real utility there's no real purpose i think there's 11 million you know just market cap now there's 11 million oh wow okay well um yeah well we know that memes don't really, that by virtue of what they are, they certainly don't have utility. But we've really gone to great lengths to ensure there is utility. And so we have a couple of unique features. One thing that stands out is because this is RWA, your funds aren't sitting on chain, like in DeFi, which is great, because it means you don't suffer from that particular, as we've just seen today, Bybit being hacked, funds are on chain. They're always at risk of being exploited.

We don't have that issue with Casu because the funds, once you deposit into Casu, there's a clearing period weekly. Those funds are converted by a circle into fiat, into USD, Canada, Canadian dollars, UK, or Aussie dollars where they're deployed with the accounting firm. So they're sitting at fiat. So even if USDC de-pegged and went to zero for some crazy reason, you would still be protected. So we don't have that on chain risk, which is really good, but it means that they're being used in the real world. So if you want to withdraw your funds today and get your money back,

it's not immediately possible to do so. If it's a smaller amount, there's a contingency, there's a buffer, it's no problem. So what we have is a prioritizing sort of loyalty system whereby, let's say, the amount of stables you have staked, the amount of tokens that you have locked also, and that ratio determines your position in the queue. So the more tokens you have versus the stables that you have will help you get access to your funds sooner. I'll give you a quick example. Let's say someone has a million dollars of stables

staked with the platform, yet they have $1,000 of tokens locked up. They have a 1% ratio there. Someone else has only $10,000 of stables staked, but they have $1,000 of tokens. They have a 10% ratio. That person with that 10% ratio actually gets ahead of the other person in the queue. So let's say in a worst case situation, there's a bank run kind of event. People are just running to collect their funds. They want to get out for whatever reason may have happened. Rather than just being first in, first out, it's based on this ranking system. So the number of tokens you have gives you priority access to your own funds. That's one thing that's really unique, and we haven't seen that in the market.

The other is obviously priority access to these strategies also. I won't call them pools because the funds aren't pools, like I mentioned. They're all ring-fenced. So, for example, if there's, and there will be, there will be limited amounts of capital that we're drawing upon. And so if you want to get access to these high yields, these 20%, 25% yields, there's going to be probably

oversubscription there. So the more tokens you have locked, the more access and availability you have to those funds. Plus there's a revenue share and there's yield bonuses. Those are two things that some of the other competitors do. So two very unique token utilities that I think make this quite special. Listen, I know it's almost 4 o'clock in the morning. Anything I missed, like final thoughts you want to share with us?

Look, I mean, I can't give too much away, but we're pretty excited. We're in late stage due diligence with a pretty significant traditional lender in the space. We're under NDA, so I can't say too much, but we're looking at a significant nine-figure debt financing deal, which will materially change sort of our position in the market. And I think sort of instantly propels us to the more significant of the yield that we're offering here that we have not just this potentially quarter of a billion dollar debt facility which is days away from potentially being contracted but we have another lender with another hundred million dollars term sheet standing on the sidelines in case the first one falls over and then another one with a 40 million dollar term sheet as well that just shows that there is definite appetite from the traditional finance space in products like this. And we're excited to be able to bring

this to market to provide access, like I said, to anyone pretty much anywhere in the world, except for sanctioned countries. Don't even have to be an accredited investor. Obviously, you need to KYC, but that's just to protect us not to go hunting after you guys. And I think it's an exciting time. So I appreciate the opportunity to share it here. Thank you, Scott. Amazing. So everybody should give Luke a follow if you want more information.

Luke Loam, obviously, is on stage. You can see in the title that we changed, Kasu Finances, K-A-S-U-F-I-N-A-N-C-E. Follow them if you also want to have more information. You know I'll be closely tracking what you're doing, Luke, man thank you you can go to bed now thanks scott chat soon buddy all right and to everyone else actually relatively impressed with uh the market reaction here uh ethereum still actually green on the day trading at 2760 bitcoin had dropped uh down into the 97s back at 98,500 or so. Pretty encouraging that on a hack like this, a situation like this, that we're seeing the market react well in an interesting day when you have such good news on the Coinbase side and obviously bad news on the Bybit side.

So we'll see how this all shakes out. Otherwise, be back Monday. Give everybody on stage a follow and we will see you next week for a full week as we usually have in Crypto Town Hall. Thank you, everybody. See you soon.