The Wolf Of All Streets - Crypto Is Under Attack | Caitlin Long, Simon Dixon, Staci Warden

Episode Date: February 16, 2023

My special guests are Caitlin Long (Custodia Bank), Staci Warden (The Algorand Foundation), Simon Dixon (BnkToTheFuture). Caitlin Long: https://twitter.com/CaitlinLong_ Simon Dixon: https://twitter.com/SimonDixonTwitt Staci Warden: https://twitter.com/StaciW_DC ►►NORD VPN  An essential crypto product to protect your privacy and keep your crypto safe!  Sign up on my link below & enjoy the benefits of NORD VPN from just $4 a month.  👉 https://nordvpn.com/WolfOfAllStreets  ►► JOIN THE FREE WOLF DEN NEWSLETTER https://thewolfden.substack.com/   Follow Scott Melker: Twitter: https://twitter.com/scottmelker  Facebook: https://www.facebook.com/wolfofallstreets   Web: https://www.thewolfofallstreets.io  Spotify: https://spoti.fi/30N5FDe  Apple podcast: https://apple.co/3FASB2c  #Bitcoin #Crypto #Trading The views and opinions expressed here are solely my own and should in no way be interpreted as financial advice. This video was created for entertainment. Every investment and trading move involves risk. You should conduct your own research when making a decision. I am not a financial advisor. Nothing contained in this video constitutes or shall be construed as an offering of financial instruments or as investment advice or recommendations of an investment strategy or whether or not to "Buy," "Sell," or "Hold" an investment.

One could argue that there's been a long cold war between the United States and the crypto industry, but it's very clear that here at the beginning of 2023, that cold war has gone hot. It's my opinion, and I know shared by my guests, that that war started with the rejection of the master account by the Fed for Custodia. Of course, we have Custodio CEO Caitlin Long here with us today, as well as Simon Dixon, who's arguably been deeper in the weeds of all the crypto contagion than anyone. And of course, Stacey Worden is the CEO of the Algorand Foundation, a layer one project that's been dealing very closely with institutions and governments alike. Three very unique perspectives from people who are very much in the know and

have strong opinions about what is happening. You guys do not want to miss this. We're going to talk about the United States war on crypto. Let's go. What is up, everybody? I'm Scott Melker, also known as the Wolf of Wall Streets. Let's go. for being here. Best intro music in crypto, Scott. I produced that song for a rapper like 10 years ago and it never got used. And so I flipped it into my own podcast soundtrack. Thank you. A lot of people tell me that trumpets are very annoying and they're sick of it. So I'm glad that somebody likes it. So Caitlin, obviously I want to dig right into what I was talking about. I believe that the opening salvo of this sort of hot war, as I described it, was the rejection of your master license from the Fed, which I think actually was a bit unexpected.

Can you speak a bit about that? Well, it was. We've said publicly we were blindsided by it. It's in retrospect, started with the joint statement from the three banking agencies that came out January 3rd. And our announcement was interesting. There will be a lot that comes out about the process of that announcement soon. But what I can point to factually is that the White House released an anti-crypto statement on Friday morning, January 27th. And at the same time, the Fed released the decision to deny Custodio's membership application and a brand new policy at the same time. So those three things happened at the same time. They were coordinated. And then within a couple of hours, the Kansas City Fed notified us that it denied

our master account application and the two defendants moved to dismiss the pending lawsuit that we have against both the Federal Reserve Board of Governors and the Kansas City Fed. All happened within the same day. And then two days later, Senator Dick Durbin came over the top and attacked Custodia and Fidelity on the Senate floor, compared us to FTX. I have to wonder, since Custodia is not even an operating company, whether Senator Durbin understood that he was attacking two female-run CEOs and comparing us to a 29-year-old kid, as Arthur Hayes likes to call him, the right kind of white boy, but I'll set that aside. But nonetheless, it's pretty clear that it was all coordinated. And a lot of facts will come out soon about just how coordinated

that it was. And we now know that the following week is when the SEC started. It was February 3rd when the Wells notices went out to the exchanges. And then a lot of the rest of it has obviously been made public in the ensuing couple of weeks. So yes, very coordinated. The real question is, are they really trying to kill crypto or are they just trying to kill stable coins and unregistered securities and massively debank the industry? That's the question. Well, you told me eight months ago at Bitcoin Miami that the single choke point for the FDIC, the Fed, the OCC, exactly what you told me, because they're the ones who could cut these few banks off from the crypto industry. And effectively, then nobody would have access in and out, no off ramps and on ramps to the industry. Well, I'm going to reveal something I've never revealed.

I tried to warn the bank regulators about the bank run risk that was happening at the banks that were serving this industry. It is fundamentally incompatible to take the most volatile of volatile demand deposits, which is demand deposits for the crypto industry, and then for the bank to turn around and invest those in longer term assets with some credit risk, the classic borrow short and lend long business model that banks have. You cannot do that with deposits that can all be withdrawn in the span of hours. And we saw clearly some pretty big bank runs at Silvergate and Signature. And those were the two banks that were predominantly banking this industry. That rightfully spooked the bank regulators. However, that should not have come as a surprise to any of them. We were

trying to warn. And we were doing a lot also behind the scenes to really help the bank regulators understand the liquidity risk involved in serving the crypto industry. In fact, actually, the acting OCC comptroller back in April of last year, actually during the Miami conference, Scott, he made a speech and referenced my public work. But what I can share with you is that I was doing a lot behind the scenes to try to figure out and try to educate the bank regulators that there were a lot of risks here, that having traditional community banks dabble in this market, in this industry, was not going to end well because the business model is fundamentally incompatible and that you needed these special purpose banks.

They were moving in that direction. The president's working group originally, about a year and a half ago, said they wanted only insured depository institutions to issue stable coins. And that acting comptroller, Sue, made that speech in April saying, no, actually, that's not what we want because of the liquidity risk involved in stablecoins. You can't do this classic maturity transformation banking business with deposits that can literally be withdrawn in the span of hours. You've got to have all those deposits invested 100% in cash and in a ring-fenced bank. And that's exactly what Custodia is.

That's exactly what the Wyoming Special Purpose Depository Institution Charter is. And so the policymakers were moving in that direction, rightfully so, because they were understanding the risks a lot better, and then all of a sudden, wham, the whole thing got shut down. So what we don't know yet is who was really orchestrating it. We definitely know that from the facts of the morning of January 27th,

it started with the White House, with the National Economic Council. Brian Deese was the author of that White House statement. And just this past week, you saw Fed Vice Chair Brainerd, who voted against our application, go to take Brian Deese's job at the White House. There was indeed quite a bit of coordination. Just one more point, Caitlin, on sort of the operational risk for the banking sector. In addition, it's this sort of immediate settlement that can't be reversed versus settlement at the end of day, right? And to have both of those kinds of assets on one balance sheet is just, you know, an operational nightmare.

Absolutely. Which is why the only safe way to bank this industry is through a Fedmaster account, because T-bills, so this gets into what are the backing of stable points. We've moved now in that market to T-bills, three-month or less T-bills for the most part, although that's not the case with USDC anymore. Look at what's in that money market fund. But even T-bills, Stacey, to your point, because they settle next day, if you have a bank run that happens in the span of hours, you could have a spectacular failure without being able to liquidate T-bills fast enough because they settle next day. And so we were really in the weeds with the bank regulators on this liquidity risk issue. And they just, something changed. There was definitely a big policy change,

clearly connected to FTX, but obviously also aimed at throwing the baby out with the bathwater and starting by, as one of the Washington DC insiders told me, this is a classic, shoot the stallion to scatter the herd. They went after Custodia first for a reason. And it was to send a signal to the rest of the industry. And unfortunately, it does look like indeed the coordinated move by multiple agencies, which all the Washington folks are telling me, they've just, it's almost

unprecedented to have all these agencies that are constantly fighting with each other over jurisdiction to be moving in a coordinated fashion. And it's all coming from the White House. But I'll end with an interesting piece, which is some of those agencies are supposed to be independent. So it's going to be interesting to dig in and figure out just how independent they really are. Stacey, what do you make of this uptick in activity?

Uptick is an understatement. Obviously, from your perspective, you're operating here in the United States, a layer one protocol. You're working with governments. How much does this change your base case for being able to operate in the United States or just in general, your thoughts on this massive sort of move against the industry? Yeah, I'll give you my thoughts in general, but we do not operate in the United States at all. We are a Singapore-based entity. We never issue algo in the United States. We are not at all touching the U.S. regulatory perimeter. But, you know, Caitlin, I sort of thought this Paxos thing, though, was a bit not going after the stallion, but going after the weakest.

You know, if they get rid of USDB or the Binance, then, yeah, sorry, sorry. Then that's what, 90% of their revenue? You know, it's not clear to me that Paxos can even survive something like this. And it does seem that there is a targeting maybe of protocols that can't fight back. So I was actually surprised that they went after you because you, you know, maybe can fight back or you are sometimes willing to, you know, the barbell approach, the barbell approach, squeeze from both sides, right? The strongest and the weakest and squeeze from the outside in. But I mean, it really is interesting. I do think Paxos will fight back to what Caitlin and we were talking

about this right before, but I don't think they're as weak as they pretend. I would agree as well. I've known Chad Cascarilla since long before Bitcoin. We crossed paths on Wall Street 20 years ago. And he was a very, very early Bitcoiner, started the BitExchange. And they have a lot of other businesses. But Chad and I share something, which is white-labeled to Binance. So it's interesting. I'm sure a lot will come out about their story. I haven't spoken to him since all of this broke, but I definitely feel the pain because those who... The regulators are all saying they want us to come in and get federally regulated.

They want us to come and get registered. And those of us who did. Boy, look at how they skewered us. But it's far from over yet. Yeah, that feels like I sort of made this analogy on Twitter. That feels like the creepy guy in the 80s inviting a kid into his van with candy, right? I mean, I know it's kind of a weird analogy, but there's no way that anyone can go in and come out unscathed. Simon, I want to ask you. I want to ask you. And we're getting an echo through your mic there, Simon.

But I want to ask you, you've been here literally since the beginning. I mean, you could argue factually that you wrote the book on Bitcoin. Didn't you quite literally write the first book? And this has to be somewhat new, even for you who've been here for 13 years, to see this level of attack on the industry. So what do you make of it in general? Yeah, I mean, well, this has been the story of my life ever since we wanted to create

a platform to fund Bitcoin companies way back in 2010. So we've been dealing with securities regulators for over a decade now. You know, companies like Kraken and they couldn't, they weren't really attractive to VCs. So we were investing in their seed rounds and we came up with this crazy idea. We actually originally wanted to create something along the lines of what Caitlin's ended up creating, but we failed miserably. We were told by the Bank of England that we needed $60 million to be held there. We wanted to create a non-fractional reserve bank and they said we had to build it on top of Barclays. So we could be non-fractional reserve, but build it on top of them fractionally reserving. And so we just couldn't build the mission. So that actually

drove me to speaking at the first Bitcoin conference, meeting some of the real activists at the time and realized this technology was building what we, you know, so we didn't create the bank in the end and we pivoted to securities. Then we had to change securities laws. So we spent three years with UK regulators to allow people to invest in companies. And the only way to allow it was to just say to structure it as a traditional security. But then they'd be investing in Bitcoin mining and various other things. So we created the first Bitcoin mining backed security and various other things and So we created the first Bitcoin mining-backed security and various other things and started investing in all those industries. Then we tried to do it in the

US and it took about five years to get Jobs Act through. And then even then, it still takes nine months for companies like Exodus that wanted to launch a security token to get approved. So we've been around this circle. But what we're seeing right now, I like to take a security token to get approved. So we've been around this circle, but what we're seeing right now, I like to take a big macro step back. I think Caitlin did an amazing description of what's really happening behind the scenes. But to me, this all started, so full disclosure,

I'm a shareholder in Circle that created USDC and Bitfinex, which is connected to USDT. And, you know, it took a long time for them to get the traction and try and create this interconnected exchange network. But once they got it, you know, I think it hit the point where when Facebook said, we want to create R1. And so Libra came out and, you know, initially they were going to compete with the IMF SDR and create a basket of currencies, but they strategically decided for political reasons to miss out

the Chinese Yuan. And ever since then, the Chinese government took their project that they started in 2014 and actually launched DCEP, their central bank digital currency. It's now got 220 million wallets downloaded. It's done about 15 billion in transactions. But as that started to get traction and they started to chat to WeChat pay and Alipay that have got 1.7 million users, and they pushed out their Belt and Road initiative to compete with the IMF, you started to see the geopolitical tension here because they were giving loans to various different countries

dependent upon them using their central bank digital currency. Now, obviously, then you had the Russia situation where the Russian central bank was sanctioned. And so if you take all these geopolitical things into into fare, you get the U.S. executive order. And the U.S. executive order said we need all of you three letter agencies in the U.S. to bang your heads together and figure out what we need to do in order to launch our own central bank digital currency. Because we believe that there's systemic risk in the banking system, and Caitlin's creating full reserve banking, but the easiest way to create full reserve banking is actually let the

banks go bust and replace all deposits with wallets created directly by the central bank. So I believe that now we're in this geopolitical scenario where all of this is happening. You know, China's trying to get their world reserve currency and central bank digital currency. The US defense is the Fed says that they don't really care. We've got digital payments. They don't, you know, they don't quite see the competitive tension and need. And so with the US executive order, I think they said, well, let's put all of those, you know, we've got this tension between commodities, currencies and securities. Let's take all the stable coins, make them securities. Let's take all the tokens,

make them securities, shoehorn it within securities laws. And then we can launch our currency, the central bank digital currency, when we need to in systemic risk event. And I think that's the big geopolitical action that's happening right now. CBDCs are an attack on the banking system, not on Bitcoin. And they've said Bitcoin can be a commodity

because we couldn't shut it down and it's too late now. Simon, I think you're absolutely right to point out that that is a possibility. We don't know, and I'm not willing to go there yet, whether the Fed has changed its mind as a result of FTX to want to pursue a CBDC. But a number of people raised connected events, some breadcrumbs. First of all, that's one of the reasons why maybe they went after Custodia first. Why? Because we were a bank proposing to issue a digital dollar token called Avid. And I don't think this has been reported on.

Custodia was granted the patent in July of last year for a bank to take in a U.S. dollar deposit and tokenize it on a blockchain. So that was one potential breadcrumb. Another is go look at all the job descriptions that the Fed put out for hiring for CBDC. And they put those job descriptions out just after they released the January 3rd interagency statement from the three banking agencies that was very anti-crypto. And then the Wall Street Journal was correct in pointing out yesterday that Vice Chair Brainard has been the biggest proponent of a CBDC within the Fed, and she's leaving now to go to the White House to take Brian Deese's job. And again,

Brian Deese was the one who put out the anti-crypto statement on the morning that they proverbially shot Custodia. So there are breadcrumbs that suggest that that might be in the works. The Fed has historically said they think that Congress would have to approve that. But I see all kinds of agency action happening on lots of agencies right now that goes well beyond the statutory authority that they have. Now, the executive branch, of course, in a divided Congress like what we have, can basically test the edges of their jurisdiction. And that is exactly what we're seeing. And because the legislative branch is impotent, they're not going to be able to push back against the executive

branch power grabs. But the judiciary branch still has the power to slap that down. And so I think you will see, I know you will see, because this is being talked about amongst a number of folks in this industry, a big pushback against this executive branch overreach through the judicial system. However, back to your question, is this all about a retail CBDC? There are some people who think it is. I'm not ready to go there yet, but there are certainly a number of bread crumbs that suggest that the Fed and the White House have changed their mind on that. You know, but if you. Yeah, I mean, clearly there's also interconnection between the contagion and basically us as an industry recreating Lehman Brothers and crypto. you know a catalyst event for okay you've got all these um fraudulent activities of people that were mixing client money with securities and then they weren't registered as securities and then all the

misrepresentation and the token flywheel model where people were printing up a token marking it to market on their balance sheet hiding all their insolvency, misrepresenting like Alex Mijinski, I think was on this show at one point with Caitlin at one point saying that, you know, this is, we've cracked the code. You can get 10% interest, put your lifetime savings, put your retirement plans. We figured out to do it. We're better than a bank. And so all of that has come out. We've got examination reports on all of that stuff and all those shady activities but no doubt you know what we did is or what we created as an industry you know trying to fight against money printing and fractional reserve banking and then printing

loads of money and doing fractional reserve banking um in a worse way was everything the government needed to say yeah you, you know what, this could have been prevented if people were in custody as custody securities as securities, they weren't co mingling. And if they were applying for banking licenses and FDIC, if they're going to re hypothecate, but we know where that that story ends. Anyway, at the end, it all goes to a CBDC. And all that needs to burn down, you know, the industry, all the crap that the industry created. That's not what I consider the industry that Custodia is in, for what it's worth. But to your point, Simon, that the baby

is being thrown out with the bathwater. And you also have, yeah, and you also have folks like Sam Backman-Fried and Gemini talking about how important regulation is and how they're on the side of regulators being called up on stage with regulators, whispering in the ear of regulators. And, you know, that combined with this industry is like a gnat, you know, it's a trillion dollars, just like go away. It's hard to understand. It's hard to, you know, just, but, you know, I do want to stick up for regulation. Of course, we need good regulation in this industry. And at least, you know, for my part and for, you know, the Algorand Foundation, we very much welcome good regulation. And in 2021, when the Treasury Department said that stable coins are going to be a priority, I was very excited for that because I don't think the legislation around this is very complicated.

You know, you're an unsecured creditor. You need to know that the issuer has the collateral to back up the issuance of the coin, that they are in possession of that collateral. And maybe there's some more nuance around that, you know, in addition to that's needed, but not too much more than that, right? Like, is it backed by the collateral that you say it's backed by? You're kind of done, right? And so I do hope that we can have a legislative effort to be out in front on this. And what I find a little just discouraging about this, you know, Paxos is just that nobody still knows really what it's about. Like what authority is the SEC asserting exactly? I mean, it's even more than just regulation by enforcement.

It's really, even after the enforcement, even after the Wells Notices, I don't think anybody is really sure what the violation exactly was. Now, I think it's more clear for New York DFS because they, and I think there's some very interesting kind of precedents that are brought up here, but you were not, you know, you did not have a tailored risk assessment, right? You did not administer in a safe and secure manner. And what they're talking about there is not so much what Paxos did, but what was happening with the coin on Binance, right? So, you know, this is maybe not known to everybody, but the coin is actually issued on Ethereum. Right. And then it is wrapped and used in the Binance ecosystem, among other ecosystems.

And there is some talk. And of course, I have no idea myself as to whether there was really a one to one correspondence between the Ethereum BUSD and the wrapped BUSD. I don't know. Right. But you can imagine New York DFS saying, OK, that's your product. You're responsible for that product. And we don't like the way that you have been in charge of that product. Now, at least that's clear. What I think that also raises are some very interesting questions around to what extent are you responsible for a product that you issue? You know, BUSD or any kind of stable coin that Paxos issues can be used on any protocol. Are they responsible for the behavior of any protocol, for any wrapping of that coin anywhere? It's just a little bit unclear, but at least I think we know where they're coming from. And when they said to stop issuance, Paxos, of course, immediately complied with that, right?

Sure. I think it was definitely a Binance attack, but also quite right, to be honest, because the way that BUSD was being represented was that it's being done by Paxos. And Paxos have a brilliant model where they try and silo the FDIC part and they keep the rest in treasury. So you're meant to understand the risk if they're following all those rules. And, you know, I personally think it's a very well-designed stable coin, what they're doing at Paxos. But the challenge comes is when Binance has these two different chains of BUSD. Now, what happened to me, for example, when I used Binance,

I put some USDC in Binance and it was automatically converted to BUSD. At that stage, they could have been creating synthetic balances. And that leads to everything we, I'm not saying this happened, but the fact that we don't know, because there's 150 different companies where different sections are siloed to different regulators, I do not believe there's anyone in the world that can say, I understand everything about Binance and the risks and the audits. And so the potential is there to create synthetic balances with BUSD, pretend that it, you know, also, I didn't get any disclosures around what the risks are with BUSD, whether it's FDIC insured,

what the, you know, any of those. And so in their regulatory requirement, you're meant to do that. Now, if you're in the background, just converting USDC to BUSD, there's no way you can meet those actual requirements. So I think what it is, is if you are issuing a token on a white label basis and they're making representations so that people can understand the risks of these things, how is that even possible in that type of user experience? And therefore, you don't meet the requirements. And did you really, were you able to audit this? Were you able to meet the requirements of suitability and their AML policies and all that type of stuff? I think that's what they're going for. And the reason is probably because, as we saw with FTX, even if that's just one siloed product, if they were doing any of the activities where there was

systemic risk in the whole of Binance and the whole thing was a security and some of it's being lent for futures collateral and is some of that being segregated, in theory, they've got a token and the whole thing, you know, could it sustain BNB being attacked down by 90%. Is that what's holding up the model? We don't know any of those things. And so you create systemic risk in the whole thing that we saw. And they do have a revenue sharing agreement between them, right, Paxos and Binance. So there is a closeness there. And I thought it was interesting that they did not go after USDP at all. So, you know, Lens, it does make you think that there's something going on with Binance that they're interested in, for sure. And Caitlin, can't this be like the stallion in

the herd again, right? The easiest way to attack Binance is to kneecap them with BUSD. Stacey, I was going to make the exact same point that other Paxos stable coins are not being targeted here. So it's clearly about Binance. It could be, but go back to that January 3rd interagency statement between the three federal banking agencies in the US, the FDIC, the Fed, and the OCC. And they said that for the first time, and by the way, this is something we had been asking them for permission for months and months because, again, Custodia only asked for permission. We weren't going to do anything for which we didn't get advanced permission, decentralized network is unsafe and unsound. Now, what they were really getting at is, Simon, you mentioned it. It's the Bank Secrecy Act, AML, OFAC, anti-terrorism compliance. Let me come back and talk about that in a second. But first, I'll say, if you look at that January 3rd interagency statement, the bank regulators inadvertently banned banks from using the Internet because the way that they described it was all open, permissionless and or decentralized protocols.

Well, that's what TCP IP is. That's what HTTP is. I know what they were getting at. They were getting at tokenized open permissionless networks and the inability to track and surveil the ownership of the tokens. And and that that is the hot button issue, I think. And the agencies raise that with regard to stable coins. That is the attack vector that they have used. And they want bank-level anti-money laundering compliance. Banks are subjected to a higher standard than non-banks. So the trust companies and the money transmitter licensed entities in the U.S. do not have the same level of standard as the banks. But when the banks came out and said on January 3rd, no open, permissionless and or decentralized protocols, that's what they were getting at. No Ethereum for stable coins inside of a bank, no Tron, no Liquid, no OmniLayer,

none of it is the official policy now. Whether they have the ability to do that without Congress involved is a separate question, but for now, it is the official policy. Stacey, I want to go back to your point about how we're somewhat of a gnat, right? A very small industry, because I actually spoke with Hester Peirce earlier this week, which will come out on Sunday, and that was one of the first questions I asked. I said, just tell me, am I in my own echo chamber here? Do I think that we're more important than we are and we can just easily be dismissed and that's why all of this is happening?

And she actually didn't really think so. She really did, even herself, obviously, believe that these are violations of our freedoms and that this is wrong in every way, shape, or form. I think she's made that very clear. But that was my first thought was, are we just living in our echo chamber and are we too small? They don't care, but they're clearly fighting us, right? Yeah. I mean, you know, again, I don't know if I take the same degree of kind of warlike stance of this panel, but I think it's not, it's just that we're just a little bit more trouble than we merit, you know, and I, of course, am never going to say that these bankruptcies have not had an effect on Main Street, because individual retail investors have lost a lot of

money. And we have done a lot of damage as an ecosystem. I mean, you know, the FTX thing is just fraud straight down the middle of the road. It has nothing to do with crypto at all, per se. But we do use, as acting controller Sue says, you know, scumorphic words to banking-like words that mean real things in a regulated environment. Like yield means something. Custody means something in a regulated environment. And we, in kind of crypto

adjacent, which we crypto hipsters tend to call CFI, but these crypto adjacent entities use these words not in a regulated manner. And it's confusing, right? And so I'm very sympathetic to regulators trying to get to the bottom of that and trying to police that kind of behavior. But having said that, you know, we have not posed a systemic risk to the U.S. financial system at all. And that's a good and a bad thing, because at the same time, we are showing that we are safe. But at the same time, we're kind of, you know, are we as important? Do we, should their smartest people be working on this full time? Should they, the most thoughtful people with time

be thinking about this as compared to something else, which has maybe more of a bang for its buck in terms of the overall impact on the financial system? And we're a trillion dollar industry, right? It's nothing. But Scott, I think your question is good as well, because the magnitude of the crackdown, it's like they fired a bazooka at a rabbit, which tells you the magnitude of the fear that was going on inside of these agencies. And I think that speaks volumes. It's the fear of the unknown.

And it is real, okay? So you can move a U.S. dollar on the lightning network at essentially the speed of light and at essentially zero cost. And that U.S. dollar never touches the banking system, okay? That is going to disintermediate the banks gradually and then suddenly. And it's just like Uber with the taxi and limousine commissions. At first, the bank regulators are going to fight. They're going to try to block and they're going to try to keep us out. But here's what they're missing. This isn't going away. This is internet native technology. It's code. And anyone with an internet connection

can run that code. They will not be able to stop this. And so I thought that the constructive approach was let's try to create regulated pathways. And essentially it's the way the internet itself works, right? Most of the internet goes through ISPs. Very little of it goes through Tor and the dark web connections. But there's no way they can shut down the dark web connections. So what do you do? You throw a lot of law enforcement resources to try to protect people's property rights against the fraud and human trafficking and terrible crimes that are happening. And then you leave the privacy stuff alone, right? That's where the Clinton administration created the stasis to let the internet go and let it develop without cracking down on it with too much regulation.

That is not the approach of the Biden administration. What they're doing is trying to fight a battle they cannot win because this code is out there for anyone in the world with an internet connection to run. And that means anyone in the world with an internet connection can create and transact in U.S. dollars without their permission, period. And so are we going to end up where the Tor-like parts of these markets end up becoming where most of the activity is. Is that really what they want? As opposed to the structure that evolved with the internet, where they do have ISPs, they do have some degree of regulation of those on-off ramps, and they can have a more effective law enforcement approach. But right now, the decision of the Biden administration is the opposite.

It's try to push it all into the shadows. And I think, unfortunately, the bank regulators are going to learn a hard lesson that where we saw there was a lot deeper penetration of these scammers and criminals into the banking system than they anticipated. It got into the federal home loan anticipated. It got into the federal home loan banks. It got into the broker deposit markets, right? This was a lot bigger than they thought at first. And they're going to keep playing whack-a-mole. Well, Scott, don't think for a second that I'm not going to take the opportunity, given Caitlin's layup, to say that on Algorand, you can do 6,000 transactions per second at a sub penny fee, final settlement in 3.7 seconds in the carbon footprint of like seven houses, right? And so

when we think about payments, we think about scale. And when we think about scale, we think about financial inclusion. And what really worries me about the attack on stable coins. It's not Binance so much and it's not Paxos so much, although I do feel for them, of course, some sympathy for them. But what happens here? Does it set a precedent? And is it a precedent that the regulators are actually going to like? Is it going to drive more activity to Tether? Is that really the outcome that they actually want? And Tether is scrupulous about not operating in the United States. Right. Do they want to drive business away from USDC?

And, you know, when we do, we have in this country dollar privilege. Right. Like we don't actually need stable coins as much as other countries do. But stable coin is a very important on and off ramp into fast payments and good payments globally, right? And so without stablecoins, you think about developing countries and emerging markets and their access to the global financial system, which now, you know, if you want to send a remittance, you know, it can take four days and somebody takes 68% off the top, right? And these are very, you know, these are countries where that is actually a meaningful amount of money. So I just hope that we can not throw the baby out with the bathwater and keep our eye on the prize

about what we really want to get done to make this industry as healthy as possible, which I do think the regulators want to do. They just have to, we just need to just think carefully about it and not in a knee-jerk way. I just left the station already though, Stacey. They already did it. It's done. Yeah. What I think the U.S. is missing is what was actually recommended to the rest of the world by the Financial Action Task Force. So the FATF put out a paper saying that all countries need to launch a virtual asset

service provider regime, a VASP. And so we're registered as a VASP for our virtual asset service and the securities business for our security service. So what the virtual asset service provider regime is, is kind of gets this in between. So if you think about the US regime at the moment, they've said, well, Bitcoin's this anomaly as a commodity. And then stable coins were being treated like currencies, but we may want to shift those into the securities market. And then you've got things like Celsius and Voyager and all those services clearly should have been securities. You needed disclosure, suitability, all of the different things that the U.S. has learned since the 29 pump and dumps and shit that's happened since then. But the virtual asset service provider regime kind of sits in the middle. At the moment, it's focused on money laundering, but it recognizes that you could issue something that looks like a currency, but it could be by some kind of company

and therefore you might need additional disclosures like securities, but you can't put it in the middle of securities laws because it doesn't quite fit into that. And so what the US, I think, needs is a VASP, which is the recommendation by FATF, and that's what all of the other jurisdictions are actually doing. Now, that really works for a stablecoin model, where you do need disclosures. You need to understand the risks of these things, but people aren't investing in them as investment contracts,

putting it in the Howey test and you've got these issuers that, you know, you need to, there's a lot to learn from both the currency and commodity regimes and securities, but you've got to create that one in the middle. And if they don't, look at the different models. You know, you've got El Salvador that says, right, Bitcoin's legal tender.

Everything else is a virtual asset that borrows some of our securities law stuff. You've got China that says, let's just make Bitcoin trading and mining illegal and centralize everything as a central bank digital currency. But the U.S. side, you know, saying that stable coins are securities doesn't quite work. And the risk here, the big problem is, for example, you mentioned that Tether doesn't touch the US,

but they are actually a registered money service business in the US. And if you are a stable coin, you can't prevent US people using your stable coin. And so if the end result, we all need to sanction the US from using all these different DeFi protocols, which is where it's headed. Then you've got the whole on-chain KYC, which kind of screws up the whole thing. So unfortunately, the U.S. does know that if you really want to enforce this stuff and you want to put travel rules into protocols, then, you know, sanctioning,

just getting people to sanction the U.S. at the protocol level kind of breaks the whole thing. And I think that's where they're trying to make it go. Yeah. Go ahead, please. No, just a just a two hander on this, you know, to your point, you know, and to my, I guess, earlier point, trying now to figure out exactly what authority the SEC is marshalling, because now, you know, and the talking heads in crypto are kind of trying to figure out, well, maybe it's not the Howey test, maybe it's the Reeves test, right, for promissory notes, or maybe they're treating it

as a money market fund, which needs to be. But of course, you know, you don't really make money on a on a stable coin. So maybe it's a particularly bad kind of money market fund or like just trying to just trying to figure out, you know, where where where their heads are at. Right. Which is, you know, this seems to me. I mean, look, I think the regulation of crypto crypto is really a head scratch, and it has been for 10 years. And I am deeply sympathetic to how disruptive this has been in terms of the regulatory categories. But this, it seems to me, is not so complicated. Regulatory guidance could have been given. And I think, Caitlin, you mentioned right before we were talking, there were certain aspects of your

rejection where regulatory guidance could have been given to you three years ago. There's stuff that's not complicated. And it is their duty, I think, to peel off the guidance where they can and acknowledge that some of this stuff is more complicated. And maybe there does need to be a kind of try and, okay, slap a hand if it doesn't work kind of regulatory approach, which, you know, I'm not in favor of, but I do see how that might be necessary in some instances, but not in so many instances as we have now. Yeah, I think one of the major concerns here that you've all touched on now is that this is a very slippery slope to DeFi, right, and to decentralization. And so I've heard a lot of sort of bad takes of people saying, well, they're going after centralized, DeFi is the big winner here. I don't believe that for one second, personally. I think that this trickles all the way down.

I don't know about that. I joined Nostr yesterday. And Nostr is, I am stunned at what is happening. That is, Nostr is basically Bitcoin for messages, okay? It's a decentralized network, mesh network that uses relays. There is no central authority to attack. And what is happening, I haven't even been on it for 24 hours. I'm stunned at not just the technology that makes it work, but the level of engagement. I just tweeted out before joining this show, I have not been this excited about technology really since Bitcoin was created. And I started since I came across Bitcoin in 2012 and really dug into it in 2013. I was so excited about it because it was so different. And that's what Nostra is. It's so different.

And so and by the way, there is nothing that any central authority can do to shut that down. Again, it's the internet itself. It's just code. People are just running code and they're doing things with the code that they've never been able to do before. And because there's no central point of attack, there is no way to shut it down. And this gets back to what I was talking about earlier with the stark contrast between the Clinton administration's approach to the creation of the internet and the sort of do no harm, the Berman Amendment, which says information, the way the internet packets are relayed across the network, if it ends up touching someone in a sanctioned country, that's not a crime. But now all of a sudden we're trying to make that a crime

with respect to the fact that the information packets are scarce and therefore they have value. So they can't, it is a 180 degree polar opposite approach to what the Clinton administration took. And what it's going to end up doing, unfortunately, is not creating the Internet structure like we have today, where the vast majority of those packets go through lit markets and not much goes through Tor. It's going to end up being the opposite. The vast majority is going to go through the dark markets and virtually nothing will end up, at least with respect to the U.S., going through the lit markets. It's really a shame. And history

will not be kind to the decision makers here. What's also funny is if you look at who the decision makers are, how many of them actually have ever gotten their hands dirty in this technology? It's an interesting question. You know, your comments about the Clinton administration, do you know that one of the big issues back then was, it seems so quaint now, but eBay, right? This was going to be commerce online. What was that going to look like? How is this going to be regulated? And as you said, they just took the decision to just let it develop and see what, and you know, and even if you look at M-Pesa in Kenya, the reason that M-Pesa got off the They just took the decision to just let it develop and see what. And, you know, and even if you look at M-Pesa in Kenya, the reason that M-Pesa got off the ground in Kenya is because it was regulated by the telco, not by the central bank. And so it gave the industry, it gave it a chance to kind of get going before the central bank even noticed what was going on, actually.

That's a great point. One trend I have noticed is, oh. No, please. Go ahead, actually. That's a great point. One trend I have noticed is, oh, no, please. Go ahead, Simon. Yeah, a movement towards, and sorry to say this to other projects to Bitcoin, but I've seen a massive shift to real, real, real decentralization and appreciation for what Bitcoin offers. And so I've started to, I don't know, I've been hanging out on various different Twitter spaces. And for the first time, I was on an NFT Twitter space. And I saw a bunch of people that would normally be talking about the Solanas and the Ethereums all talking about, oh, there's this new Ordinals thing where you can build nfts on bitcoin imagine if we could put

like you know messages that are completely uncensorable and there's no way if there's no centralized attacks at all maybe we could prevent a nuclear war by sending a message you know or um the next censorship event in china or something and they were really really excited and it really reminded me of like when we were very excited in the Bitcoin community around colored coins and in 2012 and putting all the stock markets on Bitcoin. And I really remember those days when we were very excited about these different things. Now, obviously, we learned that you can't compromise decentralization and clogging up the blockchain.

And that obviously led to the block size debate. But it's interesting that we're now really pushing the waves of these lightning network, you know, Taproot, Segwit and all of this stuff that now people, I think the next decade is about really appreciating true decentralization and the slow approach that we took in the Bitcoin community to ensure that we got it right. The Bitcoin maxis don't seem to be too happy about people shoving a bunch of data in the signature field on the chain, though. So we'll see. We'll see where that ends up. But Stacey, that was exactly the same debate that Simon just referred to. Counterparty was the first altcoin.

And in fact, if you go to the Coindesk list of altcoins, Counterparty is number one. And it was a colored coin. And that same technology led to ultimately the Omni layer where Tether was initially issued. So you can kind of see the development of all of those things. But there was a big fight back then over don't put all, you know, it's already taking a day to sync the Bitcoin blockchain.

And so you're starting to get to the point where it's not easy for the proverbial individual running a node in their garage to, you know, to sync that. But ultimately, markets are going to work on this. And my attitude is, we're going to figure this out. This is just another in the wave of challenges that Bitcoin has had. We have always had the North Star of decentralization in Bitcoin. The user, the UASM- It's not, it's not. They're ganging up on me with this Bitcoin stuff.

Now, do you see how this is happening? I do. You know, I'm talking about 3.7 seconds final settlement over here at Algorand. You should give it a try. Decentralize. But the good news is everybody agrees. They're just disagreeing on the method or the platform.

So I think that it is good that everybody at least fundamentally agrees on what's important. So I think that it is good that everybody at least fundamentally agrees on what's important. And I do want to qualify my statements about decentralization. I do think decentralization wins. I was just making the point that I don't think that the regulators stop at centralized. I think they will go after DeFi when finance is involved and yields and people's money. But Caitlin, I want to ask you before we go, do you think that this could get so bad that your average American investor literally cannot get fiat in and out of the crypto market? Could they cut off the exchanges to the point where, yes, I can do

whatever I want with my Bitcoin, but I can never get it back out to dollars? That is the question, Scott. That is absolutely the question. And I don't know the answer to that. When I saw the SEC custody rule, I put out a tweet thread last night. This was not aimed at completely shutting off all custody. There are a lot of people who are looking at it that way, but I don't think that's the case at all. What it was aimed at was something, frankly, that wasn't really related to crypto. There was a comment praising the person who worked on the proposal who'd been working on it for more than a decade. Okay, well, that tells you that crypto was just the trigger to bring a proposal that they'd had in mind for a decade forward. And the proposal had nothing to do with crypto. It has mostly to do with the fact that state

chartered trust companies cannot guarantee segregation of assets in bankruptcy. And so that's what the SEC was focused on. They want to make sure that if there's custody, that those assets are segregated properly from the estate of the custodian in the event the custodian goes insolvent. That's a really technical legal issue. It's not anything to do with crypto. Crypto just became the trigger, the proverbial good crisis that couldn't go to waste so that the SEC could attack state chartered trust companies for this particular bankruptcy reason, which they'd been working on for a decade. cut out all crypto custody, they left, for example, the Wyoming special purpose depository institutions alone. They left the institutions that have special receivership regimes that statutorily enforce the segregation of customer assets from the estate of a custodian in the event of insolvency. And that's not a bad policy goal, folks. Frankly, if you just take a property rights approach, even a minimalist government approach, that's a basic, basic tenet of custody. You should not be mixing, commingling, to use a word Simon used earlier.

You should not be commingling your rights with those of your customer, period. Right. And, you know, since I'm, I guess, the most regulators are trying to do the right thing for a regulation person on this panel, maybe I'll just say, you know, by way of agreement with that, that these things, there are many things that are not that complicated, which we could all use some clean regulatory guidance on. And one of them is what you said, you know, let's not mingle customer accounts with our trading or with our hedge fund. This is nothing to do with crypto at all. And then, and I think, you know, where, where, I guess, Scott, I disagree with you a little bit, because I think where regulators will have the most authority and is to, is where the US touches the, where, where crypto touches the fiat, right? So maybe DeFi, I think we'll, we'll be in better shape or, you know, I think we both hope that I'm right.

But at the very minimum, if you're going to call something something, it has to be that thing. And so Bitcoin is not calling itself anything. Stablecoins are calling themselves stable. And so if they're going to call themselves stable, they need to be stable. And they need to be pegged the way that they declare. And again, to me, I'm not a lawyer, but it doesn't seem that complicated to write legislation and regulation around disclosure that will give unsecured creditors comfort that the peg is really backed up by collateral. And so why not? Why not take that approach? I guess is my final comment. On that one, I think it's important to cover. I want to agree and disagree with Gary Gensler.

I do agree with what Gary Gensler said, that there is regulations that apply. So if you were offering an earn program and offering yield, there are securities laws. If you're rehypothecating, there is banking laws and safeguards around that. If you're doing trading, then there's money transmitter registrations. If you're lending, there's lots of consumer protection and lending registrations if you're not rehypothecating.

So all of that does exist. The bit that I completely disagree with is that you can fill in a simple form and you're away. So that was such a misrepresentation of reality. There are not a lot of public companies that would agree with that. That's true. Right. Exactly. To give you an example, so we have a broker dealer. We ended up, you know, so Coinbase, I know they've got the ATS registration and the broker-dealer that they could do this because they bought it off us in 2018. So we sold them our ATS and broker-dealer. But we built another one and we decided to shut off U.S. investors because they brought out their virtual asset regime that said all broker-dealers engaging with virtual assets, tell us what you're doing and get this additional virtual asset permission. Two years later, we still don't have it. And then they came along and said, well,

now you've all brokers that want to engage in this industry. You have to be what's called an SPBD, a special purpose broker-dealer. How many special purpose broker-dealers are there? Zero. They haven't approved one of them. And so, you know, it's quite clear that if you're offering staking as a service, as opposed to on the protocol, you're introducing counterparty risk. And therefore, people need to know how you manage those funds and what disclosures there are. But if it was possible to actually register as staking as a service business, Kraken would have done it.

But they knew that it wasn't going to be, you know, there was no such form. What they were really saying is if you want to do a securities offering, you can fill in a Form D, but you have to limit it to accredited investors only. And if you do something, know we just you do that notification if you're actually trying to offer services to retail you know even blockfi they went

bankrupt in the process of paying the sec's fine and trying to file their s1 in order to make their um transparent disclosures around now i'm, I'm not saying BlockFi wasn't doing anything wrong. They were clearly running a securities business and taking incredible risks while representing it as a bank or a deposit, a complete misrepresentation. But, you know, they went bankrupt in the process of filing their S-1 and their settlement with the SEC to allow for the disclosures that would have made that product something that was more understandable to retail investors. Simon, I just want to ask where you are by way of my final question, because I think we should do the next one at your house. Do I see waves crashing in the background behind you there? Yeah, this is the Isle of Man behind me.

So it's a little island, only 85,000 of this. A little fun fact, Max Keiser and myself came here in 2014 to make the Isle of Man use Bitcoin as legal tender. They actually did it. And then the Bank of England told them they attracted all of the crypto companies, Coinbase, everyone was going to come over here. They were all going to come over here. And then the Bank of England said, we're going to remove clearing for GBP banking

to the island if you support Bitcoin. That was in 2014. And they haven't done it since. I was going to say, so not much has changed when you look at the... Good to know that we're still the same nine years later. at least the kelly's turned up to them that's true and so now guys i want to tell you i asked simon to stay a bit longer to talk about celsius that's happening stacy and clayton you are welcome but i'm giving you your off ramp right now because i know we're past your schedule um but uh simon and i are going to continue on and you're also welcome to stay if you want to discuss specifically Celsius and the contagion. But there was some big news, obviously, about what that bankruptcy is shaping up to look like.

So thank you so much, Caitlin. Always a pleasure. Thanks, everyone. Real pleasure. Take care. All right. I'm going to hang out to hear this if I can. Awesome.

Yes, please. So, Simon, let's talk about what just happened. Obviously, one of the main proposals was from your platform, Right Bank to the Future, which was not ending, ended up being the winning proposal, probably because you're offshore, I would imagine. But what does this look like, I guess, for people on the ground for Celsius creditors? And can you just, in layman's terms, explained some of what happened. Yeah, I mean, what a journey. To give the background, I think it was eight months ago I was probably on your channel when this first came out and trying to warn some of the things that I discovered about Celsius. So by background, I'm the 21st largest creditor with my personal funds. I thought it was a good idea to put some Bitcoin in, try and get a loan, and then the yield that was generated paid for the loan. It was my worst investment in history.

So I'm one of the larger creditors at Celsius. And we did the funding round at Bank to the Future for their equity raise. And way back then, I was saying there's massive misrepresentations. They haven't got the licenses and they were using cell token in order to completely manipulate. That just came out as an examiner report. And the plan that I originally gave them, I think eight months later has now, we put a lot of pressure on Celsius, they wouldn't release the plan. And they were just rinsing the chapter 11. I've just think that I'm sorry, chapter 11 for these companies has just been the scammiest process I've ever been engaged in. They made it

legal. Essentially, the US bankruptcy code makes it legal for lawyers and professionals to do what SBF did, which is spend client money. So they've spent through 100 million of our money, client money, creditors money, and in the Voyager case, just to get it to the place where Binance can distribute their funds in the case of Voyager. And now they took the plan that I wrote eight months ago, we applied massive pressure where they were applying for an extension to their exclusivity to submit a plan and we managed to use the examination report

that we had to pay $20 million for in order to prove all the shit that Mishinsky and the fraudsters were up to. And once that was proven, that applied enough pressure when the New York Attorney General said they're suing Mijinski and other insiders, that now they had to overnight release a plan

which pretty much copy and pasted everything that we presented to them originally and took out, you know, and yeah, that's where we are right now. So there is a plan. It's going to be new management, you know, and yeah, that's where we are right now. So there is a plan. It's going to be new management, new licenses, you know, new risk model. It's nothing to do with Celsius. It's an SEC registered company called NovaWolf.

I haven't heard of them before. And yeah, they're trying to take all the assets and give them to creditors at the moment. And so we're really pushing on that plan. As you said, Bank to the Future, we ended up, because we couldn't get our plan through, we ended up just bidding to give everyone their assets. But Uncle Sugar in the US always wants their tax. So they wanted to keep it onshore with a US company. So they selected a US first company in the end, which I'm okay with. We never really wanted to do it in the first place. We just wanted a way to get creditors what we knew we could,

the result we could get them. Yeah. I mean, in the case of Voyager, certainly I'm roughly on the same level of the creditor list for Voyager as you are for Celsius. And it's somewhere in the 20s or 30s. And the fact, listen, it's a silver lining that FTX went under when it did before Voyager transferred any assets there. So at first it seemed like horrible news, but that was great news that Voyager creditors didn't have to go into a second round of arguably worse bankruptcy. But going back into the auction process reduced the level of expected return from like 70 cents on the dollar to 50 cents on the dollar, which may have now changed with the market going up. So to your point, I mean, it's advisors and

lawyers that have gotten paid, right, at the expense. But now I'm seeing at least for people who have 5,000, I believe, and lower, you can be more specific on this, that people are going to get back 70 cents on the dollar on Celsius. That doesn't help you, but that seemed unheard of levels. I mean, this was trading on secondary markets like Xclaim for 9 to 13 cents on the dollar. Yeah. So let me unravel that behind the headline. So 85% of all the creditors in Celsius have accounts less than $5,000. And there's a rule in the bankruptcy code that states, if you want to release a plan, then you can put people into different classes. So they're creating this thing called a convenience class. And what the convenience class is, is it says,

if you can give one class a really good deal, you can cram down the plan on the other class. So people like myself, if we object to the plan, because we've got much, much larger accounts, what they can do is they can offer a really good deal to those with tiny accounts. And if they vote yes, then they can force the plan upon everybody else. So it's a strategic move. And what they also said is if you vote for the plan, anyone that withdrew money over the last 90 days, they could be subject to clawbacks where you have to bring your money back in.

And they said, if you agree to the plan, then you won't be subject to clawback so if you think about it those that had accounts very small is probably because they took there's some people that took like millions the insiders like Alex Mijinski took out millions and millions and left a bit of dust and then they get to vote because of the dust they've got left and then based upon that why would they they vote? Because they're getting a better deal and they don't get clawbacked from those funds. So I'm not talking about the insiders, they're going to be definitely taken care of. But it's really a convenience class as a mechanism for

the Kirkland and Ellis lawyers to shove down the plan. And there's all sorts of dirty tricks. So my experience of chapter 11, I actually thought it was a process for, you know, calling down being really innovative and doing what we did with the Bitfinex hack recovery. So that's what I thought it was. But no, it's just a game for legalizing with lawyers what SPF did, spending client money and playing all sorts of tricks to get there. But anyway, there is going to be a convenience cost. Now, that 70% number is also a bit misleading, a bit like it was with the Voyager deal, right? So let's say the amount is locked in at the point of the bankruptcy. So what they're talking about is 70% of the dollar value.

So some people, for example, they invested in Matic, which has gone up like 3x since then. And so what you would end up doing is essentially taking the dollar value and then distributing a currency, and you'll get 70% of that dollar value, but then they repurchase back the currency. A third of the coin, which will be like a third or a fifth of the coin. Significantly less in crypto terms.

When I finally did that math on the Voyager claims, and they were saying you'll get paid back in coins, and I didn't believe it, so I obviously dug in. Yes, if you had Ethereum and it went up massively, you could get paid back in coins, but it would be a third of the coins that you originally had because of the increase in value. So everybody's going to look to their dollar value for the recoupment, I think. It actually is. Yeah, so these firms are crypto short.

Yeah. Yeah, these firms are crypto short. So the more the market crashes, the more they can buy back, which enables them to distribute more. If the market recovers, then that's going to be more damaging. So, yeah. Isn't Chapter 11 supposed to be a restructuring process for companies that believe they're going to actually survive rather than a liquidation, which is effectively what all of these end up being? Now, Celsius is not.

They're starting a new company. But the new Celsius deal actually reflects the stalking horse that Voyager originally proposed, which was that you would get shares in the company and they would do something with the VGX token. But I mean, Celsius isn't going to be a usable platform moving forward, correct? I mean, there's effectively a liquidation of assets to that class of creditors that you described. Yeah, no, the proposal that we put forward is that you give everybody what's left in custody. And then, you know, Celsius and Alex Mijinski fraudulently went and bought loads of stuff with our money. So he went and played a legal hedge fund and a legal vc um and uh he was so out great you know outrageous that um he took 600 million dollars of our bitcoin and used it to

pump the price of cell token so that then he could hide these ginormous holes that he had in his balance sheet um and then he would mark that to market and come to equity investors like us saying, I've got this massive crypto balance sheet, which was essentially just them manipulating the price. Then he'd go on a show, tell people that they should be buying the token while he's selling his token. He sold $60 million of the token onto his community. All of these are these big list of insiders. And some of them took that token, the sell token, which had no liquidity. And the other co-founders like Daniel Leone took out a massive amount of sell USDC loans backed by that token that essentially you could never liquidate

anyway. So it was just pulling out all of this USDC to insiders from the company. Just, you know, crazy, crazy fraudulent activity. But anyway, because they bought a bunch of stuff like a ginormous mining operation, the way they justified it spending client money is they said we would borrow against client Bitcoin. So they borrowed a billion dollars to invest in a mining operation. And when that all went wrong, we ended up with this just ginormous, unprofitable mining operation that was bleeding $25 million a month. So they're looking to restructure that. And then we get equity in the mining operation. And that's really our path to recovery. So we are where we are.

It isn't Celsius coming back to life. It's an SEC registered company constructing a fund. And they're taking them, you know, they decided to turn that into a security token as well for liquidity, but there's no liquidity in security tokens. If you think that these pump and dump token flywheel tokens are illiquid, wait till you see the security token market. You know, so we're just trying to really lobby. At the moment, the plan is there. And now we've got a few weeks to really lobby and get the plan exactly what we want it to go, which I'm happy with. You know, we've been waiting for this for eight months.

So now it's time to get to the end of this process. And we still got the whole thing of getting the SEC to sign off. Last time I tried to get the SEC to sign off to a security token was with Exodus, and that took nine months. And I don't think the appetite by the SEC for this is as big as it was. And they have not looked favorably on the Voyager deal as well. I mean, the SEC openly basically disputed it. So we'll see, I guess, where that happens. Stacey, I know you're sitting there. I have to ask you a question, if you're willing. You got to unmute. I mean, what, how's it, it makes me, I'm so embarrassed for the industry by the end of 2022, honestly, that I, I won't say that my faith was shaken, but I was questioning quite a lot of things as someone who's trying to do this. How

much does this impair your ability moving forward to do what you want to do? And how much of it is just, how do we separate ourselves from all of this nonsense and tell a proper narrative? Yeah, I mean, I think globally, none of this is good for the industry, right? It is not at all. It's not good for anybody.

And in particular, it's not good for people like Caitlin that do try to work with regulators very closely. But she is among people that also tried to work with regulators very closely for their own ne among people that also tried to work with regulators very closely for their own nefarious purposes, right? And so that, and, you know, people like Sandra Rowe, who is the head of the Global Blockchain Business Council, who is, you know, devoted her life basically to

trying to educate regulators and policymakers on blockchain and on the potential for crypto. It just casts a pall on everything. I will say, though, that looking from a completely parochial point of view, Algorand has never been like the hip, cool, 20-somethings on their beanbag chairs, you know, everybody needs to have it and, you know, hyped up and all of that kind of coin or blockchain. And so we are benefiting, I would say, reputationally from this. People are starting to pay much more attention to us. Oh, you're the ones that are trying to go after real world use cases.

You're the ones that are trying to, you know, doing a lot in, you know, disaster relief payments, financial inclusion, things like that. And so we're having a, you know, everything's relative, but we're having a pretty good moment, I would say reputationally now. And we got a lot done last year, just kind of keeping our head down and building and building on the core protocol. So that's what we're going to keep doing. And, you know, I, as I tell my, my team, survival is a strategy. And so when we get through this crypto winter, we collectively, the good, I think, will survive. And it's the Warren Buffett thing, right? We'll see who's been swimming naked as we have, yeah, and who's got a nice big oxygen tank on their back. And so

I hope that this is going to be helpful for the ecosystem broadly in the medium term, and that those that remain will be the good players that are trying to do something. Darwin, the strong will survive, obviously. I'm going to let both of you go. I have a podcast in 10 minutes. So Stacey, thank you so much for sticking around and for all of your contributions. And I will say, I do agree with you. I think that regulation is essential. I think everyone agrees with it. Now it's just a matter of defining whether they're going about it in the right manner or not.

And so we may obviously disagree to some degree there. And Simon, thank you as always for your insight. And I want to talk to you about offline, about a potential Twitter Spaces interview with the three AC guys that I don't feel like I'm potentially equipped for myself and might need your backing to have that conversation. So I'm going to be contacting you about that.

So everybody, thank you. I will actually not be here tomorrow indisposed during this time. So I will be back on Monday. Once again, please follow Stacey, Simon, and Caitlin, who is nice enough to grace us, all of them with their time. Thank you guys. And I will see everybody all of them with their time. Thank you, guys, and I will

see everybody on Monday. Thanks, Scott. Thank you. Let's go.