The Wolf Of All Streets - FBI Creates Fake Token To Catch Scammers | Crypto Town Hall [Bot Attack]

Episode Date: October 11, 2024

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Good morning, everyone. Happy Friday. Hope that everybody is having a good week and all have big, amazing plans for the weekend. This will be obviously our last spaces of the week. Always a good one today. We have our crack legal team. These are our most expensive spaces because they bill us at $1,000 an hour. Very expensive. But yeah, we've got our crack legal squad here to help us unpack a whole lot of legal and regulatory news of the week. Almost hard to keep up with all the things that have happened just this week.

Obviously, we have the, well, it says in the title, DOJ creates fake token to catch scammers. Technically, let me go ahead and change that was the fbi that created it and the doj that charged them but yes the fbi actually created a crypto token and then hired firms we'll call them nicely uh to manipulate the market on launch wash trading and then basically we can't say entrapment, but fooled them into hiring, basically allowing the FBI to hire them to do some illegal things and then charge four of these firms and a number of individuals. And then also on the SEC side, just this week, we have crypto.com

getting Wells notice and immediately countersuing. We have Cumberland DRW, which this is just an astounding one, very much worth discussing, basically getting sued by the SEC, and then Bitnomio challenging the SEC as well. So we have two directional sort of suits going back and forth. We have the SEC DOJ FBI coming after a number of companies and a number of companies in return going back after the SEC. Let's start with Cumberland. I want to start with Cumberland DRW. Dave, I know you've been looking into this. This is very much in your wheelhouse. Maybe you could explain what's happening here because this one is absolutely blowing my mind. Well, I'll let the lawyers explain what's happening. I just wanted to be

really, really clear that when you sue market makers and you chill the market, you hurt the market. So the SEC's mandate, twin mandates are capital formation, protecting investors, and the underlying tone of them and the CFTC is maintaining fair and orderly markets. By what they've done here, they demonstrably, intentionally are trying to make it more expensive to trade crypto, meaning hurt investment returns of the, I remember yesterday, you know, remember the data yesterday we talked about? What percentage of hedge funds is it 50 50 yeah it's 47. so literally here you have the sec taking action specifically to damage the investment returns of 50 of the hedge funds uh you know that that they that basically look to the sec to maintain fair and orderly markets. I can't, you can't fathom just how absolutely destructive this action is.

And to top it off, there's not even an allegation of investor harm. So to me, this is a big deal. Now, I just want to give some data just to make this really clear to people, because this happened, you know, what we saw and actually wrote a paper about this last year, when we saw there was a there was a fear at the time that the SEC was going to do something like this and all the U.S. dollar markets before that. And I talk about U.S. dollar markets, let's just talk about Bitcoin. So Bitcoin dollar used to be cheaper and more liquid than Bitcoin against Tether. The SEC started making noises. They were going to go after market makers and say, if you trade

it against, if you trade it in the United States in these markets, and then of course we saw what happened when the banking crises happened, you know, when Operation Chokepoint, you know, did it. And effectively, what it did is it turned the market in Bitcoin dollar to be three times more expensive in terms of spread and liquidity cost than Tether. So we know that when the SEC takes these actions, that's exactly what will happen. There's no guesswork here. This isn't a guess. And so you have to ask yourself the question, well, why would they do this? And the only reason is literally to try to, in their last gasps of this quote administration, which I don't believe, I think Harris continues this administration, is to shut down crypto. So if this is not a rallying cry for all the crypto for Harris people to understand, wait a minute, if she can't make a statement that this is bad, she never will.

And I think it's really interesting because you've talked about and we've seen, I mean, crypto.com, OK, whatever, you know, Uniswap, not Uniswap, Metamask, that's kind of difficult. And, you know, that's going to cause it. But this is significantly worse because there's literally only one intentional thing that can happen here. And that's pull liquidity out of the market for anyone who might even think about talking to someone who might be, not is, but might be a U.S. investor or considered by the SEC to be U.S. Carlo, you wrote a great thread about both Bitnomiel and Cumberland. Maybe since I jumped the gun going to Dave for the takes on what's happening with Cumberland, maybe you can break down actually the news for us so that we have some better context.

Yeah, look, you covered it this morning on your live show as well. It's interesting to see the contrast between what we are witnessing in the sector. And I love that you have these crypto firms that are pushing back and filing suits, and they're not just sitting back waiting. You need legitimate market makers to create liquidity. And by all accounts, Cumberland is a highly respected, reputable market maker that was acting within what they believe the proper lanes. They don't have regulatory clarity on what investment contracts exactly are. They have the opinion of the SEC. And their response is just incredible. The fact that they pushed back the way they did,

and the fact that they made it very clear that they did go to the SEC for guidance. And the guidance they got was that they could only trade in ETH and BTC as market maker, when we still don't have any definitive clarity on whether all the other tokens are investment contracts. So, look, I don't know what to make of it as well. I'm shocked because I have to agree with David that this is and could be an incredibly chilling effect because you cannot have a market for these tokens if you do not have legitimate market makers out there that help to create that liquidity. So the impact of this is tremendous for the sector. I can't put it any other way. It's not like these guys are offering the listing of unregistered securities to retail as has been the claim with Coinbase and Kraken and such. This is literally they're just they're

making the market, creating liquidity, giving a buy order for sellers and giving a sell order for buyers to obviously minimize the spread and make the market more efficient. And this has been their business since the 90s with almost every single asset class. And it's the opposite of the FBI. This is really, yeah, we'll get into that. But I mean, this is really, people should be paying attention to this because this is effectively a completely new door being opened by the SEC on top of these other suits. So this is a much more aggressive tack now being taken towards companies that are even touching crypto assets

than we've even seen before. So this is an escalation. Yeah, it is an escalation. And it contrasts what's going on with the FBI case, because there's no indication in the Cumberland action that you had any sort of fraudulent market manipulation. You just had them doing what we all understand to be legitimate market maker activity. And now this is opening up a whole new Pandora's box. And it just seems desperate. That's the best way I can characterize it. Fred, you just DM'd me that you're primed and ready to fly off the

handle on the SEC on the Bitnomial case. And that is bait that I'm going to openly take. So let's talk about Bitnomiel. Oh, my gosh. Well, good morning. I am so like this. This case came out yesterday. Bitnomiel is actually suing the SEC. They're a it's a exchange that does futures on the CFTC. And this case just shows how off the

fucking rails that the SEC is. I mean, just next level craziness. And I say that knowing I'm going to get in Dave's crosshairs because he's got a huge crush on caroline crenshaw but what's so crazy about this case is that they want to do xrp futures and everybody most people are aware of the whole sec ripple saga but what was crazy and bill morgan he's a Australian lawyer. He went through the complaint. He's a great follow, had posted. And I saw is that when Bitnomio said, why are you saying that XRP is a security? Because you just lost on that in district court. And this was all happening last or two months ago in August of 24 is when these conversations with Bitnomio and the SEC are

happening. And the SEC says, sure, we'll tell you why XRP is a security. Here's all of the briefing that we did in 2023 that says XRP is a security. And what's so crazy about that is that they lost. That was just their papers they filed, that a judge was like, no, you lose on that. So the SEC is saying, we think it's a security XRP still because we said it was and we lost in front of a court, but we're going to use that as a reason to not let you list these as futures. I mean, un-effing-believable. And correct me if I'm wrong, Fred, they also relied on that same mischaracterization of digital token assets, this word that was bantered about that has turned out to be a walkback by the SEC. Isn't that part of the briefing they provided?

Yeah, it is. And then in the, I mean, that's true. And then in the complaint that you were just talking about with Cumberland, it's gone from crypto asset securities, which they told the court in Binance in a footnote that that's not a real thing anymore. But they did a good job because they changed it to crypto assets that were offered and sold as securities. So they put a few more words in between assets and securities. And now we're all good to go. Yeah, they were crypto assets. Digital asset securities was the term that they had made up. Well, they made up that one in crypto asset security.

And now they've just put a few more words in between asset and security. Yeah. High highly effective legal technique there, I hear. Just change the name a bit and then it's completely fine. I mean, James, Metal Lawman, what do you make of all of this as we're sort of unpacking? We will get directly to the FBI, but I guess with Cumberland and Bitnomial, Crypto.com, I mean, the SEC not stopping. Yeah, it looks like a real escalation in the last few weeks to run into the election. It really makes sense to me that that director of enforcement got out of there as fast as he could. This is really embarrassing. I mean, the DRW thing, for people who don't know, DRW is a very, very big player in market making in a variety of assets. It's got started in the commodities world. So when you think of DRW, it is the equivalent of Citadel and Virtu in the equities markets, meaning responsible for an enormous percentage of daily volume in some of these markets.

So this is no fly by night organization and they are going to fight. But I think the, you know, the upshot here is any participant in the crypto markets needs to be worried. And it's one of those things like that old, you know, what was it? The Catholic priest who said, well, first they came for the so-and-so, but since I wasn't one of them, I didn't give a shit. Then they came for the next, you know, for the Jews.

I wasn't a Jew. Well, you know, they started off with the issuers of these tokens and then they went for these exchanges. And now with DRW, you know, it's counterparty to institutions that are getting into crypto. They also, just to be clear, not to interrupt, but they also market make the bulk of the ETFs, the Bitcoin ETFs. That's correct. That's correct. They're in all the markets now, fixed income, they're in currency, foreign exchange, everything.

But they're also acting as counterparties to those big players who are getting into crypto and don't want to trade on a Coinbase to do that. And so as far as I am concerned, everybody involved in this marketplace should be concerned. If you're a hedge fund trading crypto, you know, you need to get it out of your mind that you're good. You know, it's just a matter of time that they're going to come for you as well. And so I hope that everybody, you know, gets themselves organized on this Ripple case because it's the first, you know, like it or not, it's the first one going to a court of appeals and going to address to an extent trading of a particular token on a secondary market.

And so that's why Coinbase is trying to get involved in that case and have the case it's got going, have that certified for interlocutory appeals so it can go up with Ripple at the same time and present the larger question of basically all crypto tokens traded on the secondary market. Are those somehow investment contracts, which in my view is ridiculous? They're not. But get that to a court of appeals for decision. This is a big deal.

I mean, we're talking about very, very large markets operating 24 hours a day. And the SEC, by going after the exchanges, the market makers, the issuers, everybody is in the crosshairs now. By the way, Cumberland effectively laughed this off. I am not saying they're laughing it off legally, but they were like, what are you talking about? We're not stopping. Just so people know they have no intention of changing their tactics here at all. Go ahead, Dave. Yeah, and that's actually part of the point here. So if you look at what, sadly, what Harris and Biden have been doing and what Elizabeth Warren have been doing, they're trying to push the market. Their latest hack is to push the market to the larger firms. The point that Fred made that's extremely important is the words chilling effect.

So to be a market maker, it used to be enormous overhead. But as technology has improved, market makers can crop up and small market makers, lots of them can add liquidity. is this, if we get four more years, what this just did is put a double digit millions of legal fees ticket that you have to buy in order to be a market maker. So Cumberland can say, 10, 20, 30 million, you know what, we'll, we'll, we'll, we'll fricking deal with it. But all the smaller market makers that might think about come joining and competing it are going to say, eh, this is just not worth it or i can't do it and that chilling effect really really matters here and it this pervades all aspects of crypto for sure i mean but exchanges are kind of you need concentrated liquidity you don't want a hundred exchanges you know you want you know five you

know whatever the number is you want some single digit number market makers, you prefer there to be 1000 market makers. And that's why this is so pernicious, because chilling that matters. Yeah, that makes perfect sense. Should we move on to the FBI and DOJ? Because this one is wild. Could I say something about this one? Because this is so so for those who don't know coin routes the company that you know i you know i co-founded that my that ian you know is now running and i'm kind of stepping back from we in our early years because we built algorithms to trade and you know we we help people buy low and sell high. We were asked many times by issuers, would you build bots that will trade for the express purpose of generating volume? And we had conversations with people and we said,

listen, if you do bonafide trades that may or may not make money or lose money, I mean, sure, we will do that. But if you're doing wash trades where you're trading with yourself, we will absolutely not do that. And they said, well, but there's these other companies. Look how much money they're making. They're worth more than you.

Why aren't you doing this? Well, I didn't want to do it because, frankly, I knew that was illegal and fraudulent. And you don't need securities laws or jurisdictions to get there. So I think it's good for the industry that you don't need new laws that the FBI and DOJ are doing this. But to be blunt, this is the kind of thing the SEC should have been looking at for the last five, six years instead of doing the crap that we've been all over them so far this morning that they have been doing. Yeah, I obviously spoke about this all week, and I think everybody who I've spoken to agrees that this is the kind of behavior that people want out of the crypto space, right? This is the kind of cleanup that regulation and law enforcement are here for in any market non-related to crypto and that the industry would generally cheer for this kind of activity. I admit a lot, man. I see you giving 100,

but I'm assuming you agree, right? I mean, this is just bad behavior. Yeah, this is what I've said and many have said from the beginning. If Elizabeth Warren had declared, you know what, we're going to create an anti-fraud army, I would have said, sign me up, Liz, I'm in, let's go. There's a ton of fraud to go after in the crypto markets. But instead, she went for, let's just go after everybody who touches crypto and debank them and choke point 2.0, et cetera, et cetera. So anti-fraud is good. I believe the criminal prosecutor should be going after it. You know, the SEC is trying to backdoor this and get confirmation that these tokens are securities. Otherwise, they don't have jurisdiction to be involved in it. So that's why they tag along here to try to get a little win saying, yeah, this is a securities law violation.

Whereas the federal prosecutors are using the tools they've had forever, which are wire fraud, mail fraud and traditional fraud. That's good. And so what's interesting here to me is this is basically the automation of what we all who have been around for a while, for a few years in these markets, know has been going on forever in terms of pump and dump of people getting together, organizing themselves to pump up the volume in a particular token and then dump it and exit. And so this this is automated with bots. You know, technology is being introduced to accomplish the same kind of fraud that was being done eight years ago. You know, informally on Reddit boards where people would get together and say, hey, let's pump this all up together

and then exit and choreograph that. So in any event, this is good. Anti-fraud is good. Of course, I am assuming that the allegations are valid. It's pretty dead. They're dead to rights if you read it.

I mean, they've got, you know, the guy's done, just sorry to interrupt but i mean this guy i can look up his name i don't want to get it wrong but from from one of the companies i mean he literally did interviews where he talked about wash trading and the tactics and basically they viewed this i don't think he knew to some degree he was doing something illegal because he was so brazen about it i mean the guy was like basically this is a marketing service that we offer he's done interviews about it in in the past on coindesk i mean coindesk even did i think in august um an actual like paid content for gotbit which is uh alex andrean and andrean is the name the ce CEO of Gotbit. But yeah, I mean, they've got him on public interviews talking about this tactic and then privately admitting it.

I mean, if you even read the DOJ case, I talked about this yesterday, but they included memes from the Telegram chat that are just hilarious. Like Pepe the Frog memes saying pump it, where the guy is explaining exactly what they're going to do. It's just it's unbelievable. I literally don't think that these guys knew they were doing something they would end up in this much trouble for. You know, what I found interesting there is the FBI created their own token and then hired these guys to pump it. Well, is the FBI keeping track of all the people who lost money on their token? Are they planning on refunding the people who, unbeknownst to them, were trading an FBI phony token? I didn't see an answer to that one.

But if they were, in fact, pumping it, retail was getting involved to some degree, and some people lost the money. I wonder if they're going to refund them. Yeah, I didn't even read about whether it launched or how high it went. But that's a really interesting take. There was also an article that came out this morning, which I don't want to quote incorrectly, but apparently the FBI or DOJ, I think FBI in this case, utilized a smart contract developed by someone at MIT and might be getting charged or at least questioned for copyright infringement on the token that they launched, which is absolutely hilarious. They didn't even build it themselves. They basically used somebody else's intellectual

property to do it. So a lot of nuance and interesting twist to this story. Simon, go ahead. Hey, Scott. I'm trying my best not to put my tinfoil hat on. Don't try too hard, Simon. Don't try too hard. Go ahead.

No, but when you look back and reflect, just think about what's happened to this industry. So the only person that can get a meeting with Gary Gensler and the SEC is SBF. Coinbase can't even get a meeting. The most compliant company in our industry that the whole industry hates because they're so compliant. Then, you know, we know that the DOJ was investigating Celsius for two years. And yet the SEC or whatever broke down in that process allows it to go from 250 million assets under administration to 25 billion. You know, these large multibillion dollar companies were allowed to grow under the watch of the sec um suddenly we have operation 2.2.0 to try and take out the banks the banks don't stop servicing the crypto companies so suddenly inflation is transitory um when clearly it wasn't um so we get this massive hike in rates all of a sudden

that was like the fastest increase in rates that broke only the banks that serve the crypto companies, Silicon Valley Bank, Signature, Silvergate. And suddenly they're the only ones that, you know, disappear. And then investors lose billions of dollars from these scams. And all of a sudden, you get all of this SEC action

and then BlackRock ETF gets approved. The banks aren't allowed to custody Bitcoin, but suddenly the SEC says we can make an exemption for Bank of New York Mellon. I mean, Gary Ginza then goes around on TV saying you can now buy Bitcoin safely through the New York Stock Exchange. You can now custody it with our favorite Bank of New York Mellon while they're suing Coinbase. You can now, you know, buy it through an ETF. Like, I mean, to me, it is just completely enacting the policy of the shareholders of the Federal Reserve,

which are the large financial institutions that are trying to get everybody to custody their Bitcoin with them. I mean, to me, it just sounds like... Hey, Simon, what's tinfoil hat about that? You just laid that out with precision and accuracy. I don't detect a thing in what you said that is remotely tinfoil hat. Now, if you want to start talking about why people did it, obviously, we can't get in their heads,

but that's the exact point. And the point that I was trying to make earlier, which is exactly what you're saying, is that the chilling smaller companies from competing is literally part of the game plan. I mean, vetoing SAB 121, to your point, Simon, and then giving an exemption to the largest custodian in the world, and not to custodian bank or any of the crypto incumbents, it says everything you need to know. Right? Literally, like they made a law that passed or stab 121. Obviously, the repeal passed through both the Congress and the Senate with bipartisan support, and then the president vetoes it. And then the biggest name gets the exemption and nobody else does. Come on. Go ahead, Carlo. Well, look, this is an interesting case. I've seen many takes on it. And it's fascinating what Metal Lawman brought up because, yes, you do have the FBI spinning up a token in order to entice these liquidity, well, I should say these pump and dump alleged individuals to market manipulate it.

And then you have the SEC filing a parallel civil action here. Their main objective is to protect investors. But as Meta Lawman observed, this token was spun up and people bought it. And it was spun up and it was traded knowing full well that it was being manipulated by these targets. So another thing that doesn't escape irony in this is the acronym. The FBI launched this token under Operation Token Mirrors. that they gave it was NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NEXT, NE You cannot have entrapment as a viable defense when you have targets who are predisposed to commit the crime. And if you look at the chain of communications and the telegram communications and the public statements from these people, it would appear that they were predisposed to engage in this market manipulation. did not, in essence, induce this crime or unduly influence these individuals in wanting to, you know, pump this token. They simply made the token available, and then they waited for these individuals who are otherwise predisposed to jump and take the bait. And that's where I think an

entrapment defense would fail here. Yeah, this is their business model. Like I said before, yeah, you can literally go watch interviews publicly of the guy explaining how and why they do this. Leads me to believe once again, that maybe they thought that they were outside the long arm of the law. I also think one of the nuances here is that a lot of these individuals, I think almost all of them are offshore, not in the United States. So the DOJ clearly does not think that the world believes that the entire world is their jurisdiction for activities like this. They're not only going after American individuals. And I think that that's also a bad signal out to anyone doing this who thinks that they might be safe because they're in a foreign country. But it's pretty interesting now that if you're a new project looking to launch in the crypto space,

you have to worry about the, or if you're operating in this space or trying to launch a project, you have to worry about your developer maybe being a North Korean hacker and maybe being entrapped by the FBI as well for their behavior. It's pretty rugged out there. Go ahead. I just wanted to say there's good news based on what Carlo and Meadow were saying that just hit me is that we now have regulatory clarity. If you want to launch a token with the express purpose of trying to get quote scammers, it seems like that's a fair business model now. So I mean, just everybody keep that

in mind. So that's right. That's the utility. I thought if it had utility, it's a security. So now, I mean, we should really figure out how much volume was going on with the NFA token. And just if anybody's listening and you did buy it or you know it, I would love, love to sue any of the government agencies that were deeply involved in that for your losses. I'm here for that. So Fred's DMs are open, everyone. And he won't even bill for the initial consultation, right? Of course not. Wouldn't want to put words in your mouth. Lawyer, what do you make of all this? You're the

last billing lawyer on the panel who hasn't commented, really. Yeah, good. I thought I wasn't going to have to charge for this one. I knew you were charging anyway, so I'm making sure you actually do some work. Right, exactly. Fair enough. First of all, I'm shocked and appalled that

the FBI did something actually to stop crime. I'm shocked and appalled that the FBI did something like actually to stop crime, which is I'm not actually appalled. I'm excited about it. I did get a lot of calls from clients who do other things. And they're like, are we in trouble? Are we safe? What do we need to do? And most of them are not doing anything like this. But, you know, you'd be surprised how many people are doing things that are problematic, even just on a moral and ethical basis. And my advice has always been to sort of clean that up and not do those things. So if the FBI is now actually going after people who do things that don't pass the smell test, then yeah, people should be careful because there's a lot of that going around. But normally it's just lawfare, right? And I think, you know,

the one thing I want to put back on that Dave said is that, you know, he thinks that Harris is going to win. And, you know, I think they've just established themselves so much as the establishment that I think that in the end of the day, we're going to be surprised that in the end of the day, Americans would like to see the establishment lose. And I make this point because all the other things we've talked about, aside from this one instance of going after bad guys, has been sort of lawfare, you know, as you say, to push people to bigger banks and away from crypto without actually keeping anyone safe.

So, yeah, those are my thoughts on that. To be clear, I always expect the worst hope for the best. So it's not a question of what I think. But I do think it's important for all of those who are marshalling the crypto lobby, the crypto voters. At this point, this whole notion, well, we have to be bipartisan and kind of take the wind out of the sails of single issue voters and swing states. I think it's pretty clear that if you're

a single issue voter and you think that the US markets need to go digital and open up to the average person as opposed to being held onto by the elite, that this is an issue and it really is an issue. And it's very clear. And crypto for Harris is a joke at this point, given what's happened this week. I wish Mario- i'm not seeing a lot of that yeah except for maybe scott but i don't see a lot of giving um harris credit uh no but i mean there's not like maybe at first they were like let's give her a chance like scott but i think scott even too has realized that that i mean i don't want to put yeah i i was never i was certainly never supportive. I just, my point has always been that at the very beginning when Trump came out more pro crypto, the industry went all in, which I believe in and support and totally understand. But it was as if she couldn't win. And my point was always that we should have a seat at the table no matter what happens. And you have to be open to the possibility that he doesn't end up winning the election so i support people who are making an effort to interact even if it's banging their heads against the wall with that side of the aisle with the

democratic side because if they win uh we don't want to have only pushed the other way and have no voice right so that that was my only point. But I pretty openly say nothing's changed here. And it's hard to you can't look at the SEC escalating and believe in the pivot as Dave, obviously. which needs to be clear. It's not the Democrat side writ large. It's a specific faction within the Democrats. I mean, look, I don't agree with everything Ro Khanna says. I mean, you know, he wanted the Mets to lose to the Phillies. Cool. The Mets beat them. I'm happy. He's not. Cool. But, you know, the fact is, is I think he, Richie Torres, Kirsten Gillibrand, there are many Democrats who genuinely understand that digital asset will transform financial markets, will transform lots of markets, and that we should be at the cutting edge. It is, however, Elizabeth Warren and her wing, which sadly seems to be still in power with Kamala Harris, that is the issue. And to me,

it's not a Democrat-Republican thing. It's a faction thing. And so at the voting booth, yes, it's very clear, but yes, of course you want to work with people like, like Richie Torres and Ro Khanna and Kirsten Gillibrand, et cetera, and many others. And I think that, so it's a very important point that people don't seem to be able to detangle the two. That's one is how you, you work and one is how you vote. Yeah. You have to be pragmatic and push the industry forward regardless. And understand that there's a chance that this could not go the way that you expect. I mean, I speak to Ro Khanna's chief of staff and his team quite frequently. They ask me questions about the industry and opinion on statements that they

make. He's very smart and he really gets it. He's pro a strategic Bitcoin reserve. He's in Silicon Valley, obviously understands tech. And I think he feels frustrated that the voice of those kind of Democrats haven't been heard. Lawyer, go ahead. Yeah, I was just going to say my takeaway from the all-in episode with Mark Cuban was if Harris wins, we're going to really need this guy whispering in her ear. He seems to be aligned with us on so much, even if we don't, you know, we had a moment with him. But now he seems to, if she wins, we had a moment with him, but now he

seems to, if she wins, we're going to like, like him a lot. There's a few people, I think in that camp, obviously, uh, Cuban Scaramucci, Novogratz. Uh, I'm sure there's others that I'm not mentioning, but there are obviously Democrats who are not necessarily politicians, but, uh, Democrats with major voices that are proponents of this industry, to your point. And they're gonna, they're gonna need to be there. And listen, we all know that also, if, if she does happen to win the election, that a lot of people are going to attempt to run to that side and get a voice who are supporting Trump as well, just in the interest of the industry and not in self interest. So I do think that's coming regardless. Carlo, go ahead.

You know, one offshoot of this FBI investigation is that a lot of the token projects that launched on the back of these alleged fraudulent market manipulators probably need to take a step back and look at their communications because they may well be now in the target zone because if they utilize these services and there was price manipulation and clear communications back and forth about what was going on here then this may have a very very significant ripple effect outside of just this sting operation token but it might permeate into other tokens including major meme coins that might have hired these services. Yeah, that's a great segue because I'm seeing the DM that you're sending to me that I think you're basically referring to.

There's a tweet here. Three major clients of Godbit hedge fund, illicit market making services have surprisingly not sold off on the revelation that success was simply a result of manipulated trading. The three tokens you show here, the chart, is it pronounced Nero, N-E-I-R-O? I have no idea what any of these things are, except for that I've seen it pushed all over X by a number of bigger accounts. So Nero, Baby Dogecoin, Baby Doge, and Turbo. I mean, these are meme coins.

These aren't even utility-serious projects, but that implies from this tweet that these were manipulated to rise by these firms, and still nobody cares, and they haven't dumped. Correct, Carlo? Yeah, I mean, these are major meme coins. Turbo saw a huge run-up. Nero also had seen a huge run up. And, you know, we don't know anything other than what's in this tweet. So we're not pointing fingers at anybody

on this platform. But just making the observation that if you do have a history of transacting with and engaging with these target market manipulators, you may have some things to answer for down the road if the FBI does indeed broaden the scope of its investigation here. I have a question related to this. So one of these projects, or let's say even a more, quote unquote, legitimate project trying to build something serious that hires one of these firms, are they in any way breaking the law when they're told that there will be wash trading to pump their token and they end up hiring a company like this? Yeah, that's the critical, that's probably the critical distinction because anytime you're dealing with a conspiracy and fraud and you're trying to implicate other actors, you've got to have knowledge and intent. So if they retain these services and thought that

they were above board and were doing appropriate, uh, you know, they were doing appropriate marketing of these tokens and that they were market making appropriately, then probably nothing to worry about. But if, if you do get a grand jury subpoena and you have internal communications on a lot of these encrypted platforms and so forth and DMs and discords where people are actively talking about knowing market manipulation, I think that's the line of distinction where you're going to have a problem. Yeah. I mean, when the guy is sending the projects, Pepe memes that say pump it and saying that we are going to buy and sell from ourselves to create fake volume, I would say that that's pretty clear. Right? That would be smoking gun evidence that could potentially implicate the token projects and

the founders or what you call the devs behind them involved in this if they knowingly participated. So I don't know. There could be a contagion effect here. Yeah, I mean, it's like we will illegally pump the shit out of your token. Is that a service you would be interested in? And then you like click the box and like $1,000 a month. Yeah, I mean, I think it's pretty transparent. First, Gaurav, I'm going to bring you up one second.

You are a legitimate market maker, and I know that's probably why you raised your hand that you're here. You'll see in the title, it says bot attack. You'll notice we have 40,619 people in this spaces, and while flattering, and I know we do generally 10x the numbers when it's only me talking and Mario's face is here and you don't have to listen to him. Those are fake numbers. All of Mario's faces have been getting attacked by somebody who is paying to bot these to try to get them shut down. But the funny thing is, is it's not working.

So we just have, I would say we probably have about 43,000 bots here and 4,000 humans. So we appreciate those of you who are human. Gorav,000 humans. So we appreciate those of you who are human. Gaurav, go ahead. I literally squeezed my business call to jump onto the space because I saw 50,000 people. I'm sorry. Why don't you write that on the tweets? But the call was with me. To be fair, the call was with me. So here we are. Is this considered spaces manipulation, Scott?

I think so. I think that we are now complicit with the bot pumpers. Go ahead. You probably have got bit or bought bit working for you. That's right. Got bot. The reason I wanted to jump in is like, I felt, and no offense to anyone, I felt this conversation is about market makers and there's no market maker or somebody to represent that side. So I'll straight away pick up on where Carlo left, which is you'd be surprised when you sit on this side, Carlo, that and everyone else. Projects come seeking manipulation, market making. And, you know, there's the message like we looked at this as an opportunity when we

saw this news yesterday. And the message we are blasting across all our BD groups is, looks like the delusion of magic around market making is no more. Like this is our opening statement. Seems like the magic, quote unquote, is no more existent. And now people would understand the value of legit ethical market management, liquidity provisions and sophisticated financial service. So maybe we can initiate another conversation which will not have magic. Sunlight is the best treatment for this. And obviously, the veil has been lifted. Exactly. I mean, we are happy about it and everyone else is. But you'd be surprised, 90% project come seeking the service. The call I just disconnected is a company that got listed on 40 exchanges for free. And they don't want their existing market maker because, for different reasons, but it is everything but an illegal bot company. So they don't want to work with them anymore. They want somebody who can come in

and manipulate prices on intent. So an important point to understand here is crypto is super volatile and simple activity can basically move prices on either of directions. So manipulation would be strong and has to be covered in boundaries. Let's say 10% can't be manipulation for a meme coin, right? You can pump or dump, the coin can pump or dump with any simple activity for 10 or 20%, depends on the volume. But what I'm trying to imply is if you critically go through the court application and the whole case as presented by the FBI, it is principally about pump and dump and duping investors.

So that's clearly criminal. Right, if you're saying we're going to create wash trading to get retail interested, which is what the quotes are, I mean, that's fraud, right? Because you're pulling the veil over retail's eyes to make them think that the artificially inflated price is the true price to get them to buy. And that's whether you intend to dump it on them or not it's still fraud to falsely even one step further let's say even on the conservative

side one step further as soon as you say watch trading it's already a fraud that's right yeah and congratulations scott you're over 72 000 listeners now guys and i mean when if you say the word bot it double attacks you uh so we're gonna be at 700 000 momentarily but it is i mean i don't really understand what the um the tactic is we've seen this before where people bought the spaces and then you see these wild accusations that like we're botting spaces to get more listeners it's like somebody does it to us and then uses it as fuel to say that we're botting it but like is there anyone out there that believes we have 70 000 people just randomly listening to us today uh you know uh yes okay i believe it because my ego is that big but no nobody believes that right

i believe it because you guys are my friends and I thought you guys are that good. That's right, yeah. Did you provide the bot services for today's space? Sadly, we do only sophisticated financial services. Connect me for that. Yeah, I think actually what's really interesting about what you said, Gaurav, though,

and it speaks to what Carlo and I were talking about right before you jumped in, is if the other side is complicit, it sounds like absolutely yes. If this has become, whether the projects know it or not, if this has become the quote unquote market launch a project, which is to go about your things, which people can take an opinion on whether they think that that's right or wrong if they disclose there's i don't think there's anything legally wrong with it most of them probably don't but then the other side being and then we create fake volume if that is what these people have come to expect is normal then we have a huge problem right you just said 90 of

them who come to you yeah that's literally the service they want scott you're probably one of the you and mario are the live evidence of in a way our sufferings as as the company because when we went out and told people that we'll do something legitimate and that won't involve these uh these services and when we said no we don't have a meme coin in our portfolio uh to to to talk about or brag about these crazy numbers like We really struggled for business for a very long time until we cracked this new strategy of onboarding all of you guys as like not just you, but all the top VCs as investors, because now they want to defend themselves and they are the people who can talk sense to their project, right? It was such a long

route and it took three years for us to explain people what legit business and legit financial services mean. But to be honest, I am going through Saitama Inu. I'm going through a bunch of portfolio companies of these market makers that are public. And look, I don't think they're facing a big drop. So the facade is real now like people truly believe yeah people just don't care people want to see these metrics people want this they believe in this this this dream and i think that's the force behind projects and

companies to look out for these service providers but then then it's, I'll close this with a statement from Naval Ravikant. He says, ethical people are long-term greedy. So you have to decide as a project, if you're looking for a three-year, five-year or a 10-year period in this market, which even the shittiest of the shittiest projects have achieved, you know,

if there's a project that's five to 10 years old and still standing tall, they're above 100 100 500 or a billion dollar market cap so long term is not a bad game to play but of course it requires patience and ethics go on uh dave lawyered anyone yeah i mean i i wanted to make a a not subtle point here uh you know gorov's not the only one as i said you know at you know coin routes we you know we were we were tried to be pushed and we basically said no for all the all the same reasons even though it wasn't our business model to market make people saw technology and said oh okay well you could put out you know millions of bids and offers so why don't you just do this as wash

trading the the simple fact is when you look and talk to institutions in the space like I have, and many of the people on this panel have for years, this is exactly the behavior that makes institutions not trust the market. So to me, it's a very good thing they're going after it. But the point that I was going to make is, there are other forms of manipulation that also are issues that you also wonder, will legal authorities, and not just the FBI, but potentially in other countries, go after in terms of, you know, triggering liquidations and other, you know, so-called momentum ignition strategies is how they've titled them here. I don't know what they call it in Europe, but market manipulation in general, if authorities are going to go after

that in the crypto sphere, it will ultimately be a very good thing. But in the short run, there are a lot of companies out there and a lot of people out there that have done things that they think are okay because it's the Wild West that they now have to wonder, what did we do over the last four or five years that we might not be able to run out the clock on statute of limitations? And I'm curious what some of the lawyers on the panel think about that.

Oh, man, I think a lot of people are in trouble because after these companies, they've got all the communications. Who knows how far back they go with GoBit? And Carla was saying this earlier, but even if you tried and were doing it on the up and up, all you need is an SEC lawyer to come in and say, we think that you are engaging in conspiracy to commit fraud and we're going to have to charge you. And then it just becomes a conversation of, well, please, please don't charge us. What can we do? Like, well, if you give us X amount of money and plead down to making a false and reckless

statement, then you'll be just fine. So, I mean, I think those are really on the- I lost him. Did you guys? Oh, there, I'm here. So I think what a lot of people in this space need to do, and you don't need to be a lawyer to do this, and this is sort of what my clients sometimes need to do, which is there is a smell test. You almost have to ask yourself, isn't the thing you're doing in crypto something you're doing in crypto

because you couldn't get away with it and and you know outside of crypto because it's probably wrong or illegal or you're tricking somebody and if so then you need to rethink your your strategy and that's what's so powerful about the fbi and the doj doing something to root out bad actors as opposed to going after the good actors all they have to do is do it once and then people start thinking about cleaning up their behavior in general. And I don't mean saying, you know, getting me to write a 10-page memo on why your security is not a security. I mean, you know, cleaning up your behavior so that if you're running an advertisement,

it should be clearly one or things like that. Yeah. advertisement, it should be clearly one or things like that. Yeah, I do think that to a degree, it was a bit of a wild west in this industry. And a lot of people came here from not from Tradfire, from other financial markets and probably had no idea what is right or wrong. But in 2024, I don't think there's much of an excuse. You know, I think everybody pretty much understands after watching what the SEC and DOJ and such have done over the past few years what you can and cannot do.

I think we covered it, guys. I was hoping that we would close the space with over 100,000 listeners, but sadly we're down to 39,775 actual human beings who passionately love Crypto Town Hall and want to listen to everything that we have to say. But it is about 11.15am. We're going to go ahead and wrap before the bot army

kills us. We do not want to die. Before we go, I do want to remind you the most important thing you will hear in this space is to follow every single person on stage. Simon, Fred, Dave, Lawyer, Carlo, Gorov, these guys are up here because we love them, because they take time out of their schedule. As much as we joke that our crack team of lawyers is billing us and getting paid to be here, that is a joke. They are here of their own volition to help you understand what's happening in this market. it. Everybody is donating their time here to create great content to make the space better and to make sure that you guys have a comprehensive understanding, especially in these legal days and regulatory days of what is actually legal and not and what the real story behind these are. So it's not just a bunch of pundits giving bad takes and bad opinions. Guys, have a wonderful weekend.

See you all on Monday. Thanks again to the panel. Follow them all, especially if you're a bot, because you guys should each get like 39,000 followers. That's amazing. All right, enjoy your new thing. See you guys later. Thank you.

Cheers, bye.