The Wolf Of All Streets - Insiders Share The Truth Behind The Collapse Of The Crypto Lender Voyager | Shingo and Adam Lavine

Episode Date: February 26, 2023

Adam and Shingo Lavine are a father & son team who built Ethos, a project that was merged with Voyager. Shingo later became the CIO and a board member of Voyager. In this episode, Shingo and Adam share the history of their relationship with Voyager and provide their version of what they think led to one of the biggest collapses in the history of crypto. In the second part of the episode, we talk about the new project Shingo and Adam are building.  Shingo Lavine: https://twitter.com/shingolavine Adam Lavine: https://twitter.com/adamlavine ►► JOIN THE FREE WOLF DEN NEWSLETTER https://thewolfden.substack.com/  ►►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  GET UP TO A $8,000 BONUS IN USDT AND TRADE ALL SPOT PAIRS ON BITGET FOR ZERO FEES! ►► https://thewolfofallstreets.info/bitget   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  #Voyager Timestamps: 0:00 Intro 1:13 Working with Voyager 8:40 Yield vs trading  13:40 Insolvency & proposals for token recovery 18:20 $6.2 trillion in claims 20:56 FTX involvement 22:58 Binance would be the best deal   25:34 How much can be recovered 28:25 Custody 29:40 Red flags at Voyager 33:00 Joining Voyager’s board at 19 34:40 Magic keys: a new system of self custody 38:57 Ethos  40:53 Will crypto learn the lesson? 43:30 You really own only crypto 45:17 Decentralization 49:50 Voyager recovery program 50:45 Remember why crypto exists 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.

Unless you've been living under a rock, you're familiar with what happened in the crypto industry in 2022 with mass contagion that saw the collapse of platforms like Celsius, FTX, BlockFi, and of course, Voyager. Well, Adam Levine and Shingo Levine, his son, who was only 19 when he joined the board of Voyager and partnered with the platform they had built, Ethos, have really intimate knowledge of what happened there, what's likely to happen for creditors in recovery, and they're also building something much better. If you're a Voyager creditor or have been affected by crypto contagion at all, this conversation is for you. Yeah, well, now you're being recorded by Skynet. Chat GPT is here monitoring us to take over our brains with the AI, right?

The robots are coming for our jobs. Most excellent. 10% discount of bin. Yeah. I don't know what the point of any of this is anyways when we know that the robots are coming for our jobs and our lives in the future, right? The two of you have an interesting path through the crypto space, which as everybody probably knows by now led to Voyager, but now you're leading us out of that.

But I would love some context as to how you both got into the space, created Ethos, which was not your first company, I believe, and then ended up working with Voyager. Yeah, short, strange trip. You want to tee off you want a tea option or you want me to do it sure it's it's it's been now a long strange trip at this point um yeah so you know we first got into the space back in 2016 uh when we started ethos together um you know back then it was a very different space and as anyone who's been in the space you know that long uh can attest to you know it was very it was a very different space. As anyone who's been in this space that long can attest to, it was very developer centric.

Crypto was very different back then. The technology was very different back then. And we had the idea of creating an easy to use multi blockchain wallet. And we created that back then. It really struck a chord with the crypto community because there really weren't any easy-to-use tools at that time. And we grew to 100,000 users. And in the process, we had also built this backend platform called Bedrock. So in Bedrock, you can think of it sort of like a Swift for crypto kind of system,

where it was a multi-chain API that helped developers rapidly build blockchain applications on top of it. So it was the universal wallet that we built that had 100,000 users was sort of the first real use case of that platform that was powered by Bedrock. So we- And we'll call out two guys there, just Tim Simmons, who's, he's now over at ZeroHash and Derek Barrera, who's CEO of Steer.com, Steer.finance, excuse me. Those two guys built, it was like a Ferrari of they use GraphQL.

They got everything down to four endpoints. It was just a beautiful, beautiful system that was essentially a self-custody developer system that could do stuff like automated deposits, withdrawals, wallet monitoring, creation. I mean mean it was just a great platform and uh yeah those guys did amazing work on it yeah so that was uh so that was sort of the backdrop before we met crypto trading inc um and uh you know they these guys were creating some you know financial technologies they were pursuing some licenses although clearly fewer licenses than we thought um and uh and you know they were going to make this public company and and at the time

steve said uh well we either do a cannabis play or a crypto play we picked uh crypto um yeah that uh that was uh steve's story to us about how he got into crypto. But anyway, so we saw a lot of synergies between the two companies. And basically our pitch to them was, look, Coinbase is already in this space and they're this big dominant player. No one's really challenging them. You got Robinhood out there. They're about to launch their crypto system. But it's going to be several years before where they have you know real crypto to crypto you know brokerage services so uh you know you guys can be really ahead of the curve by using our technology and uh you know combined with the order routing system in our

in our user base and um and with a token then you can you can you can have this really powerful system um and uh and we were able to convince them that was that was the case and we and this is the table shingo just this was like a 10 20 million dollar market cap they were at and no users it was like they had nothing and what we brought was essentially all the crypto infrastructure and knowledge and team uh into that organization and capital and capital yeah yeah they were they had a very difficult time fundraising at that that time in fact we had a whole um uh we had a whole trip that we went out to asia and did like a whole investor roadshow and got exactly zero investors um and uh and so uh you know voyager voyager was that was actually the first time voyager almost went bankrupt they were they had a couple weeks of

runway left and they had to delay you know salaries and they had to you know push out all their um you know their expenses because they were just about to run out of money and so we and at that time we helped them restructure the company as well so the the company was believe it or not back then even as a early startup they were still bloated um as a company. And we helped them restructure that company to be a lot more streamlined and a lot more cost efficient and revenue focused, and helped them launch the first version of their app. And actually, we got the deposit withdrawals up and running before even the merger commenced, consummated. So we had a lot of great stuff going there. Unfortunately, when we were doing that process, we created some friction because the CTO at that time, who was wildly incompetent,

was one of the childhood friends of the founders. And that created sort of the initial friction because that CTO really didn't have any business being the CTO of that company and we had you know it was a really good way for us to uh streamline the company reduce costs and also uh create a better uh organizational structure but the uh but the but the problem was that then sort of created the initial uh for that. So, but it still was that restructuring that we did back in 20, that must have been 2019, set up the company for the rapid growth that then came after it. So I think that's the backdrop leading up to our involvement in Voyager.

And then we can talk more about then, you know, what happened afterwards. I can add also a little color to that too, if you'd like, Scott. I mean, my feeling in the org was that we just, what a CEO needs to do is put the right people in the right roles with the right missions, right? And you can, if you do that properly,

you can really get an organization that does amazing things. And actually a lot of the people at Voyager were very talented people that, you know, it's kind of part of the tragedy that that team executed really well. There was some very strong individuals in there. And we just, you know,

we try and look at that dispassionately, which is here's the right structure to optimize success. And I think like there was always this weird thing, like if we brought up the truth of the matter and what actually had to be done, it generated that friction, which was a little bit of a culture class. Some organizations, the optimal structure and team is not always what they want for other reasons.

And the other thing that really struck me about this is we had negotiated salary package for all of us that was part of the deal. The day we closed, the day we closed, the CEO comes to the team and says, oh, we don't have enough money to pay you. Sorry, we can't pay you. Like, what? After this whole... We negotiated it for like a year. Yeah. So there were some early red flags. So there were some early red flags. So there were some early red flags. To give some context, I met them in 2019 as well. Well, you were before, but I met them in 2019 at World CryptoCon.

They were sponsoring Charlie Shrem's stage at the World CryptoCon. And I was a speaker. And I was actually, I believe, one of the first few hundred people who was really using it. And not because there was a yield product, because it was great at aggregating liquidity from multiple exchanges, right? I mean, for the very intended original purpose. And I loved the platform and thought it worked exceptionally well, which I guess now is a

credit to you, which I didn't know at the time, but not necessarily a credit to them. But that's how I originally met them. I just tested the product and I liked it and became effectively a power user, which led to me being a power creditor, I guess. As a credit to many people. Many people, they had a lot of talented people there. I loved everyone I met there. Amateo on the marketing side and Steve Capone was there at the time. And I met Steve Erling there as well. So I think I don't want to rehash the pain for everybody of the actual process because I think we know somewhat what happened.

They did have that hyper growth that you talked about them being set up for largely because of the success of Dogecoin. I think they got hundreds of thousands of signups rushing in at once because they had Doge listed. We saw how poorly equipped they were and every other exchange, to be fair, to onboard that level, you know, customer service and things like that.

But eventually they did become this massive company. My feeling was that they became a massive company with millions of users and those users were not there to trade like I was. They were there to earn yield and those yields became increasingly harder to find with time and we can skip all the niceties in between. Eventually that led to Steve giving a massive unsecured loan to 3AC and they blew up. Is that a great summary before we go on? That's pretty good. I mean, it was so unnecessary too. He didn't have to lend out that money. He was like itching to, he felt this pressure to deliver a yield that he didn't have

to have in there. Right. He didn't have to, but he wasn't going to be able to maintain those high yields that he perceived, I'm assuming, the customers were there for without putting the money to work. Or at least I would say that's what's in his mind. Yeah, I would say that there were sort of two classes of users, as you sort of put it. The users that were there for the yield and the users that were there for the trading. And I was also a trading user, too. I really just liked the trading system. And another tragedy of Voyager was that the trading platform

and the trading business was a profitable business it was a great business and sure it was a smaller business than the than the giant yield business and sure probably not all the three and a half million users we can which we can talk about you know may or may not be all real um the uh that you know they they weren't all there for trading, but there was a core base, a really core loyal user base that was trading quite a bit and it was generating a lot of revenue.

And it would have been a smaller business, but it would have been a profitable one and it would have been one that would have protected a lot of creditors. So that's the real tragedy of Voyager, which is that the yield business wasn't profitable and it wasn't necessary. Yeah, exactly. You know, I've been an entrepreneur my whole life and I've gone through all these entrepreneurship programs.

And there's like some stuff that they drill into you. You know, first one is never believe your own baloney, right? I mean, don't like you never want to get too big for your own britches. You know, they say a great sell indicator for public companies when you see the CEO and a lot of magazine covers or whatever, because they're out there and they have the wrong priorities. The CEO's job is value for the stakeholders, period. There's no other job, right? And that means protecting all stakeholders' interests. And that was obviously a massive failure when it comes to pretty much everybody involved in this thing. Customers, creditors, shareholders, employees, every single one of them was burned by this incredibly irresponsible activity.

And the other one is when you have a company, you can't do everything. You have to pick something you're going to aspire to be the best in the world at, and you focus on that, and you focus your team on that, and you build out from that core. And this kind of like shiny object syndrome was a real issue there with the culture. And, you know, it's just on so many levels and and again it's just so we shouldn't rehash it too much but i i do want to say i i really feel like there's a lot of people at the voyager team who did great work and this the way it ended was a great disservice to them and i think honestly to be quite frank from my conversations with someone they had no idea and found out when we did yes absolutely it was a well-hidden uh it-hidden... It was like the wagon wheel org chart with one guy in the middle and spoke to everyone. I really don't think that there were

people who were complicit as many think or who even had any knowledge. They were just marketing what they believed to be a great product. But that obviously leads us on the timeline to the insolvency. I think we all have our own stories about how that happened. I personally couldn't get my money out even if I tried because they reduced it, as you know, to $10,000. And I had personally had my crypto withdrawals deactivated by the team for security purposes. And then when I saw Celsius go down and tried to contact them for a month to turn them back on, nobody responded. So I was probably the only user who couldn't even get their Bitcoin or Ethereum out if they tried without going through the dollars. I know you guys have your own stories about that, but we ended up in an insolvency

and in Chapter 11 bankruptcy, which I would argue has been just brutal and a horrible process and has not really benefited. You guys have been very involved there with what I would have viewed as superior proposals for how this could have ended. Can you talk about what you saw as the best path for creditors and why you think that didn't necessarily happen? Well, we put forward a proposal for a recovery token and we said, hey, let's have a recovery token be part of this. We'll work with anyone who comes to the table, right? We thought about reacquiring our tech because we had to carve out for our brand and mark and that portion of the IP. So we retained the Ethos brand as part of the agreement itself. But we thought about getting the universal wallet back

and we thought, well, you know, it's great tech, but it is five years old at this point. We could probably rebuild faster, more efficiently than all the costs to pull it out of bankruptcy. But we did say, hey, let's have a proposal where we'll work with any acquirer and we'll provide a recovery token that gives them hope for a future. Yeah, Adam, but before that, we had a couple of other proposals that we had sort of floated. And there were a variety of, I think, paths that could have been taken here that would have all been better than the path that we actually took. One path would have been just returning the assets immediately.

Yeah, liquidation. Strangely, FTX actually proposed that early in the summer, and there was a lot of pushback. We would have ended up in Chapter 11 with them, I'm sure. But it is interesting that that was an initial proposal, was just liquidate everything, we'll make it right, and everybody can come to FTX. But yeah, continue. Yeah, or just liquidate everything and turn on the withdrawals again. I mean, there was a pretty robust automated withdrawal system there that we had helped build and it could definitely sustain that. And it's still odd to me that that was never even considered

as a proposal. We wouldn't have to pay all these lawyers. You don't have to do any risky transaction with FTX, Binance, whoever. just return the assets there's 70 there and uh you know give it back um yeah you know that's a great point that's a great point and we were actually considering just like what would it take if we just sort of said what if we you know liquidate everything into usdc let people you know withdraw usdc and then you know just just give people the USD equivalent of USDC equivalent of 70% of their recovery. And they weren't even willing to listen to that. So that apparently, that was like never even an option. Another one that we were floating in there, and actually, one of our early filings, we had sort of said like this eight point plan was to restructure

the company and give the equity to creditors. So yeah, because our point was that there was a very profitable business there, the trading business. And this is sort of similar thing to what's happening in Celsius as well, that there's profitable business lines within the within the business. And if you give that equity back to the creditors, they have a potential to make, you know, 100% back or, you know, thousands of percent back, you know, and the model that we were sort of building on is like, look at Bitfinex, Bitfinex had given back 500% of their whole back to creditors. And, you know, and

creditors will be happy with just 100%, let alone, you know, 1000s of percent, you know, that's even possible. And, and you could build, you know, what we had proposed was a trust structure, like a trust company where the assets and the IP are held in trust for the benefit of creditors. And then revenue is paid out pro rata to creditors based on their claim. Again, they had no interest in doing that one either. So they didn't even consider the proposal. I mean, it seemed like these guys were dead set on some path they'd already picked.

Which was at that time. I mean, there's a clear reason for that, right? Which is that doing any of those things and liquidating pushes the executives out and ends the chance that Voyager continues on as a viable business, right? So that sounds like self-interest because bankruptcy in theory is supposed to be restructuring. We saw the stalking horse proposal that they made, which would have kept Voyager operating. It seems like the executives wanted Voyager to keep operating and liquidating was giving up even if it was in the best interest of the creditors because it was not necessarily in their own best interest. Is that a fair assessment? Well, yeah. And I think Steve wanted to hand it to anybody but Adam and Shingo, probably. And also, I think that there were larger underlying issues that we were not even aware of until the bankruptcy sort of played itself out even more that would show that a restructuring today is probably like, you know, not possible at all, given, you know, there's six point two trillion or something in claims from the government, you know, against against Voyager at this point.

But yeah, did you catch a figure, Scott, in the file is? Yeah. Six point two trillion. Yeah. When you add up all the claims from all the attorney generals of all the stuff they lined up of potential liabilities or, you know civil penitent pleas whatever the number added up to what was it shingo it was somewhere in the trillion range yeah and and also when you find all the creditor claims as well so that sounds like you uh go into chapter 11 bankruptcy as a shield against all of the claims right i i this is just uh my opinion and speculation but i think think Steve is more concerned with not going

to jail than he is with, you know, creditors or restructuring the company at this point. So I don't think that those factors even sort of factor into the process anymore. And you saw, you know, one of the big issues, which I'm surprised the UCC hasn't been pushing more, is that on the eve of bankruptcy literally on the day before they declared bankruptcy they got a big insurance uh contract 10 million dollars and that insurance contract can only be used to pay directors uh legal fees so basically what they did is they transferred 10 million dollars of creditor assets to pay for their own legal fees and uh and you know it's it's it's that kind of self-dealing, which I think is just not right ethically, let alone legally. But, you know, the UCC, you know, when they went after Steve, he claimed to have a relatively small net worth. And he's paying sort of like a slap on the wrist, basically, compared to all that.

Right. That all makes perfect sense. So where do you see it as standing right now? I mean, obviously, we had the FTX deal, which was not particularly great. FTX went under. I'll say the silver lining for all of us is that Voyager never transferred their assets to FTX, because then we'd probably be in a worse situation. Oh, yeah. So I have some story around that one. So what was interesting about this, and I think there's some interesting story in there that might come out later, but what we heard was that it was literally the week

of that they were about to fly down to Miami. They were about to literally hand over the keys, the keys to all the crypto and everything to FTX FTX had been selected as the winning bidder and all that and like all the the whole team was ready to like hand over the keys to FTX and uh it was that week when they were about to fly out to to Miami the CZ tweeted that CZ put out his tweet saying you know uh you know outlining all those issues causing the bank run on FTX, which caused, you know, that cascading failure that led to FTX's failure. And it's either a massive coincidence or, you know, the fact that both Binance and FTX

were both involved with that process. Binance was outbid and Binance, you know, maybe it was concerned over the creditors. Maybe they were just trying to get back to FTX. Who knows? They got a $50 million discount. Yeah. Well, they put out that tweet. They put out that tweet.

Literally, like if they put out a couple of days later, that FTX transaction probably would have consummated. So I think that it was very coincidental timing that that happened. And I thought it was very interesting. And I think that there might be something more that happened behind the scenes there. But arguably, though, CZ's tweet saved a lot more heartache, right? Because if that deal had happened to me. Yeah. Yeah. I think that's absolutely true. So that leads us obviously to the Binance deal, which was effectively 50 million on top of assets instead of 100.

What does that mean for creditors in your guys' opinion? Well, now it's 20 million. So essentially that whole process, you know, you could argue that the UCC and the lawyers involved with this process cost the creditors at least $30 million. Because Binance had a bid in there, which was $50 million initially, obviously outbid by FTX at that time. And now Binance realizing they're the only real bidder there decided to bid lower and it's just business to them and they're bidding 20 million now. So you could say there's $30 million less for creditors. And I think that Binance is probably the best option at this point because people just want their assets back.

People don't care about restructuring Voyager. They don't care about all these different things. They just want their assets back and I think that that's a fair desire and just to get the assets back. I would love to see some more accountability in this whole process for everybody involved with it, from the directors to the lawyers to the committee and all that. But maybe that's too much to ask for. In Japan, when there's a giant corporate failure, the CEO always comes out and apologizes to everybody.

I'm sorry I failed you. That's the first thing they do. They take responsibility and they're human. I'm sorry I failed you. That's the first thing they do. They take responsibility and they're human. I'm sorry this happened. I will work tirelessly to make it up to you. And there was like none of that. Some of them will commit seppuku

to restore their honor. I don't recommend that, but I'm just saying that notion of personal responsibility is taken rather seriously. And there was like none of that. And there was never, you know, like this mindset of what is best for the people affected. And, you know, how do I make it up to them?

And honestly, I mean, that's how Shingo and I were looking at this because we were thinking, well, you know, how can we try and make this better for everybody? What would be the best situation for everybody involved? And we came at it from that point of view, and we were trying to discuss it with their bankers and lawyers. And that was just not, again, not the culture. We were talking like a different language to them. Yeah, we're talking. It was like we were like talking Greek to them or whatever.

And they kept thinking that we had like some whatever, some ulterior motive or whatever. And we were just like, we just want to see what's best. We did, which was trying to come up with something that would be best for everybody. Oh yeah, our ulterior motive was helping people. Then that was the common good. That was suspicious.

Your ulterior motive was helping people other than three people. Helping people other than the people who don't deserve to be helped. Yes. Right, exactly. So what do you think now? I mean, best guess, I know it will depend on the market, but for anyone who doesn't

understand it, how much could potentially be recovered by an individual? What timeframe will that be pegged to as far as the price of these assets? And when could they potentially see recovery and actually withdraw from Binance US where it appears? Yeah, so the recovery is pegged to July 5th. I think it's still pegged to July 5th, basically the petition date. And then also the way, to my understanding, the way it works is that if your assets

sort of went like above that price, so say some coins have gone up substantially since your life it's a lot of coins they're going to basically that that additional value that went above that is going to be distributed pro rata to creditors while any losses so if your coin went down since that period those losses are also distributed pro rod socialized so basically yeah everything's socialized yeah yeah it's a big you know so so the people who gambled on shit coins are either getting highly rewarded or, or bailed out. And I think also, but effectively there's just one

huge pie that's going to be split based on people's percentage of AUM on, on Voyager, which does affect it. And then I think the last figure that I saw was around like 52 to 54%. We'll see if it's going to actually be there. But I think that was with the market at 18 or 19,000 Bitcoin, and we've seen quite a run since then. So I think it could put it back into the 60s, but maybe that's wishful thinking from a creditor. Adam, I know you had something to say.

I was just going to say, you know, Binance, I mean, I think they have a, our interaction with Binance, they've always been, I would say, tough but fair in terms of how they deal with their partners. And so I think they're going to do this in a very straightforward and fair manner. And also, obviously, there's a lot of scrutiny in Binance right now from the U.S. government. So I think they're also going to treat this extra carefully and make sure that every i is dotted and t is crossed which frankly that's what the situation calls for right now yeah the sec was not in favor of this finance proposal they're very very very quickly dissented right but the problem is like what's the alternative

if there's no uh the only alternative which i think really should have been more liquid liquidate or or just return the assets to creditors like turn the app back on and just let people withdraw. Now we're like 110s or 100 million less than advisor and lawyer fees to do so right? Yeah and you still need management lawyers and all that stuff to do that right so like who's going to operate that? That would have definitely I I mean, hindsight's 20-20, but that would have been the move a week after it happened, right? Exactly. The funny thing is we all would have been angry. What do you mean 70 cents, right?

It's probably true. happening right now in terms of uh you know kraken paxos uh and then uh gary genzo's statement yesterday about um you know centralized yeah and you know we shingle wrote a paper we're about to we're going to re-release it he wrote a paper on uh custodianship because you can really look at the lens of financial regulation throughout the last say say, 40 years, 50 years, and it's all been centered around the notion of who has custody of the assets. And they had this issue where it used to be investment advisors could also custodize your assets. And then, of course, they would steer you towards investments that benefited them, right? So then the SEC is like, well, no, we better separate that. And investment advisors are separate from the custodian and then gave rise to all these custodian platforms.

And so we're seeing the same thing play out in crypto. Like these guys are going to take your funds, commingle them, and then use them for whatever. There's got to be rules of the road about that, which I think is good. And it also then gives rise to this notion of self-custody and how that's just so fundamentally different in so many ways from centralized custody. Yeah, I want to dig into that further in a second. But before I let us off

the hook on the Voyager conversation, was there anything glaring during your time there or leading up that you guys saw happening that would have given you a massive red flag or that people may not have heard about, you know, that we could have seen this coming? Yes, there was something which in retrospect, we even should have seen as a red flag. So when I left the, so I joined the board, you know, and joined as the chief innovation officer when, you know, when we merged the companies together, you know, obviously the first red flag was how they negotiated with us. You know, we talked about when you know when we uh when we merged the companies together you know

obviously the first red flag was how they negotiated with us you know we talked about you know how the day of the closing they you know they they were doing that but we would say okay well maybe you know they're just trying to save money you know they're trying to you know business whatever um and you know in a poetic sort of premonition they were threatening to go bankrupt with us um yeah we didn't forgive our salaries. It was the suicide bomber negotiating tactic. It's good. If we go bankrupt, you guys get nothing.

And if we don't, and so you guys better negotiate with us. So that was basically their position. But then when I left the board in February, 2021, which by the way, that dispute, which even after they made all their money and after they you know they could clearly afford to pay us they they didn't pay us so um so they uh it was it was

not only a save save money but also i think a little bit of a screw you guys but when i left the when i left the board in february 2021 it was because i was the only dissenting person on the board when steve came came the night before he was about to close this financing round. And he had made a contingency in there where basically he threatened to blow up the entire financing. If he wasn't allowed to concurrently sell stock in that financing, which is like a big no, no, you're supposed to, a, if you're going to sell stock, you have to offer it to, you know,

all stockholders, you know, Prorata and, and B, you have to disclose it to the board. I'm on the board. You have to disclose it to me and see, you know, parada. And, and B, you have to disclose it to the board, I'm on the board, you have to disclose it to me. And see, he was, he was asking for my consent to do this. And I said, no, you know, we have to ask some questions, we have to at least have a discussion about this. And, and his response to that was, I don't need your support. I'm just gonna, you know, I'm going to call for a board meeting and approve it anyways, without your support. And that was when I realized that that's how he runs his company. Like, that's how Steve approaches things.

And that's probably how he approached the risk committee too, which is like, you know, I don't care. I don't care if you don't vote for it. I'm going to do it anyways. That was tens of millions of dollars in stock sales, correct? Tens of millions of dollars. Yes, it was a substantial portion. 30 million, I think was the conjecture, right?

Yeah. It's all public it was in the it's in the cedar filings uh uh you know and that this was back in february 2021 if anyone wants to look it up it was the financing that they raised at that time and i was just the only dissenter at that time that that that was sort of asking questions that was the only person on the board that was asking questions but it doesn't matter if I'm one vote out of seven, the only person sort of asking those questions. So I left. And in retrospect, that should have been a bigger red flag for us too.

It wasn't a big enough red flag. Yeah, we held a lot of our equity and got really burned, unfortunately. Yeah, we were the largest shareholder and we still, you know, we didn't sell. Stupidly. And we should have. I also want to point out stupidly but uh there i mean integrity does have value yeah let's hope the uh i also want to point

out something just really kind of remarkable at all this that sometimes gets glossed over when shingo came in and joined that board he was 19 uh and when he resigned from this public board you were what 21 22 22, something like that? Something like that, yeah. Yeah, he was the youngest member by far and people forgot about his age. But part of this, I think, was pride that Steve couldn't listen to Shingo

or do what Shingo said. And it's this biblical collapse because of this man's hubris. And I give Shingo a ton of credit. When he came to me and said, dad, I want to get off this board. I want to resign. I think, you sure? You're on a public board.

We're going to give up a lot of influence and control. That was like a huge deal. And, you know, so I give Shingo tremendous credit for having gone through all this. I mean, I don't know how many like 21 year olds have gone through crap like this. I was useless until I was like 35. So I can't speak to speak to any of that for sure. It's absolutely incredibly impressive. And obviously anyone who's extrapolating back on the timeline, that means you were doing quite a few things before you were 19. Yeah, he was. So it's, you know, and I think kind of leading into where we are now, I mean, Shingo's always, you know, punched above his weight class.

And we're trying to bring, you know, we're really working our asses off right now, trying to build something that, you know, take this situation and try and have something positive come out of it in terms of a new venture and a new entity that all the lessons learned here. So talk about that. What lessons were learned and what are you building? Yeah, well, we should be retired at this point, but our motivation really is, it just didn't sit right with how everything went down.

And we just couldn't sit on the sidelines. And our involvement with the bankruptcy process just further confirmed that for us. And we just felt that the space deserved better. Creditors deserve better. Everybody at Voyager deserve better. Shareholders, employees, like everybody else. Let's talk about what we're doing because I think we've got to get to that. So we're essentially building a decentralized platform to let people, I mean, first and

foremost, we've created a new system for self-custody because we looked at this and we said, okay, people don't want to self-custody their own assets. They don't like dealing with keys. They don't like the responsibility of here's 24 words and don't let anybody else see them. And if you lose them, you lose all your money. If anyone else gets them, they take all your money. I mean, that's kind of ridiculous when you think about it, right?

Or you have to hand your assets to a centralized custodian and hope they don't screw you. That's essentially the crypto choice right now. And we thought, okay, like if Apple, you know, Steve Jobs said to his guys, go build a better crypto self-custody system, what would they do right what would apple do if you approached a problem like this they sure as heck wouldn't have

what looks like state-of-the-art wallets that are out there right now um and actually apple did kind of approach this problem a little bit uh with the secure enclave this hardware chip they have on all their phones now actually it was really interesting They put that on there, essentially a secure tamper-proof hardware security device for, it was more or less for face ID and biometrics, but you can also use it for crypto keys and key chain stuff. And then the FBI came to them and said, hey, Apple, we need to have a backdoor in here

in case of terrorism or money laundering. And Apple's like, nope, we're not gonna let you in. Where this is, it was quite a stance they took in retrospect. So anyway, we approached that. We said, how do we build a self-custody system that's really powerful and really easy to use? And we came up with this thing called Magic Keys, which is a key that can be created without all these 24 words and seed phrases and all that, and then uses multi-party cryptography and shard encoding and backups so that if you lose your phone, you can get them back. And then it uses a concept called social guardians, which is something that Vitalik's been pushing for years,

to protect the key restoration process. So it all boils down to this thing called the magic key. And we spent months actually really focused on building that. It's actually we're filing a patent because it is unique, we feel. And the patent attorney turned out his brother was a venture capitalist. And he's like, hey, can I invest in this thing too? And so he and his brother came in. He got the right lawyer for once.

Yeah, he's a great lawyer. He's great. Yeah, so we started with this Magic Keys. And then on top of that, we're building a best price execution engine that looks across all the DeFi, you know, the decentralized exchanges for the best price and liquidity. Sounds familiar. So would you go on a limb and call it a decentralized Voyager? Well, there's definitely parts that overlap in terms of best price execution, rapid price aggregating, and aggregating the aggregation. Yep. Yield. So there's a yield service in there, but the difference is the yield is all from this

vault. So we call it a vault. It's your personal vault. There's no other funds commingled. No one controls it. We will never take possession of keys, coins, and we'll never offer any protocols. It's completely a software platform that's under the user's control and they make all decisions at all times. And it's got a really easy to use UI on top of it. So we're trying to take this advanced MPC key technology and enterprise grade, fireblocks type technology and make it available to everybody on the planet. Anybody in the world can get their own magic key for free if they want to self-custody their own assets. Shingo, I have to imagine that Ethos was your baby coming into the deal

with Voyager. I even remember, it's funny that when I used to go try to chart as a trader the VGX token, I had to go look at the Ethos token on Binance because they refused to change the name for so long. It's not the most healthy exercise, but do you ever wonder where ethos would be if you had never partnered with Voyager and you had just continued on your own? Well, you know, what we were going to do had we had that deal and not gone through with Voyager was we were actually going to build what Voyager had you know what what they what they had built there and we were going to go off and get the licenses and uh and basically build a system like that and we probably would have naturally gravitated towards where we actually are today which is now building a decentralized version of that system uh but had we not done the deal

with Voyager we probably would have competed with Voyager and who knows what would happen there but we would have been we would have but we would have had crypto deposit withdrawals alongside the order execution and routing system. And we learned how all that routing system worked while we were talking and doing due diligence with Voyager. So probably not the healthiest exercise, as you said, but I think it would have been interesting. But I think, again, going back to the tragedy of Voyager, I think that the combination was really good at that time. And what was needed was another restructuring of the company about a year after we had done that merger. Steve could have rode off into the sunset with his stock and been happy.

And we could have brought in a real know really a real technical ceo to you know that that could run that company and uh and i think the company would still be around today and thriving today um had had you know those those steps been taken but um it's it's hard to sort of dwell on you know what could have been right it could have been it's interesting though this is you know what we're describing here is just a different flavor of the same hubris that we saw across the industry. I mean, Adam, you called it hubris before and I think there's no better way to describe it. Obviously, there was the hubris of Doquan Edluna. I'm not saying criminal or otherwise, but he was backed by big money and believed that he could do no wrong and his experiment failed. The hubris of 3AC, the hubris of Alex Mashinsky, the hubris of BlockFi. It seems that this was

just replicated over and over and over again by people in a similar situation, which was they needed to continue going down the risk curve to hunt for yield because they couldn't accept that maybe they were going to have to lose a few customers to do the right thing. So I guess the natural question is, do you think that people are going to learn their lessons? Or do you think that we're going to repeat this all again? Shingo, I was telling Adam right before you got on, I crashed a meeting with Three Arrows Capital in Dubai. And I can tell you, they're having no problem raising money or getting anyone to invest in the things that they're doing. Zero problem. So I don't have the highest hopes that the industry is going to learn. What do you guys think? I think that part of the

reason that we're doing this is because we really want to push the industry towards decentralization. If you have a fully decentralized system, it prevents centralized collapse. It's a very simple concept. If it's decentralized, it's centralized and uh and that was what crypto is designed to do i mean it's it's it's what crypto was founded on you know when you wind the clock all the way back to 2009 when when you know joshi launched bitcoin it was in response to centralized meltdowns by irresponsible individuals and we've you know we've seen you know now today it's like sort of a mini 2008 you know where where we have a crypto meltdown because of the you know centralized entities where with irresponsible management and crypto the ironic part is that crypto wasn't made to enable this it was made to disintermediate that it was made to you know to to build a better system and

you know we as a community as as a collective crypto community, have a responsibility, immense responsibility to create a better and alternative financial system. And I think largely we failed in that. And I think that what we want to do is if even if Ethos isn't successful, we want to push the industry towards that decentralized ideal, towards building a financial system that works for everybody, that's decentralized, and that prevents these kinds of centralized collapses. And that's where the industry has to go if it wants to succeed long term, because that's really what crypto's niche is. Crypto's niche is decentralization. I'll take it one step further.

There's a really interesting book Shingo showed me called mine, which is about the history of owning stuff. And what does it mean to own something? And one of the books kind of premises, well, you don't really own anything like I own my house. It's like, well, no, you have the right to pay taxes on it. And if you don't pay taxes, you know, it's like, well, I own the money I make like kind of, but you know, somebody put a lien on it,

the government can take it or you can be sued or so. What do you really own? Right. When you come right down to it. And, and the thing you really own is crypto, because it can be secured by, you know, a secret only, you know, and, you know, you truly own it. And in the in some apps, it says, in these centralized commingled custodians, it says you own two Bitcoin. I'm custodians, it says, you own two Bitcoin. I'm like, well, you don't really own, no. Well, first of all, you don't own it. It should say, you're an unsecured creditor for two Bitcoin, but that's not as catchy in the UI. So I hope part of what this does is people understanding the difference between mine, I own it, and I've

given it to some guy I don't know, and he can do whatever he wants with it. And I think fundamentally, that's the problem that the SEC is trying to address is, what does it really mean when it says you own, and if you're going to have a service where it says these customers own, then, you know, and they should really own. And I think it's actually a better business model, too, because for the providers like Ethos, they can provide services and generate software fees for enabling people to take true ownership over their own assets. Yeah. And to get back to your original question, yes, I think we are doomed to repeat this if we don't move towards that idea of true ownership, towards the idea of decentralization. Yeah. Then it will happen all over again for sure

decentralization is the only path forward yeah i'm pretty sure we weren't supposed to uh rebuild an inferior version of lehman brothers in 2022 instead of it in which is effectively what we did but i love your point here you said very casually even if ethos fails you know we want to help advance the the ideology and the ethos of crypto and decentralization. I had an interesting conversation on here at some point with Tim Draper, and we were talking about comparing the internet bubble, the dot-com bubble with the crypto bubbles. And he shared a similar sentiment, which was that a lot of people rush in. Most of them genuinely want to create something, but 99% of entrepreneurs are going to fail. But each one of them advances the

ball further for the ones that eventually become the winners. I mean, I've always said, I love the comparison with the dot-com bubble because we got Amazon and we got Google and we got the biggest companies in the world. I don't see how it's a negative, right? But so you're advancing the ideals that originally were supposed to be advanced in the first place. I hope you guys win, but it's pretty noble to say, even if we fail,

if we fall on our face, that we want to see the decentralization win. I'm not maybe as hopeful as you in humanity at my age, but I appreciate that at your age, you still are idealistic and believe that can be done. I do believe it can be done, but I think that most people still are going to favor centralized platforms. But I do think the crypto native people, you can see it even anecdotally with the purchase of ledger wallets and the kind of move off of exchanges of coins. It is happening, at least for the people who get it. So how do the people that move off of exchanges of coins it is happening at least for the people who get it so how do the people that don't get it get it if we can make these are decent sorry

if you can make a decentralized app as easy and convenient as a centralized exchange then that's right that's right because grandma's not going to go on metamask and write down her uh key phrase and send coins from one wallet to another just to play Axie Infinity, right? Okay. That's right. But grandma will use Coinbase and if a decentralized service is as easy as Coinbase or easier, which I think actually can be easier because there's certain hoops you don't have to jump through,

then I think you can get mass adoption. What were we talking about right before this? Specifically, I was talking about advancing the ball and the idea of decentralization. Now, even if you fail, you know, obviously you could succeed if decentralization succeeds itself, but I was just saying it's a very idealistic goal. I mean, we're, but you know, we're trying to make it really easy for people. You go into our app, you click, you know, create, you get your own

magic key, you have a vault, and then you can do stuff with that vault, right? Yeah, sounds amazing. Yeah, you can load it up, you can trade, you can get yield, and it's all under your own control. So, I mean, and honestly, from a business model, there's some benefits to it. Like at Voyager, there's always a lot of like, you know, plate spinning to try and find liquidity. If somebody puts a big order, let's sell some of this other coin to get liquidity. Here, it's all happening on the blockchain. So there's no counterparty risk for us. And it's just like the user puts together a trade and they broadcast it.

And then it gets sent to all the decentralized exchanges and they come back and they gain a and the system can break it up into different little trades across multiple exchanges. And then it comes back and it's executed. And the funds stay under your control the whole time. mean yeah it's actually a great system and the more people that adopt it uh and it's already there's a ton of liquidity out there there's a lot of action on DeFi it's huge there's a lot of room to grow to and DeFi because DeFi is only somewhere around three to five percent of centralized volume um and yeah we sort of like to like to I'll call 5% of centralized volume. And we sort of like to call this centralized meltdown sort of like crypto's COVID moment.

COVID changed so many different things. It accelerated a lot of trends that already existed. And it really changed the game for a lot of businesses. And I think in the same way, these centralized meltdowns and the now regulatory scrutiny and the changing consumer preferences is going to really shift the industry towards a different,

I think, towards a different future. And I'm hopeful that it's already happening. People are starting to move towards decentralization, but I want to see that trend really accelerate and decentralization sort of become more of the norm and centralization becomes sort of something to avoid or something that should only be used in very rare circumstances. Well, Satoshi would be proud of that approach for sure. So listen, we've got a couple minutes left. Anything I should have asked, anything I missed, anything that people might be interested in or

don't know about this process that you've been dying to get off of your chest uh here's your chance um i i would like to just say you know we've launched uh a voyager recovery program where people that are impacted by it can come they provide their stretto docs and we uh we have a loyalty token that's going to be inside of the app that you can get we We're not selling it. We're just giving it away for people. Then it gives you certain benefits inside the app. Also, on Valentine's Day, we announced love for Celsius people. So it's a new program we announced that if you're a Celsius owner, please come to ethos.io, and you can also sign up there. That is a little simpler.

You just provide proof of creditor status and we'll just give you some tokens. But, you know, I just want people to know about that program. Yeah. And I would end it by just saying that, you know, I really, I'm still hopeful for the industry. And I would tell people to sort of remember why crypto exists in the first place. Remember why, you know, crypto was created and the ideas behind it, because those ideas have only been reinforced by this. You know, the centralized collapses aren't crypto's fault. Crypto wasn't designed to create centralized systems.

Crypto was designed to create decentralized systems. And, you know, I would hold out hope for, for a better future. And that, you know, this, this is just another bump along the way towards getting, you know, building the ideal financial future, you know, financial future that is open, safe and fair for everybody, and that everybody has equitable access to. That's, that's, that's an ideal that I think that should not be lost in all of this. I absolutely agree. It was eloquently spoken and a perfect way to end. And I would much rather go on to Ethos and upload my claim than go trade it on Three Arrows Capital's new exchange. But I guess that's a conversation for another day. Thank you, Sanyo and Adam. Oh, and where can everybody, I'll just give you the chance real quick, where can everybody follow both of you?

And also, of course, you said ethos.io. So I think we got that part. But where can people follow you? Keep up with your exploits and follow all the things you guys are doing. You can follow us on Twitter at ethos underscore IO or at Shingle Levine on Twitter. L-A-V-I-N-E. I know. We're not going to Adam Levine you, buddy.

Don't worry. Thank you. I appreciate that. I've already clarified that we're not going to maroon five buckets. I just did it. I did it on recording. I know. I should be so lucky to be compared to him.

It could be worse. It could be worse. Yeah, he's actually a good guy. And then I'm Adam Levine, L-A-V-I-N-E at Twitter. So you can follow one or both. Guys, give them both a follow. I love everything that you've done to my benefit and for the community. So just let us know how we can help continue on that path towards decentralization.

Thank you guys very much. Thank you, Scott. Thank you. Let's go.