The Wolf Of All Streets - Prime Trust Collapse - The REAL Story | Binance Strikes Back Against SEC | Lawyers Weigh In

Episode Date: June 23, 2023

I am joined by David Silver (@dcsilver) aka Silver Miller and James Murphy (@MetaLawMan) to break down the collapse of Prime Trust.  ►►OKX Sign up for an OKX Trading Account then deposit & trade to unlock mystery box rewards of up to $60,000!  👉 https://www.okx.com/join/SCOTTMELKER  ►►THE DAILY CLOSE BRAND NEW NEWSLETTER! INSTITUTIONAL GRADE INDICATORS AND DATA DELIVERED DIRECTLY TO YOUR INBOX, EVERY DAY AT THE DAILY CLOSE. TRADE LIKE THE BIG BOYS. 👉 https://www.thedailyclose.io/   ►►NORD VPN  GET EXCLUSIVE NORDVPN DEAL - 40% DISCOUNT! IT’S RISK-FREE WITH NORD’S 30-DAY MONEY-BACK GUARANTEE. PROTECT YOUR PRIVACY! 👉 https://nordvpn.com/WolfOfAllStreets   ►►COINROUTES TRADE SPOT & DERIVATIVES ACROSS CEFI AND DEFI USING YOUR OWN ACCOUNTS WITH THIS ADVANCED ALGORITHMIC PLATFORM. SAVE TONS OF MONEY ON TRADING FEES LIKE THE PROS! 👉 http://bit.ly/3ZXeYKd  ►► JOIN THE FREE WOLF DEN NEWSLETTER, DELIVERED EVERY WEEK DAY! 👉https://thewolfden.substack.com/   Follow Scott Melker: Twitter: https://twitter.com/scottmelker   Web: https://www.thewolfofallstreets.io   Spotify: https://spoti.fi/30N5FDe   Apple podcast: https://apple.co/3FASB2c   #Bitcoin #Crypto #Trading The views and opinions expressed here are solely my own and should in no way be interpreted as financial advice. This video was created for entertainment. Every investment and trading move involves risk. You should conduct your own research when making a decision. I am not a financial advisor. Nothing contained in this video constitutes or shall be construed as an offering of financial instruments or as investment advice or recommendations of an investment strategy or whether or not to "Buy," "Sell," or "Hold" an investment.

News broke yesterday that the BitGo deal to acquire Custodian Prime Trust had fallen through after due diligence, coming as a surprise to everybody except for anybody who's been digging into this story for the past few weeks. Now, last year we had the stories of CryptoContagion, Celsius, FTX, BlockFi, Voyager. This is equally as big of a story that seemingly nobody is talking about. And I've been deep, deep down the rabbit hole of it for the past few weeks. Today, I'm going to lay it all out for you, tell you what I know. And then I have two amazing guests, James Murphy and David Silver, your two favorite lawyers that are coming on the show. Now I'm surrounded by lawyers. I don't know what that says about me. But both going to be here to talk about this. And of course,

finances attack on the SEC. We love to see companies pushing back. We're going to be here to talk about this and of course, finance's attack on the SEC. We love to see companies pushing back. We're going to talk about what that means. You guys do not want to miss this one today. Let's go. Prime Trust and the BitGo deal to acquire them. There were some rumors that Prime Trust was going to go bankrupt, that they had a $25 million hole that they needed to fill, which should not be the case with a regulated custodian, obviously. And found out some information that was extremely damning. We chose not to share it on Crypto Town Hall because it was not coming from as good of sources as we wanted. But since then, the sources have gotten much more solid. And the fact that due diligence failed and BitGo is not buying them tells you everything that you need to know about this story. Listen, guys, I'm going to just start diving into it and we're going to figure it out as we go here. All right. So this story is absolutely insane.

It's seemingly not really being told. We have to start at least a little bit from the beginning because you may have heard about Prime Trust before. First of all, they're a regulated custodian, state regulated, federally regulated. They're providing financial structure for innovative companies. So they do wire transfers, banking. Basically, if you're a crypto company and you need to have the infrastructure, Prime Trust is your go-to. We know that companies like Abra, Bill Barheit we had on, said he used them for their wire transfers. So they were not just a custodian. That's not all they were being used for. But you may have heard their name before, right? Beside the fact that they were one of the biggest custodians in the space,

there's been a lot of news surrounding them that's gone underreported over the past few years. Of course, they were sued by Celsius after Celsius went down, and they ended up returning $17 million in tokens to bankrupt lender Celsius. Now, that doesn't have much to do with this story, but it shows you that there's been a lot going on, and they've been the center of a lot of controversy. The next time you may have heard about them, of course, is because FTX had tens of millions of dollars with them, and apparently so did SBF personally. And this is where the money for all of those Wyatt political donations was coming from. If you dig down into this story, you'll see that a lot of people thought that Prime Trust had actually donated $14 million to a number of political candidates.

They said the wires come from Prime Trust. That's why people think that, but this was actually SBF's money. So we heard about Prime Trust with Celsius, and we heard about Prime Trust, of course, with FTX. The next time that they made the news was when Prime Trust was going to partner with Swan Bitcoin. You guys know we've had Corey Clipston on here quite a few times. We'll get into that a little later, making up to do an IRA product. And then as a part of that, two months later, they raised over $100 million to add to their IRA crypto staking and to build their infrastructure. So guys, this is exactly one year ago, basically, I covered this story on YouTube. It was a year ago to the day yesterday that Prime Trust had raised $100 million.

How incredible this was for the crypto space. Oh, absolutely amazing. Maybe, maybe not so much. They raised that money, but by November, they'd fired Tom, their CEO, and have had an interim CEO since. Leading a lot of people to say, what the hell is going on here? They just raised $100 million. I don't understand why they're firing their CEO. Well, I'll tell you that there were a lot of rumors going around the industry at the time, a lot of those that are going to come to light right now. So then what happened? A few weeks ago, David Bailey from Bitcoin Magazine and Bitcoin Conference tweeted this. Major custodian about to declare bankruptcy without last minute bailout.

Take your Bitcoin off exchanges, even Bitcoin only platforms. This set the world absolutely on fire. We talked about it on Twitter spaces. He was not naming names, but literally people were like, does it rhyme with crime plus? Right. Everybody knew that we were talking about prime trust and he wasn't able to name it, but we saw that they were looking to raise apparently $25 million. This was on Friday. They were looking to raise $25 million by Monday, or they were going to go bankrupt. Remember, there's a company that raised $100 million only 11 months before this happened. And they're a custodian, which has one job, which is to secure customer assets. Well, this is where we dig into

the rumors and what happened after that. So first of all, you can take a look here at the clients that were listed on Prime Trust's website a year ago, right? FinanceUS, Swan, OKCoin, Dapper, Kraken, the biggest names in the space, Strike, Aave, I mean, huge, Abra, Bittrex, right? Well, by the time this news had come out, here's the list of their clients, right? And Swan had already said, not the case. So something was going on in the last year after this company raised $100 million, seemed to be the darling of the industry, but was losing actually all of their business during that time. Okay, guys. So here's what we have heard. I will say I am not CNN. Well, that'd be worse probably. Or Fox News. Who's a good news source that we can compare ourselves to that actually does their research? None. Okay. But here's what

we heard at that time and chose not to share because BitGo came in to do the deal. But we did ask Mike Belshi this very question on Twitter spaces. Mike Belshi is the CEO of BitGo. Mike, there's long been a rumor in the crypto industry that a major custodian lost the private keys to one of their wallets. Have you heard that rumor? Mike responded, we have been hearing that rumor for quite a few months. I don't think that's Prime Trust, but if it was, that would come out in the due diligence. So from multiple sources, we had heard, we did not want to say it specifically, that Prime Trust had lost the private keys to one of their wallets. You have one job. They are a regulated custodian. Their only job is to secure the private keys of the wallets. You have one job. They are a regulated custodian. Their only job is to secure the private keys of the wallets that they have and to secure the assets of the exchanges and institutions that they're holding. Guys, this is so big because we've already have a problem trusting our exchanges, obviously. Now you have to worry about if you can trust the custodian that the exchange is using

to secure the assets. I showed you the list of all the people that have been there, have left at some point. All of these companies were securing their assets. So this isn't all of all of Prime Trust's wallets. This is one wallet. This is where it gets a little stranger. And I will say this is going further down the rumor mill, just to be very, very clear. But we know for a fact that if the custodian lost their keys, the Bitcoin's still there, the keys are just gone. If they lost their keys, what should they have done? They should have probably told all of their clients, their insurance company, reported it, and immediately returned the rest of the assets, declared bankruptcy, whatever the process is. But they didn't do that, guys. And we know they

didn't do that because this still hasn't come out. BitGo, of course, did not make it through due diligence. So what they allegedly did, and guys, I cannot tell you this is fact, but we've heard it from three sources. God knows if they heard it from the same three sources, but apparently they took more customer funds, traded with leverage to try to fill the hole. Whether they successfully filled that hole or not, we do not know, but that is apparently the rumor that is going around in the back of the industry. Guys, like how terrifying is self-custody already? And you find out that even the trusted regulated custodians might not be able to secure their own keys, right? The ledger news, the ledger recover,

they can backdoor into your firmware. I mean, this industry, when you start thinking about it, it's like so much of this is a complete joke and it's horrifying. We want people to secure their own keys and our trusted custodians can't even do it. Here we go, dig in. Bitco bailed out

prime trust and acquisition deal. That was two weeks ago. Mike Belshi came on. We asked him. They had $100 million a year ago. What happened? From what we know, they hired way too many people. They mismanaged. I don't know. Guys, this company was founded in Vegas. So I don't know. YOLO at the craps table. I have no idea how these guys wasted $100 million a year, but they said due diligence has to be done. Of course, now we have the news yesterday that crypto custody firm BitGo cancels acquisition of rival Prime Trust. Why? Because due diligence failed. And then yesterday, Prime Trust has shortfall of customer funds, Nevada regulator says.

So now the Nevada regulator is stepping in and saying, these guys do not have your money. Now, it's one thing to be out of money as a business. It is another thing that your customers cannot redeem and get their money out, which means there is a hole. And your only job is to make which means there is a hole. And your only job is to make sure that there is no hole. Custodian Prime Trust suspends withdrawals following sale failure. Guys, we've been down this road before, just never with a custodian. The news flow here is absolutely insane. And when you dig in to the withdrawal request that didn't happen yesterday, you can see right here, a negative 12,071,508 stockholder equity position missing. There's at least a $12 million hole in this balance sheet. You can go through at any point at fid.nv.gov and read the entire motion.

But that's not it. This story was completely underreported. Bank, which is a platform, a software solution that bridges the gap between crypto and traditional fiat, a subsidiary of Prime Trust, declared bankruptcy last week and nobody reported it or talked about it. And this was while BitGo apparently was still doing their due diligence.

During the, here you go, right? And so why did that happen? Bank alleges founder stole assets to start crypto custodian Fortress. Guys, if you dig in, most of the ex-Prime Trust clients have moved to another custodian called Fortress, but the guy who was the CEO of bank is the guy at Fortress, right? You can't make, I mean, you literally can't make this stuff up at a certain point. You can't make this stuff up. So digging into it, his name is Scott Purcell. What was alleged here, and you'll see that now this is going to be another whole big court case, is that this guy decided to pivot the business model without board approval to an NFT business.

And then when he left Prime Bank, he apparently stole all the infrastructure, computer programming, NFT, everything, and moved to Fortress NFT Group. And now there's going to be a massive lawsuit because this guy apparently took all the trade secrets, went over to Fortress, which is now where a lot of these companies are custodying their assets. So who is this affecting in the meantime? A bunch of companies you've never heard of probably, but you'll see right here at stably.io, we are temporarily pausing our services. Look here for more information. Big custody with Prime Trust, Coin Metro, whoever the hell that is. Important announcement, unexpected disruption in USD transactions. We regret to inform you that our partner for USD payments, Prime Trust, has temporarily suspended USD deposits and withdrawals. That's what you do when you,

oops, lost people's money. Guys, again, I'm not a journalist. I'm going through what I have found out and what we've been told. What a mess. And then, of course, Stablecoin, TrueUSD, two days ago, assures users it has no exposure to troubled Prime Trust. Guys, this is like the CEOs, like there's a fire behind them. Everything's fine, guys. It's totally fine. It took all of a day for them to send this. We're reaching out to inform you that our banking partner, Prime Trust,

is halting all disbursements, deposits. Unfortunately, this means you'll be unable to mint or redeem to USD as well as any of our true coins, including a bunch of coins you've never heard of. Guys, the day before they said they had no exposure to Prime Trust and then sent this to all of their customers

a day later. And as you go down this rabbit hole, true USD, oh, God knows what's going on here, but they can't redeem a thousand bucks for you, but they minted 30 million more in stablecoins at the same time. Now, conjecture that Strike was involved, but from what I know, Strike left Prime Trust in time. We have another one of these things where people scattered and ran for the hills. We've seen news from Strike in the past two weeks that they are now offering their own custody services. But I've seen multiple times that this email went out, reaching out to inform me that Strike is temporarily disabling hard and direct deposits. Bank deposits and withdrawals remain

fully operational and work as intended. But of course, Strike, the Bitcoin-only company run by Jack Mullers, had exposure at some point, probably doesn't anymore, but still a bit questionable. Now, David Bailey, who was the one who originally broke this because apparently Prime Trust came to him for $25 million. If there's a hole in Prime Trust customer balances, BitGo said they'd pull out if there was, and they just pulled out. Any exchange that used their service and transferred funds off Prime Trust platform in the last three months is going to be subject to clawbacks. Get your money out now. I'm not sure that's true. I have two lawyers here at the back. Maybe they can tell me when we get to the end of this, which is soon. I don't know if that's true. Corey Clipston from Swan immediately said,

all Swan Bitcoin customer funds were transferred from Prime Trust to Forrest, Fortress, and BitGo. Now remember, Fortress, we'll dig into that another day. There is zero precedent for clawback of customer funds from individual bankruptcy, remote trust accounts. It's the whole point. It is actually the whole point of a custodian. If a custodian is regulated, there should not be clawback. So I think that Bailey might have missed on that one, but you can see, guys, this is a massive shit show. If a custodian is regulated, there should not be clawbacks. So I think that Bailey might've missed on that one, but you can see guys is a massive shit show. And guys, remember when we reported on the news of two South Korean Celsius type companies a couple of weeks ago, halting withdrawals and being insolvent to crypto platforms,

hot withdrawals, remember this Delio and Haru? Do you remember that? Well, yeah, they suspended and they're firing 100 people. And yeah, we'll get to it. They apparently also were allegedly, potentially, maybe was a lot to absorb. I was trying to still commit fraud without that regulation stopping them. So you could say, yeah, this is an indictment against crypto, but you could also once again say where the was the regulators that were supposed to protect us like last year, which clearly did not happen. And Gensler keeps saying the law is clear, but it stopped any of these frauds from occurring. So maybe we need some new laws that will actually protect people. Now, hopefully this business had dwindled down to almost a meaningless number. I mean, we're talking about 12 to $25 million, as opposed to six or 7 billion for creditors of FTX with these holes, obviously a billion

for Voyager. But when you dig into this, it really is yet another, quote unquote, trusted crypto company that maybe turned out to be a fraud or Ponzi scheme. It's going to do the regulators and legislators, once they dig into this, all the fuel they need for this fire. Guys, I'm going to go ahead and bring on the guests. I've got Mena Labad, James Murphy, and David Silver. I am not an investigative journalist. That was a lot to get through. Do either of you know about the clawback issue? Can I just ask you that first? Yeah, I would say that if those funds are held in trust

and it's a trust company, if these funds are held in trust and it's a trust company, those funds should not be assets of the bankruptcy estate. I say should, you know, it could be more complicated than that depending upon the written agreement between those exchanges and others in the industry who are using prime trust services. David, you were like taking notes and looking and giggling and laughing the entire time. Can I share my screen here? Because I think this is really important. David, you were like taking notes and looking and giggling and laughing the entire time.

Can I share my screen here? Because I think this is really important. Go down to present and then you can share your screen right there. Let's see. It's window. This is going to be a wildly different one than we've seen before. Can you guys see how does the movement of funds work under custody? There we go.

So this is from Prime Trust themselves. And this is where lawyers like me who have done lawsuits against the exchanges are going to salivate. All assets are held on behalf of customers or tracked by a ledger. This means customer assets will always be owned by and available to that customer. There's not going to be a Celsius issue here where they can take any position that they were paying additional, you know, like a savings account versus checking account here as long as your funds.

This is what your money was supposed to do. This is a very different case than we've seen prior. And I do think and and this is low-hanging fruit, this is going to be, especially if it's $15 to $20 million missing, and it was missing on a different side. If that's truly the case, the government regulators are going to salivate on this one because this one looks bad. It is bad. And it's worse than the other companies because the other companies had a tangential argument that they were doing something else and were allowed to use your funds for their benefit. Yeah, you basically didn't read the terms and conditions. We all know that, right?

Now, I mean, that's the bottom line is you were signing away. I mean, the judges even said that in the Celsius case. Those aren't your assets anymore once you put them in. 100%. And Coinbase- These are your assets, man. These guys have one job. Yes. And Coinbase is very like, I have 150 open cases. It's my go-to line every time I speak to people. Coinbase, you do not own your assets on Coinbase. You have an IOU and that's it. On every exchange, and this is what people say, but this is different. People believe one thing and see another. This case is different because prime trust said something different. Their terms of service say something different. There cannot be a missing dollar here that they say we were

allowed to steal your money. And I think that's what the big story here is and how regulators are going to use it. Okay. Let's say that I'm completely wrong, right? That we've heard it from multiple sources. I would have never shared it until the BitGo due diligence fell through. But let's say they never lost their keys. They didn't do any of these other potentially fraudulent activities. How could they end up not being able to redeem customer funds? Because that should be wild, completely segregated from, okay, we mismanaged $100 million in investment in our company. We ran a poor company, but that should have nothing to do with these customer funds. And those should never have been available. Even if they overspent by $20 million, they could obviously file for bankruptcy, but the customer fund should still be there, right? Well, I mean, my guests here and I speak

with no inside knowledge. And just to be clear, I have known the interim CEO, Jew Law, for years. We used to run the D-List conferences together in 2015. George is a good guy. But as he walks into this problem, I think that's why the last guy was fired in November. That's what we heard. But yeah, go ahead. George has been part of Prime Trust for a long time. He was on Directors. He was on and then he came back. So I always say in this space, you got to trust the people you're doing business with. Clearly, something happened in November after the $107 million raise in June.

Clearly, something happened. It's not public yet. I'm with you. If this is a missing key thing, it's an easy thing to say in this day and age. We lost the keys. We're shit out of luck on that Bitcoin. That'd be almost excusable. There's a reason they haven't said that publicly yet, especially given what's going on. I mean, that should have come out within, what was it, June 22nd or 23rd when the Nevada decree came out. It was an easy out for them. There's a reason they're not saying that, probably because it's not true.

Okay, so maybe they didn't lose the keys. I hope that's true. I hope that's true. I mean, that's just speculation. It's an easy out. You get to say it. I mean, clearly something happened. You know, in November,

you wouldn't have fired the CEO and a third of staff. Don't forget that. They fired 30% of the company also. You don't do that over $17 million missing because of a locked Bitcoin account. Look, I mean, I think the real story here is the true USD. That's what's going to spit out of control. And I think that's what the regulators are going to- Why? Because you think stable coins right now, as you said, are kind of the low-egging fruit and the main focus.

I mean, we know that we're about to, in July, get a stable coin bill marked up in Congress. And we already hear a lot of rhetoric about what's going to be allowed with stable coins. I don't necessarily disagree. I don't know how true trustee is so big, but yeah. I don't know. But, you know, the rumors, the confirmations, I'm obviously not an investment guy, but accordingly, they supposedly printed between June 22nd when the consent decree came out and yesterday over a billion dollars. And there are going to be people- A lot of money.

People are going to say that it's tied to Binance. People are going to say it's tied to Prime. I don't know, but I'm just saying, and you've heard me say this a couple of times, the stable coins or what are perceived as stable coins, everything in crypto has a name that sounds like it's from the finance sector that makes it sound safe and secure. It's just not the way, the more safe. True USD, it's true. And it almost looks like tether. I mean, it's like TUSD versus USDT. It's crazy. It's crazy. And I do think that this is going to give regulators

you know, people ask me all the time, why is it Nevada who's filing this, not the federal government? State regulators want to make their name to become federal regulators. And this is really easy. We saw this in Texas. We see this in Nevada. We see this in New Jersey. This is how you get your promotion. Someone's getting promoted for this in Nevada and going to become a federal regulator out of this case. Yeah. I mean, I just like I keep looking at this as you're saying it. On or about June 21st, 2023, respondent was unable to honor customer withdrawals due to a shortfall of

customer funds caused by a significant liability on the respondent's balance sheet owed to customers. You guys know better than me. It just doesn't seem like there's any way that happens without something sort of nefarious. I mean, James, I hate to put you on the conjecture spot, but I just want to ask you the same question. Is there a way you can have a hole in the customer balance sheet without having either made a mistake? I'm not saying it even has to be fraud. Maybe we're wrong. I could say that, but without making some massive mistake that you've yet to tell people about. Yeah, we have a word for that in the law. It's called negligence. That is the best case scenario, it sounds like, for prime trust. And I would just say, Scott, you've done a real service to everyone because

no mainstream media or anything has connected the dots the way you have. I now understand the situation just from listening to you over the last few minutes. And it's really, really important because this is going to be used as a club by the anti-crypto army the axis of gensler warren sherman biden to club the entire industry over the head another black guy it really sucks but you know we've got to we've got to get the bad players out and this is going to be used as an excuse for see told you we need big jp morgan and fidelity and the rest of them to handle custody and all and trading and every do we dare i ask do we because if this is the best we got well look uh you know we're going to talk about binance here in a minute but uh

we're going to go right into that because I'm so sick of even hearing about it. I feel like I've just had my cathartic moment. I've released two weeks of stress, and I don't even think I did it quite as well as I intended to. But to be honest, it's just mind-blowing. Every time we seemingly have the really trusted institutions in crypto, it starts to fail. It makes you question the other ones, unfortunately, which is probably largely unfair. I do want to, I mean, you just obviously brought up Binance, the big story here, and you're the guy who kind of broke it for me,

to be honest, was your thread, James. So we'll get into it. Binance lawyers, well, accused SEC of sowing confusion in crypto market, influencing jury. So this is, they're really, I love this one. Lawyers cash in on Binance Coinbase ultimate fight with SEC. We talked about that a little bit before, James. And then of course, your threat here. An aggressive move Binance has gone on offense against the SEC in the federal court case. Lawyers for the Binance defendants have filed a motion accusing the SEC of engaging in unethical contact. Love it. It's a big deal. Let me explain. You basically pointed out three things.

Then we'll get into it. That the statements they made are false, designed to harm Binance US's customers and likely to taint the jury pool. And I literally, I mean, I've made the same point. It's like, you don't even have to prove, the SEC came so aggressively. They don't even have to prove that anybody's wrong.

They just have to make another, enough grand statements and make enough noise that Binance US effectively goes out of business anyways, right? Right. Yeah, I've litigated with the SEC for a long time. This approach is different than what we've seen historically. This case started off when they filed a complaint, and maybe your staff could pull it up. There was a tweet from the SEC with a big, bright red background dropping the F-bomb.

The SEC, I've never seen anything. Is that the bro? It was the, we operated an unregistered F-ing exchange in the United States, bro. It was like a communication between CZ and somebody else, or two of them.

Yeah, you've got a hell of a memory there, Scott. Yeah, that's it. I've never seen anything like that. And then it just got worse. Then Gary Getzler goes on CNBC and says, you know, guys, I think if you've got your assets on exchanges, you should get them off because, of course, it's run by a bunch of charlatans, Ponzi schemers, blah, blah, blah, blah.

And this was designed to create a run on Binance. And I think it was effective. And then they came up with the TRO filing saying they wanted a receiver to come in and take over Binance and sideline CZ. So these are very very very unusual tactics and then you know the sec had a really bad day in court when they had said in their papers that you know the this money of customer u.s customer assets was flowing god knows where to cz entities controlled in the caymans blah blah blah blah blah and then the judge said okay okay, well, yeah, that sounds like something. Where's your evidence? Well, judge, double talk, double talk. No, no, seriously, where is your

evidence? And finally they said, yeah, we don't have any evidence. So that really undermined their credibility with the judge. And then, you know, they were ordered to do a consent agreement instead of a TRO. This is a big deal. And so everybody got together and agreed with the help of a magistrate mediating it. Here's an order we can all be comfortable with. And then immediately they come out with a press release saying, hey, thank God we got emergency relief from the court securing these assets, which CZ has been moving around at his discretion. And so, thank God this order was necessary to protect the assets.

And so, Biden has said that's unethical. Out-of-court statements that are misleading and designed to take the jury pool violate the local local court rules, and violate the code of conduct of the SEC. And the key thing here, Scott, is we're not talking about just some lawyers like me saying that. These are former heads of the Division of Enforcement accusing the other side at the Division of Enforcement now of engaging in misconduct and violating uh you know being unethical that's a big deal i mean this means they're not gonna get along you never forget it remember the this case is probably the biggest case of their lives uh for the lawyers on on the sec side and how they've been accused of being unethical you know that that... Yucks SEC lawyers who went to a law firm that specifically attacks the SEC fund.

Yeah. Yeah. It's a big deal. It's a big deal. I can't take it. James and I don't disagree on the law. We disagree on the political spin. I could have disagreed more with what James said from the spin side of it.

Everything James said is 100% accurate, and we completely agree from a legal standpoint. But here's one thing. First of all, don't ever believe someone that's paid $20 million to defend a charlatan. Those guys got paid $20 million, if I had to guess, for the last six, let's call it three months of work. So when they accuse the SEC,

that's just being, that's your mouthpiece that you're paying $20 million to. Everyone does that. They hired, we're not. No, no. I don't think they have to do that. That's completely wrong. Not why everybody is opposing counsel of being unethical.

They are very, very rare. All the time. They were ex-SEC lawyers, right? All the time. Very rare. When everyone, they flipped, they got their money, they're getting their payday. Let me tell you something. I don't agree with

the difference between the TRO and the consent order. That was a huge win for the SEC because they did get, they got slammed by the judge when the judge said, where's the evidence? They had nothing. They had nothing to say. Give me the big win for Binance. Who said big win for the SEC? Big win.

It's a big win for the SEC because the SEC would have lost the TRO order. They 100% were going to lose the TRO order, SEC. Okay, so wait, wait, wait. So you're saying that the SEC wins by doing something that they would lose, but then not losing is bad? 100%. They were going to lose the TRO. The SEC was going to lose. Wait, James, you're saying that means that the

fact that they filed the TRO in the first place was an effort to crush Binance U.S. business without grounds. Why did they file a TRO? But they filed TROs in almost all of them. Just individuals, not against large institutions. In almost every company, when the SEC files, they file the asset freeze, they file the TRO, and then they file for the receiver. That's the game plan.

And here, they were going to lose. The judge was very clear they were going to lose, yet they got the consent decree, which basically gave them 90% of the relief they were asking for. If Binance wasn't going to do that, why didn't Binance say, we're about to win the TRO? Fuck you, and let their lawyers go wall.

Well, I think because then their business would be gone by the time that was settled, right? I mean, isn't that kind of a catch-22 for a company? The SEC can say whatever they want about you. And if you choose to fight it, you have no business by the time you've gotten through the courts and spent half a billion dollars doing it, right? Am I wrong? I mean, I'm a layman. The days of thunder, I forget the chairman of the NASCAR, he goes, this is how you solve it. It's the Chinese lettuce test.

If you want to inspect Chinese lettuce when it comes to a fork, you let the lettuce sit there for three months, and then you examine the lettuce three months later. Clearly, the lettuce is going to be rotten three months later. I agree that that's what would have happened to Binance, but Binance was going to win the TRO and get the TRO dissolved. It was never going to be approved. So why does Binance at that point come in? Because they have no other choice. That's the problem why the SEC and why the SEC has a 90% win percentage, because unless you have

the powerful finances of Binance and Coinbase to do, and here's where James and I agree on the spin. This is the first time, or maybe not the first time, but this is going to be the largest use of social media involved in SEC litigation. And we're seeing it in the bankruptcy context, especially Celsius, where the social media has impacted traditional legal institutions, legal processes like bankruptcy. The judge was so furious in the Celsius and the Voyager cases that people were calling in. They were asking questions. They were trying to interject. That's what we're seeing. And I think that's what James is talking

about quite eloquently in what Binance is doing. I don't disagree with what their litigation strategy is, but the social media part of this, I don't buy any of it. I still think the SEC is going to win. Finance has the problem. They are not going to be able to dispute the facts from 2015 to 2021 on how that exchange was run. There's going to be a lot worse things that come out on a factual basis. So calling the lawyers, that's just name calling. That's fixing stones at this point. I don't care what someone that's getting paid millions of dollars says they're going to say bad things about the other side it's just a tit for tat right now right but yeah james i'll let you respond but like doesn't it matter that they're right uh yeah i mean uh it is not typical at all uh this is not

the playbook um but they what they want is for the judge to go revisit that transcript and see just how bad it was as he was desperately trying to elicit some kind of evidence. But, you know, the fact that the SEC did not get the TRO is huge. Because in order to issue the TRO, the judge would have had to say the SEC has a substantial likelihood of prevailing on the merits, and that really would contaminate the entire case. And she made that finding early on. So that's the benefit to Binance is it's a consent decree. There's no finding about who's going to win or the merits of the case at all. And what they ended up with is very close to what they proposed in response to the TRO. So I do chalk it up in the win column. But one thing, David, and I agree on is this has nothing to do with how the merits of this case

are going to come out in the end. This is an opening skirmish. It doesn't affect the merits, but what they're trying to do, and this is a little bit typical, is undermine the credibility of the lawyers on the other side. If the judge believes she cannot trust representations made by the lawyers for one side, that's a huge win for the other side. And so that is kind of a typical strategy that we use on the defense side. But this does not affect the merits. It's going to question whether the issuance of a token violates the securities laws as opposed to whether trading on a on an exchange in the secondary market is a security transaction so that's good she gets that um so it's going to be interesting it's going to go on for a long time uh But this is a little bit of a win, I think, for Binance. Yeah, I just want to show the reason it's a win for the...

David. I completely agree with James. That metric of the standard we're using, I agree with James. I mean, I agree with James, too, because it's only in this moment. I think, David, maybe we're talking past each other, because I do think that Binance did a lot of things between 2015 and 2020 that they're going to have to reckon with. I think we all know that. And we can argue whether they were doing that intentionally or whether that was just a result of a lack of regulation trying to build a business. Doesn't matter. Those things are going to come out, as you said. The question now is that finance, finance US, if they are running legitimate

businesses at this point, should they be crushed simply by claims by the SEC speaking with a very loud mouthpiece? I mean, finance US solves USD withdrawal issue, but warrants it won't last long, right? I mean, there's customers in here who are rushing to get their money out. And on any given day, you may or may not have a banking partner who can do that. And this is all a result of the claims that have not yet been substantiated by the SEC, right? I mean, so it just, you have to feel for your average American investor here, right? I mean, if you're invested, you're using one of these platforms, I just told you about Prime Trust. We know what happened with Mts what what the hell do you do here yeah i'm not gonna i'm not gonna tell people what they ought to do with their money if they're on centralized exchanges um but yeah i mean the sec was extremely uh successful in in generating a lot

of a lot of uh worry concern alarm But, you know, the reality is, if you look at that CFTC lawsuit against Binance, as well as the SEC, there's a lot of bad emails there, you know. So they need really good lawyers, and they've got them, and this is going to be fun to watch. Cough, cough.

There's also the class action against Binance that was filed the same day. I'm not going to say that the SEC didn't copy some of my paperwork, but more importantly, they have the A team. They have the dream team of lawyers. I spoke this is almost what happens when, I'm going to use FTX as the example, when you have kids running the hen house, this is what happens. They're saying things on chats, they're saying things, I don't care about the law. These are things that old guys in suits are going to be able to use against them in front of older judges from a different generation that aren't going to care whether or not

there was clarity, regulatory clarity, functional clarity. There's going to be a lot of bad things that were said in writing that they knew. Those are the facts that we're talking about coming out in the days, weeks, months, and years. Years. Now,

lawyers are going to make a lot of money on this. I'm a fan of that. I can't pretend like I'm not. But there's, I think that we're going to see the exposure. And if we go back to Prime Trust for a second, the underlying banks that were used for all these companies, a lot of the banks that were used that grew exponentially that are being crushed right now because of what's going on,

it's the secondary and tertiary partners that are in the regulated financial scheme. They're the ones who are going to be the next dominoes to fall because if Binance goes down and it turns out Binance was using X bank and Y bank,

X and Y banks, there's Silvergate, there's- I was going to say they already fell. I was going to say I don't know who's left if they seize signature on a Sunday without ground. It seems like they took care of that problem already. Well, I'll tell you, the Cross River Bank, MVB, BMO,, and Lexicon are all on Prime Trust as saying, these are our banking partners as of last week. So those are, I mean, I just came off the website this morning and those are banks who, by the way, I thought it was really funny. The last time they had audited financials on Google, I'm not saying this is accurate, was 2021. So, you know, those are the banks that are going to turn over all of their information from Prime Trust, for instance. They're going to for Binance, you all of those facts come out and come to light.

There are a lot of third, there are a lot of secondary and tertiary business partners who are going to try and save themselves in this industry. And that's going to be interesting when it comes to light. Tip of the iceberg. Oh, I think we're definitely tip of the iceberg. And I have no doubt that there's going to be things, like I said, that come out about Binance for sure. But I don't think that that gives, personally, the SEC grounds to crush the company in the court of public approval with loud statements rather than with the law. Maybe I'm wrong, but that's how I see what's happening here. Amen. I agree.

Yeah. And by the way, I mean, okay, we can talk Coinbase for a second, David. My friend over here, Chris Giancarlo, I don't know if you guys remember him, crypto dad. He was the chairman of the CFTC. I've had him on a number of times. I really love this guy. He just came out and said, the SEC acted deliberately in the timing of the Coinbase lawsuit. Says the SEC appears to have acted deliberately when it brought charges against Coinbase hours before its chief legal officer was set to testify before Congress. I mean, isn't this all the same PR social media playbook that we're talking about here? That this SEC is being activist and timing things for the perfect moment to get the biggest PR opportunity? I mean, listen, we can say all we want about the TRO, but like Gary Gensler's out making cute videos on social media about Kim Kardashian.

This is not a regulator that's acting in good faith and approaching these in a mature and respectable manner. Yeah, you know what? There's a lot of conspiracy theories about the timing of certain actions. And we've seen so many of these conspiracy theories proven true. You don't know what to believe. But I'll tell you one that's interesting is remember when Judge Torres and Ripple ordered the release of the Hinman emails, very quickly, the parties agreed to a delay. Now, I can tell you, my law firm had this business of handling discovery. Redaction takes a couple of days. It's machine-assisted work, and it doesn't take weeks and weeks.

Well, the extension, Scott, the extension that they got allowed the SEC to file the Binance and Coinbase cases prior to the Hinman emails coming out. And I don't think that was a coincidence. So we're seeing a lot of stuff like that. It's a weird day when I'm on TV defending Coinbase. And even I was on TV, even I was on Fox and CNBC defending Coinbase. And it's a weird day when I'm doing that. You cannot say that them filing those lawsuits within days was not, it was timed, it was coordinated.

These cases couldn't be more different. One is the allegation fraud and one is allegations of we don't like your business model, which is not fraudulent, which will come to us and you've done everything. There is such a difference in the two, but they are tying them together and tarring them together. And this is coordinated from the administration down. And when I have to defend Coinbase, who I have described myself as, I see this on TV all the time. All of my crypto is stored at Coinbase. Coinbase is the modern day Goldman Sachs. I will sue them every day of the weekend, twice on Sunday, but they are the people who I want to be standing next to when we're going in

front of Congress, when we're going to court. But that doesn't mean I won't hold them accountable for doing the right thing by their customers, but you have to stand by the people who are trying to do this right sounds like coinbase is like your teenage son i'll get more soon back here no matter what but i will punish him i'm not going to show you my kids are a little too young but they're eight and ten but it's so true i mean it's a perfect example i i love them but they're i I love them, but sometimes you just want to strangle your own kids. And it really is. And so for me to be out there defending them, it's normally more people like James who are doing it. I'm taking the opposite side, shitting all over them, saying all the things they're doing wrong. But this was a coordinated

attack to tie them together so that Congress can have a conversation and put them in the same sentence at every hearing. And it's wildly different circumstances between the two right now. Yeah. I think David makes a really important point there and people need to understand that. The Coinbase case is a pure legal question. Are assets, digital assets traded in the secondary market securities or aren't they? That's it. There's no white fraud. There aren't any bad emails cited in the complaint, even though they've done an extensive investigation, gotten documents, gotten testimony. And it sounds like they got nothing except this pure legal question. Are assets traded out of secondary market securities in my view they they are not but david's absolutely right they're trying to pair up these two cases

and one of the offensive things is uh gary gensler in both a press release and an interview said coinbase is co-minglingling functions within their company. When people hear commingling, they think FTX, commingling of assets. The use of the verb commingling of functions is absurd, like you said, and done on purpose. If you hear commingling, you're unsophisticated. You're like, holy crap, I've got to get my money off of Coinbase, which is exactly what Gary wants to purchase. I know a lot of people who have withdrawn from Coinbase, and there's no reason to. But I know a lot of people who have done that over the past few weeks. But here's the last question.

By the way, guys, we're all going to be on Twitter Spaces in about 25 minutes, and we're going to probably beat this to death. But is it possible that the SEC has pushed too hard here and that there could be political and legal implications, or do you think that they have the mandate to just go for this? Well, it's weird that we're seeing a little, you know, statements from administration officials that, hey, you know, digital assets, seem to have some legs here. And hey, well, if BlackRock thinks Bitcoin's okay, you know, that provides an enormous amount of political cover. The threat to Bitcoin, which is a commodity, has always been a political threat, not a SEC threat or legal threat. It's the political threat of Bitcoin

mining is killing the planet. And now that Larry Fink is like, yeah, well, it's okay to make money from Bitcoin. We got the ESG guy. Yes. Great point. He is worldwide the number one ESG guy. It's why it's caught on is if you've got $10 trillion in assets under management, you've got a lot of influence on what corporations do and say, as well as politicians. And so it feels like the worm is turning a little bit. That's my feel. That it might be okay to some extent, say, well, maybe crypto should survive in some form? Yeah, I mean, that's my feeling. My feeling is that you're starting to hear these like, well, maybe Gary doesn't last this whole term kind of face. Because if he becomes a political liability at some point and just pisses too many people

off, I'm not saying they'll place him with someone better, but it could happen. Go ahead, David. Yeah, I mean, first, from a D.C. perspective, you know, he serves at the pleasure of the president. And, you know, he's not he's doing this at marching instructions of higher up force. This is not a this is not a Gary Gensler. And, you know, the Biden administration looking saying, don't do this. We're against this. This is from the higher up. So the fired Gary movement wouldn't be successful because he'd be replaced by the W, though, is better than the W don't.

And Gensler isn't anti. Well, he he was not anti crypto before he took his position. And if someone says to him, how'd you become anti crypto? They'll say, well, I want to work for someone who was anti crypto. And I think that he's not the worst person to be in this position. You never know what can be worse behind him. Second, I think it's capitulation time. The government, and I say this all the time, the U.S. government is not proactive.

They're reactive. And as a reactionary policy, it's been 10 years. They're going to accept some form of crypto. They're going to eventually accept the Black Rock application. We're going to see the ETFs. We're going to see the trust. And it's good for the space.

It's good for valuation, probably. It's good for a lot of things. But ultimately, there's going to be more... The people with the guns ultimately, you know, there's going to be more regular, the people with the guns always make the decisions. There's going to be more ways for the government to make money on this and protect this from their perspective. And that's what the government's trying to do. And they will be successful. The last thing I'll say on that is Binance wants Gary to stay as chairman. They have said he is a material witness in our case because he had many discussions, not just with CZ, but other senior executives at Binance and being an advisor and had discussions specifically about the issuance of that BNB token, as well as the startup of the Binance US platform.

Now, you know, they haven't come out and denied that, you know, which is interesting. So they would love, they being Binance, to have Gary still be the chairman and demand his deposition, which will be a monumental fight to stop it. But that is really an interesting component that they're going to take advantage of in the course of that litigation. Guys, thank you.

We're going to do this. I want to believe that's not true. I want to believe that's not true. I know it's the allegation. In my heart of hearts, I want to believe that it's going to be, I had coffee with a guy for an hour you're never going to see a rhythm words in because it's the reverse

I just in my world that would be shattering to my world if they're going to be able to document that and it's going to upset me tremendously I'm sorry your buddy Gary man is going down I can't help it my life's work well we'll have you on and we can all your buddy Gary, man. He's going down. I can't help it.

My life's worse. Well, we'll have you on and we can all cry together, mine in joy and yours in sadness at the same time. Guys, I'll see you both in about 20 minutes on Twitter Spaces. Thank you so much for the perspective. And we can argue some more there. It's an even better forum for that. Absolutely. Thanks, James.

Wow, guys. That was a lot to unpack. First, i want to be very clear that uh all of that once again that i said about prime trust good sources but a lot of rumor and i am not making any claims about any existing exchanges i know we mentioned swan and strike i do think that the evidence shows very clearly that they did uh get out and especially in the case of Swan, I'm friendly with Corey. I asked him to be on the show, but he was busy today. They push very hard, Strike as well, that they push their customers very hard to self-custody. These are companies that actually don't want to be your custodians for these very reasons and want people to take control of their assets. And I think that that might be the really silver lining here is the bigger move

towards self-gusty as long as you can actually protect your keys on the actual custodians. Oh, there was one more story I just wanted to point out because this one might have gone missed. Not a crypto story, but it just makes me giggle. JP Morgan Chase is fined by SEC after mistakenly deleting 47 million emails. 47 million emails. J.P. Morgan, oops, accidentally deleted. And the best part about that is if you dig into the article, according to the SEC, J.P. Morgan has been unable at at least 12 civil securities related regulatory probes to comply with subpoenas and doctoring requests for communications that had permanently been deleted.

It's 2023. First of all, I know how to recover deleted emails. I don't know about you guys, but that seems pretty obvious. 47 million emails. They were fined $4 million for this, by the way, which is a rounding error of a rounding error on someone's balance sheet that's around the year. JP Morganed $4 million for this, by the way, which is a rounding error of a rounding error on someone's balance sheet that's around the year.

JP Morgan made $4 million while I just told you that JP Morgan paid $4 million. Literally, right? It's absurd. But in case, like, I just want to point out, they constantly come after crypto, KYC AML violations, and only criminals are using it, and money laundering.

J.P. Morgan violation tractor has paid $36 billion, $735,865,891 in penalties since 2000 for financial offenses, consumer protection-related offenses, competition-related offenses, competition related offenses, government contracting related offensive, employment related offensive, toxic security abuses, investor protection violation, mortgage abuses, banking violation, price fixing or anti-competitive practices. Guys, JP Morgan has paid billions of dollars in funds, fines for, wait for it, commingling funds, right? This is not a unique problem to the crypto industry. It's just the only one they seem to be talking about. There's some things that need to be fixed. We have some major problems. Our trusted companies were geniuses in bull markets, and they fucked up. That should not be an indictment of the entire crypto industry.

And I know that our lawyers maybe disagree, but man, I'm here for the fight and I cannot wait to see the SEC eventually losing court. See you guys on Twitter spaces.