The Wolf Of All Streets - Pump.fun in Trouble? Lawsuit Raises Big Questions | Crypto Town Hall

Episode Date: January 31, 2025

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Morning, everybody. Happy Friday. This is Crypto Town Hall. Every weekday, 10.15 a.m. Eastern Standard Time. Today, we're bringing up our crack legal squad to discuss the news about Pump.Fun. Give some people a bit more time to get on stage. It's been quite a week in the crypto space. I did my Friday show with Nathaniel Whittemore, NLW, this morning on stage. It's been quite a week in the crypto space. I did my Friday show with Nathaniel Whittemore NLW this morning on YouTube. We did a Friday Five and reviewed the biggest stories of the week. And it's pretty crazy how fast the crypto news cycle is moving. I mean, we've got obviously the Fed, Jerome Powell saying it's fine for banks to custody chris crypto i mean passively as if that's always been a thing and we don't know about operation chokepoint 2.0 you know we have uh

elizabeth warren re-emerging screaming at howard lutnick about how tether is for outlaws and criminals and that stablecoin should be eradicated effectively. It's SPF's parents fleeing for him to be released by Trump. I mean, just absolute crazy town. And of course, the Czech Central Bank actually moving forward to evaluate Bitcoin as a reserve asset. I think we got enough people in here now. Carlo, you wrote a great thread on pump.fun. I would love for you to just

give us the tldr on what is happening there good morning Scott man do we ever get a break in this space no but we love it I'm on the move today I'm on South Beach actually attending uh Raul Powell's real vision crypto gathering and actually just sat on a panel with matt hogan which was phenomenal so amazing i am if if i'm in a bad spot or it's noisy i apologize but yeah pretty significant development um we've seen previous class action lawsuits i think one was launched in response to the peanut token. And now this law firm has launched another class action lawsuit broadly going after PumpDot's fund and making the allegation that the tokens that they facilitate the launching of are unregistered securities and that they, as the launchpad, are responsible. And it's a fascinating lawsuit. The most fascinating aspect about it is that the law firm actually launched their own meme coin on the platform as an illustrated exhibit

of how easy it is to do so. They didn't fund it. But as soon as the lawsuit went down, of course, DGENs being DGENs, they all grabbed the contract address and started buying the token. And now we have this other dynamic going on. The token itself is seeing price activity. And it was supposed to be a test case

and an example of how this platform is being utilized by people and they don't have proper safeguards. So the first question obviously is, can they get this class certified? Will they get to the point where this requires a response? And are meme tokens registered securities? I don't think so. I think it's a bridge too far. So it's a bridge too far this class action then correct i mean can you differentiate what this means this isn't like the sec is going after pump.fun like we've seen in the past with basically every crypto platform no no it's a class action brought by individual investor who is certifying on behalf of the class arguing that they got burned on a few tokens that were launched over the meme coin cycle fred

remember the uh the counterparty to the squirrel was fred the raccoon flog which is another a very popular meme coin and one other meme coin that this investor apparently bought and lost on and they are trying to make the argument and i think it's a tough argument to make that pump.fun has exposure here because they are essentially uh the launch pad for these so the first step they've got to overcome here is they've got to make a case that these meme coins are in fact investment contracts under the howie test that's going to be tough. And then that they are a statutory seller, that being Pumped Out Fund under the Securities Act. And then based on that theory, that gives liability to them. It's going to be hard to do that because they're going to

have to demonstrate that Pumped Out Fund was more than just a launchpad, a decentralized launchpad, but that they had an obligation to protect investors as well. So I'm curious to see how this is going to play out as well. But I think they have definite challenges ahead. I mean, couldn't isn't there an in between right where these aren't deemed unregistered securities, but some of them are deemed pump and dumps and the person theoretically wins their suit without it having much impact on what these assets are. Yeah, but they want to go after the deep pockets, which is Pump.Fun, who gets a percentage of every meme coin launched. And we've seen the amount of wallet activity and the amount of Solana that's being extracted from the ecosystem and deposited into pump.fund wallet so unless you can make a case that pump.fund has been a facilitator of this and actively assisting

in these quote pump and dump mean coins it's going to be hard to recover damages against the individual mean points because they're highly decentralized and they're commodities in my opinion so that's why they're going after the low-hanging fruit with the deep pockets that makes sense uh dan you have any thoughts on this yeah look it's it's i think it's very akin to um the other days of the web too, was people do scams on Facebook all the time. It doesn't mean Facebook's responsible for the scams, right? A bunch of times people do scams on Facebook, on Twitter. It doesn't make the platform responsible for what happens on them. It is the people that are doing it.

But he's right. Try and track down the guy that launched x y and z token that completely centralized it's going to be impossible to find them so in theory and it does raise it that means you're going after tech yeah go ahead yeah yeah you nailed it i mean this is similar to the patterns we've seen where they're going after the tech that launches these things as opposed to the individual bad actors. Right. I mean, we've talked about this a lot with Bitcoin, you know, used by bad actors. It's kind of like the argument that if you want to shut down Bitcoin because people are using it for nefarious activities, you should, you know, go after Apple for allowing the iPhone to be used by drug dealers to make phone calls, right?

Exactly. Or going after the Fed because the US dollar is used in drug trade. I mean, after the Fed because they issue US dollars, it's used to buy drugs. It's ridiculous. JW, I was just told that you're on stage. You, you,

I only see Dan and Carlo up here. Can you, uh, can you hear because, uh, yeah, I'm here guys. Oh, you're showing you the listener for me. And this happens all the time here. So, okay. Yeah. Perfect. Cool. I would love your thoughts. Awesome. Yeah. I, uh, Carlo and Dan have hit it. And I really appreciate Carlos kind of exposition of this issue. Look, on this particular case, this one case, I don't see a lot of liability for Pump.Fun. I'm sorry they have to go through the motions of getting this class action dismissed, but this is not getting involved in sale of a security. When people have gotten closer to the line, it's usually because they're market-making post-launch.

And I don't understand Pomp.Fun does any kind of post-launch market-making activity. So I don't see a lot of liability for them. But it is true that the next boss – we've gotten rid of Gensler. We've gotten rid of SEC abuse. We've got four years where we're not going to see the SEC kind of trying to destroy crypto as a technology. But the next boss is class actions. Absolutely. And I'm a believer in the cypherpunk ethos of the future of this technology as something meant to be extra legal, meant to be illegal, meant to exist in its own environment with its own rules. But that is sometimes hard

to do. And so we have to continue to think about how to build in ways that don't end up putting the entire technology in some kind of class action abuse nightmare. And one of them is just build a non, you know, build a non, build a non, right? Anonymous building is hard to do if you're taking VC money. It's hard to do if you're reeling your app to go in the Google Play Store because you've got to put your name to that stuff. But otherwise, if you can build anonymously, build anonymously. That's what I tell everybody. Right. These individuals are not building, right?

I'm not talking about pump.fun, but I'm talking about the individuals who are launching. And, you know, we do know that people are pumping and dumping these things left and right. The whole point is that there's no utility and it's just a lottery ticket, right? A collectible. Yeah, and I don't disagree with you, but it's also an experiment in social connection that generally that meme coins are an experiment in social connection and they are this is the kind of silly uh uh antecedent to a future where i think we're gonna see a lot of cool stuff where communities build value and build loyalty tokens and loyalty and and and and access passes to things um so this this silliness right now is still part of a cool future yeah Yeah, I agree with that. So we also know that class action lawsuits in the United States are widely abused, right? I mean, anyone can sue anyone for anything.

And the person who's defending it has to unfortunately go through the motions and spend the money with really no recourse and no upside at the end. So we've seen this over and over again in financial markets, somebody loses money money and they just look to sue someone. That is the world we live in. Yes, sir. And that's why I'm excited for kind of an illegal world, an extra legal world of building toward a code is law kind of future. But it's hard. Yeah. I mean, it's just a fundamentally broken system. So in the opinion of everybody basically up here, pump.fund has very little to worry about. Maybe I can ask a better question. Would we have had a lot more to worry about if Trump had not won, Carlo?

Oh, absolutely. Because this would have certainly gotten the attention of the SEC. And it certainly would have potentially, just like they went after Coinbase and Kraken for being the intermediary centralized exchange where, quote unquote, securities are being bought and sold. I can't see it would not be a far stretch to try to make the same argument here. And look, pump.fund has extracted tons and fees out of the sector. And like you said, a lot of these mean points go to zero, a lot of them are garbage, and I could see them targeting for purposes of protecting individual investors. But this takes away the discretion from people to buy what they want and transact

and take those risks. And I think I may be presumptuous in saying this, but I think anyone who goes on PupDont Fund and looks at the hundreds of thousands of tokens that are launched is assuming the risk. I mean, it is a casino. Dave. Well, speaking of that, look, the real question. Dave, we can't hear you, or at least I can't. Can you guys hear Dave? No, I can't hear him. What is it from a regulatory perspective? Dave, you're breaking up.

You have a bad signal. Gonna have to... Can you hear us, Dave? He's still talking. He has no idea. Dave, we can't hear you. You're talking and we hear every fifth word, so maybe you'll have to get somewhere with a better signal.

Gorov, you just jumped up on stage. I don't know if you've been listening but uh you can tell me if not and we can move on but if you have any thoughts on pump.fun uh in this lawsuit love to hear your thoughts no i i literally just jumped in so i have no idea i'll speak up also juggling is yeah with the satoshi round table sounds good um so i think we've largely dave is your mic working you can try uh if not we're going to move on to another topic

yeah i don't think the the usual uh struggle of hosting uh people on the run on X. And yesterday, I think we actually just got completely rug pulled, which happens at least once a week as well, having nothing to do with anyone's connection. I want to talk about another thing. We got Michael Saylor on the Forbes front cover, which seems really, really exciting. But SPF and Doquan and Elizabeth Holmes, and basically everybody who's been featured on the cover of Forbes sitting in jail.

I'm not implying that Michael Saylor would go to jail by any stretch. But it's been laughably, as a sort of a meme, a historical sort of top signal for the industry. Anybody care that Michael Saylor's on the cover of Forbes? Does it worry you? I have kind of a love-hate relationship with Michael Saylor. That is to say, he doesn't know who I am, but my own view of him is kind of love-hate. I love the fact that, on the one hand,

he was right about Apple. He was right about Bitcoin. And when he's right, he places a bet. He does what we should all try to do in life is wait, study, sit, listen. And then when you have one just committed bet, go all in. So I respect the game. I respect that. On the other hand, toxic Bitcoin maximalism.

He's part of that world. Very much a toxic Bitcoin maximalism. He's part of that world. Very much a toxic Bitcoin maxi. Some of the original people involved in the development of Bitcoin are not as maximalist as he is. Why do I need to buy MicroStrategy when what I should be doing is buying Bitcoin and self-custodying it myself? That's the whole point of Bitcoin. I think if Satoshi were here today, he or they, probably they, would say, it's ridiculous and silly to own Bitcoin by buying a share in a public company that owns Bitcoin. That's the dumbest thing I've ever seen in my life.

I don't have a problem with him being on the cover. I don't have a problem with him being in our community, being an advocate for this space. That's great. I mean, you know, to fight fights for crypto, you got to ally with people who are a little crazy. But I'm not a hundred percent a uh fan um love-hate relationship there and yeah so um the best thing that i know about sailor is um he was anti-bitcoin before so people say um you know bitcoin is not an iq test it's an ego test so he he came out against Bitcoin.

You know, there's famous tweets about him saying, oh, it's like gambling or whatever. He was wrong. And he came out. He ate the humble pie. And he said, yeah, no, I was wrong. And it's good. And it takes a very brave person in this day and age when people are sharing tweets left, right, and center to say, yeah, I got it wrong. This is now the right way.

And so I have a lot of respect for him for coming out against his previous judgment and eating the humble pie and saying, yeah, no, Bitcoin is the right way because previously he was anti-Bitcoin and now he's pro it. That's been the path of all these guys, right? I mean, all these strong opinions loosely held. Everybody's dismissive. They do the work and then they come around. I agree.

So when I first heard about Bitcoin, I was anti-Bitcoin. I was like, oh, it's a scam. And it took me a while. And then I ate my own humble pie. And I was like, yeah, I put a blog out on my blog saying I got it wrong. Right. But the fragility of openness of saying, yeah, I was wrong. Admitting you are wrong is a superpower.

It really is a superpower. If you want to go look on Reddit slash rbutcoin, there's a bunch of dickhead losers there that have been anti-Bitcoin since it was like a dollar. And they're like the Japanese soldiers in the Philippine forest, right? Ten years after the war's over, still saying Bitcoin's a scam. Guys, the war's over, right? It's ridiculous, right? Ten years after the war's over, still saying Bitcoin's a scam. Guys, the war's over, right? It's ridiculous, right? They're still there doing that kind of stuff. Have the humility to admit if you got something wrong, because as soon as you admit you are wrong and you go, right, I was wrong and this is the way, it's such a green and pleasant land when you have the humility to admit that you were wrong about something.

And he did, so I've got a lot of respect for him for doing that. You know who hasn't admitted they're wrong? Elizabeth Warren was going absolutely apeshit on Howard Lutnick about Tether being for quote-unquote outlaws and used by North Koreans and terrorists and smugglers and such. She's not coming around in the manner that you're talking about, Dan. Okay, keep fighting the war that's way over, right? You're the Japanese soldier in the Philippine forest

in 1974. Cool. Be that. Good luck to you. Yeah, but I will say I was on a space yesterday with John Deaton in the afternoon, and he did make the point which I've kind of been alluding to before, when you have one party sweep the House, Senate, obviously the presidency, very rarely do they survive the midterms without one of those flipping. Obviously a viable chance

that the Democrats could take back the Senate in two years. I know people don't want to hear that that's a possibility. If that happened, by the way, Elizabeth Warren would be the chair of the Senate Financial Committee again. So maybe in her mind, she sees it as a war worth continuing to fight if they can flip back to Senate. Go ahead, Carla. I see that as a possibility. However, I think Trump's hedge against that is going to be that he is going to do everything he can to pump this economy in the next two years. And that's going to include devaluing the dollar and bringing as much innovation as he can into this country as a hedge against losing those midterms. I think that is something that's been baked into their transition plan from day one. And I think they are ready for that. And frankly,

I just think that public sentiment right now is really, really not on the side of the Democrat Party. So they're going to have a challenge in accomplishing flipping those seats. Agree. But, you know, if the economy goes to crap or something in the next two years, or we see a recession or a dip, which we know are outlawed by governments now, you know, there are things that could happen in the next two years that could change that sentiment, I would imagine, you know, nothing, nothing's guaranteed. David, your mic working. Want to try getting in here? Is it? You tell me. Yeah, you're not breaking up yet. Go ahead. That's good. Oh, okay. Yeah. Yeah, I'm in the supermarket. Sorry, guys.

Having a barbecue at my condo tonight. You know, I had two points to make. One on the pump.com, because you know, it really boils down to the Trump agenda and the transition plan. People have to remember that the whole

reason this last action says it's a security is because it's a crutch, because securities laws essentially outlaw everything. And the reason these things are meme coins in the first place is because they're not securities, because they don't have any economic rights. But if you read what Paul Atkins has said and what a lot of people in this administration have dissentive said, I think that that that false distinction which i've been railing about effectively for four years is going to go away and so yeah right now i think that case is kind of bullshit but you know in fact this pump dot fund is operating as an unregulated gambling or unregulated casino i

mean casinos have casino control commissions lotterteries are supervised, etc. I don't think that our Congress, if they really thought about it, has any stomach for a completely unregulated marketplace. So there's going to need to be something. Now, I don't know if they've done anything wrong, and it could very well be they've done everything right and they have nothing to fear, but the real class action would be if in fact pump.com is advantaging certain users over others not disclosing uh the methodologies you know someone argues that it doesn't dispose risks although i've seen them i think they're disposing the risks are pretty good that's really the issue and you know it's kind of bullshit when we always have these things happen,

where the, these, these suits happen based upon technicalities rather than based upon what the real stuff is. So that was my thought there. And, and I hope that that makes sense. That makes sense.

Yeah. It makes perfect sense. Go ahead. Go ahead. Okay. Now it, it, it,

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it, it, it, it, it, it, it, your thought makes perfect sense to me, but it is also true that there's no difference between Pumped Out Fun and a baseball court store or a coin collector store other than the difference of, because it's crypto, it's able to be bigger, faster, a ton more money has flown into it so it is just a coin collector store or baseball card

store plus the fact that uh you know a ton more money has gone that way so it's i think that it still is yeah sorry go ahead yeah go ahead i'm finished i think that's fundamentally true but like in this baseball card store they can take your money and then rip your baseball card in half before they hand it back to you. I know. Yeah. Fundamentally, you're correct. The point that I was trying to make here, well, fundamentally, that's true about all crypto, right? Crypto is our liquid commodities in most cases, and some of them will be securities, and frankly, it should be.

There shouldn't be any damn difference between the way we regulate liquid commodities or basically liquid assets will be regulated in a similar way. The only real differentiation being the nature of the issuer. But because, you know, manipulation concerns are exactly the same. Fair and orderly markets are exactly the same. And now we finally have leadership in Washington who actually understands that. Now, whether it will happen, whether we'll get the legislation, whether we'll get things to work, I don't know. And that's something that it's a longer, deeper conversation. But what does matter is what are the real principles of protection we're trying to maximize here. Now, I participated in class actions. Generally, the good ones have real harm and real cause.

I haven't looked at this one. I have no idea if it's real. So we'll just leave it as that. I want to make a comment about Michael Saylor because while I personally am sympathetic to the notion that real Bitcoiners will keep Bitcoin in cold custody and you don't need for microstrategy. That statement is so overwhelmingly naive that I actually have to laugh at it. And the reason it's overwhelmingly naive is because there are,

I mean, the vast majority of the participants in the world's financial system don't understand the technology and have their money locked into brokerage accounts and accounts that literally are trapped there to only only be in certain assets and so micro strategy bringing you know these this reason is preferred is so and i don't know if you commented on the fact that it's massively shows you yeah it shows you massive corporate demand from people who don't want to fight the fight. So if you're a corporate treasurer, if you're an asset owner, and you want to be invested in Bitcoin, you have a choice.

Do I buy an instrument that my rules that are written for me say I can buy? Or do I want to fight to change the rules? Well, and if you're a real zealot, then you'll try to do both. But the fact is, is what we just learned yesterday is that there's still enormous demand from people who have rules that say that they want to be able to buy Bitcoin. They want to be able to use products that they understand, that they have rules written for, where the risks make sense. And the Bitcoin community continues to ignore that until there's such a time as you can buy Bitcoin, custody it with a third party, where you know that barring a nuclear war, you're getting your money back no matter what happens to them because you're going to win in bankruptcy and it's going to be the Bitcoin. It's not going to be the cash equivalent like

those of us who lost money in FTX are getting cash any day now. Until that happens, people are going to be looking for alternatives. And it's just that simple. Why go with MicroStrategy when you could just do Bitcoin ETF? There's a ton of them. They're super cheap. Well, the answer is... you want to know the answer?

The answer is people like leverage. And in the case of the preferreds, people like guaranteeing. And they like different risk groups. Sorry, the preferred V. I mean, Jeff Clark did. Yeah, sorry. I was just going to plug you, Scott. So let me plug you.

Jeff Clark did a really good job on Scott's podcast earlier this week explaining why to look at the preferred specifically. And I think it's worth a listen. No, no, that was effectively good to say that. And also, JW, interestingly, I agree with you 100%, but I think MicroStrategy was a proxy for the ETF. Then the ETFs were launched and people said, why would you buy MicroStrategy to get exposure to Bitcoin fairly? And so we started doing these convertible notes, which similar to how MicroStrategy gave people who couldn't buy Bitcoin an option to buy Bitcoin, having these convertible notes gave a different sort of wall of money and investor the opportunity to get exposure to Bitcoin who maybe couldn't. Like an insurance company can't buy maybe an individual stock and certainly can't buy Bitcoin in self-custody, but they can buy that convertible note and get their exposure that way.

Right. So I think he's just finding novel ways for new money to gain exposure. And the prep is just another way to raise money, buy more Bitcoin. And to your point, Dave, I mean, it's like double oversubscribed because I think they were targeting 250 or something. It's at like 540, 560. I mean, that bottom line is a ton of demand for all this. Gaurav, go ahead. I have to not hear Gaurav, so we'll try with that. And Mateo. So Gaurav, try to step up to stage. Dan Mateo, go ahead. Hey, Scott. Yeah, just kind of going back to the topic at hand here. I think that this case is a big nothing burger. If you look at the plaintiffs, they're really targeting three tokens primarily.

One of the co-plaintiffs is named in another lawsuit, and they're claiming a total loss of two hundred and thirty one dollars. If you've been only wrecked for two hundred and thirty one dollars messing around on Pumped Up Fun, then you came out relatively unscathed and probably did pretty good compared to everybody else. So I think when you look at like he's actually bringing this lawsuit, it's just some disgruntled people that didn't know what they were doing. I don't think that's going to set any kind of legal precedent.

And obviously, as some of the more legal experts here demonstrated, there's a lot to prove in order to verify and validate this lawsuit. But I would say that maybe more importantly, this spooked a lot of liquidity out of the Solana ecosystem. You can sort of see that as Bitcoin dominance is trending a little bit down. There's a bounce in oversold alts kind of across the board, but you're just not seeing the same environment on Solana. And that might've been on a higher note,

what this ecosystem need to sort of return to the norm and have a little bit more of what we've been talking about here in spaces as a flight to utility. When it comes to like how they're going to actually manage pump.fund in the future, I think there was probably a clearer road path to be able to do this until Trump launched his own meme coin. When you've got that with 80% of the supply locked up, I actually think it really complicates how they're going to approach these things when you've got the president of the United States to leave quite a bit of head scratching when they start to actually iron this out and decide how they're going to approach this. I do think that we'll probably see something in the future

regarding pumped up fund, but I just don't think this is it. Yeah, I tend to agree. Gaurav, is your mic working? Yeah. Is it? You tell me. Yeah, you're good. You're good. Okay, okay. So I'll go back to I think just, you know, fan cards and coin collector shops. It isn't you cut out that signal. Now you're good. Welcome to X and

gotcha. And people so yeah, I'm saying it's when I'm going back It isn't. You cut out with that signal. Now you're good. Welcome to exit. Gotcha. And people. So yeah, I'm saying it's when I'm going back to the same point where somebody said, it's the same coin collector shop. It's the same cards. You know, the regulation or the regulated activity differs from unregulated activity only most of the times on the question of scale. It's like saying, oh, it's the same car that drives a 350 on the track. Why can't I drive a 350 on the city roads? That's where regulations kick in. approach, easiness, you know, crypto comes into the picture and smashes the question of liquidity, it has to be regulated. And exactly that's how if you see KYC and money compliances are structured,

you know, in a lot of nations, especially in Europe, you can do a lot of stuff up until $10,000, you know, maybe even without KYC, and then you got to give the basic level of KYC, and then you promote it to whatever. I mean, once you're approaching a million, then you got to show your proof of funds and source of funds and so on and so forth. So that's regulation about. So saying simply the mere argument of saying it is the same coin collector shop, I don't think it qualifies the range and span of what pump.fun is doing. And I think it needs to be checked and I need it. Of course, it's a big dent on the industry, the kind of liquidity loss and the kind of reputation loss these activities bring. Now, of course, I'm here in Satoshi Roundtable and it is a bunch of anarchists talking about

how the world should be unregulated and should be wild. Well, I'm sure anyone who's left into the wild would want the same centralized police and the same centralized systems to kick in and save them in one shape and form uh they would probably agree that it would require the same kind of implications or applications of control and centralization in different forms what i mean is let's say police is meant to save you the centralized system similarly the regulators are also meant to save you now i'll park that there the is the same thing like saying, oh, you should be actually simply posting transactions on Bitcoin and not actually using Lightning Network or anything that's built on the top to facilitate an older technology.

Almost philosophically the same thing as saying, let's use the wheels made of stone because that was the original invention. Anything that is facilitating... Can you... Yeah, we hear you you hear you saying something, Scott? No, I just giggled. Yes. Your giggle was filtered by your AirPods or your mic. That's the same thing. I think Michael Saylor

has found a genius model of finding trust, spanning into the custody problems, or let's say the custody complexities of blockchain. It's also easing out the access to Bitcoin. And who knows, a lot of card with msrt stock and and might eventually get into bitcoin uh having their own private keys and and money okay buddy you're breaking up quite a bit uh go to dan sorry grovy you keep breaking up now dan go ahead yeah so like for the last 10 years or or more the entire apparatus of the American government have said, do not touch crypto.

And they've gone out of their way to wage lawfare against everything that we're doing. And then you get rugged for one soul on Pum.Fun, and then you immediately go crying to the government to try and save you. Life's tough. Get a helmet. Suck it up, buttercup. You can't be on the vanguard of this new financial industry where we're dismissing regulators and saying, yeah, we don't need all X, Y, and Z. And then as soon as you get rugged for a tiny bit of money,

come crying to Uncle Sam to save you. These are the rules that we, no, we're worthless. We've been discarding these rules. I was at Binance when getting sued by the government's left, right, and center. We are at the vanguard, as I said, at the vanguard of this new thing, thumbing our noses at government and regulation. go crying to uh regular to save you you know the rules like again yeah i wonder i you know to some degree i 100 agree with that by the way but to some degree it reminds you though that all the people using these things are not crypto natives right the people that you're playing now are not native yeah i get it yeah so like you have to remember that retail does come in and this is maybe their first taste of what we're doing over here.

And they don't realize they're in a casino. It's like, you know, walking into it, you don't realize you're walking into a casino and you start gambling and then you're mad, right? Oh, this is a casino, I had no idea. Welcome to the show, motherfuckers. Take a seat, you know? Yeah, but it does remind us, though, that there is some responsibility for the industry and i nothing gets bumped up fun here though um you know to kind of represent the industry well to new retail that enters but listen you know we had nba top shot i have no idea what like uh nft video of the ninth man on the denver nuggets doing a dunk from three years ago is worth now but I have a feeling it's way down.

It's like a Catholic meme where the guy's getting hanged and he's like, is it your first time? You know what that meme was like at first time? Right? Classic. We've had a lot of ways for people to creatively lose money when they get into our space for the first time. Welcome to the show. Take a seat.

Yeah. Can I make a contrary point here, Scott, and tie some of these things together? So let's just go down the rabbit hole and say that this Pump.Fun lawsuit is complete bullshit. And what's actually happening is a couple of prop traders convinced some plaintiffs and some lawyers to do this. They knew that this was going to happen, so they put on a short Solana buy other shit trade because they thought liquidity would flee the Solana ecosystem. Or in fact, they just bet on DeFi that liquidity is going to flee the Solana ecosystem. How do the people in the Solana ecosystem feel about the inside information of a misused lawsuit? The same thing in any other traditional liquid asset would be considered

insider trading or market manipulation. And those people would end up paying fines or going to jail. Is that better or worse? It's a really interesting question. I personally think it's probably better. I'd say the same thing about momentum ignition strategies when people build a hedge position in futures and spot and then dump the shit out of the less liquid spot to make more money on the futures. Look, I know human beings who did that in Japanese equities and futures in the early 90s before the Japanese authorities started cracking down on it. I mean, I know them. I mean, they were at companies that I worked at and companies, people that I knew, and they made lots and lots of money.

But the market itself didn't develop and didn't bottom out and didn't stabilize until people realized that that shit was going to get stopped. So if you really want an asset class to mature, there are certain behaviors that we have decided collectively are not part of fair and orderly markets, and we don't want them. And I don't think there's a whole lot of people who are advocating that market manipulation is a good thing. But that's why the welcome to the show sort of comment to me is problematic. Look, I understand it. And they're on the edges, I think, that most traditional markets are overregulated to the point of making them less efficient and exclusive to people and all sorts of really bad things.

But there is a line upon which I believe, and I think most people in financial markets believe, that if you want to attract mass adoption, you need to have. And so that's really the point. And look, I don't know, but if it's actually true that this was over $231, this strikes me as highly likely to have been a market manipulation event. And I don't know that we'll ever prove it or know about it, but that's the sort of thing that I kind of wish that it was explicitly illegal and people would know that an attorney who files a suit pursuant to this, if they had any knowledge of why, gets disbarred. I mean, that would stop it immediately. So I'm curious what people think about that.

I know it's a controversial statement. Well, we have some lawyers here who wouldn't want to be disbarred. Carlo, what do you think of that controversial statement? I need him to kind of give a little more context on that because I kind of got lost in that one, Dave. I apologize. Can you repeat that analysis? Yeah. Let's say, for the sake of argument, that lawyers take, at the request of proprietary traders, a fr up. And then the lawyers ultimately end up dropping the suit sometime later, because they only did it because they were getting paid taking a kickback from the traders who are making money based upon the fact that the news of the lawsuit would move markets. Oh, yeah, that would be very bad. Because lawyers who sign lawsuits are certifying

that they have a good faith basis, even though they have a client who's counter certifying, just like in this class action lawsuit. If you're going into that with that sort of fraudulent intent from the start, you are clearly not only jeopardizing your law license, but also potentially opening yourself up to a fraud prosecution. So I think that would be bad on many levels to instigate a lawsuit just to pump markets and then dump based on the news of the lawsuit in order to enrich your clients and indirectly you is bad on so many levels that I mean, I know we see a lot of debauchery in this space, but that would be a new low. Yeah, I agree.

It would be. But the point that I'm making, Carlo, is without some surveillance of the market and what the hell is going on and making it clear, it's entirely possible. And, you know, because when you see frivolous lawsuits that move markets, my brain, look, I know, I mean, Rick Ketchum, who used to run FINRA, once told me that I have the soul of a thief. I have the thought processes of the thief, but I have a soul, so I tend not to steal. You know, he thought I'd make a great regulator as a result.

But, you know, I see opportunity every time I see something that moves markets. And I am hardly alone. There are tens of thousands of people who are smart and look and understand what can move markets. And, you know, we kind of like shrug this stuff off. But it's, you know, when you look at the dark underside of all financial markets, you need to understand what the implications are. And that's where regulators should be doing. The fact that we had four years of an absolute douchebag who somehow miraculously got hired by MIT to continue to take douchebag pedagogy to a new level. To be fair, it was the breeding ground of his douchebaggery.

He's going full circle. Well, maybe, but he didn't say those things when he was there the first time. Look, my point is he specifically encouraged this sort of bullshit for four years and went after good actors. But regulation in the sense of principles- based regulation can do a lot of good regulation in the case of prescriptive lobbyists written regulations that effectively prioritize winners and losers. Well, that tends to create lots of bad stuff. So, you know, I'm just pointing out in this case that something that's completely horrible should be clearly, and people should understand it. And lawyers should know to think twice before they take a case. Because the more logical, the more likely scenario, Carlo, is that the lawyers didn't know. Exactly. I was just thinking that. An unwitting

lawyer who doesn't understand or can't see. And that's where, again, like you said, Dave, strategy plays into this. I've been doing criminal defense work for 30 years, so I've made a career out of representing people that use poor judgment and always have to anticipate and look for potential issues just like that. Are you being played as the lawyer? Are you being used as an instrumentality to perpetuate fraud? If you're acting in good faith based on client representations and you have no other reason to believe so, the one canon that does protect you in the ethics code is that lawyers cannot speculate. They have to have concrete evidence of that. They can't speculate on the intentions because if they make ethical choices and decisions to advocate zealously for a client based on what they speculate is going on, well, then they're

doing a disservice to the client without concrete evidence. If the client overtly admits to it, that's a totally different story. Lawyer has to withdraw, probably disclosed to the court, and it opens up a whole Pandora's box. Right. So my point here, which I think you and I are going to be, I figured we'd be on the exact same page, is that if you were prop traders, and you want to manipulate the market, you find a bunch of plaintiffs to say, hey, go get the, you know, go get your lawyers to do this, convince them that, you know, if you if they start this, that a million other people will join in, and they'll have this huge class action. And there are a lot of lawyers who are willing to try that, and position themselves entirely, wait for the announcement, know when the announcement is going to happen and trade it.

And to me, I don't think there's a I'd be surprised if anyone on this panel thinks that that's something that is a good thing and that it wouldn't be a good thing for to have some light touch regulation that makes it very, very clear to all the lawyers in the space that this sort of shit's illegal. Yeah. And Matteo, then Dan. Yeah, I just wanted to clarify something, Dave. So the co-plaintiff has another lawsuit where the 231 is mentioned. There's no disclosure of how much the actual losses are from the primary plaintiff, but it's not an extensive class action lawsuit. Clearly, they're probably trying to recruit people to pile on, but that's not really clear. I think that the unspoken thing here is that you've got this dopamine-ergic,

absolute insanity in Pump.Fun and what's happening on Solana. And even if Pump.fun got regulated or banned, you're going to see copycats because what they've achieved and what they set out to do isn't that complicated from a technology perspective. It's only getting easier and easier with automated no-code deployments of AI agents, being able to create tokens, list them, do liquidity management. All this stuff is about to be a magnitude and a factor of 10, even more simplified and automated. And I think that this is going to be a basketball underwater situation because these people are so addicted to these quick gains.

They love getting rugged. I don't know why, but they clearly do. And they're going to find a way to participate in this degenerate behavior, no matter where it occurs. And for each one that goes down, 10 more are going to pop up. It may not be as consolidated in liquidity, but I think that's just the reality of it. Dan? You know, I think this whole lawsuit can be described as a bunch of people bought tickets to the

lions eating people's faces show and now they're doing it because a lion ate their face, right? That's as succinctly as it can be. I never thought they'd eat my face. It's the leopards eating people's face show and you went therepers eating people's face show,

and you went there and you got your face eaten by a lion? Yeah, that's what it is. Welcome to the show. Yeah, it's insane. And we'll see if a lot of people pile on to the class action or not. I have a feeling that this is going to be a nothing burger completely. Like I said at the very beginning, Carlo, if this was some sort of government action like we've seen in the past it'd be worth it's worth taking a look at but class actions i

mean come and go by the thousands every single day it's just yeah yeah i want to speak to some regulatory observations that are kind of made along the way so i'll take the uber libertarian position that's always the one I tend to take on panels. There's a subset within crypto now post-election. That's the kind of regulate-me-daddy group in crypto that wants to see not just regulatory accommodation and exemptive relief, but this group also tends to be big believers in the idea of a great bipartisan law um let me tell you something right now congress is going to be the ultimate rug pull on crypto legislation look staying with crypto rates 58 senators as pro crypto which is great

they've done a lot of work to get to 58 but guess what we need to get legislation to the senate 60 that means crypto legislation will need two anti-crypto Democrats to vote for that legislation. What it would take for them to vote for it would be so ugly that I don't want that bill to pass. I don't want a crypto bill to pass with two anti-crypto Democrats voting for it. Whatever it costs to get that is going to be horrible. And I don't want to see it pass. I'm going to light that thing on fire. I'll tell you right now. I love the memes from Dan. I think you've captured it. And I also think it's incredibly bullish that the Trump family is all in on crypto.

I don't care that there's an 80% overhang and they're keeping it. I don't care. I don't care. Incredibly bullish signal. The Trump family is all in. The SEC has the pen for exemptive relief. The SEC's power to give exemptive relief is unfettered. It is what you might call plenary power to give exemptiveC is not, KYC DeFi is not DeFi, period. I'm all in for a future where we don't need roads.

That's good to hear. I like the back to the future reference. I think we would all theoretically be in for that, but understand if we're looking for regulators and legislators to be on board with that, that's going to take a hell of a lot of time. But hey, we might as well aim for the pie in the sky, guys. I think we covered basically everything today. We'll be back Monday, 10.15 a.m. Eastern Standard Time for another Crypto Town Hall. Everybody give our amazing panel a follow. They're all here because we like them so much. And everyone else,

see you after the weekend. Have a great weekend. See you Monday. Bye.