The Wolf Of All Streets - Wall Street/BlackRock Is Taking Over Crypto | Abra Inslovency

Episode Date: June 16, 2023

Join Bruce Fenton, Joshua Frank, Eric Balchunas, James Murphy, David Bailey, James Seyffart and more in the discussion of the the biggest news of the week: BlackRock filing an application for Bitcoin ETF. Will it be approved by SEC? Crypto Town Hall is a new daily Twitter Spaces hosted by Scott Melker, Ran Neuner & Mario Nawfal. Every day we discuss the latest news in the crypto and bring the biggest names in the crypto space to share their opinions. ►►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.

Today's space has unexpected news. And I don't know, Scott, maybe do a quick market update as we wait for more people to join in the panel to join. But the news with Abra really caught us by surprise yesterday. So if that's okay with you, Scott, I'm curious to get more details on that. Yeah, I would love to. Just as for the market update, Bitcoin actually up about $25,500 right now. A lot of that people are attributing to the BlackRock news that we're going to dig into. Ethereum up 1% at

$16.63. I don't even know. Do we want to do stock market updates here? I mean, we always do it. We can run through it, but everything... Yeah, I think it's useful. Literally flat. NASDAQ $13,000. It's up 0.01%. Very exciting. Go ahead, Ran.

Can we just get straight to the fucking point that BlackRock is actually going to get the first crypto ETF? Are they, though? Can we just talk about the elephant in the room? They've applied for 576 ETFs. They've had 575 of them approved and they've had one

disapproved. This is the first one that's going to fail. My view on this six ETFs. They've had 570, five of them approved, and they've had one disapproved. Yeah, so this is the first one that's going to fail. I mean, my view on this is that the SEC was super clear about this. If you want to launch a spot-based ETF rather than a futures one,

it needs to work. These spot-based assets need to operate within a regulated spot exchange. And there aren't any of those at the moment for something that's physical. There is the CME, obviously, for the futures-based ones. But that is the big stumbling block. And I know everyone's getting really excited about BlackRock

because they're big and they've got a lot of clout. But I still think we need to come back to the basics here and say, well, the SEC has been super clear on this it's gonna you've got to have regulated exchanges and it seems like we're away off that so far i was very surprised that blackrock went in with a partner slash whatever they however they refer to coinbase you've got the sec who's actually responsible for approving and declining this etf but then at the same, you've got the SEC who's actually responsible for approving and declining this ETF. But then at the same time, you've got the SEC telling Coinbase

that they've been operating an illegal securities exchange since they started. You've got the SEC telling Coinbase that they're looking for disgorgement for a return of all the revenues made in the trade of these illegal securities. And at the same time,

BlackRock's applying for an ETF to the same SEC with Coinbase as effectively the execution partner. Look, I think that when BlackRock were in the game, BlackRock trumps Gary Gensler. You know what I mean? I think there's hierarchies here, and I think that BlackRock trumps Gary Gensler.

So if I were to put money, I'd put money on the fact that BlackRock actually do get the Bitcoin ETF approved. They know what they're doing. They also know that the SEC hasn't approved approved etfs they wouldn't have got into the ring if they didn't think that they could get it yeah because they're not stupid they're not the reputational technically it is a trust but it's different to the great grayscale trust and then it has daily liquidity which is ultimately in any other word it is an etf in that respect so it is you know if you look at the original gold fund that they created that is a trust too and it and it kind of worked because you know you something that

physical like this you can't technically have it as an etf so it has to be a form of trust really and that's what this is so i mean they're taking a slightly different angle at this. It'd be very interesting to see how the SEC interpret it. But, you know, I think in defense of what the SEC have said before, the trust, at least gold is traded on regulated exchanges and physical Bitcoin is not yet. Can I, James, I want to jump to the other James who we brought on specifically, James, from Bloomberg, because I know you and Eric, who were trying to get up on stage as well, have dug in pretty deep. I think we should start at the beginning there with that clarity between what makes this trust or ETF different, how this is different from GBTC, how this is more similar to GLD, I think, as James just pointed out.

Yeah. So there's a lot of confusion. I saw it all over Twitter last night. I was in the middle of doing stuff and Eric called me. He was like, you see these people are questioning whether it's an ETF. So this is an ETF filing. The most ETFs that you see, they have underlying structures. And most, 95% of the assets, 95% of what you see is open-end funds or something along those lines, something under the 1940s in the US, open-end investment companies often in Europe, things like that. That's what you're used to seeing. But with commodities, you can't do that. You can't operate and launch a product under those types of regulatory frameworks. There's a lot of other underlying structures that you use to launch in what we refer to as an ETF wrapper. So an example of that is grantor trusts, which is what this will operate as, and what GBTC is, what GLD is. There's a few other options. You can do unit investment trust, which is what the first

ETFs in the US were. That's what SPY is. It's a trust. That's the largest ETF in the world. There's also commodity pools, limited partnerships. There's some ETFs that are underlying structure. It's a C corporation, like a traditional company. But for all intents and purposes, this is an ETF. And what makes it different from GBTC, as I'm sure everyone on here on this panel knows, is GBTC does not operate creations and redemptions at the same time. And that's what GBTC and Grayscale are suing the SEC to be able to do. They're suing to be able to convert and operate as an exchange-treated fund in the United States. And this BlackRock filing is doing the same thing. They're filing to launch and operate a Bitcoin ETF in the United

States. Now, the difference here, the reason Grayscale is broken, the GBTC trust is broken, is because when you think of a stock, for the most part, the share supply doesn't change much. So what dictates the price of the share is demand from investors. So as demand goes up, if you think about it as like two bars on a graph, as demand rises, that's what changes the price. But with an efficiently operating traded fund, you can change the supply to meet demand. So as demand goes up, you create more shares. And as demand goes down, you destroy shares or redeem shares. And what this does is it makes sure that the price of the fund is exactly in line with

the underlying value of the assets that it holds. That process, that creation redemption process is what we refer to as the flux capacitor to go back to the future reference. That's what makes this whole thing work and why everyone wants ETF and why it's the crown jewel of launching a product like this. Okay. That's what makes this whole thing work and why everyone wants an ETF and why it's the crown jewel of launching a product like this. Okay, that's perfect clarity. Sorry, I didn't mean to interrupt, but that's perfect clarity on to what it is. So I think that we're clear that this qualifies as an ETF.

Now we got to get between Rand and James's debate as to whether BlackRock will be approved and what that would mean. I mean, we've seen 22 ETF applications denied by the SEC, to James's point. This has been a very clear position from the SEC as to their likelihood to approve. But BlackRock just moved to the front of the line because they're BlackRock. Scott, do you ever watch wrestling or UFC or boxing? And they say, in the left corner, we have this fighter. He's got a record of 575 knockouts to one loss. That's basically where you're at. BlackRock are the experts of each step.

BlackRock know exactly what you've just said, that we've had 25 whatever ETFs. If they have come in and put in an ETF application, they know exactly why they've done it. They wouldn't go in as BlackRock and have the second loss on their name. That's the way I see it. I'm on your

side of this. So I believe that they will get approved. I don't think they would have filed if they didn't already know that they will have yet. Let's go. Guys, guys, guys, guys, get me at the point. Hold on. One second. Wait, wait, one second.

One second. Mark Yusko came onto my show a long time ago. I said to you a long time ago. I think it was like over a year or a year and a half ago. And we were then waiting for an ETF result, which obviously came out negative. And I said to him, do you think that, I don't know if it was Grayscale or whatever it was, I said, do you think that this

company is going to get the ETF approved? And we were all quite excited at the time that this is the one that's going to get approved. And you know what he said to me? He said, oh, no, no. They're never going to get approved. The only person, the only company that's ever going to get an ETF approved is

BlackRock. I've heard him say it 50 times. Yeah, I mean, he's been saying it literally for years. You're right. Maybe we should get him. I just invited him. Can you take a few steps back? Why does that really matter?

What does it mean for crypto? Like if we're seeing, we've always talked about the herd is coming the herd is coming moving ethics or what's fair aside just thinking of it from from pure business perspective well the herd is here and now we're complaining that the herd is here i don't think listen it's just hard to cheer blackrock if you like believe in the ethos of bitcoin but yes objectively if you're viewing it through an investment lens this is probably a good thing come on what i've said but i've been saying come on come on wait no no come on you're not you're not one of these crypto people that think that blackrock is bad for crypto blackrock managed more money than eight trillion dollars i'm not i wasn't making that argument i'm saying that that's what you're

going to hear from the uh bitcoin maximalist side and such but what you will hear from me and I've been saying it since literally the day that FTX crashed, and it was listed, is that this was going to be the moment when Wall Street was going to swoop in and the SEC probably or regulators, legislators would naturally favor Wall Street incumbents over the crypto companies that actually built this industry in the first place and we were gonna basically just see them swoop in in Wall Street companies like fidelity Charles Schwab I like right we're going to be the ones to get approved I mean I think you can see an answer you could see an in sorry thank you everybody if it's black rock or white rock or pink rock yeah and Scott Scott you said the question I have in and I see I see James trying to jump in, but the question that I have is whenever we saw any of these big guys do anything in crypto back in 2017, 2018, or even in the recent bull run, everyone would celebrate. Now, when you look at the narrative, it's more negative. And Scott, you kind of mentioned that in Yahoo Finance yesterday. I did actually watch it.

And you said that what the SEC is doing is just unfair. You know, they've killed the people that really innovated, that brought crypto to where it is today. Instead of giving them credit, they're killing them for the sake of Wall Street. And that's what you complained about. Well, I just think, listen, if we're being objective here, yes, it would be great if BlackRock gets approved. But are we going to see a materially different? And maybe, James, you have your hands up, is this materially different than the filings from VanEck or Valkyrie or Grayscale or any of the others who have been trying to get an ETF approved in the past? Go ahead, James. I would

love the answer to that. Yeah. So from a first principles perspective, no, they're not going to be any different. This is the same type of filing, but I want to make a few points one is that yes i agree with you guys are saying about blackrock blackrock is about as well connected as you can be with what's going on in dc and the sec and what have you right they know what's going on if there's anybody that i trust to read the regulatory tea leaves and know and have a prediction it's going to be blackrock over anyone else. So that's why if any other issuer had filed this, I wouldn't have the same strong words about the fact that BlackRock could file this as a positive thing potentially for Bitcoin ETFs. The one thing I want to throw water on this a little bit is,

I think part of the reason they're doing this is because they think Grayscale is going to win their lawsuit with the SEC, which we can get into in a bit. But it doesn't necessarily mean, even if Grayscale wins, that they're going to definitively be able to convert to an ETF. So that's the first thing. The second thing is, even if the odds of Grayscale converting and them winning or BlackRock are less than 50%, they obviously think the odds have gone high enough and the payout of being in line with the first or the very first or coming out right in line with other issuers is worth the risk of filing this. So one, they don't take massive risks, but obviously the payout for taking this risk of filing is serious. The other thing I want to say is there is already an active spot Bitcoin ETF

filing and it's from 21Sha shares partnered with ARK Investment. 21 shares is a crypto ETF issuer. They have a whole bunch in Europe. They have already a filing sitting at the SEC. So technically, they're ahead of BlackRock. So the SEC would have to perform some sort of, I'll use the word fuckery, to essentially deny that

and then a month later approve the BlackRock one. James, fuckery is a good word for it because I fail to see what new angle that BlackRock are going to take to allow the SEC. The new angle is being called BlackRock, James. I mean, that is one angle, but that would be a sad day, right? Just a giant Wall Street firm suddenly gets it and some other firm where there's some equally good minds tackling this doesn't get it. And it just smacks of favoritism and is along the kind of seam at the moment of what's going on with the SEC, etc. And it'd be a very sad day, although I'm keen for actually a lot more investors to get access to this.

We have tons of investors saying to us, look, as soon as some big firm gets in, we're getting in. So if someone like BlackRock gets in, I think this is a really positive thing. If you look at the example of ProShares when it listed a year and a half ago, there's an instant $1 billion worth of all the money flowing into Bitcoin.

I mean, if it was something like BlackRock, it would be easily $ billion dollars in a week. Could we link the market today with this news because the market has recovered a bit could be just a recovery from what we saw over the last few days but could it be linked to BlackRock considering market conditions? Well I think so a little bit but my interpretation the market is kind of shrugging us off and saying I don't quite believe this just yet. Yeah not only that i think there was a little bounce to bitcoin because there were announcements yesterday that celsius was going to sell all its altcoins into

bitcoin i think more and more the market's realizing you know it's probably safer i'm not saying better but safer to get out of altcoins and to bitcoin and we're getting that that period of fear it's the bitcoin dominance it's up to 49.5 now um when we spoke about 10 days ago 12 days ago it was around 48 or something like that so there is a lot of fear now a lot of people are very scared of altcoins and they're just putting their money into bitcoin and uh that's what's happening and forget there was also tether fight yesterday um with when Tether deepened and then, you know,

that also gets people to, to, to, to. What happened with it? What happened? So Ryan,

since you mentioned Tether, what happened with Tether? I saw the news, something about the links Tether has to China. I know there's a lot of concerns around the Chinese economy. Have you,

has anyone read this? I didn't see that. I did see something around that I saw a tweet, I don't know if the tweet or anything, is that there was going to be some new attack on Tether which never materialized.

But I spoke with Paolo, I spoke with Paolo yesterday, actually, which will be out on Sunday. I did it on my podcast. I was trying to get him on Spaces, but he prefers the one-on-one conversations. And he, I mean, quickly dispelled this. We do this every single round.

That Tether FUD was nonsense. But I don't know if you did see the bigger news, which is that actually they've had requests from Coindesk. I think it's called FOIL, F-O-I-L, Freedom of Information, something or other. And they actually complied with it. And that news came out yesterday after all these years, which means that Coindesk, other journalists,

and everyone will have a snapshot, be able to look back into Tether's books and accounting from the past. So be able to see their balance sheet from previous years and now, which should dispel any issues about their backing. But I do want to stick on BlackRock. And John, listen, we have someone from the SEC, not currently, but obviously in the past, John Reed Stark, you probably have more insight into what's happening at the SEC and potentially their thinking than anyone else. Yeah, thanks. I'm not sure how to interpret this, but I think I can come up with a few answers. First of all, it's important to get in line for this kind of request, because clearly if a Republican administration is elected, then a Bitcoin spot ETF is going to

happen. That is what it seems to me, at least when you look at the votes of the commission. Secondly, I listened to the Grayscale hearing and I was really surprised. I mean, I was almost shocked and the other lawyers on the call can disagree or agree, but the judges seemed very receptive to Grayscale's arguments and seemed very sympathetic to this idea that the SEC's rulemaking was arbitrary and capricious, which just blew me away because I don't think the SEC has ever even been challenged on the basis of something being arbitrary and capricious. However, having said that, I think the reality is, what are these judges going to do? They even said during the hearing, one of the judges said, look, can I order the SEC to not stop the futures spot ETF? Or what action can the judge take to

force the SEC into some kind of rulemaking? They can say this was a problem and the SEC needs to revisit, but there are at least a dozen was a problem and the SEC needs to revisit, but there are at least a dozen different pivots the SEC can do, and you can bet they're going to do it. First of all, they can write a much more extensive, even though they wrote a fairly extensive one already, a much more extensive rejection of these Bitcoin spot ETF applications. Second of all, they could withdraw the futures ETF. They could reconsider that. There are all kinds of things. And it's not like they've ever backed down from anything. If you look at the Binance case, so I don't know that grayscale matter is going to actually result in what everyone wants on that side, which is to somehow approve a Bitcoin spot ETF. I don't

necessarily see a clear pathway for that to happen from a judicial perspective. And I see the SEC pushing back incredibly hard on that because if you read their opinion denying the Bitcoin spot ETF, their rationale seems to me pretty straightforward and pretty clear that the marketplace is just filled with all sorts of manipulation and all kinds of chicanery and all kinds of grift and no transparency. So how can they approve this sort of thing? And the appellants were saying, well, look, they already did in the context of a futures one. So I think the judges were all Trump appointees. I can't remember on the circuit panel, but the SEC could appeal it to a panel on Bonk. There are many, many different things that the SEC can do. But if you look at the Binance case

and what's been going on with it today, it could happen as early as today. The judge reported, the parties reported at least yesterday that they were getting close to a consent decree. But the SEC will have successfully frozen at least $2.2 billion of U.S. assets relating to Binance. And they did it really in the context of an emergency asset freeze, which is unprecedented in this kind of scale. And when you do an asset freeze, I did quite a few of them when I was at the SEC, and I was there for almost 20 years. You go into a judge's chambers and you say, look, your honor, the fraud is so bad here that investors' funds are at risk, that clearly if we bring the other side into this hearing, most of these are done ex parte, they could take the money and run. So we need this extraordinary relief of an asset freeze. Now, this judge, some people may say, well, look, the judge isn't

granting the SEC the relief they want in the form of the TRO and asset freeze. Well, that might be true, but she's ordered them to essentially agree on an asset freeze. Because on all the asset freezes I did, you always come in a week later and say, okay, here are the expenses that we'll allow. We'll allow them to pay electricity. We'll allow them to pay their employees. We'll allow them to pay their lawyers. You don't always have to do that. Some judges will say, look, all these proceeds are the proceeds of a fraud, so you can't use them for anything. But typically, judges will allow those kinds of ordinary course expenses after a TRO, and you might bicker and argue about those. So essentially, the SEC is getting

everything they want here. And how are they going to approve a Bitcoin spot ETF in light of what they're alleging at the largest cryptocurrency exchange in the world? Thanks, Mariam. So John, I have two questions for you. One is you mentioned that in this case, they are freezing $2.2 billion of Binance assets. How do you get to that $2.2 billion of Binance assets? The last time that I looked uh binance us had less than 200 million dollars in the exchange in total yeah that's a great point that's a great point i probably would say that's what the sec wants frozen that's what they've mentioned should be frozen i don't think anybody has a good idea of where those money where those funds are and how much they are. But the judge seems to be applying. I mean, the SEC.

Go ahead. The SEC is also asking, the SEC is also, I mean, initially came out asking for them to freeze Binance International assets, which is a real far stretch and probably would never ever happen. I said it hasn't happened. But I mean, I think the way that I understood the reaction of the judge, I'm not going to say it's a ruling, but the reaction of the judge, is that the judge said, look, I'm not going to freeze the assets.

You guys come up with something that is realistic and protects both sides and is acceptable. Now, with the exchange, it now probably has less than 100. Binance US, as of this morning, was 1% of the assets of US exchanges because a lot of people

have already withdrawn their assets from Binance. I think the numbers are, if anything, they'll freeze $100 million. Well, we'll see. I really don't know. You make a really excellent point that it's tough to say from the pleadings, and I've read all of them and all the exhibits, there are just dozens of accounts in question here that the SEC has looked at because they've had the benefit of discovery during their investigation of documents from Signature Bank and from Silicon Valley Bank and all sorts of other sources. I mean, who knows? You know, I feel like that this is extraordinary relief. The SEC has never sought it before,

this kind of relief in history, in this kind of context. This is a multi-billion dollar international corporation. Just about all the TROs and asset freezes I did were small companies, small groups of people ripping people off. Now, there was the Telegram TRO, but you remember that TRO did not seek an asset freeze. It just sought an injunction. So that was,, even then the SEC didn't seek to freeze the, the, the 2 billion or so assets that telegram had raised, but they eventually got whatever assets remained paid back to those investors. So I think any day things can change. You know, I wrote a long Twitter post about why I think a criminal indictment is either going to be unsealed or either going to be brought forward, given that everything that's

said in the CFTC complaint, everything that's said in the SEC complaint, given even the SEC complaint, oddly, and I never did this in any complaint that I ever wrote, and certainly I never wrote complaints that long, but literally mentioned the criminal investigation in their complaint. They said it had been reported, they cited like maybe a Reuters report or something along those lines. That's very unusual. I never would say anything about joint criminal investigations, but typically when I was chief of the office of internet enforcement and I was that for 11 years, we had FBI agents embedded with us. Every week or two, we would get together in a meeting with criminal prosecutors, discuss all of our

inventory with them and say, hey, these are the cases we believe should get criminal attention because these companies are treating us like meter maids giving out parking tickets. And so we think these actions warrant criminal attention and criminal investigation and criminal prosecution. And typically, the FBI agents and assistant U.S. attorneys attending would ask lots of questions, and we would go over, you know, share every single piece of evidence we had with them. And if I were sharing evidence that has been revealed in the CFTC complaint, and certainly the extraordinary, just the thousands of pages in the SEC TRO motion.

And we haven't even seen the declaration of the staff attorney in that matter. And remember, there are two declarations, one from the SEC accountants and one from the SEC staff attorney. And the staff attorney's declaration, for whatever reason, has not been made public. Maybe there's just too much private information on there. Maybe there's delicate, maybe the criminal prosecutors have said, we don't want you to share that. But for whatever reason, it's been referenced but not shared. And if you look at the kind of evidence that was presented, it would take me about less than a split second to convince the criminal prosecutors in a room in those meetings, those bi-weekly and weekly meetings we had to take on this case. So if the judge needs a little pushing and the remedies that they come up with in this consent degree aren't powerful enough, the criminal prosecutors may be, they may be triggered to act.

So that's just my opinion, you know, based on my experience. I could be wrong, but that's what I think. Yeah. I mean, I did see today today i don't know if uh if if anybody else saw but i saw that binance um is under investigation for laundering in france and that binance seized their operations in the netherlands so it does feel like the regulatory net is well look at look at the hearing ron look at the hearing when the SEC lawyer said in the hearing that, look, with this wash trading, he talked about how when customers of Binance sign up, they sign up believing that there are compliance mechanisms and all sorts of infrastructure to curtail wash trading and other forms of market manipulation. Yet that is precisely what the SEC alleges CZ was doing.

That he said in the hearing. Now, that's criminal conduct. You don't need a law degree to judge that as criminal conduct, and it's on record, and an SEC lawyer has said it in court, and you don't say anything in court that isn't true to an SEC lawyer. You still do it. John, I want to understand something. Are all criminal conducts pursued by the DOJ? And if not, how do they the fraud cases we brought didn't necessarily have a joint criminal interest for whatever reason. Maybe the amount of money was too small. Maybe they didn't have the resources for it or we couldn't sell it hard

enough. But typically, their determinations, they need a lot of money involved. They need it to be something that's going to grab headlines. It's going to be important because that's how they send messages, by grabbing headlines. And it has to do with the egregious level of the conduct. And again, there could be, on the SEC side, there can be grand jury investigations on the criminal side. And because those are secret, the SEC staff can't even know about. But what often happens is the criminal prosecutors deputize an SEC lawyer, and that SEC lawyer becomes what's called a special assistant U.S. attorney. I did that in D.C. court and prosecuted gun, drugs, and domestic violence cases when I was younger. But you can also do that to join a U.S. attorney's office and help them in the prosecution. And that's probably what will happen in the Binance case.

The DOJ will say, look, we need someone from the SEC to come over here so that we can share with them all of these secret things. And again, you can have typically in these situations when you bring cases like this, there are all sorts of informants, all sorts of whistleblowers, all kinds of turncoats that are begging for attention. Remember, a whistleblower in this case can get up to 20% of any fine that the SEC collects, and that's big money. And there are a whole slew of former SEC attorneys who run whistleblower firms, and you can bet that they're being very active along the lines as well.

So there's lots of really, there's a very complex, and this is a very dynamic situation. But what will tempt, to get to your question, what will tempt a criminal prosecutor to bring a case or not bring a case? Again, it's usually the dollars involved, the parties involved, the level of importance, the programmatic importance of bringing that kind of case. All of those things will be important to an AUSA. And in this case, clearly there is a criminal investigation. Clearly, it seems to me at least, if I had brought the Binance case, I would have alleged internal control violations relating to AML, especially given the AML, the anti-money laundering, the AML allegations contained in

the CFTC complaint. So that makes me think that the SEC carved out that space. They left that territory for DOJ when DOJ breached it. Those were my guesses. I hear you. I want to get back to the BlackRock discussion. Sorry, I just feel like you're asking about the BlackRock discussion. But James, I want to let you go first. James, stay fine.

Yeah. Alright, real quick. The one thing I do want to say, you were talking about why did BlackRock choose Coinbase while they're being sued. I want to point out that BlackRock already had a partnership with Coinbase for their institutional clients. So institutional clients, high net worth individuals, they were using Coinbase to give those clients. Likely what had happened was institutional clients, high net worth individuals were coming to BlackRock to use them for whatever they use them for on their portfolio management side of things. And we're like, I want crypto. And BlackRock had this partnership with Coinbase. So there's already

been a partnership in place. So it's a logical next step to use Coinbase as their custodian, because Coinbase is one of the main custodians being used for any sort of regulated crypto fund, specifically Bitcoin. The other side, which John was talking about the lawsuit between Binance and Coinbase, I'm wondering if specifically because this is a Bitcoin trust, whether there might not be some changing of the arguments at the SEC. James before was talking about how the fact that everything the SEC has said was they want surveillance sharing agreements, they want regulated exchanges for Bitcoin before they approve it. But what they're going after Coinbase for is all the altcoins. They're not saying it, but Gensler is trying to argue that Ethereum is

also a security and not decentralized. And after seeing the Hinman emails, I don't know if everyone here has seen them, but it's pretty obvious that the SEC doesn't really believe or didn't believe that Ethereum was a security. So that means that Bitcoin is the one area where the SEC is basically like, yeah, this isn't a security. So I'm wondering if maybe Gary is kind of like giving up the fight on the Bitcoin front of things, or there's rumblings internally at the SEC, and that's what BlackRock is hearing and why they're doing it. Congress here via enforcement to Binance and Coinbase. And as John was talking about, the Binance allegations are very, very different from what they're going after Coinbase for. And the other thing I do want to say is we talked about being first, being in line with the people to launch. We expect a ton of issuers to file for spot Bitcoin ETFs. The BlackRock was the 28th at least filing for spot Bitcoin ETF. Over 20 issuers have applied for these things. We think we're going to see

a slew of them filed today and maybe on Monday. For example, Grayscale filed for a few ETFs a couple of weeks ago. This is just a backstory. And one of the things they followed for was an Ethereum futures ETF. And what you saw the next day was when within a 13 minute time period, three different issuers submitted their prospectuses to launch an Ethereum futures ETF. 13 minutes from 5.14 to 5.27, the following day after Grayscale applied for Ethereum futures ETFs, all these issuers were like, we need to be in line as quickly as possible when these things launch, because we want to make sure we can get something out. Ultimately, the SEC made them withdraw those applications, but that just gives you an idea

of what's potentially going to happen because a spot Bitcoin ETF, there's a lot more issuers interested in that than an Ethereum futures ETF, and there's a lot more money at stake there. So look for a lot of issuers to just file in the off-champ that they think this thing is going to get through. Let me ask this question. If this happens, what do you think happens to the Grayscale Bitcoin Trust? Do you think the Grayscale Bitcoin Trust is then automatically somehow approved? Do you think that the Grayscale Bitcoin Trust then applies to the SEC to say, look, even though we're not an ETF, in order to remain competitive,

we want to apply for it. I don't remember what the section is, but there's some section that they can invoke where they can actually do daily withdrawals. Or do you think that Grayscale just played the long game and say, well, tough luck, you signed up for the 2% annual management fees, and now you're actually going to pay them? I don't think it's James' idea. I don't think it's as clear cut as that for Grayscale because let's say they did switch to being an ETF. I think it would be a change in legal entity and therefore anyone who's been in Grayscale for many years that

sitting on significant capital gains, it would be a capital gains event for them to switch from one entity to another. And then that would open up the doors for them to say, okay, well, is Grayscale at 2% fees? Is that my best option right now? No, it probably isn't with BlackRock's launching one. So you might see a big shift out there. And also there are many people that be sitting on Grayscale that are fed up, you know, sitting on a,

I don't know what the discount to NAB is at the moment, maybe minus 40% at the moment, and fed up, sitting on a, I don't know what the discount to NAB is at the moment, maybe minus 40% at the moment, and fed up and want to move. And so we'll probably move quite quickly if they have this option to increase liquidity. But if I'm sitting in Grayscale shoes or in

DC shoes and I'm saying to myself, hold on a second, I've got a contract with these people that I can indefinitely continue to charge them 2%. If I become an ETF, I immediately lose those fees. I've got a contract with these people that I can indefinitely continue to charge them 2%. If I become an ETF, I immediately lose those feet. Yeah. There's very little incentive for them to be...

Very little incentive for DCG to change the model here. And I mean, I also keep wondering why they are fighting so hard to become an ETF. I'm kind of putting myself in their shoes and saying, you know, the minute that an ETF is approved, you're getting no additional inflows into your thing. You're going to lose your fees. I think it's their fiduciary duty to do so. Yeah, GBTC would be if somebody else gets approved for the ETF, GBTC, the actual trust becomes irrelevant. So they have to either be the disruptor or be disrupted. They don't really have a choice. Hold on. They haven't taken in one additional

cent into that trust for months, right? And maybe even a year already, there hasn't been any inflows into the GBTC trust. There aren't any outflows. They're earning 2% a year. I hasn't been any inflows into the gbt trust there aren't any outflows they're earning two percent a year i think it's two percent even after expenses which is a little bit more than two percent a year in in fees um and continue to do this indefinitely for the next hundred years and they have just by the way they have no fiduciary duty to do anything because you signed up for that contract and when you invested that was the contract that you invested in and that is just the way that it is yeah so that is definitely a possibility like that's what ran is saying is definitely possible but i would say it's extremely

unlikely you're basically gray skills giving up everything by doing that like they're going to lose all reputation their reputation is already pretty solid with how the discount has gone they've been saying they're going to convert to an ETF. For them not to do it would basically be them just walking out and taking the loss, which I don't see happening. What James was saying before, if one approves, what really is happening is the process to launch this is going through what's called a 19B4 proposal, or it's a rule change proposal. So if one of these get approved, then the rule change is allowed and a spot Bitcoin ETF can launch. So basically, what that means is then all the other spot Bitcoin ETFs will have to follow the same rule change

decision-making process at the SEC. So if BlackRock is first or Grayscale wins their lawsuit and they're first, all these other filings that are coming due after they go through the regulatory process of getting approval from the SEC. It's just basically a matter of timing when the approval would happen. So once one is approved, you can then launch a spot Bitcoin ETF. Pretty much any issuer can do it. Obviously, there's costs and legal fees and all these different things that have to go into doing it. But it's not like one gets approved and the other people can't do it. Anyone can do it after that point once it's happened. So whether it's Grayscale winning their lawsuit and the SEC deciding to allow them to launch, then all these other applications can launch. The timeline between when Grayscale, if they get approved, when they can actually convert it to an ETF is

also up for debate. But essentially, once one is allowed, the rest can also launch a spot Bitcoin ETF. And what is the benefit of having so many Bitcoin ETFs? I mean, it's not like there's any difference in terms of the stock selection. So what is the difference in terms of... Why would anybody put money into the Grayscale Bitcoin ETF when I can just put money into the BlackRock Bitcoin ETF, which is, for me, a much anybody put money into the Grayscale Bitcoin ETF when I can just put

money into the BlackRock Bitcoin ETF, which is for me a much more reputable company? Well, yeah. So theoretically, that could be the argument. But also, I'm just going to play devil's advocate. Grayscale is the first one to get one of these products in the traditional finance world. They know digital assets better than pretty much any other fund company out there. There's a handful of others that I would throw in that camp as well. So there's reasons why you do it. And also, we don't know what the fees are going to be. Grayscale could drop their fees, right?

So Grayscale could all of a sudden get cheap to compete. What's going to happen is undoubtedly when these ETFs launch, look for it to be a competitive landscape where fees come down across the board for all funds. It's even going to be a detriment to probably crypto exchanges because these things are going to trade, the cost to trade them is going to be, the bid-ask spread is going to be less than a penny wide. It's going to be super efficient. And the all-in annual fee, likely from the get-go, is going to be somewhere around 0.5% or 50 bps and probably go lower rather quickly as people try to get a foothold in the space. So for all those reasons, it's going to be pretty critical.

And it's not just on the fun side of things. Like I said, if you want to trade Bitcoin, it's going to be really cheap to trade the ETF. And these ETFs will allow for redemptions. If you own a certain number of the shares, you theoretically should be able to hand in those shares and take Bitcoin directly. So it's not like you also will be locked up the way your Bitcoin is locked up in GBTC.

I have a question for you. If Grayscale is created or allowed to convert into an ETF and we'll have the exact holdings of Grayscale, but what we do know is that Grayscale GBTC shares are trading in a huge discount. Do you believe that on that day, we'll start getting a huge dump of Bitcoin into the market? Ironically, it might be the opposite. There's no way to actually know because essentially what a lot of people have right now is just like when it was trading in a massive premium they were long gbtc and then short bitcoin so they would be they would be doing the same thing here so unwinding that trade would mean buying a lot of bitcoin then again also once it becomes an etf

you can um all that bitcoin can leave so i think there's 330 000 bitcoin in there so like a lot of a lot of money can be ended up dumping in this form of outflows from GBTC. Dave, why don't you jump in? I know you've had your hand up for a while. Yeah, I wanted to go back to the why BlackRock point a bit. And I also want to take issue with the arm-waving part of John Grudenstark's

monologue. Actually on the Binance side, I thought what he said was incredibly insightful and very helpful. But he arm-waved around the SEC having all this great information and their dials of Bitcoin ETFs. Dave, is it possible to get your mic a bit closer? I'm struggling to hear you.

Okay, I'm trying. I'm on AirPod. Is this better? It's the same, but all good. We can still understand what you're saying. Go ahead. So basically, the fact of the matter is the manipulation and what's really fascinating about BlackRock is they

have placed this trust. The filing is a direct comparison to GLD, the gold trust, which is one of the world's largest ETFs. And there is no question you would not be able to find a person who has any quantitative shop whatsoever to make the argument that Bitcoin isn't dramatically more transparent on the way it spot trades, dramatically less likely to be manipulated. I mean, there have been billions of dollars of fines involved in the promotion out there,

and dramatically more transparent, particularly considering that the filing allows for information sharing with the exchanges Coinbase that they're trading on. It is a very clear comparison. And so by doing that, the BlackRock ETF application is much, much harder for the SEC to wave their arms around when they make the denial. Now, they probably will deny it. Maybe they won't. I don't know. Obviously, John may know that better than me. But what I do know is that basis for the denial is going to be much, much, much harder because there is information sharing implicit in the filing. There is incredibly clear evidence in CoinRoutes. We have a lot of this

in terms of how transparent the trading of Bitcoin spot is. And of course, the real hole that Grayscale pointed out in their court case is that the notion that futures somehow are less subject to manipulation is complete balderdash. I mean, literally one of the dumbest things I have ever seen put in print when we all know that the Bitcoin spot market moves, the CME futures are going to move too. So it's completely ridiculous. So it's really interesting the way they've set up the trust. And I think that was a much better answer to the why BlackRock than the conspiracy theory that, well, they know people. The fact of the matter is,

I don't think this particular SEC cares who they know, but I do think they care a lot about structure, and they've cleverly structured this filing to get around the main non-stupid objections in terms of the arm-waving on manipulation. John, what do you think? Obviously, you have a chance to respond there. I don't disagree with most of what he just said,

except for the part about transparency. I think the SEC sets forth a very extensive list. And again, you can read any of the 150 or so crypto related cases the sec has brought that there is obviously a feeling at the sec that these markets are not transparent that they are rampant with market manipulation that the data relating to the markets is sketchy at best and i don't think that has changed in the slightest. But I think it points about conspiracy theories. Sure. Can I make an invitation to you? Let's do a one-on-one Zoom and I will show you all the data that we collect in real time from

all the markets. And I think that that would change some of your opinion. I am not arguing, by the way, that there isn't sculpting this in the crypto market. It's not saying that at all. What I am saying is that Coinbase, Kraken, Bitstamp, those markets, the data is very transparent on crypto. Let me make it very clear. Until your entities are registered as broker dealers or exchanges or clearing firms, whatever registration, whatever you fall into, and subject to the oversight of the SEC and FINRA's auditing, examination, and inspections, I think your data will always be called into question. That's just my opinion. You can disagree with that, but oversight is important, and that's very important to the SEC. So if you're

not regulated, you can talk about all your data all you want. But unless that data is confirmed independently by the SEC as being verified and credible, it may very well be. But as being verified and credible, I just think it's falling on deaf ears. There's two points there. Point one is the SEC has no jurisdiction over Bitcoin right now. It would be the CTC. But point two, that's ridiculous.

What's the difference? The point is, in fact, it's audits and examinations. Wait, John, the difference is that you just said that FINRA and the SEC should investigate firms. And the point is FINRA has zero jurisdiction over Bitcoin. So you're saying something that's just not even possible. But here's the point. No, it's not. That's not what I'm saying at all.

You're twisting my words. John, you can go back and play the tape back. You said that FINRA should be registered with FINRA. You said that they should be registered with FINRA. John, John. You said they should be registered with FINRA. John, John. Okay, okay.

Will you please stop for a second? I'll go back and listen to the tape as soon as this is all done. You said they should be registered. The point is that they're not registered, and the data is not something that the SEC can look at. That's all. And whether you can argue that the SEC shouldn't be allowed to look at that data if you want, you can certainly argue that. But the point is the SEC doesn't have access to that data they in the in the way that they traditionally would which is in the form of an inspection and examination and an audit that's all like they did with ftx they didn't have access to it with

ftx either ftx ftx was a registered broker dealer john oh please there were no examinations there were no audits john you said they were just said coinbase was a broker you said coinbase was a registered broker dealer also it's a dormant broker decoder that they bought that they've never used for anything and you act like they're a registered broker deal there's no you didn't even know they were a broker dealer i told you they were okay you didn't even know how to look it up when using the SEC's website. Oh, right. I don't know anything. You're right. John, go back and play the tape. You didn't know. We argued about it.

John, we argued about it. Again and again. Here's what I'm saying. These are facts. Yeah. Here's what I'm saying. Okay, so this is the John show now? The SEC doesn't audit, examine, or inspect those companies that provide this sort of data. John, the listeners should know that you're not credible.

Binance and Coinbase and Bixi and Bittrex have all been charged with being unregistered broker-dealers, unregistered clearing firms, and unregistered exchanges. See? FTX was registered. See? FTX was registered. John, FTX was registered. Good luck to you all. Bruce, John, one second. I saw that James is going to jump in, and I think we need to take a quick break. So I'll talk to you.

So this is Matt, a lawman. We've got too many Jameses. I am also a James. So many Jameses. Yeah, we a James. So many Jameses. Yeah, we're piling in here. Just a couple thoughts on this. For all of your listeners, why does it matter that this is an ETF and a different structure from the GPTC? I think that the two Jameses explained it really well. And the point is that there's this arbitrage mechanism embedded in ETFs, which caused them to trade at NAV day in and day out. And that's a really big difference.

And it's what people hate about GPTC in addition to the fees. And so that's what, you know, you got a lot of people listening. Why does it matter? Why do we care about the SEC approving an ETF? It's because it trades at NAV and the point was made by somebody. It's a really good point that you almost use it

as an alternative to buying Bitcoin because the price, the fees for these ETFs, if many are approved, it's going to be a competitive landscape. You'll get the equivalent of a Vanguard in there under pricing everybody on fees and forcing it down and down. And that's what's great about a market is that competition works in the favor of investors. Second thing, I read all of the risk disclosures in the filing, in the S-1, and it's fascinating reading. So BlackRock says one of the key risks to the price of Bitcoin and hence the value of shares in the ETF is CBDCs, the introduction of CBDCs, which was interesting as they viewed it as a threat to the price and adoption of Bitcoin.

Second thing was fascinating is this question of the environmental impact of Bitcoin mining. For those people who are Bitcoin maxis or own Bitcoin, care about Bitcoin, you cannot miss the fact that it's a political football and the attack vector against Bitcoin is not, hey, this is an unregistered security. The attack is you're killing the planet. You're causing global warming. You're using all of this electricity for some frivolous purpose, and that's really bad. Now, you've got BlackRock, who is the godfather of ESG. BlackRock is the world's foremost proponent of ESG. And it is coming in publicly and saying, you know what? We're good with Bitcoin on this environmental dimension, and we're getting involved in it. So inherent in that decision is an endorsement of mining and trading. The electricity that goes

into validating trading, mining, has the endorsement of a very well-connected, enormous organization that is very well politically connected, particularly on the Democratic side within the United States, but they're politically connected all around the world. And so therefore, this political cudgel that people have been using against Bitcoin mining now has a pretty big proponent coming on to the other side and supporting Bitcoin. And that's all I wanted to say about the ETF, that people should favor an ETF. I understand John Reed Stark's point about the underlying spot markets. There is manipulation, but, you know, you establish an index. The net asset value will be benchmarked against the

index, not, hey, what is it trading at in Zimbabwe? It's going to be an index of multiple exchanges. And so while there may be some manipulation in some of them, hopefully you get a fair price or close to a fair price. It's not a perfect system, but I think it would be good for investors to be able to get exposure to Bitcoin through that kind of mechanism. Yeah, I think that is a fair point. Sorry, I'm not hearing it. Can you guys hear me?

Yeah, we can hear you, man. Ah, fantastic. I think that's a great point. Guys, I don't know if I want to maybe pivot into the story. And usually we actually have Bill Barha who is actually a speaker. I wonder if he's actually going to join us today around

this potential ABRA insolvency or alleged ABRA insolvency. I wonder if anybody's got any insight on the alleged ABRA insolvency. I don't have any insight. I reached out to Bill. Interestingly, you guys probably noticed the news we were talking about with Abra on the spaces yesterday, which was big, was that Abra was basically cutting off U.S. customers because of regulatory complications and fear. They were announcing basically that U.S. customers and companies

would no longer have access to any of their products, including yield, earn, trade, everything. And so I reached out to Bill yesterday when I saw that news break, and his response was, I don't even want to quote it incorrectly. I can literally just read it here. One second. He said, Robert will be fine. Just another bullet to the head of US investors who get screwed by regulators, right? So he's been on the show, obviously, a million times. But then the news broke in the afternoon, effectively, that I believe it was the state of Texas claiming that they've been insolvent since March of 2023. And we had talked about the idea that Abra had sort of been the last man standing in this industry in the United States. And then a whole list of claims. Now,

for now, we can't see it substantiated beyond this case. I'm trying to get Bill to come on. I have a feeling that you can't do that in this exact moment. But this is pretty big news on the tale of obviously Voyager,elsius block fi and as i said they were the ones who had survived it so i would love anyone uh in the audience anyone on the panel's takes on what's happening here i know we all know bill or quite a few of us do i really hope we can get because we've been on the spaces almost every day. Last week, the week before, would be great if we could get him on.

Yeah, so Scott, I know you've sent him an invite, but I've got a question for you, Scott. I know we know, and you know more than us, Bill on a personal level, he's been on stage a few times, but what does that mean for crypto? Because Abra is big, but not big enough to impact the market. Is that fair to say?

Yeah, I don't think this would have a market impact. I think this would be more impacted on whatever customers they still have or potentially have, I don't know, in the United States and abroad could end up in another similar situation that we've seen with similar platforms that blew up last year. So I think, you know, we're off. It just gives more reasons for regulators to keep the crackdown ongoing, which is giving them more ammunition. I don't think the regulators need any more reason. I do think it's maybe another very tiny stick on the fire but i think uh the regulatory environment is clear as to what's happening so yeah they would probably use it as a talking point for five minutes but i

would say personally our concern here would be for uh the customers and and if we end up in another one of these absurd chapter 11 bankruptcies or insolvencies bruce i saw you looking at your mic yeah so bruce before you jump into scott Scott and apologize, I just was in and out. So just exactly what happened, like if you want to summarize it in two sentences, what are the allegations at the moment? What do we know? Because I've seen what I know is that there's been money moved, funds secretly moved to a Binance account over the last few months. Is that true? Or is that what the allegations are?

That is an allegation. But the greater allegations, or at least from what I've read going through it, is that they were exposed to literally like a litany of these. I saw that. Three Arrows Capital, Apple, Three Arrows Capital, DCG in some way. I think it was with Genesis. Basically, we all know that there was this somewhat incestuous relationship between all of these platforms and companies. You would take a loan from one, lend it to another one who is taking a loan from the other one. I don't think we need to relitigate the entirety of 2022 crypto blowups, but it seemed that they had been clear of all of this. And now when people are digging in that potentially they had exposure to quite a few of them, literally almost every single one of them to some degree and that at this point

probably you know they were able to hold on long enough and now have it now whether that was being hidden from people whether there's transparency violation i can't speak to that but uh seemingly a very similar situation to ones we've seen here so so the so there's two stories to this scott and i want you to correct me if i get it wrong with the first story is that we're seeing dominoes continue to fall okay from from from what's happened from the implosions that we saw um last year whenever that was the other thing is that money moved to a binance account that's customer funds isn't it i i actually i would love to give you more clarity on that but i don't know i don't know maybe somebody else has more information on that but what do what do the does anyone know what these what the allegations

saying obviously yeah so i remember innocent unto proven guilty and and uh you know i want to be objective um and you know we we a lot of people crucified sam bankman freed for what he's done um so i want to be as objective as i can from what we know from all the allegations ran bruce has anyone read them and i just i'm just curious on those monies moved to to binance those funds moved to binance i read them you know what is it bruce tell us well a lot of these things you know and this has been going on since the days of charlie shram many of us remember charlie shram back in whatever 2013 uh you know he had gone in,

he was a young entrepreneur, one of the early entrepreneurs in this space. He set up a popular Bitcoin company where you could buy and sell Bitcoin really, really, really early, like 2011. He went into the regulators who had never heard of this thing called Bitcoin and he said, here's this thing,

I'm doing it, is this okay? He went in, I think he had something like 26 meetings with the department of new york financial services ben losky's office they never indicated there was a problem then all of a sudden they arrested him at the airport like it was uh you know some some heist movie or something with a big SWAT team and he ended up doing jail time for how many years did he do bruce i think he did a couple years and the ultimate thing was failure to report suspicious activity. And what really got him was helping somebody avoid the AML KYC procedures, where if you do a transaction over $10,000, you report it.

Apparently, there was an email that Charlie sent that said, hey, if you split it into a couple of small know, split it into three $3,000 things, and then we don't have to report it. So it was something like $3,000 or $10,000. He was jailed for that for two years? Yeah. He was. Yeah. And this was in the very early days, you have to remember. Yeah.

I know Charlie's story. Yeah. He's a good friend of all of ours. The common theme that you see with this and some of these other allegations is, you know, the prosecutors have an incentive to make it, you know, seem like it's the greatest crime in the world. And in some cases, I mean, in Sam's case, I think it's extremely valid to, you know, call him out as a fraudster and a scammer and everything else. But there's a big difference between stealing customer funds and failing to file some paperwork or something like what Charlie did. What Charlie did is a crime. Everybody in financial services knows that. My employees should know that. I would certainly immediately terminate somebody if they ever did that, of course, and hopefully they would

never do it in the first place. But there is degrees and differences, and we need nuance. I mean, Sam stole $4 billion. He reached right into it, took client money, put it in his own account, and stole it. And he bought his parents something like $50, $60 million worth of real estate, all these decamillion-dollar mansions and planes and things like that completely stolen from customer funds with a lot of these other allegations that you see. You know, that's not the allegation. You know, it reminds me of there was a Tether case where there was a big, big press release by the by the New York AG. Oh, Tether doesn't have sufficient reserves. They don't have the money they said they have.

And then, you you know a couple days after the press release when the when the actual complaint comes out it was over like 180 dollars it's like they were they're 180 bucks off out of 12 billion you know so it's so it's sometimes you know there's an incentive to to buy the press and sometimes the people sorry sorry uh i've got a selfish question what's that tether story what did you say what did they say and it was 180 183 dollars no i don't i don't have the exact details in front of me but there was remember there was a there was a thing a couple years ago where the uh new york ag had put out a release saying that tether didn't have yeah yes funds and and so when you say you

know they claim they have 12 billion and they do not have 12 billion, everybody's like, oh, my gosh, you know. And I mean, even with the even with the Binance accusations, there's there's no allegations that I've seen, at least that where they're stealing customer funds. You know what? That's the SEC's poster child. And John hates this. But but it's true. The SEC gave Sam a broker dealer license. They gave Sam a broker-dealer license. They gave Sam a broker-dealer license. They gave Sam unprecedented access that absolutely no one in the industry has. Not even close.

Who said wrong? How is he wrong, John? He had two meetings with the chair. He had two meetings with the chair. No one else. Sorry, John. Yeah, go ahead. Of course.

Let me just finish the statement. Yeah, so John, I'll give you the mic right after Bruce. Go ahead, Bruce. No problem. Sam Bankman Freed had two meetings. Gensler said that when they asked him, how many times did you meet Sam, he had a very clever answer. He said, my public schedule says two.

Now, to me, that tells me that he met more than times, but he's trying to give a clever, sneaky little answer. But we know it's at least two, And we know that at least one of his, a family friend of his. And the general counsel for FTX used to be Gensler's personal general counsel when he was with CFTC. So he's got all his old pals, his old crew, his old cronies, all his friends in there. And FTX did have a broker deal. John will probably say no, because he doesn't apparently know how to look these up or he did later or whatever but you can look it up yeah well let's just get this a boost let's get this here no no let me yeah i know bruce yeah of course of course he does every other time john last time we talked i said that coinbase you said coinbase needed an ats i said they didn't you argued about it for 10 minutes we can pull up the

tape you argued about it because you didn't know you were arguing about it acting like an expert on this and Point pointing yourself out saying things that are just materially false Just like Gensler does you said that they okay? So in this case is so linking this Bruce Bruce linking this to say Yeah, yeah, so Bruce Bruce Bruce Bruce Bruce Bruce Bruce Bruce Bruce Bruce. So yeah, John Bruce bruce bruce bruce bruce bruce bruce bruce bruce so yeah bruce we'll just move it away from personal attacks i love both of you guys on stage go ahead john and there's a lot of exactly please stay away from the personal attacks if you want the actual bruce bruce bruce bruce bruce and i know bruce bruce bruce yeah bruce let's let's get john to respond please bruce is a really interesting discussion go ahead john thank you so let me say a few things. First, if you look on Twitter, I had pretty much a 24-hour

debate with Mark Cuban about crypto and everything. And it was incredible. And at the end of the day, I said, despite my disagreements with Mark Cuban about crypto, about Kevin O'Leary, about his role in Voyager, not only would I vote for the guy for president, but I would campaign for him all day long. And you can see that on Twitter, we had this lengthy debate where no personal attacks, none of these ad hominems. I'm too old for it. Most of the people on this call are young and they can handle it. I can't handle it. So I'll address each of your points as quickly as I can without trying to get personal. First of all, let's start with the meetings that Gary Gensler had.

Okay, I'm not surprised. I would be shocked if he didn't have meetings with Sam Bankman-Fried, and I don't subscribe to the conspiracy theory about it. Again, having worked at the SEC for almost 20 years and been chief for 11 years, I met with everybody all the time. Can I introduce you to Ryan?

Ryan, Ryan, Ryan, let's get, let's get, yeah, Ryan, Ryan, but let's get all the time. Can I introduce you to Ryan? Ryan, Ryan, let's get all the points. I'm taking notes so we can address the guy, John. I met with people all the time. I met routinely with the general counsels and CEOs of online brokerages

who were just starting out back in 1998, 1999. I wanted to find out what the SEC was doing right, what the SEC was doing wrong, what the SEC was screwing up. And most of the time, like I've said many times, I'm an SEC critic. You can read all of my criticisms.

This just happens to be an area where I agree with what the SEC is doing. So I appreciate there's a lot of cronyism. I don't like it. I worked for nine different chair people and I found cronyism everywhere. And that's a perfectly reasonable allegation. It's frustrating and it's wrong. But I can tell you that just having those meetings is not res ipsa loquitur. There's this terrible crime. Now, as far as being a broker-dealer, look, the point is broker-dealer licensure requires that individuals be licensed with FINRA. It requires, again, SEC oversight, audits, examinations, net capital requirements, insurance, cybersecurity requirements, archiving requirements. There's a whole slew of things.

And typically, when I was chief, if there was a broker-dealer that was involved, for instance, selling prime bank securities, these bogus instruments that purport to represent a secondary market for letters of credit, that happened once. So before we investigated, we sent an examination. I called up, I had five former OC, the Office of Compliance Inspections and Examinations, which is now called the Division of Examinations. I had five of those former OC members in the group that we had hired. And I'd say, look, call your friends over in that division and have them do an exam. And you guys go down there and stay in a hotel a few blocks away. And if there are problems, go in there with subpoenas. So that's what oversight is, is that when there's any semblance or any, any, just even just

a tiny bit of potential bad behavior, the SEC examiners and the FINRA examiners can get in there. That's what registration means. You may own a dormant broker dealer like Coinbase did. And it, but remember Coinbase was specifically charged with failing to register as a broker-dealer. Bruce can argue that, hey, that's a wrong charge because they were registered. Fine. But the fact is, that's what the SEC charged Coinbase with. That's what they charged Bittrex with. That's what they charge all these firms. John, just on the first look, I think we could disagree, but what I love about this is just, we're not an echo chamber. It's very easy to get a bunch of crypto

guys and just sit there attacking the SEC, and I make fun of Scott about this all the time, and Ran as well. So it's good to have you here, John, to have that back and forth. On that first point, I think that's what Ran wanted to ask is the fact that, and I'll give you my thoughts on it, but the fact that Gensler

met Sam twice, and he kind of made it clear that this is public records, and I'll give you my thoughts on it, but the fact that Gensler met Sam twice, and he kind of made it clear that this is on his public records, and yet no one-on-one meeting with Brian, it was just over Zoom. Preferential treatment for me isn't surprising, and I don't think that's that big of a deal. But I know that it could mean there's more cronyism under what we're seeing right now.

So I want to get your thoughts, John. Do you think it's unfair that he met Sam twice and Armstrong none? Without implying that there's any cronyism. Sure. No, I think, you know, when you look at the, when I, again, having worked for, I think, eight or nine different chairmen and chairwomen during the course of the time that I worked there, their schedules were unbelievable. They met with everybody all the time. And even when I was chief, if somebody looked at my schedule, I met with everybody. I didn't keep a tally. I didn't sit

back and say, okay, I met with the general counsel of E-Trade today. I should instead, I better call the general counsel of Schwab and Merrill Lynch to make sure they get their say. I really didn't think of things that way. I think, you know, one of the best points that I hear people make, which I think is true, is, yeah, I didn't go to dinner with these people, although some of them were former SEC people and were my friends. So maybe they were even at my wedding. So it gets a little complicated if you're there for as long as I was, which was, as I said, almost 20 years. You know, people leave and they become very important in the industry and you're still friends with them.

You don't stop talking with them, but you try to be as professional as you can. So sometimes when I read about like the Hinman dinners, for example, I think John Deaton and those people make some very good points about Hinman's behavior in the ripple action. I don't think it's relevant necessarily to the ripple action. Maybe it is, but I haven't seen any evidence to that, that he was going out to dinner and talking about substantive things with his old firm, and he definitely had a financial interest there, and maybe he wanted to go back there. And the ethics office apparently wrote an email that said, we do not think you should have these meetings, and he went and had them anyway.

So that's a situation that I think warrants investigation and is wrong. And I certainly, when I was meeting with anyone, I would always clear those meetings with the ethics council, who was usually very independent and would tell me yes or no. And I think the chairman's office was usually very good at making those determinations, but nobody kept any sort of tally sheet. Is there cronyism that goes on? Yes. I think even worse is the revolving door. There are definitely people who come to the SEC and are just hoping to do three years and then flip themselves over back to their old law firms. And I see that happen time and again. And that's always very disappointing to me. I feel like, hey, when they were at the SEC, they probably didn't want to

upset their law firms. I was working as counselor to director to several directors, and I would write speeches. And I remember writing a speech for one director about CEO pay, which I felt was ridiculously high. And I wrote, I thought, a very good speech about that. And nobody wanted to give that speech. And I think the reason was is because everybody wanted to go out and be a ceo and make a lot of money so i get what bruce is saying i get what you're saying it's human nature and i'm certainly not arguing against that and bruce i'd love you to respond but just like my thoughts could this be in you know john kind of is meeting you're not

halfway but getting there is that could this be i know there's cronyism is a possibility and i think none of us will discount it a hundred percent but could this be, I know there's cronyism is a possibility and I think none of us will discount it 100%, but could this be just preferential treatment and that's business 101, you know, public companies get advisors, give them shares purely to get their level of access. So could it just be an example of preferential treatment, which is unfair,

but doesn't have to be that nefarious? Do you mean bigger donations? Go ahead, Chris. I mean, yeah, we got to remember that he stole customer money to give 70 million dollars to gensler's party too gensler was chairman of hillary clinton's re-election campaign and he oversaw the funding of the steel dossier and um and then sam stole 70 million dollars of customer funds or 30 and i guess his colleagues stole another 40 or whatever,

but over $30 million that he gave, including I think five or 10 to Biden. So that's, you know, so he had this, of course there's favoritism. He's, you know, the most wonderful person in DC. He got every door open for him. And so the challenge with Gensler is that he doesn't meet everybody.

Like John said. He meet nobody. As far as I know, I don't know a single person in the industry he's ever met. I've never seen him anywhere. I've never heard of anybody who's met him. So it's not just Brian Armstrong. It's Jesse Powell. It's everybody in the industry. We can't even we're SEC registered broker and we can't even get a meeting with anyone, let alone the chairman. We can't get an answer from anyone about anything about legit business that we have as a registered broker dealer registered with the commission. If anybody should be able to get a meeting, it should be us because we are legit registered and we're working in this space and we have

legit questions about our actual membership agreement. But even we can't get a meeting with anybody. Forget about Gensler. I don't even bother trying i mean you know you know who am i i'm just a you know nobody who's been registered with the sec for 30 years and been in crypto for 12 years you know i couldn't possibly help to you know just because i have a broker dealer you know i would never assume to to be you know in the presence of someone so important but we can't get a meeting with anyone. And so it does feel like, it does feel very much, it reminds me a lot of a third world country where it's kind of like who you know

and everything's sort of vague. And in my career, all my career, I've always felt that the SEC rules were clear for the first 27 years of my career. The last three years, no. I feel like we've gone over this ledge into this sort of third world territory where things are not clear. You can't look up the rules. You can't do even basic things. And this is my main beef with John is that John is, I think, living in the world that both of us in our careers grew up in, the world of, you know, I started in 1990. I think John started after that, where it used to be honest. You know, maybe when John worked there, I think it was. I never, ever, ever, ever criticized the SEC once

in my career until probably this year. Never once. Never had a problem with them. Never had a regulatory action. Never even been accused of anything. I've never had an issue with them. Always run a clean book. always followed all the rules. But now you have this situation where we can't find the rules. So you have companies like Abra who spent millions of dollars. By the way, I'm an investor in Abra. We didn't get into it that much. But I know that whatever the situation is, it's clearly unfortunate.

But I know for sure that they spent millions and millions and millions of dollars on lawyers trying to do things. And they got a lot of these same kind of dead ends that many of the rest of us in the industry get where you get to a point where you just can't, you can't get a straight answer. You can show them something in writing. Like I can, you know, I used the example a couple of weeks ago where I said, uh, INX is a fully registered publicly traded company that's filed an S1. And as a broker dealer, we are licensed to sell shares

in publicly traded companies. The SEC wouldn't even answer whether we could do that. You know, something that's clearly in our membership agreement. So basic, basic things where they are completely failing. To me, what it seems like, it looks exactly like what it would look like is if Elizabeth Warren or the Biden administration gave them specific instructions to screw our industry. So they're purposely, I can't imagine they could be this incompetent. I can only imagine that they are purposely trying to hurt us. So I think that ties to the unfairness of this. Yeah, Mario, I have a question.

Yeah, go ahead. Before you ask your question, I forgot to mention just for the audience, if you want to come on the show or work with our incubator, anyone in Web3 or AI, check the pinned tweets above and email us. That's the best way to do it. Or just hit us up via DMs or in the comments in the pinned tweet above, mine or Rand's above. But yeah, go ahead, Scott. Yeah, it's really interesting the points that Bruce just brought up and John. So I wanted to ask you about that because you said that you worked under 9, 10, 11, I don't remember the

exact number, commissioners. Is it true that potentially because of who is in power at the SEC, that you could be getting more or less clarity for certain industries and that these things can change like that? Because Bruce is actually admitting here, listen, I've been doing this for decades, never had an issue until now. So I mean, is it potentially true that it's just different this time? Yeah, I think Bruce makes a good point and you make an excellent point. And I've worked for, I'd say eight or nine different chairs. As far as commissioners, I've probably worked for several dozen because they rotate through. And the reality is when administrations change, now, historically, again, Bruce makes an excellent point, historically at the SEC, and I started

there in 1991. I'd been in private practice before that. The SEC was this kind of sleepy, quiet agency that people weren't really mad about. And then after 9-11, especially when Harvey Pitt was chair, and he really got to New York, and he and Dick Grasso, they worked it out so that the exchange came back online, the New York Stock Exchange. And those days were very – it was very proud to be the SEC, be part of the SEC, because a lot of people felt that the SEC was doing a great job. And I would wear my SEC clothing all the time, you know, no problem. And then, you know, after Madoff or so, somewhere around there, I could be wearing my SEC jacket or something or a hat. And whoever was near me would start yelling, you know,

ad hominems at me, you know, like that happens on these Twitter spaces. So I get what Bruce is saying. I think things have changed. It's become much more polarized. And you make a super, super smart point that when these administration chains, it's supposed to be that enforcement remains the same, but it doesn't. Because typically, there are new program priorities. There are new things like when Arthur Levitt came in, he was very upset about muni bond fraud because he worked in the muni bond markets and there was all this pay to play problem going on there. So that was a big priority of his.

And Mark Cuban mentioned in the discourse we had yesterday about the pink sheets and microcap area and how the SEC doesn't bring those kinds of cases because they don't really do much for your career if you're within the SEC. And he was spot on about that. You know, if you bring microcap cases, they don't really generate headlines. And oftentimes pink sheet cases, they don't give you the kind of recognition within the building that they should. And that was a big complaint of some of the commissioners that I worked for over time. But when these administrations change, things change. And I really do think if a Republican is elected, that if Hester Peirce became acting chair or

someone else became chair, that a lot would change in the crypto space because the area has become so partisan. So John, I agree with that. Yeah, so I agree with that. And so then the next question then becomes, what about enforcement actions that are started during one administration under one chairman that then continue on? Let's say that that scenario plays out. Hester Perse becomes the chair, but we're a year or two deep into Binance and Coinbase litigation.

No, that's a great point. I've never seen that happen in the history of the SEC, where a case that's actually been filed because the current chairman doesn't agree with it. It gets withdrawn. I'm certainly not saying it would be put down. I'm saying could the dynamics surrounding it change? I think the dynamics could. I think the need for a settlement, you know, the chairman could reach down to their enforcement

director and say, you know, I think that this case should be settled. I think that, or, you know, you never know what they can do. But, you know, when it comes to independence, there is, despite what some people on this call might think, there is still a fierce notion of independence from the SEC staff. Things change when the administration change, but you don't necessarily try to change with it. You're looking to seek truth, to do justice, to make the world a better place. And that's why you're there. Anytime you want, if you work at the SEC, you can leave and triple your salary, quadruple

your salary. In the case of crypto, you can probably get 10x your salary if you leave and join a crypto firm. So there's all sorts of reasons that people stay, but probably the biggest reason above all else, it's like when I was a criminal prosecutor, too, you really have a good feeling about your independence. And if you're working litigation, I don't think you would allow for a second when you come in and compromise your litigation principles. Sorry to interrupt, but I hate to ever use the term this time. It's different.

Right. The most four dangerous words in investing. But the issue here is that if you had regime change, you had a new chairperson, you had potentially even a new president in general and party switch. A lot that's underlying this case or what's being proposed here is the idea of these being securities without that ever being made clear. Right. What's a commodity? What's a security? How do you register? These have been sort of the arguing points. If you have a Hester Peirce come in who then proposes, again, the idea of safe harbor where any project can come in within three years, prove they're sufficiently decentralized and are not a security, doesn't that blow up the entire underlying premise? Now, that doesn't blow up the premise for claims against Binance, certainly. But if the basis here is that what's problematic is that Coinbase is allowing these unregistered securities to be sold and they're not licensed to do so. But at some point in that case, we get clarity that those are not actually unregistered securities. Wouldn't that fundamentally change everything? Yeah, I don't know the answer to that. So you're saying something that was previously considered unlawful is by rule considered lawful. Just by a definition of what the assets are. I get it. Yeah, I get it.

I mean, I guess that's kind of a bizarre scenario, but it's possible. And I think you're right about Hester. You know, I've known her for 25 years and she's a brilliant person, an incredible human being, a brilliant mind, everything. I happen to disagree with her on this, but she's a fierce libertarian as well. I don't know that she would become chair, but I do think the chair has incredible power. The chair can call an emergency meeting anytime they want. They have a giant staff. They're the ones who hire all the division directors. The other commissioners each have maybe three staff people. That's all Esther has. And those staff people are working around the clock helping that commissioner, but there's not a lot a commissioner can do on their own. But all the budgets of all the divisions, everything is controlled by the chair, especially the meetings. So a chair who wanted to come in and change everything, like the way Harvey Pitt did, like the way Arthur Levitt did, can make a lot of changes very

quickly. For instance, Harvey Pitt, historically, every insider trading case at the SEC could be settled with what's called a one-on-one, a one-time penalty in the amount of your disgorgement of profits for your ill-gotten gains on the insider trading, and a one-time penalty. The only thing that was predictable at the SEC was that small little piece. And Harvey Pitt came in and said, nope, I don't like that anymore. I think if you're a registered person or an accountant or a lawyer, you have a higher duty. So we won't do the one-on-one with you.

He also said, he also came in and said, you know, this cooperative credit that the SEC talks about is a bunch of nonsense. We need to codify what cooperative credit means when you come in and cooperate. So he put together something called. Let me ask you a question. Let me ask a question to Scott and Ran before we wrap up.

Again, for the audience, if you're not messaging us in the pinned tweet, it's your loss. So make sure you check the pinned tweet and email us. But Ran, Scott, my question to you is a simple, interesting one. The ambiguity that we've seen in the crypto space, is that intentional? Or is that just the way things are in the system at the moment? Are you going to cut me if I start talking? No, no, go ahead, Scott, and then we'll go around. Yeah, the ambiguity from the SEC, I think, yes.

I think that they're being purposely ambiguous and vague because it allows them to operate sort of outside of the box and do this enforcement actions to regulate, because if we had clarity and they were forced to answer, is ETH a security? Is ETH a commodity? What are these assets? Then it would be a very different conversation. I think it's very, very purposeful that the SEC in these conditions continues to just name seemingly random coins as securities in each of these suits, right? In each case, it's another six, another seven, I think we're up to 68, right? And if they can continue to just slowly list them off, we know that the implication is that everything is a security, everything is an unregistered security, and that is going to be used in their cases. So the less clarity they give, I think the more wiggle room it has for

Gary Gensler to continue down this path. So that's why I was asking that to John, because the minute that we actually get clarity on some of these assets, which there are congressional people in Congress who are working to do, the minute we have that clarity, it will be fundamentally changed the way that all of these enforcement actions look, in my opinion.