This Week in Startups - Balwani found guilty, Crypto crash updates, + Turkey’s rare earth discovery | E1502

Episode Date: July 8, 2022

First, we cover some breaking news: Theranos ex-president Sunny Balwani has been found guilty of fraud (2:27). Then we dive into crypto: those responsible for the lack of crypto regulation in the US might also have significant crypto investments themselves, and the US is currently trying to change that (13:42). Then a big class-action lawsuit hits Solana and takes aim at VCs (23:09). But it's not all bad news, we cover the Turkish government claiming it just discovered almost 700M metric tons of rare earth materials (39:29). And finally, our startup of the day is a job board for warehouse workers (49:27)! (0:00) Jason and Molly tee up today’s topics! (2:27) Sunny Balwani found guilty of fraud (12:26) Microsoft for Startups Hub - Apply in 5 minutes, no funding required, sign up at http://aka.ms/thisweekinstartups (13:42) US officials that invest in crypto can’t work on crypto-related policies and regulation that could affect the value of their assets (21:42) Masterworks - Skip the waitlist to invest in art using promo code TWIST at https://Masterworks.io/twist (23:09) Key players in the Solana ecosystem are being accused of illegally profiting off the blockchain’s token SOL (36:05) Crypto firm Uprise lost 99% of customer funds trying to short LUNA tokens during the Terra/Luna collapse last month (38:12) Lemon.io - Get 15% off your first 4 weeks of developer time at https://Lemon.io/twist (39:29) The Turkish government is claiming it just discovered almost 700M metric tons of rare earth materials (49:27) SotD: Traba has a job board that helps entry-level workers find shifts at fulfillment centers and event venues (53:41) Outro + Plugs!

Hey everybody, hey everybody. Welcome back. Molly. She's back. Thanks for holding down the fort, partner. Appreciate you. No problem. It is Thursday. I am back in time for a bunch of news because whatever day it is, you know there's a lot of news. It's actually breaking news as we started writing the rundown and getting ready to record today, which is Theranos ex-president Sonny Balwani has been found guilty of fraud. And speaking of fraud, we're going to then drive into crypto. Note the people in charge of crypto regulations in the U.S. might have to forego crypto investing themselves. The U.S. is, you know, creating some more regulations after, you know, all of this crazy

dismantling and crypto contagion. It seems like the U.S. government is going to finally step in. What a concept. What a concept. Maybe a little less self-dealing in government. And there's a big lawsuit aiming to become a class action lawsuit against Solana. It's taking aim at BCs and some of that insider dealing. Yes, this is something we've talked about. It's a multi-coin fund. And we're going to do a startup of the day for warehouse workers. Very cool.

It's going to be a great show. Stick with us. This week in startups is brought to you by Microsoft for Startups Founders Hub. For the challenges you face as a startup founder, Microsoft for Startup's Founders Hub is here to help. The platform provides founders with free resources like Azure. credits, development tools like GitHub, mentorship resources, productivity software, training, and so much more. The program is open to all and takes five minutes to apply, with no funding

required. Learn more and sign up at a.k.m.m.s. This weekend startups. Masterworks Masterworks is the first company allowing investors exposure into the blue-chip artwork asset class. Twist listeners can skip the 30,000 person waitlist by going to Masterworks.io and using promo code twist. And, lemon.io. Need to speed up your product development without draining your budget. Hire vetted engineers from Europe at lemon.io. Go to lemon.io slash twist to get 15% off for the first four weeks. All right.

So as we mentioned before we dive into all that crypto stuff, just an update that Theranos ex-president Sonny Balwani has been found guilty of fraud. Of course, Elizabeth Holmes was found guilty six months ago about. And in this case, this is kind of interesting. Sunny Balwani was found guilty on all 12 charges against him, which were all wire fraud and conspiracy to. commit wire fraud. Elizabeth Holmes got that split decision. She was like, convicted on four, acquitted on four, and there were like three where they couldn't reach a

decision. But in Balwani's case, across the board, guilty, both of them face up to 20 years in prison. Well, not looking sunny for sunny, Balwani. But heyo, you know what? Great. We need to make an example of people who are committing outright fraud and putting people's health at danger. You never like to see this kind of stuff happen, but it happened. They are solely responsible. the two of them. This was a joint effort by both of them to deceive their investors, to deceive the public, and they should have the book thrown at them. We put people in jail for selling dime bags of weed or, you know, whatever, you know, stealing a car. You know, you probably go to jail if you rob somebody's home for 20 years, right? Have you steal a car, grand larceny, if you're dealing

drugs. You know, these white collar criminals, they typically get a pass. And the amount of damage here, you know, was really significant. You had people who made health decisions based on this data. It's not a joke. And, you know, fake it till you make it when you're making an app or, you know, I don't know, you're trying to make your movie

and you're quitting Tarantino and you're telling everybody you're going to change the world with your script or whatever. That's fake it to you make it, right? You assume Molly that, hey, you know what? I'm not a director, but I'm going to be someday. I'm not a CEO.

I'm going to be someday. That's laudable. that's fun, great, you're a little bit delusional. But there is a very clear line from being delusional and being a fraud. As a delusional person, I can tell you this. I never would in a million years ever think about lying or selling shares in a company

that didn't do what it actually did, but I might try to pump myself up and say, hey, I'm going to change the world. So for founders watching, this is this week in startups, remember, you can pump yourself up. You can fake it till you make it, it can be delusional, you can try to sneak into conference

is, you know, that's all good. You can, you know, but you can't commit fraud and you can't put people's lives at risk. They knew what they were doing. Yeah. And we know that because we watched the show. Yes, the TV show proved it to us. I think that TV show is to put Sunny Balwani in jail. Like I'm just saying, who knows how much he would have gotten away with had there not been that show, which really, like, I think, stuck into.

I mean, obviously, they had a lot of proof and they had the text and the emails back. and forth from each other, you know, that we're basically like, I'm in it just as much as you are. But there was definitely speculation that that show, which was so well done. I'll tell you, they should have had a light. They need to have, if we watched this Johnny Depp nonsense for weeks unfold, which is of no importance to society, you know, generally speaking. I'm sure it's important to Johnny Depp, but all due respect, this is not like some super lesson to be learned. I think by society. But here there's a lot of lessons to be learned.

I wished that this had been televised. I think this would have been very important for the public to see what happened here and understand it. And, you know, to study it, I didn't know that the guilty, that the trial was underway even. This was lightly covered. Yeah. There's been like a lot going on. On in the world, yes. But it also tells you, I mean, what media manipulation looks like, right?

Like Sunny Ball 1, he's just not as interesting because he's not the cute blonde here. Yeah, it was not the CEO, but he should have gotten at least 50% as much coverage. I mean, I would think so, absolutely. And it seemed to be zero. Or like maybe I would say 1% of the coverage. So that does feel like a double standard. Yep. Although, to be honest, I can't even really say for sure how much it was or was not covered because A, algorithm and B, like.

Well, everything else. Being on fire at the same time, you know, yes. There was so much that even I will cop to the fact that this is the least, the thing I'm least interested in. But I really like tying it back to being a founder, you know, being an investor. Like some of this is about doing your diligence, which a lot of the investors in this company did not. They took all of these claims at face value and didn't do their diligence. And also the point at which you go from magical thinking to lying. Yes.

Which is a very clear line. Two very important lessons. And thank you for bringing up the first one, which I, you know, know, I didn't even think of, if you're an investor, do your diligence. And if something is not right and you're not seeing the technology, then you know it's a red flag. And then if you're getting spun, you know, it's just like, how many red flags do you need, Molly, in order to say, I'm going to pass on investing in this, or I am going to put my foot down. And, you know, I've had the situation happen, you know, in one of my future books. I will, I will tell more stories.

but to obscureify situations, I've been in situations not dissimilar than the Elizabeth Holmes one, where a founder was lying, or a founder was doing something unethical, or something that even Molly I could consider getting close to the legal line, right? And I put my foot down in these two cases. I think it's two cases, not legal cases, but two instances. And I have a strong belief, which you know, Now, no, since you've been working together six months here, and you've been doing this week, and we've been doing VC Sunday school. I believe in diligence. And you are now getting a front row seat to how much work we put into the diligence here at launch and the syndicate. We put a lot of work into it. And boy, do we find a lot of interesting flags and red flags. Some of them are many red flags. Some are pink flags.

Some are like, okay, this is something that could be cleaned up. Your accounting's a little sloppy. You know, oh, you need to get these legal documents in order. so you're in compliance. They're kind of like compliance issues, right? Or let's call it hygiene, right? Like good hygiene. And you now are getting to see how founders react to them and how they respect us.

The founders and other investors who see us do this diligence, they uniformly respect us. Who doesn't respect you when you do proper diligence, the people who are committing fraud? So when you get pushback on diligence, I encourage all the young investors out there on their first funds. I'm going to be starting our fourth fund and over 300 investments. I too got a little bit like, oh, am I being too hardcore doing this diligence, Molly?

And then I freed myself of that. Because I said, anybody who's going to fight back on an investor who's giving hundreds of thousands, millions of dollars to a founder and being partners with them and putting their name attached to the company, who would in a situation like that fight against doing proper diligence?

Who would? Hmm. Who would fight against that? Mm-hmm. someone who does not want that spotlight coming. Exactly. Exactly. If you don't have your house in order.

And you're hardcore about that. We're hardcore about demos. Like, I have seen you in professional development and other investors and, you know, we'll write templates that are like, if you are still going on and on after a certain number of minutes about your background and your origin story, we're going to want you to skip to the demo.

Even in super early stage companies, we want to see the goods. And in the Theranos case, over and over and over, people were not shown the goods and did not insist on it. It's such a good point. You know, if one of the core things we do as investors and as partners to these companies is we give product feedback and we understand the product. And we try to understand the product because it's going to eventually make contact with the world, aka customers. And the magic that happens in startups is when a product is so well constructed that the customer, fall in love with it, they're delighted, their problems are solved.

And if you are investing tens of millions of dollars or 100 millions of dollars and you can't bother to look at the machine and understand how it works and open it up and send a diligence team in, you shouldn't be investing. Right? Like Rupert Murdoch put $100 million into this. Could he not have earmarked but $10,000 to hire somebody in science to go look at it? Think about what he did. He just trusted everybody else.

And I'm not singling him out, but there were many people like this who trusted everybody else. But there were more people, Molly, who I know, who laughed in Elizabeth Holmes face, literally, and Sunny's face when they refused to show them the technology. So I'm actually really glad that this is what has happened. Yeah. I am glad that this is over. It was a nightmare for Silicon Valley to be blamed for this. They didn't have a lot of Silicon Valley investors. it's criminal behavior, full stop.

And every thousand companies or so, or maybe it's every 500, you could have sociopathic people, narcissists, criminals. There's an evil element in the world. People forget that. And so why wouldn't that exist in any vertical? It could exist in the movie industry,

the finance industry, startups, pharmaceuticals, healthcare. Every industry is going to have bad actors. These are amongst the worst actors I've seen in my career. Yeah, this was, I mean, this was major.

Yeah. No doubt. No doubt. All right. And I call this same bullshit out, by the way. And I will get my flowers and I will get my coronation at some point, Molly, when it comes to the crypto situations. By some estimates over 90% of startups will go out of business in year one. That's why Microsoft created the Microsoft for Startups Founders Hub.

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You can get up to six figures of value by signing up right now at AKA. .MS slash this week in startups. So sign up and start building today at AKA. MS slash this week in startups. Speaking of which. With every passing day. Exactly. I mean, I was going to say, let's talk about more bad actors.

With every passing day, more cherry blossoms are popping up behind you as a result of your accurate predictions about crypto. Okay, first of all, we're going to talk about a little regulation story because, you know, we have been wondering what's going on with regulation. A lot of companies. We're the regulators. Where are the regulators? What are they doing?

Why aren't they providing some certainty here or maybe protecting retail investors? And then it turns out it's possible. I don't know for sure. But evidently, up until right now, there weren't any rules about whether you could be a regulator or a legislator or an advisor on regulatory issues related to cryptocurrency in the United States government. that there weren't any rules against you also just like owning a crap ton and being a hoddler. Oh my lord. So what we're saying now is the next shoot a drop is there might be people who are responsible for making laws that were buying coins, NFTs, whatever, buying crypto writ large, had a vested stake in it.

Maybe. Because if they're doing this, I don't think they're doing this proactively. This sounds like a reactive move. It kind of does. Yeah, it feels reactive. I mean, if this was proactive, it would have happened five years ago. Yeah. We're in decade two of crypto, and we're certainly in like, you know, year five or six of it being mainstream.

So this is a legal advisory from the Office of Government Ethics. To be clear, it's not even really like a law, but it bars federal workers who own crypto from working on policies that could influence the value of their digital assets. So a pretty straightforward non-conflict of interest rule here. We do know that, for example, there have been some White House staffers that have been open about their crypto investments. I assume that there are plenty who haven't been. One example is technology advisor Tim Wu, who has been an advisor to the Biden administration who holds millions of dollars with the Bitcoin reportedly and has voluntarily stepped back from working on crypto policy. I have a solution. Yeah.

Kind of like journalists do. We would have disclosures. right, especially for higher profile journalists. So if you were Walt Mossberg or Carer Swisher or Molly Wood or whoever, you know, somebody up there, in your bio it might say, I am, you know, in a relationship with somebody who works at Google. Like Carra Swisher was famously married to a Googler. And so, you know, she would just disclose that. Now, if you live in Silicon Valley, the chances of you, and you do get married,

the chances of you marrying somebody in the tech industry are like 98%. So fair enough. And would that change somebody's coverage? Yeah, almost certainly not. But if it's disclosed, it makes you feel a heck of a lot better. So what should happen is on the bio pages of everybody who works in government, you know, who's in any kind of a significant position, it should just say if they have any direct holdings, not mutual funds. Because mutual funds, you know, you're kind of obscured.

But if, you know, or maybe small mutual funds, you know, which is what I always tell people when I'm on something like, when I'm on CNBC, I would say to people, listen, I, I might hold some Facebook, you know, in a mutual fund, or I might own Tesla in a mutual fund or an index fund, actually, is what I use Vanguard, like index funds. But I don't actually trade it. I don't own specific ones. If I do own specific, I'm like, I own coin base. I own, you know, Uber obviously, and I own other, you know, square. So I'm just always upfront about it. But why not just put it on everybody's bio page?

It actually gives them more credibility. Hey, Tim Wu has Bitcoin, Ethereum, NFT, and if you've listed six different things he held, great perfect you know and I'm waiting into a minefield I know because members of Congress are constantly violating these rules right like constantly is the greatest traitor in the world I mean to let's just not even get into Joe Manchin reaping like five million dollars in stock dividends from a coal mine do you not know this I mean I did I mean on the energy security like the energy committee I mean it's like it's all of them by the way It's all of them.

It's all of them. It's all of them. It's all of them. They're all. And they have disclosure rules. In fact, I think there's a Republican congressman right now who's in trouble for like waiting a year to disclose an investment that because he was like writing legislation related to that specific investment.

I mean, it's all as dirty as it can be. So dirty. And so I would love to see it all get cleaned up there. Even producer Nick found this Wall Street Journal investigation finding them back in 2021. there were 131 judges who failed to step back from lawsuits involving firms that either they or their families had shares in. And it was like, appointments going back to Lyndon Johnson. Yeah. Yeah. You know, here's the thing. It's very simple to solve these problems too. You go into government office. You should have all of the shares of companies you have either in a blind trust. You don't have

access to the trading. You just put somebody who is a good custodian into it. And they can give you like a yearly report or you could make yearly decisions, right? So even if you do make decisions, they would be every year. I think that would be reasonable because you don't want people to not take office because they can't, it would hurt them financially. So let's say they said, hey, you have to disclose it every year and you can do your trades at the end of the year, whatever. In January, you have a month of trading, but you just have to disclose your trades five days before you make them, you know, one week. So if Nancy Pelosi wants to buy some pharmaceutical company because she had, or maybe, mansion has some coal company, whatever it is, and they sit on the coal thing or they know

what's going on with COVID. They can only do it once a year. And there's five days for the rest of the world to look at that trade and they get the to jump the trade. Right? Totally. Yeah. That would be fair to me.

That would be fair. And I would think that's fair. To be clear, like, Congress passed this Stocks Act that was supposed to increase transparency and maybe make it harder for them to buy and whatever. And then they immediately watered it down. completely. So the dirtiness is everywhere, but if you have been wondering why there hasn't been been more crypto regulation, this could be a reason. Oh, that's right. It was David Purdue of Georgia and then somebody else, that one woman who like insider who traded, who like bought like body bag

and PPE stocks when COVID first broke after they had been briefed. I mean, it's so dark. It is so dark. It is so dark. You're making decisions for like you run for office because you want to do some public good, ostensibly. Then you use it as a grift. And how much money are you making? Like, are these people making $10,000 on a trade, $100,000 on a trade? Like, why even do that? It's much easier to just put your stuff into a low fee index fund on wealth front,

you know, Vanguard, and set it and forget it. And then just focus on your time in office. It's so much easier. It's so dumb to be a day trader like this while you're, you know, and then have this appearance of impropriety. It's just dumb, you know. And at it's worse, you know, there's so. a whole bunch of people in Hollywood right now who are getting dragged into a whole insider trading

lawsuit because somebody was trading or they knew about the Activision sale or something. Do you remember that? Like a bunch of high profile Hollywood people made a bunch of trades. Martha Stewart comes to mind, you know, and all the people who are making those trades. And if you get caught up in one of these things, you can wind up in jail, you know. And these DAs, SEC, you know, they take this stuff mad serious, you know. and they would love to have high-profile people to put a pelt on their wall. And you don't want to put yourself in that situation.

It's totally unnecessary. So easy to make money. You don't need to do shenanigans. All right. You know, I love alternative investments I made up invested in over 300 startups. It's kind of my thing. But if you want to diversify with an asset class that is historically uncorrelated with the stock market,

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UBS has invested in over 30,000 art pieces now, and Deutsche Bank has invested in over 55,000. I actually bought some shares last year in a Bosquiat. I love Bosquiat. I was one of my favorite artists, and I wasn't going to be able to do that myself, and I don't want to take custodian of a painting and then worry about it, and insure it. Maybe somebody steals it. No, I bought my shares in one at Masterworks, which you can see on the screen if you're watching right now. What a beautiful painting. So I want you to give it a shot, go take a look at it. Go to massworks.io slash twist and get priority access. That's masterworks.com slash twist to cut the line today.

Now, you've got to see the important disclosures at massworks.io slash disclaimer. And this is an investment. So you got to do your homework. It's so easy to profit off of tokens. Why bother with publicly traded securities when you could actually get us to doing it? No, no, no, no, no, no. I'm just saying. Like, you know what?

Disclose a way to do this is like get a bunch of unregistered securities in the form of like a crypto token. Yes. And then what you could get a whole bunch of them, and then you could be like, everybody, this token is the jam. You should totally buy it. And then you should offload all of those tokens and make a ton of money while the whole thing collapses long after you're gone. This is the Solana Labs or Solana and the multi-coin capital. Now, I had in totally.

These are alleged. On the pod on episode 13-02. So anytime something, remember I said this in the previous episodes, anytime the market comes down, the lawsuits and the actions come out, right? So we don't know here if this is a bogus lawsuit or if it's legit, but let's just factually go through what they're claiming and then I'll give you my handicapping of it. Yeah.

The claim by Mark Young, who bought Solana tokens during the summer of 2021, is alleges that Solana itself, the token, S-O-L, is an unregistered security and that far from being decentralized, he says, this lawsuit alleges, it's actually highly centralized and that mostly benefited only insiders. The lawsuit mentioned Salana Labs, the Salana Foundation, the co-founder Anatoly Yakovenko, who was on episode 1302 in 2021. And also the crypto VC multi-coin capital and its co-founder, Kyle Simani, all by name plus the trading desk Falcon X. So there's a couple, there's the two big components to this.

One is that the way the token, Seoul, was created and sold, meets these three tenets of the Howie test, which is the test used by the Supreme Court to tell if the sale of something is a security. So the four parts there are investment of money. Okay, check. In a common enterprise.

Check. With the expectation of profit. Check, check, check, check. To be derived from the efforts of others. Check, check, check, check, check. Right. It's obvious. All of these coins fit this profile.

The only reason it wouldn't fit this profile is if you didn't expect a profit from it. And that's where you would fall into what I would consider a utility. So it wouldn't be an investment of money in the utility token. You might be buying the token, not as an investment, but to use it. So if I bought miles for American Airlines, I'm just coming up with something that also uses tokens, essentially. If I bought a bunch of airline miles from United and I did that, to buy my ticket to Italy next summer, that's not an investment of money.

I'm buying them, it's a transaction. And it's not a common enterprise. It's for me to go to Italy. It's not to invest in United and to hope that other people fly United. And I'm not expecting a profit. I'm expecting to get a good deal, right? Totally.

And is it derived from the efforts of others? It's not an investment, so it's not. No, I am not giving the money to the Miles company. So this is why this test is super important. And for people who have utility tokens, you know, if the token is surging and the person who bought it wanted to make money,

which all you have to do is ask them, why did you buy the token? If you said airlines miles, why'd you buy the airline miles, Molly? Right, because I want to go to Italy. Why'd you buy your Bitcoin? Because I hope it's going to go up. Exactly.

It's pretty easy. And this has nothing to do with Solana. This has to do with the entire industry pretending that this test does not exist. all of these things are securities. The only thing that maybe was in a security was Bitcoin because they put it out there anonymously with no central authority

but if they ever found Satoshi I think you could make the argument here that they set it up in order to make a profit. I think it's because they can't find Satoshi that they can't put this test against anybody. Totally. And then even if it started that way it unquestionably is being used as a security and you could even argue

has just become one, has transformed from its original purpose into a security. And then there's this other part. Or commodity. People say it's a commodity. People say it's a commodity. I don't know what the difference would be there. You know, like still kind of passes to how much test to me. It's something that everybody uses and needs. Like, I don't.

Yeah, but what is the use case for Bitcoin? Right, exactly. Then I don't know why it would be. So then there's this other question too about, and this is what I think is actually really fascinating, is that the lawsuit also alleges centralized profit taking. So it notes that two things,

these investors, particularly multi-coin, sold millions of dollars worth of Solana to retail investors through this Falcon X trading desk, even though, and promoted it really heavily, you should totally buy my token, even though they knew there were major

technical issues with the platform. Because remember, Solana had all those crashes. They've been down three or four times. Last month that prevented the network from producing new blocks and could have affected the long-term value, I guess, of these tokens. I think that's BS, by the way, that claim.

Because all services go down. That seems like a spurious. Is that word spurious? Species, that's a little specious. I guess the question is like, yeah, I mean, it would be like you should still use Twitter even though it crashes all the time. That doesn't necessarily get to the intrinsic value. Invested.

People bought shares. They sold shares. But of course it's going to go down. AWS goes down. You know, it's Amazon. And I don't know what I don't even, I don't know what part of this is illegal, but I do think it's interesting, and this woman on Twitter who's a lawyer for general counsel of this group of European software development companies that are building blockchain-based software, noted, and other people did too, that the lawsuit contains this allegation that 48% of the sole tokens are held by insiders, either like the founder or the team or the investors. And she said they're alleging that a crypto VC is an underwriter and said, it's, you know, this would be something you might be.

more commonly see in an SEC case, but not from a private plaintiff, because in theory, it's not illegal for that to be the case, but it also does point to this bigger question of, like, who's crypto even for? If it is a security, and I think it is, then all of this should have been done, you know, properly. And it says here, Solano Labs filed a Form D with the SEC saying

the sale was a securities exempt from SEC registration, as in private company. So they're kind of saying these are private company shares, And of course, people are going to sell their tokens when they're on the market. And this is the big problem with the shadow economy, you know, the shadow market that was created. They created a shadow securities market in crypto over the last decade. And they refined it, Molly, to make it super efficient. And the claims are various VCs, and I think multi-coin is one of the smallest.

There are much bigger VC firms. I'm not going to mention any names here. But there are large VC firms who have put billions of dollars. to work, hundreds of millions of dollars to work. And if they were buying tokens and they were buying them early and they were backing the company and then all of a sudden the public can trade them and the public can trade them on exchanges that that VC is also an investor in or on the board of, you start to see a pattern here of, well, was this some grand conspiracy here to clear these tokens out to the public?

Which would be as if when you and I now are investing in private companies, what if we took the company we invested in six months ago, Molly? and let's take your first deal for the climate syndicate, the syndicate.com slash climate if you want to invest in climate companies with Molly and myself. Let's say we took that company and now we told people, hey, this is the greatest thing ever. We start talking about on the podcast and you can buy shares. Well, that's called an IPO.

Yeah. So. And if all of a sudden we're just promoting it, promoting it being like you should buy these shares, this is the biggest thing ever. And that is actually what this lawsuit is alleging is that it was this sort of constant promotion that made it seem better than it was. I mean, the lawsuit, it's a very long way of saying we think that Solana is a giant pump and note. Well, here's the thing. And if Solana was up right now,

this lawsuit wouldn't exist. It wouldn't be happening. So here's what happens. Everybody had a collective delusion that securities laws didn't apply here or didn't apply in a very serious way. And that was fine and dandy because the way our legal system tends to work is that we let people, you know, build stuff in the world. And we try. that they're going to do it in an ethical, moral way. And I'm sure they thought they were doing this, the people involved. But then if people get hurt, then we double-click, we audit, we subpoena. You know, this is just how our society works.

And so now that everything's coming apart, people are going to look deeply in this. Now, there's also a rub here. People were LPs in funds that made crypto investments. And so I'm LPs in funds that have crypto investments. And so now am I going to get dragged into all of this? And then did I get a distribution? You have to start asking yourself, did I get a distribution?

Because I LP to fund. They were flipping securities really early in the life of the fund. And then people got burned and now there's lawsuits. And then is it going to pierce the veil and our LP's going to get dragged into this? Well, if things keep coming apart like this, now the LPs will get dragged into this. And so imagine you're some giant endowment, you know, and you got some distribution of, you know, some token. I'm keeping it generic for a reason.

obviously. And now you made, I don't know, $100 million from this distribution. You had no control over any of this. When you are an LP in a fund, the fund managers get to decide when they buy stuff, when they sell stuff and what they pick to invest in. Now you're going to get dragged into this. And this is where the crypto contagion is going to be disastrous. This is going to be disastrous.

This can be lawsuits for a decade. Just like in the dot-com era, there were lawsuits for, years might be absurd right i mean there are people in the comments in response to the the threads that are analyzing this lawsuit being like so you bought this thing and you didn't mature in the time frame that you were hoping you know like it might be totally frivolous but it doesn't matter because to your point if it starts to spread if it starts to affect you know lps who thought they were investing in basically like a mutual fund where somebody else picked the stocks like it starts to be a stain on the entire industry and real businesses built on the

technology will have trouble raising money. Here's the thing. Yesterday on the show, I was talking about how, you know, everybody is an adult who made these bets. Nobody made these bets thinking, I want to make 4% on my money every year and compounded and, you know, double my money, you know, every X number of years. No, that's not what people were doing here. People were gambling.

These people were betting on the jets, you know, or the giants to win. They were playing parlayes. They were betting on 20 to one ponies, you know, at the racetrack. People knew they were gambling. So now, if you think about it like a free option, I got to bet on this company knowing, this is the most cynical version of it, that this was a little Fugazi or this was on the borderline of like the SEC's rules. So I'm going to make the bet. If it goes up, I sell and I win. If it goes down, I file a lawsuit and I threaten them with the fact that, hey, maybe this was a little Fugazi.

And maybe I can reclaim my money, so I have a backstop. So that's the other thing. So to the people who are in our chat talking about this, I do agree with that position, actually. And I do think people need to learn that there are no free lunches and that when you invest in a company, I hate to get all Berkshire Hathaway here, but you're buying into a business based on the future cash flows of that business. If there is no cash flow, if there is no product, if there are no customers and you're making that bet, you're gambling or you're investing in a napkin.

And I think all these crypto bets were people investing in a white paper, slash pitch deck, slash back of the napkin, something in that zone, Molly. Yeah. And now you learn the hard lesson. You learn the hard lessons of investing. Welcome to the club.

You are the sucker at the table. If you know, you go to the poker table and you don't know who the sucker is, you're the sucker. Congratulations. As somebody who has been that sucker at the table. Everybody's the sucker sometimes.

Like, you know. Okay. And then more, like another quick hit of crypto news. probably also a lawsuit waiting to happen. This week in crypto contagion. It's literally this week in crypto contagion. It's never going to end.

It's never going to end. Well, I mean, it's going to end, but it's going to be a while. It's going to be a while. Let's see. CryptoFirm, the latest, crypto firm Uprice, lost 99% of its customer funds. Customer funds. Oh, how? Yep.

Trying to short Luna tokens during Taurus and Luna collapse last month. That's a great trade. But you're not supposed to do that with your customer funds. Nope, nope. That's like me taking all of my LP money and going to Vegas and playing in poker tournaments or high-stake poker games. You're not supposed to do that. I'm obsessed with this re-hypothication situation that it seems like keeps coming out in the crypto companies like that Celsius would, I explained it to my son who's really into building mechanical keyboards. I was like, let's say that I loaned you 50 bucks and in response I took your keyboard or as,

collateral, I took your keyboard. And it was like, if you give me my 50 bucks back, you can have this keyboard back. And you were like, okay, the keyboard is in good hands because it's with my mom. And then I was like, hey, Jason, yeah, borrow $50. I'll put this keyboard up as collateral. Okay. So I took the keyboard that was already my collateral. And I gave it to you as collateral. And then my son was like, here's my $50. I'd like my keyboard back. And I was like, ooh, I don't have that. And I don't have $50 to pay Jason back so I can't get your keyboard. Exactly. Yeah. Or like, yeah, this is really, that is how they. got,

is have all been operating with each other. All these companies, it's insane. Anyway, in this case, Uprise was shorting Luna, while the price did fall. Good.

According to the sole economic daily, got caught out during sudden price pumps along the way. Got it. And so, uh, lost $3 million of its own funds in addition to the money invested from their clients. Like apparently they are trying to figure out how to pay back clients.

That plan is in the works. and it's gone. Here's how it works. And it's gone. So when you place a bet on a pony and you give the racetrack your money and then your pony loses and then you have some gripe,

they don't give you your money back. That's how it works. It's gone. The money is gone. They upsconded with it. Chunks. Tiny. $2 bills, $300 out of time, like small.

What is a disaster. Competition for great engineering talent is really intense. We all know that. And a lot of startups are struggling to hire fast enough to keep up with their roadmap and the demands of their, you know, competitive space. You need to have great developers if you want to compete. And if you want to hire better developers and you want to do it faster, you need a trusted source

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and Lemon.io delivered a great candidate quickly, and he says they were a pleasure to work with. So go to lemon.io slash twist to get 15% off your first four weeks. Okay, so this is bad news everywhere, but I saw some good news. So let's pivot from Web 3, and let's just get down to Earth. Get down to them rare earth. I am so excited to have a story that's good news.

This is about dirt. I love this story. This is such a cool story. It's great. Please let it be true. Please let it be true. Okay, so the story is that the Turkish government is claiming that it just discovered almost 700 million metric tons. Boom.

Of rare earth minerals. And it's the kind of like it's enough for a thousand years of supply at current demand. And these are the metals and minerals that go into electric vehicles. batteries, like fantastic, MRI machines, fertilizers, oil refineries, and it's all the metals that are currently dominated by China.

Yeah. And we use like 150,000 metric tons. It's going to go up to 300,000 or 400,000. And these are dirty to take out of the earth. They exist in a lot of places, but they're, by understanding of it, I mean getting a little bit of education last year, is that, you know, it's how much work is it

to take it out of the ground, Molly? And then it's also, does your country allow you to rip earth apart to pull them out. Totally. Because it obviously means you're going to rip apart, you know, some plot of land somewhere. But the amount they're claiming and a bunch of different people have made calculations here. My calculation was like, this is like 4,000 years at the current demand.

Another person made a calculation of a thousand. And who knows, you know, this is certainly something to look at because I don't know if you remember this, but about 15 years ago we were talking about peak oil. You must have talked about it on Marketplace and at the New York Times. Oh, yeah. And everybody's like, we're about to run out of oil. This is going to be the end of days. Our society runs on oil, and if oil becomes rare, it's going to cause chaos on the planet,

and there will be anarchy, and society will break down. That is a true statement. The part of the statement that was false was, then Norway found oil reserves that were greater than all the oil reserves that had been previously found. And then people were like, oh, wait a second, you know, we have this new technique for fracking, and you got this new technique for taking the sand out of the oil, and the oil lands. And once again, technology found away and humanity found away. And now the concept of like peak oil has never been brought up again. But there were story after story talking about

three, four, five hundred dollar barrel of oil and then literally every nation going to war and it turning into mad max. Yeah. And we don't talk about that anymore. We don't talk about that anymore. And you can buy an EV for 40 grand. And then all of a sudden the United States used fracking to determine that like in my home state of North Dakota, there's there's a massive oil field and now we're a net exporter of oil and gas, right? Like, it, this, these are the kinds of things that do turn. And again, there are reasons to be cautious about this announcement. Yes.

One of the things that points to in the Nodies are pointing this out, and it's true, is that rare earth metals always has been a misnomer. Like these, the metals aren't that rare. Accessible. It's the extraction of them, the accessibility of them that is rare. And so what we don't know about the turkey. find is the grade of the metals and minerals in question. Like, I visited a gold mine last summer when I was doing this reporting project, and it's a really

low-grade mine. As in, for every ton of dirt they mine, they only get a few ounces of gold. So it's a ton of energy and machinery and literal human power and equipment and all of this stuff to get a very small amount of gold. So it's not, it's economically dicey. So if these are low-grade deposits, then it might not be economic. economically viable to get them out and they might not even bother. And there's the question of like, are they going to make the investment in the mining?

Are they whatever, right? On and on and on and on. And will new technology emerge to make mining these more efficient? Certainly that will happen. Totally. Well, that happened, you know, according to Moore's law where it doubles every 18 months, probably not because it's a physical process and physics. And physics?

But it could become 10% you know, every year, you know, or 5 or 10 or 15% more efficient to extract these. In other words, it takes less energy. You know, it's less damaging to the air. Earth. And that's what's happened with fracking. This is what's happened with nuclear. Everything gets easier. And I don't know if you saw the news, but the EU just said in this like emergency meeting that nuclear is green. Yeah. And that natural gas is green. So no, the first one I agree with. The second one is kind of bull-b-butt, you can believe that out. However, this whole like the, the,

that the EU in Europe was going to be, you know, like, oh my God, we're going to be so green. But what we're actually doing is greenwashing. We're, we're basically going to buy, we're going to do all the production of energy in Russia and other places, and then we're just not going to do it on our soil. Now they flip, now that they are faced with a war with Russia and the Germans are funding the war with a madman who wants to take over, you know, some part of Eastern Europe. So now they have religion. Nuclear's, nuclear power. Nuclear is now is under the green umbrella, which is where it always belonged, dummies.

Yeah. It's like, Grant Thurneberg is losing her mind on Twitter over this. So there was some tweet. other day that said that Putin has done more than Greta Thunberg and Al Gore and all the climate activists and all the environmentalists or whatever combined when you, you know, it was the head of Lux capital, Josh Wolfe, who said that. Yeah, it's so anyway, back to this Turkey thing. And like, there was an announcement, Uganda announced that it's hit this deposit of like trillions of dollars worth of gold. Like resources, whether this turns out to be a huge game changer or not,

the fact is, it could be. Like these kinds of. resource deposits and discoveries are what upend geopolitics completely. And it is worth keeping an eye on this story because these are the metals and minerals of the future. And it's either here on Earth or like asteroids or something and nobody actually knows how to do that. And very clearly, when something's in demand, people start looking for it. And when something becomes valuable, people spend more money looking for it.

So it might be, just like oil, we were not spending a lot of. money on oil discovery. Then everybody starts talking about peak oil and they're like, wouldn't it be great if we found some more? Because, hey, if it's running out and it does go to three, four, five hundred a barrel, we'll be rich. So we should invest some money looking for it. Yeah. That's what's my thesis as to what's happening here. There are a lot, the majority of the planet has not been searched for rare earths. And there'll be more technology and science to look for it. And that's what happened with deep water drilling, the sands in Canada, all this stuff. people, these

you know, this species called humans that is just so you know, greedy and innovative and clever. We're so clever. We are. Now we're like, where is it? Let's go find some. That would be a good adventure to go on. And if you go on that adventure, let's say they just

found what China or Vietnam has, right? 44 million, 22 million, you know, whatever, like metric tons. Like, what if they just find the equivalent of one of the top five countries? Game changer. And now, you know what every other country is going to do molly you're like you know what we should do we should spend a hundred million dollars looking for some stuff in our backyard

what if we find some stuff just like we found fracking so let's go without a doubt last note on this is that a few commenters on twitter noted turkey does have an election coming up and its economy has been in trouble so it would be a good time to announce that you have you know 600 times more rare earth metal so notes of caution but still

yes there could be some red flags here but do keep it i It could be a huge, huge, huge deal. It reminds me exactly the peak oil on what happened with Norway. Which, like, people were like, wait, Norway's got the largest sovereign wealth fund in the world. It's like, yep, we found the oil.

And by the way, we're probably not going to even pull it out of the ground. We're going to sit on it. Hopefully. Yeah, I mean, I think that's the best case scenario here. I was looking up nuclear statistics. It turns out China is building 30 nuclear reactors outside of China in the whole belt and road program to like, you know, be influential.

in Southeast Asia and then Africa. Yeah. So they're building more, like a magnitude more than we are. We're building like two. Like we've got like two in the planning. They're building 150 in China and 30 outside of China. 180. China realizes that nuclear is green because they have serious problems in their country

with pollution, air pollution specifically. So they know that this is a national security issue. The French know it's a national security issue, as well as, you know, an existential issue for the planet and greenhouse gases. So just the EU needs to get their act together and the United States, candidly, we now have to start building some nukes

and be even more energy independent. We're beyond behind, beyond. And we're like talking about opening up more drilling. I mean, it's just absurd. I mean, in the short, yeah, I was interested in that too. It's like, it seems like we have given so, I keep hearing two sides of the story, and it's very hard to find the truth

because it's also politicized. They're like, we're not going to give more permits to drill because you haven't used the existing ones. That seems completely reasonable. And then the other folks are like, well, you've got to give us more because we need to have to raise the money and you're telling us that you're going to tax us out of existence once we get through this crisis. So why would we make the investment if you're going to turn it off in five or 10 years? And so there seems to be this like. They're not going to make the investment anyway because it's going to be five or 10 years before they even start pulling oil out of those unused, you know, permitted lands.

Yeah. It's also, this is what I hate. about the politics right now is it's so hard to get the actual reality of that situation. If anybody has a good article or a good resource for me on like what is the actual state

of these drilling permits? I haven't found it yet, but I'm looking. All right, quick startup of the day before we go. Let's like take even more of a turn away from politics and just have some fun of the start up of the day. Actually, we have, I love that.

So my, I joke all the time to my favorite movie genre is bad but awesome. My favorite startup genre is boring but awesome. Like things that sound kind of boring at first, but are actually awesome. So producer Rachel found this startup

Traba where workers can find shifts based on their preferred types of work location, transportation modes, and hours. And it's like for finding warehouse and other kind of gig work and is just this kind of platform that I would have thought existed.

If you're listing, like let's say a warehouse job on Trava. You have to have a minimum wage of $13. You have to have a rate and review section for workers and companies to fill out to help workers avoid dangerous companies, especially in the warehouse industry, which can be very dangerous. There are 5.1 injured full-time workers per 100. You get instant payment. If you are a worker on this platform, they just raised a series a today led by COSLA Ventures at $20 million. I'm sorry, they raised $20 million at $120 million post

money also got investment from founders fund general catalyst sci-fi bc and atomic and what i think is interesting about it is that like this didn't exist that it's this hard to find labor no no it did exist insta work um is a startup that's been around for a while i think this is they're kind of following them down this path so insta work i think they they might have copy of flexible staffing yeah so insta work kind of was the the uber or the first in the space so this sounds like uh they're following down there but there's always going to be two of these, right? So you get a lift, you get an Uber, you get a DoorDash, you get a Postmates.

So I think this sounds like they're seeing the success of Instawork, which I think is particularly big in South America and India are like some of the big markets there. So this is really like taking the, if you think about all the problems with gig work, Molly, you know, do you trust the person you're going to work for? Is it safe? Is it fair? You know, it's these things, these platforms are going to be

like the next way, my thesis is these platforms act as the union. because they collectively, they create a competition for those workers. Great observation, yeah. And so if you create competition and you have transparency and the workers can pick, then that just balances out.

I'm not saying it gives all the power to the supply side, but the demand side, you know, then doesn't have, I guess the supply side, yeah, the supply side would be the workers, demand side would be the people who need the worker. So the demand side had all the power, right,

previously. Now the supply, This empowers the supply side a bit more and then makes it more balanced. Yep. Great call. And yeah, it does look like Wono Lo, which I had heard of.

And Instagram with a much better name. And then Shift Smart is one of the larger players in the space that raised $95 million. Yeah. And this one is focused specifically, I think, on like warehouses and also events, which I think is kind of interesting. Yeah.

The three main categories for this are food. You need a dishwasher. You need a cook, whatever, sanitation. warehousing, you know, so you need to pack stuff or whatever, and then actually interesting events, right? So you throw a party like we did for all insomnia and all those parties, hey, you need a bartender, you need somebody to serve at an event, you know, somebody to bust tables, whatever. And businesses are constantly trying to find these. And so if you're a local restaurant, you put out Craigslist ads, you do like word of mouth.

No. From now on, restaurants are going to put their stuff up on these platforms and they're going to be rated. So that, you know, hey, how was I treated? Did I get a staff meal? did, you know, was it a safe working condition? Was the boss a jerk or not? Was I harassed? Whatever. It's just going to be like the rating system in Uber and DoorDash. If you get bad food, you rate it low.

If you have bad service, you rate it low. If you're a jerk of a customer, you get rated low. So this is also rating the employees, by the way. So that mutual rating system is key. Yep, that's clutch. That really is. Yeah, it's cool. I also particularly like the focus on warehouse because that is a place

where I think people can fall through the cracks and end up in some really dangerous situations and also has massive turnover and is really hard to find labor at. Boring but awesome. All right. Thanks for listening, everybody. That's our Thursday show for you. And tomorrow, I'm really excited for the summer. I'm going to be doing a Friday interview series back to my roots.

And I am having the founder of a game studio on. He worked on StarCraft 2. If you were into real-time strategy, which is my favorite category of video games. In fact, the only category I play, Frustine is the name of the studio. and we talk about the business of video games and why VCs haven't invested in them, but maybe they're starting to and how a video game startup with 50 people

can compete with these giant companies. It was a fascinating interview, and it got me really interested in thinking about investing in gaming. So mission accomplished. And of course, on Sundays, Molly will do her climate interview. So twice a week, we're going to have these featured interviews. Friday and Sunday, you get nice, strong interviews

for, to get you through the weekend. Yeah. You know, you go on a bike, right? whatever. Just take it in, learn a little bit. And then also let's hang out and be best friends online. Yes. Because we have tons of community.

This week in startups.com slash TC is where you can join our Twitter community. We have a Discord. This Weekend Startups.com slash Discord. And of course, our Notagang joins us every day, every weekday to watch our live show on YouTube. This Weekend Startups.com slash YouTube. And if you are on YouTube and listening, you can subscribe and then hit the little notification bell, Noties is short for notification. It took me several weeks on this job to learn that.

To get that, yes. You know what we need is. We need a new category and they're like, what is that? We need a new category because there's Noties who show up when the notification happens. There's a new category, Molly. They're the free Noties. These are the most amazing people. We typically set up the live YouTube feed.

So YouTube.com slash this weekend. We're talking about this weekend start up. You'll find the channel. Channel's at 190,000 subscribers. It's starting to grow nicely. So there are people who are hanging out the night before because we'll say, hey, tomorrow's episode is coming up and you can hit a button to get an alert, right? It's sort of like pre, you'll see this on YouTube now.

Somebody's going to have a live event. They have a show placeholder. And so we put the placeholder up and then I noticed like 25, 50 noties are hanging out hours before we get online talking. So I'm going to ask my producers to please, please invite those noties to join us in the producer document or help them, you know, let them talk about what's going to be on the show that day. We love their contributions. Pre-nodity.

We come up with a better name. There's some better name than a pre-nody. They're really like our... There's like the early birds. There's like the line sitters. Like those people who line up for an iPhone. I need it more like a like a military squadron. You know, they're kind of like our green marays or they're kind of like our...

The forward recon. They're like... The scouts. You know, they're out there. early. Scouts. That's appropriate. It's a VC term.

Yeah. So they're kind of like the bad batch. You know, they get out there early. They're our scouts. They're like our seals, you know. They get in there.

So there's a bad batch. I like bad batch. That's pretty good. I like Bad batch. Avengers. Bad batch. Baxter Notis. That's funny.

We'll work. We'll workshop it with you, Nodys. The Noddy Guard. They're like our Black Hawk Nodys. But we love you, Nodys. And thank you.

Backstage Nodys. Backstage Nodys. Backstage is good. That's Eric. Stage of Nodies. Yeah, that's going to stick. Good job, Rachel. I like that.

Rachel's good at, she's good at the punchout. That was Eric, Eric Wiener and the, that was one of the Nodys who came up with the backstage. Oh, Rachel, none for you. Sorry, Nody Criot. No, no, no lot for you. Real time. All right. All right.

See you tomorrow, gang. Bye-bye. Bye-bye.