This Week in Startups - Rapid Fire News: China’s techlash continues, Tesla’s incredible Q2 earnings, Tether holders move to USDC & more | E1254

Episode Date: July 27, 2021

Jason covers China reigning in big tech (2:03), Tesla’s incredible Q2 earnings crossing $1B in profit (25:30), a $300M market movement from Tether to USDC (33:24), and gives a breakdown of a Binance Crypto Pump Telegram group (37:43).

Okay, we've got a great new story for you today. China's tech lash continues. They're shutting down companies. People are losing tens of billions of dollars. And one has to wonder, and we'll talk about today, what is China's end game here? Why are they doing this? Tesla had an incredible Q2 earnings call reporting over a billion dollars in profit, and they can make over a million cars a year now.

That's just mind-blowing being a Tesla super fan for all these years as a customer. Additionally, we keep covering this tether story. Yesterday, $300 million flowed out of tether to circle, another stable coin. Is this the end of tether? After their Department of Justice investigation was announced, it's not looking good for tether. I got some insights into what you should do if you hold crypto on an offshore account or if you're on tether's. Finally, we found a pump and dump group on telegram with 3 million people in it, pumping a bunch of worthless coins.

And I've got some points to make there about pump and dump schemes. Are they legal? And if you are unaware of them, are you the sucker at the poker table? Stick with us. This week in startups is brought to you by Brainbase. Protecting your idea should be simple. Built by founders, for founders, Brainbase File is a clean and automated trademark filing platform that gives anyone the ability to protect their idea. File now for just $169 at Brainbase.com. slash twist by using code twist. And O-Doo is a fully customizable and fully integrated suite of business apps that lets you build and scale your stack as you build and scale your business. Your first app is free forever. And right now, O-Doo is offering $1,000 off your first implementation pack at O-D-com slash twist. That's O-D-O-O-O-com slash twist.

Okay, first up, China's tech lash continues. China, as you know, has been putting the screws to technology companies from Alibaba to ByteD-D-D-D, the parent company of TikTok, then D-D. It's been really wild to watch over the last couple of months, but I've known this has been coming for a long time, and I've been asked about this for many years and why I'm such a hawk on China, why I think China is a suckers game and that at some point, the Chinese government will change the rules on you. Well, in June 2016, I was being put under a lot of pressure for this belief that investing in China was a fool's errand and came with a lot

of risk. Now, how much risk, how much of a fool's errand, we'll see, but it's not looking good right now. And I gave these comments to CNBC right around the time of Alibaba, you know, coming to prominence and people being really excited about this incredible Google, Amazon of China and it was going to change everything and we should all pour our money into it. Here's what I said under fire, under the firing line of having a very unpopular opinion at the time. I think that nobody has any real clarity on what's going on in China. Remember, this isn't even a democracy and you have a company hanging out there, you know, sort of growing in a large way that the SEC is trying to figure out what's going on. So for any of us to try to pretend, we know what's going on in China and

with their economy, which has many thumbs on the scale and a lot of manipulation and a ton of corruption, and then try to understand what's going on inside of a company that's a high-growth internet company. Very hard to have any kind of transparency or insight into this company because it's kind of a black box China, right? And so I would be very careful owning stocks like these. Yeah, I wouldn't be comfortable owning anything in China in a place where the government can round up the press and put them in jail for what they say. So, yeah, no, I wouldn't feel comfortable owning the stock. I wouldn't feel comfortable operating in China. It's a very challenged environment. You have to be a high risk investor. I would be very careful owning the stock.

I would own it only under, you know, a small, small, small percentage of your overall diversified portfolio. Okay. So now that one, I don't get them all right, but in this case, it's pretty clear to me that the rules can change. And China, unlike our country, it doesn't really have a judicial system where the companies get to debate or present their position. The Chinese government can change the rules at any time. And we were living under a mirage where we thought they wouldn't. We thought they would handle Hong Kong with, you know, a delicate hand. We thought they would, you know, be open to cultural products like our movies and music. And we thought they'd have an open mind to democracy and freedom of speech and newspapers. And it was all trending in the right

direction and that our great engagement, the great engagement of the past two decades, us investing in factories there and creating the iPhone there, as well as them doing promotions with the NBA, our movies making their way into China. We thought all of this was heading in the right direction. And then we saw them trample over human rights in Hong Kong, put three million Uyghurs in jail, and start the great unraveling of their entrepreneurial. movement. So we've covered the CCP crackdown for the last couple of weeks here as we move to doing a little bit of news before we do interviews on the podcast. And so let's cover some of the moves. And really today, Tencent, which is an incredible conglomerant in China that owns many

different companies and has investments in many American companies, is now trading at $56 a share. It's down 20% over the past three days and down almost 50% from its February high of $99 a share. they've lost $150 billion in market cap over the past three days. Basically, they lost a coin base and an Airbnb in a couple of days in terms of market cap. This is a very serious situation. And it's tanking for a couple of reasons. Number one, the CCP ordered Tencent to end exclusive music licensing deals with record

labels around the world, according to the BBC. So China is cracking down on Tencent's music rights monopoly, if you don't know. And I didn't before I read the story. Tencent bought China Music Corporation in 2016, giving it a, the rights to more than 80% of all music tracks in the Chinese market. And according to China's state administration of market regulation, every week we learn about a new governing body in China. This is called S-A-M-R, Sammer.

This was an unfair advantage over its rivals. And so thinking about that for a second, we're sitting here talking about the different frameworks for antitrust. We're having a grand debate about it over the last decade. It's big tech getting too big. Are they helping consumers? are they hurting consumers? And is there any kind of angle to stop them from getting bigger?

And is that in our best interest or not? We're having this really vibrant debate across administrations, across political lines in the private sector, in the media. It's fantastic. It's a really vibrant democracy where you can debate these things, but not in China. From the BBC article, here's the quote, the company and its affiliated businesses have been told

they can no longer engage in exclusive deals over music rights and must dissolve any existing arrements within 30 days. This would be the equivalent of our government Biden just saying, you know what, I'm going to send, you know, the FTC, the FCC, whoever, over to Google, over to Apple and say, you know what? Yeah, you can't put Google flights at the top of your search results anymore. In fact, you can't have Google flights. Just take it out of the product.

Or going to Apple and saying, you know what, you're a deal with Google for exclusive search on Apple iPhones. Yeah, that's canceled. And it's got to be canceled within 30 days. There's no recourse here for the, companies. The recourse is, if you don't do it, you go to jail and get reeducated. That's basically what happens is you disappear. So for people who were scared about China as our adversary and our contemporary, and that really is the big picture, should we be concerned about this or is this actually

a win for the West? I, in a way, think this is a win for the West because now China is saying any success you have, we can take away from you. And I think that makes it very untenable for investors from around the world to invest in China, which they've been coveting for a long time. So China's now taking away the ability for Americans to invest in these companies or anybody around the world, the Saudis, whoever, who wants to play in a casino where they can change the rules and all of a sudden, queens are stronger than aces and aces are weaker than kings. I mean, they're basically just shuffled the deck and just changed all the rules. In addition to that,

Tencent also has a large investment in the education industry in China, which is a booming space with lots of companies because the Chinese are so focused on education and people are willing to pay for it. And this Chinese education space has just been decimated. We started talking about this on Friday. The CCP is banning companies that teach

school curriculum subjects from making profits, raising capital or listing on foreign stock exchanges. So let's pause for a second there. Imagine in America we said, you know what, that test prep company or that after school, Kulman, I think is the after school math classes or the Princeton Review coaching you on your G-MATs or your SATs, all that now illegal. You cannot make a profit from that. And any companies are now non-profits.

I mean, and then how do you unravel that? If these companies went public and they raised money from the private sector, do those people just lose their investment? What happens to all those assets? Maybe they bought a bunch of computers. They have cash in the bank. Do they buy the shares back and then shut down? There is no orderly process here. This is happening at an alarming pace.

It's happening at an alarming pace. And the Chinese government is a really well-thought-out, considered organization. They are thinking in centuries, not quarters. So they're throwing away massive amounts of wealth and influence on a global basis. Why? What is going on here? That's really the question we need to answer. Now, Tencent owns a 20% stake in this Chinese live touring app, which is called Yuan Fu Dao,

which was valued over $15 billion in October of 2020. Yuan Fu Dao had raised four billions from investors and Tencent stake is worth over $3 billion, or I should say it was worth $3 billion. And now it could be worth $0. According to the Financial Times, other big players in China's education industry, BlackRock, Bally Gifford, Sequoia, China, and SoftBank, they're all now, I guess, going to have to figure out what do they own and what are their LP's own. So speaking of SoftBank, they suffered a $4 billion loss on their DD position following the CCP, removing DD from the App Store for a

cybersecurity review. That meant that new users couldn't use the product. SoftBank owns 20% of DD&D and their stake was worth $12 billion at the time of the DD IPO. And after China's cybersecurity review and rumors of DEDY's pending punishment. Softbank stake is now at $7 billion. So this is having ramifications. Now you have China and Saudi Arabia, which is the big backer of SoftBank. Now they are getting penalized for what's going on in Beijing

and with Xi Jinping. Like, what's exactly happening here? This is going to result in a lot of phone calls from people whose bank accounts are being impacted. And China obviously knows that TikTok's parent company, BiteDance. They had recently hired 10,000 employees. according to the information to work on education projects

because it's such a huge opportunity. And now they are in danger of basically having to let those employees go or reassign them. According to the article, here's the quote, some bite-dance employees who work on the company's tutoring apps are already asking around for other job opportunities outside of education because of concerns that Beijing's crackdown could force many services to shut down.

So plans are changing fast in China. As I said in my piece from 2016, five years ago, it's a rigged casino, it's opaque, and you have no recourse. If you're betting over there, you're taking a lot of risk, you know that going in. It's kind of like going into a card game in, you know, Hollywood, run by a bunch of seedy characters. I used to get invited to these kind of crazy games, Molly's game, etc. And who knows if Molly's game was corrupt or not?

I never played in it, but I was invited a bunch of times. Who knows if people were playing from the same chip stack, right? You could have all of this collusion going on. and you would never, ever know. And that is the challenge here. You're going into a market where there isn't the rule of law, where there isn't a legal system.

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trademark now for just $169. So Larry Chan, a Chinese education entrepreneur who was worth $15 billion in January, has now lost over 90% of his net worth. He's now only worth $235 million, according to Bloomberg, boo-hoo for him. But seriously, I mean, it's pretty crazy that somebody could have their entire fortune taken from them. And the way in which this happened is notable. Chen founded Gautu Tchado is an education online tutoring company in China.

Gautu went public in 2019 under the ticker symbol, GOTU, and it hit a peak share price of $140 a share in January of 2021. Wow, so far so good. Amazing run, incredible company. From late January to July 21st, this past week, Gautu stock fell 90% to $11 a share. Now, the six-month downfall was fueled in. in part by Acego's capital losing $20 billion in two days in March.

You remember we covered that on the All In episode, number 28. They were trading billions on 5x leverage. In other words, they were trading $5 for every dollar, according to Bloomberg, and they were doing it in Chinese stock. So this is where the concern comes in. And contagion and black swans start to enter people's minds. When you have leverage laid on top of an asset that, as volatile, you get exponential leverage.

An example of that might be, what if you had a stable coin, and that stable coin was backed by bogus Chinese real estate paper, just as one example? And maybe that stable coin, let's call it tether, had bad Chinese paper, and then you had two layers of fraud and or volatility occurring. None of this has been proven. Buyer beware. Let's see where the chips fall. but that's an example of two things that are not stable being cross-collateralized or otherwise mingled.

We saw this in the financial market where people started selling during the Great Recession. People started creating packages and bundles of mortgages that were subprime. And then people were making bets against and for a bunch of mortgages that probably should have never, or certainly should have never been originated. They gave mortgages for expensive homes. The homes were overpriced. The mortgages were given to people who couldn't afford to pay for them. So you had an overpriced home, people couldn't afford to pay them, and then people trading on top of that.

You had layers of alerts and alarm bells going off, and here is another layer and alert of alarm bells going off. So Achegos had this highly levered position in Gautu, which they had to offload in giant blocks to provide collateral to the banks, which caused another large. dip in March. And since China's education crackdown Friday, Gautu shares dropped another 70% to under $3 a share. So $141 to $3 a share now. So two huge drops. And it seems crazy when you've got a stock that's trading at $140 or a cryptocurrency trading at $60,000 to imagine it going down to but $2 or $3, right, to 2 or 3% of its initial value. But I have seen this movie before. I have seen assets go to zero. I have seen all the equity holders wipe

out many times in my career with public companies, and certainly we see it all the time in private companies. So according to Bloomberg, Chen said Gowto, and this is the quote, we'll comply with the regulations and fulfill social responsibilities. Can you imagine American CEO saying something like that? And for the good of our people, we will comply. I mean, this is crazy. I mean, in America, we'll say, like, this is unfair. We're going to fight this. We will have our day in court. We'll take this all the way. We will fight this. We will fight this. for the next decade. That is why America is such a great country. Now, you may complain about wealth disparity, capitalism running amok, unfairness in our judicial system, education system, and it could

all be valid. But our system, when compared to China, is far superior because people have at least their day in court, at least some recourse if the government becomes too heavy-handed. In other words, doing an executive order to take a bunch of stuff away in China looks very different than in America. In America, we might say, hey, you need to force people, you need to let people repair their own iPhones and you have the right to fix stuff and you can't put that in your terms of service, you know, Apple, people need to be able to repair their iPhones and third parties need to. This is a whole different level than saying your company's gone. You cannot make money in education.

So this leads to the big question. Why is China doing this? are they doing it now? After this giant pandemic, which the West is probably starting to come to the realization that, hmm, maybe this was engineered in a lab. Maybe calling it the Wuhan virus is actually kind of accurate. I hate to give Trump any credit, but the lab was in Wuhan, as we know. And if it does turn out that they did accidentally leak it, I don't think they intentionally leaked it, pretty accurate to call it the Wuhan virus. I never really had too much of a problem with that, except for, you know, maybe some spillover into obviously Asian hate where people might start

blaming American, Asian Americans for that, which is actually super dangerous. The world's pretty complicated now. Bloomberg's opinion writer Noah Smith had a good quote on a sub-sac last week. He said, China's leaders famously want to prevent the emergence of alternative centers of power. I agree with that. Jack Ma, obviously getting too powerful, bite dance and 10 cent. These companies are getting really big and they have a lot of power, a lot of employees, a lot of cash. In that same article, Smith laid out an interesting argument as to why China is

smashing their own tech industry. He argues in America we equate profit with value. And most American big tech companies are profit machines, right? Google, Facebook, Apple, print money. They've got huge quaffirs are building up these giant piles of tens of billions of dollars, hundreds of billions of dollars in cash in the case of Apple. But China might see it differently. Here's the quote from Noah's piece. It's possible that the Chinese government has decided that the profits of companies like Alibaba and Tencent come more from rents than from actual value added. In other words, they are basically a tax on society. He notes that China is still going all in on creating their own world-class domestic semiconductor industry.

It could be with Taiwan and other places around the world and investing heavily in AI. Here's his quote. It's not technology that China is smashing. It's the consumer-facing Internet software companies that Americans tend to label tech. I would argue they are tech. Obviously, it's not hard tech. It's not, you know, building, you know, rocket ship engines or silicon or AI. You know, yeah, that's deeper tech and it's harder tech.

But it's still technology to build D.D. or Tencent or Alibaba or Amazon. There's still a lot of technology going on there. My take is different. I don't think it's that China sees the consumer-facing stuff is frivolous and that semiconductors are more important. That might be true, ultimately, if they are at war. with the rest of the planet and they want to take over planet Earth and, or they just want to be ensured that they're the number one or number two player, which country doesn't want to be the number one or number two global player. I think there's a lot of people who would like to

be in that position. I think they want to secure the number one slot and they want to secure their future and be protected from democracy of the West, et cetera. They're taking their own plan. I think what it is is it's not that the other things are more important, even if they are more important. It's that these companies have too much influence. If you control the media, if you have people's email addresses, if you control their money supply with cryptocurrency or your Apple Pay equivalent or Venmo equivalent, you have undue influence over millions to hundreds of millions of people. And you could challenge the government. It's really that simple. And we've seen that many times. When they tried to shut Airbnb down in a number of cities, Airbnb used their user base to lobby local government

officials and they use their capital, obviously, to hire lobbyists, same thing with Uber, same thing with Google. Big companies can actually go to their customers and say, hey, de Blasio wants to lower the number of Uber's wait time is going to go up and Lyft. Remember those messages they were sending? Or Uber and Lyft left Austin because they wanted to do a level of certification on ride-sharing drivers as opposed to taxi and livery drivers that, you know, would have made the business untenable, I guess, for those companies.

I think they're seeing the power that corporations have in the West, and they're saying, heck, no. They're seeing the power that crypto has over economies, including the dark, you know, sort of pulls the capital out there, underground economies like gambling, moving to crypto, money laundering, moving money around the world, without paying taxes on it, without declaring it. China sees that. And China says, you know what? Too much risk for us, not for us. We're going to make our own digital currency, and these companies are too powerful, and certainly

these entrepreneurs are too powerful. So they're going to take a break, and yeah, maybe they start another company or work on a nonprofit. It is super interesting that the United States can't even, our government can't even control Amazon, Facebook, Twitter, and China is just shutting it all down. I think VCs, you know, have been correctly enamored, and it was a fine bet to make on China. but I do think if you're a venture capitalist in China, you're going to have to start, or a media producer in China,

those two areas specifically, you're going to have to start wondering, what's the endgame here? If all the companies that get to victory then become shut down or worth 10% or 20% as much as they would have been worth in the West, why are you even there? There's got to be other countries to work with. And this is what happens.

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Next up, Tesla had an incredible Q2 earnings report. Congratulations to the Tesla team. Over a billion dollars in profit, which is up 10x year over a year. From inside business, Tesla crushed its Q2 earnings, reported revenue of $12 billion, with automotive revenue of $10.2 billion of 28% from last quarter. And that's not year over year. That's from last quarter.

Tesla reported a net income of $1.1.1 billion, its highest so far. Tesla's Q2 2020 profit was $129 million on about $6 billion of revenue, so 1.7% margin. So as you can see over time, in Q2 of 2021, they made $1.1 billion on $12 billion. So 9.6% margin. You'll probably continue to see that happen over time, I would guess, as they get scale. they're operating margin more than five X in 12 months. Pretty incredible. From the information, Tesla is becoming a cash machine,

so much so that Musk is continuing to ramp up cap X levels while the company is still producing free cash flow. Tesla shares were up 1.5% after hours following a 2% rally during the day. At this rate, Tesla shares still down nearly 7%. So far this year may soon make up the deficit for the year. So back in July, Tesla had reported they delivered 201,000 electric vehicles and produced 206,000 in Q2. It's just extraordinary.

So analysts already had some indication what revenue would be, using sort of back of the envelope math. Their current capacity is 1.05 million vehicles a year spread between California and Shanghai. They are growing quickly, obviously. Over a multi-year horizon, we expect to achieve 50% average animal growth

and vehicle deliveries. In some years, we may grow faster, which we expect to be the case in 2021. To achieve that, Tesla is building factories in Texas and business. Berlin. Obviously, I think the Texas one is for the cyber truck. The core automotive business still accounts for the bulk of Tesla's revenue, but the energy business is growing from TechCrunch. Tesla on Monday reported $801 million in revenue from its energy generation storage business,

which includes three main products, solar, its power wall storage device and homes and businesses, and its utility storage unit megapact. I've been looking at this megapact because I was thinking about getting one for the house. You could really like, they're big. There are like a bunch of power walls in one giant pack and seeing office parks and even little towns and cities put them in. Revenue from this division grew 62% from the previous quarter, more than 116% from the same quarter in 2020. They don't break up solar versus energy storage. It's all the same thing for them, which makes sense.

Moreover, the cost of revenue for its solar and energy storage business was 781, 781 million, meaning that for the first time the total cost of producing and distributing these energy storage products was lower than the revenue generated. Congratulations on that as well. Tesla noted it owns about $1.3 billion in digital currency. That's interesting. They didn't say Bitcoin versus Ethereum. Maybe they own some Ethereum too.

3.5% of the company's automotive revenue or 354 million came from regulatory credits, sold two more polluting automakers. That's lower than at any other time in the last four quarters. So incredible quarter. Congratulations to the Tesla team. They've worked really hard. And the proof is in the pudding. The product's incredible.

And people who own Teslas, you know, they tend to buy more Teslas over time and the cars tend to last forever. And this doesn't even take into account. I think the advances in self-driving they're making from my understanding, the full self-driving stuff that I'm seeing on YouTube and people who are in the beta, I'm not in the beta, I haven't asked to be in the beta, but people with the beta are really starting to complete, you know, more and more complex drives without driver intervention. And it's growing really fast. So if you want to think about Tesla, it's really an energy company. the cars are about one piece of that stack.

Your home, having solar and having a power pack, mean that your house is the new part of the electrical grid, and it's the most important part. It's like having a well at your land where you could pump up your own well water and be independent of the grid. Think how differently the world will look during global warming if we accomplish two tasks.

One, we don't have these centralized power lines everywhere that can get blown over and cause fires. That's why when we have wind, in California, northern California specifically, they shut down the power grid preemptively because they know that sometimes a line will break because a tree will fall on or will just fly off and that starts to fire and then you have a wildfire.

So in an abundance of caution, they turn off the power grid sometimes during high wind here. And so if each home has its own energy supply and is energy independent, that takes more and more load off of the overall grid, which means the grid is not going to be under duress and you might be able to sell your energy to your neighbors. And if things go offline and global warming, et cetera,

we will have less peak demand because your batteries will kick in during the peak. Let's say a really hot summer afternoon. If it's a hot summer afternoon and you have your own battery pack, then you are not straining the grid. When the grid gets strained, then it has to do more fossil fuel. So most of the grids are set up to if you hit peak load, it starts burning the coal. So it does all clean energy and renewables until such time it needs to hit the dirty,

you know, fossil fuels is my understanding. And so that obviously puts CO2 into the environment so we can nip this in the bud just by getting rid of the peak and smoothing it over. We should at some point just absolutely take an infrastructure bill like this, like the next time we do infrastructure, or we have a surplus in a place like California, we should just subsidize the heck out of solar to a ridiculous degree. We should mandate solar on every roof. We should mandate power walls or their equivalent.

It doesn't have to come from TASA. It's come from anywhere. But we should get more serious about it. It's just a clear win. And obviously, all cars should be EVs, you know, by 2030 or 2040. And we should start retiring cars and taxing cars to get them off the road and stop making them, right? And this is where that tax credits. I know people, it's a trigger issue for some people or a triggering

issue. Why should a big company that's doing so well get those credits? Well, they're getting those credits because other companies refuse to make EVs. You need to have a carrot and a stick. The carrot is Tesla getting rewarded for making these incredible cars and stopping the pollution of the environment. The stick is Volkswagen having this stick over their head that they have to improve their mileage and their, you know, what's coming out of the back of those tailpipe emissions. and they actually lied about it and the stick is what's pushed even Volkswagen into EVs.

So carrots and sticks, they kind of work. And taxation is one of those things and the transference of capital from people who are burning fossil fuels to the people who are buying EVs. I think entry-level EVs, we should make super cheap. Give like a $10,000 tax credit on,

you know, $50,000 and under cars. Just get them on the road and all, you know, city vehicles, etc., we should just get off the ice engine. I mean, it's time, people. I mean, it doesn't take a genius to figure out that cities are better to live in when there's less pollution. We saw it during the pandemic. When everybody was locked down, you could see the stars again. That's the future we all want, right? I mean, we have that future. It's right there. We could just take it. And we could take it and create incentives to move people there quicker. Okay. Oh, and I'm going to get a cyber truck for sure. But I may get a land rover

defender in between. I can just maybe least one for two or three years because I need a car to go in the snow like full wheel on the, I want to drive on beaches. I don't know why. I feel like going for a drive on the beaches or in the snow. So tell me which 4 by 4 to get if you have any ideas. Okay. We've been covering this tether stuff.

They were investigated by the Department of Justice. We talked about that on the emergency pod that broke last night. But today, tethered to USDC exchanges surpass $300 million yesterday. So we saw this tweet and the Twitter user's name is State Common. He created a thread on the volume of tethers being swapped for USDC on Binance. A major crypto exchange. This is Viacoin market cap. According to these reports, 300 million worth of tethers, the stablecoin, were exchanged for USDCs.

USDCs are Circle Stablecoin. Circle is going public. Jeremy Lair is coming on this podcast. They're highly regulated. They've got a lot, they seem to have a much better balance sheet and much better disclosure than tether on their holdings. Some people still want to see what the commercial paper is. But their commercial paper was very tiny at circle when compared to tethers. So this is, if there's 60, you know, 600 million tethers would be 1% of the 60 billion.

So this is about half a percent, 50 basis points. And just this one day in transactions. I mean, if every day, 300 million's worth of tethers, or even 100 million worth of tethers, move over to USDC or to Bitcoin or to Ethereum, and people get out of tether, I think we might see tether to go from whatever it peaked at $64 billion in market cap. I mean, it should go down to $6 billion. It should just absolutely get wiped out because who would ever keep their money in a stable coin that's under investigation for bank fraud? That makes no sense. That would be like you had, a bunch of Venezuela dollars, you know, during the revolution, and it was very clear that they were going to be printing more money and it was going to be worth nothing. And you had the opportunity to transfer it into dollars and you didn't or euros and you didn't. You'd have to be an absolute moron to hold tethers right now. I mean, just with all their lack of disclosure, with the DOJ investigation on top of the New York Attorney General's investigation,

I think we're going to see, you know, a major trend here now. Tethers market is market cap. It's pretty good, pretty good one. Tether's total market cap. Fright and slipped there when they said crap. The total, we're just going to call it market cap from now on. Tether's total market crap has decreased by 100 million since last week, going from $61.9 billion to $61.8 billion, according to the sites that track this stuff. Who knows if it's even true?

And that is the problem. Who knows if which of those tethers is, you know, actually in circulation and who owns them? If they're backed by a dollar, it's just so crazy. So it's possible that Tether has to burn some of these tokens, as my understanding, when they get retired. Who knows? But I would, just my message to people who are in the crypto space, just get your crypto off of these offshore exchanges and put them in cold storage,

get them onto a safer location than an exchange that could go away or get seized. I think the great seizure is coming, just like we saw China, basically say, you know what, cryptocurrency is not for China. Bitcoin, you're out. No moss. They just canceled it. It's quite possible.

You'll see that with these offshore exchanges, and certainly it's not looking good for tether. So protect your money, folks. Do not be the bagholder. Get out now is my best advice. You know, literally I would say the same thing to people who owned Nicola. And I actually did say that to them.

Like, if you know they're under-envolving, investigation. If you know the CEO's a dope and has left the company and it's under investigation and all these Fugazi transactions like, there's other places to put your money. If there wasn't another location to put your money, sure, we could talk about like, is this the best of the worst options? But we're living in a world where you could own shares in Amazon or Tesla, you know, or Robin Hood and Uber, my two favorites, two of my biggest holdings, where you can invest in startups. You could buy a nice, balanced, low fee vanguard fund. It's so many places for you to put your money. Why on earth would you put all your money into something so volatile and crazy and under

investigation? You have to be a maniac. All right. Speaking of pump and dumps and craziness and crypto, there is an app called Telegram where there's a lot of group activity. Telegram is like Signal or WhatsApp. It's a messaging app. But Telegram seems to specialize in having groups. And these groups can be broadcast or discussion groups, and there is a group that is called Crypto Binance Trading Signals and Pumps,

and it's got over 3 million members as of today. Down from 3.2 million last week. Not sure why that went down. And here's their bio. We offer to provide best possible signals by our expert technical analysis team, but if in case any trade goes wrong due to market fluctuations, then we will not be responsible for it.

That's all one sentence, folks, and obviously not a well-written sentence at all. But they were talking this past weekend of doing a big pump, and we thought we'd watch it and see what happened. They're branded with Bitcoin as their avatar, but it mostly pumps altcoins altcoins, it seems, that trade on Binance. And they do one pump every two weeks, it seems. The group admin is basically the way it works is they pick a day. date. They tell you to be ready to buy, to have your tethers or cash on your offshore exchange and

be ready to buy what they call in the industry a shi coin, which is a coin that has very little value. They count down to the pump. They post a couple of memes and then some general crypto updates in there. So on July 25th, the group's admins focus was the token DREP, a small crypto project that helps facilitate transactions across blockchains, whatever that word salad means. Again, this is why they call them ish coins because they tend to be full of is it total market cap for all DREP tokens is currently 20 million according to coin market cap. Uh, this, the week prior to the pump, it was trading at 50 cents or so. The pump then was scheduled for 1 p.m. Eastern time, uh, when the Drep was trading at about 72 cents on

finance. Building to the pump, admins did take a minute by a minute countdown. Then as soon as it hit 1 p.m., the admins announced that they were the target, and they were mildly successful. The pump lasted five minutes and they increased the coin's value to 97 cents. So if insiders who ran this pump-end-up scheme were, you know, bought in at 50 cents, or maybe they bought in years ago at a penny or a year ago, who knows when they got in, or if they're insiders on this direct project, the volume during those 15 minutes was $9 million, a quarter of the total supply, which is more than 45 times the median 15 minute trading volume. So they did successfully pump it.

Of course, it comes crashing right back down. And we bring this up because it's really interesting to know of but one of these. This is a public group that does pump and dumps. And you're probably saying, is this legal or not legal? It's obviously illegal to do this with stocks inside of trading, market manipulation. In crypto, offshore. Who knows? you know, who's responsible ultimately for this.

But the point I would like to make here is if there are public ones of these going on with a bunch of idiots doing an ishcoin, what do you think has been happening the last decade of crypto with the whales inside of a project like Bitcoin or Ethereum or XRP? You can be sure there are secret telegram rooms or WhatsApp groups where the big whales are hanging out and doing similar type of market manipulations. It would be a certainty that there are people coordinating other types of pump and dumps.

And so be careful. This is but one group and we just do it to illustrate that there are coordinated groups of people pumping and dumping this stuff. And you, if you're not part of a pumping and dumping scam in crypto, maybe you're the sucker at the table.

Maybe you're the person buying it at 97 cents and you just don't realize it. It's really in a system with no rules. Buy or beware. be careful out there folks. Okay, there's been a great show. If you have feedback on our news programs, let us know if you have a news story you want us to cover,

just at TWA Startups, at Jason on Twitter. I'm taking a little Twitter break to focus on this in the new book, which is going well. Thank you for asking. And we'll see you all next time on this weekend startups. Bye-bye.