This Week in Startups - TikTok CEO grilled in front of Congress, Coinbase's Wells Notice & Do Kwon arrested | E1705

Episode Date: March 23, 2023

Jason kicks off today's episode by reacting to TikTok CEO Shou Zi Chew's testimony in front of Congress (1:41) before delving into the news that Coinbase was served a Wells notice by the SEC (22:57). Then, he discusses the reports that Do Kwon has been arrested in Montenegro (32:35) before wrapping up with more information on China and TikTok (35:44). (0:00) Jason kicks off the show  (1:41) Jason reacts to Shou Zi Chew's testimony in front of Congress (6:14) China's use of private companies to manipulate its population (11:02) Linode - Apply to Linode's Rise program for up to six figures in discounts at https://linode.com/twist (12:29) TikTok's ability to influence our youth  (16:48) Chinese espionage (21:27) Lemon.io - Get 15% off your first 4 weeks of developer time at https://Lemon.io/twist (22:57) SEC serves Coinbase a Wells Notice (31:19) Clumio - Visit https://clumio.com/twist to start a free backup or sign up for a demo (32:35) Do Kwon arrested in Montenegro (35:44) More information on China and TikTok FOLLOW Jason: https://linktr.ee/calacanis Subscribe to our YouTube to watch all full episodes: https://www.youtube.com/channel/UCkkhmBWfS7pILYIk0izkc3A?sub_confirmation=1 FOUNDERS! Subscribe to the Founder University podcast:  https://podcasts.apple.com/au/podcast/founder-university/id1648407190

Hey, everybody. We've got a spicy show for you today. I am going to react to the congressional hearings that took place this morning with TikTok's lying CEO, Showchu. And I give my hot takes on why I believe TikTok is being used to spy on Americans the same way. They've used private companies to spy on their own citizens in China. And I delve into the news that Coinbase has been issued a wells noticed by the SEC. This meeting is basically means that the SEC is about to take legal action against the crypto exchange. And finally, I'll briefly touch on news that crypto fugitive Doe Kwan of Terraform Labs has been pinched in Montenegro of all places.

Wow, what a bond villain in Montenegro. It's going to be a great show to stick with us. This week in startups is brought to you by Linode. Apply to Linode's Rise Program for founder-led early-stage startups and get a $500 credit, up to $120,000 in infrastructure credits in year one. cloud consulting and so much more apply at linode dot com slash twist lemon dot io need to speed up your product development without draining your budget hire vetted engineers from europe at lemon dot io go to lemon dot i o slash twist to get 15% off for the first four weeks and clumio when you're building a company don't let

backups and compliance requirements distract you let the data protection experts at clumio help with immutable air gap backups that put compliance on autopilot. Visit them at CLUMIO.com slash twist to start a free backup or sign up for a demo. Okay, everybody, the TikTok CEO was grilled in front of the House Committee on Energy and Commerce today. And let's just say it didn't go very well. Here is Representative Bill Johnson and Republican from Ohio grilling TikTok CEO in the 63 second. clip that we edited for time. I'm an information technology professional, been doing it for the most of my life. You've been evasive in many of your answers.

I'm going to talk to you in some language that maybe you'll better understand, ones and zeros, okay? TikTok source code is riddled with backdoors and CCP censorship devices. Mr. Chu as CEO of TikTok, why have you not directed your engineer? to change this source code. Congressman, thank you for the question. Have you directed them to change the source code? Like what we are offering?

Yes or no. Have you directed them to change that source code? Congressman, if you give me a bit of time to just explain us. No, I don't. It's a yes or no question. Have you directed your engineers to change that source code? I'm not sure I understand it. Why are you allowing TikTok to continue to have the capacity for censorship

and yet you claim here that you don't? Let me remind you of something. Do you realize that making false and misleading statements to Congress is a federal crime? Yes, I do. Okay. Well, I never thought I'd see the day when a congressman in a congressional hearing would know more about technology than the CEO of a technology company, unless, of course, the CEO of the technology company was hiding something or being evasive in some way. And if you want an example of evasiveness, check out this 22-second clip of Representative Michael Burgess.

Texas asking Shochoo, the CEO of TikTok, who helped him prepare for this hearing. Are you willing to share who helped prepare you for this hearing with the committee? I can follow up with you, if you like. Can you guarantee that no one at Bight Dance had a role in preparing you for today's hearing? Like I said, Congressman, this is a high-profile hearing. A lot of people around the world were selling me wishes and unsolicited advice, but I prepared for this hearing of my team here in D.C. Oh boy. There you go. All deflection, no straight answers. And Johnson goes on to absolutely destroy the citizen lab report that TikTok used to try and exonerate itself from being essentially a Chinese spyware app, which, as you all know, I believe it is and that it should be banned. Okay. And here is about a minute of Johnson destroying a citizen lab report that TikTok tried to use to exonerate itself from its ties.

to China. Got the report here by Citizen Lab. I want to read you something from Ron Debert. Specifically, in your written testimony to Congress, you stated on page 9, Citizen Lab found that there was no overt data transmission by TikTok to the Chinese government and that TikTok did not contact any servers within China. You implied that Citizen Lab exonerated TikTok from any information sharing with China. Well, the director of Citizen Labs saw this and issued a statement correcting the record yesterday.

And I'm quoting Ron Debert, the director of the lab. I am disappointed that TikTok executives continue citing the Citizen Labs' research and their statements to government as somehow exculpatory. I've called them out on this in the past, and it's unfortunate that I have to do it again, unquote. He goes on to say, and I quote, we even speculated about possible mechanisms. through which the Chinese government might use unconventional techniques to obtain TikTok user data via pressure on bite dance, end of quote. Mr. Chu, you sent Congress written testimony citing this lab as a support of your claim that China cannot access user data, U.S. user data. And now this lab has come out to say, we never said that. That's misleading.

Mr. Chu, I hope you understand what that is. That's misleading. Mr. Chu, this is yet another instance of TikTok attempting to mislead Americans about what their technology is capable of and who has access to their information. Here's a pro tip for TikTok CEO show. If you're going to submit a report to defend yourself, you might want to check with the person who wrote it that it actually does. But let's pause now and take a step back from TikTok being a Chinese spyware app. And let's talk about spyware in China. and how China uses private company apps to shape the behavior and to monitor the behavior of its own citizens. WeChat, for example, is an app from a private company in China that the CCP uses to spy on and track its citizens. Back in 2019, the South China Morning Post reported that the Chinese government was testing a mini program inside of WeChat. They nicknamed it the deadbeat map.

And here are the alleged screenshots of the app. Basically, what does this do? Well, according to SCMP, quote, the map gives blue, yellow, orange, and red alarms based on the amount of dead beats around you. A deadbeat, meaning somebody who doesn't pay their debts. And from the Telegraph, UK, back in 2019, by tapping on a person on the mini-map, the app will reveal personal information, including their full name and partial home address.

here is a quote from He Bay, the People's Court newspaper from 2019 announcing this new app. And now these are apps in China. It says nothing to do with the United States. But this is how they treat their citizens. Note, this is translated from Chinese to English, so bear with us. Once a dishonest, Laulay, a Chinese term for someone who does not repay their debts, leaves the original working life circle to other places. It basically does not feel the moral pressure from society.

This is obviously not conductive to the construction of a country ruled by law and a social credit system. The authority of the law is achieved through refereeing and enforcement and malicious evasion of enforcement is the greatest dishonesty. I mean, basically this summarizes how the Chinese think about their citizens. And in 2019, due to their low social credit scores, more than 18 million people have been banned from flying in China. And 5.5 million people were prevented from buying high-speed rail tickets, according to the top. The telegraph UK. And speaking of rail tickets, again, this is in America, this is in China, with private companies, quote, unquote, and their apps. Here's a video that trended on Twitter recently and other social media sites.

It's warning folks on the train, reasonably to not smoke. Or, like Black Mirror, their social media credit score will be reduced. For your good personal credit, please obey relevant national laws and regulations that regulate of the railway company. Please don't smoke on the CR8 train. Thank you for your cooperation. I mean, let's let this sink in. In China, there's a social credit store,

and it is deployed via private company apps. And if that's not enough, China also crack down on kids playing on video games, something parents here in the United States might like to see, but perhaps not from the government, perhaps from parents, to get the more focused on educational content and schoolwork.

So what are they doing in China? right now with apps. What are they doing with their systems and how their children are allowed to use online services? Well, in 2021, the CCP restricted kids under the age of 18 from playing video games on weekdays. And they only allow a max of three hours per weekend. According to Reuters, the rules were put in place as a response to the impact that video games have on children's physical and mental health. Let's pause for a second. The CCP, the Chinese government, they understand exactly how bad social media is and how bad video games are for their own children, and they've created a rule set against that.

And here's how the ZCCP is verifying that kids won't play. Gamers will not be penalized if they fail to comply, but the gaming companies will be. In other words, the gaming company is responsible, the person providing the video games, and they will have to prove an identification system is in place, like requiring minors to use their real names and national identification numbers to track their hours played. Essentially, imagine if our children

use their social security numbers. So if it is not blatantly obvious, through these simple few examples, the CCP uses private companies to develop technology and to shape the behavior of their own citizens. But don't worry, they're definitely not displaying this template book in America.

They would never, ever use TikTok to shape our children's behavior. And let's face it, they definitely would not collect an insane amount of data or in any way try to manipulate the behavior of the 150 million U.S. users of TikTok. They would do it with their own citizens, but they would never use it with their rival, America's citizens. Right. Sure.

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and up to 50% discounts thereafter. And this was, it was referenced multiple times in the TikTok hearings that one third of US kids use TikTok. We all know that. And you can be sure they're not tracking or collecting any sensitive data. because TikTok CEO said as much in this 38-second clip. So I just want to ask you if TikTok did track and collect the sensitive data

that Americans don't want to have disclosed. We actually do not believe we collect more data than any other social media company out there. A lot of these reports, and we can talk about which specific one you're talking about, a lot of them are not that accurate. some of them we have contacted the, we have actually gotten in touch of the authors

to help them understand the data that we're collecting. A lot of it is speculation. You know, this is something they could do. They could do. But if you look at the subtext, this is something that every company could do. She's asking him, what about what data are you collecting? He's saying, he's blaming the media.

He's blaming the press. We aren't doing anything other companies wouldn't do. It's all speculation. The reports are inaccurate. Okay, pause for a second. In China, they're doing all of them. Now, suddenly they come to America and they're not doing it. Hmm.

China knows full well that these platforms are incredibly influential. That is why they are so intent on making them drive positive social change inside of China. And all we have to do is look at do yin. This is the Chinese version of TikTok. They're using it to make their children smarter and to get them more fun. focused on what matters in life. And by the way, there are about 37 different ways to pronounce duyen, it seems, from this congressional hearing. But here is a 31 second clip from 60 minutes describing the differences between TikTok and Duyan. Just listen to this 31 seconds.

In their version of TikTok, if you're under 14 years old, they show you science experiments you can do at home, museum exhibits, patriotism videos, and educational videos. And they They also limit it to only 40 minutes per day. Now, they don't ship that version of TikTok to the rest of the world. So it's almost like they recognize that technologies influencing kids development, and they make their domestic version, a spinach version of TikTok, while they ship the opium version to the rest of the world. Okay, very powerful words there.

Spinach for our kids, let's make them strong. And let's give the other kids opioids. And if you have looked at what's on TikTok, it's pretty mind-numbing. You got class warfare. You've got race-baiting. You've got people dancing in provocative ways. I hate to make this a little bit crass. But they are training young people to dress and dance.

And I'm not a prude in any way, but young girls, young boys are being influenced to dress in a way and to dance in a very provocative way. Again, I'm not kind of prude here. That probably is age inappropriate. Any parent who looks like that, whether it's Kanye West talking about his daughter being on TikTok at too young of an age or any of us just looking over the shoulder of kids, we probably don't want them doing these dances. So let's take a moment to just pause.

Think about how they censor Duyan and how they cap usage of it and they give you that spinach compared to what we experience here. and to a CEO who is lying constantly and deflecting constantly. And he is reminded multiple times during this hearing that lying to Congress is against the law. And he does not seem to have a problem with doing that, whether it's when they confront him on who has access to the co-base, who has access to the data, what are they collecting, deflection, deflection, or I believe lying. It was a running joke that this is the most bipartisan Congress has been in a decade. But let's pause for a second. We've seen how they use social media to control and influence their populace.

We've seen them deflect that they're doing the same here. But let's pause and talk about espionage. There have been countless cases of Chinese espionage here in the United States, and they will claim that TikTok is not going to be used for this. We all probably remember that Google reported a highly sophisticated and targeted attacks of our infrastructure from China with the goal of stealing intellectual property. Remember, this was Gmail accounts and it was a massive attack. These things occur regularly from China.

So let's pause for a second. The Chinese government has used private companies to do hacking in the United States. They've used private companies to control their citizens. Now they have access to 150 million Americans, and they're going to be on their their best behavior. Let's pause again here and just do some game theory. This CEO lied multiple times during this hearing and continued to say that they're a private company and that they're not controlled by the CCP. And he kept evading the congressmen and women who pointed out that he was in fact lying and that he was probably prepared for this hearing by the CCP. The CCP is

on the board of this company, according to all reports. They expect us to trust TikTok after the Chinese government has controlled their own people, has done countless amounts of espionage, and then we're faced with, hmm, if this is a private company, that's something I know a lot about. I may not be an expert on espionage, and I may not be an expert on their social control systems inside of China, but I am an expert on private companies and investing in them. So let's do a little thought experiment. There is a windfall of cash coming to the investors in TikTok. They could easily take this company public with 150 million Americans using it on the

American stock exchange and sell their shares to countless buyers who would look at this as the company that will replace and roll right over Facebook, Instagram, and perhaps even eventually YouTube. That's how addicting this product is. So, ultimate goal of all technology investors is to have an IPO. Getting purchased by another company is great, but an IPO is just unlimited upside in our experience. Why? Because a company could grow to be Apple or Microsoft.

They could become worth trillions. So these investors, if the company were to go public, would make tens of billions of dollars and then additionally have the ability for this to go 10x and then 10x again. It could go to $500 billion in value and then eventually a trillion or two trillion. But these investors, we are being led to believe, would rather take zero dollars and not spin it out. Hmm. Why would TikTok shareholders not take tens of billions of dollars today with the ability to make hundreds of billions to trillions of dollars in the next decade with $1,000,

The greatest social media product ever created, or at least created in the last 10 years. This is obviously the successor to Facebook, Instagram, Snapchat, and YouTube. It's obvious to any of us. Now, will it become as big as them? Will it have billions of users on a global basis? Probably nothing's guaranteed, but at a minimum, tens of billions to hundreds of billions of dollars in shareholder distributions are on the line. So what group of investors would take $0 instead of hundreds of billions?

Well, the answer to that is a group of investors who don't care about money, but one who care about power and who are in a power war with the United States, and that's the Chinese Communist Party. The CCP is making these decisions, and the CEO of TikTok is an outright liar and a pawn in this game. So to hammer the point home again, why is it? China fighting so hard to keep a social media app under its control? Question two, why would Chinese private owners of TikTok risk being banned and getting zero dollars instead of getting tens of billions to hundreds of billions of dollars by simply taking the company public and divesting? The answer is clear. The shareholders aren't making

the decision that Chinese Communist Party is. Okay, imagine this. You got an idea for a great tech startup, and you think it's going to change the world, but you got a problem. You just don't have the engineers that you need to make it come true. Why? Well, it's obvious. It's hard to find engineers. There's a lot of competition. And, hey, you're trying to keep your burn rate low. You need to conserve cash. Now, imagine you had a partner who could provide you with more than 1,000 on-demand developers, right? As many as you need. And these developers were all vetted, experience, result-oriented, and they were incredibly passionate about helping you grow your startup. And what if they charged, you know, competitive rates, things that you could afford? Does this sound too good to be true? Well, let me introduce you to lemon.io. Startup shoes, lemon.com, because they only offer handpicked developers with three or more years of experience and who have strong portfolios. In fact, only 1% of candidates who apply to work with lemon.io get in.

A couple of our launch founders have worked with lemon.io and they had an amazing experience. And listen, I have used outsourced full-time teams for decades, whether it was way back at Weblogs Inc, Mahalo, onto inside.com at launch, this is the way to do it. Go to lemon.com slash twist and find your perfect developer or tech team. And you can do that in 48 hours or less. And Twist listeners get 15% off for the first four weeks. stop burning money, hire developer smarter, visit lemon.io slash twist. In other news, the SEC is knocking on Coinbase's door as they have issued a formal warning that the crypto exchange could be in

violations of security laws. Coinbase's shares fell 12%. Coinbase's CEO took to Twitter, Brian Armstrong friend of the pod, to confirm that they had to receive what's called a Wells notice. That was stating that they may be in violation of securities laws. If you don't know what a Wells notices and why this really matters. It's a letter that the SEC, the U.S. Securities and Exchange Commission, sends to people or firms at the conclusion of investigation. The notice states the SEC is planning to bring an enforcement action against them. So from CNBC, a Wells notice generally lays out the framework of the regulatory argument and offers the potentially accused an opportunity to rebut the SEC claims. In other words, it's a formality before action is taken.

Brian Armstrong tweeted, today Coinbase received a well's notice from the SEC focused on staking and asset listings. A well's notice typically proceeds an enforcement action correct. It was not confirmed, but the staff of Coinbase believe these violations could be stemming from their staking product.

Coinbase earn. Coinbase earned, as you probably know, that lets you earn up to 6% on your crypto deposits. Remember, these staking products are coming under heavy scrutiny. The estimated reward, ETH is 4%. Cardano 5.75,

USD 1.5. But listen, you're probably just better off buying treasuries for 5% instead of playing in the crypto space. We had a detailed discussion about what staking is with Vinny and Sunny back on episode 1680. In a blog post

written by Coinbase's chief legal officer, quote, today's wealth notice does not provide a lot of information for us to respond to. The SEC staff told us, they have identified potential violations of securities law, but little more. So there you have a folks. Another quote, although we don't take this development lightly, we are very confident in the way we run our business.

The same business we presented to the SEC in order for us to become a public company in 2021. So just pausing for a second here, Coinbase is a public company. They have tried to run the company, you know, as honestly as possible. I actually believe that. but the SEC has told crypto folks. The rules exist for securities offerings. The rules exist for giving loans or interest.

The crypto industry said, hey, we're doing something different. I'm just broadly speaking about the crypto industry. And they tried to get the SEC to respond to them. And famously, Brian tried to meet with the SEC. He had reported on his meetings being canceled. The SEC does not seem like they want to create a new set of rules. for crypto. Crypto would like a new set of rules and there is some argument that there should

be some evolution of the rules because they are doing things that maybe the law doesn't provide for. Well, here's the truth. You don't get to make up the rules. And if you do want to make up the rules, you better be acting in the public's best interest and the public better be benefiting from it. And the public was benefiting from it when everybody was making money. But when crypto collapsed and there was a bunch of grift and fraud there, whether it was Coinbase employees front running the market, we had NFTs being washed traded and fake trades being put underneath an NFT sell. In other words,

somebody would trade with their friends or themselves to make it look like there was a floor. Painting the tape, I think, is the term, or wash trading is the term for that. You know, you can have, the reality of this is, you could have sympathy for the crypto companies who asked for rule changes and didn't get them, or you could say, play by the rules and use the government and wait for the government to change the rules. The reality of this lies between the two.

The reality is, in technology, if you're going to bend the rules and try to use products to bend the rules and then get customer support for those rules being bent, you better be making society demonstrably better. In other words, if you were to bend the rules and reinterpret cannabis laws in California, right, and in other states, or even psychedelics now in a couple of states, and go against the federal laws, well, you better have an army of people supporting that. And in the country, we have 70 or 80% of people believe in cannabis being deregulated or legalized in some way. If you were to look at Airbnb, people renting out their homes, you have an army of people who are making a living from that. Therefore, when a city or any jurisdiction says, hey, you know, we don't want Airbnb here, it's decreasing quality of life, they can have very valid arguments, but you would have an army of people supporting you. If you were ride sharing, Lyft or Uber, and you went into a market where they said, hey, you have to have, you know, a taxi medallion to do this. And you say, well, you know, our interpretation of the law is that, you know, private people can provide rides in their car if they have insurance or whatever and they don't need to. And this is a new system. All of those examples have something in common, which is the end user benefits massively. And those people who are participating in those networks will fight for those networks. Who's going to fight for crypto now? On the margins, not that many people because there was so much griff.

according to the chief legal officer at Coinbase, he says, tell us the rules and we'll follow them. Give us an actual path to register and we will register the parts of our business that need registering. That's a fine sentiment, except that a lot of people lost their money. And so you need to play by the rules unless you guarantee the betterment of society. And people will forgive you in my experience, and this is not instructions, by the way, I'm just accurately describing what I see on the field. This doesn't mean I am endorsing breaking the law. I am not. This doesn't mean I'm endorsing bending the law. Those are decisions for entrepreneurs to make and to make them in a very thoughtful way. But if you want to bend the law, if you want to bend society to your vision of what should change

and take that risk, you better be sure that the public is benefiting. Now, I was very clear. on this podcast for many years, that I was absolutely certain that dictatorships would ban crypto first or they would control it in some way. And that's exactly what's happened. You see in China, they have their own digital one. You see in other jurisdictions, they ban this or control it and benefit from it. But what we're seeing now is democracies starting to ban, regulate, and take legal action against crypto. This is the natural order of things. If you have a money printing machine, whether you're a dictator or a democracy, whether you're authoritarian or democratic, you are not going to give over the franchise of having the money printing machine to no one

or a bunch of crypto zealots in your mind who have already bought low and are ready to sell high. No government is going to do that. The dictatorships and authoritarian's locked it down first, and now we're seeing the democracies do that next. You're seeing banks that were crypto banks being closed. You're seeing celebrities who promoted crypto having legal action taken against them. And you're seeing these Wells notices go out to the biggest players. And this relates to all the fraud that occurred. If you give the government the ability to shut your industry down because you committed fraud

as an industry over and over and over and over again, who is to blame? The crypto industry should have regulated itself. If you regulate yourself, like the movie industry did with their rating system or the video game industry did with their rating system, if you regulate yourself, if you put controls in place to protect the public yourself, then the government is unlikely to come in and regulate you. If you allow chaos, then the government is going to come down on you like a sledge hammer. Are you trying to build the next Uber or Robin Hood? I hope so. Well, here are three important tips of you. First, make sure your data is protected. Obviously, remember, just because your data is in the cloud doesn't mean it's automatically backed up. Your data is your responsibility. You got to make sure it's backed up. Second, don't let backups

and compliance requirements distract you. Let your engineers focus on product innovation, not writing scripts for compliance audits. And when it comes to backups, the major players have major limitations like snapshots. If your account is compromised, your backups are compromised. But Plumio stores your backups on a different server. So if your main account is compromised, your backups are always safe the way it should be. And third, take control of your cloud costs. You'd be surprised how much of your storage costs come from backups, snapshots, versioning, and replication. Or maybe you wouldn't be surprised because you've seen these jaw-dropping bills.

Well, Clumio can help you with all three of these important points. They provide turnkey data protection that is air-gapped, immutable, and cost-optimimized. Clumio has saved customers over 30% on backup costs while putting security and compliance on autopilot. Visit them at CLUM-M-I-O-D-com slash twist to start a free backup or sign up for a demo. That's clumio.com slash twist. Looks like the founder of Luna and Terra, remember that. Stable coin in quotes. Well, the founder, Doquan has reportedly been arrested in Montenegro, like any other Bonneville.

and where else would you arrest him? Montenegro, Hong Kong, Singapore. He's going to be on a beach somewhere in a casino, playing poker, high stakes. The government officially tweeted, police have detained a person suspected of being one of the most wanted fugitives. South Korean citizen Doe Kwan, co-founder and CEO of Singapore-based Terra Form Labs. He's been on the lamps in spring when TerraUSD collapsed, erasing $40 billion worth of the shareholder value. Interpol also issued a red notice for Doe Kwan for his arrest. That informs, if you don't know what a red notice is, it's also a book, a great book.

But a red notice informs law enforcement agencies worldwide to locate and temporarily arrest a fugitive pending extradition, surrender, or similar legal action. He was allegedly caught with falsified documents and detained by police at a local airport. Montenegro authorities were in contact with the Korean National Police Agency. And they confirmed that the suspect in custody appeared to be Doe Kwan based on checking agenting. and nationality of his ID card. And if you haven't seen it, here is a viral clip of Martin Shrelli, the farmer boy,

giving advice to Doe Kwan that has aged like a fine red wine. Hey, Doe, I just want to let you know, jail's not that bad. It's not the worst thing ever. So don't fret if that, I hope it does happen,

but if it does happen, it's not bad. Good to know. Good to know. That was a wild one. And if you want to watch a completely insane interview, that was basically the peak of crypto crisis. Check out my interview with Doe Kwan from July 2021, episode 1251.

That was wild because I couldn't figure out how they made money or how it all worked. So you see me maybe playing a little bit stupid there and trying to get him to explain this. Like the Nicola interview I did with Trevor Milton, which wound up being part of him getting pinched. a lot of times in these interviews, I just ask very basic questions and I let people talk. And if the person's doing something criminal, those talks will wind up

being evidence in a case. And if they wind up doing something great, those will be legendary interviews for all of us to take notes from. So there's a wild one. And it's been a wild couple years in crypto. And I'm glad to see crypto maybe going to this endgame of accountability

and then regulation and then protecting of consumers. If the crypto industry wanted a different outcome, they should have regulated themselves a bit more. And in fairness, folks like Coinbase, folks like Circle, they did do it by the books, it seems, and I give them credit for doing that. But you don't get judged as an industry based upon the best behavior of the vertical. You get judged on the worst behavior and maybe the average over time. and just a little button here on the episode, going back to TikTok real quick.

There was an article this morning, published in the Financial Times. China says it firmly opposes for sale of TikTok. That's fine that they firmly oppose it, but reciprocation is the ultimate test. This did not come up in the hearings all that much. The greatest way for you to intellectually come to a determination about what should happen with TikTok is first, what does China allow us to do inside of their country and with their citizens? No Twitter, no Google, no Facebook, no Instagram, no Snapchat, no Google, search, no YouTube, not allowed in China.

So if they don't allow us to have our social networks and our content in China, why on earth would we allow them to deploy their products and services and their content and their social networks here in our country? The answer is we shouldn't. Now, we do allow the financial times. We do allow publications, LeMont from France, inside the United States, and vice versa. Why? Because we're part of the free world, and we have a fair reciprocation.

We can publish content. We can cover news in France or Germany, and they can have their reporters here. That's the free world. The authoritarian world does not allow that. It is one way. They would love to have influence over our citizens, and they would love to have influence over our citizens, and they would love to spy on our citizens with this tool, but they will not allow us to do the same.

Now let's reverse it. If America could use, I don't know, Instagram, inside of China, to spy on China if they were researching weapons of mass destruction, bio weapons, would you be okay with that? Well, of course you would. If we were going to use tools that we had assets inside an authoritarian country, North Korea, Iran, China, would you be okay with our spies trying to avert the invasion of Taiwan, the creation of a bio weapon, the sale of nuclear materials to another authoritarian country? You would be completely fine with that. I think most Americans would. So if we would be fine spying on China with the tool that we had implemented there, then we should assume that they are doing the same. And if there is no reciprocation there, then we probably should not allow them into our country. India

came to the same conclusion. We blocked these things a long time ago. Why? Because they're smart and they're not in on the tape. And then it took a while, but I think now finally our government has had enough with this and we are going to force them to sell it and divest. And if they don't force people to divest, it tells you exactly what you need to know. Because there's so much money at stake that the payday is so much greater than letting it go to zero. Here's a quote from the Chinese commerce ministry. Who seems to have strong feelings on TikTok? Hmm.

Forcing the sale of TikTok will seriously damage the confidence of investors from all over the world, including from China, on investing in the United States. China firmly opposes it. So there's a threat. We're not going to invest in American companies. That tells you exactly what you need to know. That's exactly what I said in my argument about investing in China. If you invest in China, you're investing in a black box where the game is rigged, the accounting, anything can be changed, and you have no recourse.

There's no justice system there for you to sue somebody and get your money back. And China is now saber-rattling. Oh, why would anybody invest in the United States? Why? Because we're a free country with a justice system. And that's what you don't have in China. So you can also, if you want to do a little intellectual exercise. here, replace China as the owner of TikTok with a more authoritarian regime.

How about Iran or North Korea? If North Korea own TikTok, would you be comfortable with North Korea having access to 150 million Americans' phones? What if we took a country like Afghanistan under Taliband and having al-Qaeda in that country? Would you be okay with Afghanistan being the owner of TikTok? You can let these scenarios play out on your head as just an intellectual exercise. If the Taliban was running, if Al-Qaeda was in control of Afghanistan and they own TikTok, how would you feel about TikTok being here in the United States?

You would think very differently about it, right? We all would. So, and according to the FTA, Beijing has installed a Communist Party official as a director at Bightance's main Chinese entity, which developed the TikTok algorithm, who has the right to vote on any spinoff or divestiture. Does it sound like a neutral company? This would be the equivalent of somebody in the Biden or Trump administration previously being on the board of Facebook meta.

How would you feel if one of the board members at Facebook could ban Trump or reinstate Trump? This is why we separate these things. This is not a company we want managing our kids' data. And this is not xenophobic. This is about free. countries in the world and democracies versus authoritarian countries, and this is about national security. We all could love aspects of TikTok, but not want to give this gift, this Trojan horse, to the Chinese Communist Party. Again, TikTok, they use it as spinach in their country,

and they make it digital fentanyl for our country. This is not something we should allow. It's been a great episode, and I'll see you all tomorrow. Bye-bye.