Unchained - DEX in the City: Why Everyone Is Overreacting About the Terra v. Jane Street Lawsuit

Episode Date: February 26, 2026

Robinhood's Coy Garrison and Seong Seog Lee join the crew to unpack the Robinhood Chain launch strategy. Thank you to our sponsors!  ⁠MultiChain Advisors Robinhood's proposed chain for the trading of tokenized assets is live in testnet. In this DEX in the City episode, Coy Garrison, Robinhood's deputy general counsel on crypto, and Robinhood Crypto Head of Product Seong Seog Lee walk hosts Katherine Kirkpatrick Bos and Jessi Brooks through the thinking behind the blockchain's testnet launch and why it is important that it supports tokenized equities out of the gate. Beyond the Robinhood Chain testnet launch, KK and Jessi discuss OpenAI and Paradigm's EVMbench tool and why it highlights the need for a safety-first approach. “AI and crypto are in the same room now, but the room's sort of on fire,” Jessi says. Don't miss how a man accidentally gained remote access to 7,000 robot vacuums in 24 countries with AI-written code. KK and Jessi also dig into the Terraform Labs estate's lawsuit against Jane Street. Is there any real credibility behind the lawsuit? Listen to find out! Save $100 with Crypto Tax Girl! Hosts: ⁠⁠Jessi Brooks⁠⁠, General Counsel at Ribbit Capital ⁠Katherine Kirkpatrick Bos⁠, General Counsel at StarkWare Guests: ⁠⁠⁠Coy Garrison, Senior Director and Deputy General Counsel, Crypto at Robinhood ⁠⁠Seong Seog Lee, Head of Product at Robinhood Crypto Links: Unchained: Robinhood Pushes Deeper Into Tokenization With Layer 2 Testnet Launch Inside Robinhood’s Big Super App Plan: ‘There’s Still a Lot of Work to Be Done’ OpenAI and Paradigm Launch EVMbench to Stress Test AI on Smart Contract Security Uneasy Money: How the Increasingly Better AI Agents Are Being Used Onchain When AI Agents Take Over, What Does a Post-Human Economy Look Like? Terraform Estate Targets Jane Street in Explosive Terra Collapse Lawsuit DeFi Platforms Could Get ‘Innovation Exemption,’ SEC Chair Says SEC Quietly Eases Capital Rules for Stablecoins Learn more about your ad choices. Visit megaphone.fm/adchoices

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Many promotions are available both in-store and online, though some may vary. You know, we're probably the first chain to launch with the stock token as part of the native part of the chain itself. I think tokenized securities in particular, there's no doubt that's where the future is, how we get there in each jurisdiction is the big question mark, right? And crypto are in the same room now, but the room's sort of on fire, right? This is my joke with crypto legal or global companies is like, oh, you want to do this? Hold on, I'll be right back. I just need to check all the laws in all the countries in the entire world. Hi all and welcome to Dex in the city where the wallets are cold and the takes are hot.

First we have Jesse, Web3 prosecutor turned Web3 Protector at Ribbett Capital. Hi, everyone. Excited for this one. I'm your host, Catherine, KK, Fluent intradfi and Conversan in Deep Tech over at Starkware. V is out this week, but we have some truly fantastic guests from Robin Hood for the first half of the pod. But before we get going, as always, remember we are lawyers, but we're not your lawyers. so nothing you hear on decks in the city is legal or financial advice, and it doesn't create an attorney-client relationship. For the fine print, as always, check unchained crypto.com.

So before we dig in, we're going to take a quick moment to hear from our sponsors, and then we're going to get to the good stuff. Multi-chain Advisors is an emerging technology growth firm that has helped create $50-plus billion in enterprise value for 80-plus clients over the past four years. They're the partner to help navigate markets, Build real traction today at multi-chain adv.com. If crypto taxes feel overwhelming, you are not alone.

That's why Crypto Tax Girl, a team that's been helping crypto investors since 2017, is offering $100 off on one-on-one crypto tax help. To get $100 off your crypto tax services, go to Cryptotaxgirl.com slash unchained. Again, that's Cryptotaxgirl.com slash unchained. And we're back. Today we are very lucky to have not one, but two guests from Robin Hood, Coy and Sung. Coy handles all things legal for Robin Hood Crypto, and he is perfect for today because he, like V, is ex-SEC, and a law firm partner and all types of other impressive things and a very good guy to boot. He actually ended his tenure at the SEC as counsel to our favorite Hester Purse,

who, as many of you know, heads the crypto asset task force. Song is head of product at Robin Hood Crypto and formerly a quant, which in Tradfai language means the people who are smarter than everyone else. So thank you guys both so much for joining us. Let's kick things off with something exciting. Song, Koi, tell us about Robin Hood's recent news launch of TestNet last week and anything else you want to cover that's new and exciting in Robin Hood land. Why don't we start with Song?

Sure. Yeah, great question. So we did recently launch our public test net for Robin A Chain. For those who don't know, it's a layer two blockchain designed to accelerate the development of on-chain financial services and specifically tokenization. We're really excited about this. We think it's going to build the groundwork for an ecosystem for all the tokenization. assets that both Robin itself will produce, but alongside builders in the industry as well. And the response has been really awesome. We have close to 9 million transactions on TestNet. I didn't check the numbers right before this podcast, but it's growing pretty rapidly day over day,

and over a million contracts already deployed since the launch two weeks ago. So I'm definitely really excited about that. And the chain's going to support 24-7 trading, seamless bridge, self-custody and as we mentioned, the financial grade products. And so, yeah, the test that's been doing really well. And we'd love for any more developers to be on there to continue building on top of it. Talk to us about why you decided to go the test net route as a first step. Obviously, as lawyers, we love seeing that. But I'd love to hear your thinking behind that and how you think about sort of migrating

it to MainNet eventually, if that's the goal, which I think it is. Yeah, so I think the TestNet serves a couple of different purposes. One, we are, well, one, generally speaking, you know, it's always good to have a test development environment so you're not putting real money onto building financial grade applications as the first step. You're testing development first, making sure it's bulletproof, and then deploying it onto Mainnet. The second thing is we do want to get builders and developers used to developing with native tokenized assets. So as part of the test net launch itself, as part of the faucet, not only are you getting the gas token to be able to post transactions on the chain, but you'll also be getting test net versions of the tokenized stock directly as part of the faucet.

So yeah, it's multiple purposes and Koi can speak to it from the legal perspective, but we definitely want to make sure that developers have both the ability to test to make sure their apps are in a really strong state, but also get used to developing with native tokenized assets on the chain. And we're the first chain to be launching with this type of system. So yeah. I do want to hear from Koi more on the legal perspective, especially with tokenized assets more generally and how you're thinking about that. But I do have to mention, I was at this

fantastic Robin Hood event in con or right outside of con at ECC when this big announcement was made about Robin Hood chain. It was an amazing, amazing event, very exciting announcement. The thing that I remember the most, however, is that this was when Western Europe was going through like this extreme heat wave. So it was in excess of 100 degrees. And everyone is sitting there watching Vlad, watching Johan discuss these really exciting developments and just sweating profusely. So I'm very happy that we're now in the depths of the winter doldrums in Chicago, and I'm warming up just thinking about that announcement and it's come to fruition. You're getting some traction, obviously from the Starkware perspective.

I love to see that you're using an L2 to do this. I mean, I would have preferred it with Starknet, but I won't hold that against you. But that is a really exciting choice and the kind of traction you're getting is also really encouraging. So, Coy, I'd love to hear kind of more from how you're thinking about this legally. Yeah, sure. No, I mean, it's very exciting, obviously, right? I mean, these are the rails that we think a lot of the tokenized assets will be moving on and whatnot. So it's an important step and it's from a legal perspective, very helpful to have the test net so that we can see how this operates and see how it works, see

what builders are wanting to do on it so that we can look around corners and understand where the risks are, what we need to mitigate, what we need to be concerned about, right? I think it's the same issue that so many other folks in this industry deal with. You know, you want to make sure that by providing the protocol, you're not moving beyond anything than a software provider, that you're not engaging in activity that needs to be regulated or registered with any federal agency and any like. And that's, that test net is a nice window within which we can learn more about how it's going to operate and the outer bounds of what people want to do with it. We can definitely talk about testing all day.

We'll have to have you back on and see how the rollout goes and how you're thinking about shifting to main net as well. But I definitely want to focus on a bunch of other stuff as well. So, Koi, your transition from public to private obviously speaks very closely to my heart. So I want to focus on that a little bit. And as we've seen, the SEC's vibe towards crypto has definitely shifted over the past year, thanks in part to Commissioner Perth. And Coy, I think KK mentioned that the beginning, or everyone here should know this already, but you know, you were Commissioner Purse's counsel during a very different period of the SEC.

I'd love to hear more about that and how that transition and the learnings from that time has helped you at Robin Hood. So yeah, I worked for Commissioner Perce from 2019 through 2022. And I should probably say at the outset, I mean, Commissioner Purst is a really special public servant. You know, I really think that if we could clone her and put her at every agency, the country would be in a much, much better spot consistently. But it was really an amazing opportunity across two different administrations, right? So I started at the end of the first Trump administration. and it was a different era back then, but we were on the forefront in Commissioner Persis Office

of trying to provide regulatory clarity in this space, right? So she hired me to help with her Token Safe Harper proposal, which, you know, it's amazing to me that we're still talking about some of these same issues of what disclosures should go along with a capital raising connection with a crypto asset. But, you know, that hard work and the like shifted very rapidly, obviously in the change, last change in administration and under former chair Gensler's leadership where you really saw the SEC use its enforcement arm and the full force of its enforcement arms to go after the industry right and the enforcement division has to go before the commission before bringing any action and the like

so you know our role my role was really holding the enforcement teams accountable to you know articulate a sound legal basis to really push them on the specific of what they thought were being violated and what what was you know where the lines were so to speak And obviously with with being in the minority during that era there was limited limited successes that that you can point to and the like so I mean it it was eye-opening to see the full breadth of what the agency can do right on one hand You can you can be very collaborative as we're now seeing again under the current leadership of real engagement with the industry understanding what needs to be done understanding where the friction points are versus the enforcement arm and leading with that first and how that can really impact and

really devastate people's lives. I saw that in private practice after leaving the SEC. So knowing what that full breadth of the SEC can do is really helpful because I think it, you know, we know here at Robin Hood where to pull the different levers to try to get to a better place, right? How do you work across the different divisions at the SEC? How do you address the different concerns that you know these people have had for now seven plus almost 10 years with respect to crypto. And how do we move the ball forward? So it's refreshing to be in a new place with the current leadership. And we really are appreciative of the opportunity and enjoy our engagement with them on any number of issues. I'm speaking my language because I really do think

that everyone in private sector should have to work in public sector and vice versa. There is just a blatant misunderstanding of how the other one works. And I even saw it myself when I left government and entered private sector. One, the way that people talk about the public sector is completely inaccurate, but two, the way that I felt about a lot of private sector when I was in government was pretty inaccurate as well.

So being able to have both sides of that is something that I think would be a dream for any government. And having your perspective and many others, I think has been really useful for this industry because it's, you know, we definitely don't want to go back the other way of just enabling criminal activity either. And so trying to find the good balance, which I think the SEC has been sitting in that space really well the past few months, is sort of the goal, I think, for all of us.

Or white color defense, Jesse. It's my person. Yeah, or that. Right. Okay. I think it's a great point. I think if everyone in this industry understood better about, about how the various stakeholders look at things and think about things.

Like this is something we've said on the pod before, but I think one of the biggest issues within crypto is that we are a giant echo chamber. And too many people in crypto do not step outside of crypto engage perspectives from people in trad by from people in different industries from the government from, you know, in all different areas. And if they did, it would make us better at strategy, at regulatory strategy, at product strategy, frankly. Now, I think Robin Hood actually has a natural advantage because you have to get out of the crypto echo chamber because you're not just a crypto company, but a lot of crypto companies,

they lose touch with the broader reality to some degree. I mean, Coy, you have kind of your career transition. I mean, I just like laughing, sitting, thinking what it must have been like to be at the SEC in 2022. Like, that was a bit, there's a very interesting time. I mean, Now the SEC is just hitting it out of the park. Shout out to Taylor Lindemann who announced yesterday. He's joining the crypto asset task force, his chief counsel. He left Chainlink. I know Taylor, he is whip smart, great guy, great hire. But in 2022, it was a weirder time. I mean, you touched on this a little bit, but just to double click on one thing. Do you think your government experience made you a better, like, strategist being in a private sector company?

company and especially from the Robin Hood perspective where you're dealing with crypto issues as part of a larger, you know, Tradfai entity. Yeah, no, without a doubt. I mean, the experience at the SEC helps you think in terms of product development of truly understanding the risks, right? It's, I think we all can sit down and assess what we think the risks are under the black letter of the law, but then to game out how this actually plays out at the SEC, what, you know, what, how do they build their different theories?

do they come to consensus on where the lines are and what is the risk reward of going in and talking to different staff about, you know, is it no action letter appropriate, is guidance appropriate? Is it something you just have a line of communication open with the staff, right? I mean, I think it's just knowing, knowing those different levers is really, really important because it helps you think, and it's not as black and white, I think, as some people, it may be on its face as it may appear of, oh, it changes with each administration, obviously the leadership on top, without a doubt changes and the direction changes. But the permanent staffers that are at these agencies,

they operate within the limits that they are told to by their leaders, but they really do have consistent concerns and issues that they think about over the course of decades, right? So it's important to be able to drive in and double click on those issues. Well, I want to double click on many things you just said because they all speak true to heart. And I also want to bring song into the conversation because we talk a lot about the crypto echo chamber, but I also have found, especially for me and I know KK and I talk about this as well, like lawyers can be in their own echo chamber and working with product is a very important function, both for lawyers and for entrepreneurs and anyone that really wants to build something

sustainable and long lasting. So I would love song for you to talk a little bit about how your team works with everybody else, including the legal team and Koi here. And really like, if you had a few lawyers on the other side of this podcast listening in, like, what would you tell them is the one most important thing about working with the product team? Yeah, it's a really good question. And, you know, Koi has definitely been an amazing partner to work with so far. here at Robinid compared to other companies that have worked out as well, we take how we work with legal and compliance really, really seriously. And not just from making sure that the products are safe and all that kind of stuff, but also making sure we fully understand the risks and mitigations going into the product. And I'm not just saying to say this.

Like we literally have a playbook for every new PM that joins a team on how to get the best conversations with legal and compliance partners. From how do you bring the right context to the table? How do you frame the conversation? How do you make sure you're both aligned on the business goals? Because this isn't like a, we don't see the relationship with legal and compliance like a checkbox like some other companies might be doing it. But we see legal and compliance as true design partners for the product. And yeah, we take it super, super seriously. So, yeah, I'd say like we, I wouldn't say like how we work is necessarily so different.

But the level of importance and sort of seriousness we bring to it is definitely, I think, a notch above anywhere that I've been at before. That's amazing. It makes me very bullish because you're, and you're speaking my language song, because I always feel like as a GC, the most important thing I can do is understand and speak the language of various business lines. Like I need to understand what the product team is saying and they need to understand me. And sometimes we're speaking different languages. Like I wonder, I have to ask some of my technical team if they ever plug, like, turn this into legal language.

into the quad. AI AirPods that doesn't in languages to translate. Lawyer to product to BD. To, you know what I mean? I'm sorry.

But it's true. And look, I think we also need to understand and appreciate the priorities so we can appropriately manage risk. And so the different business lines can do that. I also, my ongoing joke is, look, if your

GC is the most popular member of your company, like, or the most popular person in the room, that is actually a huge red flag. Yeah, it's a bug. Not a feature. Yeah. If someone doesn't hate me or is a nervous with me every day, I'm not very much off, I guess. Like, if I wanted to be popular, I would have gone into marketing. Like, I have now accepted the fact that not everyone is going to like me and it's okay.

I imagine, like, product, like, what is your favorite part of product? I mean, there's a certain degree of creativity. there's a certain degree of collaboration. Like what's your favorite aspect of working in, not just in product, but product in crypto specifically, which is obviously very different than working in product in a bunch of different industries? Yeah.

For me, I think, well, there's like two parts of that question, I guess. So the first is what's the favorite thing about product and then product in crypto? So for product in general, I think the best part about the job is you get to be a problem solver. And that comes from one spending time being able to understand what the problems are. And I think for someone like me that sort of really

likes to dig deep into data and sort of essentially like investigate what's going on, figuring out what the best, like most important problem to solve is sort of like a really fun like puzzle for me. And then doing that within crypto is also really interesting. you know, I do come from a little bit more of a technical background. So the products that you build in crypto tend to be very technical. So the challenge you get of building a product that solves a customer problem,

but doing it in a way where the crypto-related pieces are obfuscated from the customer, I think is very mentally engaging for me. So, yeah, I'd say those are the two things that drive me to both product, but also product within crypto as well. Yeah. Kay can I have to give us therapy on how to make people, how to like not care what people think about you because that's a whole another podcast that we need to talk about.

You know, there's another sort of language divide that I want to touch on while we still have you guys here, which is the crypto folks and the non-crypto folks. And one of the most amazing parts about what Robin Hood has built is that it has found a way and continues to find a way to sort of bridge that narrative and speak to crypto folks and non-crypto folks. I'd love to hear from both of y'all from different perspectives on how Robin Hood thinks about building for both of those communities.

You know, I think you're right. Robin Hood is really in a unique or fills a unique space, right? We come from the traditional regulated brokerage industry as our primary line of business, but we're also working across any number of verticals, including obviously crypto, which is why we're here today. And within crypto, you know, the centralized spot trading is, is one product versus what, what we're doing with Robin Hood chain and everything like that. So you really do want to be nimble and be able to see it from all different angles, right?

I mean, I think perhaps the way I see it is it's not a zero-sum game, right? I mean, this centralized finance, decentralized finance, all of this, there's really a convergence of needs and, you know, what customers want. They generally want the most efficient pricing. They generally want certain protections of their assets. And they, you know, there's certain things that maybe centralized finance or maybe defy will work better to solve those goals. And our job is to provide the best way to achieve those goals for our customers, right? And I think the ability to do that and not be afraid of regulation is key, right?

We come from the regulated space. We're used to it and we're okay. operating in multiple jurisdictions in different regulatory spheres. And we welcome that because we care about customer safety. We want to do the right thing. So we put in the time and effort to build products that are compliant and work across these different regimes. And it's really, I think, important to do that instead of just moving quickly into something without really thinking through what are the implications not only in the short term but long term. What does it mean to be operating in jurisdiction or in a different regulatory sphere?

Definitely. This is my joke with with crypto legal or global companies is like, oh, you want to do this? Hold on. I'll be right back. I just need to check all the laws in all the countries in the entire world. Oh, and in crypto, they're changing. So, you know, it's a it's a weighty task, but it's obviously incredibly important not only for clients and legal, but also just general investor protection. So I'm glad you're flagging that. One of the things I want to touch on, we obviously talked about TestNet. We've talked about Robin Hood chain, how exciting that is. But just from the basic kind of user perspective, one of the things I want to understand more is, you know, what are people going to be able to do on it that they can't do now? Is there anything that you and Robin Hood are particularly excited about, you know, products, offerings, things that you can offer on chain that you couldn't be for, or either relating to the chain now

or on the product roadmap that you can discuss. So why don't we try with Sung first? Definitely. Yeah, I mean, the biggest thing that I can talk about now is, you know, even the way that we've launched our test nets, I mentioned this before, but the tokenized assets are a native part of the test set launch. From the faucet to where you typically only get a gas token, and we're making it easy for you to get access to the tokenized stock so that you can begin developing with it.

And I think we, I mean, I don't want to fact check myself, but we're probably the first chain to launch with the stock token as part of the native part of the chain itself. And so I think that's sort of the big initiative here for us. We think tokenized assets make it easy for, easier for everyone in the world to access these financial tools. And by making a native part of the chain,

what it means is that developers will make it a native part of the applications that are built on top of the ravenile chain versus, I think, on other applications, other chains today, it's sort of like a segregated area of the chain where one area you have like meme coin trading, another area you have tokenized stocks. But on ravenate chain, the way we're launching it and the way we're pushing the ease of development,

we do expect tokenized assets to be native on everything that you do. So, yeah, I'd say that's sort of the biggest thing that I can talk about. Now that we're really excited about for Robin and chain. I mean, that's a lot. Yeah, we talk a lot and write a lot about this great convergence where we're building for a space where crypto is not different than tradfi, is not different than DFI. That's not different than probably AI in the future as well. And it, you know, I think chains like this that can sort of do everything are really hard regulatory questions to answer and puzzle pieces, as you said, song.

But it's probably the future. And at least for me, the reason I got into it. So I'm really excited to hear what you guys built and what it looks like. Yep. And just one final question as we wrap, a lightning route of sorts. I mean, do you think that one day we're going to face an environment where everything is tokenized? Because obviously there's a couple different schools of thought within crypto, within TradFi right now. TradFi is still kind of obsessed with tokenization. Are we going to see one day in a dystopian world where everything is going to be tokenized on chain? I mean, how do you think about that? So my quick answer is I think the answer is yes. Even internally, we've launched our stock token trading product in the EU.

And from a developer perspective, it's just so much easier to work with. And if you are thinking about the next set of builders that are coming in to build financial tools, I think the majority of them are going to gravitate towards stable coins and tokenized assets just because the ease of getting started, the ease of building with them and the barriers to build are virtually zero. So, yeah, I'd say if you look at it from the perspective of who's going to be building for the next, for the future, sure it's I think the answer is pretty clear for me yeah and I mean I think tokenized securities in particular there's no there's no doubt that's where the future is how we get there in each jurisdiction is the big question mark right and I think

the US is the biggest biggest puzzle piece and there's multiple avenues to tackle it and I think it's good to have experimentation different approaches with native on-chain issuances the DTC approach you know the the whole concept of a derivative instrument in the US is it's more difficult and the light, but I think it's going to happen. It's experimentation needs to happen, and regulatory flexibilities are key there. A hundred percent, which I'm, we're all so excited about this potential innovation exemption, which hopefully we'll cover later on the pod.

I just want to take a moment and thank you both so much for the time and the insights. It's really exciting to get to really kind of see and hear more of the Robin Hood team. And we'll be watching TestNet and the product roadmap and all the good things. to come. So thanks so much, Sung and Koi, for joining us. We are going to let them go and get back to work here from our sponsors, and then we'll be back to talk about all kinds of other fun news like Jane Street getting sued and how we felt about Heath Denver and all the good stuff. Thank you. Multi-chain Advisors is an emerging technology growth firm that has helped create over $50 billion

in enterprise value for more than 80 clients like Pith, Moon Pay Commerce, and Wormhole. They've worked with some of the largest and most impactful companies in the space. They're the partner you want when you're navigating markets and trying to break out from the noise. They help navigate TGEs, go-to-market, BD and partnerships, Capital Markets Advisory, PR, media placements, KOLA activations, and more, driving execution from launch to scale. Their results are measurable. To learn more and start building real traction today, visit multi-chain adv.com. If you're looking for help with crypto taxes, Crypto Tax Girl is offering $100 off for Unchained listeners.

They provide personalized crypto tax reports and returns and spots before April 15th are limited. Go to Cryptotaxgirl.com slash Unchained to save $100. Once again, the link is Cryptotaxgirl.com slash Unchained. And we're back. Great. We're looking at our chats. We're multitasking here and I love it. So I think we have lots to cover in the second half of the program, lots going on in crypto as usual.

But we're going to kick off with our AI insights from our resident AI expert, Jesse. Since we have the OGs back on, let's force an AI conversation. No, there are some actually exciting news. You know, for two years, crypto has really been a little thirsty for AI to pay attention to it. Every pitch deck, I'm sure many of all have seen, have AI enabled somewhere in there. But underneath the hype, I mean, there's been different conferences and the industries have been building separately. But this week, we got a pretty clear signal that they're finally in the same room with two heavyweights, open AI and paradigm teaming up to create something called EVM bench. And this is pretty much a standardized test for auditors who were looking at AI crypto trading.

Because being good at writing code and being safe with someone else's money are two. very different things. So EVM Bench is trying to measure if AI is writing smart contracts, which we know they are, can it also keep them safe? And so EVM Bench is composed of really a three-part test. First, can the model find the bug? Two, can it fix it? And three, can it exploit it? And unfortunately, and probably unshockingly to everybody here, exploiting for AI is the best an easiest part, but it's nowhere near as good at fixing the problems. And that's really the tension here because on one side, we have AI getting better at exploiting smart contracts. I mean, with the new coding agent from Chatubit, it's up to like 72% of exploitation, up from 30-ish

percent just a few months ago. But at the same time, we're letting AI write the contracts and even giving them control of our wallets, which guys, please don't do with a lot of money. But there are many examples from the Wild, including one from a day or two ago that was called Lobster Wild. The names just get even better. I think this one is after Oscar Wild. But on Lobster Wild is essentially an open AI developer, so someone very technical, built an AI trading bot on Solana. They gave them a wallet with $50,000, a lot of money, and said, turn that into a million. Now, I'm sure that some listeners, and maybe even some people on this pod,

have tried that with at least smaller amount of money. We do not recommend. We do not recommend, to be clear. But three days later, in the midst of all this being developed, someone posts on X. My uncle has tetanus. I need for soul. I don't know whether that was true or not,

but it was posted. And the bot that was controlling the $50,000, tried to send $20, which seems reasonable to help somebody out, but it misread a decimal. Oh, no. It's nice of that thought. 52 million tokens, which is about a quarter of a million dollars, it's not the most confidence-inspiring, but it is what is happening right now.

So this is the state of AI agent security right now. Do not give it your money. It's pretty much non-existence. So A&Crypto are in the same room now, but the room's sort of on fire, right? And what I'm realizing is that the real race should not just be about innovation, which is what everybody talks about, the race to develop, the race to create, the race to have the better model. The race should be about safety because that is what's moving faster. EVM bench luckily has showed us the scoreboard,

but the scoreboard shows that defense is losing and we need to up the game there. So I'm going to keep bringing up AI on this pod, especially when there's something newsy like this, because I want people to really understand what the risks are and what the potential is, because especially in crypto, it's one in the same. they should be thought about together as we build. Luckily, there are big players that are trying to do this year. But so far, a lot of what they've come up with is really good at exploitation.

So we need to increase its other capabilities as well. It's a great point, Jesse. So I'm probably going to talk about this incessantly as time goes along. But Jesse and I are working on a part two to our programmable risk management paper on agentic activity. And it's tentatively titled agents at the gate. I wanted to use the robots are going to take over. but, you know, Jesse vetoed that.

But anyway, one of the things that I've come across during this research is when you think about it, this is very basic and obvious. But look at it. Like activity on chain was built for code and buy smart contracts, right? And smart contracts, as we all know, are self-executing programs that automate functions. Terrible name for smart contracts, by the way. And from one perspective, smart contracts are actually an early primitive and iteration of agents, of agentic activities. So they pair beautifully together and AI promises more secure smart contracts.

But at the same time, as your example clearly demonstrated, the bots can be duped. The bots can make mistakes. It's a different kind of mistakes than human mistakes. But it is absolutely a use case to say, like, we need to proceed with caution, with engagement at this stage until we're at a point where we ensure that on a number of fronts, they can actually do what they promise that they're going to do. I mean, this isn't a crypto story, but I have to throw it in now is it came out today, and it's worth everybody reading

so they can get an extent of how bonkers the world is right now. But essentially, a software engineer was trying to use his Xbox to control his robot vacuum. And by mistake, somehow, the AI coding a system that help him sort of reverse engineer how to do this, gave him access to about 7,000 other vacuums across 24 countries. And this isn't just like the vacuums, but a lot of these vacuums have cameras on them. So he was able to see into these people's houses.

And he didn't really mean to build it this way, according to the story. But essentially, he could see and control his own device and then do that with 7,000 vacuums. Like we thought robots were going to take over. Maybe it's vacuums. Maybe the dogs were right. There have been movies like this where the robot appliances take over and become murderous. There was also a black mirror episode about people taking over your camera. Like, I'm just going to go, BRB, I'm going to go unplug everything in my house.

Okay, you know. So, okay, I want to pivot because we can talk about robots for hours. And I agree. The state of the world here, I just alternate between repeatedly watching clips of the USA hockey games. to watching press coverage from Mexico. So honestly, crypto is relatively calm right now. Can we take a beat even with the bare market? Okay.

But I want to pivot to another very kind of hot topic that we have heard about very recently. And, you know, query whether it's that big of a deal is the first question is, okay, Jane Street got sued. The administrator winding down Doquans, Terraform Labs, I think we all were. remember terraform labs from 2021, the crash. It was kind of the first step in the bigger crisis of 21, 22 in crypto. Ultimately, they agreed to pay nearly $5 billion in SEC penalties. Doe Kwan went to prison. So the administrator winding down terraform labs, and every time a company goes bankrupt, there is someone in charge of the bankruptcy. Basically, his mandate is to collect as much money to

return to the debtors, to the people that this bankrupt company owed money. And the administrators mandate, frankly, is to be as aggressive as possible. So oftentimes you'll see administrators making kind of very, very ambitious claims that might necessarily not be backed up by facts. My favorite expression, the bankruptcy administrators, the administrators of the estate will throw the spaghetti to the wall and see what sticks. So query whether there's any, real credibility to this lawsuit. But basically, the administrator sued giant quant trading firm Jane Street, along with its co-founder and two employees for allegedly using material non-public info from Terraform insiders to front-run trading that helped Terraform implode. And if you don't

understand what material non-public information or front-running is, you can consult our insider trading episode. But basically, we don't read Twitter. Don't on Twitter. Don't on Twitter. Don't read what's on Twitter about this. But basically they said, okay, here we had an employee. There was an employee at Jane Street. He was an ex-teroform Labs employee. And the allegation is that this employee, whose name was Bryce Pratt, started a chat. The complaint does not specify where my money's on telegram.

Okay. I don't know if there's a polymarket bet as to what chat group there is yet. And this chat was named Bryce's Secret. Okay. Just going to pause there. I think we should pause to say we don't give legal advice, but don't ever create a chat called Catherine's Secret or anything else associated with Secret. If you're going to do anything that might be considered illegal or inappropriate in any way,

even in a very big stretch, don't put it in a chat and call it someone's secret. You know, I don't know. These are things that GCs have to cover in their compliance, best practices, or my personal favorite, I call it the scared straight presentation that I like to give it all companies I work at. These are things that we often have to cover. But so, okay, so the allegation was that he started this chat with some senior terraform labs individuals. And those individuals pass on material non-public information that allowed Jump to kind of, or sorry, Jane Street, although Jump was also mentioned in the suit, to kind of front run and precipitate or

or exacerbate the terraform crash. Now, some people have said, what are you talking about? Like, this is all on chain, okay? This is all public information, what happened with Terraform. But what you have to do is the lawyers will do this, but other people won't even know to do this,

is you go to the complaint, the actual lawsuit that is filed. And FYI, most complaints are actually publicly available. Anyone can see a complaint and read the specific allegations. And in this complaint, the non-public information that was allegedly passed on in the chat is actually redacted. So we don't know specifically what information they're talking about, but we can insinuate based on the redaction that this just wasn't entirely on-chain publicly available information. And the last thing I'll say before I hear from Jesse on this

is we talked about this a little bit last week. But just because an entity, doesn't get in trouble criminally, it doesn't mean they might not get in trouble civilly. Like the civil standard for an administrator or for a random person to sue a company is lower than the criminal standard. So sometimes you won't see a criminal action, but you'll see a civil action. Sometimes you'll see a criminal action and you'll see follow on civil litigation, even if the person was found not guilty. So this is just kind of a mess. Yeah, it's a mess. I'm going to start with a quick explainer on redaction. So in the United States, it's pretty much very, very clear that everything needs to be in the public. That is the default state of criminal and civil actions. It's very important to the court system. But you can ask the court to let you redact certain things for a variety of reasons, including confidential information, trade secrets, things like that. So when this complaint was filed, they had to get permission. from the court in order to be able to redact things. So the court actually can see it and the other

side can see it. The public just cannot see it. So it's hard to comment on all the allegations when we don't really know a huge chunk of it. I mean, if you look at one page of it, it's largely black. I mean, we've seen it with lots of government files as well. So it's, I'm sure people have seen redactions before, but just to give background here on how this all works. And just to take a step back, I just cannot believe that we're here. Like last week we talked about SBF and FTX. This week we're talking about Terraform. I'm just like, enough of these people.

There were bad people who did bad things that hurt us all. And yes, everyone should be held accountable. And if it's high frequency traders, they should be held accountable too. I just, I get so frustrated. And I hate that I'm always the crypto Twitter naysayer here. But like at the same time, there's so many things to talk about. and there's so many interesting things going on, good and bad. I'm not saying we only need to focus on the good,

but it's just like, can we just not talk about the bad people from years ago anymore? Like, can we just move on with our lives? But I do think your point is well taken that we need to understand what the incentive structures are here. This is a bankruptcy administrator whose job it is to find the money and to hold as many people accountable as possible to help the creditors get their money back. And there were a lot of people that lost a lot of money here who were relying on the estate and the administrator to be able to find it. And a lot of times, their compensation is also tied to how much money they get back. So thinking of this case in that lens is also really important.

And just like a frame I would like to put on this conversation, that being said, since this is a legal tinged podcast, there is an interesting legal question here about how much much. market makers have a duty to the platforms that they're working with to keep information confidential. So, like, that just hasn't really been ruled on and market makers just aren't sufficiently regulated, in my opinion, or have sufficient disclosures in the crypto industry. So thinking about how that plays moving forward is something that's really interesting to me. Now, the Bryce's secret channel adds a certain layer on top of that. But I think it's an interesting conversation to have and think about like what disclosure should market makers be required to put out there and what duty do they have to the entities

they're working with and their customers. I love that. I mean, it is a real opportunity to examine kind of the whole infrastructure here. And obviously, these lines are not black and white, especially when it comes to market manipulation, as we've discussed. But I always like the basic lip-miss test, which, you know, Jesse alluded to, is like, is this hurting retail? Like, does someone have an advantage over retail? And unfortunately, that's also when regulators get involved, too. Or I shouldn't say, unfortunately, fortunately, is when someone is making money on the backs of retail. So it's always something that everyone,

particularly in crypto, but in trad by as well, needs to effectively be hyper-conscious about. fortunately or unfortunately, if you're taking advantage of retail without any duty, you might not have to get in trouble. And so the question is not, are you taking advantage of retail, but are you doing so with information that you should not be using? And if you don't have a duty to the other party that gave you the information or have to keep it confidential for any reason, then you maybe aren't liable in any way. And so that's the real question here. And the fact that crypto has sort of created these sort of semi new parties that act in different ways and don't fit into like are neatly structured, maybe not so neatly structured, but regulations is something that we need to continue building for. Once again, it's not a rush of innovation only. It's a rush of safety as well. Yes, absolutely. So I want to pivot to something interesting. As we all know, there is a crypto conference every five.

seconds, right? But one of the OG crypto conferences is ETH Denver. It happened last week, and there were a lot of bear market vibes going into it, a lot of FUD surrounding ETH Denver, some statistics about the number of side events that have gone down, down, down, down, down. And now the big FUD or FACs, TBD, coming out of ETH Denver is that it might not happen next year. So I have heard from some sources that apparently they had a lot of sponsors either kind of not show up, not come to the table for Eat, Denver, which meant that the Eat Denver organizers, the conference itself had to dip into its budget more so than it ever has done since the conference started years and years ago. Hence why there's discussion about not holding it together as a financial proposition or even shrinking it down further. This raises a couple questions in my mind. One, does this mean that the crypto conferences are going to, if not stop, but slow down?

Because part of me feels like they're a little out of control. Like I think you or I could go to one 365 days a year. Two, no matter what people say about Eat, Denver, there was actually a huge thing that happened at Eat, Denver, where we saw the SEC Chair Paul Atkins and Hester Purse on stage together covering some very real content for crypto, including talking about a possible innovation exemption. So, Jesse, what are your thoughts, Crypto Conference, the Pierce Atkins show, which I love their dynamic, by the way. They're clearly friends.

They respect each other. Like, I feel like they can have a pod and everyone would listen. I'm sure Paul Atkins is. very interested in that. I think some people's main job is going to crypto conferences because there really are people that seem to always be at one and like don't pay rent and just live in hotels of crypto conferences. And I used to envy that.

And then I had to go to so many and I'm exhausted all the time and I'm getting older. So I think it's okay that we have a few fewer crypto conferences. there are still like over 30 major events scheduled for 2026, and they're all over the world, and it's hard to keep track and trying to figure out which one to go at is, I think we're making too much of a signal of just one conference not doing well, although the signals were pretty extreme there. To just sort of get to the Atkins' purse conversation,

I mean, first of all, they both just have the best way with words. I think like Atkins' talk was something like number go down and other Scheidenfreude, which is just like so beautiful. And it makes people pay attention to what they're saying because it's interesting and it's also thoughtful. A lot of what they talked about was this innovation exemption, which came up in our conversation with Robahood shortly ago and has sort of been layered in throughout this conversation here. And I think the way that they framed it there was actually really interesting because it was this is something big that. we're going to lean into, but no one should be afraid of it from TradFi because it's going to be well cordoned off. It's going to have rules around it and it's going to enable innovation and security, which is sort of the goal throughout all of this. And I think we should probably dedicate more time

on another episode on really diving into how innovation exemptions work and why they might apply really, really well in these circumstances and perhaps bring in some people that are using it. because they are probably the future here because just putting technology out into the space and hoping it doesn't hurt consumers is not going to work in regulated spaces. And so building from a place of trust and a place of responsibility with regulators while simultaneously testing out new products is probably going to be the way to go forward. We're looking for good news in crypto right now. We're hopefully at the depths of the bear. And I can tell you an innovation exemption would be good news. Now, I don't know if that's going to affect pricing.

I don't know if market structure if we get the Clarity Act is going to affect pricing. I don't think it is because it looks like that as price into the market. I was actually shocked last week. Polymarket had it at a 70%, which I'm like, oh my gosh, maybe I should take that bet because I probably put it at about a 20%. So I don't know if any of these positive moves are going to dramatically affect pricing. However, they should instill investor confidence in crypto as a lasting sustainable asset class because every step forward we make from the regulatory perspective is a step in the right direction to bring more people on board to the asset class.

And that innovation exemption would be huge. So that's something that I'm going to cling on to in terms of good news. And this actually transitions this perfectly to our crypto good news of the week that, that also dovetails into our final topic that we're just going to touch on very briefly. So I actually missed this, but it was a few weeks ago. Arthur Hayes responded to Kyle Simani's very vocal criticisms of hyperliquid by betting him 100K on, you know, hype basically outperforming any shit coin on Coin Gakko. And here's why this is crypto good news, is that the.

bet was loser donates 100,000 to a charity of the winner's choice. And I would just like to say, look, I think that's great. If people want to bet on things, if crypto titans want to bet on things and then funnel the money to charity, they should do that. Like let's give up some of our crypto winnings or Arthur and Kyle's crypto winnings to a good cause. Okay. Did he like did he donate? Is the good news wrapped up or this is just a tweet? This is just a tweet. I don't. I don't. I'm unclear of the outcome. Man, we must have been low on crypto good news this week. Someone please, someone please follow up.

Let us know what happened. But look, like the reason I raise this is good news is this also dovetails to the final news item we wanted to mention is that hyperliquid has rolled out a $29 million Washington Policy Institute. So, TBT, whether this is considered good news. Now, I think it's great. We'll take all of the policy advocacy. Gat in Washington. There have been questions raised as to whether hyperliquid is the right entity or

organization or decentralized entity that should be the one advocating for defy or decentralized systems in Washington. But then again, I am all for any money, any advocacy, the more of the better in Washington on behalf of crypto. And I hope that this will be effective. Any final notes, Jesse. before we wrap up and go track down the tweet to see if 100K was ever paid out to a worthy charity. I wish them good luck. I don't know if we need another coalition that has a different perspective, although I think that all perspectives should be brought. But I'm hoping that they're all able to find a way to work together because we saw with clarity what happens when different parts of the crypto industry disagree on certain things that seem small at the beginning, but then end up being

really, really important for different parties. So it's worth keeping an eye on, but there's only so many of these policy groups that legislators or regulators have time for. 100%. We need alignment. We need to speak in one voice. People forget that we're still incredibly small compared to Tradfai and other industries that are advocating against us. So that's Jesse and Catherine's message for today. Thank you so much for joining us, for joining our guests. Next week, I'll try to take better care of my olive tree in the background that is dying. I don't know what's going on with that. So stay tuned to see if the olive tree looks better. Thanks again. We'll see you next week on Dex in the city news. Is that the bet was loser donates 100,000 to a charity of the winner's

choice. And I would just like to say, look, I think that's great. If people want to bet on things, if Cryptotitans want to bet on things and then funnel the money to charity, they should do that. Like, let's give up some of our crypto winnings or Arthur and Kyle's crypto winnings to a good cause, okay? Did he, like, did he donate? Is the good news wrapped up or this is just a tweet? This is just a tweet. I am unclear of the outcome. Man, we must have been low on crypto good news this week. Someone please, someone please follow up. Let us know what happened. But look, like, the reason I raise this is good news is this also dovetails to the final news item we wanted to mention is that hyperliquid has rolled out a $29 million Washington Policy Institute. So TBT, whether this is

considered good news. Now, I think it's great. We'll take all of the policy advocacy we can get in Washington. There have been questions raised as to whether hyperliquid is the right entity or organization or decentralized entity that should be the one. Advocated. for defy or decentralized systems in Washington. But then again, I am all for any money, any advocacy, the more the better in Washington on behalf of crypto. And I hope that this will be effective. Any final notes, Jesse, before we wrap up and go track down the tweet

to see if 100K was ever paid out to a worthy charity. I wish them good luck. I don't know if we need another coalition that, has a different perspective, although I think that all perspectives should be brought. But I'm hoping that they're all able to find a way to work together because we saw with clarity what happens when different parts of the crypto industry disagree on certain things that seem small at the beginning, but then end up being really, really important for different parties. So it's worth keeping an eye on, but there's only so many of these policy groups that, you know,

legislators or regulators have time for. 100%. We need alignment. We need to speak in one voice. People forget that we're still incredibly small compared to Tradfi and other industries that are advocating against us. So that's Jesse and Catherine's message for today. Thank you so much for joining us, for joining our guests. Next week, I'll try to take better care of my olive tree in the background that is dying. I don't know what's going on with that. So stay tuned to see if the olive tree looks better. Thanks again. We'll see you next week on. in the city.