Unchained - The Chopping Block: ETH Denver, EF Silviculture Society, Lazarus Group Has Skills - Ep. 792

Episode Date: March 2, 2025

Welcome to The Chopping Block – where crypto insiders Haseeb Qureshi, Tom Schmidt, Tarun Chitra, and Robert Leshner break down the biggest stories in crypto. This week: Recapping how Bybit lost $1.5B to North Korea’s Lazarus Group—how did it happen, and why did they use THORChain to launder the money? Meanwhile, Ethereum is facing an identity crisis at ETH Denver, with the Foundation’s bizarre “Silviculture Society” raising eyebrows across the ecosystem. And if that wasn’t enough, memecoins are in freefall, with Hayden Adams admitting the game was rigged all along. It’s a wild week—let’s break it all down. Listen to the episode on Apple Podcasts, Spotify, Pods, Fountain, Podcast Addict, Pocket Casts, Amazon Music, or on your favorite podcast platform. Show highlights 🔹 Bybit’s $1.5B Hack – Largest crypto heist ever, pulled off by North Korea’s Lazarus Group. Attack exploited Gnosis Safe’s front end, not Bybit itself. 🔹 THORChain: The New Laundromat? – Lazarus Group uses THORChain to launder stolen funds, sparking backlash. Some THORChain members celebrated the volume spike. 🔹 Memecoins Declared ‘Collectibles’ – SEC says memecoins aren’t securities—right as the bubble bursts. New token launches are down 60%, and pump.fun is drying up. 🔹 InfoWars Bought With a Memecoin?! – Alex Jones supporters use Wars token to outbid The Onion for InfoWars.com in a bankruptcy auction. 🔹 Ethereum’s Cultural Crisis – EF’s ‘Silviculture Society’ announcement triggers community backlash. Hayden Adams calls it “peak Ethereum dysfunction.” 🔹 SEC’s Crypto Pivot – Enforcement shift: Uniswap, OpenSea, and Consensys investigations dropped. Is the SEC losing its war on crypto? 🔹 Richard Heart’s Case Dismissed – The SEC’s lawsuit against the HEX founder gets tossed on procedural grounds, but the agency has a chance to refile. 🔹 The Hyperliquid Question – Is Hyperliquid the next frontier for crypto liquidity, or a regulatory time bomb waiting to go off? Hosts ⭐️Haseeb Qureshi, Managing Partner at Dragonfly ⭐️Robert Leshner, CEO & Co-founder of Superstate ⭐️Tarun Chitra, Managing Partner at Robot Ventures ⭐️Tom Schmidt, General Partner at Dragonfly  Disclosures Timestamps  00:00 Intro 00:48 ETH Denver 06:16 Bybit Hack & Its Aftermath 14:52 Lazarus Group Has Skills 16:52 THORChain and Ethics of Decentralization 24:49 Role of KYT Services in Crypto Security 28:40 SEC's Stance on Memecoins 37:19 EF Silviculture Society 46:43 Ethereum Scaling Bet Learn more about your ad choices. Visit megaphone.fm/adchoices

Chopping Block, Denver, take one. Not a dividend. It's a tale of two-quan. Now, your losses are on someone else's balance. Generally speaking, air drops are kind of pointless anyways. Unnamed trading firms who are very involved. D5.Eat is the ultimate pump. DFIPOTOC protocols are the antidote to this problem.

Hello, everybody. Welcome to Chopping Block. Every couple weeks, the four of us get together and give the industry insati perspective on the cut of the topics of the day. So quick control, first you got Tom, the D-Fi Maven, and Master of Means. Hello, everyone. So we've got Robert, the Cryptoconassur, and the Tsar of Super State. Good morning. Then we've got Tarun, the Gigabrain, and Grand Puba at Gauntlet.

Yo. And I am the seed of the head hype man, a dragonfly. So we're early stage investors in crypto, but I want to caveat that nothing we say here is investment advice, legal advice, or even life advice. Please see chopping blocks at X, Y, Z for more disclosures. So it has been a very down bad kind of week. Crypto has been bleeding, and the damage has been pretty much everywhere. We had a day of, I think, a billion dollars of liquidations. earlier this week. And all of us are here at Eat Denver, which has somewhat been kind of

mulifying the pain. I don't know. You guys have been experiencing. I don't know about that. And molifying was not the word of it. Yeah. You don't feel the pain is mulfied. I feel like when you're around other people, it's a lot better when markets are doing like. Right. shared emotions. Yeah. I felt more that way. I think the vibes at the Solana conference last week at Mountain Dow were better than at Eat Denver. Eat Denver is very negative. Like, I have not perceived that, actually. I feel like mostly people aren't talking about price stuff. It's not the price stuff.

It's the fact that half the infrastructure doesn't work and roll up schedules are late. And, oh, base is using AWS and dot that, you know, everyone has a complaint. I've only been, it's been the stream of complaint. Everybody has a complaint. Everyone's complaining too much. Oh, meta. Love it. Okay, well, the chief complainer, thank you.

But I feel like I'm constantly just getting inundated. with people complaining here. Whereas like a mountain down. Everyone complains at Turun. What's the vibe for you guys? For me, I'm just bumping into old crypto friends everywhere I go. And I'm mostly just socializing and having a great time. So you're finding it lovely.

Yeah, I think it's a lovely. Lechner doesn't go to conference as much so. Yeah, I never go to conferences. You're just happy to be here. I'm just happy to be here. People are happy to see me. I feel this is the power of positivity right here. Yeah.

You see the Delta. Yeah. Okay. Glass is half bowl versus. Every investment committee needs a bull and a bear. I am very, for sure. I think it's pretty mellow. Like, I remember years when, like, Denver was, like, totally overrun, and it was just, like, chaos.

And this is, you know what I'm saying? Like, a lot of these venues are, like, pretty empty. And, and I don't know, the streets don't just don't feel, like, chaotic. And I don't, I don't hate it, actually. It feels a little bit like a conference. You like the chill vibe. Yeah. Totally.

Like, comparatively to previous Denver's, like, previously, it was, like, everything is overrun with people and it's just completely insane. And this year does not feel like that at all. It feels like people were preparing for a last year kind of turnout. Their home building. And they're not seeing that. Yeah. No, I think it was that DevCon was such a smashing success that Denver just feels like a piece of shit

comparatively. Was DevCon a smashing success? I thought DevCon was great. I heard very mediocre reviews about DevCon. I mean, I think comparatively it was just like people were way more excited. They were both on the developer and investor side. And also, I just felt like because DevCon's moved to this like every other year type of thing, the years that you have one, it saps the energy from all the other conferences.

It's like the Olympics. Yeah, I definitely felt that. My theory is that every, every, every, Denver, okay, there's the developers, the true believers, the people who've been going for a long time, people were actually doing the hackathon. You didn't mention investors. There are obviously a lot of investors like ourselves. And then you also have the people who are there for like the cultural, like the culture, right? And it feels like that culture has really drained out of Ethereum because the culture, even a year ago,

There were a lot of NFT people who were still coming. And I feel like there's no NFT people here anymore. I mean, there's a little bit, you know, this metamorphosis is like, okay, there's abstract, there's pudgy, and they're, they're meme points now. And the meme coin scene is just, it's not here. It's not in a getting mad. And so like all the retail, all of the people who are the, you know, the touristy kind of, you know, pallbearers for the culture, they wouldn't come to Denver, you know.

Wait, the Paul bearers for the culture. Paul bearer, wait, that's right. I think it's the opposite. That was a Freudian slip. Yeah, that wasn't. That's pretty the flip. That's right. The flame bears.

The flame bears. Now we're left with pallbearers. That's right. That's right. Now we're the pallbearers. Yes. The four of us are holding up the culture. Okay.

Well, that all being said, like I do like the smaller vibe. It's like less overrun. There's more space. There's like time to go between things. And like I do actually appreciate that. But I did hear that last week, I think a lot of people were in Hong Kong for consensus. And apparently that was like really good. That was like super packed.

But I feel like a lot of the Delta may have been. I was just talking to somebody who was there. And they were telling me that, yeah, there was a ton of mean coin excitement in Hong Kong. And I have to imagine a lot of that has already, has already tied off in the last two weeks. Another thing as an anecdote of evidence, like a lot of people I knew last year, there were a lot more people I knew who came from Asia. And this year, I feel like there was not much international. Like the number of people who flew from out of the U.S. seems way less than last year. It may be now actually because the first year that Consensus Hong Kong was really big.

It may be that consensus Hong Kong kind of pulled some of the people who were willing to travel. And they were like, okay, if I'm going to go travel, I might as well travel to Asia and like go hit a spot. I don't usually hit. And then it's like, well, you know, I just saw everybody. But even a lot of the Ethereum core developers I know who are in Europe went to DevCon and were like, I'm not going to get Denver. I felt like there really was this like, I'm picking one of the two. Yeah, it's a fall of a great city. Are there too many conferences?

Are there too many conferences? Are there too many conferences? Yeah, I also think people don't want to go to Denver. Yeah, I was like, great city, great city. It's a story city, whatever. Okay, fine. All right, you hate Denver. I get it.

You hate everything. I don't hate everything. I love Boulder. Let's talk about more terrible things that have happened in the last couple weeks because there's no shortage of them. So we talked to the last time about the Bibit hack. So the Bivit hack, of course, the largest hack in Crypto History. $1.5 billion that was hacked from Bybit stolen by the Lazarus Group, which is the cyber arm of North Korea.

This hack, Bybit ended up making everybody whole. They replenished all the ETH. They ended buying a bunch of it back after taking short-term loans. So everybody's okay. But we finally got the audit report. And the expectation that everybody had going into was like, oh, you know, there must have been Trojans. They must have been, you know, reusing their devices, doing all sorts of shit. And the crazy thing that we discovered was that the Bybibat machines were all clean.

The attack was actually on NOSIS-safe. So NOS-Safe, which is one of the most used multisigs in crypto, they host a website, which is a UI that you can use to interact with these smart contracts, where they also basically cash intermediate states of transactions that are partially signed. So it's not strictly necessary to use NOS-Safe, but it's the way that almost everyone uses it. Well, it's not the way, I mean, I don't think exchanges should be using it, frankly. I think it's more of a retail product designed for small.

all or sums of money. Well, I think the way in which they were using it was what ended up leading to the problem. The service itself is not the problem. But what ended up happening was that NOSASAFE turns out had some kind of compromise in their AWS S3 bucket. And the really bizarre thing was that initially SAFE said that they were good. They turned off the service immediately after the hack and then a couple days later they turned it back on and said we've made some security upgrades, we're good, we were not compromised.

Then Bivit releases the report. The report says that actually SAFE was compromised, there was a JavaScript snippet that the Lazarus group hot-swapped from the UI to put this JavaScript snippet that only targeted one wallet, which was the By-Bit hot wallet. And that JavaScript was live for the number of hours. And then once, so By-Bit, you know, it was a $1.5 billion wallet, but they were only moving like a few, you know, like $20,000 or something, a very small amount that they were moving in that transaction. And from that transaction, they swapped the implementation of the wallet to a wallet that they controlled. And within minutes of that transaction

taking place, the JavaScript on the front end reverted back to the old version. And so that's maybe partially the reason why SAFE didn't notice that anything was wrong, nobody noticed anything was wrong, until these auto reports came out. And so this ended up being devastating for SAFE. Safe then came in and tried to reassure everybody that, hey, we're okay. They were able to eventually find the compromise, which was tied to one of their developers had a compromised API key with AWS, they're going over everything with the fine-tooth comb now to make sure that they're secure. But it's one of the craziest compromise paths that we have seen in crypto. Lazarus is good.

Lazarus is incredibly good. And the crazy thing is that, you know, this is analogous to the radiant hack and the Wazir X hack, which led people to speculate. And again, right now, I don't think there's any evidence of this yet, but that maybe the Lazarus group had this for a long time. Right. You burn a zero day or an opportunity when the opportunity gets larger enough. That's right. That's right. And a one and a half billion dollar hack is worth holding onto, right? They could have developed this years ago.

Totally. We really don't know at this point how long they've been in the safe system. And so the thing, and I think Laura Shin just had some folks on from the Security Alliance talk about, okay, what can you do in order to secure yourself from this kind of attack? And the one thing that I think should give everybody some comfort is that the one thing that has never been compromised. And all of these attacks that we've seen across the years is the hardware wallets themselves have never been compromised, right?

As we as up to, as of yet. Over the last 10 years. Because we're talking about sleeper zero days, and let me tell you, having worked in hardware, that is, there can be sleeper zero days for many years after you burn the chip. After you, like, do the tape out. Absolutely, there can't be. Absolutely, there can't be, right? But like, at least for now, we have seen there's not been a single of these hacks in the,

in crypto history that has been at the hardware layer. Now, the layer between the hardware, like what it shows you on the ledger and what's on your monitor, that can get compromised all day long, right? So the pixels on your screen are not trusted and can be manipulated all sorts of ways. Right. But what you see on the hardware also is not going to give you the visibility into the actual transaction for safe multisic transactions. It's like, you know, here's a blob of data that who knows how that decodes. That's right. So like nobody is taking, you know, their screen, taking the information displayed on the screen and then like uncompiling it.

Well, so this is now the best practice that people are recommending is to basically use some of these services that I think P. Carvasero. I don't know how to pronounce it, but I don't pronounce his name. Thank you. But he's from CEO, and he's been pushing this product. I think Open Zeppelin recently productized as well. Yeah, it's basically just a script that reruns locally the transaction generation process and shows there's like their ad verifies it.

Yeah, it shows that the hash that you're signing corresponds to the transaction is supposed to be signing. And if people had done this, these attacks would not be possible. I mean, not necessarily. Like, I don't think it's fundamentally safe for there to be a billion dollars in a smart contract wallet, period, right? Agreed. Like, I don't think we can just, you know, this is not the first time there's been a,

we'll call it, smart contract based multi-sick wallet that's had astounding losses to it, right? There was like back in the day, the parody multi-sig, you know, multiple hacks, right? That was $200 million at those prices. At those prices, yeah. It might be more. It might be more. Yeah.

But fundamentally, I don't think anyone should be keeping a billion dollars plus. in a smart contract wallet. Like the fact that they weren't using a custodian of some variety to store their assets is absolutely perplexing to me, frankly. Like an exchange of that size, an incredibly successful one, a large one, one that has to safeguard the assets of millions of users, using a multi-sig wallet that's really designed for like prosumers. I just can't get around.

I'm going to take the opposite side a little bit, which is that the custodian, what's the custodian doing? They're doing an MPC wallet with either Shamir secret sharing or like some type of sharded key. There's still lots of ways for those to also have issues. And I agree that like, yes, the size was probably way too high. Like, why is that in one wallet when you're only doing these $20,000 turns out? I think the wise isn't one wallet thing is certainly valid. But I'm actually, I think in general, like there's lots of other cryptography.

you can use to make this harder to do. But this was actually very crazy. Another kind of interesting thing about Lazarus in general is they seem to be able to make much more money by these hijackings that are around the smart contracts, but never touch anything in the smart contracts, which is like an interesting thing of, you know, you think about the hacks in the early days of Ethereum. There's much more just like finding direct vulnerabilities and smart contracts. And then it became clear, okay, you can do audits.

You can do formal verification. You can do a lot of stuff that's like very tested. But the problem is the environment stuff around just never will, never can and will have the same security practices, right? Like a front end developer is never going to be inevitably. It's just like a skill difference. They're never going to be able to be as paranoid and spend as much. Yeah, they're not ordered it to the same capacity.

Yeah, they're never going to be able to be able to. I mean, there's so many layers in between. Right. The supply chain of all the things that go into. That's right. There's like DNS poisoning. There's James poisoning. There's all sort of, you know, all the package.

We've seen those before as well, right? I remember one inch got hit on one of those a while back. So, I mean, the most fascinating thing about this was that North Korea clearly had this on the safe side. And they, you know, one might think of like, well, if they had this, why didn't they just, like, grab everybody? Why didn't they just like drag net? And the answer, of course, is that they must know that any given moment, if they swapped this, it may be like 10 minutes that they'd be able to get random people transacting, and it would be nowhere near $1.5 billion that moved to that amount of money, right? The only, like the most high value thing is to find one target, follow their patterns,

and know exactly when you're going to get them. And then, you know, try to retain. I mean, the reality was that we did not know that they had done this until the post-mortem came out. Like, literally the whole world was clueless that North Korea was still in the NOSSA front end a week later, right? Which is great. I mean, actually, we don't know. They might have rotated credentials afterwards.

But in principle, like, it may have been that North Korea was holding on to this, hoping that nobody noticed that they had. they'd get swapped out the front end. So the most interesting part of this aftermath, not just being like, okay, the drama about, okay, how did this actually happen, was the inevitable laundering of money that North Korea then did, right? So it started with a few addresses that they got all the money into. Then it became a thousand addresses.

Then it became tens of thousands of addresses. And this is what they do, right? They have this systematic way of laundering funds and break them out into many, many different addresses. And so Bibett put out this. basically bounty, I think it's called like Lazarus Bounty or something, where anybody who can find and stop or interdict Lazarus Group funds across all chains, as it's migrating into Bitcoin, it can get a portion of the bounty. So far as I don't think we've been able to get very much, and obviously it's very hard to

stop North Korea because they're very good at this. But one of the things that you saw in the last few days, which has caused a lot of drama, is Thorchain has become the mechanism of choice for North Korea to launder these funds. Naturally, ether is good. It's better than M-Eether, these like other, you know, whatever, stable coins. But it's not as good as Bitcoin. Bitcoin is the gold standard for liquidity and being able to, you know, fence this for something. Also, Bitcoin doesn't go down as much as ether goes down.

I'm sure that's what North Korea is thinking about. So, yeah, North Korea, unfortunately, we try to get them to be ETHBOLs, but they weren't having it. So, yeah, they abandoned us. So North Korea started using Thorchain to transact and turn their Ethereum into Bitcoin. This resulted in one of the largest days of Thorchain volume ever. And this created a bunch of drama because Thorchain people on Twitter, not all of them, but some of them, started celebrating. Being like, wow, look at this. Like, finally Thorchain has a bid and people are using it again.

There's a use case. Well, you're also ignoring the fact that like that community got decimated by their lending protocol having a devolving spiral a few weeks ago. They're already down pretty bad. They already have so many fewer validators, which is also true. Yes, yes, yes. And so this ended up sparking a drama where Tay, friend of the show, Taylor Monaghan from MetaMask, she started calling out all these Thorchain apologists being like, motherfucker, this is North Korea. This is the Lazarus group.

This is like public enemy number one. Yeah, they're buying missiles with that shit. That's right. That's right. Like this is, if there's ever a moment that you shut off the validators or you like, you specifically break the rules in order to interdict funds, especially on like a Mickey Mouse chain with like 10 validators where like all this stuff is like you know why are you insulting Mickey Mouse? I'm not insulting Mickey Mouse is great I think the comparison is apt and this also resulted

in the resignation of certain people from the Thorchain community basically saying look I'm done I'm not on sides for you know money laundering or sanctions violations or any of the shit like I'm I'm getting out of this game so this has been an interesting moment because you have some people who've been saying like, well, you know, crypto is supposed to be decentralized, supposed to be permissionless, those should be censorship resistant, we shouldn't be signing up for censorship. In a moment like this, it kind of really puts your conviction to the test of yet, do you really, when 99% of your volume is North Korea washing the hack that just happened last week, do you agree with that? Especially when, you know, this is not like

tornado cash. With tornado cash, you cannot tell who's who, right? It's either like shut down the whole network or, you know, whatever. There's no way to identify. identify which funds are North Korea and which ones not. In this case, you know exactly which. Yeah, it's obvious. Yeah. It's completely transparent. So, curious to get your guys' reaction to the whole Thor chain laundering drama.

I mean, I guess you seem to already have some sense of what's going on there. What do you think about it? I mean, I guess like, A, I think their lending debt spiral actually made it so much easier to censor because they have this huge TVL drawdown in terms of stake as well as fewer validators. I also think that Thorchain has always been North Korea's preferred means of crossing. Like there's some of the other bridges like X. There's this other one, EX, C.H. Yeah, very weird.

I'd never heard of it until this thing. But like clearly, but in previous North Korea stuff, this had happened. I think the irony is that I think if the Thor chain lending crash didn't happen, maybe it would have been much harder to even make this argument that like, oh, it's like going to be too hard to coordinate all the validators as well as as much stake.

But like it kind of seems like the lending crash for Thorchain and this hack being so close is actually the reason that it's like compounded this. Right. Yeah, I kind of, I am left thinking about Taylor's thing, you know, the stuff she said about hyperliquid

right around this. 100% agree. I feel like that to me was the first thought I had when I saw the Thor chains. Okay, so we get some hyperliquip. No, no, no, I'm not. Develop the thought. Develop the thought. Develop the thought.

They're going to come after you. For the record. Develop the surface area of risk to be aware. For the record. Dot HLs. I own hype. How much though? Yeah.

Enough that I'm not trying to fud it. For more disclosure, just please see chopping off. Yeah. I just think the. Perpetual's exchanges are very natural places to go. I think Hyperliquid right now is probably actually less likely to have all these issues because the Arbitrum Bridge is so janky and it's sort of like, it's like going to a city at the top of a mountain and like the city is amazing, but like you have to like drive through this horrible

jungle and oh, now they're building an airport, you know, you can, the hype VM lets you. Have you ever used hyperliquid? Yeah, I mean, I've been using it. The Arbitram Bridge is like such a bad experience. And you get trapped there, right? So, like, suppose they did bridge funds and then hyperlocut sensors them because, like, they could on the exchange pretty easily. Then it's kind of not a great. There's no exit.

But I think once the hyper EVML1 is there, then it's a much more attractive place to go because there are now going to be multiple bridges out, right? You can go from the... Maybe, maybe. I mean, it requires a lot of liquidity in order to get, like, if you, if you had all the U.S.C, oh, first of all, it's UstC, right? Yeah. Yeah. What is there like?

$2.5.3 billion? Yeah. You got to get all the U.S.C. Well, there's now spot Bitcoin from the, the, the, the three. Two of three. Do you have that more collateral types? Do you know if it's getting traction? Is it?

Not that much, but it, yeah, but it's also a kind of somewhat weak threshold signature. It's like two of three type thing. So. But again, the attack compromiseization wasn't, compromising a number of the signers, right? Which is a harder task. No, no, I'm just saying that like as. Yes, two of three is weak.

Two or three is weak. As the hype EVM develops, if there's enough liquidity there, it becomes a natural way to like take liquidity from the exchange, exit via a spot and then exit via a bridge. And there's a sense in which it, because of how big it is, how much capital is in hyperliquid and is like sort of, new so it's more likely there could be these vulnerabilities I look I'm not trying to fud my bags all right like

it seems like you're trying to fund these bags though so that you can find more to lower price yeah I get it yeah for somebody not trying to fud bags you're I just am saying like I thought about Taylor's kind of description I would say I would say it aged fairly well that Lazar's group should not be fucked with no yeah yeah these guys are serious motherfuckers they're trying to compromise almost every single project in crypto right now while we have this conversation. The other thing is hyperliquid has a very high UX surface area because it's a first party app.

And that's where I want to worry there could be this kind of like UX audit doesn't match smart contract audit type thing. Tom, what's your take on the situation? Yeah, I mean, I do feel like all this stuff is somewhat futile. It's just like obfuscation. It's not actually an organization of the assets. Like I think there have been a few either like FBI or DHS. DOJ and diamonds that is he explicitly cite like Thorchain data and show, hey, we can actually like trace, you know, this Thor chain swap because it's public information, right, once the

transaction post. So I think the Lazarus Bounty site was actually, I think, quite clever just as a way to, hey, actually keep the public abreast of where these funds are actually going and feel like people can have some stake or feel like they can get some transparency. Otherwise, it's like, yeah, I'm not going to go and sort of, you know, create my own data site of the tens of thousands of addresses, you can stitch all this stuff together and create something that's publicly available. So, I mean, even the hyperliquid thing, like, yeah, they can bridge and they can bridge out, but that's still transparent. It's still public. And like this just feels like it's delaying kind of the inevitable. So, you know, the one thing that you bring up at the Lazarus Bounty website,

and this is more as a pithy joke, CZ, don't come, kill me, which is, there's only, if there's only one thing you can say centralized exchanges are really good at, it's making leaderboards out of anything. Right? Like this is like They stood up a leaderboard in like Two hours It was a beautiful leaderboard

You know one of the One of the interesting things I was talking with some folks from SEAL And it should be that Okay moving money around from the theory Of the Bitcoin over Thorchain Like okay what is that really going to do besides Get you out of you know A bad EF exposure

Great trick Yeah exactly Besides the trading inside Yeah most people who are selling ether for Bitcoin It's done pretty well Yeah that's true that's true So maybe, I don't know, bullish North Korea, I guess. The striking thing is that actually it's more effective than it should be.

And the reason why it's more effective than it should be is that a lot of these KYT services, so KYT stands for know your transaction, which is basically like transaction monitoring. A lot of these KYT services, they're just actually fucking terrible. Right. So a lot of these exchanges, especially like, you know, cheaper, shittier ones, they use these KYT providers that literally update like once a day. Or they just give you like this big data dump of, like, hey, here's a snapshot of all the addresses you should not be interacting with,

and you pull down a new one every 24 hours. Obviously, this is not how anything should work in blockchain land, but there are a lot of them that actually do work this way. And because of that, if you just do a bunch of like, oh, you know, combine split, combine split, combine split, and then basically within 24 hours, run it through some Russian exchange, you know, cash out, get out, and you get. So that is actually the way that a lot of these funds end up getting laundered

is because there are so many terrible KYT service providers out there that really if those all went away and everybody standardized on real-time KYT, a lot of this would become way harder for North Korea and for money laundering generally. So this is something that I learned, you know, chatting with some of the folks at SEAL who are kind of in the trenches trying to help these companies that literally have KYT services and they're just accepting deposits from Lazarus. They're like, well, what's wrong? It's great.

So that's part of the reason why this shit, despite how simple it is, it actually does work. What's the path that Lazarus uses to go from Bitcoin to Russian exchange back to North Korea and off-chain money? I think they just deposit into some exchange. They withdraw from that exchange, right? And that exchange is not necessarily... Oh, that's obfuscating. Right, exactly.

And then they send it to some other Chinese exchange. Yeah, and by then it's like, oh, it's clean. It looks clean, right? It's not a lot connected to the whole thing. So basically, the exchange itself becomes a mixer. So ideally they can sell it for for Yeah although in theory I guess that seems like you have to be really quick to get out of Because like the moment that in theory the exchanges could

Unlike a mixer the exchanges could share like all the right but that's the thing is like is Is Binance sharing data with like some random tiny Russian exchange? Probably not sure but doesn't the random tiny Russian exchange not have that much withdrawal capacity either So like that probably that's why you're splitting it up yeah But if they're putting if they're putting 100 Bitcoin in there's an extra 100 Bitcoin to take out. Yeah, yeah. So on this episode, we two to go out more money.

Interesting. Don't do that. So, yeah, so to be clear, I think the way forward for this is an industry. So one, it would be great to have more intel sharing among exchanges, right? This is kind of one of the coordination problems. And it's not even a domestic problem. You know, blockchain can solve this. Blockchain does actually solve this.

So having more information sharing among exchanges would be a big solve for this. But the second thing, obviously, would be that we have to extinguish these bad KYT providers because this is really the whole. heart and soul because these days there's almost no exchanges that don't do someone on a KYT. But it's oftentimes like a box checking thing, right? Just like, oh, we did it. This guy is compliant. He's compliant, so therefore we're fine.

And like no one's going to yell at you because your KYT provider has 24 hour latency. Right. So I don't know, it's not my fault. It's the provider's fault. So anyway, that's my understanding. I might have bursed some of that. So if I'm totally wrong, please, you know, yell at us in the comments and correct us. Okay.

So hopefully we can put this. that story to rest all as well, that ends well, and by bit, I think, has come out, relatively speaking, stronger for it. So their volumes and some of their deposits have recovered. And they paid back the loans, right? As far as I understand, they pay back the loans. And they're, I feel like for the end users, if you didn't read the news, you might not have noticed, which is like as good of a thing as you could. Yeah, exactly, exactly, which is really just such a far cry from where we were, you know, in previous big hacks that we've seen in crypto. So on the other side.

Also, Ben's PR push was great. I think I think I saw some of it. of the podcast later, and it was like very impressed. Really masterful. Yeah. So, all right. So going on to our favorite topic, everyone loves us covering this is meme coins. So meme coins, alongside everything else, have been having a very bad, no good week.

And to top that off, but they had a good day. Well, so as kind of the angel of death that inevitably comes when the party's already over, the SEC showed up and had a big announcement to make to everybody, which is that meme coins are not securities. Official policy. Yay. As it turns out, meme coins are akin to collectibles. Memcoins also typically have limited or no use or functionality.

Fraudulent conduct related to the offer and sale of meme coins may be subject to enforcement, but as a general matter, meme coins are not under the SEC's jurisdiction. That was the statement and basically perfect timing because nobody wants to do meme points anymore. So it looks like new token launches are down over 60%. The number of tokens bonding on Pump.comte has cratered. All these pumped dot fund tokens and meme points generally are getting no bid. are basically saying that the meme coin cycle is cooked. I've heard this from multiple people at Denver. So there's something very beautiful about the SEC showing up always, like, so whether

it's like Gensler coming in to prosecute open sea after NFTs have already collapsed, so now Hester Perth is coming in to declare, the memequins are great after they've collapsed. It's like those memes of people like dancing, actually speaking of Paul Bearers. Like, you know, the memes are like a funeral dancing thing. It feels like that. It is a little bit of that. The He always carries out the trend one way or the other, whether it's on their arms or in the grave. So, I don't know. How do you feel seeing how crypto-friendly this administration is? So I actually, I found there was an amazing article.

Like, I didn't realize this until reading Matt Levine sometime this week. But basically, I don't know if you know about the Info Wars bankruptcy. So I guess Alex Jones. I followed the beginning parts of it, but not the end. No, there's a meme coin thing here. That's why we're... Hooray! I remember you shouldn't hide a bunch of assets.

Is that what you're talking about? No, no, get ready. It gets even crazier. So... Wait, did he make a meme coin? No, that, you gotta wait. Let the man tell the story. Let the man tell the story.

So basically, Alex Jones sued by Sandy Hook, the Sandy Hook families and victims. They won. He went bankrupt. He basically had to pay some hundreds of millions, maybe a billion in restitution to them. them. And so what happened was Infowars was seized and the government ran sort of a normal

foreclosure auction. The company that won it was something tetrahedron ink, which is technically the holding company that owns the onion. And basically they won and the main thing and the deal they struck with the Sandy Hook victims is like, hey, we don't have that much cash, but instead we will buy the InfoWars IP and use it to do gun rights education, like basically be like an anti-gun media outlet. I didn't realize that. But Alex Jones Acolytes launched the Wars meme coin and put in a bid much higher than the onion, sneaking it under the rug of the foreclosure auction, saying that they'll give 51% of

the war's token as part of the... the payment plus some cash and it was significantly higher than the mannions bid and the with the war's token being marked to market yeah okay because it this token they had 10% live it's been trading okay and 51% goes to the victims um and even at the current price is way higher than the onions offer because the onions offer was mainly these concessions around doing education and not cash okay or cash equivalent and um the onion sued because they're like, wait, wait, wait, wait, this is our thing. And lost due to some procedural issues that I guess happened in the auction.

So now it's going to go to the wars meme coin holders. And the wars meme coin holders get to vote on what happens with Infoors.com. Wait, so this meme coin has utility. It does. That's bearish. Yeah, yeah, yeah. That's trouble. That's trouble with it.

Yeah, yeah, yeah, yeah. Okay, tough shit. Yeah, this might actually be a situation where it's pooling assets to run a business. It literally is. This is exactly what we're going to be a security. This is what Hester warned us about. Exactly, exactly. Watch out, guys.

So, so anyway, I think, I think this is where this, as far as I know the story, Tom, maybe if I'm missing anything, I think that's. No, I think that's right. Well, I think Matt also talked about sort of the bid being weirdly structured where, like, hey, you actually have this huge liability, right, from the, you know, that they owe to the parent. So the onion thing was actually functionally higher because they also agreed to wipe this, this,

you know, debt from the business. But, yeah, I don't know. It was all weird, but I do remember. Yeah. Yeah, that was the procedural thing. Yeah, the meme coin bidding. Wow. How's what I was doing now?

I haven't looked. That was my first time thinking about it, actually. What would happen if the bankruptcy bid gets worse because the meme coin value plummet? I mean, if you have to give 50% of the meme coin to a bunch of, you know, deceased, parents of deceased kids, that's probably not bullish for the token price. No, they're going to sell. Yeah, of course. They're not going to be long war's token.

No, but I guess they get to vote on something. So like there was this claim that like And so I this wasn't in the written article But this was on the podcast they do Matt Levine and Katie Grefeld Which was basically like Actually the The families can still vote to turn it into a gun rights education thing

So they could the idea was that they would vote and then don't Oh man Finding governance Some kind of government Team coins with governance that is incredible I'm just I'm just reporting the facts I don't even understand how this thing happened But I guess because the meme coin already launched it. Yeah, this all sounds extremely over Yeah, I mean yeah, I think the SEC went too far. There's also there was there was the news today that they settle with Richard Hart

No, they didn't settle it was actually dismissed on that's even worse. What? Yeah, so it was dismissed by a judge and For anyone who is not aware of Richard Hart, you know, the largest die holder we will we will absolutely get sued if you try to reiterate the Richard Hard case from memory. All right, I'm not going to try to reiterate the Richard Hard case. Only thing you know, he's the largest Maker Dow, Die Minter. He's a great man, and he's a true patriot. The case was to use a little bit of better fashion advice. Okay, the case was dismissed, but without prejudice.

And so the judge basically said that they did not correctly allege that the acts were directed at United States citizens. Oh. And that they gave the SEC leave to amend their filing. Until then, it's dismissed. Okay, this is not as bad. The SEC did not drop the case. Oh, okay, okay, okay.

All right, thank you. Yeah, yeah. That is a relief to hear that that's not what. Correct. There'd be probably riots in the crypto streets. There were if they dropped that one. Okay, yeah. So there have been a lot of cases that the SEC has recently dropped.

They dropped the case against Uniswap. Obviously, we all know point base. We talked about that last week. OpenC. They dropped an investigation against OpenC, Uniswap. uniswap, et cetera. So like, there's a difference

between... There was a Wells notice issued but they hadn't actually filed charges. Right, exactly. Right. So a lot of...

We're seeing basically the slate get wiped clean for a lot of companies. Consensus as well was on that list. None of those actors being accused of fraud

that's right. They were all good actors trying to build in America. Yeah. So to the extent to which the SEC is making good

on the promises it made, we're seeing that play out right now. So that's all great. Obviously, markets are fixated on macro and tariffs and all those other stuff. But at least within the crypto world, it's really great to see the, basically, United States being open for business for crypto founders again. And I think there is, at least if there's any side of relief that I hear from when I talk to people in Denver, it's like, okay, it does feel like that part of the vibe has changed, you know, and the sense that everyone has to pay a gazillion dollars to lawyers and do all these structuring gymnastics in order to build

anything in the space. Ultimately, it's good for all of us if that stuff goes away. Yeah, more capital to hire people to build. More capital to hire people to build. So speaking of people, bad transition. All right. Isn't that like every topic? Don't think about it too much. Speaking of people. The Ethereum, okay, the Ethereum Foundation, the Ethereum Foundation. All right, so we had some big transitions in the Ethereum Foundation, which is apropos of, you know, being here at East Denver. So I, Miyaguchi, who was the executive, director at the Ethereum Foundation. She's been leading it for, what was like seven years, eight years, something like that, quite a long time. And she recently transitioned to president, but I think

is code for step down. I'm not sure what exactly it means. It could mean anything. Okay, yeah. I mean, I feel like it's one of these, like, okay, you're sort of an elder stateswoman kind of role, you know, it's like, okay, well, you'll be in the wings, you'll be on the board or something, but you're no longer day-to-day operating. So, well, a president could be day-to-day operating. I don't know. But certainly the way that the way the blog posts were written and the way the tweets were written kind of made it seem like, okay, you know, it's been an amazing journey. It didn't sound like, hey, we're promoting you.

I will tell you the blog posts, you know, if when you were in high school, you were had to use strunk and white, you know, the elements of style. That blog post did everything wrong in that, like, it was like very. It could have been translated from Japanese. You don't know. No, no, sure. I'm just saying I had to read it three times. because I was like there's no concision, there's no directness, there's no way of like following the points.

And it took me forever. It was very philosophical, which is very, which is why I inferred that this is somebody who is moving on to greener pastures. I'm just thinking it was really, I really had strained to read it because it was like confusing. It was a little quaddy. I feel like, you know, it's like a lot of AI systems in that. Well, you need AI to decode it. I did. Yeah, I probably should have done that.

Yeah. reading it's three things. Okay, so I'm a Gucci step down. This was pretty anticipated. People kind of knew that it was this, you know, we talked about before, this sort of civil war within Ethereum and the sense of, okay, maybe Danny Ryan or somebody else is going in to leave the foundation. We have not seen that person yet, but there was this tweet that the Ethereum Foundation put

out recently that really got people up in arms. And so there was really no time to celebrate. Today, right? I think this morning. I missed this tweet. Okay, you missed this tweet. Okay, you missed this tweet. So we'll try to explain to you.

stage, everyone was talking about a tweet. What tweet is in the time? So the announcement was what's called the EF Silva Culture Society, which is an informal counsel to the EF of a group of people who will help Ethereum tend to Ethereum's infinite garden. And they will be our assistant gardeners who will help us to make this into a more beautiful and green pasture. And they showed a circle of like 12 PFPs of people of whom probably maybe three of them

you've ever heard of. And that was the tweet. And basically everybody's response to this tweet was what the fuck are you saying? What is this? Also, do you remember Google's failed social network circles? It looked like that. It did look like Google. Yeah, so basically what I saw, I don't know how you guys interpreted it because obviously

this just happened today, but I just saw just pure rage. But rage from people who never speak out against the EF. Like Hayden wrote a tweet that was like, that one in particular was like very surprising to see that. I've not been on Twitter today. I can't wait to log on tonight. Yeah, yeah, yeah. Well, it's very much like this civil war breaking out into the rank and file. You know, that's what that's what this feels like, which is that it's just like one general said the wrong thing.

And now everybody is like, wait. Also, I will say, I did know more than three. And a lot of those people are security researchers. So the guy who wrote the hash checking script is on there. So like Matthew Green was there. I know leftress. I know who else was on there? Millie, Matthew Green.

Optimizer. Optimizer. Yeah. Okay, okay. Yeah, like six mutuals on there. So I got to give a shout out. Yeah, actually, I feel like there, there were, how many of them did you not know?

10%, I think. 10%? Like 40%? Okay, yeah, I'm at least 60. That I didn't know who it were. It's okay, you're a VC. I'm a VC. You guys are in the trenches.

But the, the, the, the, the fact there was security researchers made me feel better. I will, I'll give the one positive because I know everyone was dunking on it, but I actually like the fact that after the safe hack, you have all these security. Yeah, yeah, but it's like, but it's about tending the garden to ruin. It's not about for, The garden. This sounds like some kind of euphism for like hygiene. Look, if the EF is going to get advice from security researchers after this big hack that we spent all this time talking about, I'm happy with that.

No, they need advice from marketers. They need advice from business development pros. They need advice for people that want to win. Okay. I'm just, I don't think this was done in response to the buy the hack. I know, I know. I'm trying to find some positive because there's no way. There's like three ladies in there.

So that's my. Oh. Okay, so I'm just trying to not be as negative. People who are never negative to Ethereum. Well, you've been negative all show, and now all of a sudden you're super positive? I have a much bigger soft spot for Ethereum than probably ever on the show. And so I... What?

And I will say... What? Sorry, yeah. Well, an audience, I just want everyone to mentally check in with Teroon's vibe over the last couple of years. Is that what it feels like? Does it feel like he has more of a softbacker than us? More than us in the show. Yeah. I think there's a salana deep state plan.

He's trying to promote the Ethereum cultural rot from within. Agreed. I think he's a double agent. If there's an Ethereum softy on the show. That is true. No. You say, you know what the number one of fear of softies.

You say F. That doesn't change. See, this is culture war. This is exactly. Yeah, I agree. You see the conflict. He's trying to start culture wars inside of Ethereum. Inside the chopping block.

What were you going to say? No, I was like, every, we've seen that excerpt from like the CIA manual. I had a like to disrupt organization. Yeah, this is truant's checking all the boxes right now. 100%. Ethereum self-sabotash. I just, I just kind of feel bad because I've never seen so many people dunk on. Like, like, even the other stuff people were like annoyed about with they post Danny Ryan deadlifting picture or whatever.

That's not a dead left. Whatever. The walking with weights thing picture. With weight. You know I'm talking about? There's a photo of him with like a yoke. Okay. With weights on it, you know?

Yeah, yeah, yeah. And it was like them being like, look, we're not soy, West, whatever. Yeah, yeah, sorry. Turin doesn't, you know. It's good. Okay. And even then there were always like still support. This one was like universally reviled in a way where I'm like, oh, I kind of feel bad.

I feel like they did not think that hard. I can't wait to read this tweet. Yeah. What's your analysis? Yeah, I think in isolation, there's nothing wrong with it, but it's just so tone-death. It's like now at the time when the people want to hear from you and they want to see change, it's like, this is what you put. If it was like, you know, when like brands have some, you know, crisis and then the intern's scheduled tweet goes out anyway.

That's what this kind of felt like. So, you know, check your schedule tweets, people. Yeah, yeah. That's a really good way of describing it. I will say even for the EF, it was particularly stupid. Like just like like like I think this was Hayden's criticism is like but the idea is fine. Okay, there's a council of people who I guess are mostly security experts. Not mostly it. It's mixed. Okay. So there's a council of technical people who will talk to the ladies and non-maladies.

Yeah, that fine. Okay, describe what it is. What the fuck is tending to the infinite guard? Like what are you talking about? So even even if it was a scheduled tweet like who scheduled a tweet that was so nondescript? He was scheduled some a year ago. Yeah. Yeah. Exactly. It's like no, we. Like, the job of an organization is to give people clarity about what you're doing. You know, you're not like, this is not like a teaser, you know. It's not so cool. People are like, oh, you guess what company we just partnered with, you know. It's like, guess what our, guess what this cabal we just put together does? Yeah, guess what the goal of Ethereum is.

Yeah. Yeah, pretty much, pretty much. So I think this is, I don't know. It does feel like whoever is coming into the EF needs to take heat of this and see that, like, the idea that there's a problem with the branding and the messaging and the marketing, which on some sense, like Ethereum has been, it's been hearing that message, but kind of not fully embracing it. You know, it's like, oh, well, maybe we need to change the leadership.

Maybe we need to, you know, be more aggressive with our timelines. Maybe we need to, you know, think about scaling Ethereum. Or we don't do this. We need to do that. But they haven't really taken on, you know, Battalic said, like, look, we are not embracing this like, you know, Bronze Age, hypermasculine, whatever. Like, we're not, yeah, we reject that. thing and we're going to continue on with the W.E.F. Soyboy mentality. Which guard intending is.

Exactly. And I think what this tweet told you is that no, don't do that. Everybody in the theorem is telling you, please don't do that. This is not eight years ago. We are not like some socialist utopia. Like Ethereum needs to reorient its storytelling and its messaging. I don't know. Am I wrong? You're not wrong. I just felt bad for whoever wrote it because like I've never seen someone get dunked that universally. Like that, that was like the world's worst ratio in history. Like if you just like added up all the dunks. It's pretty bad. It's pretty bad. I can't wait to add to the ratio when I get home. Okay. Well, we look forward to to the tweet. So speaking of Ethereum, we do have to close the show out by settling a bet that we made on this show six months ago. Oh, spicy.

If you remember, six months ago, we were talking about the conversation that was happening around Ethereum scaling. And the idea of whether or not Ethereum was going to increase the block size, increase block space, lower the gas, increase the gas limit, lower the block time. I just said the same thing three times. Or whether they're going to be bigger changes to Ethereum. So here's what our predictions were. I think we bet a case of Red Bull on it.

So the winner gets a... So I'm the only winner in this is what you're saying. Yeah, I would give my Red Bull to Toronto. Well, Red Bull, you can maybe receive your Red Bull in kind, or you can get it in Red Bull. No, it's Red Bull only. Red Bull, if you're listening to this, this is why you sponsor us with the fridge. Yes.

Ooh. That's true. Let's get a Red Bull fridge on deck. Okay, so here's the, here's what we all bet happened. So, Tarun bet either gas limit increase or block time reduction. I said that both a gas limit would increase and a block time reduction would happen. Tom said only a gas limit increase would happen and Robert predicted nothing would change in six months.

I believe we had a gas limit increase since the merge, right? We did. Yeah, we did. I won. So Tom wins the bet. You know it all too well. I guess three packs of Red Bull to Tom. Thank you.

Thank you. One case of Red Ball. Do we just do one case? I thought it was a case of Red Bull. We split it. We split it. I accept cash too. How much is a case of Red Bull?

Do you expect, do you take Ethereum? I do take Ethereum. I don't have to be in time. We disagree with me in time. I only take base Ethereum, though. So you're going to have to find some way to make that happen. Yeah, Maynett's tough. Or you can send me bridged Ethereum on Solana.

They have that now? They have that. They have that. Great. Yeah. Okay. So we'll have to take a photo of you with your one case of Red Bull. Sugar-free or regular?

I want that coconut edition. Wait, there's coconut? Yeah, it's good. Yeah. Oh, to ruin thumbs down. Coconut. It's good. I want to try a coconut.

Okay. Yeah. Let's go on. Do you, have you ever drank Malibu, the coconut rock? Yes. It tastes like that. When I was 21. It tastes like that.

That's precisely why I'm saying that. I've not had a Red Bull in like 15 years. I had one this afternoon. The Flamed ones are crazy. At the Robot Ventures event. Yeah, yeah. To Root's honor. I had a sugar-free Red Bull.

No kidding. It's beautiful. I have seen since the advent of the chopping block, there have been Red Bulls in so many more speaker rooms because of you. That's right. I think purely because of Turu. Red Bull. Where's the phrase?

We're single-handedly increasing the demand. Amongst the crypto. At crypto. Yeah. That fridge just probably costs 1% of the increase in sales you got. Less, way less. Not even, yeah. Absolutely.

All right. Put in the call out. If you have any contacts of Red Bull, get a Red Bull fridge. We will feature it on the show. All right. I promise if I get the fridge, it'll be whenever I'm at home, it will be in the background. I just want to point out that you're rich enough to buy a fridge. No, no, no, no, no.

The game of the Red Bull fridge is that you're a, you know, they created it as a way to, like, be like, you're a streamer who's, like, drinking Red Bull all time. And it was a status thing to get one because it's like, you can't really buy it. It's not about buying. I bet you can buy one. I'm sure you can buy, use one now, but I think there was a while. How many Red Bulls a day do you drink? I probably drink, like, three 12 ounces and one Celsius. What?

Do you 12 ounces? That's like 500 milligrams of caffeine. Yeah. I'm worried. What? What? You're still alive? What caffeine do you need before you will die of a heart attack? More than that.

Okay. Yeah, yeah. But I'm like, you're getting up there like heart palpitations. The great thing is my blood pressure is low, so I'm like, all right, I'll keep. I don't know that you can rely on any of your biomarkers if you're ingesting that much caffeine every day. But that is a staggering quantity. That is a lot. Red Bull.

Again, again, this is why you want me as your sponsor. Maybe let's like find some caffeine free bird. Let's go down caffeine. They actually do have some of the flavored ones don't have faith. Really? What? Okay. So what is it?

Because now they have like 500 flavors. To trick him to start lowering his caffeine intake. Wow. All right. On that note. Yeah, we got, we got to get out of here. Is this like a Pavlovian dog experiment with me drinking not fake caffeinated drinks? Oh.

Oh, that's great. No. Yeah, placebo Red Bull for Toronto. If it was, we wouldn't, we wouldn't tell you in advance. All right. Thanks, everybody. We'll be back next week. See, everyone.