Unchained - The Chopping Block: What Does Binance’s Record $4.3 Billion Settlement Mean for Crypto? - Ep. 573

Episode Date: November 23, 2023

Welcome to The Chopping Block – where crypto insiders Haseeb Qureshi, Tom Schmidt, Tarun Chitra, and Robert Leshner chop it up about the latest news. This week, the gang breaks down the record $4.3 billion settlement between Binance and the U.S. government — whether it was fair, the chances CEO Changpeng Zhao will face any jail time, whether it was ultimately a good thing for Binance and for the U.S., and what this changes for the industry going forward. They also delve into the SEC’s lawsuit against Kraken, and the drama around Sam Altman’s firing from Open AI and what it says about corporate governance and crypto companies.  Listen to the episode on Apple Podcasts, Spotify, Overcast, Podcast Addict, Pocket Casts, Stitcher, Castbox, Google Podcasts, TuneIn, Amazon Music, or on your favorite podcast platform. Show highlights:  the details of the settlement between Binance and the Department of Justice  how a core part of Binance’s business model was to allow bad actors on its platform, according to Robert why Binance had to settle with the U.S. government even though it's not an American company why Tom believes that the settlement represents a "very bad lesson" whether U.S. market makers should be liable in cases like these how the crypto community has reacted to the settlement  what the settlement means for the future of the crypto industry  whether the new SEC lawsuit against Kraken is just a “copy-and-paste” of its suit against Coinbase The drama around Sam Altman’s removal from his role as CEO of OpenAI Why Robert thinks that the OpenAI board was “silly and dumb” What the problems at OpenAI say about its innovative governance structure  Hosts Haseeb Qureshi, managing partner at Dragonfly  Robert Leshner, founder of Compound Tom Schmidt, general partner at Dragonfly  Tarun Chitra, managing partner at Robot Ventures Disclosures Links Binance Settlement Unchained:  Binance to Pay $4.3 Billion to Settle U.S. DOJ Criminal Probe; CEO Changpeng Zhao Pleads Guilty for Violating Bank Secrecy Act  Binance CEO CZ Released on $175 Million Bond SEC Charges Against Kraken Unchained: Crypto Exchange Kraken Accused by SEC of Violating Securities Law OpenAI The Verge: Sam Altman returns as CEO of OpenAI Unchained: Worldcoin Falls and Rises After Sam Altman-OpenAI Saga Haseeb’s tweet on accelerationism Learn more about your ad choices. Visit megaphone.fm/adchoices

It sort of reminds me a little bit of kind of what we've seen actually out of the SECC where, or frankly, the CPC as far as U.S. civil matters go, where really the lesson that I feel like keeps, continues to be learned is you can break the law if you get really big and you have a giant war chest and then you can use it to go fight. And that is a very bad lesson. And I think that that runs very counter to what we want our laws to signal. But that is kind of what we see in terms of enforcement action. So I think it's kind of disappointing in that way. Not a dividend. It's a tale of two fun.

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. I like that eight is the ultimate puns. Defi protocols are the antidote to this problem. Hello everybody. Welcome to the chopping block. Every couple weeks, the four of us get together

and give the industry insider perspective on the crypto topics of the day. So quick intro is first you got Tom, the Defi Maven, and Master of Memes. Hi, everyone. Next is got Robert, the Crypto Cotazur, and Tsar of Super State. GM, everybody.

And then we've got Tarun, the Gigabrain, and Grand Puba at Conlon. Aloha. And finally, I've received the head hype man at Dragonfly. So we are 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 Chopin Block.

That XYZ for more disclosures. So, gentlemen, it's been another crazy week, particular today is Tuesday, November 21st, and today is the day we have all been waiting for. There finally has been a settlement between Binance and the U.S. government over almost all of the charges that have been filed against Binance. Have we all been waiting for this? I think the entire industry has been waiting for this hammer to fall. Like, I mean, I know a lot of people, a lot of LPs that I talk to are like,

what's going to happen with Binance? You know, when are we going to get clarity on the thing? This is the big one, for sure. This is like, okay, Binance can now wash its hands and move forward into kind of the post-bad boy era, presumably. I mean, you never know. So let me give you high level what happened. So some of you may remember the CFTC and SEC filed suits against Binance in the summer. And we knew from the CFTC lawsuit in particular that Binance did a lot of bad things. And many of those bad things are criminal, such as sanctions violations and money laundering and all this, the sort of stuff that it's really not a civil violation. This is really criminal stuff that the CFTC was digging up that Binance was participating in. So we knew that there was a long

investigation into Binance from the DOJ. And there's been a lot of different leaks about how the DOJ was thinking about actually bringing this case to bear. And now we finally have the resolution of that case. So CZ flew to Seattle from Abu Dhabi where he was residing, which of course Abu Dhabi does not have an extradition treaty with the U.S. But he voluntarily came to the U.S. in order to face these charges.

So the charges are that Binance is going to pay a total of $4.3 billion in fines and restitution. This is a massive fine. So just for a sense of scale, Purdue, which was the company that was ultimately prosecuted for all the bad opioid prescriptions they were writing, was charged $5.5 billion. Binance is charged $4.3 billion. This is an incredibly large fine. CZ is barred from any involvement in Binance's businesses for three years. And there's a bunch of changes to compliance and stuff like that. This resolves Binance's charges that they would be facing from FinC, OFAC, and the CFTC.

notably the SEC is not on this list. So the SEC is still going to be pursuing their cases against Binance and still saying that stuff that Binance is doing is bad and wrong and evil. CZ is stepping down as CEO, obviously, and is being replaced now by Richard Tang, who is going to be the new CEO of Binance going forward, or at least for a little bit.

And the DOJ basically detailed some of the things of which Binance was accused. One of them is there was over $900 million that US users end up sending to Iranian users, which of course is sanctioned violation. There were also sanctions violations to Syria, as well as Crimea and some of the other areas that are otherwise under sanctions. There was also over 100 million from Hydra, which is a Russian dark web platform,

as well as a bunch of money being sent back and forth from mixers. So sanctions violations, money laundering, and willfully bringing on U.S. customers, which we already knew from the CFTC lawsuit. So CZ is out. He's basically said that, hey, I'm no longer going to be running company. are doing anything like that. He wrote a tweet, a very long tweet that sort of sounded like his retirement speech where he's like, hey, guys, look, I made some mistakes. I don't think anybody in the industry actually thinks he made mistakes. I think people in the industry were kind of cheering

him on. But the most part, he's like, look, I made some mistakes. I've had my run. It's been really incredible. Did something's right? Did something's wrong? I'm probably going to step back, take a vacation, chill a bit, and maybe, you know, do some investments in defy and kind of be, you know, an elder statesman of the industry more or less. So it kind of sounds like he's imagining himself in an Arthur Hayes kind of trajectory. And for the way he was describing it, sort of implied that he doesn't expect to face jail time.

Now, it's not clear from the settlement whether or not he will be facing jail time, but it seems to be implied by the way this is all being handled and the fact that he came to Seattle is paying this massive fine that probably he's going to either get a very small sentence or he's not going to face any jail time at all, much like Arthur Hayes.

So I will pause there. thoughts on the Binance settlement. Most important thing is we know he's really retired. If like Arthur Hayes, he comes on this show. Yeah, that's a good point. CZ, if you're listening, come on the shopping block. We love to have you. And, you know, we'll get too far in the nitty-gritty.

You're just going to ask you about your defy investments and see if you're going to be able to beat Justin Sun in terms of on-chain valor. And AI. He threw AI in there just for good measure. So you never know what disease is cooking out. Yeah. Yeah. On the jail time bit, I was initially also under this impression.

But there was a new story that came out. Basically, CZ has waived his right to an appeal if his jail time or probation time is under 18 months. So there is still a window, but I assume it's pretty nailed down at this point. Otherwise, I don't know why he would fly to the U.S. to sort of face these charges. But I mean, on face value, it seems like kind of a win-win for everybody. Like very, very minimal jail time. I think they can pay this balance or this fine at the balance sheet pretty much. The U.S., hey, finance is now in compliance.

They get all the finance data and all the user activity. It seems kind of like great for both parties. The other hand, though, you know, it does kind of make me question, like I guess like BSA and sort of KFC AML, the whole regime. overall, like, why is it that for some, you know, federal crimes you can pay a fine and get out of it and some you can't? It seems overall a bit silly. And I feel like they trumped up actually a lot of the way they represented these charges. I mean, there's an article out saying, oh, you know, Hamas was using finance. And I think they alluded to it in the thing

or, you know, even the $900 million Iranian thing. It's not like those are all Iranian officials that were trading with U.S. users, presumably some much smaller percentage. So, you know, sure, at face value, it seems great, but I don't know, it just kind of makes me a question like, you know, what are we really doing here? Like, who is being protected? What is sort of the point of this interaction? Well, I'll take the opposite side of this. And I'm going to take at face value everything that was in the charges, everything that was discussed at the press conference, everything that's been, you know, presented as evidence so far. You know, one of the things that we said is that there's basically a consistent and repeated series of egregious violations when it comes to AML.

and moving of money on behalf of people that are not supposed to be moving money, right? You know, Binance got to start way back in the day. I remember it was like, oh, anyone can sign up. There's like no KOC, like put every asset you want into Binance and take out any other asset. No one's going to know. And it got to start with, you know, basically, you know, a Wild West approach to allowing people to trade. And they never really dropped that approach. You know, obviously they sensationalized a lot of the violations like, oh, it was a

group. Oh, it was drug cartels. Oh, you know, they joked around about AK-47s and like all of these things. But they basically never really tried to prevent bad actors, so to speak, from using their exchange. Like, it doesn't seem like there was ever, you know, a proactive approach. They joked around about how they weren't being proactive and they didn't want to be. And it was core to finance the business model to let anybody use it, you know, including, you know, And the degree matters and the magnitude matters and the impact on the world matters to your point on. But really including people that are very obviously the bad guys, right? And I agree it's possible that it wasn't like, you know, unilaterally like allowing people to, you know, create terrorist groups or whatever.

But it certainly was directionally on the wrong side. And not just on the wrong side once, but like on the wrong side repeatedly and on an ongoing basis for, you know, six years. And one fact I actually found most interesting, you know, I think it was Janet Yellen, who said to the press conference might have been someone else. You know, finance never once filed a single suspicious transaction report. Seeing the largest, you know, hacks move assets to finance, seeing the largest flows of funds in the history of crypto, you know, nothing once ever was considered suspicious to them. They never once filed a suspicious activity report. They just didn't, so to speak, want to crack down on the various uses of their platform. And that's very

different than like accidentally letting something bad through. You know, they've really repeatedly turned a blind eye. And I think, you know, that's what's the driving force behind the U.S. government wanted to crack down on them. And I think they're doing it to send a message. And I think all in all, it's probably a good thing that Binance is charged and has settled the charges, both, you know, as you said, for the government, for Binance, for the industry. So, yeah, Robert, I more or less agree with you. I think this is unequivocally good outcome for the industry. It's good for Binance.

We knew that, you know, Binance knew this was coming. There was no fucking way after that CFTC lawsuit that this is not the logical next step. And getting a settlement that basically says, look, you pay, you know, that's probably like one to maybe one and a half years worth of profit for Binance, if I had to guess. You pay a one and a half year speeding ticket, but you basically get to keep the proceeds of all the last six years and you get to move on and now you're off scot-free.

That's a pretty good deal, I think, for Binance. For CZ, I don't know. It really depends on whether or not he faces jail time and the nature of that jail time. I would also say, you know, moderating a bit on that perspective, I think it's also important to appreciate that, look, Binance is an international company

and I think there is a big difference between the sanctions violations and the dark net market mixers and, you know, kind of criminal activity stuff. you're not filing a suspicious activity report. Subistic activity reports are an American thing. And Biden has always taken the view, obviously somewhat, you know, kind of speaking out of one side of its mouth that it doesn't serve the U.S.

Now, obviously, it was being very, very cute about what that meant. But nominally at least, it does make sense that a company that claims it doesn't operate in the U.S. and has no ties to the U.S. would not be filing suspicious activity reports with the U.S. government. But it very clearly operated in the U.S. It did. Right. So that, I think, very clearly, it deserves a slap in the face.

the sanctions violations, I think, are interesting because, of course, Binance was founded originally in China and eventually moved to Hong Kong and then eventually moved to Singapore and eventually moved to UAE. China and Iran are allies, right? So obviously China does not acknowledge

the sanctions on Iran as binding on China. And so it is kind of a weird thing when you think about it that like when Binance was actually founded, they might actually think that, well, you know, Iranians are not sanctioned as far as we can, you know, as far as I, I mean, I don't do business with, in America. And so from my perspective, like, I'm not in violation of anyone's rules when I do this. Now, the reason why, and this is kind of the real politic of it, is that when you touch American users,

now you are in America's jurisdiction, whether you like it or not. And one way or another, we own the high seas of the internet. So if America doesn't like something, they can take down a domain name. They can shut down your DNS connections. They can cut off your Google access. Like, more or less America runs the internet. And so once you touch American users, and we, established jurisdiction, you know, it's, it's kind of, it's our game now. Yeah, maybe I want to hear Truane's perspective, and maybe just one point of clarification. I don't, I don't disagree that they definitely violated U.S. sanctions, and I think they were pretty flagrant in, just how negligent and sort of carefree they were with respect to

knowledge of bad actors using the platform. But I think I really took issue with the way they were presenting this as, you know, this was sort of a disgorgement of profits from doing that. that wasn't the point. Like, that's not where Binance makes money, right? Bin Laden doesn't make money for, by laundering money for Hamas. That's incidental. That's, you know, a very, very, very small percentage of their total volume and fees. And so it kind of feels like, hey, you know, you have this, this, you know, very, very small percentage of bad activity on the platform. And we're going to take that in the whole thing just because of it. And I really just don't agree with that. I mean, look, clearly they made, I don't think, I don't actually how they do the math on the four billion.

and sometimes they end up kind of giving this convoluted explanation of why this is the number. But it's very clear that a lot of their revenue came from U.S. users. And that, I think, if there was a place where a giant number comes from, that's probably it. It would not surprise me if they've made several billion from U.S. users over the course of their history. And, of course, you want to do something punitive. I don't know if it's quite punitive enough to be a really, you know, actual strong impediment to the next person who wants to build Binance. But this one at least, you know, I think it's, it seems in the territory of reasonable, it may be a bit small, honestly, for what Binance should be paying for how much they were

kind of railroading and breaking U.S. laws. Well, I think it was actually a quite significant penalty. I read one tweet recently that looked at, based on Binance's self-reported proof of reserves and the assets on hand and their own statements, based on that, you know, they were able to unearth the number that Binance had approximately. like $6.5 billion of crypto assets on hand that belong to Binance, not to customers. And so if you take that number at face value and you say, well, Binance's balance sheet has an extra $6.5 billion on it, you know, a $4 billion penalty is basically two-thirds of their

non-customer liability balance sheet. And that's significant, right? It's the seventh largest fine in financial history, but it could be like two-thirds of what they have available. Right. When J.P. Morgan gets fined $10 billion, it's more of a drop in the ocean because they might have, you know, hundreds of billions of dollars. And so, you know, just putting in perspective, I actually think it's quite significant based on the size of the entity. But maybe you're right. Maybe it's small for some other reason. I think you have to look historically and, you know, non, non-crypto assets as as well. I think, again, it's, you know, obviously this is DOJ, CPC, but it sort of reminds me a little bit of kind of what we see. actually out of the SECC where, or frankly, the CPP as far as U.S. civil matters go, where really the lesson that I feel like keeps, continues to be learned is you can break the law if you get really big and you have a giant war chest and then you can use it to go fight. And that is a very bad lesson. And I think that that runs very counter to what we want our laws to signal. But that is kind

of what we see in terms of enforcement action. So I think it's kind of disappointing in that way. I think that is a kind of law of the jungle that's unlikely to change. And I don't think. I mean, I don't understand international prosecutions well enough to know kind of what are the levers that Binance has, but very clearly they've hired some of the best legal teams in the world. Everyone's been saying that now for years, that they have an incredible bench. And those people are probably making it very difficult for the DOJ to be able to extract quite the win they might otherwise want short of money. Now, Robert, you made the point that, like, look, relative to their balance sheet, that's a huge chunk of flesh that they're taking. But of course, like, they, you know,

what's on the balance sheet is just the retained earnings they haven't dividended out or bought and burned, B&B with or whatever. And so the earnings they have from prior years that they vanished from the balance sheet because they already paid themselves that CZ already has personally or other shareholders have personally. That money feels like the right denominator, not the money on the balance sheet. So the profits they've made over the last few years is a lot more than $6 billion. That's a fair point. And one of the things that, you know, comes up a lot is that Binance seems to own like half the entities in crypto, where his name's at the top of the cap table.

And so like, you know, even outside of Binance, he's been able to use that position to, you know, create a huge ownership structure. Yeah. Tarun, you've been pretty quiet on this. What's your, what's your thoughts on this whole? Again, maybe this is just like a little too boring for my taste, but personally, because at some level, I have a lot of sympathy for this argument that the U.S. sanctions didn't probably shouldn't have applied to like the 2017.

I agree that the U.S. is very good at finding ways to forcibly put you into their regime. But I can see some, you know, I think the most recent stuff, all the signal messages that that stuff is like, well, okay, obviously, clearly are making mistakes.

I think another thing I find kind of interesting about this, and this is more of, in my mind, a bug in the U.S. legal system versus a bugabit finance, is that like there's no liability for any of the U.S. market makers who are the U.S. users using the – it's like not a very symmetric liability structure, right? Why should there be liability for U.S. market makers? Well, I mean, arguably they're sort of like – in the case of like how they're getting

remunerated, they're sort of earning implicitly finance equity via equity-like instruments via at B&B, and they actively know they're participating in this. And I feel like they actually have some fault themselves. I'm not trying to be some like Binance Stan here. They obviously made mistakes. And I think they deserve, CZ deserves a penalty. Yeah, it should really, yeah, it should really be the market makers on the stand. Well, I just think the market makers knew what they're doing too.

Like, like, and it's sort of weird to me that they have zero liability. I guess like Blander slash Radix trading firm number one from the. the original thing. I know they've had issues and that Jump obviously has had their legal stuff with the head of Jump Crypto being deposed a couple weeks ago. But it does feel like it should be more symmetric to me in some ways. Like maybe the penalty should apply to them to versus strictly the venues. I don't know.

It's just like to me it always seemed a little bit weird that the market makers kind of got to get off scot-free because like a lot of them. got warnings. They still stayed on there. I mean, that, that seems a little extreme. And it sounds a little bit sort of collective. I don't know. I mean, those were, those were clearly the people who the U.S. was going after, right? Because they're like, oh, you tried to block U.S. users. But you didn't block these U.S. market makers. And, right, I mean, generally the perspective, yeah, look, fine. Generally, the perspective that the government takes, which I think is the right one is that like it's like for example when uh this this was the thing when a back when i used to be a

professional poker player is it's illegal to offer gambling services to americans but it's not illegal for an american to gamble like as an american you can gamble whenever you want the person who is liable for the no no i i think for in three sides this is this is a tripartite market this is a gambler in the house right this is i have the market makers who are incentivized by the house and technically are earning in the case of B&B, they're earning equity-like structures of the entity. And there's the equity holders of BNs and the exchange itself. And then there's the traders. In the tripartite structure, the market maker are sort of in the middle.

And I actually think they fundamentally own some liability too. I know our legal structure. Sure. So to the extent that the equity holders of BNs were hurt because Binance is paying this big fine, to an extent, B&B holders were also hurt because BNB went down. It didn't go down that much, but it went down. I think it went down like 5% or less. I mean, very mildly.

I think like 9%. So it went down quite significantly. So you could argue that, okay, by some proxy to the extent that they were, quote, unquote, equity holders or pseudo equity holders, they incurred the same harm that equity holders might otherwise have. But of course, individual equity holders are not held liable, right? If you own stock of some company that did a bad thing, you don't have any collected, pass. I just find this relationship of like the, you know, the, you know. U.S. market makers who are the reason that say the stuff about sort of violating Iran sanctions happened is because there are U.S. market makers who maybe took the other side of those trades

without knowing who they were, right? Because they don't know the identity of the other side. In some sense, I think that they sort of act as a convenient way. For them, it's a little too convenient that they get to get out of it. It does feel like they really do own some liability in this. You ever traded on Binance? I've never marketed But you've traded on finance So your counterparty may have been In Iranian or may have been

Before they block U.S. So you must have known at that time That like, okay, it's kind of Wild Westy You know, you never know who's on the other side of it But like But there was never there's never guidance that said you can't use it I mean there's guidance that like you should not be interacting in any way With a sanctioned individual right?

So you can never be exchanging money with an Iranian or with somebody from Yeah. Again, I agree with that, but I think if you think about, let's say you look at a U.S. exchange, market makers have to go through basically a white listing process for a lot of exchanges where, like, they have to go through more sort of exams and check. I agree with you insofar as as a regulated market maker, you're known to the SEC, you're known to the CFTC, you're regulated market participant, you have higher compliance obligations and burdens, and you should have more knowledge of these things than the average bear,

right? That for sure is true. Anyway. I mean, it's a question of degree as well, right? I'm sure there are some market makers who were very close with finance and knew a lot more than other market makers who were just kind of like, well, you know, they've sort of cleaned up, I assume, and so on and so forth. They did KYC on us, so I assume they did KYC on everyone else, which obviously they were not doing, but, or they were doing and ignoring, you know, it's hard to say. I just kind of agree with Tom's perspective that, like, clearly there's a lot that went

bad. This clearly is not that big of a punitive measure in some ways. Maybe the CZ has to post bail, whatever it might be slightly the, you know, the fact that he had to go to Seattle, I think, was quite surprising to me. I actually thought it would be. Seattle's the punishment. Wait, is he, is he staying in Seattle or is he just there for like the whole? He just got, he only, he apparently only just got the bond posted now. He had to post on 75 million. Oh, wow. Okay. Interesting. He has to come back for sentencing.

He hasn't been sentenced. So it's not clear what the actual end. When you post the bond, you can't leave the country, right? So he has to like chill in the U.S. No, he got approval to go to the UAE, but he has to be back in the U.S. 14-folds two weeks before. Again, I'm not trying to say like there's no fault to violence. But I just think there are some American entities who probably, in my mind, having interacted with them or the last years.

I feel like they were just as complicit. Well, it's clear they're two... In a DCG-like way. You know, they're like, they would talk about things in a way that I'm like, okay, you're basically complicit also. It seems like there are two big categories of reactions that I'm seeing, even hearing from the four of us. One category of reaction is, you know, like, look, what did you expect?

Of course, this was happening. You know, it was like the Wild West era and, you know, always kind of let bygones be bygones. Everyone's growing up now. We're all adults now, and people aren't going to do that again. And they sort of see CZ as like, look, he never stole money. He never took customer funds. He never like broke the piggy bank. He's very different from Sam. So this is all kind of like, it's almost like pseudo heroic of like, oh, look, actually somehow the skeletons in the closet, it's like, oh, you know, a little bit of dark net markets and stuff. But like, you know, you're going to have that. And then

there's probably another category of people who are looking at this and saying, finally we're cleaning up the scum, you know, the industry is getting moving past its infancy. And this is, you know, really good for everyone that finally were, we're institutionalizing space. Yeah, I thought, I thought hilarious meme today, which was like, crypto Twitter. All right, finally, it's cleaned up. It's going to be bullish, boys. We're only going to the moon, right? And then the next panel was like, everyone not hoot in crypto. And it was like this like guy crying in horror, you know, over the Binance games. being like the two interpretations. Right, right, exactly.

So here's then the natural question. The CZ era is over. CZ is going to take a step back. He's no longer the captain of the industry. What do you think this changes for the industry going forward? I think if there's not the perception that the largest exchange on earth is crooked or breaking the law,

and that's not the going perception, I think it's a huge service to crypto on the whole and the industry. I think the argument against a spot Bitcoin ETF and the dark, cloudy spot markets is reduced. I think in general, by cleaning out the concerns that the U.S. has about finance, it puts everything on a good foundation going forward. If all that's left are the good actors like Coinbase and exchanges that are reformed and chastised and cleaned up like Binance, then anything that's left, I think, is like default good instead of default bad. And I think that actually is really powerful. And I think is, you know, a starting place for the continued growth of the industry as a whole. And I think it's going to be a positive.

So I'm really excited to see Binance cleaned up personally. Don, what do you think? Yeah, I agree. I mean, this was kind of the big overhang that I think everyone was. kind of worried about and I agree. I think it also kind of imperiled the ETF applications and now it feels like you know, the path is clear. There's not really any sort of big overhangs or big worries or some, you know, mysterious. Tether. In time, in time. You know, mysterious black orb in the corner somewhere that we pretend doesn't exist.

I'm willing to take the other side. Yeah, this is like perfect crypto selective blindness. It's like, oh, everything is good now. There's nothing else weird. When I went to Turkey, I went to Turkey for an Ethereum conference last week. In Turkey, literally every corner is an FX store, and there's only one currency that's uniform at every FX store. It is at every FX store, other than Turkish lira is USTTron. Everywhere in the city, I paid for coffee for the first time with a stable coin. I generally think stable coins are useless in person in the US, because like the US system just doesn't, you know, like everyone's uses Apple pay or whatever. But, you know, you were in Turkey. I mean, I paid too many transaction fees because the bridges from

East to Tron are horrible. And I've never used Tron until this moment. But once I got to Tron, I just paid for at least five sandwiches and coffees and a beer over like the week. And it, it is actually used. And people there treat it. I asked people, I was like, well, would you take USC? And they were like, fuck no, after the DPEG, we'll never use that shit. And they said it in like, aggressive language. They didn't say it in kind of like, oh, we don't like USDC. I was actually surprised at how much they disliked USDC during the depay. And it was like the February, March stuff that's really stuck in their brain. And they're like, tether is reliable. And look, like, they're all the problems of tether. But the fact that there's, you know, a capital city, you can like spend

tether as if it's, you know, almost as easily as a local currency is, was wild to me. Yeah, that's a very good point. And it's something that I've often tried to emphasize to a lot of people who think stable coins and crypto and all this stuff is like kind of worthless is that if you step outside the U.S., it becomes very, very clear what is so interesting and compelling about creating this, you know, financial rails that are totally untethered from traditional banks. And it's, yeah, places like Turkey. Turkey, I think right now within the Middle East, it's like the number one biggest market for crypto in the Middle East and large part because of the volatility. of the lira. So that is driven more and more people into the arms of crypto. So I've heard a lot of similar stories and other places in Latam and in parts of Southeast Asia as well, where there's a lot of penetration of Tron, USDT. I mean, Istanbul was actually, is the first like very large city I've been to,

like other than Buenos Aires, where I, you know, it was like almost ubiquitous. It felt like, you know, 50% of the coffee shops and stuff took it. Interesting. Okay. So let's move on real quick in the interest of time. So there's another story that's dropped just a couple days ago, which is a lawsuit from the SEC against Cracken. So this lawsuit is more or less a copy and paste of the Coinbase lawsuit. So unregistered, securities exchange, broker dealer, blah, blah, blah, clearing agency, all the stuff. And that there's a bunch of securities on the platform and the securities are the exact same ones they listed in the Coinbase case of Solana and Falcoy and so on and so forth. So there's not a lot, I think, in this case that's interesting or even particularly

informative about the SEC, other than that the SEC is continuing this campaign of regulation via enforcement. Cracken, thankfully, is willing to throw down the gauntlet and fight this one. If you recall, they were sued before by the SEC over their staking program. This one, I think, is more existential in nature, much like the Coinbase case. The Coinbase case right now seems to be, you know, the market is handicapping Coinbase to be favored to win that case. And presumably, if the Coinbase case resolves in their favor, that may also be true for Cracken. However, my understanding is that the Cracken case is filed in a different district. And one perception of this is that the SEC is trying to gamble on getting a better judge. And if the judge is more sympathetic to the

government and more anti-crypto, then maybe they can get different decisions in different districts, which would allow them to potentially appeal to the Supreme Court to get some ultimate decision about how crypto assets should be treated as securities or non-securities. Any thoughts real quick on the Bracken, sorry? The only observation I have, and I'm just parroting back what people on crypto Twitter were saying, people are identifying and noticing that they filed this basically simultaneous with the charges against finance being announced that they were settled, and that this action seemed to have come out as almost a response to most of the other government agencies settling with finance. In fact, they timed their tweet of the charges to coincide exactly

with the beginning of the press conference that other departments were having and that, you know, lawyers were opining that this was really a deliberate swipe at other agencies for being excluded from the Binance settlement. And it was meant as a sort of interagency middle finger. I'm, you know, not too sure if that's accurate or not, but that was the opinion that I was reading about. Interesting. Yeah. As I mentioned, the SEC was noticeably absent from settling as charges with finance. And so it seems that Gensler's SEC wants to go down swinging on these cases. So it does look like the ETF is pretty inevitable.

And I think at this point, I mean, from everything that I'm seeing, the Coinbase case looks like it's more or less lost for the SEC unless it appeals. It doesn't seem very likely that the SEC is going to end up looking too good at the end of this series of lawsuits. But speaking of, you know, the impending sort of black holes that we're waiting for, we still have yet to see the termination of the ripple appeal or the ripple case, and it's more or less inevitable appeal, and the coin base case, which probably by, I would guess,

mid-next year, we're probably going to have some resolution on. So there's still a lot of big question marks to be answered for the industry, you know, even putting aside tether and the stable coin bill and all that stuff. So anyway, this, this Cracken thing, I don't think there's a whole lot interesting here. And I'm glad to see that Cracken's going to be fighting it. So the other news this week, and this is a very, very left field from crypto, but this is the news has been dominating the tech headlines. And I'm sure at this point everybody knows about it is the OpenAI drama. And it's tangential to crypto, but it sort of touches crypto in interesting ways.

So we're going to talk about it anyway because whatever we're a podcast, so we're going to talk about it. So just a quick backdrop. Open AI, the company that creates Chad GPT. It is run by this guy, Sam Altman, who was formerly the president of Y Combinator. Sam Altman was originally when Open AI was first. formed, he was a board member. He was co-chair of the board. And Open AI was originally formed, I believe in 2015, as a nonprofit. However, the nonprofit was not able to generate enough donations for them to pursue their goal of building safe AGI. And so they decided to create

a for-profit company that had a board that was governed by the nonprofit, which is a very weird structure. You'd almost never see a for-profit company governed by a nonprofit, but that is the way that Open AI was set up. Opening AI took in a lot of funding and created a bunch of amazing models that we now use every day in the form of chat GPT and Whisper and Dali and so on. So on Friday, it was announced that the board had fired Sam Allman. Very suddenly, nobody had seen this coming. There was no forewarning of any of this. The board had fired Sam Altman.

And the board, for what it's worth, was composed of Greg Brockman, who was the chief product officer, I think. Chief Product Officer? I think it was president. Okay. So Greg Brockman, who's president and co-founder, Ilya Sutskever, who was the chief scientist, and then three outside directors. One of them is Adam DeAngelo, co-founder of Quora, and then two EA types who were also on the board. And Greg Brockman was a chair of the board. So in one fell swoop, Greg Brockman was removed from the board. Sam Altman was fired a CEO,

and they decided to make Mira, the CTO, the interim CEO. And everybody in the world, apparently everyone was told this like minutes before it happened over like a Google meet, and then suddenly all chaos broke loose. Everyone was like, oh my God, what the hell. This is close to the end of the fiscal day or the trading day on Friday. And so Microsoft stock suddenly plummeted. And everyone was like, wait, what the hell? Like the open AI seems to be in a mutiny right now.

Sam Altman was not aware of this. Everybody got extremely upset, including the investors who wanted to reinstate Sam Alman. The board got terrified that maybe suddenly they might have made a mistake in removing Sam Altman. They claimed that it was because he was not completely forthcoming with the board. there was a huge drama over the weekend of Microsoft hiring Sam Ullman, but then negotiations resuming with the company for Sam to come back.

I think 700 of the 750 employees at OpenAI have signed a letter, basically saying that they threatened to resign, unless Sam Altman is brought back and the board is fired, or they can't be fired, but the board resigns. So anyway, right now everything is in a holding pattern. We don't really know what's going to happen. It's pretty clear that one way or another they're going to remain within the Microsoft orbit, but this whole,

nonprofit board thing has just completely become an enormous cluster fuck, and everybody in tech is now talking about this drama between what many people in tech perceive as accelerationism, which is the Sam Altman, let's move fast, let's break things, and the safetyism or the effective altruist sort of dumer approach of the board members who had no financial stake in the company but said, hey, we're moving too fast, presumptively, we don't actually know what the board said in substance. And so this is cause of kind of a big culture war to start brewing online. And of course, Sam Maltman, he is famous in crypto because of his affiliation with

WorldCoin, of which he is also a co-founder. So that's my big brain dump of what exactly happened and where we are. I'll stop there. Thoughts from you guys. Tom, why don't you go first? You missed the other big crypto bit, which is all the AI crypto tokens have been rallying. They're the best performers as we, because everyone now thinks that, oh, we can't trust, you know, centralized companies centralized models. We got to decentralized models and decentralized inference. And so,

you know, nothing like a good narrative to public coin. But yeah, I mean, I don't know if I have opinion or insight here that's like too far off of consensus. It seems like this board is like extremely amateur. And it's like it's okay to make a very bold move if you stick by it. But I mean, within 24 hours, they were already kind of reneging. And I think Ilya said he like regretted the action. So it's like what like did you not think like two steps ahead of of what you? you know, the action you were about to take and the implications. And so it seems quite bad, but I mean, the big thing is there's been like a narrative vacuum. Everyone sees Sam on Twitter.

You know, they see, they see, they see one side of the narrative, but the board has been totally AWOL. They haven't really explained, you know, in more detail, specifically why Sam was removed, what not being forthcoming with his communications with the board really means. So now everyone's just kind of, you know, create the worst assumptions. I think even the whole safetyism sort of culture war trope has been sort of superimposed on this. But I think even Sam himself said no, it was not about safety or the board said it was not about safety. And so it's just kind of this weird, you know, question mark right now where we don't really know why they tried to remove Sam in the first place. I have a lot of friends who work there or maybe don't work there.

Unclear based on the letter. They all signed the letter. So they, in fact, I had one friend who actually was supposed to start his first day. yesterday. So as you can expect, his entire team, like, quit or quit, you know, whatever. Wrote a letter, like quit. I mean, they signed the letter. Yeah, I think

it's like basically essential personnel only. And if you know this chattee, PTA has been down a lot today, so I would say that it's showing. But yeah, everyone I knew it works there, and I know some of the personalities involved for a long time.

I would say, you know, much to Haseep Shagrin, I do agree with the claim that effective altruism is good at killing $100 billion of value fundamentally. It seems to be their altruistic in terms of giving away value. Listen, hold on. I'm going to dispute that real quick before you go on. The idea that $100 billion of value is vaporized is obviously nonsensical because Microsoft owns the IP rights to everything that Open AI produces. And Open AI, even if the, the, the, No, the board, the board, by the way, the board has a right to revoke IP rights.

If AGI is developed, if they team that AGES develop, which obviously is not. The board. Yeah, which is obviously not. So, yes, at this point right now, Microsoft has full rights to everything that all the IP related to GPT4 that they develop. But also, like, essentially what's happening is that Microsoft is absorbing all, you know, assuming that there's no resolution. Microsoft absorbs all the talent and retains the rights to all the IP. at OpenEI. There's no way they keep all the talent.

Maybe they lose some of the talent. There's a fuck ton of people who are like, I'm going to go do something else. I'll go work somewhere else. I'll start a company. There's very few people who are like, I want to work at big Microsoft, especially on the engineering side.

I think on the research side, people are more okay with it. But the engineers, I know there, it's like very much like fuck Microsoft. Sure, sure. So I will say, I will say there's, don't think it's just like, ah, they didn't acquire.

It's going to be an explosion, and obviously it's going to be one of the biggest events for private market funding that we have ever seen in the sense of like, you know, when companies IPO, oftentimes there's like this huge secondary swing of like people who leave and then start companies and whatever. I kind of think that's really the end state we're going to be in, less the whole like get the band together. Yeah, I mean, but that said, that said, to the extent that this, I mean, who loses in this, right? Who is the big loser? Let's assume that half the people come over to Microsoft or something. I guess like all the existing. The opening ad investors, right? So, like Sequoia loses, Kosovo loses, Thrive loses.

These are the big losers from this. No, no, Thrived didn't buy it. The Thrive bought earlier. They bought earlier and they wanted to buy again at 90. Now they want to buy more, right? So they're also big investors, which is why they're fighting to like fix everything. So these guys are the big losers if Microsoft ends up becoming the winner. But most of the value in Open AI is in the.

brand, the distribution, the IP they've already developed, and the leadership, right? So it seems like all of that is going to probably move over intact if Sam Allman is embraced and they start a new org within Microsoft and they have some relative freedom within their... Yeah, I just think, I just think, I think their velocity is going to go down. Oh, for sure. Within Microsoft, the velocity will go down for sure, for sure. Yeah, I think like if I were a, the second place, meaning Anthropic or third place, like Adept or something like that, competitor, this is like the, I think the, I think, I think, I think, ultimate, like, run for the fences, like, swing as hard as possible moment, right?

Because, like, you can basically take all their customers in, like, a week. There's already, like, reports of people. Like, there are already tons of open source projects, actually. I saw a nice statistic showing, like, the number of pull requests that, like, replace the Open AI API call with the Anthropic or open source model calls. Interesting. Yeah, it's actually quite high because people are, like, basically, like, using a backup.

The business continuity plan live. You can watch it on GitHub. Is it that easy to switch? It's pretty easy. It's easy to switch or the quality of answer is not going to be as good. Right? Like it's more like you can't do multimodal stuff. You can't,

you can't do like the voice to text to image type stuff. I mean, GP4 is just so far ahead. It is. But like I think there are, there are people are already like rushing to find the next thing. So in some ways I think, I think like if the band doesn't get back together in the next, like by end of this week,

meaning like Sam is back on the board, all the EA people get kind of kicked out. Adam D'Angelo, I don't know, gets in a fight with someone. Because it sounds like he's the linchpin of this. It sounds like he's a linchpin, really? Where did you see that? Well, he's the one. Yeah, that's what I've heard.

Yeah. He's the sort of lead antagonist board member. Oh, I just might know that. according to public reporting. Yeah. Also, my personal experience with him, you know,

I find him to be a huge asshole in person. And I don't usually say that directly about people, but like he's just like a huge asshole. Like I was, I used to write a lot of Quora answers in 2011, 2012, and I went to one of these like top writer things. And I'm like, how the fuck can you make a product that has user generated content

and you're a dick to everyone who is making free shit on your site? like fuck you. So that's like literally when I stopped writing court answers. What did he do? He's kind of a very like icy, I see demeanor person. And then like very like I'm always right. Like no one else can be right about anything.

So like which kind of matches what media portrayal of the board vote is right now about him. I think another aspect of this that's interesting from the crypto side is that, yes, there's this huge move and all the decentralized. AI coins, like things that barely even work or like, you know, maybe you're computing 100 gradient steps but haven't done a real inference yet. But I think the more, the interesting upshot is a lot of AI developers, like Andre Carpathy, who's at OpenAI, well, again, in the, whatever, in this like Schrodinger at OpenAI state that it's unclear what I would call all this,

was writing about decentralized stuff. You know, I think during the crypto bull market, he like wrote a Bitcoin client. And I think the interesting thing is people in AI who are working in AI are suddenly like, okay, I actually care about this notion of ownership of models. Like before it didn't matter, they're just like a big tech will always own it. And I've just noticed the narrative shift amongst people in that world towards having like some more transparent collective ownership of models. And, you know, I don't think we're quite, it's not going to be obviously decentralized training very soon. But there is going to kind of be. be something that works. And I suspect the next 12 to 18 months in crypto is going to,

you're going to get a ton of crap, bad ideas, but there's going to be something that that sticks. One jab I saw a lot of people on crypto Twitter making was, wow, even Dow governance isn't this bad. And I think Nick Carter wrote a great takedown talking about why we should really discourage innovation in governance. And that's essentially what, you know, Open AI's board of like a nonprofit governing a for-profit and all this stuff. It's a governance innovation and it turned out obviously to go incredibly badly. Ironically, Anthropic actually has the same structure. They have like this weird board of like academics and stuff that they're responsive to. And I have to assume that they copied it from Open AI because of course they're all Open AI guys. And it looks like, I mean,

one argument you could make is that look, almost all governance innovation that we've done has been bad because governance, especially for well-understood corporate things like, you know, software companies has just been optimized and optimized and optimized over hundreds and hundreds of years of us trying different things and arriving at this crystallized thing of the C-Corp with the board of directors with fiduciary obligations. And it works really well to avoid really painful, catastrophic, stupid drama like this. And I think in a way, it's like almost like a side indictment of even a lot of the governance innovation that's happening in crypto, which also, I'd say, has not looked amazing

in retrospect. But I will say one thing that is worth pointing out is that it is kind of crazy that everyone who was on the board had no skin in the game in the equity company. Like, I feel like the disconnect there was already weird. And then there's also, it's also weird that they basically have this like write a first refusal on a bunch, a lot of things. you know, like this idea that, oh, like, if we deem AGI exists, then X. Like, it's like, if subjective thing happens, then we can kill everything below in the dependency graph.

And it's, I don't know. It's very weird. Also, the churn on that board is unreal. I think there was, like, a board member leaving and joining every nine to 12 months. Yeah. Like, everyone from Elon Musk to Reid Hoffman. Like, if you look at the list, it's actually, like, it has had a lot of people on it. Clearly has been very contentious.

And actually, very few of them have had skin in the game in the equity company either. So it's like, it's been like sort of a well-known issue. I guess it's just like, yeah, just, I'm surprised that I'm more impressed it didn't, there wasn't any kind of, this didn't happen earlier. Well, so remember like the nonprofit, the way that Open AI works is that the for-profit company is a capped profit structure such that the investors into the for-profit entity can only make 100 times their money, and anything excess to that is actually donated to the nonprofit that governs the board.

I think this is Sam Altman fundraising magic, saying you can only make 100x your money and I have to stop you there is a great pitch. I mean, to be good, they're pretty close to that 100X for the first round. No, no, but Microsoft has this waterfall structure, right? They get like 75% or something of the fee of the revenue until they recoup their investment. There's like some type of weird waterfall. The investment is not really a dollar investment and so on. Yeah, and it isn't done yet either.

So, like, I think this is the problem with a board structure of this form also is that there's no incentive for the people on the board to actually have the, like, you know, if Microsoft pulled the compute, the board might be like, this is a valid use of the board, right? It's sort of. Right. Compared to FTX, I don't necessarily know if I, blame the investors because here this was transparently this always, right? Yeah, for sure.

In the FTCX case, it wasn't even that obvious there was no board to like someone who wasn't maybe. I mean, it should have been obvious if there was no board. What do you mean? No, no, no, no. It should have been obvious if you're doing D.D. But I meant to the public, there wasn't there wasn't just like, oh, clearly there's no. Whereas the open AI thing, I mean, look, it had the public Elon Musk like rage quit thing, right? Yeah, yeah. I mean, so to, I think Tom's point of the board itself, not really having a voice. here. I have been really frustrated that everybody is speculating purely on what basically the people who are talking are saying. And we haven't heard from Adam. We haven't heard from Helen and

Tasha. Elon Moss did just point post some letter he claims that came. Yeah. I was reading that. But yeah, it doesn't, it seems kind of nonsensical. Yeah, I agree. Actually, it just got deleted. Okay, good. Yeah. Well, it was a lot of sense. I guess what strikes me is that I'm, I'm, I'm, absolutely positive that if we actually heard from the board, we would have a very different picture of Sam Altman. Because, like, the story. Why haven't they said anything? I assume that they have no idea how to deal with PR.

I mean, obviously, I look at them. And also, look, the CEO they hired literally said he's quitting unless they give him in 24 hours an explanation of why they fired. Oh, I see. Yeah, they wouldn't tell Satcha. They wouldn't tell M.N. Like, it's crazy. Like, this is the worst PR.

This is obviously really bad. The other thing is they're being threatened with lawsuits by some of the biggest fucking players in the world. So I can imagine they are terrified of their whole world's ending if they do the wrong thing. And their lawyers are probably telling them to shut the hell up. And ironically, that is the wrong answer. And this is not a place where you should be listened to your lawyers. In a sort of interesting counterpoint to what we were talking about with Sam. Sorry, Robert, I cut you off.

Go ahead. Well, I was just going to say that, you know, I think Emmett's calculus is pretty simple. I think he's going to be out of a job in two days anyway. Yeah, exactly. He's trying to say things. At this point, Emmett has been just eviscerated by everybody who's looking at this. And he's just like, you would not think that accepting the title of CEO at Open AI would be bad for your career. But Emmett might be the only person to actually face that wrath.

I does have some very sus tweets that obviously people start digging out as soon as people. But like, you know, yeah, you would never expect that this would be quite this brutal in. saying yes to like this really amazing opportunity. So I, I feel bad for him. I mean, this is like a pretty shitty, you know, they call a bunch of people and you're like, look, I'm like, retired. I like have a kid. I'm kind of out of it. And they're like, what, we need you to come and save Open AI? And he's like, all right, I'll do it. And there's just like a bomb goes off in his face. What did his first question, though, be why did you fire Sam? Like, I can't imagine accepting that job and be like, well, you had an issue with the old CEO, but I'm sure everything

would be fine with me. Like, that's insane. I think he had like two hours to accept. It was It was clearly an 11th hour thing. They were in the same YC batch, which I also thought was funny. Yeah. But so what I was going to say is that here's what we do know about Sam of like why potentially he was fired. So there's a lot of speculation that it was about the overcommercialization of open AI and about this like chat bot store that they were launching with like laundry buddy

and like talk to me about Chinese recipes and da-da-da. And like you can sell these different dinky little chatbots. and I think the board was annoyed that like, hey, I thought we were supposed to be building AGI and instead you're like monetizing laundry buddy. Why are we spending our time on this? But the more salient thing that seems actually, like I can see why if I was a board member, I'd be really pissed about this. Apparently Sam was hobnobbing in the Middle East trying to raise money for a hardware

company that was not going to be under the Aegis of Open AI, but was going to be his own separate venture that he was going to run in tandem. So he kind of wanted to do like an Elon Musk thing. and it seems that he was, you know, garnering the political clout, the fame, the notoriety, connecting with all these, you know, world leaders and really doing it in a way that he wanted to start. And also this Johnny Ives, like, AI phone that he wanted to do. It looks like he wanted to do this Elon Musk type thing. But this had been in the news for months.

No, no, no, no. No, no. What are you talking about? The Johnny Ives thing, yeah. But, like, you're trying to raise billions of dollars from people in the Middle East to make a chip town. This is brand new. This is brand new. Okay, okay, okay, yeah.

The chip, yeah, the foundry part, but the thing is, all of the stuff had been in the news for a while. I mean, the Johnny I think was like very throwaway. That was not a, that was not a like concrete. I'm raising money. But they, they were claiming they were going to, they claimed they were going to raise $8 billion from SoftBank for that. But wasn't it under Open AI? That one had, it was unclear. The articles were all very ambiguous. So I can imagine that like the board maybe chastised him when he did that and they was like, oh, okay, whatever.

And then he goes to the middle east. Like, we don't know the story. But clearly this has to have been part of it. And if I was on the board, I would be. pretty fucking pissed that I'm like, hey, you are the CEO of like the fastest growing most meteorist company in the world. And somehow that doesn't seem to be enough for you and you want to do all these side gigs and like, especially at chip foundry, like that is directly related to what we do at opening eye. Why wouldn't we have that be under the banner of all the other stuff

we do? Why would that be a separate venture that you own? I highly doubt based on the candor of some of the things that were said that this was the sticking point. There's no way it wasn't part of it. No, I see how that's a contributing factor. I think the contributing factor. I don't see that it was like the put your, you know, gavel. Yeah, it might have been the straw that broke the camel's back, right? When they discovered this and they learned that, hey, he's trying to raise money and like, he's actually trying to raise money now after we may have gotten pissed off about the Johnny Ives,

you know, AI phone thing. So anyway, the point is that we don't know the story, but there's no way that doesn't figure into it. And there has to have been a broader pattern of behavior that got people pissed off about Sam. So anyway, all this is to say right now, I think the story is extremely one-sided. And that feels to me like, it feels to me actually we may never really learn the story because the board has been just fucking defenestrated from every single news publication, every single CEO, every single investor in Silicon Valley hates this board. Well, again, again, Ilya signing the letter to quit is also a sign that the board itself is.

I think I'll just be weak. It is not a single unit. I think that a lot of this comes down to the immense public pressure, seeing people start to quit, seeing all these pieces start to fall apart, and it's your fault. And the whole world blames you. What the fuck do they expect doing?

Yeah, yeah, yeah. No doubt. No doubt. They fucked up in how they did this, especially in appointing Emmett here that was such an incredibly bad move, rather than leaving Mira to be the CEO. And there's the way they can be, clearly all of this.

But my point is that we still don't know why he was fired. And it seems like the whole tech press is assuming that the answer was nothing really. There was no good reason why he was fired. Humans are really silly and dumb. And I will attribute the board to being silly and dumb. And just watching them act over the last like five days has been so embarrassing, honestly. And I think this goes full circle to like the root of the problem, which is bad governance. Humans are always going to be silly and dumb and make bad decisions to get emotional.

I mean, this whole thing about like firing the CEO, they just put in place to hire someone else, like, you know, a day later because your first CEO was, like, disloyal to you. I mean, the only reason that these are even problems is because of the corporate governance structure in the first place. And in a normal corporate governance structure, you're going to have humans who are silly and dumb and emotional, but they can't blow things up in the same way as they did here. And I actually don't blame the board members individually. I don't blame them collectively. I blame the bad decisions that went into how they set up governance in the first place, because that's the root of this. You have to assume that everybody's going to make really bad decisions in any organization.

And you build it to be resilient to that. And you build it to be anti-fragile. And they built the most fragile organization imaginable. And I think that's the root of the problem. Well, to be fair, to be fair. The organization started with a completely different mission. It really was supposed to be this nonprofit, right? Like, I think the conceit was maybe trying to pull the like financial slash organizational

engineering to make it look like it wasn't the thing that it started as. Yeah, it started as a nonprofit that became a, quote, non-profit and a way for a bunch of people to make a lot of money. Like, there was all these profit sharing units and venture capital investors and things that no nonprofit, I think in history has ever had. If Virgil Ablo was still alive, I would say he should make the off-plate nonprofit line because that would be like bestseller right now. I think actually the root of this, I mean, look, I agree with you that the governance structure

was a experiment and you generally don't want to run one of the most important companies in the world with experimental governance in retrospect. Obviously, at the time, no one knew this. At the time, people thought it was a crazy moonshot, you know, like, one of these X moonshot type companies that comes out of Google. You know, that was the vibe of open AI back in the day, and it became this much bigger thing. And so in some sense, you can't blame them too much because they were trying a crazy thing and it happened to work out.

It feels to me like, actually, if you look at the composition of the board, as Turin was saying, there were some experienced operators on the board at one time. And we don't know the story of like, why did Reed Hoffman get kicked off? Why did Sam Altman get kicked off? They're all, they all kind. There were so much turnover. Why? What contributed to all that turnover? And I have to imagine that it's not because they just got bored of being on the board of the most important nonprofit that the world is currently seen in the tech world. And so I think that may be the kind of root cause, or at least like if you do the five Ys, it may be like the third why, is that there was nobody on the board who actually knew how to call up Satya or how to call up the investors and say, hey, we're thinking about doing this. How do you think we should approach it? What's the blah, blah, blah, and like get other stakeholders involved. Whether or not, you are a nonprofit, there are other stakeholders that are going to, like, they just didn't understand

companies, right? Ilya does not understand how companies dynamics work. And these other people, the other three people in the board clearly don't. I mean, I don't know how Adam got this so wrong, but the other two clearly, you know, have no clue. Like, they're, they're academics. Well, the other, what's their name? I think the suspicion, right, is that Karnowski, when he left because of his conflict for

being on Anthropic, part of Anthropic, like, told them to assign someone and then assigned her randomly, even though she, like, kind of just graduate. whatever. Her entire career is like, I ran open philanthropy. I'm not sure that's exactly what sets you up to be in charge of this rofer on IP rights for this $80 billion company. Yeah, but to Robert's point, this was like a board level thing rather than about any individual except maybe apparently Adam.

So anyway, look, I suspect that the way this all wraps up is that probably Sam comes back by the end of the week. I think more likely than not, Sam comes back by the end of the week. and I believe that's where Polymarkets pricing it. I think it's 75% chance. Yeah. This has been a roller coaster. It was like,

by the way, noted crypto, noted cryptosceptics and haters have been really shilling polymarket and manifold lately because they're like, oh, the prediction markets have been more accurate than the news. I think that's actually been an interesting thing

about this whole saga is that somehow the last year's events overall have somehow made people, trust prediction markets more. Like, I certainly look at them, okay, not daily, but like once a week now, and I never really looked at them before. So like, I feel like that that's a crypto aspect to this. That's very interesting is that I think these prediction markets for these kind of crazy events have been, you know, really growing.

Like, you know, before it, you say prediction markets really only had all of their volume around U.S. elections and it was like nothing. But we've had like a kind of bonanza a year, like last two years, basically. Definitely. Yeah. Well, it's been an insane news week. I'm supposed to be on vacation for Thanksgiving, and it just feels like I've just been glued to my phone following all the insanity.

We missed a few big, big things. We miss Argentina electing Javier Malay, who loves that's significant. That's significant. There's a lot of stuff that we weren't able to get to. We'll hopefully get to. I would assume that maybe next week will be a slower news week, because of Thanksgiving, but maybe not. We'll be back with more next week.

In the meantime, enjoy the soap opera as it continues to play out with Open AI. And thankful to be at the end of this Binance thing. And I think as an industry, we can finally move on. So until next time, thanks, everybody.