Episode 98b – FTX Collapse feat. Mike Burgersburg (Recorded Live) (Bonus Episode)

Cas Piancey and Bennett Tomlin are joined by Mike Burgersburg of Dirty Bubble Media to discuss the collapse of FTX.

This episode was recorded live on November 9th, 2022.

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English Transcript:

welcome back everyone I am Cass pianci I'm joined as usual by my partner in crime Mr Bennett Tomlin how are you today I'm doing well how are you Cass I'm doing good we're joined by a special guest for the second time Mike burgersberg how are you I am doing quite well guys how are you hanging in there um there's a lot going on today um we did an update yesterday about the Alameda situation um we mentioned you specifically Mike and how you had at the very beginning of this made the proclamation that FTX was insolvent um and you were clearly correct about that what we have discovered is that there is an 8 billion dollar hole in their accounting and we don't know how that happened um or maybe we do let's talk about it uh guys whoever wants to get us started please

well let's just go over some of the basics that have happened since yesterday binance has walked away from the deal we found out there's according to the Wall Street Journal an eight billion dollar hole in the books we've seen continued selling from Alameda the Alameda website is deleted the FTX Ventures website is deleted FTX is non-functional and the entire oh and we found out they've been under investigation by the SEC for like months now which was a thing we kind of reported at protest a couple weeks ago if you were paying attention but uh yeah and so um things have the [ __ ] the proverbial [ __ ] hit the proverbial fan it's incredible that's right that's right and I wanna I think the next topic we should talk about though is that yesterday there was hope the Hope was that the savior CZ from binance would come in swoop in like the angel he is and rescue FTX save all these these retail customers who don't deserve this right and uh lo and behold that is not what has happened Mike can you can you talk about that yeah well um I've been constantly tweeting out every time someone said there was a deal non-binding because in the tweets and the various descriptions of this deal it was a like basically a pre-offer that had no legal like he he could walk away at any time and and the fact that the news people all reported it as being this like done deal it's like oh they're going to absorb them for sure it's like no no come on like I'll admit that yesterday I thought it was relatively likely that binance would end up acquiring FTX I thought when they said liquidity crunch there was a hole in the books but like based on some of the things I had already identified on chain and stuff I was thinking in the realm of like half a billion to 1.5 billion I wasn't expecting 8 billion I'm like binance might close a billion dollar hole to get ftx's customers no one's closing an 8 billion dollar hole for any reason yeah yeah I mean I don't know the way that the way that they played that binance played this from the beginning I assumed they were just out to cut their throat and um that's what they did so yeah yeah this was a very public as we mentioned yesterday uh the idea that CZ was um like the idea that you would ever suggest that you're gonna sell all this a liquid token and try to do it without affecting the market well you just screwed that up by announcing it so that clearly he's not dumb enough to do that uh he knew exactly what he was doing but uh we also have a supposed leak of their of their of Alameda Alameda researches uh portfolio um and so so just to be clear that wasn't actually a leak of their portfolio someone went through and took some of their like known addresses and tried to like figure out what their exposure was and some of the things they've been doing so it's not actually like related to their official balance sheets but it is a useful peek into some of the things they're exposed to just wanted to I mean maybe yeah maybe who knows I mean it it matches as of what time I haven't looked at it like what time is it it uh yesterday as of yesterday wasn't that bad I wasn't sure I thought it was just [ __ ] it's missing their Solana stuff and some of the stuff like that but it does have a bunch of their ethereum things and it's a lot of the stuff we knew they were exposed to like 80 million dollars in Abracadabra Danny's little uh protocol that sifu helped him with for a while

what are we I I there's so much there's so much to kind of try to pick apart here but what we do know like regardless is that binance walked away from this deal this deal is not happening um FTX has looked for anyone else to please God please purchase them and it hasn't happened um and so what what we can suspect is that FTX is going to go into some sort of bankruptcy or something like their insolvent this is not good this is the end of them um but what do we think wait Cass did you know Pepsi went into bankruptcy that's right it's the same thing it's the same exact thing um but but I think we haven't really understood what this means because this means this means the other the only hope that there was to save this platform at large is dead what do we think the ramifications for that are going to be now

well uh we saw what happened when an obvious Ponzi scam called Tara blew up and everybody knew it was a scam uh and FTX in comparison I mean I know that was like 15 billion dollars or whatever it was worth technically but like there wasn't the same kind of um interdependencies that are involved with the FTX automated thing I mean they were involved with everybody um or three AC I mean that was what a couple billion dollars I was trying to look up how much it was actually that was lost I'm not sure Celsius as far as I can calculate the hole is about 2.4 billion so like LMA to FTX if it's eight billion dollars is like two to three times the size of of three AC and Celsius put together uh and both and both those companies were not nearly as Central to the entire function of this if you want to call it ecosystem or whatever uh it's going to be interesting to see who goes down but people are going to go down there's no question yeah so there's been let's actually get I want to we might as well get into the weeds here because there's been a lot of questions about people that we'd previously discussed on this podcast and entities that we previously discussed on this podcast so um there was a lending episode that we did a long time ago where we specifically mentioned blockfi we mentioned nexo and we mentioned Celsius so far Celsius is gone block five got bought out by FTX so we have no idea what that means um and then lastly we have nexo when it comes to those three which we can talk about we should probably talk a little bit about that and then also the other one I wanted to mention was that we did one on market makers and these larger entities like Cumberland Global and Genesis trading um Genesis trading apparently you know people are talking about it seems like they're in some big trouble so I think maybe million dollars in credit losses Cass how did you accuse them of having trouble in their multi-billion dollar book with 7 million in losses and and jump trading and jump trading is another one who I don't know if we mentioned them but we have mentioned them in the tether papers which by the way again everybody I I you should re-examine the tether papers there's a lot of great info in there um but a lot of the entities that are mentioned in the tether papers are either no more or um are in deep deep doo doo right now but let's let's talk about some of these counterparties and and what to expect in the following days weeks months yeah well you mentioned Genesis and I was being somewhat glib right and I was like seven million dollars in credit losses because that's what they announced on their Twitter today um but you're right there have been a couple of persistent rumors that that is less than the full truth and um I think it's quite plausible that they have much more substantial losses than that I mentioned on my Twitter that at one point they had over 3 million FTX token uh towards like the beginning of June and by like the end of June they had like 300 000 ftt token and they finally dumped the last of it yesterday um yeah yesterday sorry the days are blurring together and so I would be surprised if we've seen the end of their total exposure to this yeah I mean all I can say I haven't looked carefully into this but there is a massive amount of interaction between known Alameda wallets and Genesis on chains so I mean your guess is good as mine but it's like if Alameda was this giant I mean here's the thing I mean the problem is that we're still operating on the assumption that Alameda was even doing what they said they were doing how do we know I mean if they vaporize eight billion dollars we have no clue what they were doing let's be real here I think that's actually kind of a good point that we should pause on for a moment here in that this is [ __ ] weird like Alameda was at least sometimes a market maker and most of that should be delta neutral they should be making the spread and they should be comfortably making money which some other market makers seem to have been doing Cumberland Global for example has I haven't heard any rumors of any distress over there and they seem to be continuing to just make money by providing liquidity like a market maker is supposed to um now the other tricky kind of parts around that is that like Alameda clearly wasn't just doing that they were Venture Capital investing they had a bunch of equity in projects they were buying random [ __ ] coins like their exposure to these to the dumbest tokens ever you can find in their wallet like Shiba Inu is an incredibly stupid token and they would find like Shiba Floki whatever dot dot dot random token and would have like a weird amount of it that constitutes like a strange portion of the total market cap and and sorry just to get back to the point they were regularly taking advantage of some of the like highest paying yield firms FTX had supposedly a good amount of volume when they should have been making a decent amount of fees on it and based on their FTX token Burns we've got some idea of what their revenue was and so like they should have been reasonably profitable entities that should have had money but like there's eight billion dollars that are just gone that we know of so far I could see that number going up

I think it will go up because I think that's the hole in ftx's book and I think Alameda is also separately from FTX also insolvent and unable to pay their debt oh absolutely so I think in addition to the eight billion dollars at FTX there's more hundreds of millions or billions over to Alameda and so the total thing here is just like several times larger than Celsius than block five and Voyager even meaning it's at least as large as 3ac and in this case Broad and exchange with it which was providing all this liquidity and all this stuff across the marketplace and it's just it's incredible yeah

yeah yeah I mean I don't know I mean it's a lot of liquidity that's suddenly evaporating um which gets to the other company that I just mentioned which is nexo these lenders seem to rely on liquidity I think they need they need people trading these assets they need people coming onto their platforms they need to be constantly onboarding new people I wonder what this sounds like it doesn't let's not get into that but anyway so they constantly need new customers to pay out their old customers but anyway go on let's talk about this one you had mentioned this and this is another one of the details in the reporting over at protest I think has gone under appreciated is that like during the period when the rest of the withdrawals were getting shut off the erc20 tokens the Tron tokens the Solana tokens all of that ethereum withdrawals stayed open and during like the last 36 hours that those withdrawals ran nexo was one of the largest withdrawals from was sorry alert a massive portion of the withdrawals from FTX ended up going to nexo at the time worth like 113 million dollars and this is either like nexo's prop desk pulling assets off of FTX this could be Alameda posting assets for a loan they got from nexo or this could be uh individuals pulling assets off of FTX and deciding that nexo is going to be a better custodian but it was a massive amount of outflows like right before it was fully cut off yeah and they're claiming now that they have no exposure as far as I know yeah or or they Minimus exposure or something like that um and so I am curious about the nature of those transactions in the hours before withdrawals were shut off and I think that it's important for us to mention like as you mentioned in your coverage before Mike that like Kentucky when they were looking into nexo noted that ignoring the value of nexo token on the balance sheet nexo has also been insolvent and like the value of nexo on the balance sheet like the value of cell on the Celsius balance sheet or the value of FTX token on Alameda or ftx's balance sheet is a mirage it's a it's a thing that continues exist for as long as people continue to believe it exists printed out if then they are independent on this Collective belief in it well I I think I think Mike also made a really good point before in just talking about the 8 billion that we know of so far because here's the reality right we've heard about this eight billion dollar hole um that didn't even come from Sam himself but what we do know is that Sam said everything is fine FTX is fine we do know that he put pretended he was gonna be involved in the Twitter purchase by Elon Musk we know that he's done a bunch of stuff in the past month two months that would there clearly he was a con man I mean very very clearly he was a con man he was leveraging this sense of well everyone trusts him he's a rich guy why would you ever question what he says to you and the reality is I think a lot of people need to be asking this about a lot of companies in the cryptocurrency industry period right whether we're talking about nexo or Genesis or jump or whoever like them telling you their assets are fine is really in especially in this industry is proof of absolutely nothing yeah and I mean I think Sam probably you know whatever else he won't get the award for the biggest Ponzi scheme in history he probably get the award for the least charismatic Ponzi scammer in history like the guy's a goofball the fact that anybody thought this guy was a genius blows my mind like you could when he went in public and talked about what he was doing he was like yeah it's a Ponzi but it's a good Ponzi you know like come on man you're always always big investors fell for it I mean it's just like this this was one of the things I struggled with in a newsletter I wrote for protos a couple weeks ago go call that what does Sam bankman free believe because like he convinced so many people that he was this positive person for the space but the entire time he was doing like the most extractive things and like the most exploitive things and like he ended up getting blown up in the same way that he has blown up protocols and Traders and other people like that in the exact same way and like yeah he was this just mercenary traitor and mercenary investor who got the same thing that happened to him and ended up blown out and then like that and just this is a bit of a diversion but in that same vein of like what Sam bankman freed believes he claimed that like the reason he needed all this money and to earn all this and to do all of this was because it was going to be for the good of the world that this was the best use of his time because earning this money would allow him to do a greater amount of good for the world and he would use that to justify all of the things he did in terms of trying to earn that money and in the same breath would often end up citing kind of the utilitarian ideas of Jeremy Bantham and so for those who are unfamiliar and he would actually describe himself as a banthamite Jeremy Bentham was the creator of the idea of a panopticon and like thought that the best way for us to determine like what's morally good and morally bad is to track every single thing that every single person does and measure every single actions either good impact or bad impact and use that to determine which people are good and which people are bad and even created like designs architectural plans for prisons where the entire entire concept was that you believed you were under constant surveillance by like people who were watching every single action you took for every single second of the day to try to force you to have good behavior and this is like the person that Sam claimed was like his philosophical inspiration and like meanwhile Sam is like pushing for blockchains where all of your transactions are happening on a public Ledger where every single person can see every single thing you do and then pushing for this legislation so that all the people who use this thing end up having to go through these kyc places that he controls and you have all of this information potentially at your hands of every single thing that all these people are buying and every single thing that they're doing and that was like what Sam wanted he wanted to extract your wealth and know exactly what you were doing with all of your money and that's what he tried to like create and that was the best possible case for his legacy and now what's actually happened is he ended up stealing billions of dollars from retail investors well maybe it's a good thing he blew himself up then you know like maybe the alternative would have been much worse

but

yeah um yeah I yeah yeah uh uh I sorry I don't know I don't know what to say about that either other than to suggest that he I think everybody's under the running under the assumption now that customer funds were stolen and traded with and uh last I heard he is not in communication with the FTX staff any longer and as far as I know he hasn't tweeted in over 24 hours well I hope that he's still in one piece I'm sure he's fine I'm not suggesting he's not fine I think he's well I mean the question is where where is he and what's going on wasn't he still giving statements to the Wall Street Journal as of a couple hours ago when he's like what emergency funding and stuff like that yeah so I think he's fine I don't think there was some fake tweets from fake accounts that were trying to convince people he was on the run or stuff like that but I think Frank chaparro Frank chaparro specifically said that well the tweets were fake about him being on the Run tweets the the reality is that he's not been in contact with employees that he has not been in contact with these people that he is not in discussing things with them in slack and that he's not getting into the weeds of what's Happening any longer I think this is actually a good entry point to talk about what I thought was one of the weird things that was going on with it which is that Sam didn't communicate with FTX employees or FTX investors about the letter of intent that was signed by cc to purchase FTX and then when Sam finally did send a letter out to people it was um lacking in substance and was kind of like you know things happen this is bad but maybe it'll be good when things get better and this all happens and um yeah that's been weird we're like that that Sam apparently didn't Sam and Alameda according to something reporting hadn't talked to CZ or reached out to him except in tweet form By Carolyn until like the price of FTX was crashing and like Carolyn may or may not have been escorted out of the building and like there's been a bunch there's a lot of weird stuff but like the report so far from like the Wall Street Journal and stuff is that at some point Sam calls CZ and goes I've got a five to ten billion dollar hole in my books do you want to help her and then that's when they get the like letter of intent signed without talking to FTX employees FTX shareholders or anyone else and then the deal ends up blown up when cesy actually gets a look at the books and goes oh that's that holds very real and not going to be filled so I guess my question then is like I wonder how much binance new before they did this like I wonder if they knew things were as bad as they were I mean like I feel like given I knew I knew very little but like I'm one guy with etherscan like I don't know that much I'm just screwing around with this stuff these guys have a whole team of people probably monitoring this [ __ ] constantly like they should have had some idea of how bad it would be if they took out FTX so I still don't totally understand the motive and I think I said that I think it might have said this before we ended up going live when we were chatting is that I think they thought the hole was smaller than it was it's very possible yeah I think I thought there was a hole they'd be able to drive FTX into an uncomfortable position and buy it for cheap and then they saw the whole but I I was I was talking to you and some other people Bennett earlier and I think motive is the right question here because look I understand driving a competitor out of business if you think you can afford to deal with it but I also suspect that CZ is smart enough to be like maybe this is worse than I can even perceive on chain right now like I I'm sure he was looking at the chain and going oh they don't have enough ethereum and stuff to cover their assets like I I am I you know not I'm as close to 100 sure as I can be without him I know he said he definitely didn't do anything I get it I hear I hear it he's I whatever but anyway I think you still would need a really good reason because he's smart enough to suspect maybe it's worse than I can perceive and you still have to have a good reason to do this because if it's really bad and you think it could actually screw with your business then it's a bad move it's a really bad move to try to knock this competitor out of business because he's now painted he's painted a a big Crosshair on his back huge he's the um this is the only real liquid exchange pretty much in the world and he needs a huge Crosshair on his back to Regulators to anybody like some someone I'm sure somebody's going to try to nail binance to the Cross I'm 100 sure so why do this if you know that that's how that's going to end right what is the motive here and I'm and I am genuinely curious I think there is one other thing that we're not considering which is that maybe CZ didn't have a master plan and maybe he took ftt token because it thought it gave him a lot of the upside of equity without some of the downside when he ended up leaving his FTX Equity position and then what if he noticed that since June there have been these weird withdrawals from what might have been the FTX cold wallet through the FTX hot wallet into the Alameda research binance deposit address and then you see the balance sheet and you go oh things are worse than I thought and you have this it was what one it was 561 million that billion dollar position in FTX token that's knows he had was it that said yeah he said we're going to sell this over the next several months he might have just legitimately wanted to devis that position because he realized FTX was not as straightforward as they had been and then as soon as they started trying to de-risk they realized how bad it was and the rest was just responding to that it's possible I mean who knows like it could have really just been that fragile like Alameda was really counting on having no real meaningful cell pressure because they controlled so much and they didn't think CZ would just suddenly go and dump it and then well and the thing was so the thing was that maybe you know if they had faced if it just been one or the other right like if it just been cell pressure or if it just been withdrawals maybe they would have been able to somehow pull it off at least long enough that people would have stopped withdrawing and that Ron would have been over but when you have a combination of your token that you're levered on is getting crushed and you've got people with the wrong billions of dollars then you're done I mean that was one-two punch you know um I don't know I I I don't know if we'll ever know you know I mean it makes for a good story though no one could have written this

it it sure does feel like um like cryptocurrency Armageddon I mean this is uh Bennett and I have been following this for solidly since at least 2018 and uh this is the eeriest feeling ever I like I I it truly feels like apocalyptic like everybody I I'm seeing Traders just it's total capitulation um and this is this is worse than Celsius this is oh yeah Celsius is nothing compared to this yeah this is worse than Voyager this is I I would argue at this point like looking at the reaction so far worse than the bitfinex heck in 2016 which was an industry shaking event at the time and we keep hinting at it like there's more ramifications to be felt here we don't know exactly who all the counterparties are but we know Alameda had these loans that we know FTX has this whole and there are other people exposed there's funds that are going to get blown up and there might even be protocols and stuff that kept most or all of their treasury with FTX who are going to find that inaccessible like the overall consequences of this have not been fully felt yet and I need everyone to hear that like this is going to continue to have ramifications for weeks months and probably years get out okay if you have your money if you number walk here you want to believe in crypto that's your business fine if you have it on any any platform any platform that you do not control okay you don't know where the money is withdraw that [ __ ] now because it's going to be gone on period I mean here's the thing like number one yeah we have to think about who's directly exposed and then who's exposed to the people who are exposed etc etc but then we also have to think about the psychological effect of this right I mean again we go back to the Tara thing that was an obvious stupid Ponzi that blew up and that That Shook people's confidence tremendously Celsius was a a decent sized Ponzi scam that had some ramifications in a few hundred thousand customers that shook sentiment quite a bit three AC shook sediment quite a bit but this isn't I mean FTX was like they probably were the biggest spender in terms of advertising I think I mean they they were like nationally known in in terms of the US like if you're somebody who doesn't know anything about crypto you probably would recognize FTX because I mean they had goddamn Tom Brady fronting Forum you know I mean like they own the naming right they own the name right they have their name they have their name on the Damned umpire uniforms I mean holy [ __ ] I like every time I saw that I would just like wow every time by the way that deal has never been disclosed so we have no idea what FTX paid paid to have the the Umpire uniforms plastered with their location I hope that Sam I hope that Sam I hope that was a joke I hope that I hope that he he was laughing when he did that because like that's a great joke I mean you can't get much better than that only baseball fan yeah only Baseball fans will understand this but yeah it it is pretty damn silly to have FTX plastered on the the rules rules and regulations of baseball basically he tried to plaster himself on the rules and regulations of cryptocurrency he tried to buy off half of DC like and yet he was there's 50 million dollars there's 50 million dollars of customer money right there went to our lovely politicians so we know where 50 million and this is this is interesting I saw someone say this more or less where it's like oh so okay effective effective altruism is when you take your customers money and donate it to whatever you feel like donating it to and it's like yep that pretty much describes what they think is effective altruism and like yeah yes yes because like Sam bankman free got so much coverage for TR for being an effective altruist in this long-termist and all these other words um and like at the end of the day what he actually donated to was a few politicians who might move the needle a little on pandemic prevention Maybe and like that's it he didn't buy a whole bunch of malaria Nets didn't do like any of the other things that have large immediate impacts he maybe had a small diffuse future impact and that's the philanthropist that's the altruist that's the next Andrew Carnegie who is being crowned thanks to brilliant work by whoever his PR team was like props to them they have excelled over the last two years the thing I don't get is like imagine how much I think the Heat stadium was like 50 million or something I remember exactly 130 135. Jesus okay well I mean imagine if instead of putting 135 million into a stadium he'd been like FTX we're giving 135 million dollars to malaria prevention in Africa wouldn't that be a better marketing strategy I mean like I mean that's what I mean it's like I don't know man I don't know say yes I wish I don't know yes but definitely I don't know I mean how many people do you think really how many people think actually ended up using FTX because they put their name on a stadium I really don't know I don't know no see I think after the initial who hoopla of it probably not many but when you first do it when you first do it not only not only is it a good thing in terms of oh there's a bunch of eyeballs and a bunch of media reporting on it also it establishes that you are legitimate you're a respectable business Bingo yeah like that that's the main that's the main corporate goal because what it does is it puts you in the same league uh without right as as uh as I don't know let's say Minute Maid um or who Enron which is which is Coca-Cola for us we think Enron for us we think about Wachovia for us we think about all of these these deals gone bad as I pointed or as as was pointed out in an article by protos that there's 75 professional stadiums in America like the curse is not real like they're yeah of course there's naming rights exist for a reason we understand that right but like yeah this is not good that 135 million could have been spent elsewhere also this brings up another good one which is we're talking about we're talking about contagion right now crypto.com spent 700 plus million dollars on the naming rights for the let's just call it the Staple Center because that's what it is um for the quote crypto.com Arena and they built 700 million dollars for that for two decades it's it's all about getting your name in front of sports Bettors

and they're deciding between which one they want to like that's right pick between can you see that date Gemini between FTX you pick the one whose name is on the team you bet on the most did you guys see this uh what's Portland complaining about now I'm gonna read it uh I have a dumb question if I bought Bitcoins through FTX and FTX goes Belly Up where do they go like Bitcoins or finite right does anybody have access to them or are they just lost or something forever well I mean the Bitcoin still exists I know but it's just like the fact that this guy's I mean I don't know if he's a joke I assuming he's not joking no he is being very serious he's a very stupid sexual predator like holy [ __ ] but like he's a great example of an idiot Sports better who gets sucked in so I mean you know good point like holy [ __ ] he's been talking about crypto for a while he absolutely bought this stuff you know now that I think about it probably Tom Brady or somebody reached out to him and said FTX is the way to go if you're gonna buy you should buy there maybe it was even maybe it was even Sam um he was doing like pump and dumps on his like daily live stream right like he's a he's a piece of [ __ ] does he not he doesn't do that anymore I I mean I try to avoid Port annoy bubbling up into my view as much as I can in life yeah um yeah anyway that doesn't surprise me uh I I think a lot of these uh a lot of these athletes probably had uh funds on FTX now that I think about it um which is well I mean it looks like Dave like looks like Tom Brady actually got suckered into buying Equity I thought they thought they gave him Equity as part of his deal and Giselle and Giselle my guess is the way the deal was structured is they got in at a lower price than the like what a good deal what a good deal how nice of Sam to do that for them

Tom Brady is an adult male in control of at least some of his faculties and he's allowed to make whatever investment decisions he so chooses it's probably all the head injuries man I mean listen as a former offensive lineman who spent 10 years playing football I'm just gonna say that and he lost probably probably shouldn't control their own money that's what I'm gonna say on that um yeah okay so I think right we've we've clearly expressed that there's uh it's a [ __ ] show I like I don't know how else to express this right now we've and the price action is only down um we are I don't know I was back up about 16 000 it was a second ago so it's okay everything's fine guys don't worry about it levels we're back to 2017. this is fantastic for Bitcoin that was only five decade ago it's more early it truly cut we got years that I believe what when was the last time we saw levels this low was it 2018 2019 I guess I'm not I'm not sure but it's been a few years hasn't it um and yeah that that's just Bitcoin but that also again last I think the last point I want to bring up because we're talking contagion here the last point I want to bring up is that this is now affecting actual real life markets not just cryptocurrency microstrategy coinbase gbtc um uh silvergate

um

as disclosure I I'm sure both coinbase and signature Banks so whatever I say is colored by that appreciate that yeah yeah good good to point out but but we've previously had like a Jim chanos on he was short uh coinbase and I think that it was trading for I believe it was trading for around 70 at that time for a moment please this is one of the things that's been inexplicable to me about the cryptocurrency exchanges recently which is that where is the money going they're supposed to be like printing money in terms of fees and especially like during bull markets from retail Traders they give discounts to a lot of the market makers and many of the market makers end up trading for close to free so you can't like do a direct like volume times fee equals Revenue calculation but if you look at like their Burns of many of these exchange tokens they supposedly have pretty healthy revenues but like coinbase is burning 500 million dollars per quarter still FTX has an eight billion dollar hole where is the money going

is it or I mean it costs a lot to run these businesses yeah I mean it costs a lot to run these businesses I mean there's no how much does it cost because none of them hire very many employ they don't hire very many well I think coinbase probably has a lot of I mean how much it costs coinbase to develop their nft platform it costs like 500 million dollars

yeah but like FCX is not that's not the excuse I mean Celsius had 900 employees to run a Ponzi so like it takes you know it takes a lot of effort to run money run in the circle uh

I don't know somebody's somebody I mean somebody has to have the money right I I don't know of course that's how ponzi's work I mean every every time somebody withdraws it's their money plus their returns and if the returns were never there to begin with that takes a lot out this is the beauty though of equity and and particularly cryptocurrency Equity right is that how much ever went in how much money ever went in and we don't illiquid its work to model is we don't know exactly as transparent as the as the cryptocurrency world is serious sorry I mean we can assume that let's assume that like tether is sort of back let's assume it's like 80 let's assume that let's assume usdc and busd are legitimate which I think is reasonable so that's what like reasonably legitimate there's over that's 100 and some billion dollars that's like well over 100 billion dollars there's a lot of money sure but like yeah I don't know man I don't know like you you do have Michael Saylor uh yeah I legitimately buying Bitcoin you have naive Kelly legitimately buying Bitcoin you have real money definitely coming into the the eco ecosystem right definitely no doubt about it but we don't know how much because it turns out that behind the scenes when you start getting into the three aacs the Celsius is and the ftx's of the industry suddenly most of the deals that they're doing are in a liquid [ __ ] coins that never had very much money behind them and we don't know the answer to that do we I well I might guess I mean ultimately the hole will be in dollars so like with with Celsius there are a number of different assets that they're short they're short Bitcoin they're short ethereum they're short basically everything except their stupid token that they had uh but if you look at like where their hole was when they shut down withdrawals it was all dollars that was what got sucked out of the system it wasn't ether or Bitcoin it was dollars so the question is where the hell did they send all the actual money to um and I haven't figured that out yet and so and then element is going to be a much more complex Beast because that's you know it's much larger and much more integrated into everything I have no idea where the hell this money went no clue I I've spent 12 hours over the last two days and another six hours at least last week going over like on-chain transactions trying to track all the money and I am nowhere in the ballpark of an eight billion dollar hole like I can find some transactions that look funky some that make me go this looks like it might be the misappropriating funds but like I said I'm in the range of like half a billion to maybe one and a half billion eight billion is just such an incomprehensible number like even as I mentioned before like compared to the other things we've seen recently it's just it's stunning and from the guy who went in front of Congress and talked about how like the most important thing is to protect customer deposits and he was like saying all these things in front of lawmakers and stuff it's just so Brazen and so massive and like I think it's important for us to kind of bring together here some of the details like and what the motivation was here witches and we talked about this way back in our contagion episode 3ac failing was unexpected and a lot of people who had lent money including people you might not generally think of as lenders ended up way Overexposed on it because of that Alameda and FDX Ventures started stepping in and offering bailouts and what we've now learned is that those bailouts were financed by basically customer deposits of FTX whether directly or indirect directly we can argue about later but like fundamentally that money was coming from FTX customers in an attempt to try to slow down the overall contention to try to contain it and I think in Sam's mind hold out until the next bull market when these valuations would be super inflated again and he could start trying to correct the massive hole he knew he left and then because CZ started to recognize there was some kind of problem and started to de-risk it started a bank run which shouldn't have been possible and that collapsed the entire office

yeah this reminds me I was talking to uh or tweeting with Mark Dao earlier today and I said something along the lines of the reason that this is going on at all is because there was too much leverage and no do due diligence and he said something I'm not going to be quoting him word for word here but he said something along the lines of as when when you obliterate credit when you only care about greed and competition so like you obliterate your any any real checks and balances for credit for giving out money for loans for let over leveraging you obliterate that when all you're doing is trying to get the number to go up and I think that that is the reality of this situation it really just boils down to that like I don't know what happened with Alameda I don't know how I don't even under I honestly I cannot comprehend stealing someone's money that they gave to me using it to trade against them which again who knows maybe I'm wrong maybe this isn't how it worked but this is what it sounds like to everyone I I take I take Bennett's money I trade against him and then I somehow lose his money and I can't give it back to him I don't even understand I can't comprehend it it's hard to comprehend how that money vanishes like that like I I'm stealing I'm stealing from from customers to pay random strangers or other exchanges like it's it's it is truly mind-boggling what clearly the the discrepancies and probably fraud that was going on with the the man in front of Congress uh the ramifications for that I think is an important point just because like we're talking about the ramifications financially right now we're talking about financial contagion we're talking about all the all the stuff that people care about people care about price price action that's that's all these people care about but honestly the part of this I still can't believe is that the guy's name is bankman fried I mean like you can't even you can't write this I mean like it's insane like the guy I mean just but he did he was the he him and Brian Armstrong are the only two faces right now that are standing up more or less in front of and coin Center but besides these besides these three people entities there's very few people going in front of Congress and advocating for the cryptocurrency industry and guess what turns out he was a giant scammer I I mean I'm sure that's another thing right yeah it's only it's only SPF I I don't know that that Point's been fully appreciated by everyone in cryptocurrency at the point you're making Cass which is that there's been there's been a effort by many people in crypto to try to affect cryptocurrency regulation but Sam really has been spearheading a ton of it recently and him being outed as an eight billion dollar hole what there was a total of 11 point something and best invested and Madoff like we're talking Madoff level fraud here like you just gave every regulatory agency every lawmaker and every single person who might have an agenda like a reason to decide that now crypto is the enemy and this is at a time when the U.S treasury Department has already shown they'll sanction a smart contract and anyone who interacts with that smart contract like I don't know that anyone's fully appreciated what's what like the symbol of the good guy failing is going to have in DC I mean all these politicians are going to have to cover all the ones who took money from him and took pictures with him what are they going to have to do they're going to have to go the exact opposite way and be as absolutely you know balls to the wall you're done we're gonna fry you it's game over I mean that I don't know if people comprehend yeah you're right that's what I mean about this having the psychological effect alone of this is going to be it's not even you can't even you can't even like project almost insurmountable almost insurmountable not like not necessary but insurmountable what you mentioned there might is something Cass and I were talking about earlier which is like that even Biden may be motivated to like make an example of Sam because Sam was his second largest donor and when you're running against like a party and probably a candidate whose entire platform is corruption and you need to try to pitch yourself as like anti-corruption and anti that kind of capture it might be valuable to you politically to make an example of your second largest donor and so Sam invested millions of dollars in the hopes of a get out of jail free card and it might be a go to jail card yeah because remember Arthur Hayes what ended up negotiating for like suspended release and oh from like home arrest and stuff and so like and I don't think that's going to be true for Sam my gut feeling right now is Sam is in deep trouble I want to clarify I like we might not like the way that bitmex was run we might not like the way that Arthur Hayes dealt with his business plenty of illegal things going on in red flags um but he didn't steal the customer's money did he yeah [Music] he traded against customers take the money out and and put it somewhere else no no exactly there's a difference between those two things there's a very big that's gonna be my point he traded against customers he didn't steal their money and then trade against them and look the bar exactly the bar is low but like Arthur Hayes never did that and and like that he doesn't I the fact that he's not in prison makes sense to me on on some level the fact that I think cooperating the fact I think SPF is like I am it's the most sure I felt about in a person who's running an exchange in cryptocurrency going to prison the only way felt ever the only way Sam gets out of this well he will almost certainly I mean come on I mean I'm not a lawyer I just do this for fun but like he's probably gonna do prison none of us are lawyers the only way the only way he gets out of this is if he can give up somebody who's bigger and there's only a couple people who are bigger than Sam so and he just demonstrated he has no leverage against those people in a very public fashion that those people are people who have him by the balls metaphorically they did they physically can't come to DC as Sam will quickly points out but metaphorically they have his balls well you just have to wonder I mean the relationship can Sam go to DC now yeah right

he might end up staying there for longer than playing hahaha

oh man I know um I I do want to kind of I know we keep coming back to this but like this has been incredibly strange for me to observe like this has been a really weird series of events and like at one point I was looking for alameda's ethereum cold wallet and I ended up saying nice things about bitfinex because I could at least find their cold wallet and it was like in the expected place and did the expected thing with their hot wallet and had roughly the expected amount of ethereum I would think would be there and that wasn't true for Alameda or not for Alameda for FTX and I was having this moment where like this is this person who's been in front of the lawmakers in front of Congress in front of the regulators and who has been trying to control so much of the industry is worse than like companies who I thought were like Paragons of bad behavior

and that's been disorienting yeah I found myself saying the nicest things about tether that I've ever said probably in the past few days which is just um

yeah it's troubling for my sanity for sure um but yeah okay so look I think we've we've more or less covered I think the overall I don't know there no we haven't no we haven't there's a lot more there's a lot more to cover I'm sure we could go on for 10 or 20 hours um continually updating everybody about all the craziness going on but we're not gonna do that I I I I wanted us to oh sure I do think that it's kind of uh interesting that we found it to the basically the entire FTX legal and compliance team quit and since we were talking about sports Bettors before this is a good time to mention that Daniel Friedberg the like uh was he the general counselor that had a Regulatory Affairs he was one of the top lawyers over at FTX used to be over at x capsa with Stuart hogner and was like and helped cover up like ultimate bet and uh what was the other one the other cheating poker site Full Tilt one of the other ones he was involved in all of the same poker BS that Stuart hogner was back in his days as a gaming lawyer and so we've got those two buddies back again and we've got the rest of the lawyers in compliance team just saying that you know what it's not worth figuring out what went wrong here at FTX I can find a better job

can they I'd rather be unemployed I think is what there is what there is what they're deciding yeah um look Okay so we've we've kind of run through the updates that have happened over the course of one single day um but I know we were talking all of us about opening up some of this to some questions if anybody had any there might not be any questions I guess I have no idea I haven't checked um we'll just just walk away but um I did want to let uh viewers and listeners one question we got Cass was do you think if tether implodes will it be bigger than this and yes if everything was yeah everything just stops at that point like it just doesn't exist anymore I mean I think I think that um it's really I think that's essentially what you're saying is an interesting way of putting it because I think there's no way any of us can even fathom it right now like the idea of that that extra issue being on top of all of the cascading issues that are happening right now even me as someone who kind of has been like well I think it's going to fail for a really long time it's like God I hope it doesn't I hope it doesn't fail right now please don't feel right now um because I think because a lot of people would get hurt a lot of people are going to get hurt regardless it I think that I so I do here's here's my argument they're gonna fail they're gonna fail at some point there's there's different kinds of failure though I think is is the reality um and I think if you can

look if he's if they've been if they've been buying a bunch of treasuries and there's essentially let's just in air quotes say fully backed right now um let's even say Mike's 80 because that's a lot better than it might have been at certain points in history and right like and we talked about last episode sometimes bankruptcy is the best option like there's ways to more gracefully fail yeah exactly well I mean 80 back would be better than FTX yeah I so I think

all I'm saying is we're going to find out at some point we are going to find out we will and look I hope I hope there's no problems at tether I don't believe that there's no problems with tether because they've lied a lot so I have no reason to believe them the same way that like no one should just believe words out of somebody's mouth as is it's been expounded on repeatedly now uh especially with FTX uh 3ac do Quan Alex mercinski the list goes on so um the idea that Paulo or friends will be like everything is great over here shut up that doesn't instill me with any sense of confidence I'm not suggesting as much but I do think that there's better and worse ways to fail and there's better and worse times to fail and I really hope that tether is one not going to fail anytime soon and two uh if they did I hope it would be very very gracefully that's all I'm going to do things are very fragile right now and I think there's Alameda tried very hard to hide some of the fragility of the system by doing this bailout where they took these funds from FTX and so additional failures at this point will further expose the fragility of the system and can Cascade uncomfortably here's my thing okay guys is that and I probably shouldn't say this because I know a lot of the people who like Follow Me Now on Twitter are like big crypto people at the end of the day my opinion is that this is basically a tumor on the face of our economy okay it needs to it needs to be extirpated

so so I talked to I talked to somebody today about the idea that I like I don't I don't hate Bitcoin I don't think Bitcoin I can understand why there's criticisms about it I can understand why there's people who wanted to die yeah I mean I don't think it's I don't think it's a fundamentally on its own it's not a bad thing but it's a vehicle for ripping people off and it has been for a very long time sure but knives are used for stabbing people but they're also used for cutting meat like I it's just what do you use Bitcoin for what do you use Bitcoin for besides I think it can be I think it can actually so I this is this yeah I do think there are Niche use cases for Bitcoin right and when that's when it comes to cross-country selling drugs payments to hit the reality is Mike look I have friends I have friends in China where I could see and and we can talk about the legality of it fine maybe in 10 years the US government says I can't send money to China anymore but I still like my friends I still want to interact with my friends I still want to be able to let's say pay them for a job that they work on work on for me like I could foresee a future where the best way for me to be able to do that would be through something like Bitcoin and we can we we can argue whether that's legal well I think there's I think there is some value I think there is some value to it but it's like 99 of the value is fraud sure and speculation I'd say 99 is speculation or 90 and five or seven percent is fraud and then there's like one or two percent that is legitimate interesting cool Niche use cases and Cassie and I go a little deeper in this in episode 21 when we talk about kind of our thoughts on bitcoin I think that largely mirrors my thoughts on cryptocurrencies that there are times when it is useful right when you do need to do the censorship resistance thing or where there's value in that censorship resistant thing and you've talked about like cross-country uh trades there and I think there's also value in terms of like um we've talked before about paying journalists in places where there might be limitations on that or like paying sex workers in places where they might be being removed from payment rails and things like that but the other flip side of that that we always have to talk about is that censorship resistant is this double-edged sword where a lot of the people who need censorship resistance is because the things they're doing are illegal for reasons like they're societally important reasons we've made those things illegal and that's the trade-off of cryptocurrency and that was also just to bring some things back together one of my frustrations was Sam bankman freed is that he didn't seem to believe in any of like the actual reasons that crypto should exist and his priority was almost entirely just around the extracting of money yes I guess my problem with the idea of censorship resistance is that if the government makes it impossible for you to turn your Bitcoin into currency then it still is useless and it's censorship it's censored right like if they're if they're able to basically prevent you from turning your dollars into Bitcoin or your Bitcoin back into Dollars without going through some sort of regulated process but like if there's a geared of someone who wants your business yeah but I was saying is like the Bitcoin itself is peer-to-peer but at some point you have to turn your Bitcoin into Dollars how are you going to do that and this is the thing we kind of talked about if it's peer-to-peer that's how yeah this is the thing we kind of talked about uh in our episode with Mario Gibney which is that for Bitcoin to be censorship resistant in terms of like as a meaningful transfer value it needs to develop a circular economy where people are interested in going directly in exchange for goods or soon and that that is an important part of developing the censorship resistance of Bitcoin but people who are likely to be censored when you need that censorship resistance or also reasonably more likely to accept Bitcoin for those same reasons right that gets to the journalists in a country where there's restrictions on journalism that gets to the sex worker and things like that and so there is a place for that but you are absolutely right that many of the people including I think very clearly Sam Beckman freed see cryptocurrency as a chance to develop these systems outside of Regulation where the true power of it for them is that they can extract and keep such a large portion of the money from these people who don't really understand what they get to and that is your right separate from whatever real value cryptocurrencies has because so much of it is dominated by this leverage and by the speculation and by this Brazen desire to take as much as you can no matter the cost

and and I agree that most of the most of the names we've come to know and love are people bent on extracting wealth so I I don't think I don't it's not that your point is incorrect it's just that Bennett and I try to understand that there's some Niche value there some Niche small amount of value in this industry I like how much we can expound on that and how big that would ever be I don't know but I but I will say that like the stuff you're talking about is very real like a lot of it is straight up Ponzi schemes and people trying to come up with the economics of Ponzi schemes which is blatant it's just it's a scam like that's just scamming people and trying to steal their money it's trying to invent a perpetual motion machine they would say it's experimenting that's what they would say it is to me it's knowing full well that it's a disaster and you're going to get in trouble for doing it but I don't know like this is It's a give and take I guess I I don't know I don't know I I understand your perspective Mike but I I think we disagree slightly

fair enough yeah there's a there's another question here from typical hog which is way to FTX or Alameda have a lot of usdt if so what if they demand a Redemption but tether doesn't have enough um as the as protos helped report out in the tether papers Alameda has received over 31 billion dollars worth of tether issuance based on what we can see in their publicly known wallets they do not have anywhere near that amount of tethers left Alameda and ftx's implosion will almost certainly slack in the demand for new tethers and may affect like the number of redemptions ongoing but if tether has been honest they should be able to handle it and this gets into some of the other questions I'm seeing in the chat here which is like what are the risks of this spreading to tether and like it comes down to how honest tether has been with us how much of what do they say they have do they actually have and how much has been moved into accounts or Faked on statements for the Auditors to sign off on and assuming they've been honest things are okay assuming they're lying things could become really really really [ __ ] bad really really [ __ ] quickly so uh you decide if tether's being honest you're lying to you yeah do we have any idea where any of this tether ended up like the Alameda tether like how did where did they send it back well they couldn't have it because it was used for making on exchanges or as collateral back when they needed as collateral for binance right because back uh tether was the first collateral that you could use for the finance Futures Trading and so a lot of the Alameda tether issuance was so that they could trade on binance it was I should have gotten it back at some point sure and they they have redeemed they've redeemed several billion dollars worth of tethers um but but the like tricky note there is that like there's this still kind of weird outstanding issue of tether is supposed to only accept dollars in exchange for tethers and like the balance sheet coindesk saw for tether had only 130 billion or 130 million in cash and they've supposedly gotten 31 billion in tethers and it's just hard to imagine 31 billion dollars in relatively liquid cash flowing through Alameda yeah it's unlikely let's just put it that way

um any other any other questions yeah let's see uh on the question of nexo being next at what y'all think will trigger that collapse well if nexo is solvent then they're okay right and if they're insolvent but can keep the value of their token high enough then maybe they're okay and otherwise will anyone who's given them assets are taken a loan from them might be in trouble do we know do they do they work with a lot of Industry like institutional investors or are they more retail focused on their client base I mean their money comes from retail I think but like in terms of where they send it um uh your guess is as good as mine I haven't figured that out yet uh I mean if they're doing what they say they're doing they have to be sending it to they have to be sending it to institutions because that's what they tell you they're doing right so who their partners are we don't know um I mean one example is it's possible these withdrawals from FTX were actually from Alameda somehow right alameda's paying them back yeah that was one of my implications earlier is that it was elumia trying to post collateral too because nexo had extended them and FTX token collateralized loan and they needed to put up non-ftx token collateral I would be crazy if nexo wasn't doing business with Alameda because Almeida is like the biggest game in town like if you're the biggest lender and they're the biggest like Market maker and you say you lend a market makers like it makes sense that you would be dealing with them uh but yeah we have no clue and I mean like again like my reporting on that is based totally on the assertion of the Kentucky Regulators who say that they are insolvent without their token like if that's not a true assertion then I'm not right yeah so your guess is as good as mine but if if you'd rather believe who would rather believe I guess that's your kind of decision you have to make yeah okay someone else says how does coinbase primarily make its money through trading fees and yes that's primarily how coinbase makes a trading fees um better questions how does coinbase lose their money but that's an easy ques that's an easy question to answer though they just spend all of it um yeah I think but I do I I do think that it's um it's clear that coinbase is kind of up against a wall right now because as Jim Jim talked about right these these trading fees are relatively High compared to competitors um and you can't rely on those especially in a bear Market to maintain profit and revenue um so we're gonna see some interesting stuff happening with coinbase in the next few months I am not short coinbase so I have no I have no uh horse in this race but it does seem like they're they're running up against a wall right now uh in my opinion that doesn't I don't I don't predict prices though so yeah yeah go listen to our episode with Janos for more context on coinbase's business model uh someone else asked if FTX files for bankruptcy will it be under sipa you should ask a lawyer um and they're based the Bahamas so I have no clue exactly I don't know I don't know the answer to that um it's gascoigne going to open withdrawals soon uh withdrawals are functioning normally as long as you don't try to withdraw uh sorry sorry I'm busy right now just let them know I'm busy um you're busy dealing with other things yeah cast coin is fine cast coin exchange is fine that's all I have to say about that uh let's see what else we got

why is 95 of crypto trading volume and stable coins because it's hard for crypto exchanges to get Banking and if you primarily trade against stable coins you don't need to worry about trying to get banking you just rely on the stable coin spanking and backing to keep your exchange functional is the short answer

uh someone else asks do you think other exchanges will delist ftt yeah the price has permitted the values gone the volume's gone there's really no reason for them to keep it and they now know there's U.S Securities investigations ongoings I don't think they want to be exposed to that didn't you say you would buy didn't you say you'd buy everyone's ftt for 22 Bennett I thought that was you no that was someone someone said that I thought I was pretty sure you suggested you were gonna buy everyone's ftt for 22. yeah uh someone asked if we can answer Dave portnoy's question and the answer is if you had your Bitcoin and FTX they're probably with Alameda and Alameda probably gave them to A lender yeah he'll get a percentage of his Bitcoin back that's the answer to it you'll get something back probably I'll get something back yeah

uh why doesn't exchange like coinbase need more and higher paid Engineers than say NASDAQ well I mean they do some things that NASDAQ doesn't do like nfts um yeah

did Sequoia know what was going on no Sequoia didn't even know that Sam was playing League they invested in his exchange Sequoia didn't know [ __ ] y'all are looking at the wrong villains here I love vested and Sameer Clues this is just stupid I I there's so many conspiracy theories that run rampant when it's like these people can't tie their [ __ ] shoes man you don't need to worry about a lot of these conspiracy theories like I don't know there's there's so few conspiracies as opposed to just flat out lies and fraud the conspiracies don't need and laziness don't need to be and laziness and and it's it's Occam's razor right like I think people who try to like build these enormous conspiracy theories or um imagining most of them yeah exactly I mean they know that we're all secretly working for binance though they figured that one out I thought so although two weeks ago people two weeks ago people were telling me I was working for FTX so I actually don't know who I'm working for Sorrows but I I work for Soros and the and the FED is what I've been told right I don't know I'm a jihadist

clashing interests

um

if eight of 11 billion are missing does that mean deposit holders get 27 cents on a dollar maybe FTX FTX accounts fading over the counter for 15 cents today I saw so 27 cents on the dollar is not an unreasonable recovery expectation by the time bankruptcy is done and my Discovery doesn't take as long as yeah it might be optimistic after you've paid the lawyer fees the accountant fees the investigator fees and all the other fees associated with actually going into bankruptcy yeah it's obscene isn't it

yeah uh what do we think will happen to FTX us that's a good question that's a good question

uh did you see the thing I sent you guys that they were they were transferring a bunch of their rap Bitcoin over to an Alameda address yeah yeah yeah if if see and they said FTX us is fully backed even when they wouldn't say that about FTX but they did used to say that about FTX even when it wasn't true so who's to say they're not lying I mean are they still processing withdrawals I don't know the answer to that I believe so I mean that's a relatively small operation I think yeah compared to smaller in volume and liquidity I have no clue how big it is compared to FTX as a whole it's possible they were operating that one completely legitimately because they were trying to use it as their like uh like Finance used binance us and the Tai Chi documents as the regulatory Shield as their way to avoid the uncomfortable questions about I think this is what things are doing on FTX yeah my guesses are probably okay but I would still take my money out of there as quickly as possible but I personally would not be happy if I had money in FTX us right now yeah I think that's right I think that's right as well and look this is I want to drive this point home as well you can't you can't cause a bank run on a on an Exchange Bank should be able to no no no you cannot a bank run happens to a bank so you cannot cause a bank run at an exchange because they shouldn't be lending out customer funds so uh no such thing um but yeah I we're testing hey if you have money on there go ahead and take it out why not let's see if we got any other questions odds of machinski and SPF indictments relatively High missions if he doesn't go to jail like I mean that we're not lawyers none of us are lawyers and we're saying this we're talking totally out of our asses but I'm so goddamn certain that both of them are going to try to probably see prison time um but who I who knows unless they can sell out somebody who's really worth something to the feds that's all yeah at this point they've they've been so blatant and so like loud about what they've done wrong but I think it would be really hard to give them no jail time at all so we'll we'll see but I that's what I that's my guess uh someone else asked tether is in Hong Kong right what are the risks associate with the CCP shellacking them Tyler is not in Hong Kong called Taiwan and tether discussing how Tyler was originally set up in Taiwan and now primarily operates out of the bridge in Virgin Islands there's still a chance of China shellacking Taiwan but tether's primarily out of the British Virgin Islands and I'm not particularly worried about the risks of China going after tether same

so I'm trying to see if there's other good questions here

is Jump crypto invested in FTX uh not as far as I know are they not not invested but they had money on FTX no oh sure sure they had some exposure to FTX like multi-coin and a couple of other people that who have lost some percent of their assets under management by having them on FDX uh jump crypto is heavily invested in Solana though which Alameda has been aggressively dumping to deal with the fact they have no money yep do we know do we know how um how Solana performed is it how how much is it down it's like 40 it's down bad because like 40 today I think it's a lot yeah it's like 50 over the last week or something it's ugly it's an ugly chart which it should be all right could bitfinex be doing an ftt style thing with their with their Leo token

good question could Finance be doing a similar thing with there being B token good bitmakers similar things CZ says no next token crypto.com be doing something similar with their cro token could etc etc etc you decide the answer to that after looking at what happened to FDX exactly I think the question is why do any of them need exchange tokens that's the question you should be asking yourself and I I have an answer that I can share which I think is they don't need them except for solvency but that's just my wild guess uh Jackson Palmer a former guest asked would Banks rather large financial institutions have extended USD loans based in ftt collateral injects and please God I hope not please I really don't think so I mean I've looked at I've looked at silvergate and signatures for 10ks and like they are making loans I believe only against Bitcoin it sounds like they are fairly over collateralized so I'm pretty confident there are no at least U.S institutions that are like financial institutions directly exposed to ftt um us though that's a good U.S I mean who knows who knows internationally maybe who knows who who knows what counterparties are willing to extend loans and in what to them for what so it's actually really really really good question yeah Dell tech is a good good name to drop right now um I who knows who knows what international banks are willing to do and Loan in what I think that um is a really good question from Jackson um and we don't have the answer to that someone else said I saw it mention that ftx's API was still going into price oracles and Bots do you guys have any idea on what the risks and implications of that might be if it's all right I'll start on that uh we've seen some Arbitrage Bots and some stuff on other exchanges tried to basically effectively Arbitrage price differences based on what they're seeing in FTX and so they've tried to like for example run up prices on other exchanges because they've seen a premium develop on FTX due to the inability to withdraw because of that they've started to drive that up on chain you start to see the same thing in other oracles and this also affects some index products that ingest FTX data is that you start to use this thing that's getting a higher and higher premium because the people there are effectively trading with Monopoly money and if you leave it as a data source you start believing Monopoly money is real money and you make trades as if Monopoly money is real money and after a little while all your real money is gone and you can't get it

thank you so better than I could

uh wait so there's I mean like that's the crazy thing is they're still supposedly trading going on in FTS that makes no sense there was Elite I thought they shut it off a few hours ago but for a long time there was and basically if you were left there your choice was either hold on to what I've got now or take a flyer and try to take as much money off the other [ __ ] as I can

someone asked are stable coins actually profitable for issuers we don't have full financial information for all stable coins but the circle has never consistently made a profit and so unless you're doing things with your reserves that aren't leaving it fully reserved it is challenging to make a profit as a stable coin historically but it was it was now much easier yeah now they should be doing okay yeah they should be doing great right now I mean [ __ ] that's pretty good pretty good spread on uh I don't know I don't know what like short-term treasuries are paying but it's like three four percent I mean that's not bad they should be in substantially better places uh

got it um if stable coins are being used for their Banking and most of the market is using them to trade what amount you think is laundering I don't have a good number for that it's hard to measure a metric like that it's really hard I think it's really hard to even Define it I mean it's it's a it's a really tough question I don't I don't know how to I don't know how to answer that I don't know how to answer that I wish I knew either yeah uh somebody else do you think the payments Giants MasterCard Visa will start to take a more cautious approach partnering with crypto exchanges and getting engaging in institutional capabilities going forward yes have they been have they been particularly not cautious up until I mean they feel like they've been card issuing and things like that right you can still off yeah Celsius had a credit card briefly I think and I think they were able to issue their credit card before they went under so yeah I mean okay but like how many people had it I don't know this is no I mean it doesn't matter it's insignificant largely largely I think they've been relatively cautious compared to other other people like let's say if you're a uh uh what like a security business a software security business um who pivots to just being like a Bitcoin ETF there's other people who have done far far greater far more Reckless uh initiatives as opposed to visa and MasterCard so let's put it this way I mean Sam had to call his trading fund elevator research to make it seem like it wasn't a crypto company right uh this is it was bad then it's going to be worse now that Sam blew himself up so that's that's a good point good point and and that also is something I just wanted to note is that this dude started Alameda research he we I don't think anyone fully understands how he made his initial money other than Arbitrage it doesn't it doesn't sound like it was legal um and then he like made all these outlandish claims the entire way up whether it was effective altruism or you know just leveling insane claims about other people without ever backing it up and nobody ever thought maybe this guy is lying to us but sorry go on go on Bennett yeah Sam's bad guy no question next question is uh uh won't these failures lead to significant regulation in the industry yeah probably I mean that's what Sam wanted see he got what he wanted at the end of the day he realized that the best thing he could do is sacrifice himself for the greater good of Regulation and so he decided to steal eight billion dollars and blow himself up that was his whole plan this whole time you guys don't know It's very effective altruism it's for the good of us all hey maybe you know what maybe you sent the eight billion dollars to like malaria prevention maybe we'll find out he actually did steal it for a good cause he realized that the best thing he could do with his limited time in this Earth was built the largest Ponzi he could as fast as he could and give that money to the to others malaria nuts um okay so I mean if he did that I would actually be okay with it like fine you know what well let's find out gosh we're gonna find out if that happens we're gonna bring Mike back on and we're all gonna personally apologize to Sam bankman freed um but I suspect that is not going to be the case someone asked about contagion 2gbtc because of Genesis cbtc has been such a weird [ __ ] asset for the last 18 months like first when blackfy was arbitraging it because it was so much above nav and then the funds that literally got blown up because it was below nav I I don't know

aren't they suing the SEC they are yeah good job good luck guys genius uh yeah it's it's a garbage offering to begin with I think is what we're all saying so yeah okay someone else asks is there any way you can see the current players disentangling from each other and not killing the entire ecosystem I think at least Cass and I believe some cryptocurrencies will continue to function no matter what happens to these remaining companies but there's going to be a bloodbath I expect there to be a bloodbath that's not Financial advice or things you should like plan your life around but I expect many cryptocurrency companies are more exposed than they're letting on right now we're going to see that over the coming weeks agreed well all I'm going to say about that is that if I'm going to bet on a Ponzi scheme it's going to be the US dollar

s

um

don't we think that our government has allowed this to flourish and that makes them look like complete fools well they at least look a little bit like fools yeah oh The Regulators look awful The Regulators look The Regulators look awful and they deserve to look awful I I they every every ounce of disrespect that goes their way after the hodgepodge of insanity that has transpired over the past three to four years not just in cryptocurrency by the way I'm talking about Finance in general I mean like the problem is like half of the SEC has been dealing with Elon Musk this whole time so like they haven't really happened they've been trying to deal with Elon Musk well they've been trying to have they that's how inefficient they are I don't think ordinary people are just working on Elon Musk every day at the SEC I really wonder Gary just Gary this is Gary in an office by himself like frantically running around he he just once a day yells out all these things are securities and they won't listen to me and then he goes um someone else asked what do you think about people looking to decentralized exchanges as an alternative after the implosion of these centralized exchanges some will there will still be alone no no but we were talking about this the other day we were talking about this the other day it looks like there's no movement changes and like a lot of people still at the end of the day want dollars right more than they want any of these other assets and so because of that they're going to try to find a way to get dollars and that means centralized exchanges well and if you look at if you look at the the function of decentralized exchanges at least in my experience at least for the smaller tokens it's all just watch training by market makers for whatever purposes like 99 of volume is dominated by a few a very small group of players like it's worse than any centralized exchange so good luck uh because those guys are going to get blown up too so what happens after that I mean good luck he was invested SPF was invested in CRM um and yeah numerous it was Market making it at decentralized exchanges and all this other nonsense so I think um it's it's early days and maybe who knows what happens but um for now that is not a realistic possibility um so

okay Mike do you have any closing thoughts on what this means for cryptocurrency before we wrap this up tonight

I think that uh if anybody if you there's anybody who didn't want to blow up maybe after coinbase it was FTX just because of how prominent they were publicly just because of Sam's political contributions and role uh because of his because everybody thought that he was the smartest guy in the room uh uh and seeing that he was the one who blew up and blew up so badly and was so egregiously fraudulent in everything he was doing uh that's going to have a very big effect on people's belief in this whole thing it might not be today or tomorrow but a lot of people are going to realize maybe it's time to get out and as we all know there's not enough money in the system for everybody to get out in time so it's going to be very interesting

uh Cass do you have any closing thoughts before we wrap this up and say thank you to everyone for joining us tonight yeah no I just you know try to uh hang on to your butts everybody it's gonna be a wild week and month and year uh and I hope nobody is severely impacted by this I hope our listeners and our viewers are are on oh and yeah if if seriously and this is a serious statement like I've been very negative with my cryptocurrency and all that stuff at the end of the day if you lost some money even if it's all of your money it's just money it's gonna be okay don't hurt yourself you know like call The Suicide Hotline if you need help I'm being totally serious because there are people who are going to be very seriously hurt by this it's a really good point I know that that we laugh about some stuff and we we try to as critics and Skeptics have a good time as this entire uh industry uh goes to levels we haven't seen in a really long time um but yeah it is it is a real thing and people have truly lost money and people have probably burned some friendships and some family relationships in regard to recommending FTX to their family and friends and you know I'm sorry I'm sorry that that happened to you I'm I truly am unless you're Dave Portnoy because then you deserve it but he's a multi-millionaire he I don't care what happens well he was um I don't know

um exactly so look again as we approach the serious topic I just want to thank our listeners our viewers I really appreciate you guys tuning in uh and wanting our perspective at all I hope all of you are okay and not seriously impacted by this and if you are as Mike just said you're gonna be okay I know that's not probably something you want to hear but you're going to be okay and um yeah I don't know thanks thanks everybody thanks for for joining us again thank you all very much and uh stay safe out there

okay

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