Nexo Raided, SBF Lies, and Genesis and Gemini Charged – Crypto Critics' Corner
Bennett Tomlin and Cas Piancey discuss the raid executed against Nexo, SBF's lies in his Substack, and the unregistered security charges brought against Genesis and Gemini. Kentucky Cease and desist against Nexo Protos On SBF's Lies This video was streamed live on January 12th, 2022.
Cas Piancey and Bennett Tomlin discuss the raid executed against Nexo, SBF’s lies in his Substack, and the unregistered security charges brought against Genesis and Gemini.
This episode was streamed live on January 12th, 2022.
Other episodes mentioned in this episode:
- Episode 101 – Banking on Regulators – A FTX Story (Recorded Live)
- Sam Bankman Fried Banks like a Criminal
- The Florida Republican scam ICO with connections to Belarus – Organic Fresh Coin
- Episode 26 – Cryptocurrency Lending is Too Good to Believe
- Episode 103 – Binance, Auditors, and Global Regulation
- Episode 98 – FTX and Alameda are dead, long live cryptocurrency
- Episode 98b – FTX Collapse feat. Mike Burgersburg (Recorded Live) (Bonus Episode)
- Episode 99 – Continuing Crypto Collapse (Recorded Live)
- Episode 102 – Sam Bankman-Fried was Arrested (feat. Coffeezilla) (Recorded Live)
- Episode 75 – Cryptocurrency, Coinbase, and Contagion (Featuring. Jim Chanos)
Other resources mentioned in this episode:
Where to find Crypto Critics’ Corner:
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- Cas’ Twitter
- Bennett’s Newsletter
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- Bennett’s Mastodon
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I am Cass piancie and I am joined as usual by my partner in crime Mr Bennett Tomlin how are you today I'm doing great chaos little little frantic little bit like I wish the news would stop coming for just like a little while so I could sleep but otherwise good how are you doing finally dried out uh yeah it's uh it's briefly we're gonna just rain again tomorrow but you know for now um but besides you and me boy there's a lot of news going on today and uh a lot of other people are having a much worse go of it than we are let me put it that way we started the morning off with uh the offices of nexo financial which we have discussed in previous episodes they are A cryptocurrency lender if you're not familiar they have their own coin nexo um token whatever uh and they they had 15 of their offices in Sofia Bulgaria rated that is the extent of the knowledge that we have at this point um well we've got a little bit more knowledge than that and like I still had some questions even after reading the existing reporting like you mentioned the 15 offices but it wasn't clear to me of all 15 sites were nexo sites or if there's some broader organized crime investigation ongoing and some portion of the sites were nexocytes and some portion of them were just the organized crime right and like that especially seems true since Nexus trying to claim that the places rated we're only doing back office stuff payroll HR things like that and it would surprised me if nexo needed 15 different offices to accomplish that honestly when I first heard the 15 sites my thought was that they were running call centers to try to recruit investors like we had heard Celsius was doing um but that they Nexus claiming none of these were customer facing and was just back office so that's weird the other thing we do know is that the things they're being investigated for so far are supposedly money laundering uh operating a bank without a license connections to organized crime tax crimes and Computer Fraud plus they've let slip that they think there was a terrorist financier moving money through nexo's platform shocking shocking all of it um but okay so that's the first piece of news we will jump back to that and discuss it in in more detail uh we should also discuss some of the other lending platforms just because I think it all comes back around um but the second piece of news that greeted me when I logged on to Twitter this morning is that our boy Sam bankman freed has decided to start a sub stack in the midst of a criminal trial uh yeah yeah um we're definitely going to go into that but let's just move on to the third thing that seemingly just happened right before we decided to do this live stream which is that Gemini and and uh digital currency group are both being is it straight up charged I think Genesis okay it's not d d not D not DC yeah right um so these two companies are being charged by the SEC is that am I getting that right they're being charged um so it's not even investigated and like the SEC loves to say charged but it's a civil church right it's not a criminal charge right um but it's still it still sucks um so we're gonna delve into that uh before we before we sign off today uh but yeah let's get started with nexo as you said we know that there's some of these sites that have been um rated we don't know exactly what these sites are we don't know exactly Who's involved we don't know exactly what's going on we know the founders names have been kind of dropped here and there um but I I do want to say so there's a couple things I want to talk about here one uh the the Consumer Financial Protection Bureau uh previously was trying to deal with uh nexo and there was a long-standing uh back and forth between them and nexo was trying to basically petition this uh the courts to be like now throw this out this is BS um back in November the courts finally decided uh no this isn't BS you guys are in big serious trouble you were definitely in violation of these laws and we're going to nail you for it um so and then backtracking a little bit more nexo acquired a bank uh who let who let group holet group which is Summit National Bank in America it is a federally Chartered Bank we're talking similar to like uh you know uh other people per like purchasing let's say a moonstone Bank Farmington State Bank um purchasing these these State chartered and federally chartered banks in the U.S to have access to US Dollars seemingly um and then they in December decided they were going to have a gradual exit from the U.S markets nexo did um which is odd considering they just acquired a U.S Bank but okay and then in January we have their offices getting raided in Bulgaria I think it is an odd turn of events all of it is very weird maybe this is a con game where you're suggesting you're totally fine by doing something like acquiring a federally Chartered Bank um how they were able to even do that I find stupifying um so let's talk to me about what what are your what are your thoughts on nexo right now man I'm I'm at a loss I think one of the things I want to talk about is what they tweeted in response which a bit down the thread they get to this point where they say that some Regulators have adopted the kick first ask questions later approach and then they continue in the same tweet and say that in corrupt countries it is bordering with racketeering like they seem to be accusing the Bulgarian authorities of trying to extort them in like their defense here which is an ambitious strategy to take for the authorities of the country you are a citizen of and have been operating in like to try to come out with your reasoning being they're just trying they're they're the criminals they're the Mobsters we're not organized crime it's really The Regulators who are hmm I'm not here to vouch for the Bulgarian government by the way I don't think I think there's probably not truth to them not true to them trying to seek out nexo for any particular reason but um I mean all governments are corrupt and gross so uh you know there's probably some level of Truth to those claims but that is not a good defense strategy ever um and I don't know they got to be thinking they're gonna leave I mean there's no way you stay in that country after you make claims like that right I mean you I don't that doesn't make any sense to me like I they must not be there I I would presume and like part of the problem here is there's still some kind of ambiguity about what they're actually kind of in trouble for right are they in trouble because one person who sent money to Isis was using nexo and they didn't catch it and like this was a larger performative raid related to that or were the 300 investigators and officers who participated in this brought in because this was a larger probe or in question to some kind of organized crime money laundering or texts evasion scheme that they think nexo is participating in like it's not clear to me if nexo is an accessory to the crime or the perpetrator you know yeah yeah I mean you recently did a video about how tokens can be used for for money laundering uh whether they Ico or don't kind of kind of thing um yeah I mean we've been calling out nexo for a long time these lending platforms I don't know I've been wondering how they've avoided the same kind of problems that blockify um and Celsius had I I still can't fully understand my hypothesis is that there's very few people actually using the nexo platform my hypothesis is that they have not fully evaded those problems and if we go back to like the Kentucky State Securities Regulators cease to desist they sent to nexo in it their investigators make the claim that if you ignore the value of nexo token on the books for nexo they were insolvent that they were effectively like Celsius in 2019 20 20 21 or 2022 effectively insolvent if you ignore the value of their made up asset right and if you look at the recent attempted acquisition evolved by Nexa where like the Vault Executives came out and said nexo wasn't providing the expected due diligence materials and that they were worried that nexo may be insolvent or something like that I think it's plausible that nexo has not avoided as many of the problems as they've tried to convince people they have um yeah that could be that could very well be true um yeah it's like a confidence thing uh like I was suggesting with the with the other with the other stuff um but I will say oddly maybe this just speaks to the disconnection between crypto uh and the real world uh but their their token hasn't like crashed on this news which is just kind of like hard to believe um but yeah uh you know here we are uh block by way Dead Oh although now uh Voyager was just purchased by uh uh binance us that went through I believe right that went through is it binance us purchasing it I thought when we talked in two episodes ago we thought it was actually binance who is providing the money for the acquisition well binance provided the money it was by Nancy us you're right okay I got those confused for a second yeah well they just got approved it got approved by the bankruptcy judge which was somewhat surprising to me considering the ongoing money laundering investigations and like some of the other things we know that Finance has gotten involved in but it seems that they were the best choice for Voyager possibly the only choice left I I mean I don't yeah I don't even know what to say about that uh but this is kind of the I don't know what I don't know are are there any cryptocurrency lenders left sure there's some of the smaller ones swanned leading um oh Babble eventually reopened withdrawals you hot you hodler whatever it's called oh my God reaching out to us um there's but there's no big ones none like there were uh I mean Genesis black five Celsius Voyager and have all blown up and now nexo just got raided that's a lot yeah it's a lot it's a lot um so that was the start of the day um let's move on to the second part of the day SPF man wow you know people talk about tweeting through it uh that he's resorting to now I guess sub stacking through it um his lawyers are playing White Collar defense on hard mode normally that's like easy mode because our prosecutors don't actually win a prosecute white collar crime but right now they've got hard mode just because their specific client is a narcissistic sociopath I it's hard to even tell at this point yeah uh we are not doctors so I'm I'm not going to make any claims about having any idea what the hell is going on in that kid's head um but a kid is the wrong word uh he's a grown ass man I don't know I don't know I read that um I read the so he put out a sub stack article and I will say that it more or less amounts to every defense we've heard so far in that ridiculous media blitz that he did for such a long time um he talks about how the balance sheet was solvent definitely solvent for FTX us how he thinks all of those people should have their money back he said there was eight billion dollars in assets he says um there I I just yeah a lot of a lot of the same nonsensical claims we've heard before not taking any responsibility whatsoever and I want to talk about some of the specific claims he made because I'm mad about them like you talked about the FTX us the FTX us one where he made the claim that it was always solvent and that's a specific claim he made but if you go back to the cftc charges against him they specifically make the claim that there was a shortfall detected by the executives a shortfall for FTX us this on November 7th and that in order to fill this hole in FTX Us's books Sam bankman freed personally directed lme to research to start selling assets and transferring the proceeds over to FTX us Alameda research the only assets they had at this point were basically all purchased with FTX customer funds ftxus was not always solvent based on the cftc reporting and specifically it was FTX customer assets passed through Alameda research which were being used to make fdxus appear solvent by the time the they handed it over right and like this is kind of alluded to in the bankruptcy filings we've seen so far we're like John Ray is talking about how he did not think there was adequate segregation between FTX us and FTX which is another claim that Sam bankmanfried made he said that these were always segregated and again that's just outright not true he's just like lying to people and like that continues throughout this entire piece yeah it it there was nothing uh there was nothing of substance or value in this sub stack article that he wrote um I think the reason it's getting attention and and probably getting under everyone's skin is that there's just it doesn't make sense to do this it doesn't make sense no criminal in their right mind is doing what he's doing it doesn't make any sense uh as everyone keeps repeating his parents are lawyers um he's working with Elaine Maxwell's lawyer um like these are serious lawyers these are these aren't these aren't amateurs uh this is an amateur hour so there's no reason for him to be doing this it is puzzling it's odd and I think it it bothers everybody because it doesn't make any sense um so I I get that didn't make any sense to me either um I'm sure there's more to come because it's a sub stack so he's going to keep doing this obviously I think it's uh I think it's serious attention seeking I think this dude uh is desperate to um yeah I think this dude is desperate for attention still he he was saying like none of his friends are answering his phone calls like what do you expect man um nobody likes you anymore I I like I don't know um really odd really odd behavior that's that's all I can that's all I can say about it you can you can talk more about the the sub stack itself if you want I'm I yeah nothing of value there yeah there was there was a lot of Deceit contained within that blog post like the claim that FTX was fully solvent until the middle of November which is only true if you pretend that the loans to Alameda research with no collateral were appropriate and only if you pre and like the claim that Alameda had a certain amount of value on their books is again only true if you accept his made-up numbers for the value of ftt and serum and all these other things which was more than their market cap and like there's more lies than that in here like he says that U.S customers were onboarded to FTX us and not FTX the cftc says that U.S persons and entities were using FTX he includes a chart that he believes shows Alameda research becoming less important to FTX over time and you wonder what it shows at the beginning of FTX half the trades on FTX are Alameda research and like even just the idea that this decrease in volume from 50 of the volume to two percent of the total volume means Alameda was less important is such an absurd thing to say when they have billions of dollars in margin out from your exchange with effectively no valuable collateral it's nonsense it is like it is such aggressive [ __ ] that it made me so angry to read were like his claim that I didn't steal any funds I just got loaned billions of dollars from an from an entity that I knew was taking out zero collateral loans from The Exchange I run like say maybe you don't consider that stealing but the customers don't have their money and you got their money in a loan so everyone else kind of feels like you stole it Sam and like the [ __ ] claim that he did not control or direct Alameda research is making me so [ __ ] mad we talked about in a previous video on this channel that like Alameda research went out and purchased this Australian over-the-counter trading desk called hivex because it had access to Australian banking rails like goldfield's money and Sam bankman freed was a director of this desk once they took it over that was owned by Alameda research that was being used to bank FTX he was involved in all of this the cftc the SCC and the doj all agree he was directing actions at Alameda research after he supposedly had no involvement this entire subset is just such Brazen lies it's like he's still convinced it's November 9th and people are questioning him but don't yet know how much he's lied about but people do no yeah I mean that's my point is we should probably not pay any more attention to his sub stack because it's going to be more of the same and it's going to be no no data to actually back up any of these absurd claims that he's making uh blaming the Liquidators blaming John Ray for not giving him access to the data suggesting if this had happened or this had happened or this had happened it would be better and I know better bro no you do not you definitely don't like Let It Go let please let it go so we're gonna let it go I don't want to ever talk about a sub stack ever again we're not going to link to that either I don't want to link to that that [ __ ] um no no more views for Sam bankman freed last thing that we need to talk about here today uh I mean I hope the last thing that we need hopefully nothing is breaking right now um oh man this uh Gemini dcg uh grayscale Genesis like this whole thing is such a disaster it's really funny uh in the sense that it's a bunch of billionaires um slapping biting like just yeah I don't know acting insane publicly openly and loudly uh this started um it started a while ago this is the Gemini urn product which um we'll get into what happened today in a second here but basically I want to just go through the backstory here Gemini earn was this product that Gemini was offering that was offering much better rates than your savings account or whatever um and people were utilizing it to get great interest rates um that sounds a lot like a security and that is going to be something that comes up here shortly but regardless they were utilizing um Genesis to fund this uh to fund this this earned product and they had basically handed 900 million dollars to Genesis and now they can't get it back now they can't get their money back and they can't get anything for their customers and they're saying it's all Barry's fault and what a what a jerk Barry is and they wrote an open letter on Twitter saying hey man we can't reach you you're a jerk you better talk to us and I guess he didn't so they wrote a second open letter and they said hey we're more mad now we're more upset I'm angrier this time that didn't seem to work either um kind of made fools of everyone Barry looked just as bad and uh and the only per person who really did anything ultimately was Gary Gensler so let's talk about what happened just before we went live Genesis and Gemini have been charged with selling unregistered Securities because of the offering of the aforementioned Gemini earned product which makes sense right like ever since coinbase got the wells notice telling them not to offer their earned product it's been pretty clear that the SCC has not approved of these lending products we saw them take action against block fi we saw them supposedly have investigations on going into some of the other ones but now we're kind of at the moment where after Genesis has shut off withdrawals after Gemini and customers have been without their funds for a month now is it over a month a long time Gary Gensler the hero of the day is stepping in to save us by charging these entities with offering unregistered securities yeah it's infuriating it's uh it's truly infuriating to me because it's such the uh somebody posted a meme where it showed like uh it's the classic like the guy just like pouring champagne over himself and kissing the girl and getting excited by this trophy that he has and uh ultimately he's in third place and acting this way and the person in second place was uh the the third the third place person was Regulators government Regulators the second place person was uh um short Sellers and the first place person was investigative journalists and I think that's kind of the way it goes right like we had all this stuff come out and be known because of investigative journalists we have short sellers shorting a bunch of this stuff we've talked to Jim chanos he shorted coinbase uh what at 60 something um so we have that already happening and then while these companies are down just dead on their own lo and behold here's the SEC to go ahead and kick them and uh yeah I don't know what to say about that like great job guys uh I it's better than nothing I guess I don't I don't even know how to how to react to it you know part of my frustration is that like like I said ever since coinbase got the wells notice everyone has kind of known right like at that point Jim and I had to be pretty sure that what they were offering was going to have the same problems that the SEC was telling coinbase about and during this period you had a bunch of people on cryptocurrency Twitter and other places talked about oh so coinbase can't offer this but all these other places can do this and at the time I remember saying like I don't think they can do it I think they're going to get in trouble with it but like the byproduct of the SEC is General posture in the political will that supports it is they are not really super willing to do much until these things no longer work so Genesis failed because they were offering a bunch of overly risky loans to cryptocurrency speculators and because of that Gemini customers got blown up and so now the SEC feels like it's okay for them to step in obviously ideally once the SEC was willing to say like this is not okay to coinbase they should have been more proactive in trying to do something about the existing products out there that were clearly the same twins have also spent their entire time running this exchange trying to pretend that they are somehow the most legitimate well manipulating the volume on their exchange for the options product that they have tied to it right that's what the cftc settlement just found and then just taking almost a billion dollars in your customer funds handing it to Genesis and saying good luck and continuing that after you see your competitor get in trouble for something that is broadly the same idea you're just like yeah this is a thing we should definitely keep doing it feels good to me like there's so many [ __ ] idiots in this story well and the Washington I think it was the Washington Post did a an article on uh the winklevi and it was it was such a weird article to me not criticizing it but it just was so odd to me because one of the things that it said was specifically their net worth which they claimed was six billion dollars how that's provable I have no idea but okay so they have a six billion dollar net worth um and the suggestion was that they could use their personal wealth to backstop Gemini and I was just like I'm sorry in what reality is that ever going to happen like they aren't going to they're not going to do that I can promise you they are not going to use their personal funds to help their customers get their money back I I can almost promise it a hundred percent there's no way that is not how business works like it's just not it's not and I want to know do they have a billion dollars in cash to just give to their customers I doubt it I really doubt it but you know I'd love to see it I hope they do that I hope they do it I mean they were willing to use their personal wealth to again manipulate the volume on their exchange sorry I don't mean them I mean the incredibly Bitcoin wealthy unnamed individual one and individual two who are Executives of Gemini who weren't named in the cfdc settlement whichever those Executives were were willing to use their personal wealth to try to manipulate the volume but you're right there's no chance they're going to step in and make their customers whole because they feel like it's not their fault they trusted Barry look at his face he's got such a trustworthy face how could it be their fault for giving him a billion dollars it's pretty absurd it's all of it is very absurd um couldn't have happened to a a more deserving group of of lads I would say um so uh I feel bad for customers I think it's a bummer that they're involved in this that sucks I'm sorry for them retail I never like to see your retail get hurt but billionaires flailing about like a bunch of idiots is always funny to me so um it's it's uh yeah it's crazy it's crazy and and Gemini I I never expected to say out loud uh that Gemini looks like it might be in some trouble here I mean they who knows what the outcome of this is um it's not like they've ever had lots of volume and demand on their exchange or anything like that but I I nobody ever suggested that they might get in some serious trouble and lose a lot of money sounds like that's what happened um and then Barry who's been around forever um you know yeah I think I said the other day I I feel like John Ray III is the only adult in the room um in the entire industry almost it's like these guys who were supposed to be grown men are not behaving like grown men and it it also made me think of how the Gemini the Gemini twins uh did their um they're banned in like last year where it's like reflecting on stuff like that now is just so it's like SPF where you like reflect on all the political donations you reflect on all the effective altruism and you're like oh man you just like were trying desperately to ignore the huge problems that were bounding your way I'm wondering if like these twins were doing their band stuff because they were just like oh God oh God oh God oh God oh God oh God you know after Luna after Luna and Tara collapsed you know oh God which just reminds me of dokwon Serbia and I get everything connects and I get I get more upset thinking about all of these people um yeah uh uh what are we what do we think is going to happen now that they're both in trouble with SEC do you think there's more to come out of this I wonder if this is going to accelerate a potential Declaration of bankruptcy for Genesis because they've been effectively kicking that can since November when they closed withdrawals right and so it seems possible probable to me that this ongoing engagement with the SCC May finally embolden enough creditors that will see the naturally file for bankruptcy well um I I specifically asked somebody why that hasn't happened yet um and they said you know sometimes it's better sometimes it's better for these things to not happen it's it's better to not rip the Band-Aid off as they say uh and it's better to slowly peel it and less people might get hurt I don't know when that's necessarily the case but maybe well like we've kind of talked about this before with Genesis and like other lenders is there is in theory a gap between like a liquidity crisis and a solvency crisis right it is possible for a lender to become illiquid but still be solvent if the duration on their debts gets mismatched right and so it's possible that genesis's problem looks more like a liquidity problem than a solvency problem and they hoped by delaying until some of those more of those debts got paid and maybe they raised additional fundraising they would be able to prevent it from becoming a solvency problem however most people who claim liquidity problems are actually having solvency problems at least in cryptocurrency that seems to be at least in cryptocurrency um yeah I mean I think that covers the the news for today um who knows what tomorrow brings but I think that pretty much covers it um is there anything you wanted to Circle back to anything any other any other things you wanted to bring up no just make sure you you know hit that like button hit that subscribe button and share it with three friends you can get airdropped to your appropriate amount of cast coin once the white list is done and we're ready to actually go live yeah yeah it's beta it's still beta we're yeah yeah yeah yeah but if you don't hit the like button you're not going to get the coins so foreign