Crypto Critics' Corner

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Episode 152 – Justin Sun is probably insolvent

Justin Sun is Insolvent – Crypto Critics' Corner

Bennett and Cas discuss Justin Sun's empire, and the fact that he does not seem to have enough money. Additional resources: Protos coverage of Poloniex and WBTC Protos coverage of USDD reserves at HTX Protos coverage of TrueUSD market-cap collapse Protos coverage of false Diplomatic Immunity Protos reporting on stUSDT This episode was recorded on May 1st, 2024.

Cas Piancey and Bennett Tomlin discuss the failing empire of Justin Sun and the almost certain insolvency of his firms.

This podcast was recorded on May 6th, 2024.

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English Transcript:

00:00:05:01 - 00:00:11:04
Cas Piancey
Welcome back everyone. I am Cas Piancey. I'm joined, as usual, by my partner in crime, Mr. Bennett Tomlin. How are you?

00:00:11:04 - 00:00:12:11
Bennett Tomlin
I'm doing well. How are you, Cas?

00:00:12:11 - 00:00:14:10
Cas Piancey
I'm good. We're talking about

00:00:14:10 - 00:00:19:13
Cas Piancey
favorite person again. Who we just can't get enough of.

00:00:19:13 - 00:00:23:19
Cas Piancey
Justin sun. I'm sure I know he's a huge fan.

00:00:23:19 - 00:00:40:03
Cas Piancey
Justin Sun, who created Tron and, bunch of stable coins, but, bought some cryptocurrency exchanges and, is known as has is one of the wealthiest

00:00:40:03 - 00:00:41:12
Cas Piancey
cryptocurrency guys.

00:00:41:12 - 00:00:54:06
Cas Piancey
we over at Protos have been reporting on him lately and noticing some significant issues with some of the projects that he's deeply intertwined with.

00:00:54:06 - 00:01:02:06
Cas Piancey
So I am going to turn it over to you, Bennet, where you can get us started. I think probably the best place to start is with,

00:01:02:06 - 00:01:03:07
Cas Piancey
Poloniex.

00:01:03:07 - 00:01:17:18
Bennett Tomlin
Sure. We can start with Poloniex. Poloniex is like the classic cryptocurrency shitcoin trading exchange. They used to even have, like, an open chat box where all the shitcoin degens could, like, make comments at each other. Well, they were trading.

00:01:17:18 - 00:01:24:07
Bennett Tomlin
At one point it was bought by circle and then it was bought by Justin Sun. And since then

00:01:24:07 - 00:01:26:16
Bennett Tomlin
it has gotten even worse.

00:01:26:18 - 00:01:30:22
Bennett Tomlin
At one point, Justin promised that they were going to do a proof of reserves to

00:01:30:22 - 00:01:40:10
Bennett Tomlin
prove they were solvent. that never happened. For reasons which I think will become clear. And since then, there have been some other issues,

00:01:40:10 - 00:01:51:06
Bennett Tomlin
one of which involves a product called Wrapped Bitcoin on Tron. Poloniex offers this product, which allows people to get a version of Bitcoin on Tron.

00:01:51:09 - 00:01:56:08
Bennett Tomlin
The problem is Poloniex won't tell us where the bitcoins for this product are held.

00:01:56:08 - 00:01:57:06
Cas Piancey
sorry. Sorry, sorry.

00:01:57:06 - 00:01:58:13
Cas Piancey
I don't think that's like

00:01:58:13 - 00:02:07:08
Cas Piancey
an accurate enough description of what wrapped bitcoin is necessarily like. I think it would be nice for us to help people understand, in case they're unfamiliar with

00:02:07:08 - 00:02:08:18
Cas Piancey
cryptocurrency in general.

00:02:08:18 - 00:02:26:23
Bennett Tomlin
wrapped Bitcoin. How it's supposed to work is you send your Bitcoin to a certain address and you get a corresponding token on another chain. That's meant to represent that Bitcoin. There's a common and very popular version of this on Ethereum that openly publishes, like the addresses that Bitcoin and stuff are stored in.

00:02:26:23 - 00:02:28:21
Cas Piancey
Why would anyone want to do that?

00:02:28:21 - 00:02:32:05
Bennett Tomlin
Because they went to use bitcoin in DeFi, right.

00:02:32:09 - 00:02:42:00
Bennett Tomlin
Interact with various smart contracts on the chain on Ethereum generally, or in this case on Tron. So if you want to use Bitcoin in a lending protocol or something like that

00:02:42:00 - 00:02:50:10
Bennett Tomlin
on Tron, you got to wrap it first. And the most popular wrapper on Tron is this one offered by Poloniex. But the problems, like we said, are

00:02:50:10 - 00:02:50:20
Bennett Tomlin
Poloniex

00:02:50:20 - 00:03:15:00
Bennett Tomlin
Won't tell you where the bitcoin are. Poloniex delisted this asset. It's not clear that any user can currently issuer redeem this asset via Poloniex. Oh, and then Justin sends other exchange formally will be over half the bitcoin on that exchange. Is this version of Bitcoin over on a Justin Sun connected. Just lend a Tron lending platform. There are billions.

00:03:15:00 - 00:03:24:19
Bennett Tomlin
There's like a huge portion of this bitcoin as well, making up the a big chunk of that. And so Justin Sun has this

00:03:24:19 - 00:03:26:14
Bennett Tomlin
Bitcoin product.

00:03:26:14 - 00:03:33:08
Bennett Tomlin
But we don't know if there's actually bitcoins that go with it. And it makes up a huge portion of HTX's

00:03:33:08 - 00:03:39:18
Bennett Tomlin
reserves. And we don't know how much a Poloniex reserves it makes up because they still haven't done their proof of reserves.

00:03:39:18 - 00:03:56:23
Bennett Tomlin
That's one of the problems in Justin Sun's empire right now. There are others, including the fact that, USDD, his algorithmic stablecoin, which was originally supposed to be a rip off of Terra but like, hasn't actually gotten to the point Terra was ever at.

00:03:56:23 - 00:03:57:15
Bennett Tomlin
That one

00:03:57:15 - 00:03:58:20
Cas Piancey
There appears to only be

00:03:58:20 - 00:03:59:23
Cas Piancey
one user.

00:03:59:23 - 00:04:24:21
Bennett Tomlin
Well, currently a bunch of the reserves for that coin, which are presumably controlled by the, Tron Dao reserve, are for some reason held at HTX and included in the HTX proof of reserves, which kind of seems like you're double counting there, Justin. Kind of seems like you're putting money into places. Then we have the other stablecoin that Justin's and probably owns, and we have to say probably because he keeps denying it despite

00:04:24:21 - 00:04:27:07
Bennett Tomlin
the large amount of evidence.

00:04:27:09 - 00:04:38:21
Bennett Tomlin
TrueUSD. TrueUSD has recently seen its market cap collapse from like 3.5 billion to 450 million, losing like over 3 billion in the span of like a month.

00:04:38:21 - 00:04:39:14
Bennett Tomlin
And so

00:04:39:14 - 00:04:40:11
Bennett Tomlin
Poloniex

00:04:40:11 - 00:04:56:11
Bennett Tomlin
won't show its reserves, HTX’s reserves are fucked to hell. There's a whole bunch of shit going on with, like the Huobi Dao being converted to some new token thing where he's trying to like, screw over old token holders, but the old will be whatever thing that never should have existed in the first place.

00:04:56:11 - 00:05:16:12
Bennett Tomlin
TrueUSD, his stablecoin has been like gutted and like they're not storing money at one of their banks anymore. They still haven't fixed the issues with their Swiss bank and like so this huge portion of Justin Sen's empire looks plausibly insolvent, and Justin Sun no longer even has diplomatic immunity to help him get out of it.

00:05:16:12 - 00:05:26:05
Cas Piancey
Yeah. That was the other story that we, we reported over at Protos. Was that, Justin Sun, who, in addition to all of the stuff that you've just heard,

00:05:26:05 - 00:05:28:02
Cas Piancey
had to settle a court case,

00:05:28:02 - 00:05:28:19
Cas Piancey
in,

00:05:28:19 - 00:05:31:12
Cas Piancey
San Francisco. It was under arbitration.

00:05:31:12 - 00:05:34:05
Cas Piancey
it's not clear what the settlement was for.

00:05:34:05 - 00:05:34:19
Cas Piancey
but

00:05:34:19 - 00:05:38:19
Cas Piancey
one of the claims that Justin Sun made in this case, repeatedly

00:05:38:19 - 00:05:46:19
Cas Piancey
was that he had diplomatic immunity from this lawsuit because he was not only the,

00:05:46:19 - 00:05:47:19
Cas Piancey
permanent

00:05:47:19 - 00:05:51:18
Cas Piancey
representative and ambassador to the World Trade Organization for Granada.

00:05:51:20 - 00:05:53:05
Cas Piancey
He was also

00:05:53:05 - 00:05:54:03
Cas Piancey
the

00:05:54:03 - 00:05:58:05
Cas Piancey
in chart, like the ambassador for technology and emerging

00:05:58:05 - 00:06:00:10
Cas Piancey
like emerging innovation

00:06:00:10 - 00:06:05:19
Cas Piancey
for Granada to the United Nations. And so he believed that the United Nations.

00:06:05:19 - 00:06:14:22
Cas Piancey
I don't know if if he actually believed this. I have no idea what lawyers he's speaking with or what. Grenada. Grenada. I guess I'm saying it wrong. Grenada.

00:06:14:22 - 00:06:19:15
Cas Piancey
told him when he received this, but I can I can tell you that

00:06:19:15 - 00:06:23:15
Cas Piancey
the UN says that diplomatic immunity does not apply

00:06:23:15 - 00:06:28:15
Cas Piancey
retroactive. So there was no way that he was covered for this court case,

00:06:28:15 - 00:06:34:15
Cas Piancey
regardless of whether it was for the UN. And then we've previously reported that the World Trade Organization,

00:06:34:15 - 00:06:36:07
Cas Piancey
ambassadorship that he had

00:06:36:07 - 00:06:37:16
Cas Piancey
is only

00:06:37:16 - 00:06:40:10
Cas Piancey
good when he's on a mission in Switzerland.

00:06:40:12 - 00:06:48:00
Cas Piancey
So any other time when he was in any other place or not on a mission, which is also quite common. the UN said this as well, that,

00:06:48:00 - 00:06:51:19
Cas Piancey
Unless they're on a mission, generally they don't have diplomatic immunity at all.

00:06:51:19 - 00:06:57:21
Cas Piancey
it is actually, I don't think people people think you're, like, granted diplomatic immunity and it just applies all the time.

00:06:57:21 - 00:07:03:18
Cas Piancey
And that and for anything. And that is definitely not the case. It certainly was not the case with Justin Sun.

00:07:03:18 - 00:07:06:21
Cas Piancey
and yeah, it seems very clear that he did

00:07:06:21 - 00:07:08:04
Cas Piancey
get this,

00:07:08:04 - 00:07:09:01
Cas Piancey
special

00:07:09:01 - 00:07:11:04
Cas Piancey
citizenship from Grenada,

00:07:11:04 - 00:07:14:14
Cas Piancey
specifically because he thought it would give him diplomatic immunity.

00:07:14:14 - 00:07:17:12
Cas Piancey
which it didn't. So we don't we know that he lost those posts.

00:07:17:12 - 00:07:21:03
Cas Piancey
We don't know what his citizenship status is in Grenada.

00:07:21:03 - 00:07:26:17
Cas Piancey
or I believe he's in Singapore, but I who who knows? Who knows what's going on with him?

00:07:26:17 - 00:07:27:00
Cas Piancey
it's,

00:07:27:00 - 00:07:31:01
Cas Piancey
a lot of little messes, but it doesn't seem like anyone

00:07:31:01 - 00:07:36:04
Cas Piancey
is too concerned about his. His little empire. Maybe because it's so,

00:07:36:04 - 00:07:38:13
Cas Piancey
it's own little walled garden. Perhaps.

00:07:38:13 - 00:07:39:12
Bennett Tomlin
Perhaps.

00:07:39:12 - 00:07:42:08
Bennett Tomlin
And like. I think part of it is that,

00:07:42:08 - 00:07:51:18
Bennett Tomlin
like, he has such extensive control, despite him pretending that DAOs exist for some of these things, he has such extensive control over so much of this.

00:07:51:18 - 00:07:58:13
Bennett Tomlin
And he has, like, a significant network of connections to various people.

00:07:58:13 - 00:07:59:17
Bennett Tomlin
let me rephrase this.

00:07:59:17 - 00:08:01:03
Bennett Tomlin
You and I were talking about this recently.

00:08:01:03 - 00:08:03:16
Bennett Tomlin
Justin Sun does have a significant

00:08:03:16 - 00:08:12:14
Bennett Tomlin
pile of relatively liquid coins, and I think that has so far helped him paper over a lot of other issues as they come up.

00:08:12:14 - 00:08:25:09
Bennett Tomlin
When USD, for example, pegs, he's able to bring it back to Peg when there's issues with, he's able to send enough assets over there to keep withdrawals open for some of these coins.

00:08:25:11 - 00:08:33:19
Bennett Tomlin
And because he has this well, it and my guess is he also has, other lenders and desks who are extending him credit

00:08:33:19 - 00:08:41:00
Bennett Tomlin
against the knowledge or against this pile of somewhat liquid coins. And this gets into, I'm saying, liquid.

00:08:41:00 - 00:08:52:21
Bennett Tomlin
They may not truly be like unencumbered liquid assets he's supposed to be using in that way. What I mean is he has assets he could easily sell in cryptocurrency wallets he currently controls.

00:08:52:23 - 00:09:16:19
Bennett Tomlin
There may be other claims against them, but for now, they're under his principal control. And I think because of that, he's been able to kind of papered over the other kind of wrinkle to this. and I think we talked about this a little bit when has was on is that Tron is not significantly used in Tron is far less significantly used in like the Western world, if you want to call it that.

00:09:16:19 - 00:09:41:19
Bennett Tomlin
Right. Like Tron's major base of support was far more in the East, and many of like the issues over there, even the ones that have been somewhat reported, have not seemed to have made their way into the like. Western crypto press in the same way. I remember when we were looking at like the, will be token shenanigans and stuff, almost all the people you could find, like complaining and talking about it.

00:09:42:00 - 00:09:43:04
Bennett Tomlin
We're doing it like

00:09:43:04 - 00:09:53:00
Bennett Tomlin
in Chinese, not in English. And like that seem to have been the primary audience that was originally reached by the token in that. And so I think that has somewhat insulated

00:09:53:00 - 00:09:57:11
Bennett Tomlin
Justin from the interest of the broader Western crypto world.

00:09:57:11 - 00:10:12:18
Cas Piancey
I will say that Tron is as much as I. I think everything about it is, a total shit show. It is widely used in cryptocurrency. I think largely just because it's quick. it's known as, like, a fast cryptocurrency.

00:10:12:18 - 00:10:13:13
Cas Piancey
and,

00:10:13:13 - 00:10:17:11
Cas Piancey
That has created some sort of moat for it, though I would imagine

00:10:17:11 - 00:10:21:01
Cas Piancey
we don't like you said, I like there's all these Ethereum and

00:10:21:01 - 00:10:24:06
Cas Piancey
Solana and all these other whatever coins that are,

00:10:24:06 - 00:10:25:04
Cas Piancey
known for their

00:10:25:04 - 00:10:26:01
Cas Piancey
DeFi.

00:10:26:01 - 00:10:27:06
Cas Piancey
usability.

00:10:27:06 - 00:10:33:11
Cas Piancey
I don't know if Tron has been able to build that out. As much as Justin Sun pretends

00:10:33:11 - 00:10:36:11
Cas Piancey
he has it, it seems like it's him

00:10:36:11 - 00:10:37:18
Cas Piancey
who's building on Tron.

00:10:37:18 - 00:10:59:04
Bennett Tomlin
And this gets to be kind of like the wrinkle, right? Like you go on DeFi Llama and you can see that Tron has a total value locked number that is double Solana. even BSc is still ahead of Solana, believe it or not. But then you hear that number being eight point whatever billion or whatever, and you go, oh, how much of that is just Justin?

00:10:59:06 - 00:11:10:18
Bennett Tomlin
Like if WBTC and JustLend alone is over $1 billion and we don't know that there's actually bitcoins that go with it, like, what is that 8 billion number actually mean

00:11:10:18 - 00:11:19:06
Bennett Tomlin
or whatever. Right. And so you end up in like that makes it in my opinion, also harder to assess Tron in the grand scheme of things.

00:11:19:06 - 00:11:25:20
Cas Piancey
Well, similar to Ethereum, I think most of the transactions that are occurring tell me if I'm wrong, but most of the

00:11:25:20 - 00:11:32:13
Cas Piancey
transactions occurring, fake or not, are, Usdc or tether transactions on on Tron. Right?

00:11:32:13 - 00:11:33:08
Bennett Tomlin
I don't know.

00:11:33:08 - 00:11:45:09
Bennett Tomlin
probably especially with Justin doing some shenanigans with his staked USD t, which like 99% we said was going to like entities connected to him or whatever.

00:11:45:09 - 00:12:01:21
Bennett Tomlin
and so again, this is and like, staked Usdc, this other thing that's almost all going to Justin makes up a big portion of the Usdc reserves and further contributing to our aforementioned likely insolvency, like this entire thing is an interconnected,

00:12:01:21 - 00:12:03:18
Bennett Tomlin
insolvent mess that is

00:12:03:18 - 00:12:08:01
Bennett Tomlin
like one indictment away from a multibillion dollar collapse.

00:12:08:01 - 00:12:08:19
Cas Piancey
there any real,

00:12:08:19 - 00:12:11:05
Cas Piancey
idea or threat or concept that

00:12:11:05 - 00:12:12:02
Cas Piancey
Tron

00:12:12:02 - 00:12:13:11
Cas Piancey
like, there could be

00:12:13:11 - 00:12:17:18
Cas Piancey
the the chain could get destroyed that, that it could get shut down, that all the

00:12:17:18 - 00:12:23:09
Cas Piancey
validators and nodes could get like, is there any realistic idea that that could happen with Tron?

00:12:23:09 - 00:12:26:09
Bennett Tomlin
So the largest sticker

00:12:26:09 - 00:12:29:13
Bennett Tomlin
on Tron seems to be Binance staking,

00:12:29:13 - 00:12:32:08
Bennett Tomlin
followed by something called Crypto Labs,

00:12:32:08 - 00:12:33:06
Bennett Tomlin
which

00:12:33:06 - 00:12:39:09
Bennett Tomlin
poke some of these too hard and see who's behind them. The third largest is Luca Nodes, which is tether funded.

00:12:39:09 - 00:12:43:23
Bennett Tomlin
then you get to something called in that like this is the problem is it's kind of hard to

00:12:43:23 - 00:12:45:02
Bennett Tomlin
get into some of these.

00:12:45:02 - 00:13:08:01
Bennett Tomlin
Then you get like metaverse home, which I don't know who that is. Jade investment could be anyone. Poloniex. Hey, we're back at Justin Sun intelligence quotient could be anyone. Crypto. I could be anyone who will be wallet. Hey, we're back at Justin Sun, Tron Alliance, Hmhm, Justin Sun, Valkyrie Investments, Justin sun Justin doesn't own Valkyrie. He's just like 80% of their AUM.

00:13:08:01 - 00:13:08:19
Bennett Tomlin
And so

00:13:08:19 - 00:13:18:11
Bennett Tomlin
I am not sure I haven't gone deep enough on like, Tron's consensus algorithm. And frankly, there's probably not very many people who have who can like,

00:13:18:11 - 00:13:23:03
Bennett Tomlin
accurately start to figure out what like how secure is Tron really?

00:13:23:03 - 00:13:24:05
Cas Piancey
Here's something else.

00:13:24:05 - 00:13:35:11
Cas Piancey
I don't think until I see any, I would. I would expect if any government entity were to attack a blockchain. I don't know if that's the right word, but take over sees a blockchain.

00:13:35:11 - 00:13:37:01
Cas Piancey
I assume it would be the US.

00:13:37:01 - 00:13:42:04
Cas Piancey
but until I see them do it, I. I really wouldn't expect them to do it.

00:13:42:09 - 00:13:46:02
Cas Piancey
I wouldn't expect them to put all that effort and energy into something like that.

00:13:46:02 - 00:14:07:15
Bennett Tomlin
I think you're right. I think that it is very unlikely they would do that. But you can already get all the blockchain information without having to do that. Right? So I don't like doing that, giving you some secret insight. And generally the government's going to prefer to go after like registered entities with addresses and people and things like that.

00:14:07:19 - 00:14:31:23
Bennett Tomlin
And they're just getting like if, let's say, let's pretend, let's pretend the US government decides we hate that people can transact and trust you. Like, try to get Tron named a security you cracked down in any exchange that lets you go after financial service providers that are providing like Rails to Tron, you go after any like Tron nodes and validators in the United States, and you can do all those things without ever having to try to like Takeover Tron.

00:14:31:23 - 00:14:35:07
Cas Piancey
You know how you do all of those things. You arrest Justin Sun.

00:14:35:07 - 00:14:38:06
Bennett Tomlin
Which, of course, we don't know that that's what they're going to do.

00:14:38:06 - 00:14:49:15
Cas Piancey
Oh, no. I'm to be clear. I want to make sure everyone understands. I would never suggest that I'm not. You know, I'm not making any suggestions about actual criminality here. this isn't.

00:14:49:15 - 00:14:50:13
Cas Piancey
This isn't court.

00:14:50:13 - 00:14:51:04
Cas Piancey
anyway,

00:14:51:04 - 00:14:53:19
Cas Piancey
you know, Justin, I want to. I just want to let you know,

00:14:53:19 - 00:14:57:03
Cas Piancey
I hope you're still invited to the Tron Christmas party.

00:14:57:05 - 00:15:00:02
Cas Piancey
We didn't mean anything bad by reporting,

00:15:00:02 - 00:15:14:10
Cas Piancey
on you and everyone. If if you want to see Justin, come on the podcast. If you want to see him, join us. Remember to hit that like and subscribe button. Because I think, Justin, I think we've reached out to him. He's he's interested. Right.

00:15:14:10 - 00:15:22:10
Bennett Tomlin
Oh. Almost definitely. I'm sure he'll be on here any day. Right after he answers some questions about why Poloniex delisted BTC.

00:15:22:10 - 00:15:27:11
Cas Piancey
Yeah. I would love for him to just come join us in studio. Come to the US. Justin.

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