Binance Buying FTX? | CZ vs SBF | Guests: Brian Armstrong & Erik Voorhees

Transcript

backless Nation wow we've got an emergency episode for you David you and I had scheduled a different episode today for our state of the nation but we gotta pivot because something massive is happening in crypto last time I felt like this it was uh during the dokwan days and the collapse of Luna and Tara this is another one of those pivotal days something shocking something surprising happened in crypto some questions I think people want to know is FDX and Alameda going bankrupt is CZ causing a bank run is that what just happened and is binance about to acquire FTX David what are we going to talk about in today's emergency bankless update episode this feels like it's the

final season of Game OF centralized exchanges there can't be that many left for for like really big contagion events because they're all dying yeah they're all there's there's few we're at the very end uh and so this is a story of of contagion I don't think it goes further Beyond FTX and Alameda but but we'll see but the relationship between Alameda and FTX seems to have actually played out in a negative fashion uh CZ uh we'll we'll figure out how much of a chess move CZ was actually playing or if he was just taking the opportunity as it was given to him but a feud a very short feud between SPF and CZ that started on

Monday has resulted in the a letter of intent being signed by binance to a choir FTX um as a as a result of perhaps we do not know but a under the table relationship between Alameda research and customer deposits in FTX that caused weakness in FTX uh and it was CZ that Lit the match so we're going to cover all these details recap the last 48 hours in crypto which some people are saying are crazier than the Luna debacle even though the lunar debacle was pretty damn crazy some people are saying it's the craziest thing to happen all of this bear Market that's a big question right it's like with FTX what happens when the thing The Entity that is bailing out other entities I mean they help bail a

block fi they helped with some of the Voyager debt now they need a bailout is that what's going on I mean that is pretty massive and just when I think David I can no longer be surprised in crypto I wouldn't ever people tell you know tell me about things and I was like yeah you can't surprise me yeah I've been in crypto for like five years and it always goes back to like uh nope I just got surprised again today like I did not see this one coming yeah it's it's crazy that ether Bitcoin ether went down to like 800 Bitcoin went down to fifteen thousand dollars or something and that's not what triggered the destruction of Alameda it's weird that we went down so low earlier and they made it through uh but today of all days this week of all week was the week when

uh the the bubble finally popped for Alameda research and FTX um there's a lot of things that are still being speculated on we're still waiting for facts to come out uh it is alleged the tldr that it is alleged that customer deposits in FTX were sent to Alameda research Alameda traded those customer deposits in an attempt to make money they didn't they didn't make money uh and as a result FTX became insolvent and stopped processing customers withdrawals we don't know if that is true we do know that FTX stopped processing customer withdrawals we do not know if they actually did send money to Alameda research but there's all of the facts and all of the actions seem to line up with this speculation and so we're going to go through that story as to why people are alleging that uh

less than good activity was up to uh was going on at FTX that caused um ultimately a run on the bank at FTX guys uh Dave and I are going to take you through all of the facts we're going to take you through the timeline we're going to show you some takes uh and get into the details to see if we can put a analysis on this as well but before we do we want to thank the sponsors that made this episode possible arbitrim1 is pioneering the world of secure ethereum scalability and is continuing to accelerate the web 3 landscape hundreds of projects have already deployed on Arboretum one producing flourishing defy and nft ecosystems with a recent addition of Arboretum Nova gaming and social daps like Reddit are also now calling

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crypto so click the link in the show notes to join over 5 million users who are getting the most out of their crypto Finance acquiring FTX that is the question it seems to be the case we've got a bank run possibly we've got bailouts from CZ we've got binance coming to the rescue there's a three bees there and of course this is bankless that you're watching we're going to cover everything that we we know from a timeline perspective there's going to be two parts uh to what we're doing today so the first part is David and I are going to go through a timeline and the takes to break this story down for you and how it unfolded uh and the takes hopefully we learned something from this episode as we've learned from every single episode uh event in crypto that has happened over the past couple

of years so we want to walk away with some lessons and then the second part of this is we're probably going to ask some people in uh we know in kind of the community to join us maybe for a conversation at the end I have no idea who those people are going to be it just all depends available we're doing it live uh David's got tweets out to like uh Eric Voorhees and people like this so um we'll we'll open up the conversation a bit later but first things first David we gotta talk about about this incredible story something that a lot of people didn't think Could Happen including myself I mentioned the intro I was surprised by this it looks like FTX is on the brink insolvent needs a bailout FTX the second largest maybe the largest by some measures uh Exchange in the U.S

and certainly one of the top three binance coinbase and FDX these are the the world's largest crypto exchanges right now and FTX about to go bust that's what it's looking like um David why don't we unpack this story by talking about some of the stakeholders some of the entities and people involved because the players in the game of of Thrones yeah yeah be helpful I think to get the same yeah so so you mentioned one uh Alameda Alameda research uh who is Alameda research when we get to them and they're part of the story what are these guys about yeah so Alameda research was spf's first Endeavor I believe sandbagment Freeman freed yes exactly uh and so it was a trading firm it is a

trading firm uh and has been trading since 2017 has done done very well for itself uh SBF Sam bankman freed uh red Alameda until he started SBI or excuse me FTX uh and so that this is where FBF really got his big claim to fame by starting Alameda research um I don't know why they call it research uh but it's a trading firm uh they just trade they do hedge funds yep exactly deals made a ton of money during the 2021 bull market and seemed to be one of the few trading firms hedge funds that were able to survive up until this point uh it survived three hours Capital it survived the Luna debacle uh but I guess perhaps its time has come uh

anyways they've been around for a while so that's that's Alameda and then so how are they linked to this other entity that is also owned by controlled by primarily uh sandbag benfried that is Ft uh that is SPF The Entity FTX that's the exchange our Alameda and FTX they're separate entities are they not but how does FTX enter this story yeah it's really just a Association through Sam bankman freed so in November of 2017 SBF founded Alameda research he later founded FTX uh he founded FTX and when was that I think 2018. uh and so started started with Alameda then created FTX as FTX became

the bigger organization he distanced himself from Alameda and mainly focused on FTX however there's always been this loose unofficial association between Alameda research and and FTX and so Alameda research would Market make on the FTX exchange and so there was a significant overlap between the assets just overall the social connections between Alameda and FDX one of the reasons why FTX became such a dominant place to trade is because they got early liquidity and a lot of that early liquidity came because of the relationship to Alameda research it Formed I don't think the relationship was really codified or formalized it's just there's this guy SBF he's at the

heads of both of them he can kind of steer both ships at once we don't really know how much uh how much symbiosis Synergy between these two things he really leveraged but we do know that there was overlap there was Association basically all of alameda's uh assets they would hold in FTX and they would trade on FTX and they would just prop up the support of FTX as a Marketplace so there may have been some co-mingling between these two entities but one is clearly in exchange the other is a hedge fund all sort of lead directed uh founded co-founded by this figure SPF sandbankment freed maybe a bit of background on Sam bankman freed so is he like the world's youngest multi-millionaire yeah well maybe not anymore but okay but like prior to this

like by reputation effective altruism was the thing he planned to give away 99 of his uh of his wealth uh that is give that away to altruism not to not watch it drop to zero different things um but um very successful kind of figure in the crypto space kind of rising star and it was an incredible Story how FDX kind of I mean he started an exchange in 2018 2019 April 2019. yeah it's even later so uh well Gemini and coinbase and Kraken and binance were already established he had the audacity started Exchange in 2019 and rocketed that exchange to growth so quite an impressive figure you guys may have seen him on a recent bank

list live stream where we were talking about crypto regulation with Eric Voorhees he had kind of a different take from Eric Voorhees but he's been involved in the the regulatory the DC regulatory scene so that is on one side we've got Alameda uh hedge fund we've got FTX exchange and we've got SBF at the center in our other Corner we have another Corner we have binance all right the kingdom of binance who is binance and uh talk a little bit about um binance's leader CZ you know in the same way ft TX just rocketed in 2020 and 2021 binance had that same story in 2017. binance was my first exchange back in the Ico days of of ethereum it was a an exchange I believe it started out of

China but quickly became more Supra National I don't really think it's domiciled anywhere in particular I think it does have a base in Singapore but it's really all across the world um it's the it's the most decentralized centralized company of all time started by CZ who I believe used to work at OK coin or another different another another exchange and then CZ decided to make binance and uh just binance just saw gangbuster success in 2017 uh by being the place to launch icos get Ico liquidity the user experience was great I remember using it all the time in 2017 to 2018 and it has just turned into a gargantuan Empire in the East it has it is the dominant crypto exchange by

legitimate volume I think binance is somewhere between like 75 to 80 percent of all particularly outside the US I mean it just dominates right yeah uh and it got there because for the longest time you did not need to do kyc on binance uh and so it was kind of kind of pushing the the into the gray area legally um but it just has by and large by far the most massive gargantuan Beast of a centralized exchange that's in the room even compared to coinbase even compared to FTX uh and it's been around for a while uh and so like not only of course we all know binance smart chain is one of its projects there's many other affiliate uh products out of the binance ecosystem uh they have some of the most adoption in the developing world in in

Africa in in South America um highly just massive uh and so these are the two players you got CZ and binance you got FB SBF and FTX um yeah last thing uh we'll say in introducing kind of names and definitions there are also two assets coming from each of the these kingdoms so we've got the SBF Kingdom with an asset called ftt behind it and then we've got from the binance kingdom cz's Corner BNB a different asset how are these uh assets similar and what's their link to their the respective uh exchanges and Empires you might call these things pseudo Equity they have no legal connection to these exchanges they are not claims on Equity or ownership

they unlock services uh inside of the exchange so if you own ftt in your FTX account you get reduction in fees when you trade you can open up stronger Services uh same thing with BNB if you it's it's the it's the tokens the access token that you know makes perks happen on the exchange BNB is also special in that it is also the staking coin for binance smart chain for BNB chain so it's got that extra ecosystem but uh it seems to be a lot of exchanges other than coinbase seem to launch the pseudo Equity tokens that just enhance your powers on the exchanges and they come to be associated with the value of the exchange itself and so when we see these

token prices go up and down it's kind of the public opinion on like how much is this exchange worth um these are very relevant especially ftt the ftt token of FTX is a very significant player in this story it's one of the big pieces of ammo that these exchanges that these billionaires have to throw at each other to uh engage in billionaire economic war games they're they're really Tethered to the fates of their respective Empires so we'll get into some pricing conversations okay definitions aside and we've gotten that out of the way hopefully you know the players who've got these two opposing uh crypto Banker Empires now let's talk about the timeline David timeline of events take us back if you will to uh November 2nd I think our timeline events

probably it goes from November 2nd to November 8th which is today when we're recording I'm sure there's more coming I'm going to be more by the time we're done here we're this is an unfinished episode there's plenty more to talk about but I think we've seen some major milestones and events take place during the course of uh you know this last week or so but take us back to the start November 2nd uh SBF talking a lot about regulation this actually ties into a little bit of a you know the bankless story uh we played a minor role in this as well but what are we looking at what tweet are we looking at here so yeah so this is this is pre-november 2nd the bulk of this story started on November 2nd but the context for this starts with Sam bakeman's freed his dccpa bill and

also the bankless episode of SBF versus Eric Voorhees at public debate really it's Sam bankman freed going to DC and lobbying for things that seem to really benefit FTX in particular uh and so that was kind of the concern and the claim that not not CZ but all of the industry was concerned that Sam was doing he was going to uh he was going to to DC to lobby for a regulation that would primarily benefit FTX to the loss of any other competitor monitor so that is the context that is the background and we all know that the bankless episode with uh SPF and Eric Voorhees that really accelerated this conversation into the mainstream this is this is the background uh so while this story starts this specific story of what we're

talking about today starts with November 2nd a coindesk report uh the context of what SPF is doing in DC is extremely important to keep in mind as we go through this story so let's fast forward to more recent times November 2nd that was last week a report comes out of coindesk that states that uh that leaks the Alameda balance sheet and so this uh this leaked document discloses a lot of what's on alameda's balance sheet and this perks the attention of a lot of people in the crypto industry there was some conversations some back and forth some people were saying this report's not that big of a deal some reports some people were saying this report's massive um basically a quote from the document says coindesk claims to have reviewed A Private Financial document which shows

that on June 30th Alameda had 14.6 billion dollars in assets 3.6 billion was unlocked ftt and 2.6 billion of that was ftt collateral against eight billion dollars in liabilities uh that's not too much information so if you take 14.6 billion dollars in assets and and subtract 8 billion dollars of liabilities you'll get something like 6 point or 7.4 billion dollars in assets that they have so positive 7.4 billion dollars but 3.6 billion of that is ftt tokens 2.6 an additional to that is ftt collateral so that's that's uh 6.2 billion and right there yes and so the ftt the value of

their own token exactly the concern is that so not their own tokens Alameda research this is Alameda research sure not their own not their own tokens Alameda Alameda research had a bunch of its total balance sheet was this ftt token well that's already a tie there that's already massive amounts of commingling between the organizations yes a huge tie massive tie but like anyone can anyone can own ftt I can own ftt you can own an ftt um you'll own a little bit less in value today um but uh the concern is that ftt is not that liquid owning billion billions of dollars of ftt tokens does not it should not feel good and secure because you will not be able to liquidate a billion

dollars of ftt tokens there's not enough liquidity there to support that we're watching this happen I'm looking at the ftt chart we'll get there later uh there's a lot billion let me tell you Ryan billions of dollars have left uh the ftt ecosystem but even if you just add that up we have 14.6 billion in assets eight eight billion in liabilities but if you subtract like the the 6.2 from the 14.6 right we're already at like just over 8 billion which kind of matches the amount of liabilities it doesn't seem like there's much room there in the balance sheet for anything that does not indicate like a a that's not a strong statement of solvency yes but I guess I guess this is not FTX we should remember this is just let me research so that thing could go

to zero and presumably shouldn't affect FTX at all presumably presumably yes okay um and this is this is what the Twitter conversation again this was on November 2nd so this was six days ago this was last week and so up to this point this was just mere Twitter conversation I was kind of expecting it to die off I kind of expected it to turn into a nothing Burger but why um just because I mean they survived so far Alameda research they're a hedge fund they don't have customer deposits that they have to honor they're just a HED fund hedge funds can blow up that's fine so long as there's no contagion but as we learned we'll get into that we do we did know of course SPF did have close

ties to the trading firm but overall this this this report started to Peak uh get people peaked as to whether or not FTX would be caught up in any sort of Alameda really related contagion so if the big question was could Alameda go under and FTX be okay and the problem was no one knew the answer to that question uh Daniel Dylan Leclair did a deeper dive on the balance sheet and the balance sheet gets even unhealthier the more we unpacked it so he said other significant assets on the balance sheet include 13 3.37 billion of crypto held and a large amount of Solana's blockchain native token 2. 220 292 million dollars over a billion in in

Solana Solana right again like not liquid decently liquid still not not super liquid and again a lot of that is locked so actually technically some of that is very very illiquid as in Alameda would not be able to access that so Alameda is already feeling the squeeze and it's also worth noting that defy apps like Abracadabra had a hundred million dollars in ftt collateral as well so that's what Ryan is showing on the screen here the point is is that ftt was in a very precarious position as in Alameda was using it as collateral to backstop a lot of their loans and so why yeah yeah well that's because that's they had they had those assets that's what they had and so of the eight

billion dollars that um Alameda had his liabilities 7.4 billion of that were loans presumably US dollar denominated loans oof wait wait run that by me again uh so I this is uh reading in the coindust report so there are more FTX uh tokens among its eight billion dollars of liabilities 292 million dollars of locked liabilities uh the liabilities are denominated by 7.4 billion dollars of loans uh if it's U.S dollar loans that's bad uh if it's crypto asset loans that's a little bit better because those things move price in tandem but if they're dollar loans they have Dollar loans but ftt collateral and ftt collateral goes down that's bad and this is why this is why we brought up

Abracadabra also having a hundred million dollars in ftt collateral a lot of people are using FDT as collateral to backstop loans that is precarious especially for Alameda research who has billions of dollars of ftt as collateral and 2.6 billion in ftt collateral okay so so Alameda is not looking good I mean some people dismiss that as flood last week others were saying hey this could also have an effect Ripple effects on FTX given how close these entities are together but but people are dismissing that as flood that was that was last week so that report came out November 2nd now we can fast forward to uh November 6th that was uh I guess Sunday uh when things started heating up a

little bit more over the weekend uh what is this tweet that we have displayed so this is the Alameda CEO who tweets out a few notes on the balance sheet if you are a hedge fund manager and you have to tweet out about the state of your balance sheet we're already not off to a great start a few notes on the balance sheet info that has been circulating recently the specific balance sheet is for a subset of our corporate entities we have over 10 billion dollars of assets that aren't reflected there the balance sheet breaks out a few of our biggest long positions we obviously have Hedges that aren't listed giving the type tightening and crypto credit spaces here we've returned most of our loans by now basically saying we're totally solvent uh we have more assets that are off the books that aren't listed there

but like it was fun we're good don't worry about it it's fun we're good my desk article whatever um a lot of people uh this this allegedly reminded a lot of people of dokwan saying uh uh what do you say study Labs deploying more Capital uh it was a and also Alex was machinsky did the same thing he's like Celsius is totally solvent we're totally good like everything is fun you have I'm not saying you have to I mean you could be honest with people but like if you are in the midst of insolvency or some sort of bank run right you have to project confidence you have to project strength which is why this is always the strategy employed by by those who are trying to fend off some kind of a bank run uh but

but um when did CZ enter the story here because I feel like it was the same day yeah so that that is uh yeah that's where that's where we're going next so this Alameda CEO tweeted this out at 9 30 a.m on November 6 on Sunday that hey everything is fun uh we're good uh don't worry about our balance sheet um an hour and 13 minutes later at 10 47 12 minutes later uh CZ says he's gonna liquidate 2.1 billion dollars of ftt now first how did CZ and binance get their hands on 2.1 billion dollars of FDT I'm so glad you asked uh binance is actually an early investor in FTX so binance invested in FTX so they own FTX equity

and as a result of that also got a bunch of ftt tokens and so since ftt has actually the price of FDT has actually done pretty damn good pretty damn well they had 2.1 billion dollars of ftt says due to recent Revelations that have come to light he's talking about the Alameda report in coindesk we have decided to liquidate any remaining ftt on our books and so he says we will do so in a way that will minimize Market impact due to market conditions and limited liquidity we expect this to take a couple months to complete a fct at the time was trading 25 27 28 dollars binance has always encouraged collaboration between industry players regarding any speculation as to whether

this is a move against a competitor it is not our industry is in its nasincy and every time a project probably fails it hurts every user and platform saying hey uh we're we're liquidating ftt it's not a play against FTX we just have a bunch of ftt on the balance sheet and the precarious nature of ftt makes us want to remove that for uh remove that from our balance sheet he finished saying we typically hold tokens for the long term we have told it held on to this token for this long will stay transparent in our actions um so there one part of C easy is saying hey I'm just being responsible and I'm liquidating this thing that's precarious other people who are assuming that Assisi is more of a shark than he's letting on is like he is publicly

stating he is dumping 2.1 billion dollars of ftt on an asset that he knows does not have 2.1 dollars worth of liquidity David isn't that obviously what it is I mean coming from CZ who is someone who is generally kind of diplomatic uh and knows exactly what he's doing definitely a strategic thinking thinker the timing of this the communication style right and and by the way we'll read some subsequent uh tweets as well so you can kind of decide but publicly saying you're going to dump 2.1 billion dollars uh and then saying things like we typically hold tokens fit along run we've held this token for a long time we're just trying to stay uh transparent this sort of thing I feel

like CZ knew exactly what he was doing here and this was like a a mob boss Mafia style Game of Thrones power move to like check a competitor now he was obviously phrasing it saying this is just normal course of business but the timing of it right you have to tweet it he didn't have to be public about this he didn't have to time it as such this looks to me like it was all very uh strategic um but I guess maybe some people still doubt that I think that is a perfectly Fair take okay especially the rod number that is in the first line of the first tweet 2.1 billion like if you're gonna if you're gonna liquidate 2.1 billion of something like you don't disclose that if you're trying to optimize for the price if you're trying to optimize for

being front run by other people you disclose that you are going to market sell 2.1 billion dollars if you want to cause a panic you tweet that you are going to sell 2.1 billion dollars uh and so I think it's it's a fair assumption to say that TZ was using these this tweet as uh as leverage um here's some back and forth too somebody asked him in this thread by the way I think thread will be kind of legendary in terms of the the annals of Chris of crypto history where it's just kind of precipitated the downfall of kind of an enemy or a competitor uh someone asked him if you don't mind me asking if the tokens weren't locked why'd you wait until this long to sell issue with FTX or liquidity providing during the bear CC goes not locked we

usually just hold it removes any doubt that we would attack a competitor not financially sensitive uh sensible we want the industry to go together but there is a limit to hold comma LOL I've about it uh yeah so he's kind of saying look this is normal course of business there's but we're not going to hold on tokens forever uh so he's kind of playing that game back and forth um what's this tweet I think that the end of that line there is a limit to hold LOL is important because he's what he's implying is that Sam SPF has crossed a line with Alameda is using ftt as collateral uh and we'll also get into other some other things as well he's he's implying that there is a limit to what uh binance and CZ will go up to

before they are feel like they must be compelled to sell ftt so that's what he meant by that so he is saying he's implying he is hinting that maybe SPF FTX crossed the line somewhere yes correct yeah uh so back to the CEO of Alameda she goes if you're looking to minimize the impact of the market price on your ftt sales Alameda will happily buy it from you all today at 22 and you'll notice Anthony cesano's tweet below that saying that's a reply to CZ well that's a new tweet two is easy yeah she's just saying hey mention it she's easy Anthony cesano going dokwan is that you uh and this is actually what I meant uh earlier uh this was actually the tweet that people were referencing saying uh you need to project uh sign

like an air of strength uh because if ftt price goes down seemingly below 22 dollars that's really bad news of uh for Alameda because they have so much of their Capital locked up in ftt so reminds me of something is the take here uh feels a little bit dokwanish what is this from Dylan LeClaire Dylan Leclair again with a great great uh graphic uh he tweets out deploying more Capital study Labs again the the famous the famous dokwon uh meme just months months previous I mean was it like six months ago this happened so the top line is the volume of ftt and you can see that volume just taking a nude all-time highs well I guess since like October so

the volume's going up big volume going up uh and then on the bottom you see price going down so selling pressure is significant we are at that 22 threshold uh that 22 dollar number seems to be important because that's what the Alameda CEO said that they'll buy it all at uh so this this 22 number becomes like kind of a meme line uh and so you can see it starting to like Ram into that 22 level so it's being defended this Alameda research is buying uh ftt in bulk with their remaining funds on FTX but if you look at the price of ftt now you know that that didn't last uh 22 did not last but this is this is Alameda trying to hold the line here at 22

exactly exactly wow so now it's just a kind of a A game A Bank Run game I guess back and forth what is uh the CZ tweet that we're looking at yeah back to CZ being very publicly dog whistling about his intentions uh he says liquidating our ftt is just post exit risk management learning from Luna so wow yes so we are liquidating our ftt because they they made money on FTX they made an investment that after that investment became liquid and now they are doing risk management and liquidating some of their successful Investments learning from Luna as in such a triggering word yeah we gave support before CZ continues but we won't pretend

to make love after divorce we are not against anyone but we won't support people who Lobby against other industry players behind their backs onwards so this is what I was saying earlier when uh cz's claiming that SPF crossed the line we won't support people who Lobby against other industry players behind our backs onwards and this is why we started the show with the context of SPF going to DC to lobby for regulation that seemingly really supports FTX and kind of throws everyone else under the bus CZ is calling on the whole industry with this everyone who's against Sam's uh like legislative views as well should pile into this that's what he's saying and this is quite the escalation so this is hours later from that 10 10 30 a.m

tweet where he was saying hey normal course of business we don't hold tokens forever we're just you know selling some tokens now this looks like a clear escalation learning from a Luna learning from Luna biggest dog whistle of all time because what what does that do that just puts Luna into the minds of everyone yeah and for for for me Ryan I don't have any money in FTX so I don't really feel too scared but if you imagine Ryan if you are uh somebody who uses FTX that you oh I'm getting out right on the back of Celsius is learn from Luna and it doesn't and so people get fearful especially when we know that runs on the banks happen that's what Luna was basically a big run on the bank so he just invoked fear into

the minds of anyone who has money inside of FTF yes I mean unless you had any doubt from the from the 10 o'clock or 10 30 uh tweet from from that morning this is fully knives out this is like yes you know we're coming for you stab in the back like like we this is this is blood right here right so if you are a centralized exchange operator the biggest insult that you could have invoked upon you is being compared to Terra Luna a quality scheme oh yeah nice uh and so they actually start binance CZ starts to move ftt tokens on chain to finance their own exchange to liquidate and so in hindsight this is crazy so this is a bot I bought Twitter account that says

23 million ftt tokens which are 584 000 excuse me 584 million dollars transferred to binance CZ then retweets it and says yes this is part of it and again he he started off saying we're just being fully transparent we're being super transparent this is us being transparent uh we're so so transparent like yeah I bet you are CeCe you're trying to Nuke the price of ftt um yeah what are we looking at here today so this is not this is not the current price of ftt this is a screenshot of an older price of ftt this was at the moment that uh the the transfer to a binance was made this is I think maybe got 12 more hours of data

from the last time we looked at the ftt chart uh and it's just ramming into that 22 dollar number over and over and over again um again we're saving the current ftt chart for later in the show so stay tuned um but ftt just not looking good here's a tweet from the data nerd says actually if you scroll up Ryan uh yeah Alameda research is sending stable coins to FTX in size just 15 minutes ago they received 56 million uscc and then deposited that into FTX within the last 24 hours they have sent a total of 257 million dollars Alameda research to FTX and then if you scroll down to that in that next tweet meanwhile the stablecoin outflow from FTX is the largest among

all exchanges in the last seven days down 300 million dollars to a balance of 261 million excluding FTX us if we exclude the inflow from Alameda I'm sure the number would get much uglier and then Ryan this is where a very important Nuance comes in Alameda research is not sending stable coins to their FTX account they are not like you and me when you send money to coinbase or Gemini they're not sending Sable coins into their own accounts they are sending it to Alameda or excuse Alameda is sending it to FTX because FTX is needing to facilitate user withdrawals and they're sending it to the uh to the hot wallet to the FTX hot wallet so that

there's enough money to facilitate user withdraws but I thought these entities were separate not commingled independent but Alameda research sent money on chain to FTX to the wallet that FTX was using to facilitate user withdraws this is crazy so what's happening is that's what Alameda is doing is it's trying to kind of I guess bolster reserves into FTX meanwhile seemingly you would think that FTX uh has uh has deposits in Alameda as in they sent Alameda money once and now they are recalling that money so that they can facilitate user withdrawals and Alameda is sending them the last of their stable coins uh because it's ftx's money and by the way allegedly allegedly

this we're just seeing this on chain we need more this is the thing that the entire industry is speculating on well what's crazy about this what's crazy about this is you can see all of this on chain right I mean we're watching a bank run unfold in an immutable Ledger on on chain publicly with the conversation among these crypto Bankers happening over Twitter it's just crazy like uh I mean this doesn't happen in traditional finance and meanwhile that that dog whistle that bank run that you're talking about um that's what this looks like FTX getting its account drained by customers we're like I don't want I don't want to keep my money there I'm gonna exit I saw what happened in Celsius I you know I know what happened with Luna and Voyager and all of these examples and I'm getting out of there before something

breaks right and I can't get my money back so that all happened on Sunday November 6th well take us to uh Monday November 7th so uh I guess the start of the business week here uh SPF comes out with his own tweet that morning I remember I woke up and I read this uh but this is sbf's response David what does he say uh he starts off the Tweet thread saying a competitor is trying to go after us with false rumors FTX is fine assets are fine details to follow and so he makes a thread of details uh and he says FTX has enough to cover all clients Holdings we don't invest client assets even in treasuries we have been processing all withdrawals and will

continue to process all withdrawals some details on withdrawal speeds and then there's some update about how why withdrawal speeds are slower and it continues and says it's heavily regulated even when that slows us down we have gaap audits I'm assuming that's some standard with about Gap accounting yeah I'm with over a billion dollars of excess cash we have a long history of safeguarding clients assets and that remains true today and then concludes I love it CZ binance if we could work together for the ecosystem interesting interesting tie off tweet I love it but it's easy if we could work together for the ecosystem please help me is that what that was help stop um uh and and so uh and then the the I saw this tweet and then where where I

saw this tweet Ryan was interesting this is Patrick Hillman who I'm actually not familiar who he who he is but he tweets out let's be clear binance did not one Define uh fbs's stance on DCC PA as in did not what binance did not do is help SBF and FTX create the dtcpa what's the dccpa that is the regulation the law that we are still waiting to get the details of that is in Capitol Hill being drafted that we are worried uh goes after defy and really just instantiates FTX in ways that uh centralized exchanges may be more generally yes Perhaps Perhaps yes uh and so so this Patrick Hillman guy is saying hey binance didn't do that uh

also binance didn't debate Eric Voorhees on the Merit of ftx's stance on the dccpa finance did not get into post Twitter fights with kols nor do they manage to leak alameda's balance sheet or write the coindex story about alameda's balance sheet or fail to address the concerns around ftt so binance is just not taking part on all of these things you know where I found this tweet Ryan where uh see easy retweeted it CZ retweeted this CC retweeted this yeah so this this person's making the claim that don't blame by because people don't blame binance yeah people at this the point where coming to Sam's defense I think sbf's defense after especially uh you know Sam said look assets are fine FDX is fine and I'd rather CZ be

collaborative and work together for the ecosystem so people piled on and said you know CZ you're knocking a competitor when they're down you're spreading fud you're trying to cause a bank run this is bad for our industry and this person is I guess coming to binance's defense and saying hey you gotta you gotta basically SPF and FTX hold them accountable for some of their actions and and the reason why binance sold he's basically saying SBF and FTX dug their own grave and all CZ did was like all right get in well I don't know and so so that's where the teak was like I guess yesterday and bankless put together an article about this and this was like a battle of the billionaires I saw a lot of crypto Publications talking about kind of like

Knives Out drama between CZ and SBF right this kind of like scene of like uh is that Donald Trump by the way WWF wrestlers writing yes Vince McMahon and Donald Trump like punching each other that's kind of where things fell on Monday so people didn't think that um there was I think very few people thought there was the possibility that that this could actually take FTX down as early as as early as yesterday but the story has continued to unfold which I guess brings us to uh brings us to November 7th yes okay so this was uh the ftt president price uh last night uh so last night ftt broke down before 22 after like pounding up against the 22 threshold for almost

24 hours uh broke breaks down and immediately drops to 16 hits a low of 15 and starts to find a find a new floor between 15 and and 17 dollars um this Ryan might be the moment that Alameda research efficiently became officially became insolvent because 22 didn't hold very publicly sold yeah we'll buy all ftt right and they under 20. they needed ftt to be above a certain number is that number 22 uh well it was the number that was being defended across markets by significant a significant capitalized player and then it fell and then it fell down uh so this might be the moment yesterday about 24

hours ago this might be the moment that Alameda officially went from running on fumes to being completely insolvent um no more no more ammo we couldn't fight this we can only assume uh I'm sure the truth will eventually come to fruition uh but if we are just kind of inferring based off all these dots this would be the conclusion that this was the moment that Alameda went to zero I mean judging by how fast this timeline has moved it won't take long I think for us to for us to find this out but then what happened to FTX The Exchange yeah so that was this morning uh oh that was last night this morning uh the block of researcher a news journalist at the Block uh tweeted out that uh it seems to be that FTX stopped processing withdrawals three

hours ago according to on-chain data as in no one no outbound FTX withdrawal has been been seen in three hours and that when was that that was at 8 53 a.m so starting around and this is Eastern time so starting around like 6 a.m ish uh FTX stopped processing users withdrawals there seemed to be some confusion uh and so the same Doug Toshi Steven uh they says as the block started writing and Publishing the story the withdrawal started ramping up again turns out that was actually a mistake uh they just mixed uh inbounds for outbounds so inbound money so we're still coming in but outbound still not being processed so uh yes uh just kidding withdrawals had not been processed so FDX officially Ryan and I don't think anyone has seen a

withdrawal since about 6 a.m this morning from fftx Eastern time well that's when things get really scary because we're Beyond a hedge fund blowing up right because at the end of the day that's investor money it's highly risky who cares now we're talking about FTX customer deposits not being there not being there not being able to withdraw like I don't know if the money's there and like this just happened to us in crypto it's Celsius I was like I mean people still have money there they're never going to get it back out uh this is all fresh in our minds uh and that's what started to happen this morning what is uh what is this tweet uh yeah this is just the summary tweet which I thought was pretty funny uh number one FTX appears who have stopped

processing customer withdrawals on-chain data shows uh then uh fgx started processing withdrawals again after we published uh and then the third one uh the block never mind withdraws not being processed oh my god wow that was pretty funny uh so this is the tldr uh says uh the the the block teams saw FTX stop processing withdrawals on ethereum went to confirm on Solana and Tron published a story stop withdrawals being processed panicked uh people smarter than me confirmed it was only movements to approve tokens uh no Panic and get clout anyways whatever you gotta collect your clout gotta collect your clout uh and now this is SBF Finance which has been silent silent all morning uh silence it for a while and then finally and this is the drum roll moment finally speaks and

when was this tweet this was tweet was at uh November 8th yes 1103 a.m so about five hours of FTX basically running out of money to process customers withdrawals and he goes at that point the gig is like it's it's over right once you know that an exchange which an exchange Ryan as you know should always have customer deposits they never should lose customer deposits if they are just being normal customers come and deposit money they trade with that money with other customers and so the there's no one it's impossible to lose money so if if you see an exchange not facilitating withdraws it's because it means that they went and did something with that

money and now they don't have that money anymore it's like a bank I mean if you go to the bank and you're like hey can I have my money and they say no we don't have your money it's not here you can't withdraw come back tomorrow right like you can't um then that rumor spreads and you get more and more people trying to withdraw their money and that escalates so he had to say something at that point that was kind of the pressure that SPF was was on at 11 A.M this morning so what does he say well it's also how we know that FTX was up to some Shenanigans what are those Shenanigans I don't know but why was Alameda transferring FTX money directly to their hot wallet that is a data point that is now people are

speculating on uh so SPF says hail I have a few amounts to make yeah I bet you super friendly hey what's up things have come full circle and ftx's first and last investors are the same uh which is the punch line we have come to an agreement on a strategic transaction with binance for ftx.com pending due diligence Etc so that's that's my drop what does that mean that means the ftx's first and last investors are the same it kind of says it without saying it at FTX just bought binance is what he's saying the last step the last Finance just bought Excuse me yes yeah are the same uh so f binance is seated FTX with capital uh now they are buying FTX uh so

Sam continues and says um our team is working on clearing out the withdrawal backlog as is this will clear out liquidity crunches all assets will be covered one to one this is one of the main reasons why we've asked binance to come in it may take a bit to settle we apologize for that but the important thing is that customers are protected a huge thank you to CZ binance and all of our supporters this has been a user-centric development that benefits the entire industry CZ has done and will continue to do an incredible job of building out Global crypto ecosystem creating a free economic world I know there has been rumors of in media of conflict between our two exchanges however binance has shown time and again that they are committed to a more decentralized global economy while

working to improve industry regulations industry relations with Regulators we on their best of hands uh Brian this doesn't sound like SPF this sounds like a PR person oh this sounds like someone who's just spent the knee for sure I mean this is somebody who is desperate needed uh some cash for those withdrawals and just needed to make a deal with CZ uh I mean mean yeah this is a different SPF coming out like that's crazy how quickly this happened and you have to wonder so did CZ know that this was a possibility and inevitability when he tweeted when he started tweeting about this on Sunday was this like the opportunity that he then took intentionally and knowingly I don't

think we'll ever know that ain't Ryan well I mean I I know one thing is like uh do not cross season wow crazy and this is this is Sam bankman freed who is right I would say one of the top three crypto like there's SPF there's Brian Armstrong and there's CZ I mean these are kind of the three and SPF seemed like it was a legitimate uh competitor to binance and now uh this is SBF fully capitulating um and we have to mention that this does not mean that Finance has acquired SPF yet this is just a letter of intent yeah and I think what is happening is binance is providing the funds yeah liquidity so

that uh you know uh people customers of FTX can withdraw their funds which is of course very important that's the main thing we want to protect is is customers but um who knows if this is actually like there could be more drama ahead for us if this deal doesn't close if CZ asks for unreasonable terms like all sorts of things could could be happening I think cesia since tweeted out that they are now doing due diligence to investigate uh FTX and it's okay is he like he's giving himself the option he's giving himself the option and he's like my rules now you know I'm the captain uh sit right here we'll look at it and you know maybe we'll make a deal afterwards but like Sam is no longer in the in the

captain seat with respect to negotiation he'll take whatever deal sees he gives him at this point yeah yeah in the thumb war of crypto exchanges CZ definitely pinned Sam down uh so CZ had his own version of the same tweet that came out five minutes later and uh and said uh what did he say this afternoon FTS FTX asked for our help and oh yeah so if you want to go to that sync tweet Ryan uh and and zoom up um there is a significant liquidity crunch to protect users we are assigning a non-binding letter of intent again CZ picks his words to put in the first tweets very carefully we are signing a non-binding letter of intent intending to fully acquire FTX to help cover the liquidity crunch we'll be conducting a

full DD in the coming days basically they're going to audit FTX and see how big the hole is how big the whole that Alameda research created in the FTX balance sheet if it was indeed Alameda research which it probably is and then we have this meme of CZ walking in with a sink into Alameda research this is a playoff of Elon Musk we're walking into Twitter after he bought Twitter uh and because he threw the kitchen sink at it uh and now we have CZ doing the same thing for Alameda research but again it's actually not aluminum research it's uh it's FTX but again where are the lines we don't where are the lines we'll be all the same it seems like they they both fell together um so what's the stake so this this uh this got leaked a a quick and dirty

article saying that FTX scoured Wall Street sourcing emergency fundings for a billion dollar Lifeline uh and so before FTX went to czn binance they were going back to tradify to ask for a billion dollars in emergency funding so that they could prop up the exchange and so that was before and that's actually further down in this article they say they were looking for a one billion dollar Lifeline but they had a balance sheet whole of five to six million dollars right oh my God yeah yeah so uh they were hurting this was kind of a desperation move and uh CZ pulling this in into his camp for the wins he's like hey you know who's got five to six billion dollars I've got five to six

billion dollars wow the binance Empire just totally checked back to competitor these are the crypto Banker Wars and I've certainly never seen a chapter like this what's also ironic to me is of course FTX and SPF they were the the bailout Kings left and right so this is one of the big claims is that FTX bent all of its ammo acquiring the bloody carcasses of the Luna and A3 arrows and then they ran out of ammo to save themselves I wonder were they acquiring these things to cover something else up there I wonder if there was some sort of intent between uh to acquire these things I wonder if it was for other reasons that that we'll see in the weeks to come

um we have some more takes and I think we want to give some analysis on this crypto Twitter is on fire today Ryan yeah I know you've been busy but I've been enjoying it yeah uh so we're going to get to all of those and the memes and the takes and and um the analysis of what we do in the aftermath of this we'll also take a closer look at some of the markets from a pricing perspective yeah to all of that and more but before we do we want to thank the sponsors that made this episode possible in all of my years in crypto I've never been hacked scammed or lost money to a thief and a lot of that credit goes to my ledger Hardware wallet the love your Nano X and The Ledger Nano S Plus Hardware wallets allow users like you and me to secure

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fees you can be a part of a cross's story by droning their Discord and using a cross for all of your layer 2 transferring needs so go to across.to to quickly and securely Bridge your assets between ethereum optimism polygon arbitrum or Boba Networks okay it's going to take a while to digest all of that David but uh let's get some quick crypto Twitter takes and also look at some charts the after effects of today's events so this is a chart from Luke Martin uh comparing two coins BNB and ftt of course these are the the main Assets in play from uh both of the kingdoms the binance kingdom and the fdxm begman freed Kingdom what are we looking at here yeah so these two

tokens and Luke Martin says this uh typically trade in lockstep with each other like they're highly correlated same kind of sector same kind of assets except for November except for all of November uh ftt starts to go down and it's interesting that this happened so early I I guess this really became very obvious uh November 2nd when that report about Alameda research came out but you could see the decoupling before that you can see the decoupling starting around October 30th maybe 29th but being so people knew something was going to happen yeah do you think like Insiders is New Markets always know markets know first and so BNB performs great starting all throughout November ftt has performed absolutely

terribly starting in November and so you can you can here here is the winners Ryan you can see it in the market you BNB is up big ftt is down big this is one Empire uh winning the war against another and it's being reflected in the market can we just look at ftt real quick like oh wait wait no but don't don't do coin you guys saving that you already have it pulled up go click the trading view to have the black one oh this one yeah okay so here's where we are remember the 22 line Ryan uh where's that up here yeah so that's that big red candle that's when Alameda research ran out of money this is and that that that is Tuesday the eight that is this morning it's not this morning that was last night last night late last night yep uh wow and so

22 down to where we are now at five dollars and forty cents uh and so that puts ftt down at uh let's see negative 77 in 24 hours down 77 it's 80 now this thing uh isn't gonna go to zero like so it's not an algae stable coin not a recursive algorithmic stable coin that hyperinflates but I mean it's giving it a run for its money for what it's worth eighty percent in one day even for crypto standards uh that that means you got wrecked I mean in one day it's it's 80 it's seven it's yeah it's like 85 over seven days like pretty bad this is uh the the a similar chart but with um the time stamp

of when CZ tweeted this out liquidating our ftt uh and this is I believe um ftt uh ftt chart remember remember when he said that it's going to take months to fully liquidate this position and we're going to do it in a way that disturbs the market as little as possible is that is that what this looks like in this chart absolutely I wonder if CZ actually sold any I think there's a chance he probably he probably did there's also a chance that this is just the run on the bank that you're seeing I mean why wouldn't he sell I mean why would you want to hold ftt for an 80 drop he probably sold as fast as he could too probably but probably not over a month or I don't know maybe it doesn't matter who it

doesn't matter if whoever has ftt it's like oh we actually only have 20 left CZ is playing the 4D chess game right now this is what this is happening uh and all right came back DM he says is this his first tweet in like months what so he's been following like what does this mean GM I think I think he's just saying hey I'm here for this is he saying it wasn't just me I don't know I don't know can I have my money back please yeah like dude is replying to suzio here uh here's dokwan our other friend who is also on up only earlier today uh this is uh a painting I think this is a again a reference to Game of Thrones of somebody bending the knee to probably House

Targaryen yeah one of the targaryens here yeah yeah so this is bending the knee and wow short order yeah he's retweeting SPF as he does it yeah okay so our old friends are coming back huh is this empty Siri just doing the kiss to ring like it yeah Sam Trabuco so here's Sam Trabuco of Alameda research he's one of the the like spfs I think like right hand man Alameda he goes much love to everyone I'm sure the past few days have been dark for many I hope the road ahead is brighter what does this mean Brian he's just waving the White Flag he's like it's over I'm done here I got nothing left this is this is him capitulating uh saw similar from some of the the big

Luna Terra Bulls uh in the aftermath of this this is what uh capitulation looks like on Twitter uh this is that tweet again oh yeah okay I guess we included it twice uh I thought this was from Jameis at pleaserdale where we have C5 main characters who are warring with each other and then D5 main characters who are like if you're in defy if you were in D5 during Terra Luna as long as it was in Terra Luna if you're on ethereum D5 or even salon and D5 like like actual D5 actual D5 yeah real defy you've been fine uh if you were during defy during the three hours Capital liquidation you were fine if you were in D5 during just now you were fine uh and in fact if you were lending out ether you're getting some some strong yields right now uh so I thought this was a

great meme do you know what does it do you find this ironic that um we had this whole conversation with with SBF and Voorhees a couple weeks ago about how to protect retail from defy and um talking about like having user interfaces for D5 have to register with different states or you know the feds for example and what's interesting about everything that we've seen in 2020 uh two is the problem is coming from C5 primarily yes I mean they're they're like quote-unquote D5 Quincy type schemes that are going on algorithmic stable coins that are um not even you know collateralized we don't even know the

assets are it's not it's not on chain a huge it's not real D5 but then it was like Celsius and Voyager uh and even block Phi had quite a time of it C5 is the thing that we need to be protected from it feels like as as retail I don't understand how regulating a front-end user interface is going to help solve this problem and I think it's somewhat ironic that uh in one of the individuals pushing for that now like Days Later finds his own crypto exchange on the brink of insolvency um D5 has been doing pretty well in comparison to that and uh you know I hope Regulators pay attention uh here's another meme out of Dylan Sinclair this

is the uh find find out around and find out chart and it's CZ that's pointing to like this is what happens when you around you find out level seven find out that's the equilibrium yeah and this is uh cantering Clark saying the game of chess that CZ just played was possibly one of the greatest of all time I don't think I've seen like there there was like conspiracies and allegations that somebody some entity triggered the collapse of Luna I don't really think anything has come of that we know that CZ just triggered the collapse of FTX maybe they put themselves into precarious position to begin with but it was CZ was the one that that Lit the fuse and then capitalized on that and now now uh SPF has to work with him yeah

SPF has to Kiss the Ring after that because Big Time SPF has to call him boss and do what he says and and like that has to be a humbling position to be in right now but CSC is the one making the rules for sure big time Big Time uh next here's another tweet from will Clemente saying next cycle CZ will be the richest man in the world I think he's already breached top five richest men at the top of the market uh yeah uh like see this see we already knew that CZ was the the chief of an Empire that Empire just got twice as big because they just they they already had like 75 to 80 of total crypto exchange volume they just acquired number three maybe it was

number two FTX passed coinbase and volume at times so now the number one just gobbled number two and they also gobbled up everything that that FTX acquired over the last six months all the blockfy's assets like everything like all the the bleeding hedge funds that that uh blockfi or is that FTX acquired now CZ just acquired it so it's just massive consolidation huge consolidation and so see we already knew that CZ was like this massive just Mogul of a massive Empire and that Empire just became so much bigger this guy goes from being insanely powerful it's to top five most powerful men in the world all right by the way he owns a 500 million dollar stake in Twitter like fun fact he was in

on that deal too uh are you worried about this should we be worried about this so so in general like I prefer like you know a duopoly or an Ogle uh what's that word oligopoly um versus just like a monopoly right right and so this is I mean at least yeah I mean that would be better uh right it would be better to a triopoly it would be it would be better to have more crypto bangers now CZ is just kind of consolidating Knocked a key competitor out of the ring and it's just I guess it's kind of like coinbase and binance I mean by the way Brian Armstrong's looking pretty good in the back of all of this just plain nothing just just doing nothing

is has one you have done well CeCe did something and definitely easy one big you know the coinbase kingdom still stands as well but anyway I guess the point of like consolidation crypto Banker is getting powerful like um this worries me I think some people some people in in crypto and D5 are like uh taking a short-term View and thinking that you know SBF was an enemy of of maybe D5 maybe he was maybe some people uh you know think he was but like um CZ is also a crypto crypto Banker right are we worried that he has now Consolidated more power and doesn't have a competitor to to check him should we be worried about this or do we just say you know CZ

um crypto values um hopefully he doesn't do anything nefarious in our industry what's your take on this yeah I think we should always be wary of people in power always why wouldn't you be I don't I don't think that there's anything specific about CZ that I'm specifically worried about although the sharpness and the level of execution is extremely intimidating uh I I trust zc more than I trust SPF definitely key and binance has done fantastic things to promote the crypto industry Finance smart chain is a real uh Bank list technology for a lot

of people out in the world even though it's not completely bankless on the bankless Spectrum it's more bankless than most things and it's more self-sovereign and user solving than most things and finance has done a great job of onboarding many Penny people into crypto he has 100 made a net positive impact upon the crypto industry I am worried that one person has so much goddamn power and reach um but I I'm not worried to be I'm not too I don't know man I've it's hard it's hard I would like to see some more competition to be honest I would like to see um a little bit of uh you know disruption but I mean who's close who's close right now just just coinbase just

coinbase but like it's binance is like the offshore unregulated one and coinbase is the onshore regulated one like if that's if that's the binary star system that is the end result of all of this and I guess that's just the way that it is um I do think that you know when you think of kind of the the crypto tribes left standing who are they what are the crypto tribes left standing there's kind of like the bitcoiner tribe for sure there's still sort of the the ethereum uh type type tribe out there D5 tribe but the largely like unscathed tribe at least that's what it feels like yes but um it feels very much like this other tribe of like FTX and I might throw a Solana in there I mean SBF was a big

Solana supporter we have to look at this for example yeah that's very good we'll get to that but like it feels like that tribe has maybe taken a big hit here I don't think in the YouTube chat it's like Hoffman's kissing the ring are you kissing the ring David I don't want to go up against CZ Jesus I mean but like it's gonna liquidate me here's the thing we can't trust script here's the thing we we can't have power Consolidated in kind of the centralized app layer right um binance smart chain is ultimately it's you know kind of CD controls the validator set it's sort of like fintech with an API um it's not it's not pure true defy right I mean there's a lot of negative things to say about it but um I guess

we'll have to see what CZ does with his power I mean there is a way you can use that power to the good of crypto and to support decentralized values and like I hope he chooses to do that but um to be determined I think we should all be skeptical as well and hold them accountable uh well here's a take just based on that what's that tweet CZ owns the biggest scent uh sex C centralized exchange the second biggest Chain by tvl the third biggest asset by market cap BNB the third biggest ablecoin busd everything it's easy touches just becomes like the biggest the biggest one um this is funny now CZ says all crypto exchangers should do Merkel proof proof of reserves Banks run on fractional

reserves crypto exchanges do not finance will start to do proof of Reserve soon full transparency if CZ because great great treat we love proof of reserves I'm sure this is not how Nick Carter thought proof of reserves was going to get rolled out but if this is how it happens uh fine this this is a an interesting tweet that this is happening this got tweeted out like an hour or so ago this is cz's most recent tweet Banks run on fractional reserves crypto exchanges should not he is calling out the fact that in my this is my interpretation that he just sniped the hell out of FTX it was like oh FTX you're running fractional reserves I'm going to trigger run on the bank put you in a corner and then buy you and then if

the next step that happens is that binance implements proof of reserves next is the most Chad move of all time because not only did he snipe an underwater Bank he then just proves that his bank is unsnipable because you can't trigger a run on the bank on a bank that has proven to have full reserves look I do think proof of reserves would be a big step forward for for centralized exchange here's the thing though it's like um you can't you can't prove all of your reserves unless they're unless they're on chain right so I mean at some level one response to this would be like that's great binance is doing this this is what D5 is doing though from like the base layer aren't gonna be put on your

D5 maximum this hat yeah Defy is well that's what I am is a D5 maximalist and so Defy is already doing that so I'm glad binance is taking a step towards that but I will say these are the types of actions that would make a more centralized exchange providers a bit more decentralized and this would be I think a win for all consumers right here's the thing is like we had no idea whether the thing's insolvent or not compare that to Ave like loans on Ave for example entire stack traceable Unchained no one has to work like we can look it all up we could see every asset what's backing it right click view Source you get to see it um and we don't have that visibility with with FTX so we'll uh we'll see what

what CZ does on that but um yeah no question he's made a huge move today so so this this is uh so these are some questions that I have and I have some tweets that I paired up with this there's so to to conclude well the some of the most important questions that I think we are have left to answer as a result of this event did Alameda blow up we don't know that but people probably seems very likely that it blew up under 22 right yes exactly uh how big is the regulatory impact going to be on this is a is an interesting question to unpack D5 is strong we've already talked about that this is uh the question of is SBF in legal trouble so FTX allegedly took customer deposits sent it to Alameda research to go make

money with customer deposits Alameda lost money and then therefore FTX also lost people money uh if people who invested in FTX or customers who might not get their money back uh if they cannot be made whole that might trigger legal concerns um and Dylan uh Dylan Leclair uh says call it what it is it's fraud fraud what SPF was doing is fraud is the claim that this is making can we talk about the the regulatory impact because I think that's related to this so I believe uh Ryan sulcus is in the waiting room well why don't we have that conversation with him yeah all right

you want to stop sharing a screen right yeah what's up mixer cell kiss you with us I am how's it going hey how's it going hey you're on a stream by the way I'm on a stream I'm live oh yeah you're live with 3 000 people watching so we just got off uh of a rant all throughout about everything that's going on uh and the conclusion that we that we want to unpack is is there how big of legal trouble do you think SPF is in um well I I think everybody's speculating off the same public information right now so I actually think that's a secondary issue to be

honest with you I think the bigger issue is what's going on with the pccpa and the legislative agenda for the rest of the year okay um and in my mind you know this should be a killer for the dccpa for for this year um it's difficult to Envision a scenario where this gets pushed through before the end of the year given how influential FTX and their team has been in these conversations the flip side is I don't know if this really did us any favors in terms of um you know urging caution and restraint and a kind of balanced comprehensive approach to um to whatever legislative package could could be pushed next year so there is an

argument to be made that um this actually pushes Us in the wrong direction um and that there might be some more urgency to to put something through almost like as an immediate measure uh an emergency measure to make sure that there's a little bit more oversight of the exchanges in short order so uh we'll we'll have a little bit more color I think after we see the results of the election tonight in terms of which which way the balance is going to shift Ryan um is it fair to say that this uh definitely makes the crypto industry crypto Community look bad is this another black eye for us [Music] well yeah I mean [Laughter] any other questions yeah I mean

look how bad like I mean the way the way that this went down was I mean I don't I don't know exactly what the thought process was over the weekend uh but this certainly could have been handled a little bit differently my my honest transparent guests is that um CZ wanted to take Sam down a peg given how much time and energy FTX has been spending on the lobbying front and and you know frankly doing some things that might have been that unfavorable to binance but maybe the reaction today

was trying to kind of stem the negative effects of that weekend action um because I I think that there's a good chance that uh CZ didn't realize how damaging those comments would be over the weekend and the goal was to kind of jab not fame um FTX and and it's just kind of spiraled that that's my you know kind of poor man's speculation which I think is the same thing that everybody's playing a guessing game around but that that seems to be the thing that makes the most sense my vantage point just having watches play out and and having kind of known what some of the political

issues are right now how does this look though to like a typical legislator you know um I mean what would they make of this and we we don't know SPF was very um kind of tied into kind of the regulatory scene and was somewhat of a key contributor and Champion for the dccpa uh and now um we're looking at the collapse the bailout of FTX his entire exchange uh how does a a legislator interpret well let me I mean yeah let me let's just clarify we don't actually know this is a bailout right this is a non-binding Loi and this could have been what I just said which is to um just prevent contagion and kind of Hysteria from taking hold but there's

still plenty of opportunities for you know both sides to walk away uh FTX to line up other financing figure out the duration issues on their on their books that could be causing some of this and eventually you know these these good you know both continue to be independent kind of going concern exchanges both internationally and domestically so let's not conflate like uh binding purchase agreement and a non-binding Loi that's number one but from a from a uh your second point the policy makers I don't think the policy priorities have changed it's still let's have oversight of the exchanges nobody disagrees with that let's make sure that the stable coins are well regulated and properly

integrated in the financial system so you don't have a Luna situation and you have fully reserved stable coins that don't give you tether-like Vibes that's still a no-brainer and that's still something that's on everybody's mind but the third thing that wasn't really solved by dccpa and that hopefully would be better integrated and comprehensive legislation or kind of a third act if you will third pillar to this is where do we draw the line between digital Commodities and securities right and and how do we classify tokens and I think what's opened up now is the opportunity for us to have a serious conversation about what do disclosures safe harbors and and you know kind of fit for purpose regulation look like for that broad

bucket of assets and the the story that was buried today that's just as important as what happened with Library um so that third issue is only getting more pronounced uh in its importance and it's something that has to be solved regardless of dccpa so I think exchange oversight before and after what happened today it's it's still the same priority and I think it's maybe more urgent from uh policy makers perspectives um stable coin same thing but but the hard work and the kind of standard setting that's going to happen over the next few months and maybe some self-regulatory efforts for a change that we've discussed but have never really gotten momentum now there's probably a little bit more industry-wide urgency to get that right and and I

think that's you know on the margin I think it's a good thing and and we could still come out of this in a healthier a healthier position uh even though this is a an immediate term setback but all this really means is that it's going to have to be a more coordinated industry response versus one firm pushing the envelope Brian thanks so much for uh cluing Us in on the regulatory impact here in the dccpa I appreciate the work you're doing and um uh I guess do you have any other concluding thoughts from today's events recognizing it's all still early there's a lot more to play out anything else you'd leave us with uh Leverage is bad trading customer deposits also bad yeah

Ryan thanks so much man we'll uh we'll see you around we'll do it again soon thanks guys all right take care um yeah we got we have more to cover Ryan so that if that was a nice little break for for Ryan to come in and talk so I could peruse Twitter so there are things to discuss uh here's a tweet from Brian Armstrong but before we read this tweet from Brian Armstrong I just wanted to say thank you to the 3 000 people we got watching the show uh if you're not uh liking the video yet please do uh if you are not subscribed to bankless Please Subscribe uh we kind of cover these events whenever we can uh and we have a fun time doing it so make sure you like And subscribe to the video um Brian Armstrong the one other exchange founder left standing uh the

most humble of all exchange Founders the least main character perhaps uh put out a tweet thread Ryan you want to walk us through the street thread yeah Brian goes uh number one first off I have a lot of sympathy for everyone involved in the current situation with FTX it's stressful anytime there's potential for customer loss that's right Brian it's very stressful number two second coinbase doesn't have any material exposure to FTX or ftt and no exposure to elementa thank God also number three I think it's important to reinforce what differentiates coinbase in A Moment Like This this event appears to be the result of risky business practices including conflicts of interest between deeply intertwined entities and misuse of customer funds this is interesting so what he's already

established is first I have sympathy second we don't have exposure not us we have nothing to do with this third I feel like David he's starting to tee up making the case maybe for some independent some separation between sort of a hedge fund and uh and an exchange you can't be both maybe he's uh tilting the conversation towards that four coinbase has always strive to be the most trusted player in the space we don't engage in this type of risky activity five we don't do anything with our customers funds unless directed to you by the customer we hold all asset dollar for dollar and users can withdraw their money anytime number six we are Incorporated in the US and publicly listed in the us because we believe that transparency and Trust are so important every investor and customer can see our

publicly audited financials which show how we hold customer funds we've never issued an exchange token interesting never issued an exchange token I could see Brian laying down some best practices here right you shouldn't have a fund and you shouldn't have an exchange they shouldn't be part of the same family businesses you shouldn't have an exchange token it's crazy that we have to say this well we have to learn the hard way everything uh I think uh in this industry part of the issue number seven uh here is that Regulators have been forced onshore uh in each of their respective markets while customers have moved offshore in companies with more opaque and risky business practices oh now this is a shot across the battle Regulators David so he's saying hey

Regulators you know what uh customers are getting hurt because you're not allowing us to keep their funds safe so they're seeking these services in other shadowy jurisdictions they still want the services this Market needs but you're pushing them outside and so they're still getting they're getting the worst of all world so getting the risk to take the us as an example 95 percent of crypto trading has developed overseas did you know that I didn't know that I thought it was like like 80 95 is developed overseas he said because crypto regulation the US has been hard to navigate that's bad for the US and Americans are still losing money in these overseas blow-ups number nine the Temptation from events like these is to call for more heavy-handed regulation

this would just make the problem of crypto companies and crypto users going overseas worse this is a very fair point uh number 10 we should continue to work with policy makers to create sensible regulation for centralized exchanges custodians in each market as we've been doing for some time but uh then we need to see a Level Playing Field in Forest which hasn't happened to date long term the crypto industry has an opportunity to build a better system with defy and self-custodial wallets that don't rely on trusting third parties instead you could trust in code math everything can be publicly auditable on chain sounds like D5 David this is a topic for another day a strong tweet thread from Brian laying out his case for coinbase and uh the long-term direction for the

space By the way David you know what I think in the aftermath of this we should really get Brianna on the podcast I think people said but it would be refreshing to hear from Brian uh I put out this tweet it's funny I saw you put out this tweet right after I put out the same tweet uh this is just you know why I enjoy you as my co-host Ryan you both tweet it out like thank God for Brian Armstrong yeah it's just like and it's not to say that anything that CZ is doing is maybe it's maybe it's less than neutral it's not inherently bad but I'm just glad that there is a centralized crypto exchange founder who isn't playing and is just focusing on himself a little lawful good category lawful lawful good category of you which is exactly what we

need as the U.S onshore exchange absolutely what's this other twig uh take yeah so uh while I was uh doing writing some notes for the show up only was live streaming and they were they were trying to get people on uh they of course wanted to get SPF on that's easy on they're not coming on but so who do they get they get dokwon uh who's not that the one with your cursor in the top right is uh the guy at winter mute I don't know who the guy is okay yeah also Martin shkreli also showed up and then there's Kobe just like laying on the ground is like what the hell is going on yeah it's crazy crazy times uh crypto is uh never boring I gotta say that David um all right I feel like the last thing

I think we want to do is pull up coin gecko um let's pull up coin gecko uh the impact is Marcus down bad Ryan Market's down not bad I haven't looked at this yeah uh and so ether 20 down east yes yeah so ether was at 12 20. it bottom ticked at 12 20. uh and as soon as I saw that I opened up coinbase coinbase had was having trouble keeping up with server load and so I kept on having to refresh it I sadly did not make a sub 1300 buy I bought about wait that's what you're buying you're buying Ethan a day like this you're not buying BNB I'm not buying BNB no you can uh we'll we'll go to BNB later I but I'm just saying I bought today I bought it 1310 I really

wanted that 1250 but they jumped back up too high look at that let's open up BNB let's open up the BNB chart it's still down seven percent today David yeah it's down to seven percent where everything else look it jumped up as soon as the news happened it jumped up to 375. uh all-time all-time highs on not quite all-time highs um uh but uh since then the whole Market has nuked uh I'm wondering where that cell pressure came from definitely a lot of fear I'm worried that Alameda liquidated whatever it's got um but a lot of stuff could it be anywhere is this worse than three hours Capital David uh I I mean this is we're at the bottom of this local liquidation event I don't I don't think there's any

more contagion the contagion is just between Alameda and FTX I think this is a local bottom these are pretty big parties though let's not discount them like uh house by the way how's uh Solana Solana is it caught in the crossfire so Solana has gotten hit particularly bad because uh it's a big asset of Sam and probably a presumably a Alameda is kind of associated with all of them so Solana has gotten hit particularly bad this is a the salon is at Lowe's for the year where you know ether is almost two exits lows Bitcoin is like 50 up on his lows Salon is at its lows for the year um but I mean I kind of think this this is a fair bottom to call um I'm not one for calling bottoms uh salon and bottom so I saw a Solana

bottom yeah I could call a Solana bottom here um you know what else is bottoming right uh tell me ether Supply oh my God what are we really doing we're we're doing this right now so first of all but first of all we forgot to talk about Bitcoin just briefly 12 down huh yeah yeah so ether down 70 Bitcoin down 12 yeah right um we are so close and I've been I'm waiting for this moment we are so close look at that straight line down gas has been between one and 400 wait we're at 50 Gray it got up to 400 way Ryan and we are burning ether like crazy look at that 600 Quid 600 Quay and we are burning ether like crazy right now more than we were at 600 wait where's this

where's the we peaked it uh yeah it low down just there you can see the peak yep that was 600 Grand some blocks hit 600 wave I'm sure we burnt something like 10 20 30 ether because when stuff happens in crypto a lot of blocks demanded things on chain uh get expensive yeah I bet you if we hang out here Ryan for a little bit oh except uh Eric Voorhees is in the room so here comes Eric uh and but we are at point zero two percent of ether Supply what's up Eric hey can you hear me hey how's it going how's it going it's going all right what a day yeah what are you making this man what's happened um so I was out this morning and my phone starts blowing up and I was like

rushing to get back to see what was happening and um I've been watching all the drama between CZ and SPF over the last few days uh and then to see that CZ might be buying FTX is is crazy so it's just crazy you've seen a lot you've seen a lot in crypto there's been a lot of crazy games in crypto right and we've had some even this year um how would you rank this one I mean did this one get you by surprise I I was telling David that the beginning of the show I I like to say now when people ask like um you know what'd you think of this event I'm like I'm never surprised uh and then crypto continues to surprise me like a day like

today was was surprising to me but you've been in crypto for for longer than I Eric what you know how do you rank today like what's on the surprise meter I mean this is a 10 on the surprise meter this is like the most dramatic soap opera event that I've seen um there there have been more there have been days that were more calamitous for sure like Mount Cox going down or three arrows or something but um this is definitely the weirdest this one seems like the most like it was written into a script yeah to just with everyone yes like The Mastermind that people in you

know crypto Twitter are making about to be um so there's definitely like an Icarus phenomenon in crypto right you get these people that they come in and build up some momentum and traction and then they get super popular and everyone loves them and they're like a god and so many of those people have been destroyed or destroyed themselves sometimes very quickly um CZ I think gets the the crown for being in such a high position for so long um and doing it so well so it does not I mean yeah I don't know inside of his head but he's clearly

executing at a level that is impressive and um who who knows how much of this was pre-orchestrated or not but it certainly looks like a masterful move in hindsight um I guess we need to be careful not to assume what's going to happen right all that's happened is a of a letter of intent um an actual deal could fall apart for a thousand Reasons uh and the whole thing may end up being a huge black mark on the industry but right now it looks like cz's in in the position of uh the kingmaker this is the meme right where their their crypto Traders got the meme of uh you never want to be the main character because if you're the main character you're about to be killed off uh CZ has been the main

character for a main character for a long time he's made it through all the seasons he's on season eight and now now like there were like a collection of main characters at times like dokwan took front stage and Center for a while uh throughout his Capital were front center for a while cz's been a main player but never really like in the same Limelight as dokwon or all of them until now now he is the main character uh I hope I hope he continues to be around yeah it's um it's wild and I I was just talking last night with someone about this how like yes these these spats and these feuds are kind of immature kind of

unprofessional maybe very unprofessional and they kind of make our industry look a little childish granted but I would so much rather have this world of like honesty and Hyper capitalistic competition out in front of everyone versus the banking system which has all sorts of corrupt nonsense happening behind the scenes but they put on always this like professional face a suit and tie super slick you know marketing brochures and press releases it's also fake right like it's also fake and you look at one of these like

banking CEOs and there's no way anyone should trust these people they're like they rise to that occasion sure on their skill but also on their ability to be completely opaque about their real intentions and so I like the raw energy and the genuine nature of crypto even if it may look kind of immature and and wild west as content creators so did David and I that's for sure it gives us a lot to work with um yeah you guys have probably had your schedule full I guess since our interview with SPF well I I want to ask you about that Eric So like um you know some people are saying that this was the first Domino to get tipped over kind of they hearken back to you uh the

conversation that you and SBF had um I guess two weeks ago now this debate and in fact uh even even CZ you know mentioned it as uh maybe part of a reason for for selling ftt uh you mentioned you know sbf's work in DC maybe going contrary to the industry something to this effect um do you think that this is all related or how do you think this regulatory conversation ties in if at all and and how do you think maybe uh lawmakers those working on the dccpa might respond as their as they're witnessing the last two days of events unfold yeah I'm still I'm still trying to

process all this uh it does seem that SBF was inviting or encouraging some regulation which um much of the community as in like the authentic crypto people that really care about what we're doing uh we're not happy about and I don't I don't know this and I don't want to like make up rumors but I would not be surprised if someone like SBF had been throwing a company like binance under the bus like like in some ways binance is is a is the living breathing ethos of crypto it is this Renegade company and and the best one like the the best

Renegade company in crypto that has built something so impressive and successful and you you just know that it gets trashed like in in the policy circles because it is not it does not play by the normal rules that a U.S regulated financial institution would um and thank goodness for that right so I wouldn't be surprised if SPF had used Finance as the example of how exchanges should not operate and hay Regulators let's fix that right and he would find lots of allies in in DC with that message so um yeah this whole thing has just been really wild and I think most

important of all is for people to recognize yet again the dangers of opaque intermediaries that are custodians this lesson has been learned over and over and over and over and over and people keep leaving all their funds with these counterparties um some of them are very very trustworthy right like I think coinbase absolutely falls into the category I think Kraken falls into that category um but but people need to recognize that like defy being audible all the time open source all the time provably verifiable all the time operating exactly as the code says this is such a step function improvement over centralized intermediaries any anyone in DC who actually cares

about protecting people needs to pay close attention to that lesson I hope they see that lesson Eric and I think there's a certain irony in um the conversation that you and SBF were having a couple weeks ago this debate about protecting retail by having um registration by registration being required for all D5 front ends right but the story throughout 2022 has not been a story of like D5 failing it's been a centralized exchanged and centralized uh institutions failing due to opaqueness due to lack of transparency and and Defy is a way out of that but one hopes that they'll learn the lessons I'm just I'm just worried that our industry crypto

might come out of this with yet another black eye and with lawmakers not learning the actual lessons they should be learning I mean a simple view of this is like up there it goes again cryptos the wild west they screwed up again this is why we need the cops on the beat to breathe down their neck and bring some law to this nefarious industry I hope that's not the a takeaway it will be the takeaway by everyone who wants to regulate the industry which is probably most of the regulators um so that's unfortunate you know let's hope this doesn't become a black eye let's hope that this actually ends up as an example of the industry settling its own issues and perhaps um something insolvent being

a exposed by the market B resolved by the market that would be wonderful and that's all on CZ right now so let's hope it goes there a lot of responsibility on CZ right now uh Eric do you have any parting thoughts for us uh you know this this day November 8th anything you you you want to say to the crypto community in the on the back of this now just this is so much more interesting than the election um wait there's an election today okay yeah apparently there's an election here so everyone make sure to go vote so that the government can get bigger tomorrow yeah I thought I was gonna like be sitting around watching CNN and um

drinking myself to death and misery which is usually what I do on Election Day just because it's kind of fun to do that but um this has been so much more interesting I gotta say yeah this is a certainly people are going back and forth as is this the biggest thing since Luna or is this even bigger than Luna um some people we don't know how it'll turn out yet right so yeah so how much my my take is that the contagion is largely contained between FTX and Alameda I don't can't really think of a world where it escapes that but like I think the risk is that a deal does not happen that a deal oh that a deal does not happen yeah what's what's been exposed so yesterday

it was reasonable to believe as I did that uh FTX is fine all these rumors are just rumors there's no reason to think that they're insolvent um and then this morning it's like oh boom not only are they insolvent but they're being acquired by um by CZ so what's been revealed is that there was an insolvency right people are assuming that this deal fixes it and if the deal happens it probably does fix it but if the deal doesn't happen which could happen for all sorts of reasons then where is this in solvency and what are the consequences of that right uh that we we saw that report that um SPF went to Wall Street to immediately emergency Finance one billion dollars but that the hole in a balance sheet could be as

large as five to six billion dollars which is a huge hole uh I don't know if that was those numbers check out uh did he try borrowing from Ave well you mean collateral to borrow from Ohio ftt wasn't going to cut it I'm wondering if if this has uh from what I've gathered uh binance is immediately establishing uh some sort of line of credit to allow for customer withdrawals so that customers can get their money out of FTX um I'm sure as again unsure is the details of that I'm wondering if this is given SBF the time to go actually to Wall Street and put a more sophisticated deal together to have competing offers rather than just being under the thumb of CZ

do do we know where this insolvency came from I mean I I dismissed this as rumors because I was like the properly run centralized exchange takes customer deposits and then even if everyone withdraws their deposits that just means the exchange is empty it should not in and of itself cause some kind of run what what is it that actually was the deficiency like is that a rumor or does anyone know like where actually this came so this is we only have speculation but the association between FTX and Alameda research uh the idea the speculation is that um FTX sent customer deposits to Alameda research to leverage in their trades um and then Alameda research returns to

them less money than what the like really you know we don't know that that is true uh we just see Alameda research sending stable coins to FDX to their hot wallet so that so that FTX can facilitate outbound withdrawals um so so people are just connecting dots but without any sort of real substantial evidence if that is true this needs to be if that's true and I don't want to judge people before things are clear if that's true this needs to be the Center example of the compliant Exchange actually being riskier with customer money than what the unregulated

non-compliant D5 apps would be doing to be loaning customer deposits to a risky counterparty to such a degree that a a decline like this which is very foreseen right like a 10 20 30 drop in crypto prices is not unheard of that they would that they would do that while going to Washington DC to beg for more regulations to protect people is unforgivable if that's what happened so let's Reserve judgment on that until we know but what the I mean there's there's Sam has been in DC he's there's not like this it's not like this hole in ftx's balance sheet just magically showed up recently he's

been in DC lobbying for the dccpa while this hole in FTX balance the balance sheet has existed like that feels like a safe bet to a safe claim to make I mean yeah I don't I don't have a better explanation it's not none of this is proven yet again but um man so bad yeah it's it's as bad as it gets so uh what would you say Eric to somebody who says all right how do we fix this uh is is the answer just like Defy is that kind of the bottom line answer so is there more to it one way to fix it is for centralized intermediaries to be

more responsible and there are some coinbase has done an amazing job of that over very long term Kraken has done an amazing job of that over a very long term but the bigger important Point here is that we don't want to have to trust people fail people are wrong people can be malicious people make mistakes people are subjective we don't want people running the financial system we want the hard laws of code running the financial system that's how you fix it um so that that is the lesson here I uh definitely hope the industry learns this lesson I wonder how many more times

we have to learn they won't they won't so some people will like each each time this stuff happens some cohort among the unwashed masses gets bathed in Blood and learns the lessons that we try to talk about all the time um and then they're like oh I see I see why self-cust is important I see why sound money is important I see why defy an open permissionless systems are important but before that these were just like bullet points on a white paper and they didn't they didn't quite get it these trials and these tests like teach people through the breaking of Bones why the financial system that we have today is bad and how to make a better one I mean one uh one example of that I think

is um you know from the time CZ tweeted what he originally tweeted about selling ftt and started making some comparisons between FTX and Alameda uh and Luna there was a mass Exodus of withdrawals from FTX and this I think uh is investors and Retail um actually like uh learning the lessons from Celsius I mean I mean I guess they totally learned the lesson they wouldn't have their money on there in the first place but they were quick to get it off that's for sure and I think this also contributed to the company to spiral downward we saw where as of this morning FTX was no longer able to honor withdrawals and I mean just thinking

about that Eric is just like that should not be the crypto experience like it should not be the experience of um a retail user to be able to to go and try to access their blockchain secured uh coins crypto coins and told that like sorry delays we don't have your money we can't give it to you come back tomorrow wait until we sort it out we don't know where the money is like for that to be a first experience is is not why we're here and it's not why um like we call this a bankless financial system yeah it's not bankless if you use a custodian um yeah I mean it's just it's just

atrocious and like when we created when we created shapeshift you know in 2014 it was in response to mount gox like how do you let people trade cryptocurrencies without taking custody so the people don't need to trust us doesn't matter if they know me they can just use the system and we're not holding billions of dollars of customer money and then to have these Regulators like you know going after us for years under the banner of protecting people um when this kind of tomfoolery is going on is is ironic and just makes me so livid but here's Brian hey Brian it's good to see you man hey Eric good to see you what a day I'll uh I'll see the floor to

you sir hey Brian welcome welcome to bank list thank you for uh for joining us um we're just talking about uh the the Tweet threat you put out and uh we're hoping to get some insight on that so what what do you think of today's events what's kind of going through your mind yeah a lot of stuff well I mean first of all it's kind of a difficult moment obviously for everybody involved in the markets the Market's going to be down um there's potential for customer losses across a variety of areas so we got to start with that and then you know I think it's also it's not a great day for crypto let's just be honest um you know this kind of reminds me a little bit of Mount gox back in the day um there's folks of us that that went

through that time period and it it was not pleasant and it left a you know it left a memory for people for many years just about what it was like to be in crypto and what's going well and what's not so I think my hope is that people remember going through this moment that not all companies out there are like this right it's not a criticism of crypto large it's really there's certain actors that are going to do well or do poorly in any kind of environment and we need to wait to see what all the until all the facts are in about what exactly happened in this case but um yeah I guess the other thing I'm just thinking about is whether this you know the Temptation is that this will always lead to sort of sort of overreaction of Regulation and I don't know if this is

Eric what you were just talking about when I came in but I think the other thought I have top of mind is the regulatory environment has not helped this situation right there's as there's been a lack of clarity um or trying to move towards more clarity with regulation many customers have kind of gone towards these offshore unregulated exchanges and we're seeing these blow-ups happen um whereas if I think if we'd had more regulatory Clarity in the US for the centralized exchanges and custodians um you know customers wouldn't have gone offshore and gotten into even bigger issues Brian that was one of your uh your tweets and your thread that I actually didn't know the stat behind but you said uh to take the us as an example 95 plus

of crypto trading has developed overseas and you say that's because crypto regulation the US has been hard to Navigate 95 plus so you're making the case that um crypto regulation as we have it in the U.S is actually putting investors and uh folks that want to trade in retail in a worse position because we're driving them offshore into entities that engage in in riskier practices yeah that's correct so that 95 stat is looking at both spot trading and Futures and yeah it's pretty Stark if you look at it even if you just look at spot trading Alone um I think at the beginning of this year

the US market was maybe like 23 of global spot for crypto it's now about 13 so spot went down but of course Futures and derivatives and all that really developed offshore because of the lack of regulatory Clarity and that Market's even bigger so if you take those in at least from a trading volume point of view so if you take those in aggregate over 95 of the trading volume really moved offshore outside outside of the U.S and of course you know we want crypto to be a global thing so offshore is not necessarily A Bad Thing it should be developing in every country of the world but where it becomes a problem is that if you if you have a for you know a foreign company that's sort of jurisdiction hopping or trying to find one place that's the least regulated and

serve the whole world from there you know that's where you kind of get to some of these issues so what do you think the takeaways for regulators and lawmakers uh should be from this event over the last couple of days yeah I think number one it's again it's not an indictment of all crypto it's by the way these kind of blow-ups happen in the traditional Financial system you know as well look at 2008 in all kinds of situations right so that's not we don't say oh let's do away with the whole traditional Financial system that you know so that's that's the first point the second is let's keep working towards regulatory Clarity for centralized exchanges and custodians and stable coins and things like that while preserving The Innovation potential for defy and self-custody because those have

the opportunity to actually create an even better system which we can come back to in a minute don't resist the temptation to say oh where you know we need more and more heavy regulation no we need to push forward the regulation we were already contemplating but then actually create a Level Playing Field and don't allow you know citizens of these countries to go offshore to to other products like right now the incentive system is actually kind of backwards where the companies that are trying to do the regulated approach often end up with a worse product fewer features higher costs and they're almost incentivizing the companies that are less regulated to go to draw these customers offshore I'm here in Japan actually right now where I've been meeting with

um our team in Japan and The Regulators here and it's actually a very similar story here as in the US companies that have gotten locally licensed in Japan and there's some regulatory Clarity emerging have had a very hard time making compelling products whereas you know we've seen uh Japanese customers go offshore to these unregulated exchanges and um you know we're starting to see some of the results of that Brian you you mentioned this uh in your thread as well that this talk of um tokens as well and you know something that coinbase is not done uh famously uh coinbase is ipo'd but um tokens these sort of I don't know what we'd call them what we classify them as a loyalty token not sure what they are but they were

actually at the center of the story um part of the center of it like Leverage on tokens like ftt for example and we've seen massive price swings um what role do you think tokens play in this story and uh you know what would you say the the learning lessons for for exchanges or centralized intermediaries are from you know from a token perspective yeah so you know I I'm basically there's a number of conversations I've had and I I don't want to reveal anything out of turn um so I I would say just high level we need to wait until all the facts are in and let other people kind of share some of these stories as they come to light um but I do think that there's certainly a risk just broadly of com there's

nothing wrong with companies creating tokens right there's various types of tokens there's reward tokens there's some that are clearly non-securities I think if companies want to create tokens that are securities there should be a regulated path to do that in the future and kind of register those in various markets around the world so the issue is not tokens writ large in fact I think there should be more and more companies creating tokens and have regulatory Clarity around that it seems like and again the facts are not all in um that in these cases these tokens may have been used to kind of um you know inflate the assets on paper where there may not have been true liquidity there or true use cases and you know we're seeing that come back in a negative way um you know coinbase we we would have

liked to have done something like this I think there's a lot of interesting tokens that um could have been created but again we looked at the regulatory environment and we didn't find a way to do it that we felt was within um the current regulatory Frameworks and so we decided not to do that and I think obviously in moments like this it looks like the right choice but ideally we would be able to create tokens in a clear regulatory environment going forward um and I think it would prevent some of this activity Brian one thing I'm concerned about is that um binance this huge Empire that's been built out in in the East has uh an insane amount of market share of centralized exchange volume and FTX and coinbase have just been like neck and

neck kind of tied for a second in in volume so over the last like six months or so uh and now if this deal goes through with binance uh binance will just gobble up the next biggest centralized exchange that exists on the market just an insane amount of consolidation and CZ is a person that plays a particular game we started this episode talking about like kind of it's like a Game of Thrones it's a game of centralized exchanges uh and a certain I feel like if you are a centralized exchange that issues an exchange token you're playing in that Game of Thrones um coinbase doesn't seem to play it plays a different game and we we both Ryan and I were saying while we were going through the stream like thank God

for the differentiation between coinbase space and the rest of the market so first off thank you for for being different and being what we called lawful good but are you worried that there is this binance Empire that is offshore that is this this massive player that is playing in a different game that is like now uh like just so entrenched into this industry like I'm kind of worried about just the insane Monopoly risk that is now happening to this industry uh when you see the growth of binance are you concerned for this industry yeah I mean a lot of questions there and I like the lawful good uh framework by the way that's a good one um

look I I think it's good to have a variety of different companies with different approaches in most markets um and I agree with you centralization is bad so there is a there is a place that the industry can get to where any one player has too much of any particular metric you know trading volumes the one people look at a lot but there's there's lots of different ones you could look at um I do think coinbase and binance are following pretty different approaches and look I it's not my place to kind of say anything about what they're doing I can just tell you what we're doing and we're we're trying to follow a regulated trusted approach we're trying to think long term um we're trying to enable people not just to do crypto trading but to actually go use crypto like what I'm really passionate about is not just I'm

not really a Trader by background I'm a tech guy I want to see a more free and have have an economy for the world that has more economic freedom so I want to see people using crypto for earning earning a living and buying stuff in Commerce and remittance and peer-to-peer payments and then all kinds of new stuff in web 3 and daps and whatnot so um you know trading we I think we have really good trading products and good trading tools sometimes it definitely feels like our hands are tied because we can't um offer some of the same products that we want other times it's just our own execution is getting in the way right so I you know I think to intellect look at it very intellectually honestly I think like 50 of it is we could be executing better and that's where we have our own

work to do the other 50 of it is that we're choosing to follow the rules and you know it's just like a very different uh it's a more difficult path and like sometimes your hands are tied so I but you know I think that's the right long-term strategy and um I don't know if that's gonna what it looks like short term but long term I think that's definitely the right way we're gonna go at the center of this story was uh sbf's approach to regulation and engagement with Capitol Hill uh CZ whether or not he actually meant it cited Sam's um approach in regulation in DC and how he sees he felt that Sam was really going to DC and then shutting the door

behind him and leaving binance out to dry allegedly this is what CZ was one of the motivating factors behind CZ and and also the industry at large kind of voiced their opinion especially with our episode with Eric Voorhees and SBF when we had that debate no one really seemed to appreciate to have appreciated Sam's approach to regulation and that also seems to be one of the differentiators that I see out of coinbase and and your guys's approach to regulation and how to interface with uh with Regulators on Capitol Hill how uh if you were in Sam's position which you are because you're the CEO of a centralized exchange uh how what's the right way to approach Regulators like how should he have been doing it uh in your opinion foreign

yeah so you know I'm trying to make sense of this too because I actually think Sam's approach with regulators and policy makers in DC was actually pretty good I thought um you know he he clearly had a passion for it I think he he's he was smart and he Advanced some of the issues in a meaningful way um which I gave him credit for I think that where he went on the defy side obviously was not like fully in line with what some of the values we have as an industry and so that I think you guys did a great job of sort of bringing that stuff to light I don't know the most interesting story from my point of view is um you know he gave a lot of money to various um politicians in DC and had built these really strong relationships and I guess

I worry a little bit what's happening in their mind right now where they think oh well I've got to go distance myself from this person who is now sort of persona on grata or something like that um or maybe they're thinking you know we have to be careful why did I trust this person and I I don't really know what's going through head but I do I do think that DC is going to be a little more skeptical of people coming in and talking a good game if they if they made it they might feel like they got a little bit burned in this situation you know our our approach to DC and just policy making generally is we're a little bit more behind closed doors you know sometimes these people appreciate having like dialogue and back and forth that doesn't you know emerge on Twitter and so we've basically been

behind the scenes trying to just be quiet and we try to give them all the credit and like not take any credit on our own and I think we've done reasonably well advancing some of these conversations and defending the industry once in a while if there's something we feel like you need to speak out on like tornado cash well actually you know take a stand and try to protect our customers from Bad policy but 95 of the time it's it's just us working with there's like a lot of reasonable people in government and we can find common ground with them and that's what we do most of the time so Brian uh you alluded to this earlier and you actually end your Tweet thread with it which is uh like uh I think a really important place to go is is just kind of what's next how we actually

solve this you talk about coinbase taking the long-term approach and you said about the long term long term the crypto industry has an opportunity to build better systems with defy and self-custodial wallets that don't rely on trusting third third parties instead you can trust in code math everything can be publicly auditable on Jane this is a topic for another day can you tease us a little bit about what you think the real solution to the problems that we've seen today over the last couple of days are and how is defy part of a solution of the solution in your mind yeah well you guys know this better than I do I mean you've been preaching this for for a long time and I'm a True Believer I mean I think this is the real

opportunity that crypto has to create a more transparent and fair and free financial system um I'm a real believer in that so you know I think people have to bifurcate these two things in their mind like a lot of the activity happening today is still on centralized products exchanges custodians you know that with stable coins and that's fine I mean that stuff needs to exist as a bridge between the traditional Financial world and the crypto Financial world and I think we can play a really important World role there and that stuff's going to be very regulated it probably should be that's it's a financial service business but coinbase is also helping in you know the crypto to crypto world the true crypto economy would Define everything and we've done that with coinbase wallet you

know hopefully people have been realizing and seeing a lot of that we've been pushing a lot of Updates this year I think it's I think it's like an incredibly good place and we're enabling for instance people to access web3 from directly in the coinbase app whether using previous wallet or our main retail app um we invested in a bunch of MPC technology to make that kind of stuff work and we've started to build some decentralized apps ourselves like for instance some of this stuff is web 2.5 you know you're kind of getting closer and closer to web3 but without you know for instance coinbase nft and things like that we're doing more and more on chain we're introducing EMS into our products so you know I think coinbase can basically help in both areas we're going to help we make a lot of our revenue from the custodian exchange

brokerage piece but we're also starting to generate Revenue in the web three piece and I think over time that'll become a bigger and bigger I hope I hope someday by the way the majority of our revenue and our user base are accessing coinbase through self-custodial using web daps and web3 um that would tell me that we've actually succeeded in creating this new crypto economy it's not just about trading anymore so the entire crypto community and everyone watching has been through quite a tumultuous day and there have been a few of those this year um how would you summarize this what what message do you want to share with the crypto Community who's tuning into bankless right now yeah well I would say you know it's Never As Good As It Seems it's never as bad as it

seems in crypto so um this is not this is not unlike we've been through things like this before right we went through Mount gox we've been through crypto Cycles up and down we went through um three arrows capital and Celsius and Voyager and um Terra Luna so look in any kind of in any kind of marketplace or economy or in capitalism in startups right like you know a thousand ideas are going to be tried and some of them aren't going to work but others really will and they'll rise to the top and that's that's what capitalism is about it's about trying many different ideas and seeing which ones work and those grow and they get to allocate more Capital into the next things so this is incredibly painful um I know some people are probably in

experiencing financial hardship due to it and they are in the traditional economy as well with down markets so I want to be very sympathetic to that and also send out a reassuring message that you know crypto is is resilient we're going to get through this and we're going to build the future in an even more powerful way Brian we appreciate you coming on and talking to the crypto community on days like this I think it's particularly important um you know I'm glad that coinbase has always taken the the approach that's taken of um you know establishing a firm foundation building strong and being there for the crypto industry when we need it and also we certainly need it and also what Brian said the strategy of following the rules which is crazy that that's a strategy yeah we appreciate you and thanks for coming on Brian yeah

thanks guys I appreciate what both of you have done for the industry as well so have a good day see you later uh bankless Nation uh as always if you are tuning in of course and you have not hit the like or the Subscribe button please do so um we're trying to keep you up to date on the latest that's going on today was uh quite the day occasionally we have days like this where we just jump on the live stream uh and um I don't know if we're gonna have any other guests here David but I do know something important might be about to happen we'll we'll get there there's a one last uh tweet a new CZ just dropped if you will oh okay you want me to send that send you the link to that sure I got it here it is here we

go uh two big lessons CZ says he tweeted this out uh let's see uh 10 minutes ago never use a token you created as collateral number one number two don't borrow if you run a crypto business don't use Capital efficiently have a large reserves binance has never used BNB for collateral and we will have never taken on debt say safu seifu um I I just I can't read this Ryan and think that cz's taking a Victory lap and also just like I'd he definitely just sniped the hell out of FTX uh he's like you guys opened up a weakness using your token that you created as collateral and I sniped you and now here's my victory tweet that's

how that's how I interpret this yeah but I yes and I also think that these are uh good and obvious takeaways right never use it it's it's interesting how you um um you know the faster they rise the faster they fall kind of thing it's it's just um I think part of the reason that FTX it seems like an Alameda grows so fast is because they were taking excess risk so borrowing uh while running a crypto business not having a large reserve leveraging the token that they they created I mean Brian Armstrong's approach we just heard is like don't create a token in the first place right if you don't need it right CZ pushed that a little farther

we're going to have a token and then CZ said and then FTX said we're gonna have a token and we're going to use it as collateral uh so just kind of juicing up the growth growing a little faster but at the cost of of risk this is what things like like margin give you and certainly tokens give you super powers uh in these areas um and I think that'll bring us to the final slide that we want to bring up because this is like the eth Maxi show so we do the eth Maxi things it's not Maxi show David this is not why do you say that now people say I'm making fun of people who make fun of us anyways and yet still really here at the ultrasound money chart so yeah here we are uh so ether is below 100 ether issued since merged this

is what happens when volatility hits the markets uh and this is why I'm I'm always super bullish on the burn because this the burn rate that we've seen thus far has been a bear Market burn uh this straight line down in the last like hour or so has I think something like two or three thousand ether has been burnt in in one or two hours wait wait a second I I just want to underline this are we 90 eat away from ultrasound money sound yes correct 90th away I remember was it last week we're about like uh 2500 yes 3 000.

today it was today we were 2500 this morning this morning yeah 1800 excuse me uh and so uh depending on the gas is coming down it peaked around 500 or 600 we're now at 36. we're still so we're still burning you through but the rate of burn is going down I think it's going to be at this rate an hour Ryan or so before we go ultrasound it's also a chance that we touch the bottom and don't actually go through it at the rate that gas is calming down David really really wanted we he really really wanted this to happen on the live stream but I don't think it's going to happen what I'm saying is it might be one to three to four hour hours perhaps yeah I'm not perhaps but uh yeah at least we showed you ultrasound money website at the end and

we're real close um I mean it's got it It's gotta be one one more liquidation and etha's ultrasound that's not rules so look for the tweets I guess we're not coming back in the live stream to stream that after um after that epic live stream that wow man we had uh Eric Voorhees on Ryan selkisson Brian freaking Armstrong on we covered the event I hope you guys enjoyed this we'll be putting this out on the podcast feed as well David is there anything else we should share with the bankless nation uh Ryan I'm kind of I'm uh sad for you because uh you don't get to engage with the chat as much as I do while we do the chat is just so fun man uh and so especially it's like the thankless community so thank you thanks

for the again the 4 000 people that showed up and all the people hanging out in the in the chat uh so shout out to shout out to all the people in there uh and so we we definitely enjoy you guys and definitely appreciate you being here so you know make sure to like And subscribe so you get notified whenever we go live well guys I'm gonna I'm gonna end it as we always do risks and disclaimers on days like this these risen disclaimers should be in a little bit more crypto is risky all of it is d5's risky but so are centralized exchanges maybe especially centralized exchanges you could lose what you put in but we are headed west this is the frontier it's not for everyone but we're glad you're with us on the bank list Journey thanks a lot okay