The Chopping Block: FTX: The Biggest Collapse in the History of Crypto? – Ep. 418

Transcript

Not a dividend. It's a tale of two funds. Now, your losses are on someone else's balance sheet. Generally speaking, airdrops are kind of pointless anyways. Um a number of trading firms who are very involved. I like that ether is the ultimate Ponzi scheme. DeFi protocols are the antidote to this problem. Hello everybody. Welcome to a special episode of the chopping block. Every couple weeks, uh we get together and give the industry insider's perspective on the crypto topics of the day. Today is a very special day. Uh it's a little bit of a harrowing day. Um and so we wanted to get together given all the drama that's been going on in the crypto industry and share our perspective on what's happening. So, let me first start with intros. Uh first here we have Tom, the DeFi maven and master of memes. Uh

then we've got Laura, who's the CEO of the show. Joining us today as a special guest, we've got Nick Carter, the illustrious reformed Bitcoin maxi. And uh then there's myself, I'm Haseeb, the head hype man at Dragonfly. So, um most of us, well, not all of us, but most of us here are early stage investors in crypto. I want to caveat that nothing we say here is investment advice, legal advice, or even life advice. Okay, so why why are we here? Today has been a a pretty crazy day. Actually, the last few days have been very harrowing day for the entire industry. Uh and it all started between two of the central characters in the crypto drama, who are CZ, the founder of Binance, and Sam Bankman-Fried, the founder of FTX. So, uh Sam and CZ have a very complicated

relationship. And so, I'm going to start from the very very beginning and kind of give the exposition for what happened. So, Sam and CZ they have been competitors for a long time. Uh Sam, of course, got his start as a trader and originally he was the founder of a trading firm called Alameda Research. Then they went on to build FTX, which is now one of the largest exchanges in the world, or was until very recently. Now, Alameda Alameda Research and FTX have always had somewhat of a confusing relationship. Uh it was known for a long time that Alameda Research traded a great deal on FTX in the early days. As the exchange became more institutional, their relationship became a little bit more um opaque. Became people didn't really know exactly what the relationship was between Alameda and FTX. But the claim from FTX was always

that Alameda, the trading firm, is not, you know, directly associated with FTX. We're totally distinct. We might have common ownership, but we don't really work together in a direct way. That was the story. It's generally considered to be a bit suspect to have a trading firm and a and an exchange to have a close relationship because of course that means the trading firm has some kind of unfair advantage when trading on the exchange. Now, what does it have to do with CZ and Binance? Binance, of course, is the largest exchange in the world. Binance was an early investor into FTX. So, they had a early partnership. They invested at a very early stage, and eventually FTX bought out Binance from their initial stake for a total of $2 billion.

And part of that $2 billion was in cash, and part of it was in FTT, which is the native token of FTX. Now, what is FTT? It's another central part of the story. So, FTT is an exchange token. Kind of like BNB, kind of like OKB. The way that FTT works, and Tom, please correct me if I'm wrong here. So, the way FTT works is that FTX burns a portion of their revenue to buy back some of the FTT and then destroy it every week or something like that. I think it's weekly. And in addition to that, if you own a lot of FTT and you stake it, you get trading discounts if you're trading at FTX. Do I have that right Tom?

Yeah, that's right. Okay. So, so this is FTT. So, what what what triggered all of this was that if you recall over the last week, actually in the last episode, we talked about an episode where Sam Bankman-Fried was was weighing in on his thoughts on regulation and DCCPA, which is a new proposed bill that was going to end up regulating quite a bit of crypto as well as DeFi. And many people became very upset with Sam after that. And they believe that Sam was selling out a lot of the rest of the crypto industry, particularly around DeFi, but also other exchanges. And there was a big debate between him and Eric Voorhees that we covered on our last show.

Now, Sam public sentiment against Sam really turned after that. And it seems like CZ, similar to many of the other people who are upset with Sam, CZ was one of the central people who believed that, "Hey, I think Sam is is behaving as a bad actor." And so CZ published a tweet a few days ago where he said that he was going to be liquidating his FTT ownership. So, remember huge portion of their buyout was in FTT. So, Binance was a huge pile of FTT and they decide finally that they're going to sell it. And the reasoning they provide for why they're going to sell it is one, risk management. So, the the leaked financials about Alameda Research scared a lot of people because of course Alameda held a huge amount of illiquid assets on their balance sheet. Of the roughly $6 billion of equity that was on

their balance sheet, that was of I believe end of last year, a huge portion of that was extremely illiquid and a huge portion of it was FTT itself. And so Binance announced as part of their exit plan they are going to be selling their FTT on the open market. And there's this line that he posted which I think is a a very telling line. He says, "Liquidating our FTT," said CZ, "is just post-exit risk management, learning from Luna. We gave support before 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." So, this was a direct dagger at the heart of FTX.

Now, Alameda Research, which again, unclear the relationship between FTX other than the common ownership. Alameda Research owns a huge portion of all the FTT in existence. And Alameda is quite has has a very very large outstanding loan book. So, there are a lot of loans that Alameda is holding and presumably a lot of that FTT is collateral. So, Alameda then announces on Twitter that we will buy all of your FTT at $22. So, FTT immediately after CZ announces FTT starts to decline. Alameda announces they're going to buy all this FTT at $22. Binance refuses.

Binance says, "Look, I'd rather do this on the open market. Why not do all this out in the open?" Binance then proceeds to move all of their FTT to Binance and starts to sell. This starts to crash the FTT market. FTT starts dumping and dumping and dumping and by last night, which last night was was Monday night, FTT goes below $22. $22 was holding there very strong under this belief that FTX / Alameda was going to backstop the market. After that, the floor fell out and all of a sudden, massive massive massive outflows from FTX. All of a sudden, everyone starts getting scared that FTX is going to be insolvent, that Alameda is insolvent, that there's going to be another Three Arrows-like liquidation spiral as a result of lenders no longer being able to liquidate the FTT collateral that

Alameda has. Alameda, to be clear, is one of the largest market-making firms in crypto. They are a massive massive player. They have huge amounts of loans from other parties. And if we see another a repeat of what happened with Three Arrows, everyone knows that it's going to be carnage in the markets. So, Sam Bankman-Fried goes on Twitter. He announces, "FTX is fine. There's no need to reason to withdraw. Everything is okay." At the same time that he's doing that, yesterday, meaning Monday, Sam goes to Wall Street. And he starts trying to get a an emergency liquidity injection into FTX.

Now, to be clear, up till now, this has all been about Alameda. This has all been about Alameda and FTT. FTT is supposed to be a discount token. But all of a sudden, everyone learns that FTX is trying to raise money. And we see that withdrawals start getting slowed down. And suddenly, withdrawals eventually, as of this morning, stop completely from FTX. Now, to be I also want to specify this is FTX International. This is not FTX US, which is the US regulated entity. FTX US is fine, and there's no real reason to believe that FTX US is not fine. So, all of a sudden, people are thinking "Wait wait wait wait wait.

This market-making firm, which is supposed to be disconnected, is losing money, and as a result, FTX needs to raise money. That doesn't make sense. FTX was trying to raise a billion dollars around midday yesterday and by the end of the evening FTX is trying to now raise five to six billion dollars. And there are no bids. Nobody wants to invest. What we've What we've heard is that there was maybe about half a billion dollars of interest that they were able to round up, but as the number kept going up by the end of the day, originally they were trying to raise at a 10 billion dollar valuation by last night, it completely falls apart.

Pretty soon there is mass fear that Alameda is insolvent and that somehow FTX is also insolvent. And that the connection between Alameda and FTX was not as originally explained. Sam claimed on Twitter that FTX customer funds are not being lent out, they're not being played around with, everything is there at the exchange, but on-chain sleuthing reveals that this is not the case. There's too much money going around, there's too much There's too much hand-wringing. It It looks like something is wrong at FTX. And fairly soon there is a mass exodus. FTT starts to absolutely collapse until this morning CZ announces that Binance is going to be acquiring FTX.

Now, they are not acquiring the US entity, they are not acquiring Alameda Research, and also this is a non-binding LOI, meaning a letter of intent. So, that means that they still haven't done due diligence and this deal might still fall apart. The market rebounds a little bit and then continues to fall and now we are basically in the mode of mass contagion. Everybody is afraid that if Alameda defaults, are we going to see another three arrows? Is FTX completely dead? Are people going to lose their money? Is this going to lead to a wave of pain for the industry and for the future of how crypto is going to be seen by regulators and by lawmakers. So, that's the high-level of where we are at today. I think I covered as much as I could. Let me stop there and just get first high-level responses

how you guys are feeling about what happened today. Nick, why don't you start? Well, I think the most dramatic day maybe since this summer, but maybe even since sort of March 2020. This feels a little bit like the Lehman to this summer's Bear Stearns. I think this is actually possibly worse, dare I say. I mean, FTX and you know, the FTX Alameda FTX US empire, if that really is dissolving, that just leaves a lot of holes in a lot of balance sheets throughout the industry and the lenders that are already seriously impaired and distressed and might be kind of the last hammer to fall taking them down. I think then you you question what what becomes of Genesis, what becomes of DCG, what becomes a lot of

the the firms that are very sort of Sam affiliated. I mean, FTT going to almost zero in the space of 24 hours is is truly remarkable and even more shocking almost than Luna going to zero just because it it seemed to be backed by real corporate revenues, you know, with and and actual earnings. And not to mention the enormous consolidation here, which is a crazy crazy event to happen. Now, Binance will be a total behemoth assuming the deal goes through. From my seat this is yeah, as you said, one of the most harrowing experiences I've ever seen in the crypto space.

Yeah, I would agree about just kind of almost like from an optics perspective, you know, a lot of people were calling out Terra Luna before. And it is true that in recent weeks, I mean, my DMs were filling up with people talking about FTX and and Alameda and I did, you know, ask SBF in my last interview with him about that relationship. But at that time, there was nowhere near as many connections as have been made in recent weeks. But the thing is that, you know, up until recent weeks, Sam really, you know, was like the face of kind of regulated crypto in DC. He was, you know, the one who was advocating, as we saw in the debate with Eric Voorhees,

you know, a way of operating with regulators that is very friendly to them and something that, you know, they could probably get in line with. And I think what's fascinating is that at least, you know, based on what we're seeing on chain, it kind of looks like you know, FTX and Alameda were operating in a way that is definitely beyond what any regulator would, you know, sanction. And so it's just so funny that he advocates for that type of regulation, but he himself doesn't practice those practices and that's what took him down. So there's some crazy irony there and especially that CZ of all people who is the poster child for, you know, regulatory arbitrage is the one who like

called his bluff on that and took and took down FTX. So the the the the the the whole I mean, just like, you know, for me as a storyteller, I'm like like I don't even have to do anything here. Like I when I go to write this, it's just like all written for me. So yeah, just definitely to my experience, you know, um I actually think this is the number one biggest news day in crypto ever in the history of crypto. Yeah, I mean, I agree that you people copy it to like Terra Luna or Three Arrows, but again, I think like a lot of people refuse to get into Terra just because the mechanics weren't sound. A lot of lenders refused to lend to Three Arrows because they didn't pass diligence. But Sam was like supposed to be, you know, sort of the golden child, uh networking

in DC, uh this MIT wunderkind. And then like this is sort of falling apart. I I I do find it also funny that like this CoinDesk article really seemed to actually be the thing that kicked off this sort of crisis of confidence. That came out about a week ago. That's what started to cause the stablecoin withdrawals from FTX. That's what started to cause this entire sort of cascade. Um and but even that was like not a very I guess well sort of diligence article. It was from June and it was kind of unclear what the liabilities were supposed to be. Um and so when I read that article, I didn't think immediately, oh FTX is insolvent.

It was okay, this doesn't look like a super healthy balance sheet. I don't really know who's lending, but it wasn't as if like, oh this thing is is toast, it's a zero immediately. But it's almost sort of a self-fulfilling prophecy of as more and more people lose crisis or lose confidence, more people lose confidence and you end up with the current situation. I think I think that's right. We The The question is like, okay, what did what did we learn today? The first thing we learned is you never cross CZ. So that's the first lesson. I think that's one thing that you want to take with you for a long time now because you cross CZ and you're not going to live to tell the tale.

The second thing is that I think we now understand um a lot of how FTX worked. Which is that So So first I want to say that a lot of what we're talking about in this show, especially that's not already um out in public, is is going to be speculation. Right now, we don't know a lot. It's a very live situation and a lot of news is flying by and a lot of things are not confirmed yet. So very few people know the truth of what is actually going on here. But um what I've heard, and again, this is totally speculation, so I don't know whether it's true, what I've heard is that yesterday when there was this emergency financing going on for FTX, basically people realized as Sam was asking for more and more money that the diligence materials he was sharing were [ __ ]

It's very likely that, you know, when when the FTX round happened last year, there's absolutely no way that if the investors knew that customer funds were basically all being lent out to Alameda, that this would have been invested in by all of these institutional investors. So the the the speculation that I'm hearing is that what happened is likely going to be criminal because they misrepresented a huge amount of things both to customers and to investors. There's really no plausible way that FTX, not Alameda, but FTX would not be able to process withdrawals because the value of FTT went down.

It doesn't make sense. Well, right. There there shouldn't be a relationship. Yeah, I mean Exactly. And this is why I was so shocked about the whole thing cuz I thought okay, maybe Alameda is in trouble, but that shouldn't actually reflect. There there shouldn't be a contagion over to FTX. The only explanation I have is that CZ somehow got wind of the fact that maybe customer deposits were being lent out and decided to launch this attack. I would love to know what they knew such as they could feel empowered to launch that attack. They must have done some on-chain sleuthing or something to determine that FTX was not just holding those balances in full reserve.

Yeah, and my point about how the exact behaviors that regulators would not sanction is what took Sam down. You know, when I mentioned like you know, on-chain evidence, what I meant was it was I saw multiple tweets about this. You know, a bunch of people had been trying to look for FTX's cold storage. And that is a major red flag if you cannot find anything that looks like that. And then when people were also saying there's so much money that Alameda is sending to FTX, like if they're truly as separate as they're supposed to be, then like that should not be needed in this kind of scenario. You know, you're right. Like if it's full full reserves, then just as people are withdrawing, they just get the coins they have. So, you know, I I

like obviously nothing is like 100% at this moment, but you know, it's a major red flag that people haven't been able to identify those wallets. So. Yeah. I I agree. The chain doesn't lie as we've seen time and time again, and it's a big red flag to be going on Twitter and public and saying we're completely solvent, and then on chain we see that you're pulling, you know, a few million dollars from random yield farms. Like you don't go, you know, scrounging through your couch for change if you're if you're totally good for it. And so, I agree. I mean, I think like if you you you produce reserves, if you can't produce those this this cold wallet addresses, it doesn't really breed a lot of confidence.

Which which to me is also crazy. But how did this last round get done without doing basic enough diligence to understand where the assets And I mean these are some of the largest and most sophisticated invest investors in the world. That's right. It was over a billion dollars that they raised. It was a billion dollars. And 32 verified where the funds were. Which is absolutely insane. Um but it it it the the other element of this which is I think um also worrying of course is is is the Alameda side. So there's FTX okay FTX is in trouble.

Um Alameda I've heard they're not they didn't make margin calls. And people can't get in touch with them which probably means that Alameda is going under. Um we don't know for certain but that's that's a it's a good prediction at this point to make especially given that FTT has gotten rocked. It's down over 75% uh just in the last 24 hours. Now originally you might think like okay why did CZ do this? You know If if you think that CD CZ was the one who shot the gun. Um why did he do this? There may have been in his mind an expectation that okay if I if I hurt FT FTX I it's a it's a chance to take out a competitor and I can consolidate.

I don't think he realized how bad it would be if something like this were to happen. Like the reality is that the entire crypto industry is down more than 12% today. Uh Bitcoin Ether everything is down massively. And there's there's a lot of fear about if good things get worse if we see real contagion kick off and if we see an impairment in the lenders as much as what happened with three arrows. And so I don't think I don't think CZ fully understood the consequences of what would happen if he were to try to take down FTX. It's always been a bit of an open secret among exchange owners that FTX was never very profitable.

And it was kind of weird that they were so big and they were spending so much on marketing and they were they were they were were aggressive and they were so loud. Um but of all the big exchanges, FTX was probably the least profitable except besides Coinbase. Coinbase is maybe the only exception which is somehow losing money. Uh, almost every other exchange made money. They especially that did derivatives, right? Derivatives are incredibly profitable. But FTX was the least profitable of all the big exchanges. And it was always very confusing to other exchange founders what is going on at FTX? Like why are they raising so much money? Why are they becoming so successful when we can tell they're not making that much money.

And I think now have a clear idea of what the answer is. Is that FTX was a way or sorry, potentially the suspicion is that FTX was ultimately a way to fund Alameda research where they made the real money. Oh. And now is when we saw the whole thing unwind. That kind of maps I'm still in shock about that and I almost don't believe it because they positioned themselves as the pro-regulatory exchange and they were trying to come into the light in the US and you know, from from offshore and so it beggars belief that they would do that. I would never never have expected that. I was completely taken by surprise. But that does track in terms of the path dependence of this whole thing cuz Alameda was first.

You know, Alameda came first and then FTX was created and so if you see it as a vehicle to get more deposits and and allow Alameda to obtain more leverage, it kind of makes sense. But it still shocking that they wouldn't adhere to the basic basic principle of running a crypto exchange which is maintain a full reserve. So speaking of which, soon after this whole debacle was playing out, CZ announced that uh, Binance was going to start doing proof of reserves. And Nick, this is something you've been you've been very vocal about. Can you explain very briefly what proof of reserves is and why it matters here? Yeah, and there's also misconceptions about this. People think proof of reserve is just one side of the balance sheet. That's not true.

Okay? Proof of reserve actually does refer to both the liabilities and the assets. Okay, so it doesn't when people talk about proof of reserve they are talking about a procedure in which you can call it a proof of solvency even although of course maybe that might be overreaching cuz that's always hard to assess. But proof of reserve is like a term of art which refers to a procedure whereby you compare the assets that you have to user liabilities on a platform. And it has been done since 2014 in the wake of Gox.

Actually there's an interesting story there with CZ. I think did want it OKCoin back in the day when he was CTO at OKCoin and now he's is announcing it at Binance. But so basically the what you do is you do a trivial proof of assets held on chain. That's the easy part. Then you do you sum up all the liabilities and you kind of attest to the user liabilities on the platform. Optionally then you give depositors the ability to verify that they're included in that liability set. Typically done through Merkle type proof and and it's not that complicated.

There's code out there to do it. BitMEX did it recently. Kraken did it recently. So it is technically doable although challenging if you include margin and other types of accounts and obviously as you add blockchains it becomes more difficult to do. But basically it's a way to prove that your assets and liabilities match. And now we're seeing renewed enthusiasm around it. Binance of course the most important firm in the industry has announced they'll do it. Frankly I think it's going to be extremely challenging for them because they have such a tangle of assets. I Actually it's going to take I joke that it's going to take all five of the big four accounting firms to figure it out for them.

Because it's just very hard. But yeah I'm very encouraged it's happening. I just wish it was happening under more auspicious circumstances. It is part of the ethos of crypto really which is uh don't trust, verify. And crypto the whole point of crypto is that it should make this stuff easy. Now, okay, look, there's complexity as you're doing derivatives, you have different blockchains, you've got all these like kind of weird esoteric assets that you're trading. Um but at the end of the day, I I completely agree with you that this this should be in principle doable. And I think one one of the big lessons from this is that nobody in this industry is unassailable.

Right. We thought we learned that a little bit with three arrows, but clearly we didn't. We didn't we didn't learn that. And I want And I want to me a culpa because on the last show we were saying that we thought this whole thing was overblown and that you know, there wasn't enough Not that it was overblown, but that we didn't there wasn't enough there in that CoinDesk report to actually know what the balance sheet of Alameda looked like. I had no idea that this was coming. And till yesterday, I mean, I wasn't tweeting about this, but I thought Alameda and and FTX would be fine. And talking to the lenders, the lenders who had loans out to Alameda as of yesterday, they thought that Alameda would be fine.

It was very quick and sudden that people realized that this thing was over. And I think it was really the the fact of what was happening at FTX that made all of this very quickly come to a close. If there was actually a line between FTX and Alameda, I actually think that things would have been okay. But it turns out that there was this whole underground tunnel that nobody else knew about and that was never disclosed by FTX. Now, again, this is all speculation. We don't know until we know what happens in the end. But one of the core questions now is one, um is CZ actually going to buy FTX?

So, he announced that this morning. And I think this morning, the moment that he announced it, marke- markets jumped up. And it seemed like there was going to be a broad recovery. And then soon in the hours after uh the market dumped again and it went even lower than what it was before the announcement. Um what do you guys think about the likelihood? It's very clear when CZ tweeted this that it's like, "Look, we are not committed to buying FTX. We are in due diligence. We've given them an LOI, but we may we have reserve the right to walk away from the deal. What do you guys think happens from here with respect to CZ buying FTX? I I would say 60% probability that the deal closes. Totally arbitrary number, but I mean I think they're going to find skeletons in the closet. They may have

been aware of them already, which is why they launched the attack and felt empowered to do that. But the prize is enormous. I mean FTX is maybe not by user account, but still by breadth of product and just the quantity of things they've built over there and the and the innovation and dynamism rivals only Binance, I would say in terms of the offshore exchanges. So ultimately it's a massive opportunity for them to just consolidate and and grow their reach and and control of the industry and and get access to this additional user base. So I think it's in their interest to do it.

It may be at a complete fire sale price. I'm also very curious to see where if that gets consummated. Yeah, I also wonder if like SBF is you know, using this tentative deal as a way to find other funding to remain independent in the background. Um I don't think anybody else is going to step up and do So you think that's It was possible this morning. Yeah, I think it was possible this morning, but after this afternoon, I think I think FTX has got only one potential acquirer. Okay. The fact that they were trying to raise 5 to 6 billion tells you that there is nobody in this industry who can pay up other than Binance. Wow. Right.

Does Binance even have the the could they buy for cash or would it have to be for Binance equity? I mean there to be clear, I'm talking about the hole in the balance sheet. I'm not talking about the enterprise value. I think the enterprise value for FTX is negative. I I don't think anybody will pay for this. It's insane how closely this mirrors the BlockFi situation. I was going to say this is BlockFi. This is BlockFi. can't believe that it's the same thing, but now it's happening to them. I and for a bigger, more reputable company. Like what what I what I've heard, and again, I don't know if this is correct, but what I've heard is that the deal, the shape of the deal is that basically, they take over the liabilities, no payment for enterprise value, and a kind of handshake that they'll

take care of the team afterwards. Meaning that basically, it's a fire sale. They are taking over the liabilities, and they're going to make customers whole. Now, why would you do this if you're Sam? The answer is that nobody else wants to buy this from you, and it's going to be much worse for you if FTX goes down in flames than if there is a smooth exit. And to be to be clear, I think a lot of what Binance buys is not even the customer list or whatever. FTX at this point has a terrible, terrible name given everything that's happened over the last 48 hours and what's going to come out inevitably over the upcoming months. I think it's more that he's buying lots of goodwill. He's buying lots of goodwill with US regulators. People will remember this.

If he steps in and saves retail investors and saves face for everybody who trusted Sam, I think it's going to it's going to buy him a lot of goodwill in the industry. The same reason why Sam bought BlockFi. I'm just saying his effective altruism philosophy um comes out even in moments like this. Uh cuz I I do you think you're right, he's trying to like benefit the greatest number of people at this point basically in in a bad situation. Yeah, just they don't happen to be uh crypto depositors. Um I think like I agree. I mean, this this kind of feels like BlockFi redux where it's it's not about uh it's almost like this is sort of macro story around smoothing out the industry, creating sort of this like quieting effect, making people whole. I

mean, honestly, like you know, what is a few billion to to Binance to to CZ? Like, you know, this thing prints money. Um and so, I think for them to, you know, basically acquire this, I I think the the downside here is just the concentration in the industry. You know, Binance becomes massive compared to all the other players, especially players that have shut down in the past year um or just or has really really fallen off. Um and you know, what does it mean when 80% of, you know, crypto volume goes through one single entity, which is you know, not that inconceivable in the future. I was just going to ask how you know, obviously Binance's regulatory situation is not clear, but I did wonder at this point I don't know, US regulators might get in in some way just because

I mean, I don't know, it's offshore, but I'm sure they have plenty of US customers. Well, no, no, no, no, because FTX has a US arm, right? FTX has a US arm. FTX US is unimpaired. FTX US is still processing withdrawals. I'm not talking about FTX US or Binance US. I'm just saying I well, my question is just when you have even if it's offshore such such a such concentration in the industry, like would they find some way to get involved? I don't know, you you might know better than me. US regulators have no jurisdiction over what's happening to non-US customers, right? Both FTX and Binance have US entities.

about BitMEX? Yeah, but BitMEX BitMEX was was BitMEX got in trouble for serving US customers, right? Like they they had like a very weak IP block. They were knowingly taking on US customers, and that was the jurisdiction. That was how they established jurisdiction over BitMEX. For Binance, I mean, there have been other claims like that for Binance, but not since Binance US has existed as far as I know. My my suspicion what happens is that So, Binance did not claim that they're acquiring FTX US. My guess they want nothing to do with FTX US, right? They don't even want to touch it because that would trigger that would trigger CFIUS, which is like basically, you know, if you have foreign investors investing into US companies, there's all sorts of regulatory reviews. They don't want to touch any of that. And FTX US, there's no way FTX US was doing any of the funny

business that FTX International was doing, right? And it's much smaller. I see Laura's point a little bit is that if these were US firms, the FTC would be looking at it for antitrust. Um and obviously that's probably not the case here but you know, in a if this was a if this were a US transaction, there would certainly be eyebrows raised about the concentration in the industry and maybe there's no entity that actually has that actual regulatory ages, but I think it should cause concerns actually that basically the two largest effectively offshore exchanges are now one.

To be to be clear, FTX was not the second largest after exchange. FTX was probably number four. Okay, but still still very material and you know, in terms of influence maybe over some of these networks, you know, where they had a close relationship with them. That's only going to be increased now. That's definitely true. That being said, I think in these situations if there were I mean there is no global regulator who like who does that like what the FTC might do for the US, but this is one of those situations where I think everyone is going to look the other way because the consequences of pulling this back are so disastrous for everyone that it's like look we we'll figure it out later.

For now, yes, please let's minimize the damage to markets. The thing about FTX as well to understand is that although FTX did a lot of volume most of FTX's volume was institutional. It was not retail. That was what FTX had a reputation that most of the trading volume FTX was institutional, which is why where where most people really wanted to trade if you're a market maker or a trader, you want to trade on Binance. Binance is much more retail than FTX does. Coinbase is much more retail than FTX does. And so because so many users of FTX were institutions I think that also makes FTX going down extra bad or bad in a different kind of way I should say. It's not it's not worse than having retail lose money.

Retail losing money is is very very bad. Having institutions lose money hurts you in a very different kind of way. Which is that I think it's much more likely that if FTX goes down that there's going to be a lot more regulatory heat on crypto. There's going to be a lot of institutions that pull back from crypto and think that crypto is not fundable. I mean what what do you guys think are the knock-on effects of such a massive and such a well-publicized exchange going down like this, especially if they're not saved by Binance. I think there's a bigger question around crypto venture. If you can have Sequoia and Paradigm and Temasek and Tiger and like all the big names, you know, piling money into this thing, um which is supposed to be, you know, sort of this, you know, A-stamped, you know, approved

investment, and have it be a massive write-down, how do LPs sort of think about crypto venture as a whole, um and and that component of the industry? Yeah, and I actually want to echo Nick's points at the beginning about contagion, because if FTX and Alameda really are just like, you know, um the same two-headed creature, basically, then, you know, it's going to be very similar to what we saw before, and yeah, there could, you know, be knock-on effects to other players like Genesis and DCG, which, you know, those are similar They're They're just like those kinds of names that that have a certain level of quality associated with them, certain level of trust. And if those have, you

know, repercussions from this, then it's just it's bad for the industry. Yeah, the the crypto lending space, this might be the last shoe to drop. I mean, Genesis was already deeply, deeply in trouble, and God only knows how they'll react to this. I believe they did still have loans outstanding. Uh there's They're not the only lender. Alameda, after the the dust had cleared, was still one of the big borrowers. Um and so, if if they go down, it's another credit crisis that's upon us. And it's not like people can really handle it.

Like for the um the the uncollateralized loans in DeFi, a huge portion of all of them were out to Alameda. So, I think that was true on TrueFi, I think it was true on um Maple, if I'm not mistaken. Uh and I think these all of these lending pools are likely to be in trouble if Alameda is genuinely insolvent. The other thing we haven't talked about is just the political winds in the US. I mean, uh Sam was really meant to be the white knight in terms of professing a open regulatory stance, you know, being the emissary from the crypto industry, and uh you know, preaching moderation, preaching engagement with Washington. You have to imagine his the bill they were working

on the DCCPA is probably dead in committee at this point. Um I think there's a huge loss of reputation. I don't see why Washington would engage after this. It's also the midterms today. And Sam, you know, obviously was a heavy Democratic uh donor. It doesn't seem to be the way things are going in the election. I I do wonder what the consequences I will be. I think a lot of the Democrats that were engaging happily with FTX and with Sam now just take a step back from the industry and and think to themselves, yeah, this crypto thing was a wild cat sort of crazy industry and and you know, let's not engage carefully like, you know, why why bother if if

this is the way that things actually are. I was looking at um well, I mean, yeah, there's there's a lot going on today. US midterms. Tom shared a tweet earlier that uh today is a very bad day for Sam cuz not only did he lose FTX, but also it looks like there's going to be a red wave. There's a there's a market on Polymarket, a very a very illiquid market that asks will FTX become insolvent by end of year. Right now, it's trading at 40% yes, which is um which is which is which is basically a prediction of whether Binance will buy them out.

I I I hope that they will. And I and I think Nick, it seems like the market agrees with you that there's a 60% chance that this deal goes through. But the the scale of losses on FTX's balance sheet must have increased dramatically today. And so what might have been 5 to six billion last night could be much more than that today. And I don't think I don't think Binance would buy FTX for 20 billion. I think they might pay five. Maybe they would pay 10, but they would not pay 20. So, it really depends on what the damage looks like after today, and we just don't know.

But if Binance doesn't buy it, then I think FTX is probably toast. The other The other question, so one thing that we've seen across the board, especially yesterday, was everything that Alameda owns or FTX owns has been dumping aggressively. And at the center of that empire, of course, was Solana. So, Sam and Alameda and FTX were known as being very large holders of Solana, as well as very large advocates for Solana. And with the with basically Alameda having to sell almost everything they have in order to meet margin calls, there's been mass selling of all Solana tokens and everything in the kind of Solana ecosystem.

And so it it kind of poses a real question. Just very recently, we had Breakpoint in Lisbon. It poses a real question of one, how viable is Solana as a layer one without the support of Sam and of the FTX empire? Do we think that this is going to be a long-term impairment of Solana or has Solana already achieved that escape velocity such that, okay, it started with Sam and their associates as as, you know, being the initial launchpad for this blockchain, but does it have a life of its own? Just yesterday, we saw uh we saw um Polygon flip Solana for the first time, pushing Solana out of the top 10 tokens by market cap. What are your guys' views on on Solana and what happens from here?

I actually think Solana has exit velocity here. I think I see enough traction in that ecosystem, enough organic enthusiasm, enough developer activity, startups, infrastructure etc. I would say I subjectively from my view I consider them maybe second most active smart contract uh ecosystem. Uh so I actually do think they can survive this. Uh obviously a big loss of confidence in the sort of primary sort of underwriter and patron of that ecosystem is out down for the count, but yeah, from our perspective I think they actually will stick around and you know, so the the core Solana bet remains unchanged. It's kind of a bet on the

sort of monolithic blockchain, the composability, uh the you know, benefits to a DeFi setup that you get with sort of like the larger throughput and the higher frequency and things like that. So, yeah, from my stance I actually see them surviving. I agree. I don't like I didn't get the sense FTX or Alameda were like a big part of breakpoint. If anything, like Jump was a bigger part with uh firedancer, which like their FPGA client that's supposed to be way faster. So, it's like it's not like it really hinges on them anymore. I I also want to circle back to the lending bit. So, I was actually just looking through like Maple and TrueFi and again, a testament to the ability of to be able to being able to do things on chain. Uh Maple actually

doesn't have any loans outstanding to Alameda at this moment. Um I think TrueFi has like 12 mil. Um so, not actually that that bad. That's good to hear. And then yeah, that's a that's a beautiful demonstration of why the DeFi hybrid approach lending is better. You know, when would you have been able to do that from the centralized lenders? That's fair. If you if you had some money into one of these centralized lenders right now, you'd have no idea what your exposure was to Alameda. Whereas um using using these on-chain ones, you can see the entire loan book.

And so, it does it does speak to the transparency, the value of transparency. And and if anything, that seems like that was at the core of what went wrong here was that nobody knew what was happening behind the scenes at FTX except the people who were in charge. Yeah, and the good news is like we have these crises, they're not fatal, and then we have reform. So, I'm not saying the crypto lending market is fully reformed, but we're seeing green shoots. We're seeing much more enthusiasm for the hybrid under-collateralized lenders. There's not just those two names, there's a whole bunch. Um and then hopefully in the centralized exchange space, I think this will finally be the catalyst actually other exchanges reach out to me as I'm like the proof of reserve guy for some reason.

Um and tell me, "Yeah, hey, we're doing proof of reserve. How do we like get on your website?" Cuz I have a tracker. I'm like, "Well, you just tell me and I'll put you on the website. I don't I don't charge a fee." Uh as if there's some sort of admittance fee or something. But so, I'm actually seeing many more exchanges now take proof of reserve seriously. I think I think it'll be written into legislation, actually. Uh I think a smart policy maker writes that into law, says, "Yeah, you guys have the tools to do this. Do it. You have to do it. You haven't done a good job of doing it on your own." And it that converges CeFi and DeFi a little bit, right? You think about what DeFi lending is, it's all proof of reserved, uh you know, fully proof of reserved. So, you know, let's

converge the two. Yeah, that's what I was thinking earlier when we were talking about how CZ promised that he was going to do proof of reserves for Binance because I was like, "Oh, how ironic it would be if CZ of all people is the one who's kind of showing regulators the benefits of blockchains and um you know, this kind of like source, you know, transparent blockchain basically." Um I I just was like, you know, cuz normally the regulators, they want to like just have all these intermediaries who are checking everything, blah blah blah, you know, the whole bit. Um so, it'd just be hugely ironic if this person out of all people is the one who kind of shows them how to do it.

CZ is doing some real art of war stuff right now. Like this has been an absolute master class over the last 24 hours. So true. It is an irony though that we get these crises because of the lack of transparency. The the confidence crisis with FTX Alameda was because nobody knew. It was a black box, right? And we weren't getting a lot of communication. In theory all this stuff can be run under transparent. We're using blockchains. That's the main critique of blockchains frankly is that they're too transparent. Let's take advantage of that.

I remember when uh when Sam was on Odd Lots and he was talking about uh the magic of putting money in a box. And it turns out that that was what he was doing all along. Was uh allegedly allegedly. Uh that we were putting money in the box and he was taking money out of the box and trading it on chain. So the idea of you know if you recall you know when we were talking about Celsius we talked about how you know we called Celsius a lender sort of as a euphemism, right? Celsius was really a hedge fund.

Because you were putting money into Celsius and you were basically giving debt to a hedge fund. You're not even in the equity tranche, right? You're giving debt to a hedge fund. Hedge fund goes and does crazy stuff on chain. If it doesn't work out you take the loss. If it doesn't work out you get a coupon, right? It turns out that's what FTX was too. Now again I say turns out allegedly we don't know. Um but it seems like that was the exact ultimately the exact same thing is that you had your money in a hedge fund. You had your money in Alameda. And you were getting nothing actually for it. You weren't even getting a coupon. You were getting nothing. Which is a much worse deal than even the people in Celsius. At least some people in Celsius got their coupon and could get out.

I guess where I want to end this is I I feel like there's two audiences that we should speak to. The first is you know people in crypto who maybe are new to the space and are just like what the hell is going on? Like I I come here you guys tell me this big story about how great crypto is, how transparent everything is, you guys are reinventing the financial system, and then all I get is 3 Arrows, I get Terra, and now I get this. Um explain yourselves, otherwise I'm out. What would you say to somebody who who who tells you that?

I was actually thinking about this today. Um you know, behind all the craziness, there are people building normal, functioning businesses that are boring, that they're normal exchanges like Coinbase, there are normal investment funds that, you know, operate completely solvently and and normally, but they're just boring. And so, I don't I don't know what it is that like causes these sort of incidents to continue recurring, if it's like the type of people or the technology or the market, but there's no inherent reason why, you know, people have to play these games. There's tons of businesses out there that don't do these things and are totally fine, but maybe there it just becomes too attractive to, you know, chase after these opportunities to, you know, sort of behave less than

ethically, but it's it's it's not um inherent in the technology in my mind, it's it's maybe something else. I'm reminded of uh Lion from uh for all his flaws, you know, still a great writer in his book Fooled by Randomness, and um I think it's first book when he was still sort of hungry and good, and uh he says, "In any market regime, the best-performing kind of traders or entities are the ones that are sort of most overfitted. They've they've most carefully fit their strategy to that particular market regime.

When it turns, they're the most exposed. So, the best-performing entities in a given market circumstance, uh if things change, they're kind of the most exposed. So, you can't expect that it's With some exceptions, of course, you have funds that do extremely well for decades at a time. You can't expect that the guys that did the best recently are necessarily going to do the best when things change, and you know, I think Sam was sort of like the Sam Empire was the preeminent success story of the market over the last couple years. And I think that is the problem is they became you know, somehow accustomed to that market regime and and took on, you know, additional risk and they became enamored

with their own success and and felt that they were invulnerable. And I often think about that. Maybe it's a form of cope. Um but I you know, I do think about the fact that if someone, you know, appears to be sort of like the killer success story of crypto, then you should really you know, consider what happens if market conditions change dramatically, which they did. Laura, what would you say? So, I don't I don't I don't view my role as like trying to convince people that, you know, crypto is good or whatever. I probably, you know, I agree with Tom that obviously the the the crypto industry is vast. There's kind of good players and then shady shady and unsavory characters,

like in most things in life. Not going to lie, I still find some of the idealistic parts of crypto like very appealing and I actually feel that some of those areas have shined in different ways throughout this whole period starting, you know, since back in the spring. Um so, you know, maybe pointing out some of those things. But, you know, overall, I think most people probably would agree that everything that happened here will be a net benefit for crypto in the long term. And kind of the earlier we get like certain people that are kind of not acting above board out of the space, like, you know, the better it's going to be for everyone. Obviously, there's going to be a lot of pain during this period of

turmoil right now, but, you know, ultimately, like it will be for the good. And so, you know, maybe you could just say to somebody sort of like, "Stick around while we like weed out all the all the shenanigans. You know, something like that. But one other thing that I was going to say um was just about oh oh I had a funny thought about like a very ironic thing. You know, Coinbase was so upset about um the Wells notice that the SEC threatened based on it wanting to do with lend product. And I'm like, oh, like maybe they're like, oh, maybe it's a good thing we didn't do that.

So um that's just like an ironic uh kind of little coda to this whole thing. Yeah, one thing I'll say quickly is that, you know, a lot of people got upset with Sam because he was advocating for sort of like a C5 first approach to crypto regulation, right? With DeFi, I don't want to misrepresent what he said, but DeFi apparently sort of more of an afterthought. The tools to move on from this kind of crisis, whether it's the credit crisis in the summer, uh maybe another credit crisis now, the centralized exchange crisis, those tools are simply just reacquainting ourselves with the sort of underlying core values of crypto.

Right? Focusing more on DeFi, more on transparency, more on the you know, actual like transparency that we get from using crypto assets, right? On trustlessness, right? On not trusting, you know, large centralized providers. So, we have the toolkit laid out in front of us. So, if anything, I think this should be a reminder. Yeah, you know, these big centralized institutions are not inviolable, you know. There is an alternative way, and that's just the crypto way. I will absolutely echo that.

In the Bitcoin white paper, Satoshi says, I have laid out a way to transact without trusted intermediaries. That was what Bitcoin was originally all about. And time and time again, we learn what happens when we re-centralize power into trusted intermediaries or institutions, and we build cults of personalities around people instead of understanding the incentives, the mechanisms, and ultimately the code. That's what crypto's about. That's what it's been about from the very beginning. And so to me what all of these you know, this is the oldest story in crypto. It happened with Mt. Gox. It happened with Three Arrows. It keeps happening. Right? This idea that you need to stop trusting people.

And you need to start trusting the system. The system that we are trying to build here. Again and again, the story of all this stuff is that it's not Bitcoin that breaks. It's not Ethereum that breaks. It's not DeFi that breaks. It's not Compound or Uniswap or any of these things that break. It's the it's the institutions that we build around people and individuals who have incentives that drive them in a wayward direction from the incentives of their users or their customers. And at the end of the day, to me it's a reaffirmation that we should be finding ways to use this technology, as you pointed out Nick Carter, with uh sorry, Nick Carter.

As you point out Nick, with with proof of reserves and being able to lean further into the power that this technology gives us that isn't available in the regular financial world. Right? To me, that's so much of what the take home is of this whole debacle. Uh crypto was built to give us the tools so that this kind of thing doesn't need to happen. And my hope is that um we learn from this. And we do learn a little bit every single time. Right? We do push the vanguard forward every single time in terms of the transparency, the real-time, the analysts who are looking on chain and figuring out where is this capital going, where's that capital going.

There's there's so much more clarity on how this story happened in real time. Remember remember how long it took for Mt. Gox for people to realize the money wasn't there? Compared to today, all of this stuff happened in a single day. And so we are making progress, but I think there's still clearly further to go in understanding what the promise of this technology actually is and how to harvest that in a world where obviously we do need to have some connective tissue with the traditional financial world. That's a lot of what FTX the story was about, was that we are going to be the gateway from the old financial world to the new financial world. Um, we do need that, but we need to leverage the power of crypto and the transparency that it brings to do that in a way that that ultimately works in the long run.

Right, but so I I agree with you that is one possible and very um, you know, valid conclusion. Um, however, I do see a risk for regulators to have a different conclusion, which is So, obviously the whole issue around like why why people were upset with Sam over the DCCPA thing is had to do with DeFi, obviously. That's not you know, this doesn't involve DeFi. However, in general what what that, you know, sort of debate was about was like getting regulators involved in an area where people were crypto people felt like hands-off. This is not an area where we need regulators. We have, you know, on-chain transparency, blah blah blah, right? And also I think people are very

protective of developers. And actually the Tornado Cash thing today sort of shows that the government is amenable to that idea of kind of, you know, exempting developers from some of the stuff. But I do see how some of what happened in the last 24 hours could actually lead regulators to, you know, this other conclusion of like, oh, we need to be more involved. We need to make crypto more We need to make sure that these crypto institutions, if they're exchanges or whatever, act more like banks. And, you know, there So, I don't know. So, I I'm I'm not saying that what you're saying is wrong. I actually feel like that's a perfectly reasonable lesson to take away from this, but I could see someone with a very different background reaching a completely

different conclusion. So, I wouldn't say necessarily that like the end of the story is like, don't trust in intermediaries because a lot of regulators, their solution for things is to use intermediaries. So. That's that's totally that's totally fair. And I want to make clear and this is this is maybe an extension of the point that you're making like if you look at the all the US exchanges are very highly regulated, right? FTX International was based in the Bahamas. And apparently Bohemian regulators somehow this this I don't know snuck by them or whatever it is that FTX was doing, we still don't know the details, was okay in the Bahamas or maybe they hid it from the Bohemian regulators, we don't know.

But the US cannot regulate everything in the world, right? Like ultimately, no matter how restrictive you make US regulations, Coinbase is not doing this stuff, FTX US is not doing this stuff. It's the businesses that end up getting pushed overseas that find themselves in these weird weird pockets of you know, potential alleged malfeasance. And so, I think it's it's not it's it's not you can't rely on regulators because if you rely on rely on regulators the the companies are going to pick up their headquarters and leave. They're going to go from Malta to here to there to Dubai to whatever blah blah blah.

That's what they do. The moment that a regulator gets tough, people pick up and they go somewhere else. Yeah, but then the weird twist is everybody's always criticizing US regulators, but then it's like oh, well, because they're so strict like this kind of [ __ ] doesn't happen here. So I'm I'm not criticizing US regulators. I yeah, to be clear, I think US regulations would make something like this impossible. And which clearly they did because FTX US didn't do any of this stuff, right? And so, it's not just about protecting I don't think there's something you can look to regulators for. It's something that we have to look to the industry for. We have to look for ourselves in the industry demanding different things of the services and products that we use, right? If people say that exchanges need to do proof of reserves or I won't deposit my money

there, they will do it. Period. It doesn't matter where they are. It doesn't matter if they're in Dubai or if they're in Timbuktu, it doesn't make a difference. They'll do it if that's what the industry demands. I love it. point that I'm making. That's a great point. Yeah. I agree with that. So, I guess the the but the point you made, Laura, is is a very good one. Once again, regulators are watching. Regulators are like and lawmakers are like, "What the hell is this circus? You guys told me that this guy was so great and he's he's he's uh you know, this boy genius uh gives away all his wealth explaining crypto to us.

which like adds, you know, I know. He's got the funny shoelaces. He's got the crazy hair. He sleeps in a bean bag. You guys are telling me this guy's the second coming and and and now look where where I am. Last thing and then we can wrap. What would you say here to lawmakers or regulators? That there are still decent operators in the industry that are actually interested in safeguarding client assets and and running real businesses and you don't have to look far to find them. But, you know, don't be dazzled by, you know, the Sam Bankman-Frieds of the world coming in with a huge budget, slinging money around Washington. Like there's other people to engage with in the space and there's other firms that actually do want to play by the rules and protect their clients and things

like that. I think some of the blame is small very small portion of the blame is due to the folks that got sucked into the mystique of Sam and the cult of personality they built as as is the case a lot of these other collapses we've seen. And um you know, it's the crypto regulatory story is clearly not going to be written by him. Uh it's going to be written by the people that are left after the rubble's uh settled. Yeah, I think you know, the flip side of good regulation is strangulation and a chilling effect and not letting entrepreneurs start and build businesses. And I think in my mind, you know, we have the technology to sort of get the best of both worlds of a um transparent, you know investor-consumer-friendly

business, but that also allows people to experiment and try new things and serve their their niche. And I think of it a little bit almost sort of like um end-to-end encrypted messages where we don't need a central, you know, authority to go through and make sure that people's messages aren't being read. We just have the technology to sort of enable that by default. Um and I'd like to see the industry move more towards that of allowing us to sort of be compliant with what we want from these products by default um and not sort of uh relying on a a government or a central authority to enforce those. I don't know if I want to give a a message to regulators necessarily. I I don't want to like speak for the industry, but what I will say is that, you know, I sort of now see this kind of

little vacuum where the industry had certain players that it relied on to put a good face forward and Sam definitely was preeminent among them. And, you know, when you look at some of the other exchange owners, you know, Brian Armstrong is just too Brian Armstrong is he's I don't think he's going to like step up to the plate unfortunately, you know, it's just not in his character. Um Coinbase, you know, really like from from literally its first days tried to be that, you know, good actor, work with the regulators, and yeah, Brian is just not the person who can be a face. They have this huge compliance department.

They have a lot of people that, you know, go to Washington and interact with regulators, but they don't necessarily have a good face. And because of their frustrations with regulators, now they're often in this antagonistic role. The Winklevoss twins, you know, the a similar situation, you know, obviously they try to put forward a good face and then now after the CFTC action against the you saw, I think some of the twins were like kind of trash talking this or they I I I don't I remember they wrote some tweets where it was just such a different tenor from their previously kind of more obsequious tone. I don't know, Jesse Powell, um he's more like, you know, I'll support CoinCenter to do the advocacy work. I don't see him necessarily, you know, doing that. And I

could keep going through the list, but I think you get the point. And so it just makes me wonder like, okay, so now what's going to happen? You've got kind of like the Katie Haun paradigm-ish people behind the scenes. Like is that what's going to happen? I I just don't know. Um but it's just something that I've been wondering because a lot of the narrative around like getting DCCPA done or any kind of crypto legislation done actually a lot of like a lot of what I kept hearing was like you know, oh, you know, we can all credit Sam Bankman-Fried for, you know, putting a lot of face time in DC to try to get legislation done.

That, you know, obviously went down the [ __ ] uh in the last 24 hours. So that's why I'm wondering like, okay, so now what's next? It'll be interesting to watch. I I've heard that the two most influential people on the hill within the crypto industry were Sam and then Katie Haun. So I think probably Katie's going to have to carry a lot of this on her shoulders now. Yeah, and in a way I think she's a better person to do it than Sam because she spent how long in government? I don't remember like what, 15 years or I don't even know. So in that regard like, you know, cuz Sam is like what, like 20-something? I don't know how old he is but Like he's like 29. Yeah.

Yeah, he's kind of fresh out of college. Uh you know, Katie and I are like sort of the same age, so we like I think understand when you have relationships for a long time or you just have a certain like level of knowledge and depth of knowledge of working in an industry for a very long time. Like it just it is very helpful. So um Katie Haun, if you're watching, you know, um we think that the crypto industry relies on you at this point. Yeah, Godspeed. Please save us. I'd say uh Circle and Jeremy Allaire are also a big presence in DC now and they'll they'll have an opportunity to kind of reframe reset the narrative here. Yeah.

100%. Yeah, so what I what I'd say and then we can we can wrap up is that um I remember one line that Robert said on the show uh after the 3 Arrows collapse was that one of one of the lessons of that episode was that the problems in crypto keep arising when we do things Wall Street style instead of crypto style. And I think that was kind of the central theme of all the big failures that we saw this year was that when you see more centralization, when you see more trust in individuals, that's when you get these uh really unfortunate failures that surprise everybody.

Uh sometimes things fail, but when things fail it shouldn't be a surprise. That's that's kind of the the rule of how orderly markets function. At the end of the day, I would say, you know, what Sam was advocating for was for less regulation on exchanges and more regulation in DeFi. And it actually seems like the lesson should be the opposite. That there's probably there probably should be more regulation on exchanges and less regulation on DeFi in large part because DeFi was totally fine. Nothing in DeFi, you know, rugged anybody, nothing in DeFi stole people's money, nothing in DeFi tricked anyone into doing something they didn't intend to do. Now of course there are scams and there's, you know, all sorts of uh problems with with uh hacks and and things like that. Uh and those are things that the industry Yeah, and those are things that the industry gets

better at and it's figuring out its way to to get past because users demand it. But the story of centralized exchanges kind of, you know, it's the same story since the beginning of time. And I think the if there's one takeaway from this, it's that there definitely needs to be regulation in crypto. But I think the shape of that regulation depends a lot on how you see why this happened and how it should affect how users um interact with this industry going forward and the promise that this industry actually holds for a better version of a financial system. So. Yeah.

Well, all that being said, we've gone a bit long. It's been a long day. I'm very exhausted. I assume that you guys are too. I haven't gotten a lot of sleep lately, but we'll we'll be back next week. Uh hopefully things will be a little bit more calm by then. Thanks so much Nick for jumping on on short notice. Yeah, my pleasure. This is great. Yeah, and anybody wants to do proof of reserves, you know, you know who to hit up. He will list you for free if you do. Yeah, it's it's Nick Carter.info/proofofreserves, I think. It's a list of everyone that's done it. If you want to get on the illustrious list, just send me a DM. I'll put you put you on there.

Beautiful. Love it. We'll put that link in the show notes. All right. Awesome. All right, signing off. Stay safe everybody. Bye everyone.