SBF's ruse, NFT market predictions & Coinbase takes on Apple | Roundup

Transcript

all right everyone welcome back to another episode of bell curve before we jump in quick disclaimer the views expressed by my co-hosts today are their personal views and they do not represent the views of any organization with which the co-hosts are associated with uh nothing in the episode is construed or relied upon as Financial technical tax legal or other advice you know the deal now let's jump into the episode all right everyone this episode is brought to you by our friends at Avalanche they're the layer one blockchain that is fast stable and scalable you're going to be hearing all about them later in the show for now let's get into it all right everyone welcome back to another Roundup on bell curve you're joined by Michael's one and two no mics just Michael's on this show we got Yano

Advanced as well fellas welcome back glad to be back Vince you know Vance you didn't need to dress up so nice for us on this episode you look phenomenal you really gussied up I mean this is a casual program man I mean there's no need to go all out for this listen I got [ __ ] to do this as well oh man comfort not speed yeah just double fisting Lacroix out here where Vince give us a little background here buddy what what happened last time what did you get up to last night what's going on no we're not through this news oh man

look we can skip all right we'll keep it moving we can skip the personal we can skip the personal life stuff theme of this episode is a No Redemption Arc episode zero Redemption arcs all right this goes for SPF goes for Sue goes for Kyle goes for doe No Redemption arcs on this uh I do want to get your guys thoughts on the deal book interview that he gave yesterday with Andrew rossarkin so I watched this whole thing I thought to his credit I was a little bit worried about this I thought Andrew Oscar can actually did a very good job or just about as good of a job as you can possibly do he asked a lot of hard questions he asked very specific questions that I think he got a lot of the Nuance right I think he got about 80 of the Nuance

right there was one specific question they talked about money laundering or washing between Alameda and FTX that I actually thought he got backwards that we've talked about on the show and I want to clear that up and get your guys opinions on it but you know just in general what did you guys think of SBS decision to give this interview do you think he's you know Inc what's the word for getting himself in trouble from a legal liability standpoint do you think he's making strides in the court of public opinion what what are your high level thoughts and then we can dig into some of the specific uh my my initial read is that number one I don't know if you also saw the Good Morning America interview that he gave

with George Stephanopoulos that aired this morning um my visceral read and having gone through a little bit of this myself and ourselves is he's been media trained for this exact situation he knows how to answer the questions he knows how to how to give non-answers he knows how to divert the question into something that is not relevant whatever the question is in his answer um and and so the whole like my lawyer I'm going against my lawyers in their advice in going on these different interviews and talking about this stuff I think it's actually completely false I think this is part of a PR strategy to be able to have the ability to to have plausible doubt that he actually knew it was going on

um but yeah the I was also worried that Andrew Ross organ would basically serve him a bunch of softballs he was hitting him with every tough question and not letting him get off the core question which is when did you know and did you know and when did you know that you were using customer funds um in in non-okay ways um I think what became very clear is that Sam was just going to give no answer to that question he wasn't going to be able to give any sort of clarity uh and then he had to move on because he can't just keep asking the same question for 45 minutes but I thought basically a whole lot of nothing happened some of the people who aren't in our industry who I talk to that listened to the same interview thought number one it was a car crash he

just looked terrible like physically he looked you know not in a good place um and that his answers were just like non-answers and you can't just plead ignorance on a couple billion dollars of being misplaced based on mislabeling um so I I'm I'm hopeful that things will come back in the way that we all kind of expected they will I just don't know after all this whether or not that's going to happen um you know it seems like he's really setting up The Narrative of I didn't know what's going on I agree with Michael I mean he um I think there are a lot of people like I I like right when Sam got on I was like man this guy looks disheveled like come on buddy like you gotta he had that shirt you know when you like chew a

T-shirt and it looks like you're all stressed out and the shirt was kind of hanging in front like he's just not looking good but I as the internet as the interview went on as the interview went on I was like oh like he is constructing a really specific and deliberate public narrative right now and the the time I got really pissed off actually was when he made the audience laugh so there's like a series of three things he made the audience laugh then he goes right he he goes he bounces off of the audience laughing to talk about his charity work and like buying beds in Africa and then and then he got the audience to laugh again and it was like a series of three points in time and I was just like and oh and it

panned to the audience and the audience was smiling when he was talking about his charity stuff and I was just like ooh man like he is and he's he's painting this picture that like he's this he's he's like ignoring the advice of his lawyers and he's like you know he doesn't really want to he shouldn't he shouldn't he's he's like I shouldn't be doing this but like I you know I owe it to people you got to see through that you've got to see through that and the worst part about all this is I feel like some mainstream media folks and and other built like even black men who I think has is really smart and Kevin O'Leary juries out on whether or not he's really smart and uh and uh and I'm just kidding I'm just kidding and uh Henry blodged it from Henry Blodgett from a Business

Insider they were you know they're coming out saying that they like that they trust him now and I he's not doing these interviews out of the goodness of his heart he's using he's using this to promote a specific message um and that feels obvious and it pissed me up I I want to believe the idea that there's like this you know like deep state plan to like you know reconfigure and rework His image because like that feels like kind of orderly at least I think the alternative is just like this is just chaos he does not have a plan the people in the audience who are laughing are just idiots and don't get it Andrew Ross Sorkin maybe knows like 50 of the story like I think you know Sam is still in my opinion you know

going to be serving some sort of legal consequence in the near-term future I don't think this absolves him of that the money's gone like there kind of is no like like a crime has been committed the money is no longer there like I think we can give it but let me change but but so I agree van said I think he will get in trouble but what he did successfully in my mind with that interview for a lot of people is um it was actually Nick Carter posted about this and I think he nailed it he said this is legal positioning where perceived intent is the most important thing here he says as Nick Carter he said manslaughter is a lot less worse than first degree premeditated murder so he was admitting that things went really wrong but what he's trying to say is that things went

really really wrong because of risk management and over leverage and they were kids and they weren't sleeping and it was chaotic and like all these reasons why it went wrong not that it went wrong because it was premeditated and that was the goal of that interview in my mind and he successfully he successfully got a lot of people to think that totally so it doesn't matter the the intent behind something like wire fraud no it does well it does matter the intent if the the intent no it does it if you if he success if he successfully like it's a really different story the FTX story and Sam and Alameda story is really different if he set out to build FTX and they they had these backdoor channels in 2018 and 2019 and this whole thing was just a front to like take money like that's

really different than like at Luna head and in may like we got over leveraged and like it was just it's not it's not even that it's not even that you could start off without the intent of defrauding anyone but it really comes down to what are the actions that you took while you were you know doing all of these things so going back to it and one of the stories that we didn't cover uh but that kind of uh I think it was maybe last Friday or the Friday before Elizabeth Holmes was officially charged with 11.25 years of uh jail time because she committed wire fraud and the people that she committed wire fraud against were her investors specifically and the reason why I was 11 years is because the

court found that there was 121 give or take million dollars of defrauded value from the investors that her misrepresentation of the facts led to uh and and you could very easily assume you know intent with that because you wanted to raise a higher evaluation you you gave fake documents you gave fake financial statements whatever it was to be able to get that much value into your company that was the that was the intent that was the value but that's also sort of the multiple that I think you know if the same facts and circumstances are found to be here you can kind of assume that there would be some correlation to what what the what the time is the problem is how can you prove that fake

documents fake information fake uh financials were given to investors to to lead them in the direction of investing I think you know in a lot of ways that's what this will come down to the customers you know the the people that Elizabeth Holmes like allegedly told uh that her product uh allegedly told you know were either sick or not sick you know they didn't even choose to go after that right and I would actually argue you know like health is probably a bigger variable here than than money and so you know having misinformation on a health Factor wasn't even what the the prosecution decided to go after it was all going after the investors um and so I'm not a lawyer uh we haven't even talked to anybody about what you know the legal perspective is here but I

think you're going to go after wire fraud it's about proving what did the investors know and what were they you know misled to believe here's the reason why I think public opinion is always going to be is always going to be somewhat impactful because in America when a criminal proceeding is brought you are Tried by a jury of your peers so when when Sam made those people laugh in the in the interview it took me back to you I don't know if you guys ever watched the Jinx which is the story of Robert Durst so there was a period of time where not I don't know if people are familiar with the story of Robert Durst he's kind of the Scion of one of this big real estate new york-based families and he was accused of murdering his ex-wife and he actually moved down to Galveston Texas

and he on the record he he murdered his neighbor down there chopped up his body put him in garbage bags dumped him in the river they found out about this and he's getting tried and he has this defense of being he is this defense of self it's like self-defense I think is what he ends up claiming and he also he has these weird parallels to Sam because you kind of I know he's this monster and you watch him do these things but you sort of end up kind of being like um he somehow finds a way to humanize himself and the they during this documentary The Jinx they are interviewing the defendants the lawyers who represented him during the trial and they had this phrase that stuck out with me which was when Robert Durst took the stand and he was describing what

happened he had people in the courtroom laughing and that according to the lawyers was when they knew that Robert Durst was going to get off so I actually thought I don't want to read too much into this but I thought when I heard those people laugh what it told me was oh these people are looking at him as some kid who messed up and not as this criminal mastermind that's that was my interpretation listening to him which is exactly what which is exactly what Henry Blodgett the guy who started Business Insider tweeted he's like ftx's collapse doesn't mean that someone committed a crime they were just a highly leveraged financial institution their assets plummeted in value while their liabilities stayed the same happens all

the time incompetent Reckless and stupid yes but not necessarily criminal which is exactly what he wants you to think and uh yeah yeah but but like like there's a body here like the customer deposits were used to trade fraud was committed wire fraud specifically as well like I really I agree I agree with you guys but I think it changes his legal trajectory no no I agree with you I mean but I think he realizes that there's no way Sam can win an illegal process they're like no offends about Sam cannot win an illegal process so now he had now I think what he's doing is turning to the court of public and political opinion which can turn there's a lot of ways you can use that to your favor pardons sovereign immunity jury

nullification all these different things the one that comes to mind other than um SPF is Michael Milken kind of like within the same vein of like large-scale Financial crimes you know he was charged went to prison for 10 years but now he's he's out kept most of the wealth that he garnered from that I think he got pardoned by and didn't he didn't he thought like his narrative his Redemption Arc was Finding religion he's like I you know he's like I found I Found Jesus all this stuff so just like Sue found the law like he found Jesus and he actually got pardoned by Bill Clinton and so you know think think of you know

like let's let's just say that um let's say that I'm right you know and and he gets charged he goes away there's all these bad things that happen to him but he's in jail 2024 comes around Biden's doing presidential pardons towards the end of his his term you know what is to happen but SPF you know Garner's one of them that feels more likely in terms of like a how he evades the long-term ramifications of what he did that he gets off because he did a Good Morning America interview but I think it's all part of the same thing the public push for the the recognition that's not going to help him in a court of law in fact that only hurts him but if you're in the court of like you know one person's discretion to give you a

pardon maybe that public perception adds up but there's a very different situation between SPF and Michael Milken which is that Michael Milken literally broke Securities laws he went to jail because of Securities Law violations and misrepresenting of uh I actually don't know exactly what it is but but it is not using customer funds to do illicit transactions the other example of someone who has done essentially exactly what SBF did is John Corzine of MF Global where in I think it was the early 2000s that blew up he used customer funds over levered blah blah blah John Corzine never went to jail

and that's because they didn't prove that there was any sort of fraud it was negligence you know they were over levered Etc it's not necessary necessarily the case that because you use customer funds you committed a crime you violated your own terms of service you could get sued maybe civilly but it's not necessarily the case that you definitely committed fraud for doing that case as well is so he took all of his customer deposits and he used them to buy on margin Italian bonds and that position moved against him and he eventually like blew up and had to kind of you know fold up shop but if he had helped been able to hold on to those for

a few more weeks those actually would have risen in value and he would have been you know multi-multi billions in the in the green there's parallels here as well right like you know the financing came in eight minutes after you know like we we declared and like a lot of this stuff is um like you know could have would have Shoulda you know what happens if this you know doesn't happen in a week or happens in a month like maybe it's a different story it's kind of interesting there's another there's another element to this which is you brought up this idea of I think there's a lot of parallels actually to be drawn between SBF and Trump and I don't necessarily want to get political here but people were at one point there were these theories right the Trump is actually a mad genius right he's got this all scripted out and

I never personally bought into that but what I did think he had a very good sense of was how to talk to a room full of people and how to play the media and there's an element of playing the media here that I find like a little distasteful probably I I think if I'm being honest in my heart of hearts I understand why the New York Times did that interview with him and I think Andrew Ross Sorkin questioned him well enough that I actually thought it was that was actually pretty good journalism I actually ended up thinking at the end of the day but now you've got whoever the guy is from Good Morning America like flying down to interview him in the Bahamas every journalism outlet and podcast wants to interview him and to me that feels a little it feels a little gross I don't know I

think one of the things I think Trump did really well was even though he was always at odds with the media and calling it fake news he clearly found out what the algorithm was you know you said these outrageous things and every single news Outlet in America covered you you got probably tens of billions of dollars worth of of coverage for free and I wonder if I think SBF to his credit one of the things that he does well I'm not necessarily convinced anymore he's a master genius but I do think he has a good sense of what to say to people to get him on his side he kind of buries a grain of Truth in with a bunch of Lies if that makes sense he said something about ESG they asked him about the texts the Box texts and he was like well do

you believe in ESG he's like not really I think most people in this room also don't believe in it and I think that was kind of a good strategic move in that a lot of people while they might agree with the ideals of ESG in its current form it's heavily flawed so he kind of knows how to sprinkle in some truths with his falsehoods that I think a lot of people find convincing but whatever it is he's playing the media in my opinion I don't know what you guys think about all this coverage that he's getting the best sociopaths are the best at doing exactly what you just described he he's going for a pardon that that's that's my thinking that's really the only move that makes sense at this point you're not going to beat the charges there's like just like Robert Durst cut

up a body and then the body existed like you know there is the there is like physical evidence here like there's a negative account balance for most of their customers there's just no way that you can massage that away but you can get pardoned I'm not convinced that a negative balance necessarily means that there's jail time that needs to be served I I think you could chop that up to negligence you talked up to uh you violated your own terms of service corporate misconduct but those aren't things that necessarily require jail time that's a civil type of suit the thing that bridges into the criminal is and I think this was an another interesting part of it where he was like I didn't

create the back door I don't even know how to code it couldn't it couldn't have been me but like at a certain point mechanically that money has to move or or it started commingled and and you know it was a fraud from the start but like mechanically there is a point in the value chain where the money moves and a fraud is committed you cannot absolve yourself of that sin by going on Good Morning America although it is funny like how is that the show that he chooses to go on but that's neat okay so on the money moving part one something interesting about MF Global the way that it worked is there were there were more accounts on this but there were basically two accounts there were the customer accounts and then

there was the proprietary trading desk account and the way that it worked from a systems perspective is one dollar that started out in the in the in the morning of the customer accounts there had to be for every dollar that started out in the morning there had to be a dollar at night but that didn't preclude them from moving those Dollars around during the day that's how their actual accounting works at that at MF Global so it was a weird thing where you would thought oh that that makes a lot of sense right every dollar as long as it's there at the beginning of the day at the end of the day it means customer accounts aren't being touched in in reality there was a lot that you could do between the beginning and the end of the day right um so I I do Wonder this is where I

frankly just don't know enough about exchange and brokerage systems to to be an expert here I don't know if there's a logical plausible argument to be made that it was a systems breakdown I I hope I hope not that's my sincere hope but to be honest I was feeling a little bit not crazy there's only two paths one is there's a big pot of money and we're doing Alameda position margining and custom withdrawals from the same pot of money you know that's like the first model the second model is at some point you know they were separate and I moved money from one hand to the other to cover it some sort of shortage and you know we all assumed that it went from FTX to Alameda like in either of those circumstances a crime

has been committed you know what I'm saying like it happened I I don't know enough to my to your point I don't know enough the third path would be my question what is the crime that was committed the lizard people at the uh who are actually running the world they gave him a pardon that's the that's that's their best the crime that was committed was either the funds were co-mingled to start or the funds moved from one entity to the other when there was a shortage both are crimes why hmm why why would we why would

co-mainderland funds be a crime I mean that is a good point I think it's definitely against their terms of service which told customers exclusively or you know explicitly that that was not happening that would be fraud just via a misrepresentation um like that would have been the the fraud that was committed how did you guys think Andrew russkin did on one thing that I think is very difficult for because it's sort of a sophisticated scam that he was running with everything that he was doing with ftt this sort of low float scams and then borrowing against these low float tokens that he

ended up controlling frankly I think that's kind of a a tough concept for a regular average person to grok you know that's kind of that's kind of the trick with getting convictions on financial crimes people don't understand what rigging treasury auctions mean they're not going to understand games around low float and taking advantage of that but ultimately that that might have really been the business model you know to lose money on that Alameda and FTX side but borrow heavily and then just take that money out what do you guys think let's let's think about let's just the thing about that is that like you have the buckets of crime that were committed on the on the wire fraud moving money around the unregistered security side the same stuff that Michael Milken went to jail

for that's more of the realm of ftt and serum posting that is collateral and borrowing a ton of USD assets against that that's not a crime that's like you know maybe your counterparties are idiots and they're letting you too much but like that is not a crime let's describe it as a black box how about did you hear Jim yes Jim chanos is like that was the interview where people realized that that that uh yes that like what he was doing was was [ __ ] up so right after that interview advance and I I remember walking to the office being like wow I think we just saw Peak SPF like it's it's over you know and I I think the only way to describe it is you have this black box which you don't nobody really

knows the internals of but you have a system outside the black box to make the Black Box be super valuable really really like to the tune of billions of dollars maybe even tens of billions of dollars and you have found counterparties who are willing to take this black box and use that as collateral in the same way that you would have you know a HELOC on your house it's just like physical capital that you can borrow money against and the bigger that box is the more you can borrow and you can do so in an automated way but when the the system outside the Black Box stops working and the Black Box stops losing it stops increase in value and starts actually losing value that's where you get a mismatch of assets and liabilities but I I mean it's really really simple in

advance's point it's not technically illegal it also wasn't just ftt right it was like um no but no but also like what they did with um so so follow this so block fi did you follow did you see that block by suing Robin Hood or suing ft suing Sam to get chairs in Robin Hood did you see this whole thing if you followed the line of I was trying to work this out with Santi earlier today I was like block five is a creditor to FTX that lent to Alameda that lent to emergent which is Sam's shell company that had bought Robin Hood shares that were pledged as collateral to guarantee the blockify uh to block fight the lone to FTX that was used to bail out FTX itself

but [Laughter] it goes even further because block Phi is a creditor of Alameda and dcg blockwise the Creditor of Alameda and three arrows and then dcg is also a creditor of three arrows and three arrows has all these like startup Stakes that all these people are tied into it's it's just like a Russian doll of predatorship it's pretty unbelievable yeah I mean Sam purchased his stake in Robin Hood via a shell company via a loan from Alameda via a loan from blockfi that like yeah it's just cool let me ask you this so that entity that holds the Robin Hood shares did that file into bankruptcy along with the rest

of the FTX entities I don't think it actually did emerging okay so the oh okay so the it's called the shell companies called emergent the largest creditor to blockfi right now is uh is this other company it's a 700 there's a 720 million dollar line out to this one company I'm forgetting the name of Acuna or something oh and Cura trust company they have a 730 million dollar unsecured claim they're the largest creditor to F uh to block by us so if you look at the lock the creditors to block fi it goes SEC they have a 30 million dollar unsecured claim then a client like an unnamed client has like a 50 million dollar uh claim then FTX us

has a 275 million unsecured claim then there's this random Trust Company that's 730 million so so Ankara trust actually does creditor uh representation so it'll it'll bundle up a bunch of creditor claims and be like all right we'll go take this on and we'll negotiate with the parent company so there's a bunch of smaller people who bundled together basically right if you're trying to restructure your book like you can't just go deal with like you know tens of thousands of customers like you need to have one point of contact where you're like hey how does you know how does x amount on the dollar sound all right everyone quick break from this episode to talk about our show's sponsors Avalanche many of you know Avalanche as the fast reliable and scalable layer one uh the folks at Avalanche have a really great

message for those of you who are in the crypto industry right now which is bear markets are for building so while a bunch of our friends over in C5 are kind of going through these struggles and travails the folks at Avalanche basically put their heads down and are shipping products that Builders want the latest solution elastic subnets right and just to expand on that Avalanche is consistently upgrading all of their platforms right so on the platform side you've got elastic subnets you've got new VMS on the infrastructure side of things you've got core which Mike I just uh I know you used that the other day yeah exactly exactly uh so they're upgrading the infrastructure side with core and Enclave the chain has had like no downtime super customizable for devs uh yeah if you're a builder avax.network uh avax.network great place to be but do

Yano and I as well so you definitely go check them out click the link at the bottom of this episode click the link oh it's not going to get any credit come on yeah give us the credit exactly so yeah big thanks to Avalanche um yeah you I mean you you just had a great experience with them the other day on the user side of things so go check them out guys thank us later let's get back to the show can we talk for a little bit we talked a lot about dcg and Genesis last episode but I don't know if you guys saw this I dropped this in our chat but there was a this is speculation but this guy did some pretty good detective work it's a medium post I will I'll link it in the show notes here but on the connection in

between three arrows capital dcg and Genesis I'm not gonna it'll take me 20 minutes to run through all of this but this guy basically looked at a whole bunch of publicly available information public filings that dcg and grayscale had to do because they're you know um public companies that are registered not public companies but they have to register with the SEC and they sort of describe this chain of events and the link in between freeros Capital Genesis and dcg and it is I felt I got to be honest if this is correct which it's not necessarily 100 positive I feel a little bit less bad for the situation that TCG and Genesis find find themselves in because if this

is true is relatively irresponsible what was going on but basically there's a chain of events where where in three years Capital borrows BTC from Genesis as a lender with some small amount of collateral so I'm making up numbers here but let's say three arrows starts out with like 10 million dollars and they get 100 million dollar BTC loan from Genesis that's what Genesis initially did they did Bitcoin Lending what three arrows Capital then did with that Bitcoin is they went to Genesis as an authorized participant for GB for the grayscale Bitcoin trust and they pled they gave the Bitcoin and they minted shares of gbtc remember there was an Arbitrage there when gbtc was trading at a Bitcoin to at a premium to bitcoin where they could pledge the Bitcoin and then wait for six months and then sell

the gbtc at nav but what they did when they got the gbtc is they went right back to Genesis and then pledged the gbtc as collateral and got a usdc loan in which case they could that's like a recursive leverage that they're basically getting there and then they can either either keep running that trade into infinity or they can go out and go long a bunch of [ __ ] coins which is apparently what they actually did so it's just it's just incredible to me that so much of what was viewed as oh this is really smart smartest guys in the room was just yeah pretty basic leverage schemes you know I mean if this is actually true I

mean this industry is just so loaded up on Leverage is I don't think anyone realized it it's just on just unreal and it just [ __ ] unwounds so fast uh yeah I mean who's still lending now probably like it's a couple people in D5 that's it no there's no C5 borrowing available at the moment like we've gone from 50 million of loans issued in Q4 2019 by Genesis to 50 billion issued in Q4 2021 so we went up 100x and we just completely torched ourselves with all of that leverage and now we're back down to zero it's remarkable that we've round-tripped this entire thing um and like to your point Michael it doesn't look great like we don't I

don't know if it's true that's kind of whatever I mean we've long suspected but it does look like some sort of scheme to inflate the gbtc premium and generally just pump crypto assets that they hold not a great look yeah um as an orthogonal point to all of this um you know we have a number of banking relationships that expand past just like having a bank account and cash management uh anecdotally talking with them over the last couple of weeks even the banks the publicly traded Banks uh who are registered as banks of the United States they're not even able to touch any new crypto projects right now like they they have literally like closed for business as well uh at least

back in 2018 2019 again when you could literally couldn't get a bank account if you're a crypto company yep it's crazy yeah so they're they're their party line is like we're waiting for all the stuff to settle out you know like the silvergate stuff kind of gives us some some heartburn right now and um we just want to wait for everything to cool down before we take on any new customers it's like we've got portfolio companies that need bank accounts let me let me a little prediction here I would say that the obvious place of this leverage ends up in the next cycle is where like the big carry trades present themselves and like stake teeth in the next cycle is going to blow some people up that that's my prediction people are gonna do this recursive leverage thing

where they borrow against teeth and they assume it's all good unless the position moves against them and then either withdrawals are going to get stuck or an East drawdown happens and you know that USD collateral is going to get blown out and I think that is kind of like the next obvious place that I think this this leverage of cruise especially because a lot of Leverage will be defy native so it'll be very interesting to see that trade over the next couple of years play out I think that's a good prediction I think the one of the big takeaways from this from this whole cycle was just because some I've I've kind of broken record saying it's just because something can be used as collateral doesn't mean it should be used as collateral and Jason I had this little pet Theory where you remember there was

a period of time and it kind of it almost sort of happened a little bit with Ben Dow but where people were every everyone was trying to take out leverage use their nfts as collateral and that just has disaster written all over it that's just I'm sorry that is just not a good idea that is a that is always going to end in tears so I agree with you I think what I hope we we take away from this is not just that C5 failed us which I think it did but also that we should be a little bit more judicious in terms of what we use as collateral because that that's how you blow Financial systems up you know I don't know um

I I have a let's move on a little bit from our our Doom and Gloom here I want to talk about because there have been actually good things cool things happening uh uniswap launched its nft front end I suppose so we could talk a little bit about this I don't know if you guys had a chance to oh and back and back end too yeah they launched the whole aggregator I mean they said they acquired Genie back in June um that like so so there are two nft aggregators Gem and Genie uh openc acquired gem uh Universe Genie by the way there's an airdrop available if anyone's used genie before I think it was April 15th was the snapshot so openc uh unit swap acquired Genie and they basically have uh integrated it into unisol so if you go to uniswap right now you can click nfts at the top you click

the link and it's going to open a page you're going to think that you're on openc because it literally looks identical uh but uh they've got this great aggregator now it pulls in from like seven or eight different marketplaces right but the reason I was saying that's a front end is because this is a uniswap Labs product right this isn't uniswap the foundation the protocol that's doing this this is like Genie is uniswap Labs as opposed to uniswap that protocol the the foundation this is a I think it's pretty cool actually I kind of think it's a this is the way that I understand the growth strategy for uniswap there are two entities there's the protocol which is governed by the foundation and then there's uniswap Labs uniswap the protocol that's the sort of public good if you want to call it that I think you

could sort of dispute that because it has a token but that's the basic idea that it's sort of the liquidity layer and then there's a company uniswap Labs which has equity and they're supposed to build products on top of uniswap the protocol that leverage that protocol that's what Genie was I think that's what this is so I kind of think it's it's cool I think the the governance structure of a dow for uniswap the protocol makes a lot of sense you want that to be decentralized I think but then when you're building consumer-facing products like this you probably want a company doing that because they can be more responsive to customer needs move faster and be more competitive so I personally just thought this was kind of cool and I think it's sort of an

affirmation or directionally right for how thous could ultimately build and scale products I don't know if you guys have any other thoughts on this the interesting stuff that's happening to the nft market right now are you have uh nft or nft dexes like X2 Y2 um blur uh you know other ones that are basically building their own captive order books and they're doing it through things like you know no fee trading and that attracts like a different cross-section of customers and like they're starting to Chip Away at the openc order book which has canonically been like their really big moat and that's kind of like one thing that's happening the other thing that's happening is things like Reservoir are launching which is kind of just like aggregated liquidity for all nft order

books so like you can just build a front end and plug into this like open source liquidity and that's historically not been available and it just looks like people are just gradually chipping away at open C's kind of mode and I think like they're kind of the big loser in all of this is like I don't know what their market share is going to look like by the time the next nft Bull Run comes back they may be like a 10 or 20 share player versus like 80 or 90 or whatever they're at today yeah I think uniswap dominate like if I'm gonna buy an NFC right now I'm going to uniswap and I'm using this um so I think but I'm a re but I'm why you said yeah uh because I'm a retail NF uh retail nft buyer like I'm not buying anything in

size I'm just like buying a crypto dick butt here and there you know so um and I I just think they have the uh I just think that like they have the best pricing now so uh that's why I would do it if you're an ins like I don't know if you read Melton's piece about like the institutions are coming to to nfts um like the institutional folks are not going to trade on on this unit swap thing but like I think unit swap will will win the retail game here I'm not sure the institutions are coming for nfts I don't know I don't know if I quite believe that I'm just saying if they do if they do end up coming because there's Arbitrage opportunities or because you can trade whatever um

they're not going to use this uniswell platform I I think it's Hollywood what do you use to trade yeah what do you use if you want to go buy an nft right now open C I mean that was before you just swap was was uh yeah was available we also use Genie and and uh and Gem I just like when like I I never really used openc that much I always use gem just because it was like why why not use an aggregator you know on the rare times that I decided to lose money in nfts I did openc which was consistently lost money on every nft I bought except for burmes actually plug yeah armies are pumping right now 13 billion opens evaluation is looking like

increasingly suspect just as these products launch as nft volumes change and go down um it's definitely not the same Market that they raised in yeah well the openness of the craziest margins of any company I've ever seen though so yeah but those were all I think if you were putting your sophisticated due diligence hat on you should have known that those operating margins were going to fall right that's what everyone said there were I mean I never saw the investment decks or anything but what I heard from some investors who participated with 90 operating margin or something like that but I think I think the 13 billion valuation that openseek got was more about the dynamic of there was a there was a pretty big bubble in especially later stage private you know like equity for crypto companies as opposed to just necessarily

the tokens because the tiger globals of the world are those um like the altimeters or whatever the guys that were really pumping up the valuations even the SoftBank it was just much easier for them to own Equity than tokens so I think there are a couple companies like that I don't necessarily want to pointy fingers but there are a couple really pretty eye-watering valuations on the private side of things that I think still have to collapse I still don't really think they've necessarily taken their own medicine there so it was kind of I mean they were sort of a a really sexy sector in a part of the market that I think there was a pretty decent bubble I don't know if answer my close VCS if you guys have thoughts on that we've kind of we kind of did not invest

in the nfe exchanges of the last few years just because our view on nfts is that the market as it stands right now is not going to be how it's long-term defined like the nft marketplaces that are existing to us are the canonical games Marketplace you know the canonical fashion nft Marketplace and like frankly that just doesn't feel like uniswap is going to win it doesn't feel like openc is going to win it it feels like it's going to be more vertically oriented players and so we're holding off like we think like things like Stardust could very easily be like the canonical nft gaming layer just because they provide all the value-added services on top of that for game devs but like the entry into that market is a lot different than just like I'll list a bunch of pfps on my you know pre-existing crypto app front end and

just go after the market so it's it's yeah it's a little bit different in terms of how we see it evolving I would say um do you guys have any thoughts on I'm not sure if you are familiar with Gabriel Laden but he's got sort of an interesting thesis about nfts around free to own as an idea where he kind of reversed you know at least I thought it was interesting when he was I haven't really dedicated enormous amount of thought to it but you know his his sort of idea was that just like there's what there's an there's an analogy in Mobile gaming that you guys would probably know much better than me but free to play this would be free to own so you get your nfts kind of for free and it's sort of a trojan horse for most people the way that they first interact

with crypto will be through these free nfts that you know many won't gain value but some of them will and then once I go I've got this nft and it was free in the beginning but now it's gone up so I'm incentivized to become a part of this ecosystem oh like what is this actually based off this is on you know this plugs into ethereum as an ecosystem and that's going to sort of Trojan Horse and that will be the way that a bunch of people come into this space do you guys have any thoughts on that whole model I mean the Crux of that whole model is that by exchanging the you know you mint the nfts for free you exchange them you play with them you you know ascribe more value to them like you have to create something of value on chain that's like

the whole Crux of the argument is that like you don't pay anything for it but by like socially signaling using it you know using it in games you can actually create something that other people would want to pay for and I think that's correct like we've seen a bunch of examples of people bootstrap on-chain value and on-chain community and so it doesn't feel very different from the core arguments of like why is crypto powerful generally um I think the question is like scale can you create like one of Gabriel Laden's things is like you know we're going to see a billion dollar nft at some point and like if you have like a billion dollar nft you can bootstrap like you know like a like a 100 million to a billion user Community like that's all you need like do I think that that can happen

I would say that's actually probably that's probable you know in the near future we've seen billions of dollars of TBL flowing to these D5 protocols like why wouldn't we be able to create something that's worth you know a billion dollars that's just non-fungible like that feels like a pretty attainable goal and so I don't disagree with any of like his core tenants I think people have bones to pick about his strategy and how he executes like doing a Super Bowl ad is that the best way to bootstrap on-chain value at Mass scale I would say you know maybe I don't know like you know he's he's done this before he kind of failed you know in in whatever the machine Zone uh company was he sold it for you know Parts but like I do think the core thesis is very much intact and it's at least logical I mean

I completely agree I think the place where Gabe is probably most correct and this is stuff that we've talked about before on the Pod is his positivity towards the Apple regulations the the change in the terms where you can use IAP to purchase you have to use IAP to purchase in-app uh nfts um one of the antidotes that we've heard recently uh is that for anyone who has nfts baked into their mobile based game what they're seeing is that the number the percentage of users that are monetizing is up two to three x and the amount of people the amount of purchase price ASP that people are buying is up two to three x as well

and so if you have the ability to have nfts that are sold in app via IAP in the same channels that people are used to with traditional gaming you're looking at a four to nine X increase in your gmv for your game and I think you know the future of what these like nft worlds looks is a little bit more centralized it's a little bit more of a trojan horse into having 100 million people with private keys and a wallet uh maybe we see a billion dollar nft eventually but I I think generally what we will definitely see is that these nfts are just to be everywhere you're going to have nfts for games that you don't play anymore you're going to have nfts for like programs that you joined you get like marketing nfts you can start to think about like user

attribution nfts um it's it I I think the future of what you know social on blockchain looks like is dominant with nfts as the core technology and innovation and and we're also not like guessing anymore like we're starting to see this play out at a very small scale with like specific games that are either in our portfolio or you know we're building on top of Stardust like we're seeing like the 2 million monthly active user game in Europe that has the back end of Solana nfts but the people don't know that they're using them start to happen like there's like a few success cases like that and so I would say we've kind of moved from like the thesis to like you know the testing it out to like it being real uh spectrum of like okay the

thesis is real it's playing out at a small scale now it's like how do these small games break out into being these Mass scale successes but like we're starting to prove that out which is I think the most positive thing I was going to Pivot a little guy to a related topic but one of the most interesting things this week actually is what coinbase tweeted out earlier today about the about the App Store so um I just want to go I want to go there I want to get Michael advances take on that so coinbase wallet tweeted out he said they said you might have noticed you can't send nfts on coinbase wallet iOS anymore this is because Apple blocked our last app release until we disabled the feature and what Apple's claiming is that the gas fees this is here I'll just actually keep reading

what they said they said Apple's claim is that the gas fee is required to send nfts need to be paid through their in-app purchase system so they can collect 30 of the gas fee for anyone who understands how entities and blockchains work this is clearly not possible Apple's proprietary in-app purchase system uh does not even support crypto so we couldn't comply even if we tried this is akin to Apple trying to take a cut of fees for every email that gets sent over open internet protocols so um yeah Michael Vance what do you guys think about this um well first and foremost I think everybody thinks that Apple has this like fully fledged like complete idea of how you know the the terms and conditions

and App Store guidelines are going to work for this for this web through world I think in reality they're just like starting to piece together all the different variables and all the different components and they're going to run into situations like this where you have a decentralized a non-custodial wallet in the form of uh coinbase wallet and and because of that you have to use crypto to facilitate transactions where if it was a custodial experience and you were sending assets from one one custodial experience to another at another address you would assume that the custodial wallet would be paying the gas fees for making that transaction so you know that's a major flip in terms of how these systems would work and how you'd be interacting with them in in an

iOS ecosystem Apple I think is really just trying to like come up with a model that works for most use cases it probably won't work for all use cases but I'd say right now the the way that it looks for apple is that they just have no clue what they're doing when it comes to you know how they're going to enforce this how they're going to actually decide who's in and who's out and in what ways and um I would also say uh that um the the IAP system itself has no possible way of making this work for the way that apple is requiring it to work there is no possible way that you can have a user pay money to facilitate a

blockchain transaction to then be able to transfer a blockchain asset it's just impossible because not only is there a cash settlement that happens in a delayed fashion but there's no recognition of when that actually happened there's no there's no API hooks back to say this thing actually settled you basically get a report as the developer at the end of a period of time on everybody who made purchases and and then you credit those those purchases in the app itself but if somebody if somebody refunds you have to refund that asset that those that value back and there's no way to convert from like let's say US Dollars into eth to facilitate an nft transaction so the system itself there they have no incentive to increase the the

flexibility or the capabilities of the IOP system itself they just say here's our system comply with it or choose not to it's up to you unfortunately I don't think that this is going to be the the hill that people need to die on for apple to make their changes to the system but this will be a good conversation point to have uh with the Apple team on if they are serious about integrating you know eth transactions or blockchain transactions into Apps this will be at least an initial conversation point there's going to be some sort of window for custodial wallets to build out workarounds that can somewhat satisfy this criteria and I think that's kind of where Apple naturally pushes well they're like you know we'll comply like

we're not changing our rules so you guys just have to comply it's like well you know the only way that we can do that is we have this custodial wallet where we can Mark to market the transaction add another 30 percent give you your 30 and then somehow process the blockchain transaction you know while that's all going on like that's kind of the only way that you you know like if you take this a step further really comply with this if it's non-custodial I really don't see how you can like mechanically work with the App Store and I and I think that's kind of the big thing here is that custodial architecture in some forms especially when interfacing with the App Store gonna be super important when you're thinking about how nfts move and are bogged or minted and things like that um man you know it's funny there's a lot of

movement and antitrust right now especially against well here's here's a good example of why the court of public opinion matters because people generally not speaking about my own personal opinion are less sympathetic to Mark Zuckerberg because kind of comes across as a little bit of a robot but Apple has phenomenal PR and right now antitrust is up Mark Zuckerberg's ass and he's getting his [ __ ] rocked by Tick Tock and meanwhile apple has a 30 take rate on one of two different options the other which is owned by Google it's the Android yep and you've got no alternative options so I think they have the clearest definition of a monopoly

when it comes to the App Store but public opinion got Tim Cook looking like uh unfortunately unfortunately not yeah unfortunately not in the eyes of the Supreme Court though um like apple is like a like a national security apparatus at this point like their Monopoly is in place for a reason that it's not just like it's the best product it's like the US phone and Chip manufacturer that controls all basically the points of accident entry into the mobile and you know IOS app stores like that's a choke point that the government has a very vested interest in controlling I think 30 is their way of just rationalizing that I wonder who's next after Tim Cook it's going to be really interesting to see who who the

next generation of Apple is do you know enough I don't I don't know enough about the who the potential successors are could be probably would have been Jimmy I've but he's gone no no chance no chance I wish I wish I wish it would have been so then they could have gotten back to building good stuff well they would have been pretty so here's what I will say yeah here's here's what I will say uh it's gonna be someone internal I would assume um if they they have had zero success uh bringing in outside people to run the company um and I would also say it's probably going to be someone who's more operationally

focused financially focused and just like General management focused less someone who's like the product Guru that you saw with Steve Jobs and Jimmy Ive um it's not well Tim Cook was the operational guy no exactly I think it's you know it's gonna look you know Jeff Williams is the CEO right now uh he's sort of the the like number two behind um Tim Cook in terms of you know like running the business I he could be a good potential candidate um you know I bet it's a I bet it's a deep deep engineering guy I've added someone more technical um it's like in someone I I bet it's someone who's like deep AI person or deep engineering person that's that's what my bet would be I have no

idea no clue but did you see the Apple's little PR snaf food that they got into this week no oh yeah for Chinese processors wait what are they that could not that could be a total nothing burger or it could actually be a slightly bigger deal that is being covered so the gist is that there was an update like a software update that got patched by Apple which limited the ability to do air drops that applied only to iPhones that were sold within mainland China so this was people you know China has their their firewall that allows information to not get in necessarily to

China but they also limit how people communicate within their borders and airdrop was something that protesters were using to circumvent circumvent some of the censorship messages or this censorship things that China had in place or the CCP had in place and what it looks like is that the CCP called up Tim Cook and said we don't like these people that are protesting can you do us a solid and Tim Cook said sure it's your thing so it's you know it's not it's not an excellent PR look but I mean at a certain point all the iPhones are made in China so I don't know I guess he's kind of got to do what he's got to do you gotta Wonder like what went down because there was a time

where you couldn't get iPhones in China uh you know they were they were made there but you couldn't get them and it's sort of like what went down what back doors were were facilitated to make that possible to start selling those devices in country and it's kind of like that you know the negotiation from the movies and every sort of movie where it's like listen you owe me a favor and I'm gonna call on it one day literally this is that day no you don't think it's no I mean it's probably because Tim is they were allowed to start selling because they moved all their manufacturing to China I'm sure no either manufacturing there and still not able to haven't they one

by one oh interesting they capitulated sort of one but didn't Google do this as well Google said we'll never censor our algorithm or whatever and then and they kind of did I mean it's I mean that's I think China is just too large of a market to ignore they've got one and a half billion people or whatever they have over there so someone did a good chart actually showing that where China sells its products into and where all the growth is coming from and I'll see if I can find it on Twitter but I was looking at it you can basically tell all the growth is coming from the Chinese market for Apple so they kind of got to do what they're going to do yeah I mean I think near term more of the growth is actually coming from India

and and like one of the big things when people look at Apple and analyze it is when is India going to be a larger market than China and I think they have that pegged for the next five years so it's kind of interesting like you know it's like more of a U.S friendly country it's like a place where we can you can domicile your manufacturing if you're Apple it's a place where you can sell a ton of iPhones as it gets more digital and more you know mobile aligned like it'll be interesting to see if if Apple rotates and I think they're in the very early Innings of doing that with just moving things like Vietnam and other places in Southeast Asia but it'll be interesting to see The Last Story to touch on here was there are more more layoffs in in crypto land at least Kraken laid off

about a third roughly of its Workforce so that was about 1100 or so full-time employees that crack it laid off do you you know do you see any more layoffs coming I mean we had kind of this round that I think Jason and I talked about this a lot that felt relatively light you know that people were announcing riffs about 10 there were funny numbers like 10 13 14 and it just felt a little bit light so seeing 30 from cracking actually to me you know Jesse's he's an OG he's seen multiple Cycles he's been around for a long time I don't know what do you guys do you guys think that there are more layoffs that have yet to come have some not been

announced in crypto I mean either feel free to comment on crypto or like web 2 more broadly as well I think there's a lot that haven't been announced in crypto just like startups that have kind of shut down and and like how we can tell this is that the talent Market is there's just a ton of people on the market more than have been announced in these layoffs and I think that's really positive if you're hiring I don't know it depends on how long the the bear Market lasts for but I see things turning pretty soon and I don't think we're going to see like another 50 Cuts like I I do think this is kind of as low as we get for the big companies but the startups you're going to see more rolling shutdowns generally I agree with I agree with fans I think that's a

good take I think some of the big companies have like done their done a lot of their Cuts you just probably don't hear about them but like I was on the phone I found earlier today and they were a crypto company for all I knew and then and then they were like oh yeah we don't do crypto anymore like we we cut our we cut our we we laid off the whole crypto team I was like but you raised money as a crypto company what do you mean you're not a crypto deal what do you mean what do you mean that was your whole thing you were what are they what are they pivot towards what did they pivot towards fintech oh of course yeah we're just fitting Tech now yeah so there's a gonna be a lot more of those and there's gonna be a

lot of companies that can't rate like I think start a lot of startups that just they're like so far from profitability it's like easier just to shut down and either start over or go or go join a company if if you raised at the end of 2021 and you had two years of Runway now you have a year of Runway maybe less and you're really kind of deciding like how do we how do I make this work like this is when you're making the big cuts this feels like kind of the time period where at least for the startups you're going to see a few more people at least hitting the market it's okay though I think it's I think it's I I agree with that take as well I think there was a period of time where people were saying back you know during the

first big sell-off run Terra Luna where people were saying oh there's great talent on the market and I don't think we really necessarily saw that but I think even in the last month it's been a completely different market for talent and good peeps yeah yeah good peeps good people that's how it is though you got a cut to survive sometimes like you gotta you know take terms that you might not otherwise entertain like I like I really don't see layoffs as like oh my God they're laying people off it's like you know this is just how it works like you gotta contract you gotta expand with the market and sometimes you kind of get caught in the wrong position but the people who are not cutting are just not going to make it it's kind of that so that's I think that's actually something that I mean

Jason and I found that before but there's a there's a there's a misunderstanding sometimes which is when you you announce a cut obviously if it's a 70 cut then yeah there's a big problem you know but uh if it's some if it's something manageable anywhere from 10 to 30 percent oftentimes that's the mark of Founders who have kind of been there before and they know what they need to do to survive whereas sometimes when you don't cut companies that don't cut that should that's perceived as a signal of strength oh we're not cutting because you know we must not need to but a lot of the times I'd Venture probably more often than not especially in a young industry like crypto that's more often the mark of an inexperienced founder I say as a first-time founder but you

know I think that's largely you can see people make that mistake you guys have been through a couple of Cycles like we were at the blockwork Chicago 2019 conference like there's definitely been a few iterations of block works like you guys have had to you know fight to survive at times like that's just kind of how it is yeah preach preach coin alts great event that yeah didn't melt them give the keynote that year Melton did yeah same the same one who bullied you into your first Dick Butt purchase melt of De Paris no that was obviously absolutely bodied me yeah you know you know comes back from this party at David Hoffman's and he's like I gotta I gotta

I got a dick butt and I didn't really think anything of it but I went to his place next week and I saw Aubry strovel she's like I bullied your partner into getting a spirit I was like ah that should happen is her and Alex uh for his last name uh at try Lolly at Lolly yeah yeah I stood no chance yeah all right that's it all right yeah I think we can wrap it up we wanted to do Advanced we were talking about this before you came on but like uh we want to get your founder Dynamic yours and and Michael's oh he's back on our family Dynamic the fat yeah I want to know who's the who's the optimistic one between the two like what's the dynamic kind of look like I've got got these questions but we could also wait till next week because

it seems like Michael's Wi-Fi it goes on the front over here he's on the fritz yeah yeah I I we started this episode we started this episode I thought Vance was on the fridge but man Michael is on the real Fritz cases the machines are not to be trusted I know we we should cover founder Dynamics at a certain point because they are they're pretty funny in terms of how other people have described it let's do the next episode let's do it next step we got to give the people something something to look forward to Bell's it's been another great episode we'll see you next week [Music]