SPEAKER_00: Hey, everybody. Hey, everybody. We got a great show for you today. Tether, the stablecoin that we've been talking about in our tether investigation has a long standing critic. Many of you know this person from their Twitter handle bit the next. They are an anonymous Twitter handle run by a real person who has been riding tether for, I think, close to five years. And we talk about the history of tether potential implications of a crash and much more. And he is anonymous, we don't know who he is. So this is the first time in the history of the program, we have an anonymous guest, but we know it's from that Twitter handle. But we could be being punked who knows who this person is. But they have been for years. That's what we do know on the tether story. So take this for what it's worth. We could be getting punked. This could be somebody inside of tether who created this account and why they would do that. Who knows, it could be a disgruntled employee, we asked them if they're a disgruntled employee or competitor,

SPEAKER_02: they say no. So you're going to have to take this one buyer beware as our first anonymous ever interview. But first we're going to talk about Joe Biden's antitrust executive order, which was just signed today. Okay, stick with us.

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SPEAKER_05: choose Ladder. Check out Ladder today to see if you're instantly approved. Go to ladderlife.com slash twist. That's L-A-D-D-E-R life.com slash twist. Calm for Business. Healthy and happy employees create successful companies. And that's a fact. Calm for Business can help your employees be their best selves at work. Get a free well-being ebook and one month free of Calm for Business after you attend a free demo at Calm.com slash twist. And Embroker's Startup Insurance Program helps startups secure the most important types of insurance at a lower cost and with less hassle. Save up to 20% off traditional insurance today at Embroker.com slash twist. While you're there, get an extra 10% off using offer code TWIST. Okay, in the news, Joe Biden has signed a new

SPEAKER_07: executive order on promoting competition in the American economy. As you know, we've seen a lot

SPEAKER_09: of saber rattling over the last couple of years from Obama to Trump and now on to Joe Biden about

SPEAKER_00: big tech. The scale of these companies, whether it's Amazon, Google, Facebook, Microsoft, Microsoft is larger than anybody ever really anticipated, including people in the industry,

SPEAKER_09: we never thought these companies would get to a trillion dollars, let alone two or three,

SPEAKER_00: and their impact on the world is becoming great. And in most ways, it benefits consumers. Antitrust law was designed to protect consumers and to keep a competitive marketplace. That's why we're having a hard time deciding if these companies are in fact hurting consumers. If they were price fixing, and every time you use Gmail, you had to pay 10 bucks a month for your Gmail account. And then it went to 12. And then it went to 25. And they kept raising the prices. And maybe they were in cahoots around that. That would be one issue. But if users can get free photo services with unlimited uploads on almost every service in the world, and they can get free email, and the price of an Amazon basics cable or battery is a fraction of the brand names, there's really no consumer harm. And you don't see consumers shouting from the rooftops break up big tech. But you do see a number of people in Washington, over time, showing concern about this, it has now become acute. In other words, Joe Biden signing an executive order, and some of the people he's putting in place. And the fact that the GOP, the Republicans and the Democrats are in agreement on this is the big change. That's the big change we're seeing. What other issue can you think of, where Republicans and Democrats are aligned,

SPEAKER_09: and both want to see the same outcome? They can't even agree on infrastructure, they can't agree

SPEAKER_00: on pandemic regulations, they can't agree on our borders. I mean, they're just, it seems like they pick adversarial positions as a default, but here, they're both in agreement. My theory on this is, a lot of people on the left felt that Trump in some way benefited from Facebook advertising, Cambridge Analytica, we can debate that, but there was clearly some shenanigans going on there. And Facebook was influential in elections. In fact, Facebook is so influential in elections, we know this, that they have a team that trains people in elections on how to use their advertising services to win elections, they literally cannot say on one hand as Facebook, we are not impacting elections, and then have a team selling ads embedded in different people's campaigns to help them win elections. So we all agree on that. Whether you like Hillary hate Hillary think the election was stolen or not. Then, in 2020, we had Trump get suspended from all these services. So if you're sitting there, and you're in Washington, and you're a career politician. Now you've seen both parties become disgruntled. And you've seen somebody just basically get removed from public life. Trump. That I think has led Washington to believe it's now time to take action against big tech. That's my belief. Maybe it's cynical. But I believe that's why this is coming to a head. There are other issues that are not about competition. But are of concern to citizens in the United

SPEAKER_02: States. One of them is wealth disparity, they see Jeff Bezos becoming worth a lot of money and you know, Zuckerberg, and they feel that's unfair. What does that have to do with breaking up the companies feels vindictive feels like you're changing the rules of the game. Let's put that aside. I do think that's an undercurrent of public support, then you have these companies not paying any taxes. And then you have some individuals who are getting loans against their equity, which is totally allowable under our current law. But they're not paying

SPEAKER_00: taxes the way we all pay taxes on our income. And then third, of course, privacy is becoming more and more of an issue for some people. That's a serious issue. Other people, it feels icky. Many people perhaps most don't even care. So that's the climate we're in. And that's the emotional sort of backdrop to what's happening right now. And just last week, James Bosberg, a judge throughout a recent FTC case, and said it was ridiculous to reverse a merger that was completed almost a decade ago, of course, he was speaking about Facebook's Instagram acquisition in 2012. So that's the backdrop. What is this new order? Well, this order this executive order includes 72 initiatives by more than a dozen agencies to

SPEAKER_19: promptly tackle some of the most pressing competition problems across our economy. And that's a that's a

SPEAKER_20: quote there. Some things included in this are initiatives to ban or limit non compete agreements.

SPEAKER_00: This is great in California, we don't have non competes if you worked for Tesla or Apple or Waymo in self driving, you can't take the documents and the IP from that company to another company as we saw with Waymo and Uber self driving. In that case, but you can go work at another company other locations, I believe Texas and some in the Northeast allow non competes, which means if we can pay you your salary for the next four years, pay or play you so you can work for us play or we will pay you to not work on self driving. That limits competition. So that's good. Another item in here is lowering prescription drug prices. So obviously, this goes beyond big tech, allowing hearing aids to be sold over the counter, make internet access more affordable by banning excessive early termination fees that makes sense. Ends landlord internet service providers exclusivity arrangements. That's fantastic. So if you live in a building, you know, some would just previously offer Comcast, because they had some side deal with the landlord or just using an example there. And here's the quote, the overarching objective with the executive order is to make sure the President is encouraging competition in industries around the country. White House Press Secretary Jen Psaki told reporters on Thursday, this follows Biden appointing Alina Khan, which we talked about as the chair of the FTC, which was approved with bipartisan support. So again, there it is bipartisan support. And, you know, the way I always look at this is why is this happening now? Again, I went through wealth disparity, Trump and Hillary and the impact, Facebook, Instagram, Twitter have had YouTube on banning those people or maybe putting their thumb on the scale, and helping ones get elected. At least that's the perception. We don't know if that's true. Tax avoidance is a huge one. People putting their IP in Ireland and not paying a ton of tax. This makes

SPEAKER_09: people feel really bad about it. So what's going to happen? We know that consumers are not being harmed

SPEAKER_00: in the short term. They're not. In the long term, you have to make a really weird sort of argument that okay, because there are not seven more photo sharing apps, and because Instagram is owned by Facebook, you're not getting enough competition for your photo sharing, probably hard to make that argument. Now, if somebody like Amazon copies everybody's products, and they went from having,

SPEAKER_02: you know, I think it's maybe hundreds or low 1000s of Amazon basic services, and they decided they would have a million of them and they would put them first on the lists, or Google is putting their Yelp

SPEAKER_00: review competitor above Yelp. Those are the kind of things where on the edges on the margins, you might see some consumer harm. Again, it's just really hard to determine. So what's going to happen? I think

SPEAKER_02: what we're going to see is the big tech companies are not going to be allowed to make future acquisitions that are large. In fact, I think many of them are not even trying. So that chilling effect is here

SPEAKER_00: already. I think we would see some major acquisitions going on. If people felt they could clear market, I don't think people feel, you know, Netflix being bought by Amazon, or, you know, something of that scale, Uber or Airbnb would probably be on the bubble under 100 million 100 billion rather, getting bought by, you know, one of the bigger services, I can almost see that happening. I think that's kind of the ceiling is, you know, maybe when you know, Coinbase getting bought by Google, I could see that going through, but I maybe not when you get to 200 300 400 million dollar services. So something under 100 billion, pretty easy, something at 2300 billion, pretty hard to get through. And things in between might take time. But a more likely scenario is people opt in and say, you know what, Google spins out Waymo does a SPAC does a direct listing, YouTube goes out, and Google just becomes search and they take all the other bets, nest, and they just start spinning those things out. Amazon web services, if that became its own independent company, and you had Amazon and Amazon web services, I think it would unlock more shareholder value as an independent company. And then I always think about myself, and about you the audience as startups, what does this do for you? Well, if these big companies get broken up, or they're not allowed to buy large companies, that's good for the smaller companies. For the smaller companies, it means that maybe they, these big companies will not be as

SPEAKER_20: quick to compete against smaller companies, they'll stick in, they'll stick to their lane,

SPEAKER_00: they'll stay in their lane, as it were. And David Sachs predicts Amazon spins out AWS. He predicted that in July on July 6 was a couple days ago, because, as he says, of all the big tech companies, they are the smartest chess players, I think he's right. And you know, I've talked about this a whole bunch. Jeff Bezos did something amazing. And it was a controversial decision inside of Amazon, we're gonna let third party sellers sell on Amazon, and we're gonna let them buy ads on Amazon. This seems crazy. That you know, the idea that you could come onto our website, and sell your products, and you do the fulfillment, but am the people get the beautiful Amazon experience. It's like, wait a second, why are we giving away this incredible Amazon Prime experience to third party sellers, and we're competing against them, this makes no sense. What Amazon I think realized was, you know, giving people more choice and having a big, robust platform was more important. And they can always point to that, I think it's 40 or 50% of the sales and the items, it's either the sales or the items on Amazon, somebody fact check me on that, come from third party sellers. So Bezos allowed these because it was better for consumers. And he said that, what's the best outcome for consumers. And this is where the law is just really problematic. The law is to help consumers. It's in the best interest of all these big companies to help consumers. So what we'll probably see is some regulation around privacy, some voluntary spinouts, some blockages of large acquisitions, and then maybe even, you know, Google search results will be tampered a bit, and maybe, you know, they'll not be able to put certain things up top, or, you know, they might even have to give some insight into their algorithm, which would be super interesting. I know that's a Hail Mary, and unlikely. But you know, big tech will fight this. And they may put in somebody into office after Joe Biden, who is more pro big tech, at the end of the day, it's going to be the consumers are not losing right now. And the people who will lose are the people who have the large shareholders in those big tech companies are really the only losers here, because they might lose,

SPEAKER_33: you know, control over the ecosystem, because of their scale. Ultimately, they might actually wind

SPEAKER_26: up doing better, Bezos might be worth more, he might be worth more money, when they split these

SPEAKER_02: up. And that's going to be the great irony. Oh, we're trying to, you know, solve wealth disparity with this, that's not going to get solved with this. All it might do is make, you know, Larry and

SPEAKER_00: Sergey even more wealthy as Waymo, if it succeeds becomes a trillion dollar company, or AWS becomes a

SPEAKER_02: trillion dollar company, you might have the baby bells. And when we broke up the phone companies, the baby bells in this situation could be the baby Amazons, or the baby Googles, and those spin outs could become worth as much or more than the original companies quite possible. Amazon Web Services becomes worth more than Amazon, the e commerce store. So 55% third party sellers in q1, I said 40 to

SPEAKER_00: 50%. So I had some old data there. So Amazon Web Services has been built to be easily separated from what I understand. Facebook did the opposite, they tied together all the back ends of WhatsApp, Instagram. And they did that for a reason they want to claim. I mean, I know it sounds cynical, but I kind of, I kind of have the inside line on this one. So trust me, they integrated that stuff deeply so that when people came and said break it apart, they could go, Oh, we don't, it's going to be too much work, you're going to cause us so much harm. Only shareholders, people's jobs, we'll see if that flies in with this incredibly, this deepening resentment of big tech and wealth polarization. Sometimes you can overplay your hand. My advice to the big companies pay taxes, stop, even if you can stop trying to do all these end runs, start paying people really well, who may be working your stores, you know, increased, you know, your transparency in privacy, and maybe don't compete as savagely when a new startup comes out. You know, we saw this with Clubhouse, they came out and then all of a sudden, Zuckerberg, Slack, Spotify, everybody had their competitor up and running immediately. It's that kind of quick copying that I think gets people worried about competition, because the scale of these services are so big, but I don't see anybody mentioning that. And that is a very interesting dynamic. Is it better? And I don't know if anybody has the answer for this? Is it better

SPEAKER_02: that Spotify, Slack, and Facebook and Twitter come out with Clubhouse clones, competitors, coexisters within the first year of Clubhouse, or because it creates more activity in the space gets more people exposed to this new feature, just like stories, getting copied from Snapchat gave more people access to that technology that service? Or is that worse for competition? I don't actually have the answer to

SPEAKER_00: that. I can see people arguing it both ways. Okay, let's get to this incredible interview with and our first anonymous interview in the history of the program in over 1100 episodes, our first anonymous

SPEAKER_42: interview with the Twitter handle Bitfinex. As founders, investors and executives, we spend so much time

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SPEAKER_07: All right, next up on the program. For the first time, we are going to disguise our guests voice. And we're doing that because our guest today is a self described whistleblower. And you may know that

SPEAKER_17: we've been talking about the stable coin, basically a cryptocurrency called tether on this program for a couple of weeks. And if you know anything about cryptocurrency, you probably know our next guest through his now we know it's a he. So we've narrowed it down to 50% of the population or thereabouts. But we actually don't know who this person is. We don't know what their motivation is. But we will get into that as we have the discussion. He runs a handle on Twitter called

SPEAKER_07: bitfinexed b i t f i n e x e d bit fin x. And he's been writing that account since April of 2017 when

SPEAKER_17: it was created in order to in his worldview, bring some attention to tether. And so welcome to the program anonymous disguised voiced bitfinexed. All right, thank you for having me. Okay. So right off the bat. Um, I guess it would be good for you to explain to us what is a stable coin? When did you

SPEAKER_46: become aware of stable coins? So I first became aware of tether actually, uh, probably was early

SPEAKER_48: 2017. Um, and I remember seeing, you know, you know, bitfinex trading and I always watched, you know, the trading bitfinex. And I started investigating tether probably, you know, around late March, early, you know, early April, 2017. And I went to the, uh, you know, the term of service for tether and trying to figure out what was exactly what, you know, what was going on, you know, on there. And I, when I read the term of service, you know, the term of service basically said that, you know, um, it's not, you know, the reason tethers are completely not readable. So I was, I was always already suspicious of it. But at that time, I didn't really put together that, you know, tether and bitfinex are owned by the same people. And that was the, the website for tether didn't actually list any, like I didn't have it about us. And as I was watching bitfinex, and I was watching the trading of bitfinex, I started noticing late March of 2017 that the trading is, you know, um, peculiar.

SPEAKER_52: So that's, that's kind of when I started, you know, kind of noticing, you know,

SPEAKER_07: and bitfinex is, um, a crypto exchange for people who don't know, and it's an offshore crypto exchange. It's not one here in the United States, right?

SPEAKER_55: Right.

SPEAKER_07: Yeah. Explain to us what the goal of a stable coin is and why a stable coin would be necessary.

SPEAKER_30: And then we'll get into the terms of service and your motivation here.

SPEAKER_48: Okay. So the whole point of tether was to solve a banking problem with Bitcoin exchanges.

SPEAKER_60: Um, Bitcoin exchanges, they kept getting basically blocked from having any kind of bank accounts.

SPEAKER_63: Why were they being blocked from having bank accounts?

SPEAKER_48: Mainly because the exchanges, they don't want to, they don't want to really comply with KYC AML. You know, Coinbase, they comply with KYC AML. So they have banking, you know,

SPEAKER_00: Explain what those are KYC and...

SPEAKER_48: So KYC is know your customer and anti-money laundering. So basically, um, when you trade on Coinbase or, um, Bitstamp, they verify your, your identity. They, they take, they ask for your ID, you know, they ask for, you know, your social security number and stuff like that to make sure they know who they're doing business with. Um, those exchanges usually don't have any problems obtaining banking. Bitfinex and the offshore exchanges, they don't want to do the KYC AML. So they have problems with banking. The idea with Tether was, Tether was going to go ahead and, and comply with all the banking regulations and they would go ahead and open the banks and they would basically receive dollars and then they would issue a token. And that token was supposed to represent those dollars. A legitimate version of Tether, but basically they do all the KYC, all the AML, and then they just allow the, the, the Bitcoin exchanges, hey, just implement Tether and it's on the blockchain. It's, it's backed by dollars. Here's our audit. And you know, you, that would solve a real problem. The cryptocurrency with all these exchanges, basically constantly having these, you know, magical banking problems. Um, and that was the idea behind Tether. And you know, that's, that's not, it's still probably most likely to be illegal, but it wouldn't be a fraud. You know, it's just, it's just trying to try to work around the, you know,

SPEAKER_69: the KYC AML, um, issue. Would I be correct in saying that people who want to get around KYC,

SPEAKER_17: know your customer and anti money laundering AML, would that group be, uh, people who maybe are part of the underground or a black market or a gray market? Or are these people who maybe are just

SPEAKER_00: from foreign jurisdictions? Like, why wouldn't, uh, why would the customer need this service?

SPEAKER_48: Um, I think the vast majority of the trading and the vast majority of users that they're going to have are going to be most likely going to be black market and, you know, potentially a gray market, you know, or, you know, a lot of money potentially could, you know, could be stolen, you know, or it could have, it could have bad, um, you know, who, who knows, you know, what could be going on with it. Um, but I, I have noticed that when, when Bitcoin exchanges like implement actual KYC AML, for example, their volume goes down tremendously. Got it. It's friction. Yeah. I, I, I, I, I feel that most of these users are going to be, you know, uh, black market and, you know, maybe some gray market stuff, but I think the black market stuff is going to be significantly higher than like, if you have a local country that has a, you know, they have, they have a bad, a bad, a bad currency and they want to hold dollars and, you know, they can't, maybe they can't get a bank account in the U S you know, okay. Yeah. They might be holding tethers, but there may be a few edge cases that are like that, but I think those are going to be edge cases. Those aren't going to be the vast majority of people using tether.

SPEAKER_42: And some people said these stable coins would just make things faster, even for legitimate

SPEAKER_00: people. Is that an accurate description of the legitimate use of say a tether? Is that it's

SPEAKER_81: faster to move money around? It certainly is. You know, tether is faster to move than bank wires. Um, that, that certainly is true. Got it. Okay. So basically it's just a blockchain transaction.

SPEAKER_30: You read in the terms of service. So you're one of those folks who reads the terms of service, the 1% of users who reads the terms of service. And you see in the terms of service for tether,

SPEAKER_17: that you are not allowed, you are not guaranteed the ability to get your money back. In other words, to sell your tethers back to tether. So when you go to their website,

SPEAKER_48: their website basically said that, you know, you know, tethers are backed one to one, you know, um, with us dollars. And then you go look at the fine print and, uh, they, they basically tell you that tethers are not money and not monetary instruments. You know, they're not stored value or currency. And then the keywords or the key sentence is there's no contract or right or other right or legal claim against us to redeem or exchange your tethers for money. And that was,

SPEAKER_20: that was the original terms of service. That's the original terms of service. And that terms of service has changed. And in the beginning, they were marketing this, and this is super critical.

SPEAKER_17: In the beginning, they were saying every tether has a dollar and every tether will only be worth a dollar and that dollar will be stored in a bank account somewhere. So you'd never have to worry. If we have a tether and a tether exists, we have that dollar. And then if somebody cashes it in, we do what's called burning of those tethers. Correct? Right. Correct. Got it. Now something changed along the way. But it makes one wonder, why would they put that in the terms of service to begin with? Do you think this started out as

SPEAKER_00: being something fugazi or shady? Or do you think something happened along the way that made them

SPEAKER_19: change the terms of service? And then I guess would be good to talk about what the terms of service says

SPEAKER_46: today. Okay. So those terms of service, I believe, were added sometime after Bitfinex, Phil Potter,

SPEAKER_48: and Juan Carlo de Vincini basically bought tether from the original founders of tether, which was Brock Pierce, Craig Sellers, and Reeve Collins, I think. They started out the business and basically Bitfinex just bought it from them. We don't know how much they paid for it or anything like that. But they bought it from them. And then they had those, they changed that from the service, basically adding that adding that light in there. I actually have one of the main Bitfinex supporters, he goes by the name of Swapman, they actually are he actually admitted to me that they they added that to try to bypass money laundering regulations. Ah, so they they put in there that these aren't worth

SPEAKER_00: anything. Therefore, you can't come after us from money laundering or KYC rules, because we're saying people are buying funny money. In essence, they're buying like Zynga tokens or something to play poker. They have no value is their claim, right? This is after claiming that there was a dollar in the bank for every dollar. So they're kind of having it both ways. They're marketing it as one thing. But then the terms of service are saying the exact opposite. This is virtual currency that has no value. Correct. Okay, that's confusing enough. Healthy and happy employees create successful companies. That's it. That's a fact. And calm for business can help your employees be their best selves at work. You can partner with the number one mental fitness app to provide support and tools for your employees right now. Calm can help kickstart mental well being initiatives by empowering employees to stress less,

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SPEAKER_02: slash twist that once again, you know how to spell it calm calm slash twist. That's why I invested in the company. I thought that this company could change the world. And I am so happy to see calm doing that every day. So what's happened since that time, because there's Bitfinex, and then there's tether and people

SPEAKER_42: thought these were two different companies. But then they found out at a certain point, accidentally,

SPEAKER_60: I believe, that these are the same company. So that's actually a very funny story. Because

SPEAKER_48: I figured out that Bitfinex and tether are run by the same people because Bitfinex and tether sued Wells Fargo. So I literally had the lawsuit that Bitfinex and tether filed against Wells Fargo, and I had sworn affidavits from the CEO of Bitfinex and tether, where they basically admit that there's

SPEAKER_60: they're the same people. So I took excerpts from that lawsuit. And I shared it on Twitter. It's like, Hey, these are run by the same people. And nobody believed me. Oh, that's just fun. That's not true.

SPEAKER_20: You know, and I had sworn affidavits. And people claimed it was FUD, which is I think a classic,

SPEAKER_17: correct me if I'm wrong, any criticism of any cryptocurrency, the people who are stakeholders

SPEAKER_07: in that cryptocurrency are apt to say that you're spreading FUD, fear, uncertainty and doubt. And that is like a way of sort of neutering any criticism. But in this criticism, people told you it was FUD, but

SPEAKER_33: you knew that through this, these legal documents you obtained, right?

SPEAKER_46: Right. And this is public information. This isn't a secret. This is you can't really I mean, you could fake it, but it's obvious you'd fake it, you know, but the only time people really started to

SPEAKER_48: believe that Bitfinex and tether run by the same people was after the Paradise Papers leak. And another point I'd like to make is I actually had audio recordings of the chief strategy officer of Bitfinex and tether Phil, Philip Potter, where he actually at first he kind of says that, Oh, well, we just bank at the same banks. And then that was sometime in 2017. And in 2016, he actually admits that, you know, yeah, you know, we were majority owners of tether money is all there. I don't know what I can make people feel

SPEAKER_117: bad about that. But that I will, you know, that's basically, you know, what he says, he doesn't actually, you know,

SPEAKER_83: Those recordings are on the internet today, correct?

SPEAKER_81: Yeah, I published all those Bitfinex tried to get them removed off of YouTube, they fortunately, they failed at doing that.

SPEAKER_00: Great. Okay, so we'll put those into the show notes here. And people remember the Paradise Papers

SPEAKER_30: were the this leak of documents of all of the 13.4 million confidential electronic documents relating to offshore investments that were leaked to a German to German reporters. Um, and they shared them with the International Consortium of investigative journalists. And this led to a lot of revelations about different companies and individuals who were running all kinds of offshore accounts, amongst them, Bitfinex, right, and tether, and tether. So that proves the

SPEAKER_60: connection that they're the same thing, right? Yeah. And at that point, people started to admit that, yeah, okay, Bitfinex and tether are run by the same people. Got it. So we have multiple red flags

SPEAKER_120: there. One is the denial that these two companies related. The other is the terms of service is

SPEAKER_00: saying this is a virtual currency, essentially, it's not real money. But the public positioning was every tether has a dollar, right, backed up in somewhere. Now at some point, what will you tell me

SPEAKER_48: what happens next here? Okay, so what happened after that, I kept hitting on their terms of service, and they were getting a lot of flack for that, because I was basically on Twitter just spamming anybody talked about tether. I took a screenshot of the tether terms of service, it's not backed. And they're always trying to do damage control around that, because obviously, you can't, that's, that's pretty, you know, that's a pretty big indictment that it's, you know, your website says it's not, not, not redeemable. So they finally updated the terms of service, and it basically is the same exact thing, but they just worded it a little bit, a lot better, I would say. So now basically, in order to redeem tethers, you have to be a verified customer of tether. So what is a verified customer of tether? And that's somebody that they go to the tether website, and they go, you know, tether does do some KYC AML for the people that issue tethers. The thing is, it's a very, very small club of people. If you were an offshore entity, you know, and you actually try to go through the terms of service, or not terms of service, but you try to go through the approval process to get, you know, into tether, I doubt that you would actually be able to go in there. It seems that their primary customers are basically just some big

SPEAKER_72: traders, I would doubt that they have more than, say, 25 customers. It's just a couple big, large

SPEAKER_127: entities. Got it. And so at some point in 2018, the tether price collapsed for some reason. How does

SPEAKER_48: a stable coins price collapse? I'm curious. So at least in 2017, there was only one actual real legitimate trading pair for tether, and that was actually on Kraken. And there is very, very little liquidity on Kraken. So if you had 500,000 tethers, you could actually cause the price of tether to go to zero, basically, on Kraken. What's interesting about Kraken listing tether is Kraken only listed tether, like, immediately after tether lost their bank account. And Kraken had a bank account, and I

SPEAKER_60: actually suggested to, you know, Bitfinex and tethers, like, hey, why don't you guys go ahead and take some of your reserves and put up a large buy order for tethers, you know? So, hey, you're claiming you have to, this is back when they had, you know, say 50 million tethers, you know? So why don't you go ahead and take $10 million, send it to Kraken, and put a $10 million buy order on tether. And you

SPEAKER_48: can basically kind of use Kraken to, you know, redeem tethers. And they kind of say, oh, yeah, we can't do that. I'm like, that doesn't make any sense. You know, why can't you just send some money

SPEAKER_60: to Kraken and support your own peg in place of massive buy order? So I guess right now,

SPEAKER_17: the audience is wondering, you seem extremely motivated to uncover what's going on here. What is your motivation for the people in the audience who are thinking about this?

SPEAKER_60: I do think that if tether is allowed to continue, I believe that they will eventually trigger a

SPEAKER_00: financial crisis. Okay, so you're, you consider yourself a concerned citizen, but maybe this behavior and your obsessiveness about it, people might say, well, that seems a little more extreme. Do you have an axe to grind with them? Did you work for the company and get fired? Or

SPEAKER_14: do you otherwise have some relation to the company that we should know about?

SPEAKER_117: I have no relation. They never really, before I started doing this, they never did anything to me, I didn't lose any money on Bitfinex.

SPEAKER_48: I didn't lose any money in the hack. You know, I really would have, you know, I was originally, when I first started, I wanted to make sure that I was right, because I didn't want to be somebody that's just a troublemaker. I wanted to go out there and I wanted to make sure that they were actually, you know, that they were bad. And I very carefully, I listened to all the all the available recordings of Juan Carlo, Philip Potter. I tried to gauge their body language, you know,

SPEAKER_137: over their voice, you know, because I didn't want to cause harm to somebody that's doing something and

SPEAKER_117: being honest. Now, you know, I, that was it, you know, the only time that I really started getting really, really nasty was when they really got nasty to me. Got it. So before we get to that,

SPEAKER_07: so people understand how tethers work. You know, we know there's a blockchain, as it were, for Bitcoin and the transactions can be seen. And it's very transparent, let's say, how does technically tether work? Can we see every tether in existence? Do we know where they've moved? Is it on a blockchain,

SPEAKER_30: or some equivalent for non technical people listening? Yeah, yeah, so all the tethers,

SPEAKER_81: they are issued on a blockchain. So originally, tether was only one blockchain, which was known as

SPEAKER_48: omni chain, which the omni chain was originally master coin. And then they kind of changed it, it was trying to do something similar, very similar to Ethereum, but to do it on the Bitcoin blockchain. So you could actually see all the tethers being issued. So every time they issued 100 million tethers, you know, you could, you know, you could see that on a chain, if they created these new currency units, they would send them to Bitfinex, they send them to Polonix, they send them to Bittrex, and you could basically follow the tethers. What you don't know is, you don't know if they actually have money in the bank account to follow that. And what's really sad is, you know, you could actually have a blockchain based stablecoin. And what they could have done is, when they get an incoming wire transfer, the 100 million to buy those tethers, they could put the information from that wire transfer,

SPEAKER_147: you know, and they can hash it, and they can actually encode it onto the blockchain. So they

SPEAKER_48: essentially, they have the record, all the banking records are secretly put onto the blockchain. Got it. And so they would never lose the records.

SPEAKER_07: How many tethers are in existence today? And then how much money does tether claim to have? Because

SPEAKER_17: we're going to skip ahead here for a minute. But there was a, we had the Attorney General from New

SPEAKER_09: York take action against tether. Why did the Attorney General take action against them?

SPEAKER_48: I think they took action against them, because they figured out that they were $850 million in a hole after they had a bunch of money seized in April of 2018, and also October of 2018. So they're actually in a hole for a long time, but they kind of kept it quiet. Tether got hacked in November of 2017, right around the time that the New York Times article came out on Bitfinex. And that hack was very suspicious, because it's actually kind of pointless to hack tether, because they can just freeze the tokens. It doesn't do anything. So there was nothing was lost in the hack. There's all they did is freeze those tokens. And that was that was kind of the end of it. I'm honestly, I'm a little suspicious

SPEAKER_60: about that hack. But anyways, that I don't think that was why the Attorney General started investigating

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SPEAKER_07: Okay, let's get back to this amazing episode. But there was some loss of money between Bitfinex and Tether and then Tether covered for Bitfinex, or that 850 million that was launched, that was lost.

SPEAKER_81: The $850 million that is that was missing was basically Bitfinex funds. And so Bitfinex, because they don't actually have a bank, they didn't have a bank account, or they didn't have a

SPEAKER_48: bona fide bank account, they were using this company called crypto capital. And they basically would instruct their customers, instead of sending money to Bitfinex, you would send money to this crypto capital. And the crypto capital would basically report Yep, we got a million dollars from so and so. And at Bitfinex with intern credit that those accounts with with US dollars, you know, trusting

SPEAKER_81: that crypto capital actually got that money. What's interesting is there was no written contract

SPEAKER_83: between Bitfinex and crypto capital. No contract, but they had 850 million dollars of Bitfinex's money. Basically, yeah. Wow. That's super strange.

SPEAKER_48: Mind blowing. So Bitfinex, they started asking for some of the money, you know, to honor withdrawals, and the crypto capital started, you know, giving them problems. In April 2018, there was a had their Polish bank account was shut down and the money got seized by the Polish authorities. And then when that news came out, you know, I obviously caught on to that, because there were threads on Reddit showing that it puts out kind of like an announcement saying, Yeah, we don't know what you guys are talking about that has nothing to do with us. It's just for that point, they're 400 million dollars in a hole. And Bitfinex is not really talking about, you know, anything missing, you know, so six months later, they have another form, I guess they got clued in from, you know, one of the guys that crypto capital that you have this money, this money's gone. And that was sometime, I think early October 2015, I'm sorry, October 2018. On October 15, 2018, all other went from $1 to like 80 cents, give or take a cent or so. And the price of Bitcoin on Bitfinex, it went up on nearly $2,000

SPEAKER_81: in about 15 minutes. And as the price of Bitcoin was going up on Bitfinex, because going up on the money exchanges to have real money, because there are bots that will basically automatically start

SPEAKER_48: buying Bitcoin every time it starts going up on Bitfinex, you know, they don't actually know why it's going up, they just start automatically just buying it. But it got to the point where the price of Bitcoin was about $1,000 higher on Bitfinex. And Bitfinex comes out with a statement saying, oh, everything's fine. I don't know what you guys are talking about. There's no money missing, you know, withdrawals are working just fine, you know. But in reality, Juan Carlo was completely freaked on the same day that they had this liquidity spike, which I have a recording of it, by the way, which is kind of very, very amusing to watch. The same exact day, Juan Carlo is basically

SPEAKER_81: going out and saying that if we do not act quickly, the price of Bitcoin is going to fall below $1,000. And that is from the chief financial officer of Bitfinex and Tether. And so the

SPEAKER_48: only way that makes any sense at all, is if the price of Bitcoin was manipulated there.

SPEAKER_120: And you believe that you believe they were manipulating the price of Bitcoin

SPEAKER_07: as they were using the stable coin. So in a way, and this was explained to me by somebody I know in the crypto, multiple people in the crypto industry explained it to me this way, that what's happening with tether is, maybe they're front running the Bitcoin trades, they're buying right before other people are buying, or they're creating this massive volume. And that tether, I guess the, the one conspiracy theory here or one theory is they were juicing the price of Bitcoin and then

SPEAKER_19: benefiting from it in some way later on. And that was concerning people in the crypto industry.

SPEAKER_137: Yeah. So one of the dumbest things about tether, honestly, is that it opens it opens you up to be

SPEAKER_117: front run, because when the tethers get issued, they're on the blockchain. And for a while,

SPEAKER_48: really, the only currency you really could buy was Bitcoin. So if you're a large institutional trader, you know, and okay, I have a choice, I can buy US dollars, I'm sorry, I can buy Bitcoin with my US dollars, or I can take my US dollars, and I can send it to this offshore crypto capital account to buy tethers, and then buy Bitcoin. And theoretically, you know, Bitfinex, they decide when they give you your tethers, but they already have your cash. So they could take your, they can take your cash, and they go ahead and they buy Bitcoin with your cash.

SPEAKER_177: Pure speculation. Yeah, but it's possible. Yeah. A day later, you take your tethers, and you buy it back from them for more money. Crazy. Yeah. So that, yeah. So the idea of somebody buying tether, you know, with actual money,

SPEAKER_81: you're just opening yourself up to be front run by not only Bitfix and tether, but everybody watching the blockchain, whereas you can go into Coinbase deposit money on Coinbase, nobody sees that on the blockchain, and you just buy Bitcoin, you know,

SPEAKER_09: And so then there's some sort of investigation by the New York Attorney General. And how did they

SPEAKER_07: find out about that in 2019? And to decide to do this investigation that eventually ban tether

SPEAKER_17: from operating in New York City, or New York, rather?

SPEAKER_48: Yeah, I think they started investigating it sometime in 2018. And through discussions, if you actually, when you look at the New York Attorney General's case, basically Bitfinex admitted that they had, there's money missing. And then the, you know, the Attorney General's like, you know, you guys haven't made this public, you know? So Bitfinex, obviously, they wanted to keep that, you know, they really wanted to keep that quiet. So I think that's when the Attorney General started investigating it, and they didn't publicly disclose, you know, the whole lending agreement with, you know, with tether. And what's interesting is just before the Attorney General sued Bitfinex, all of a sudden, we had a sudden, we had a bull market, you know, the price of Bitcoin started really skyrocketing, just for fire. And if you actually, when you look at the emails that was made public by the Attorney General's office, there seems to be like a breakdown of communication in late March of 2019. And this is my opinion. But I suspect Bitfinex figured out that, you know, the Attorney General is going to sue them. And it would be catastrophic if all of a sudden, they get sued by Attorney General, and that's going to cause the price of Bitcoin to go down, everyone's going to freak out. And the best way to get people to shut up about an investigation or FUD about Bitfinex is make them think they're all getting rich. So all of a sudden, on April, April 1, 2019, the price of Bitcoin goes up like, you know, 1000 bucks in one day, it went from 3500 to 4500. And they basically, they triggered a whole new bull market, it went, it went from $3,000 to around $13,000. Got it. You know, throughout the

SPEAKER_186: whole investigation, you know, throughout the start of the Attorney General's investigation.

SPEAKER_120: And the investigation basically said, I'm just going to read from it here,

SPEAKER_07: according to counsel for Bitfinex and Tether. In 2014, Bitfinex began a relationship with a believed to be Panama Panamanian entity called Crypto Capital Corp. To act as one of their payment processors in quotes, according to the documents provided to OAG by respondents, by 2018, Bitfinex had placed over $1 billion in co mingled customer and corporate funds and crypto capital. And then Crypto Capital either lost all or fled with $850 million in their money.

SPEAKER_19: This led to the New York Attorney General's office to sue iPhone X, the parent company of

SPEAKER_00: Bitfinex and Tether in April of 2019. They allege that iPhone X had been co mingling, blending client and corporate funds between Bitfinex and Tether to cover up the missing

SPEAKER_19: 850. So they were dipping into the tether reserves to keep their crypto exchange solvent, I guess is the insinuation here. Right? One thing I want to point out

SPEAKER_81: is I generally like to say that $850 million is missing. One thing that people haven't really caught

SPEAKER_48: on. Reginald Fowler, the guy behind one of the guys behind Crypto Capital, he was caught with $14,000

SPEAKER_186: of counterfeit money and the equipment to make it. So when you're running crypto capital, and you're, you're physically making counterfeit money.

SPEAKER_120: So he had previously done that, you're saying the crypto capital guy or he was doing a concurrent,

SPEAKER_188: right? He was doing at the same time when they when they arrested him, they searched his offices,

SPEAKER_136: they found uncut sheets of horror bills, $14,000 worth. So he was counterfeiting physical currency,

SPEAKER_81: while doing crypto, while doing while doing crypto and running crypto capital. So you know, it's a lot easier than going through all the hassle of counterfeiting money. Yeah, I got I got $8 million from this account when there was no actual deposit, you know, and it's a convenient

SPEAKER_78: scapegoat for business. Oh, yeah, we had no idea. The Reginald Fowler was issuing deposits that

SPEAKER_09: without actually getting any money, you know, since that time, the Attorney General said, Hey,

SPEAKER_07: you got to put out quarterly reports. And a quarterly report came out for the first time in May 2021. And this provided a breakdown of their reserves from March of 2021. And this is what started the whole

SPEAKER_30: interest in tether again with Financial Times, Jim Cramer, Coffeezilla, myself and a bunch of folks,

SPEAKER_00: watching what you're reporting on for these five years. And we said, Wait a second, this is a

SPEAKER_42: little weird. It's a PDF with a pie chart. And it says they have $60 billion in assets, but 75.85%

SPEAKER_02: of them are cash and cash equivalents, and other short term deposits and commercial paper that last part being loans to other businesses. And this was wholly unsatisfying to a lot of people because it

SPEAKER_00: would have made them the sixth or seventh largest commercial paper holder. In other words, holder of loans of other corporate entities. And this is where the black swan star, the black swan discussion

SPEAKER_17: begins, which is wait a second, this is $60 billion. What if 10% 20% half of it's not real? What if it's gone? What are the chances that you think it's gone? And what are the what is the worst case scenario? If in fact, there is some giant fraud going on here, which we are not sure of. But as we've discussed, the red flags are such that in my experience, when there's this many red flags, something is not right. Can I say it's a fraud? No. Can I say there's red flags? Yes. Can you say

SPEAKER_60: it's a fraud? Or there's just red flags? In my opinion, this is one of the largest frauds

SPEAKER_48: in financial history. And that's my opinion. Wow. As far as what their commercial paper is, the worst case scenario, the paper is junk. What they could be doing in theory is they can find commercial paper that's probably not selling at the full face value, and it's selling for 10 cents and a dollar. And they go ahead, they buy that paper at a discount, maybe give somebody a commission, and then they print up all these tethers. And then they take those tethers and they buy cryptocurrencies. And they say, Hey, yeah, it's backed by commercial paper. It's technically true. We don't know exactly what that commercial paper is. I suspect it's Chinese commercial paper.

SPEAKER_17: Ah, and we know everything in China is on the up and up. And that the accounting systems over there are totally squeaky clean. Now they, they have a huge shadow banking system in China. Yeah. So if this were to come apart,

SPEAKER_48: what would that look like in your mind? In my opinion, once tethers actually done for, once it becomes, you know, obvious to everybody, it's already obvious to me, but once it's obvious to everybody that this is a massive fraud, I believe you're going to see a huge capitulation of the entire cryptocurrency market. Um, cause you know, tether makes up, you know, 60, 70% of all the actual volume. And in my opinion, it's the tether activity that really drives in the real money. If you go back and you look at Mt. Gox, Mt. Gox was playing with funny money and they were

SPEAKER_81: able to, with funny money to bring up the price of Bitcoin from $50, $2,000, $1,200, you know, and it brought up all the other Bitcoin exchanges that had real money. They followed that fake, that, that funny money. And once Mt. Gox blew up, they realized that that funny money wasn't really there. And that's when the market starts crashing because you don't have that funny money, you know,

SPEAKER_136: pushing the price up anymore. So tether is basically just the, a much, much, much bigger Mt. Gox. And

SPEAKER_48: the genius about the tether scandal, um, is the fact that they exported their funny money to dozens and dozens of exchanges. All the tethered exchanges, in my opinion, should be considered the same as a single entity because of tether. So now if the people who own tether right now,

SPEAKER_17: whether they're exchanges or participant in exchanges are seeing all this talk, especially

SPEAKER_07: since this PDF of the pie chart came out and everybody starts covering it and it's like, Hey, this could be a black swan. Would that not lead to everybody who owns tether saying,

SPEAKER_00: get me out of this as quick as possible. I want to cash in my tethers.

SPEAKER_117: Interestingly, apparently not, you know, tether, you know, the, the only time there's ever been any mass redemption of tether was actually when they had 850 million dollars used. All of a sudden,

SPEAKER_81: they started redeeming, um, about 700 million, 800 million, um, tethers were burned, um, sometime in October and November, 2018. Um, that's the only time we've ever really seen a big burn. There was one

SPEAKER_48: burn before that of 30 million tethers. Um, I suspect that was Phil Potter redeeming his tethers, because that's, that's just before he quit working for Bitfinex and tether.

SPEAKER_09: Got it. So if people are still using this, it's active. Do you think they're out of compliance with the New York attorney general that asked them to do these quarterly reports?

SPEAKER_117: Um, I do believe that, you know, tether is still doing business in New York,

SPEAKER_81: Bitfinex is still doing business in New York, even if indirectly, you know, um, they're still, you know, and honestly, um, I've, I've seen people that, you know, they're in, they're physically in

SPEAKER_48: New York and they were trading on Bitfinex. So in my opinion, Bitfinex is still in violation of the settlement agreement. Because again, Bitfinex is still not KYC AML compliant.

SPEAKER_00: Why wouldn't Bitfinex and tether just go through a normal audit with PricewaterhouseCoopers, Ernst & Young, somebody like that?

SPEAKER_137: Um, because it's hard to do an audit when you don't have the money.

SPEAKER_07: So in your mind, they're not going to put themselves through an audit because the money's not there. And that would prove it pretty quickly.

SPEAKER_09: But they do have an audit from some firm in wherever they're domiciled in the Cayman Islands. And this is more Cayman is the name of that?

SPEAKER_213: That was not an audit. That was an attestation.

SPEAKER_33: Okay, so explain to the audience what the difference is between those two.

SPEAKER_81: So an attestation is basically that, you know, they'll come and say, hey, on this day, on this time, we saw that there was this much money in this bank account, or this, you know, you know, they had assets of this value. The problem with the attestation is they

SPEAKER_48: actually have cheated with those attestations before. So if you actually look at the first one that they did, um, which was in September of 2017, they literally opened up the bank account the same morning that they did the attestation. They transferred all the money in and then Friedman LLP, they say on this day and this time that there was this much money in this bank account and Friedman, they, they covered, you know, they did, they did it. They did their, you know, their job. They basically said, hey, we don't know what happened. There's no opinion on what happened before or after this exact time. What's really interesting about the September 15th attestation is the price of Bitcoin fell by about 50%, maybe 40, 50%, just two weeks prior to that attestation. And then immediately after the attestation was done, um, the price of Bitcoin started scare rocketing again. And it was actually one of the largest four hour candles of buying in

SPEAKER_177: Bitcoin in, in history, the same day they did it. So what is your theory there? They sold their

SPEAKER_53: Bitcoin and then bought back in to have a giant account? My theory on that was,

SPEAKER_48: um, they basically were selling all their cryptocurrency that they were buying. And they

SPEAKER_81: caused the market, you know, because they weren't, they weren't buying Bitcoin to push the price up anymore. They're trying to cash in to generate enough money to show money in the bank account.

SPEAKER_09: Got it. The CEO of tether has been seen last when, and what's the name of the CEO?

SPEAKER_163: Um, his name is, uh, Gene Lewis, uh, Gene Lewis Vanderbilt.

SPEAKER_20: Sounds like a James Bond villain. Now he's the CEO. Now my understanding is people have not seen him

SPEAKER_02: in years. Is there, um, video of that? Do you know if there's video of him ever talking in a public

SPEAKER_42: forum? Who is this person? And if somebody was saying this about my company, I would be out there on CNBC talking about and explaining what the big misunderstanding is. But this person hasn't been

SPEAKER_220: seen ever. I mean, there was somebody who told me that he may not exist. He's a real person. He

SPEAKER_48: absolutely exists. Okay. Um, I, I, I looked, you know, I looked into it, you know, because again,

SPEAKER_137: some people thought he doesn't exist. He definitely exists. I can tell you that, you know, beyond a

SPEAKER_81: reasonable doubt. Where does he live? Do we know? I think it's an, you know, some I lived on, uh, in Hong Kong. Um, I can't, I can't think of the name off the top of my head right now. Um, I may be wrong.

SPEAKER_48: He also might be, may live in the Netherlands. But the thing is the, the CEO of Bitfinex and Tether, um, in my opinion, he does not actually run Bitfinex and Tether. Um, he's a, he's a very important

SPEAKER_169: character, um, but he does not run it. The person that actually runs it is, uh, Juan Carlos Devinasini,

SPEAKER_48: the chief financial officer. And again, he's, he's never been seen anywhere for a long time. They used to do voice interviews, you know, on their, their shareholder, um, group, which is called Whale Pool, um, which is run by a bunch of Bitfinex and Tether shareholders. Um, but they, ever, ever since I kind of started, you know, throwing shade at them, they really haven't done any real interviews.

SPEAKER_07: So, uh, for my audience, if anybody knows where these individuals are and can let us know, we'd love to interview them. In fact, the CTO has, uh, told us he would come on the podcast after I interacted with them on Twitter. They seem to be interacting with people on Twitter. What can you tell me about their trolling back and forth with you and me and other folks on Twitter?

SPEAKER_48: Um, the CTO of, of, honestly, it's quite possible that he doesn't actually know what the hell's going on with their, with their banking and the money, because he's just a tech guy. You know,

SPEAKER_137: that's like going to enter on and asking their IT guy, Hey, what's going on with all this stuff?

SPEAKER_00: Yeah, or in made off circle. Yeah, made off circle, like the IT department might not know, even the CTO might not know, because they were running this off of some C, I think in the birdie Madoff case, they were running a secret trading floor where only, um, the Madoffs were

SPEAKER_229: allowed. So Paolo, who is their CTO, you think might not even know that there's a fraud going on

SPEAKER_231: here, right? He, he, he may just believe his employer, you know, he has, he, in my opinion,

SPEAKER_81: he probably has plenty of plausible deniability. Hey, I was just the IT guy. I don't know what that was going on there. You know, I, I certainly wouldn't want to know about all that stuff, especially if I'm getting paid, you know, you know, don't tell me anything. And I saw this,

SPEAKER_48: have possible deniability. The person you want to want to talk to is Juan Carlo, um, the Vecini, which has a shady history of himself. He actually used to sell counterfeit software. Um, he actually was fined by Microsoft, I think roughly $60,000 for basically selling, you know,

SPEAKER_177: massive amounts of, uh, this was years ago. Yeah, this was back in the nineties, you know, but it's again, it's just shows you that it's a shady. Some character. Yeah. Yeah.

SPEAKER_07: What have you learned recently about, uh, the company and where they're at right now and how they're taking this recent round of scrutiny because they interact with you, correct?

SPEAKER_117: On Twitter and social media. Indirectly. I do have the, the, the lawyer does have me blocked. I have Paolo blocked. He hasn't actually blocked me yet, but he'll probably block me after this, but, but there really hasn't been, you know, it's, it's usually kind of always indirect,

SPEAKER_81: you know, uh, attacks, you know, they, he has, you know, kind of like, you know, tweeted, you know, some of my stuff and he's got, he's taking pictures, screenshots of my tweets.

SPEAKER_48: Um, I think he, I think he noticed that he actually took, I think it was one of my tweets and one of your tweets. He actually like, you know, I did see that screenshot posted it. Yeah.

SPEAKER_243: You know, in case I deleted, like I, I really, I, I, I, the only tweets I deleted are ones with

SPEAKER_07: have typos or something like that. Yeah. And to be clear here, we just would like to see, I'm just speaking for myself here. You've, you've given your position. My position on it is, um, you know, having watched Theranos and having watched Enron when I was a journalist and seen multiple scams and frauds. Um, they always had a very slow burn up until they were found out. It took the, the Madoff case took, I think seven or eight years of whistleblowers talking about it for it actually to implode. And so my spidey sense just went off with this. And I, I was like, huh, this doesn't seem right. So let's get some answers. And when you probe and you don't get answers, okay, then maybe there's something there. So let's pivot here, I think. Is there

SPEAKER_09: anything else on tether we should discuss because I was going to pivot over to circle and their

SPEAKER_186: stable coin for a moment? Um, not the top of my head. I mean, it could go on forever. It could go

SPEAKER_09: on forever. If you know, is there another, there's only 13 people who work at this company? Is that

SPEAKER_136: correct? Where that's the reported number of people where nobody knows? That's, that's the reported. Um, they, they hire people just to use their name. So they're real people, you know, and they do

SPEAKER_07: officially work there, but they don't actually. Basically like, um, window dressing, uh, for it. Yeah. Is there another date or time when you think there's going to be a critical come to Jesus moment

SPEAKER_81: for tether? Or is it just unknown when this is all going to come to an unknown? Um, I think eventually people are going to figure out what, where their commercial paper is, if they have the commercial paper.

SPEAKER_07: Cause financial times is on that, right? Yeah. Yeah. And so the financial times being on the story, they said all the people they know who'd trade in a commercial paper have never heard of tether. Right. Which is kind of interesting. They could, if tether wanted to just give a detailed report on who, which paper they own. And then we'd all go, okay, then you could make a better decision here

SPEAKER_136: of is that quality money or not. Right. The, the reason why they don't do that is because it's going to cause another problem that, that breakdown that they, that they were kind of forced

SPEAKER_81: to by the attorney general, you saw how the market reacted to that. That was bad. You know, so they don't want to do that. The only reason why they published that was because they were kind of forced to. So, um, they did it, they tried to hide as good as they can, but again, it just brought in a lot more scrutiny. So if they do like with the specs, you know, the specs list, everything that the

SPEAKER_52: specs owns, if they do that, people are gonna realize this is junk. And that would basically

SPEAKER_07: be the end of it. So that's a perfect segue. I've known Jeremy Allaire, a famous internet entrepreneur who created cold fusion, I've known him, or known of him since the late 90s, when he created cold fusion, because we built a lot of software in the industry on cold fusion, then he went on and did, I think, Brightcove, a video company that I remember, and I think I've had him on the podcast talking about Brightcove, or, you know, I'm not friends with him, as such, I'm just colleagues in the industry, if you know, we would recognize each other and say hi at a conference, or maybe, you know, I, you know, I'm trying to think of the last time I ever saw him in person, and probably 1020 years ago. But I do know him. And circle bought a friend of mine's company seed invest. They've raised from very knowledgeable people, and they have their own stable coin called USDC. So US dollar T is tether USDC is circle, they operate in the United States in all these different jurisdictions. And they've given some indication of what they have in their reserves, and they have Grant Thornton, which is pretty notable firm here in the United States doing that attestation. What are your thoughts on the difference between USDC and USDT, especially in

SPEAKER_02: light of the fact that today was announced, that circle is going to SPAC, so they will be under even

SPEAKER_48: more scrutiny as a public company. So USDC, I think, again, it started just like tether, they're kind of being transparent, they're, you know, showing that the attestations were showing that it was US dollars in a bank account. And sometime in around, I think it was around March of 2020, they, they changed the format of their attestations. And in the attestations, they, they went from saying, you know, US dollars in a bank account, to US dollars and approved investments. And the problem with that is, they do not exactly explain to us what the approved investments are. And again, I have PTSD from tether. So when I see something like that, it's a red flag. I just want to know what the approved investments are. And I wrote a couple blog posts on circle. And I want to be sure that I'm not accusing him of really doing anything wrong. The only thing that he's doing wrong right now, in my opinion, it's they need to be transparent. Yeah, a higher level of transparency would make

SPEAKER_20: you more comfortable seeing what happened with tether. And in, you know, I might give him the benefit

SPEAKER_07: of the doubt knowing he's in, you know, somebody who's been in the industry for 30 years, and that they're spacking and that they have Grant Thornton, who wouldn't want to touch this if it was

SPEAKER_20: something fugazi. But what is the business model? Do you think of these stable coins? Because I'm curious why people can't just make a stable coin that is $1 in the bank account? Is it that everybody

SPEAKER_267: wants to try to make money on the spread or provide a return on the investment? You know, interest,

SPEAKER_81: in other words, it seems they want to do something more risky than just buying treasuries for some reason. Because you can actually make a lot of money just if you have $60 billion, and you're

SPEAKER_137: making you just buy government T bills, even at a very low interest rate. I mean, if you made 1%,

David Friedberg: you'd make 600 million a year. Yeah. And then that would be your money for running the service,

SPEAKER_81: just like what you see with specs, you know, the specs, they manage $220 billion. And they take, you know, a little bit of good, I think they take point 4.5% for themselves. Yeah,

SPEAKER_07: they get what's called a promote for putting it all together. Yeah. Which makes sense. Everybody

SPEAKER_136: has to get paid in some way. Yeah, right. And it shows they should they show all the reserves, they've been running for about 30 years. I think it was sometime in 1990 or 1981, when they started

SPEAKER_48: doing this, the specs. And I actually cited that as an example that hey, you know, to circle, like, hey, just here's an example of how to do a, you know, even if you can't do an audit, you know, just publish what your reserves are. Yeah, I mean, I think it's pretty clear that

SPEAKER_07: what circle is doing is 100 times more regulated than what tether is doing. We'd agree on that, correct? Right. Yep. You would agree on that as the as the most critical person. So it's 100 times more, and you just want another 10% more clarity, totally agree with you. And and I have been DMing with Jeremy Allaire. And he has said he's going to come on the program. So I think in the next two weeks, he'll be on the program. Now the CTO also said he would have tethers that he would come on the program. But we he's not responding to us now. So we will keep going after that. But

SPEAKER_231: the only people I would really suggest talking to would be one card of the scene or Vanderbilt.

SPEAKER_07: Well, I'll talk to I'll talk to any of them just to kind of get a feel for them. Now let me ask you

SPEAKER_20: this. You have been super critical. You said here you believe it's a fraud. Now, if it was wasn't a

SPEAKER_07: fraud, and I was them, I would find out who you are and sue you into oblivion. Have they sued you

SPEAKER_81: into oblivion and taking legal action against you? No. Interestingly, though, they did threaten me

SPEAKER_48: to sue me sometime I think they hired a PR firm out of New York called five WPR. He put a press release basically saying that they're gonna explore like legal options. And I was actually December 4th

SPEAKER_137: of 2017. So that hasn't happened yet, right? No, they haven't, you know, they haven't sued me, they did threaten me. And I did take some precautions. Because, you know, you know, I was,

SPEAKER_81: you know, you know, a little concerned. Yeah, of course, they're still doing the, you know, they're still allegedly doing the audit with the Friedman LLP. So, you know, there was always, hey, there's a possibility that, you know, they do the audit with Friedman LLP and the artist comes out and says that everything's okay. And hey, you were wrong. But very interestingly, two days after they threatened to sue me, they got subpoenaed by the CFTC. Fascinating. So that happened. The PR guy quit,

SPEAKER_48: you know, because the PR guy, I kind of I basically only tweeted him like, because he started attacking me, you know, doing his job and calling me a liar, blah, blah, blah, blah. And unfortunately for him, the PR guy, his press release that he sent out to reporters, I found out he made a false statement in that press release. And I took the fault I had proof of the false statement because he contradicted what the audit with Friedman LLP did for the attestation. And after that, he disappeared.

SPEAKER_81: And their reporters apparently, they went to ask him about a question about Bitfinex. And he responded saying, Yeah, we no longer represent Bitfinex. Got it. So I don't know who you are.

SPEAKER_19: Just to make it clear to everybody, we contacted you through your Twitter handle, you decided you would come on and talk to us. Thank you for doing that. We don't know who you are. So

SPEAKER_07: disclaimer, who knows, if what you're saying and what percentage of it is true. But you have been chronicling this for four or five years now. And we thought it would be good to just have you on record talking about it. Do they know who you are? I'm nervous. They still don't know. They think they know, but they don't, you know, so you are telling us here, you don't have an axe to grind with them. You didn't work for them. You weren't a former partner. You're not a disgruntled co founder or

SPEAKER_19: nothing like that. No. Got it. But you are pro crypto. If I can just get your take generally on crypto, you are a fan of crypto and you own crypto. I have zero cryptocurrency. You have zero

SPEAKER_81: cryptocurrency. Yeah, I have no absolutely no holdings of any cryptocurrency. Until the tether

SPEAKER_48: issues resolved. I would advise anybody to stay away from it. Once it's once tether goes away, and it's kind of resolved, you know, we'll see what happens. Did you trade crypto back in the day?

SPEAKER_09: Were you a crypto holder and a fan of crypto over the last decade? I was a speculator. Yes.

SPEAKER_48: I actually, so by trade, I was a programmer. And I've been honestly, I've been programming for decades, mostly C++. So I actually, when I first heard about Bitcoin back in 2009, I actually downloaded it. I looked at the code. I actually thought it was quite beautiful. But then, you know, I didn't really do anything with it. I just kind of went back to work, you know, and basically in April 2011, I think there was an article on Slashdot saying that Bitcoin reached parity with US dollar. And so I used to basically kind of look back into it. And

SPEAKER_81: this was a gamble. I put a little bit of money into it, you know, and I really never, after that, I didn't really buy any more Bitcoin. I just would slowly sell off small, small portions of it, you

SPEAKER_117: know. So you've done well for yourself in crypto. Yeah, I, you know, in 2017, that's kind of when I

SPEAKER_81: started, you know, it became an amount of money that, you know, I need to look closer into this and see what the hell's going on with this. Because I always thought that there's something wrong with the

SPEAKER_48: trading. But because the price always went up over time, I didn't really care. But I always there's something wrong with the trading. And so I decided to just, you know, if you're holding a lot of

SPEAKER_52: something, and you're trying to investigate it, you're gonna have a clouded view of what the hell's going on. You know, you're gonna have you gonna have a bias. So to wrap up here, you,

SPEAKER_07: you, you believe that Bitcoin is a great fundamental, you know, revolutionary technology, and that there are other actors, bad actors manipulating it. So this would explain maybe

SPEAKER_20: part of the tension that we're feeling in the crypto economy is, there's a real technology, which is beautiful, as you describe it. And that could be great for humanity. But because it is not

SPEAKER_07: owned or controlled or audited by any buddy and has no regulations associated with it,

SPEAKER_02: people can then manipulate it and do all kinds of scams around it. Is that an accurate sort of

SPEAKER_48: description of your take on what's happening here? It's pretty accurate. There are some fundamental problems with Bitcoin itself, that I actually even when I was a speculator, I felt that, you know, they need to increase the box size, they need to increase the transaction capacity of Bitcoin. And as a programmer, I struggle with how they that's a very difficult problem to solve to actually have,

SPEAKER_19: you know, the scalability. How much of Bitcoin's price do you think is the result of manipulation?

SPEAKER_30: Everything past 2017, early 2017. So anything past $3,000, $2,000? Is that about where it was back

SPEAKER_81: then? Honestly, I believe that we don't know, it's impossible to determine where the price would be right

SPEAKER_07: now. Without manipulation, but you believe there is a lot of manipulation, some manipulation,

SPEAKER_300: an extraordinary amount of extraordinary amount of manipulation, extraordinary. Okay, I don't want

SPEAKER_00: to put words in your mouth. So that's why I gave you a number of choices there from minor to occasional that's a good extraordinary. See, I've always felt watching this knowing that people

SPEAKER_07: can paint the tape and create false volume, that a lot of the volume was false on coin market cap and those kind of sites. And that all of these they were putting together all of these exchanges that are unregulated. So I you and I, for example, could create 100 different exchanges, pop them up. Nobody would know the providence of those exchanges, then we could take our $10 million in cryptocurrencies and just slosh to between our accounts and create volume. While we had already bought in a large

SPEAKER_02: percentage of crypto and sell it off. Then if we could stop trading, which would then create less

SPEAKER_00: demand for Bitcoin, watch it collapse, buy some more and then do that over again.

SPEAKER_52: Buy it back and do it, do it, do it over and over again. One thing I want to add, even Coinbase had

SPEAKER_48: one string, you know, they actually admitted to it in the CFTC, fine, that they actually had an employee

SPEAKER_81: that worked with them. I suspect it was Charlie Lee, because, you know, Coinbase listed Litecoin, and 99% of the trading of Litecoin was a Coinbase employee. Really? So very interesting. Yeah. And that was Coinbase. And Coinbase is supposed to be this transfer, you know, the leader, you know, of compliance, and they had an employee that was watch trading. Yeah, they got and they got fined the CFTC

SPEAKER_07: fined them $6.5 million for this improper trading from a forum employee. So the concept of watch trading here would be, I buy a but I'm a bad actor, I buy a bunch of this coin, Litecoin in this case, then I create fake trades between accounts, different wallets, I could do that, you're a developer, we could write a script to do that fire up a bunch of different instances and start trading between them. Other people see it's getting more and more active on coin market cap or other rankings of coins. And they say, Oh, well, there's a lot of activity, I should buy that one, because people are

SPEAKER_177: interested in is that what the strategy is, right? Then they end up buying it from, you know, these

SPEAKER_48: wall trading accounts, and they keep it, you know, they keep pushing the price off, and they buy it again. And, you know, and you don't realize that you're, you're buying from, you know, the person

SPEAKER_117: that's wall trading it, it's both wall trading and painting the tape. So they're kind of the very similar, you know, wall trading, a lot of times when they're actually doing wall trading, the price

SPEAKER_81: usually stayed out the same. They're just trying to increase the volume, they're not trying to push the price up, painting the tape, you know, they're trying to either push the price up or push it down because they do both things that they do both. Is that the difference? I was wondering

SPEAKER_109: what the difference is. So wash trading, you're creating volume, but painting the tape, which comes

SPEAKER_07: from back in the day, when you would have the tape coming out of a ticker tape with stock quotes on it, painting the tape means trying to, we decide, you know, to buy shares in a company from each other, if it was a stock, had increasingly higher prices to create excitement that it's going up other people buy in, but they don't know that we bought in for $1. And we painted the tape up to $5. And then the suckers come to the poker table and start buying in a five, four, three, two, and we double our money

SPEAKER_117: or more, right? So they do the both ways, they'll go ahead and they'll put a bunch of their own buy orders, for example, you know, let's say they know that, you know, the amount of legitimate buy orders

SPEAKER_48: is a small amount, you know, between two, between two prices. So they'll go ahead and they'll fill up their own, the order book with their own buy orders and they'll just crash the price and they'll make the price go down 20, 30%. And yes, there's going to be some of the, some buy orders that get lucky

SPEAKER_81: and they, you know, they got into that, but they really, they, they sold, you know, 50 million in Bitcoin, but you know, 48 million of it, they sold it to themselves, but they caused the price to go

SPEAKER_48: down a lot and they cause a panic and people pile into it. And if they're short on BitMEX, for example, now all their front positions are, you know, in massive profit profit, they didn't actually

SPEAKER_81: really have to sell any Bitcoin, you know, they sold a little bit to the people that were lucky and

SPEAKER_00: put it put in a buy order. All right, listen, thanks for coming on the pod. Thanks for being on the case as it were. Hopefully, this all resolves itself. And it's all a giant misunderstanding. But

SPEAKER_07: in my experience, when there's this many red flags, you know, maybe some agencies,

SPEAKER_00: three letter agencies should get really deep in this and find out what's going on here. Because the longer this goes on, that is unresolved, the more egg people are going to have on their face right now, I got to think that there are a lot of three letter agencies up in these people's grills and in their books, or tracking them. Because with this much public scrutiny and the press on it,

SPEAKER_229: from Jim Cramer to the FT, you got to think that the feds and everybody know what's going on here.

SPEAKER_48: You would hope. Yeah, there's a reason why my my logo is a flame. You know, it's a business and it's the logo and it's on fire.

SPEAKER_316: There you go. All right, we'll see you all next time on This Week in Startups. Bye bye.