Chamath Palihapitiya: all right everybody we've got a great crypto round table for you today sonny and vinnie join molly and jcal i'm talking about myself in the third person to break down everything going on in crypto of course we're going to talk about spf ftx but we're going to talk about the wider contagion

SPEAKER_01: and the source of all of those crazy 18 20 30 percent uh interest rates you were seeing in crypto there was one place that was causing all of this the grayscale bitcoin trust and we're going to explain what that is and why that can cause this huge contagion we're also going to do a vibe check and figure out what's going on in crypto right now as spf sam bank run fraud goes on his insane demented i'm sorry tour while having run what is apparently the greatest fraud in the history of frauds making bernie madoff say hey pump the brakes kid then finally michael sailor goes scorched earth on anything but bitcoin saying the obvious that ripples a security but then talking about all of the other foundations that have tokens out there and saying they're obviously securities we're going to talk about this issue and what it means for the wider crypto space and america's viability in the global market where other people don't have as tight restrictions on what you as an individual can do with your money it is a hot episode it's an important episode stick with us this week in

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SPEAKER_04: doing great just want to say for the record you were magnificent on all in oh you got to see the

SPEAKER_06: all this morning oh you caught up bravo bravo okay i guess we have to keep this in the show then so

SPEAKER_08: welcome to wednesday it's the crypto roundtable molly's starting with a compliment we're keeping

SPEAKER_14: that in this week in startups obviously doesn't have a lot very stingy yes she does dole out the

SPEAKER_16: compliments once every couple of weeks i get one uh but it's it's wednesday so we do our crypto

SPEAKER_01: roundtable every other wednesday with us of course video lingam sandeep madra sunny and vinnie how we

SPEAKER_19: doing boys gentlemen excellent lots to talk about interesting times lord it's crazy times right now

SPEAKER_21: yeah full disclosure i had to send sunny a note the other day that was like hey so um you know

SPEAKER_23: sometimes on the crypto roundtable we're kind of snotty about it but then i realized like that's your

SPEAKER_26: whole job like should we be more sensitive to this it's all good well i think that's a good place to

SPEAKER_01: start let's start with that molly what is the vibe in crypto right now because with this fbf situation i think everybody's at their wit's end with the crypto community and all this hard work there's code that's being written there's businesses that are doing real things in the real world that i think are obviously getting massively overshadowed by this sbf fiasco and he can't seem to shut up we'll get to that in a minute but sunny what's it like to be a crypto executive in the age of bernie madoff

SPEAKER_32: yeah well you know if you're building real utility it's great because the you know the exchanges were

SPEAKER_34: sucking all the oxygen out of the room for a very long time and so the folks that are actually building are loving it because instead of the industry being about speculation we're seeing people actually talk about utility properly now and you know not rushing to you know launch a token and put it out there and get it on exchange and everything else so uh from the builder's standpoint it's a really

Chamath Palihapitiya: really good conversation right now vinnie what's it like for you you know you've been one of the og

SPEAKER_11: crypto people since the beginning and now this sam bank run fraud can't seem to shut up he he's doing three twitter spaces a day we've discussed on our private chats and group chats on all i mean every group chat is taken over by this uh yeah what do you what do you think vinnie i mean obviously it'd be great if he would just shut up and go to jail uh go to trial but apparently he will not so what's what's the crypto community think about him specifically you know obviously we got sunny's take on the

SPEAKER_48: industry but what about the man the man i mean this guy is he's not an idiot right he's not stupid he's you know he he might he might have gone downhill and made a couple of bad decisions which

SPEAKER_49: which snowballed into absolute fraud and corruption and when i say when i say that is that i don't think he started off the business trying to be a fraud fraudster like that wasn't the intention he tried

SPEAKER_50: to build an exchange at some point he got over leveraged and he lost money and then he was like well i was gonna double down double down double down and he kept doubling down hoping to make it

SPEAKER_49: back and the market kept sliding south and he just couldn't make it back and at that point it was way too far too late to go on you know and so what he's doing now is he's making sure that he's safe in the bahamas that's why he let all the bahamian people take their money out on the same day so he's

SPEAKER_50: safe there there's no tradition treaty between the bombers in the u.s he will not what was that you said he

SPEAKER_52: let the bahamian people take their money yeah yeah on the day everything was collapsing he authorized

SPEAKER_49: and he allowed bahamian people to withdraw their money from exchange while everything was collapsing

SPEAKER_53: wow i actually didn't hear that in all of this so there was so there wouldn't be a revolt basically yes exactly otherwise a lot of people in the bahamas coming out exactly so obviously all the

SPEAKER_50: politicians everyone had money in exchange they were able to get money out then his parents are both

SPEAKER_49: lawyers and i think harvard educated lawyers or whatever stanford profs yeah stanford profs whatever like these guys are they know the game first of all he's never standing foot in the u.s okay and there's no tradition to you with bahamas so i can't see him coming there to the u.s to do anything

SPEAKER_63: he's supposed to speak to the senate on the 13th i will bet you money sonny that he does not come i bet you whatever you i'll bet you a bitcoin that you already owe me that he will not come back to to

SPEAKER_67: to the senate for testify double or nothing okay the good news is the bitcoin's half so you can give

SPEAKER_49: him two it's fine the coin's half double or nothing it'll be 8 000 by then okay cool we'll double

SPEAKER_71: acquits on that okay so it's recorded wait wait what is the bet is the bet that he will be extradited

SPEAKER_72: no that he will show up or not show up for he will you will not show up for the congress

SPEAKER_21: hearing in person or on zoom in person for the congressional hearing for the earring he will not

SPEAKER_74: show up in person in the united states for the hearing and you believe sonny he will show up

SPEAKER_76: in person what happens if he shows up on zoom no that doesn't count oh okay i thought you were saying

SPEAKER_80: he won't show up to the hearing vinnie no no no no this is i'm a bookmaker i just gotta make sure i

SPEAKER_49: understand he'll do the hearing over zoom he will not do the hearing in person he will not physically

SPEAKER_85: come to the u.s that's off that's off that's off okay the reason he moved to the bahamas and that

SPEAKER_49: was should have raised all the red flags was that you know for lots of reasons like that's why he moved there right and i mean look i'm not going to go through my personal text with certain friends of ours but i can show you texts at some time with friends of ours where i called this like months ago six months ago i was like i don't trust this guy at all back in may i mean when everything was collapsing and he was coming to the rescue of the shiny white knight i'm like something stinks here there's no way he made money while everyone else was losing um in this industry anyway long story short i think that we you know what he's doing right now is he's trying to paint the picture and taint jurors potentially if he does get arrested and picked up that everyone sees him as the altruist that failed as opposed to the fraudster that you know he doesn't want to be the made of and so the more he can taint jurors because the guys look at even the craig wright trial for example like these jurors have no idea what goes on in crypto like you get 10 average people onto a jury and you explain them how the like imagine trying to explain how derivatives work i mean come on like they like this is these are like normal average joes on the street right maybe you get lucky and one person is tech savvy but that's about it so all he's trying to do is like everyone sees him in a positive light and the media has been covering this up and at least to some point i think they're loosening up right now but in the beginning they're like this is one of our biggest donors we we you know we got to defend him in some way i think he's probably holding some people over a barrel with donations because he hasn't actually named all the republicans and the democrats that he supposedly supposedly reportedly gave money to so at some point he's like look you know i'm and i don't know how he gave the money and i will i will actually go and posit that he probably paid off people in bahamas and other politicians in other parts of the world as well so he's basically got a dead man you know trigger right now the bahamians are not gonna extradite him he's obviously probably paid people off there and any other country in the world that he has like he was licensed and he got licenses very quickly and it was very clear that he was willing to donate money to politicians listen i have been

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SPEAKER_04: okay so separate from sbf and that specific story do we think that to sunny's point the best thing that can

Jason Calacanis: happen in crypto is for it to just not to just dispense with the great man theory strategy or like

SPEAKER_04: it become decentralized like lots of different builders and not one giant hero of the whole thing

SPEAKER_32: also one of the things that's been uncovered through this whole process is you know most

SPEAKER_34: likely what the cause of all this was and vinnie vinnie's gonna have a a heyday in this one so this goes back to that grayscale bitcoin trust and what a lot of people are starting to zero in on is you know much a huge part of the speculation side of the industry the arb side of the industry the yield side of the industry was driven from at the core the grayscale bitcoin trust and we talked about this a little bit last time but we have vinnie here now and up until 2021 the grayscale bitcoin trust traded at a premium to bitcoin price and what everyone is uncovering because of this contagion right now is that most of the bigger players in the industry were all arbing that that and then you know taking customer deposits to put by bitcoin to put more into the trust to take advantage of that arb and vinnie i'll hold on a second i just want to understand that mechanically bitcoin's

SPEAKER_102: trading at 16 000 today that's trading at i don't know 16 500 bucks no so you move by bitcoin there

SPEAKER_34: you get the 500k yeah so the 500 let me outline it and then let me jump in right historically up until 2021 march that bit the grayscale bitcoin trust traded at about a 30 percent premium to bitcoin and so what people were doing was buying bitcoin putting it into the trust and then if you if you left it in there for six months you could get the gbtc out which was at a 30 percent premium so essentially it was a what is gbtc that's the grayscale the the the ticker oh i see yeah and so people would put bitcoin in and so let's let's just use some round numbers let's say they put the bitcoin in for 10 000 and then they could get the equivalent of 13 000 out after six months plus whatever appreciation that's happened as well and so this trade has been running since 2013 up until 2021 positive and it went that that went from a premium to a discount in 2021 and what everybody has really realized now is a huge part of the industry was basically making a ton of money off that trade and using that to give high yield interest accounts and you know all kinds of things out there and um and now once that stopped and once it went negative that's what's really led to the collapse of the industry but that's a good thing because this trust probably shouldn't have existed i'm going to throw it to vinnie as to why i mean so

SPEAKER_113: thanks any um i've spoken about this many times in the past i posted a link to you guys and i'm

SPEAKER_50: going to read up one of the comments there so i wrote this blog post uh it's called preventing another bitcoin bubble on my blog i haven't written blogs in years but this is 2017 and i actually um i'm scrolling down to point number four and uh anyway so i'll just i'll skip ahead but i wrote i don't believe that and this is when 2017 when you know the price of bitcoin was like

SPEAKER_72: five years ago yeah five years ago so so price of it was like five it was a thousand bucks or

SPEAKER_63: something at the time i don't so i wrote i don't believe the market cap of bitcoin is growing organically enough to be large enough to support 300 million plus of immediate demand from

SPEAKER_50: potentially fickle and retail or corporate investors with stop-loss triggers like this is in relation to an etf i said bitcoin works when the price rises slowly people hold and are reluctant to sell 300 million overnight demand will create a spike potentially encouraging more buying and some selling and the price will keep rising until it doesn't then one day the etf will need to offload half its holding because people get scared imagine what that'll do the price overnight bitcoin will be most successful and is held in small amounts by large numbers of people not when they are highly centralized in one or two etfs that have to force sell it whenever people get

SPEAKER_49: the jitters or have to make margin calls you think you've seen volatility baby you ain't seen nothing

Jason Calacanis: yet okay well and here we are in this case grayscale you're saying was operating like that etf that hypothetical etf that they were making it easy and it seems like it was like the fountain of youth of money like a like a cd that never doesn't appreciate you just go and put your money there for three

SPEAKER_58: months here's the ob the ob is it wasn't an etf and this is on this is on the regulators this is

SPEAKER_63: their fault it wasn't an etf and so the the disparity between uh the the trust and what it synthetically what an etf was was this arbitrage margin that you could play around with because it wasn't there this margin was created and then it was exploited and then that's how the whole thing broke what why a

SPEAKER_129: stupid question why did grayscale offer this to attract people to put their that was the only way

SPEAKER_39: for regular people to buy exactly before these changes got big right it's been around since 2013

SPEAKER_133: so you could buy why do they off why do they have this premium the premium is this this is it's a

SPEAKER_136: regulatory arbitrage premium it's like the difference between a a trust and an etf is this premium or discount because it flips to a discount i think it's also slightly different like the reason the

SPEAKER_34: premium started to disappear by 2021 there was much it was easier for retail folks to buy bitcoin through a coinbase and everything else all those companies are becoming public and so before you were paying a premium to buy bitcoin through you know your traditional so then people had bitcoin that

SPEAKER_129: they bought on some international exchange or had for some reason or they had mine could put it in there and get that extra bit yeah so so jason could they take it out after hold on just a technical question could they take it out after six months and then do it all over again yes yes oh rinse and

Jason Calacanis: buying a short-term cd yes yes reaping the interest earnings and then selling it and then locking your money back up so when so this starts to answer that question that jason asked over and over which

SPEAKER_04: is like if you're offering 18 yield which felt burnt you know made offish yeah where who is paying that

SPEAKER_150: yield and so what you're saying is that it was coming from this is where it was coming from

SPEAKER_23: yep the bodies are coming out of lake mead it's all starting to come together okay so two two things

SPEAKER_08: that they meant that you hold on just two things for the audience that may not have caught it um

SPEAKER_11: the craig wright case vinnie you mentioned before uh that people didn't understand crypto that was the guy who claimed he was satoshi right and people were upset that he did that and they sued him or something yes and then dead man dead man switch just so people know that term of art is you think you're going to

SPEAKER_01: be assassinated you've got i don't know a book of secrets you have it automatically email it to folks unless you every i don't know 10 days press a button on a website so these dead man switches exist in the world uh the dead men switch originally came from um trains by the way if you are running the new york city subway you have to put your weight on the uh accelerator and then if you died and fell to the ground from a heart attack the thing would pop back up uh the throttle and therefore the dead it would stop the train knowing that the conductor was dead yeah i just hate when a term comes out and i know half

SPEAKER_163: the audience doesn't know it sorry everybody knows it no i only know from the gray man books so

SPEAKER_133: well what's even what's even what's the military fetish what's even more interesting now is he

SPEAKER_63: happened to hire the other person with a known dead man switch uh uh other person with a known dead man switch uh other person hold on i can guess that hold on no no it's got to be uh snowden or

SPEAKER_171: no no no no jesne maxwell is still alive oh dead man switch yeah she got a dead man so she's gonna do it for sure and and his lawyer her lawyer is now sam's lawyer so he's got a dead

David Friedberg: man switch attorney exactly wow i did see that i go by drudge report i love going to drudge report because drudge reads like whatever the story is and he's like here's the here's the portion of the story that you'll talk about at a cocktail party and it was you know sam backman freed uh i was

SPEAKER_180: good yeah so think about it like like we we it's almost like unbelievable that that you know what's

SPEAKER_181: his name died and killed himself what's his name um um yeah it was like a suicide

SPEAKER_180: exactly we all know what happened break yeah exactly but just lane is all alive and well

SPEAKER_186: who kept the records god this is gonna be a good movie this is gonna be a great movie back to the

Jason Calacanis: topic but back to the topic yes okay so back to grayscale because on the emergency pod that you came on you said grayscale is like the thing you're watching yeah and so let me just finish the arc of

SPEAKER_32: the story so there's this premium in march of last year the premium flips and it becomes a discount

SPEAKER_34: and right now gbtc trades at a 40 discount to the price of bitcoin and what's the why um because there is the the premium is exactly the premium was there because it was sort of the only place one of the easier places by bitcoin i get bitcoin wherever you want and so it's a supply demand thing and now what's happened is um many of those businesses that were put you know so what was happening let's try to paint the whole picture and we won't name names but let's just say you're a crypto bank right or you're one of these exchanges you're taking people's deposits and you're saying hey come here i'll give you these high interests this is what you know molly you were saying jake housing where is it coming from well what they were then doing is taking that money going and buying bitcoin putting it in the trust getting it out six months later getting the 30 percent and this rinse and repeat again then taking more money in it was everything was working what ended up happening as that premium flipped that game stopped but now people are underwater and they're becoming more and more underwater and that's the issue and that's what started to kind of break everything and that's the real kind of tie in that everyone's that you know going back to the initial point now everyone's kind of digging in and realizing this this thing was at the core of a lot of the you know the high yield accounts that we saw everywhere and this is what people were leveraging to put more money into and this is what led to the blow up of 3ac voyager and a bunch of other folks and even these ftx folks are involved in this as well

SPEAKER_129: okay so to recap that just so i understand uh graysdale launches a financial device

SPEAKER_01: where people can put their bitcoin in or they can buy bitcoin either of those things so if you're a miner you put a bitcoin in and if you want to buy bitcoin you can buy bitcoin in your example it was ten thousand dollars if you buy bitcoin it's thirteen thousand because we make it easy for you we custodian it that's your basically your vague as a consumer you have your morgan stanley and all that stuff perfect yeah and this has like uh the patina of something that's very trustworthy on the other side of the business they're saying hey if you want to make a little bit of money put your bitcoin here uh oh no no they said hey if you give us a bitcoin we're going to give you 13k or it's going to have 13k in value when you contribute so i contribute it and now i get 13 the extra three thousand dollars now i am an exchange people are buying a million dollars in bitcoin a day six months later i get three hundred thousand dollars for having put that bitcoin that they bought that i bought from some other exchange or from mining it into the grayscale so everybody

SPEAKER_205: has the grayscale uh incentive get your bitcoin over grayscale to get that 30 percent of putting

SPEAKER_132: bitcoin and it's 30 twice a year yeah and even if they're not putting their bitcoin in you can offer

SPEAKER_34: them a high yield interest account for their cash and you can basically take their cash by the bitcoin yourself put it in and give them the interest as well right so i'm just somebody with a million

Jason Calacanis: dollars literally propped up businesses across the entire ecosystem and once it went away is when everybody found themselves in a ponzi scheme right it's like it always starts out fine i think even made off started as real investments it's when for example the crutch the the tree of life in this case grayscale goes away and then you can't meet the obligations anymore and you have to start cheating

SPEAKER_132: to keep up so you've borrowed money to put it in there and now you can't get it out with a 30

SPEAKER_34: premium let alone even now it's 40 down and you have a real problem and now your depositors show up and say i'm really scared of this crypto thing give me my money you're like uh it's sort of locked up in grayscale because i converted it to bitcoin and put it in there and it's 40 down would you like half

Chamath Palihapitiya: of your money all right listen i gained back a couple of pounds i'm being honest about it i got a little crazy over thanksgiving and now i'm cleaning things up and you know how i'm cleaning up with super gut that's my bestie dave freeberg's company and it's a breakthrough in nutrition it's helped me lose weight it's helped me feel great it's increased my energy and they have you know just amazing a fiber mix they have bars and they have powders you make yourself a nice smoothie in the morning or if you're on the go you're in an airport instead of making these bad decisions i ran out of bars you know why i ran out of bars everybody in my family loves the bars so now i'm buying twice as many my favorite flavor right now the chocolate brownie bar and when i have that super gut whether i have a simple shake or i have the bar it curbs my cravings that's my big problem i'll get to be honest i'm a gavon as we would say in brooklyn i just love to eat but if i curb my cravings with a nice super gut you know what happens i boost my energy i feel better about myself and i start losing weight and i gotta tell you when i lost the weight and i dropped the 30 pounds that's when my performance across the board in my life went up they are running their best deal of the year right now i kid you not if you use the code twist twist as in this week in startups you will get 30 off so visit supergut.com supergut.com and just use the promo code twist save 30 it's awesome buy extra have it on hand how do you set yourself up for

SPEAKER_96: success you have a plan make super gut part of the plan i'm gonna go back to my like look i think

SPEAKER_50: greysdale is probably fine um i mean you know on balance it's regulated i don't think that there's funds missing in greysdale necessarily i think it's actually all the bitcoins there they use coinbase custody and coinbase is sitting with billions of dollars of bitcoin i think it's all there

SPEAKER_136: what i'm really really concerned about is genesis and i'll tell you why genesis was the largest lender of solana okay over the past couple of years sam bankman freed we know for a fact is sitting on north of uh well it's i think the the last another was 37 million locked solana now that was acquired a year ago and that was quite a year ago 37 it would have been probably closer to 50 million because of um obviously the unlocks have happened at 200 bucks a coin a year ago that was 10 billion dollars

SPEAKER_63: worth of solana or something like that some okay so so oh no sorry five billion five billion was like five some it was like billions right that obviously that collateral dropped in value now i do not think

SPEAKER_136: for one second i do not believe that the guys at alameda held that position long unhedged i don't believe it for a second i believe and and and and this is why i'm i'm i'm like i'm happy on this point is that

SPEAKER_63: genesis has not told us what is in their their billion dollar loss or whatever it is what assets are there they haven't told they're not saying we owe uh 10 million sol to our lender you know we owe x number of bitcoin it's just a round dollar number but they were a lender of crypto not just

SPEAKER_136: dollars so that number can't be fixed in dollars it has to be floating because you could borrow a soul from from genesis so people could have borrowed soul from genesis so alameda hypothetically could have borrowed 10 million soul from genesis dumped it on the market you know and and effectively taking

SPEAKER_218: profits and hedge themselves out of a position and now they owe 10 million solana to genesis

SPEAKER_220: and this is always a fraction of the price yes yes exactly exactly so you're saying two things are

Jason Calacanis: happening one the grayscale was the tree of life that propped up all of these businesses and allowed them to offer these various premiums and you know genesis and that oh great yeah but it's and what

SPEAKER_04: you're saying is it sounds like grayscale is probably solvent in the sense that it has all the bitcoin

Jason Calacanis: it said it had it's just that now it's at a 40 premium instead of a 30 or a 40 discount instead of premium but on the other hand you have genesis which and there was news that came out today actually that said that genesis owes the winklevoss twins crypto exchange gemini 900 million dollars um and you're saying that on the other hand there is also genesis that plays a huge role here and that doesn't have the money is not going to be able to make people whole well we don't know this is right

SPEAKER_229: speculate everything i'm saying right now is speculation okay so because there's no transparency

SPEAKER_01: and there's no regulation because gary against our sec everybody else said you know what you're not

Chamath Palihapitiya: playing by the rules we're not going to give you the rule book the rule books over there so if you want

SPEAKER_231: to read the rule book feel free gary sort of messed up and i'll drop an article in our chat but gary

SPEAKER_32: messed up because he had a chance to approve um a bitcoin spot etf then there would have been none of this

SPEAKER_34: arb and it would have been just talking one to one and he didn't and so that that's also you know

SPEAKER_01: the discount is there now because of that either you could blame him for or you could say listen there's so much shenanigans going on over here probably a smart move that he didn't touch it i just want to also point out that this would um grayscale was doing was even more extraordinary than the 30 number because that could be claimed in six months if you do just a simple you know two flips of 30 you go from 10 to 13 to 69 that means on a yearly basis it's 69 if my math is correct yeah 69 there's a

SPEAKER_32: great article that i just dropped in that bloomberg had earlier this week it's called the credit bubble in crypto that shows exactly that that's what people but people were taking off a billion dollars in

SPEAKER_76: profit it was really really i knew this was a problem when i saw people in the uh some friends of ours

SPEAKER_01: who play poker who are professional poker players like they play poker for a living molly and they

SPEAKER_241: were talking about staking and how they were making free well yes but i'm i'm but you're putting a fine

SPEAKER_76: point on it like they are tournaments gamblers yeah like not just like your your friend's really good

SPEAKER_01: at gambling like this is their job for a decade or two or three they've been doing it as their chosen profession so they know an angle when they see it they they know a one percent angle so if they can play blackjack roulette whatever with a one or two percent advantage they will plow a million dollars into it just to make whatever winds up being you know 10 20k uh in expected extra expected value i guess or whatever depending on how many turns they're going to do this so here they told me they've stopped playing poker they stopped doing sports betting because they were staking and they were doing all the stuff they saw this and they were like oh well that's obviously a scam so i'm just

SPEAKER_249: going to exploit the scam as fast as possible and then one of them who's incredibly high profile

SPEAKER_96: and does a lot of different podcasts i won't say who um was just like yeah i got out like a a year ago he's like yeah that's the easy money's gone i'm out i'm on my yacht literally i see the guy on a yacht

SPEAKER_01: and i'm like okay there you go the industry suspended disbelief in the face of absurd returns

SPEAKER_11: whenever you see a predictable return that is absurd and absurd is compared to the existing devices venture returning 20 irr you know muni bonds returning four or five or six percent whatever bonds you know treasuries stock seven percent whenever you see something that's just an outlier it's a scam

SPEAKER_256: it's basically a scam i'm going to come up with a rule but whenever anything is double or triple the

SPEAKER_189: existing stuff it wasn't a scam right it was there was a desire for bitcoin and for a very long time

SPEAKER_34: there was a premium you'd pay through grayscale to buy bitcoin what people didn't realize is that premium disappeared as exchanges and everywhere else made it easier to buy bitcoin like so i don't that wasn't a scam that was a premium that was being paid for making it easier for you know more

SPEAKER_01: regularly aren't the exchanges taking the customer deposits and you know doing the arbitrage where it starts to get into scammy territory no but they're telling customers they're saying hey we have a high

SPEAKER_34: interest account pays 18 right that's better than what you know uh bank of america or anyone else offers you and they basically you know they're telling you that they're doing that as well now if they're doing it without there's another topic we want to get to on sbf and ftx which doesn't add up right now but with respect to all the folks that were offering the high interest accounts they were telling their customers that they were redeposit they were using those deposits to generate re-hypothecation

SPEAKER_01: when i hear a word that i've never heard before combined with an interest rate that i've never seen before that's when i'm like you know what you're using a word i don't understand you can't explain the process to me molly and the number is four times what you know another instrument is

Jason Calacanis: offering me sorry i i think that people always want to believe right and it's very what we're hearing from sbf now on his tour is i wanted to believe but you will also have one if you look if you set up a tree of life that spits out money all day every day and you can just put you know money in and get more money out somebody is going to build a scam on top of that those things can all be true at the same time but also like of course it's real for the time that it's real right yeah with spf it's

SPEAKER_189: slightly different maybe a good transition here if you guys have more questions we can stick on it

SPEAKER_34: the thing that's not adding up with sbf is he he keeps saying a couple of things very consistently he keeps saying well the depot customer deposits were going into alameda because we didn't have bank accounts at ftx you guys have probably all heard this yes says it almost at every every time he gets to talk what doesn't make sense for me is okay if i'm sending money to ftx i'm sending it there to buy some crypto whether it's bitcoin ethereum you know solana take your pick of whatever it is and what doesn't make sense to me is if i send it there then i log into my ftx account and say let's say i send 100k and i go okay you know i go in there and i win bitcoins 20 000 i buy five bitcoins

SPEAKER_189: it's those five bitcoins should still be somewhere what i'm really struggling with is was everyone on ftx and vinnie i want your take just plain fantasy crypto because it would be really hard to use people's

SPEAKER_34: money that was you know crypto that they were buying through the exchange right and that's where things aren't adding up for me and we're not getting a lot of clarity okay i'm here with

SPEAKER_93: allison rose from microsoft for startups so allison what is the most valuable resource for founders in the early stage of their startups that microsoft is offering so let's face it financing is one of

SPEAKER_278: the biggest if not the biggest roadblocks that startups face today through founder sub we're alleviating some of the financial stress of starting a company by providing tons of free resources for founders so we provide founders of any stage with up to 150 000 in azure credits which is huge because that can be used to do anything from building your prototyping to a lot of our founders are using that for conducting experimental development without eating into your runway so it's there's so many things that you can do with those credits but beyond that we also provide founders with free access to crucial tools and software like github enterprise as well as a suite of microsoft software like office

SPEAKER_93: teams power bi and so much more that's amazing yeah i mean those things alone are like a line item or two in any startup's budget and you could redeploy that with an extra sales executive designer developer just by recapturing those credits the microsoft for startups founders hub has no fundraising requirements it's open to anybody you don't have to go to some elite program to get those credits that only takes five minutes to apply and startups can get up to six figures of benefits right away sign up for the microsoft for startups founders hub today at aka.ms this week in startups aka.ms

SPEAKER_283: this week in startups thanks alison thank you i've always been a big fan of decentralized exchanges because i just don't trust exchange operators jason you're right like i mean someone posted a comment

SPEAKER_63: here which i think is really really uh important k-pack ready there's always counterparty risk with high yield accounts it's a hundred percent true okay so the moment you have to trust a third party um you know that's that is counterparty risk i mean touch wood right now i have not had i haven't lost any funds

SPEAKER_50: in crypto ever um on exchanges because i just i don't don't leave money on exchanges so and like i you know i dodged the lunar bullets it does ftx mount gox all these places like none of them because i just don't leave funds i tell people that do not leave funds exchanges are meant for to be a transaction point

SPEAKER_136: you go there you wire your money you buy your crypto you take it off and you don't leave it with them

SPEAKER_50: use coinbase custody use anchorage use one of the the custodians out there there's no reason for you to go in and you can just put it in self custody yeah use ledgers metamask figure out how you want to store your crypto but the whole point of crypto was that it's self-custody that's the whole point

SPEAKER_136: but i want to go back to this other point early on where you said that the price of solana has dropped the price of solana has dropped and that is a good thing for in theory if you're if you're owed solana it's a bad thing if the person can't pay you back so now if let's say for example the price and the price was so this is what potentially happened um they borrowed some solana from genesis they gave

SPEAKER_50: ftt uh at some point look at april by the way where it all came crashing down i mean it's like so you know they borrow they borrowed some uh uh ftt they borrowed some solana they gave ft the ft is worth

SPEAKER_136: nothing now a buck 50. now genesis still owes the people it borrowed the it took the solana from let's

SPEAKER_50: say i had solana deposit with with um with genesis and by the way i had some solana with genesis at some point and they were lending it out um and there's a company i'm part of that you know we had a distribution of solana and we were just basically earning interest and it was okay it was like genesis wasn't a huge amount and we withdrew that when all the stuff started looking shaky but we went we weren't the only ones they were borrowing taking the soul from and then lending out to other

SPEAKER_136: people we're lucky we got our money out before the holding you know collapsed and now it's obviously locked up but here's the point if they grow and raise a billion dollars to plug this hole they have to get you know if sunny lent them i don't know 100 000 solana and they oh they owe sunny 100 000 solana they don't owe him 15 000 bucks or whatever it is 1.5 million whatever it's worth today they owe him 100 000 solana so now they can go to sunny and they can say sunny your solana is only worth 15 bucks right now 14 bucks we're going to pay you out 1.4 million and he might accept that so sunny may go okay i'll just take the cash value however there's a tax consequence of that

SPEAKER_63: because then he's effectively sold it at that price and so sunny is going to say you know what guys i actually don't want to sell these prices i don't want to pay the long-term capital gains tax on this give me my soul back so now they're going to scratch their heads and go we're going to go out

SPEAKER_218: into the market and go buy the soul back because we owe sunny so now for sunny they're going to go buy a hundred thousand soul at spot to give him the hundred thousand soul back what does it do it pushes

SPEAKER_136: the price of solana from 14 bucks to 15 bucks let's say now the next person same thing happens the next

SPEAKER_218: person sent me happens all of a sudden they cannot go and buy all the solana so so they're almost like

SPEAKER_63: a short squeeze yeah it's a short squeeze them raising a billion dollars is you know to fill the hole is immaterial if the people on the other end they owe the they owe the coins to don't want cash in

SPEAKER_291: kind they want the actual tokens because there's this is an infinity d there's a black hole on the

SPEAKER_136: other side exactly and so here's the play here's the player the play is that they potentially the short squeeze but the reason they haven't leaked and haven't so nobody has seen what the liabilities of genesis are except this cash amount they're trying to raise is because if it gets out that

SPEAKER_01: it's solana or whatever coin that coin is gonna run yes because they have to cover which is exactly what the wall street bets people did when people were shorting amc and game stop they were like let's buy a bunch and make it go up so that and we'll be the apes and apes help exactly but here's the

SPEAKER_290: other problem okay at some point that price moves up so much that they have to go into liquidation

SPEAKER_136: because if the price goes so so any lender if any lender comes to them and says we're going to give you a billion or and a half example and this thing doubles in price now it's three billion you need

SPEAKER_32: to cover so there's a couple additional data points here vinnie i think um related to the 3ac crash dcg

SPEAKER_34: picked up a huge liability like a 1.6 billion dollar liability right from from genesis and then there's another like five or six hundred million dollar facility so some of these have already been moved up the stack into dcg so it's really fascinating what's happening i'm going to go out of business i don't think so paused with i think the combination of gemini and dcg is probably going to have to go through like some kind of equity financing or restructuring or something i don't think it'll go

SPEAKER_16: out who's going to put money up into equity financing these things after you've got to

SPEAKER_34: remember what happened with sbf and ftx well on dcg there's um sorry on grayscale which is owned by dcg they have 640 000 bitcoin which today is roughly worth 10 billion dollars that's generating 200 million dollars a year of fee income that thing has a two percent fee on it and so that thing is that's real right that again 600 000 there so that that's that's something that's real they also own coindesk and a bunch of other assets and so um and the genesis business is quite complex outside the lending business they also have a prime brokerage and other things like vinnie knows it really well and so what may happen is their lending business could go you know to the side but other businesses

SPEAKER_307: could remain i think as a side note too before we move on because we have a i know we have a clip we want to show you we want to get your uh impressions on this viral conversation and the

Jason Calacanis: future of the whole thing but one other note on not necessarily when it might be a scam but when you might get yourself in trouble is a thing that we've been talking about like sbf using this chaff strategy where he all his answers are like unbelievably complex and that's not the point the point is did you use customer deposits but like this entire ecosystem you know i'm gonna wager that a fair number of people listening to this show right now listen to everything that vinnie said and we're like i get i got about 12 of that if it is too complicated for you to understand don't put your money there like that is a way for you to get in trouble and what these exchanges did in a lot of ways what all the centralizing in this industry has done is make it more convenient we love convenience that's why we used to have an open internet and then we got google and facebook and walled gardens the convenience abstracts away the complexity making you think that you can understand it

SPEAKER_129: which is how you lose your money yeah we see it in mortgages complex mortgages uh totally and other complex devices really really good advice or if the game is too complicated you're not obligated to

SPEAKER_01: put more than one percent of your money into it if you're going to go play poker you don't know if a flush or a straight is a better hand vinnie's still figuring that out um you can just do one percent of your net worth and then we can all just pay our mortgages based on vinnie spewing at the

SPEAKER_317: table i'll ask sonny who owes you money in poker this year oh it's like that now here we go all

Jason Calacanis: right cue up the clip this is a great clip i really want to ask you guys about this clip this is amazing so michael michael saylor who uh obviously a bitcoin maximalist he was on cnbc the other day saying crypto and uh bitcoin and crypto are in an unhealthy relationship and we want out and now he's just taking his chance as the uncoupling begins to just come out swinging against everybody um let's do this one minute 40 second clip in which he basically says everything is a scam except for me

SPEAKER_325: ripple's an unregistered security it's pretty obvious there's a company the company owns a bunch of it they sell it to the general public but there's no they never took the company public there's no disclosures so uh the sec's position is you're selling an unregistered security it's a it's crypto token right just like ethereum is an unregistered security it's controlled by a few people in the ethereum foundation and consensus fair then just like ftt just like solana perfect but here's a follow-up they're all unregistered secured i think the best thing for the world would be with the if the sec pretty much shut down all of it it's all unethical right i mean the bitcoin position would be bitcoin is an ethical commodity all of these other alt coins are unregistered securities they're all just equity tokens issued by a company in order to get around going public and they're committing securities fraud ethereum included of course especially ethereum you know ethereum's got 20 billion dollars of eth token locked up in the staking contract right now and there's a couple of people that may or may not give it back to you ever now isn't that the definition of investment contract if a bank took 20 billion dollars of your assets froze the the window and said you can't have your money back ever and maybe in the year 2024 we're not sure we're just going to keep it we may actually give you interest on it we may take it all we may slash it that's the definition of a security right it's an investment of money and a common enterprise you know relying upon the efforts of others and expectation of profit the whole point is if you want a crypto asset to be a commodity you can't rely upon four engineers a company a ceo especially ethereum sunny yeah i'm still processing that like

SPEAKER_32: i thought you were going to do that rick roll sale like it doesn't do the other clip you've played a

SPEAKER_334: couple times so i was just i was ready for where he says sell your home sell your this sell your that

SPEAKER_01: the only logical thing to do is buy more bitcoin obviously he's super biased he's put all of his chips on bitcoin and he told the public to sell their homes i think he has a margin call or has multiple margin calls for micro strategies at certain bitcoin prices you know going from like

SPEAKER_204: three to twenty thousand dollars where he has to cover and i think he's actually had to cover with some cash but he hasn't been liquidated so what do you think i mean ripple to me pretty clearly a

SPEAKER_01: security but the ethereum one molly and i were talking about feels like huh yeah could you make

SPEAKER_339: the case that ethereum is a security even though there's a foundation you know because there's a foundation and central control what do you think this is all going to hatch out i'm still i'm still

SPEAKER_341: processing what he said here because it sounded reasonable and so um this is what's so confusing

SPEAKER_342: like how is he starting to sound like the normal uncle yeah i felt the same way about that crypto and

SPEAKER_23: bitcoin comment where i was like oh my god that's kind of true it does sort of make sense um

SPEAKER_32: you know look we've talked about this a couple times like that there's a it was a huey test or

SPEAKER_34: something right the dewey test howie howie howie howie test yeah common enterprise basically yeah he

SPEAKER_204: basically explains the howie test there yeah yeah i still think and again just reading the tea leaves

SPEAKER_34: is that probably ethereum bitcoin end up you know sort of in the same category and then what he puts you know the other ones uh like whether it's solana or xrp or other things like that probably end up in the securities category that that's the way that's what it seems like to me if i if i were to kind of

SPEAKER_48: you know agree with his line of thinking vinnie yeah it's it's a tough one i mean um i think when we try

SPEAKER_50: to draw comparisons between companies and crypto you know protocols and and entities it's very it's it's it's very it's not it's not very clear right um now you could argue ripple was ripple i think is very different from ethereum i don't think it's the same thing uh ripple has shareholders you can invest in ripple ethereum has no shareholders there's no dual dual structure there so i i think i mean say look sailor's a bitcoin maxi he's gonna slap everything together and say it's all it's all the same and it's because it's serving his purpose of of being a maximalist on bitcoin so i don't think

Jason Calacanis: it's as simple as as what he's trying to make it sound i feel like the way he described ethereum to try to make it sound like a security to me sounded like it also described bitcoin i mean and isn't there like a big chunk of bitcoin held in the satoshi account that if it were to be released it would like mess up the economy and isn't it also a common enterprise and people and you know i was like well well to me i felt like listening to it again as somebody who's like i understand i think

SPEAKER_20: i'm up to like 62 percent of what you guys are saying i actually i actually can explain this i think

SPEAKER_01: i'm going to take a shot okay so just the howey test you're investing money one in a common enterprise two for profit three derived from the efforts of other all of these projects share those things yeah now here's the problem in a company that's a corporate entity ripple is a corporation as vinnie correctly points out to you know share structure they control it there are shareholders there's governance it's clearly a security there's no way for them out of that box it's a security they have them dead to rights now there's two other structures no structure or a foundation offshore

SPEAKER_93: foundation or structure that's where ethereum lives ethereum has a foundation and then you go to bitcoin

SPEAKER_01: there's no bitcoin foundation there's no bitcoin central governance right you can vote as a server correct me if i'm wrong and if a certain number of servers vote you can make changes to the code ethereum happens through the control of four or five developers i believe they have a foundation the foundation holds those coins so now the argument is when is it a security no control which makes it a commodity which is the brilliance of bitcoin so yes there's a wallet somewhere that's never been touched but there's no corporate entity molly this thing was just put out into the world there's nobody to subpoena there's no board of directors but then when you get to the foundation people and the corporation people each step along the way it gets easier to hold somebody accountable and there's somebody who profits from it here is the rub and i'll end on this one and then you have it a lot of the companies who are corporations created parallel foundations because they felt like the foundation argument was the strongest i heard this from attorneys you create a foundation you put it in panama put it in bahamas put it in bvi put it in singapore put it in the zerg your foundation will protect you and the foundation owns the coin and the foundation does stuff with the coins now you as the founder since you have the early uh line on this can buy a billion tokens for 10 bucks and then there's a public offering so essentially they architected a lawyer law firms architected this what i'll call shady and or clever depending on the interpretation you just be clever or it could be shady or it could be uh trying to get around securities law that'll be up to a jury and a judge to figure that out but that dual structure is where i think you're going to have a problem i don't think i don't believe there's a ripple foundation ripple came before all this foundation concept and so if somebody creates a foundation

SPEAKER_96: it's a non-profit do they get some level of protection i don't know i'm not a lawyer i don't know how a trial and a you know a judge and a jury if it goes to a jury trial is going to

SPEAKER_63: you know call balls and strikes here vinnie so so so i want to i want to at least make the point that

SPEAKER_283: not all cryptos even if there is a company behind it means that it is a security right so it depends on

SPEAKER_218: like this is not a simple answer let's just make that point first the next thing i will ask you like

SPEAKER_50: u.s security laws apply to americans and and and how security solves americans and and so basically the laws are being built the global laws are crypto is a global state right like it's a global um

SPEAKER_368: movement the u.s laws dictate around basically dictate how crypto is sold to americans why is that

SPEAKER_316: jason because americans have protections because of what happened in the 19 early part of the 19th century or 20th century in the 1910 and 20s when people sold grandma's gold mines and they were scams and then securities laws came out after the great depression in 1929 to protect people so

SPEAKER_221: so why do those laws apply globally to well they should apply to americans they don't need to apply

SPEAKER_316: to people in the zerg in the zerg or into in the philippines of course not but it does apply to

SPEAKER_50: americans if they're profiting from it so what happens then is that people start and this happened we saw this over the past couple years people start doing really cool projects and they start selling tokens and americans can't participate in it and like if i want to go buy tokens and some foreign uh project which i think is amazing i'm a sophisticated investor and they say well you're american we won't sell to you what is the american government doing for me then because they're not helping me recover those like you know i it's my money right so i have i have like my my cash i can put it wherever i

SPEAKER_136: want i can go to the casino and drop it on black or red or one of 36 numbers on the roulette table and they don't stop me why are they stopping me from so here's here's the solution i'll give i'll cut to the chase crypto investing and buying tokens whether they're securities or not should be an opt-in for

SPEAKER_50: the individual something simple you follow the sec you go uh you file some paper form 1abc whatever and say i will not hold the government's whatever else libel courts whatever i'll not chase off this money i believe that i have the ability to make these investments myself and i'll take the losses myself and move on because like it's the same as as the accredited investor laws which is you know

SPEAKER_63: jason it's the stupidest laws ever that people like you can just because you don't have a lot of

SPEAKER_136: money you can't even so the same principle should apply instead of having to get a license or something

SPEAKER_63: i just do an opt-out form and so i i just you know i accept that this is high risk i accept that i can get scammed and i do it on my own volition and i'm done that's one solution a waiver and another

SPEAKER_08: solution is to allow people to have an education and get a license just like they some places have a gun license a driver's license a truck license or a haircutting license that's all the time we

SPEAKER_249: have for today vinnie yeah i i i just i understand you believe people should be able to do what they

Chamath Palihapitiya: want with their money gamble it on crypto but look what just happened you know what buyer beware you

Jason Calacanis: want it to play a game play silly games win silly prizes let's give you the like the last word here and

SPEAKER_32: then we'll let vinnie get sunny sunny you're the voice of reason yeah okay again like i i do think we have to allow more people to play in the ecosystem but you know the rules need to be

SPEAKER_34: defined like what we're seeing here what we spend a lot of time talking about just the transparency doesn't exist and honestly the technology was meant to be about transparency and that's where i thought vinnie was going to go and and it's not being used in that kind of way and and i think maybe maybe the

Jason Calacanis: new rules that get established go to transparency love it you nailed the target so well said sunny we can all agree with jeremy brown one of our noties vinnie and sunny are gods walking among men thanks for

SPEAKER_190: another crypto round table i think just take that one and run with it take the w gods thanks for your

SPEAKER_407: time with us mortals today men and women by the way humanity humanity i don't get all worked out

SPEAKER_408: about that i'll take the generalization thanks guys all right everybody stay tuned tomorrow we got our

SPEAKER_01: boy lon harris we're going to talk about all the streaming news going on out there and of course it's friday it's ok boomer with rachel reporting it's going to be a great show can't wait to see you

SPEAKER_96: tomorrow don't forget rate and subscribe wait if you got to this point in the show you've rated and subscribed already just tell your friends about the show