1
00:00:05,100 --> 00:00:07,900
Welcome back everyone. 
I am Caspian Sea. 

2
00:00:07,900 --> 00:00:09,900
I'm joined as usual by my 
partner in crime. 

3
00:00:10,100 --> 00:00:11,800
Mr. Bennett Tomlin, how are you 
today? 

4
00:00:13,000 --> 00:00:16,400
Okay, I guess it's another day 
in crypto where everything's 

5
00:00:16,400 --> 00:00:19,300
falling to pieces. 
It just keeps coming. 

6
00:00:19,300 --> 00:00:21,200
It just keeps coming. 
There's it doesn't stop. 

7
00:00:21,900 --> 00:00:24,000
I'm asleep. 
We're going to ignore all the 

8
00:00:24,000 --> 00:00:25,900
noise that's been going on 
today. 

9
00:00:26,600 --> 00:00:28,700
We're recording on Thursday, 
January 12th. 

10
00:00:28,700 --> 00:00:31,800
We're going to focus ourselves 
on something that we have been 

11
00:00:32,400 --> 00:00:35,700
really getting into which is 
Silver Gate. 

12
00:00:36,400 --> 00:00:40,200
All these Banks, signature 
Silver Gate, Metropolitan 

13
00:00:40,200 --> 00:00:42,400
they're all struggling. 
These are cryptocurrency. 

14
00:00:42,800 --> 00:00:44,600
Related banks. 
These guys have really been 

15
00:00:44,600 --> 00:00:47,600
involved with the cryptocurrency
industry in general, that's a 

16
00:00:47,608 --> 00:00:51,200
lot of their customers. 
We previously have discussed 

17
00:00:51,200 --> 00:00:54,400
how, like, signature was selling
all of their customer deposits, 

18
00:00:54,400 --> 00:00:56,900
their cryptocurrency customer 
deposits, which is not something

19
00:00:56,900 --> 00:00:59,700
you generally see Banks. 
Do, why don't you kick us off 

20
00:00:59,700 --> 00:01:02,000
Bennett? 
I'd love to hear your takes on, 

21
00:01:02,000 --> 00:01:05,200
on some of the stuff. 
Sure, I think one of the most 

22
00:01:05,200 --> 00:01:08,600
interesting things to start with
is like how Silver Gate and 

23
00:01:08,600 --> 00:01:11,000
signature kind of function. 
They each had their own kind of 

24
00:01:11,008 --> 00:01:15,500
version of this Silver Gate had 
one called Silver Gate exchange 

25
00:01:15,500 --> 00:01:18,100
Network and signature had one 
called Signet. 

26
00:01:18,100 --> 00:01:21,900
And what this was, was a way for
exchanges to effectively, by 

27
00:01:21,900 --> 00:01:26,400
banking at Silver Gate, or 
signature, be able to send funds

28
00:01:26,400 --> 00:01:29,900
to any other exchange quickly, 
rather, than waiting for the 

29
00:01:29,900 --> 00:01:31,600
normal process. 
It could be done effectively 

30
00:01:31,600 --> 00:01:33,900
instantaneously between any of 
these exchanges. 

31
00:01:34,300 --> 00:01:36,800
And so as more and more 
exchanges in crypto companies 

32
00:01:36,800 --> 00:01:39,900
signed up for the for these 
networks, you start to see a 

33
00:01:39,900 --> 00:01:41,300
little bit of this network 
effect. 

34
00:01:41,300 --> 00:01:43,800
Kind of like we saw at the 
beginning of Tether where each 

35
00:01:43,800 --> 00:01:46,900
new one that integrated made, it
more appealing for others to 

36
00:01:46,900 --> 00:01:49,200
integrate, because you could 
take advantage of the existing 

37
00:01:49,200 --> 00:01:51,500
Network. 
And so because of these networks

38
00:01:51,500 --> 00:01:54,500
or at least driven in part by 
these networks, we saw both of 

39
00:01:54,500 --> 00:01:57,500
these Banks so Brigade in 
signature build up billions of 

40
00:01:57,500 --> 00:02:01,900
dollars in deposits and now both
of them have lost billions of 

41
00:02:01,900 --> 00:02:05,300
dollars in deposits 8.1 billion 
dollars was withdrawn from 

42
00:02:05,300 --> 00:02:09,900
Silver Gate posts FTX signature 
ended up selling 8 to 10 billion

43
00:02:09,900 --> 00:02:13,400
dollars in customer deposits, 
both of them have needed to Look

44
00:02:13,400 --> 00:02:16,900
to Alternative sources of 
funding in order to sustain 

45
00:02:16,900 --> 00:02:19,600
themselves will get into that 
more in a minute, I think. 

46
00:02:19,600 --> 00:02:22,500
And the other thing that I think
is interesting is Silver Gate. 

47
00:02:22,500 --> 00:02:26,900
It turned out was banking FTX 
through an Alameda research, 

48
00:02:26,900 --> 00:02:31,400
entity called North Dimension 
Incorporated, and signature is 

49
00:02:31,400 --> 00:02:35,600
banking Finance or was banking 
Finance at lease through an 

50
00:02:35,600 --> 00:02:39,200
entity called key Vision 
development, limited and so 

51
00:02:39,200 --> 00:02:41,200
structurally. 
There's so many similarities 

52
00:02:41,200 --> 00:02:43,800
between these two Banks from Um,
the Network's, they were using 

53
00:02:43,800 --> 00:02:45,800
from the amount of deposits, 
they've lost over the last 

54
00:02:45,808 --> 00:02:48,800
couple of months to the 
performance of their stock 

55
00:02:48,800 --> 00:02:51,700
prices to like everything else 
they've had to do. 

56
00:02:51,700 --> 00:02:54,700
They think, looking at these two
right now in this moment, you 

57
00:02:54,700 --> 00:02:57,500
are really seeing how this 
exposure to the crypto. 

58
00:02:57,500 --> 00:03:00,500
Ecosystem has hurt these Banks. 
It's really funny because we've 

59
00:03:00,500 --> 00:03:03,300
previously, I think a lot of 
people just kind of presumed 

60
00:03:03,300 --> 00:03:07,400
that there was no exposure to 
the real world financial 

61
00:03:07,400 --> 00:03:11,200
ecosystem, which was a mistake. 
I mean, I've been talking about 

62
00:03:11,200 --> 00:03:15,000
how this could sneak. 
Way into the real world 

63
00:03:15,000 --> 00:03:18,100
repeatedly for a while now. 
And even you I think of often 

64
00:03:18,100 --> 00:03:20,400
disagreed with me and thought 
like no, there's no way like 

65
00:03:20,400 --> 00:03:22,300
it's cut off. 
I've been saying this for a 

66
00:03:22,308 --> 00:03:26,400
while that this is absolutely. 
Now a part of the traditional 

67
00:03:26,400 --> 00:03:30,100
Financial system and if you want
to have an idea of exactly how 

68
00:03:30,300 --> 00:03:34,200
signature is the perfect example
now, because what we had was 

69
00:03:34,600 --> 00:03:37,500
essentially a bank run, we had a
real life Bank Run on a 

70
00:03:37,500 --> 00:03:40,600
real-life bank if we look at 
their ticker. 

71
00:03:40,700 --> 00:03:43,500
So, today of the day, Day of 
recording. 

72
00:03:43,600 --> 00:03:47,200
They are up 13 percent from 
their previous from the previous

73
00:03:47,200 --> 00:03:50,100
day, they're trading at 1375 
that sounds great. 

74
00:03:50,400 --> 00:03:55,700
Let's keep in mind, however that
they traded at one time for 

75
00:03:55,900 --> 00:03:58,900
almost two hundred and twenty 
dollars a share. 

76
00:03:59,200 --> 00:04:02,500
So that is a massive fall from 
grace, for sure. 

77
00:04:02,500 --> 00:04:04,900
But it's not just about their 
stock price going down. 

78
00:04:04,900 --> 00:04:07,200
It's not just about this Bank 
Run. 

79
00:04:07,300 --> 00:04:11,300
It's about how they tried to 
cover up their Bank Run, which I

80
00:04:11,400 --> 00:04:14,400
never heard of this. 
Most people I know had not heard

81
00:04:14,400 --> 00:04:18,399
of this, it's a really 
interesting and strange 

82
00:04:18,399 --> 00:04:21,000
governmental agency. 
It's called the federal home 

83
00:04:21,000 --> 00:04:25,500
loan Banks system. 
It's 11 government-sponsored 

84
00:04:25,500 --> 00:04:28,900
banks that quote provide 
liquidity to the members of 

85
00:04:28,900 --> 00:04:32,400
financial institutions to 
support Housing Finance and 

86
00:04:32,400 --> 00:04:35,600
Community investment. 
I am stuck on those two points 

87
00:04:35,600 --> 00:04:38,200
by the way. 
Like, since I found out that the

88
00:04:38,200 --> 00:04:42,600
federal home loan Banks gave 
Silver Gate for point. 

89
00:04:42,700 --> 00:04:46,000
Three billion dollars. 
They're called advances their 

90
00:04:46,000 --> 00:04:49,300
loans that people like you. 
And I cannot get because they're

91
00:04:49,300 --> 00:04:52,200
at better rates than you and I 
could ever get even if we had 

92
00:04:52,200 --> 00:04:54,700
perfect credit they're going on 
International markets and 

93
00:04:54,700 --> 00:04:56,600
getting the best rates they can 
possibly get. 

94
00:04:56,600 --> 00:04:59,500
But these guys they went to, 
there's eleven Banks, one of 

95
00:04:59,500 --> 00:05:01,500
them is in San Francisco. 
Silver Gate. 

96
00:05:01,500 --> 00:05:06,700
Went over to the fhl bank of San
Francisco and said, please, we 

97
00:05:06,700 --> 00:05:10,100
need a 4.3 billion dollar 
advance because essentially 

98
00:05:10,100 --> 00:05:14,400
looks like we're getting a bank 
run here and I thought fhlbank 

99
00:05:14,400 --> 00:05:18,100
of San Francisco gave them. 
This 4.3 billion dollar advance 

100
00:05:18,100 --> 00:05:23,400
when I looked at the 10K because
all of these banks are actually 

101
00:05:23,400 --> 00:05:26,000
registered with the Securities 
and Exchange Commission. 

102
00:05:26,600 --> 00:05:29,700
The whole concept is kind of 
weird when I I let me backtrack 

103
00:05:29,700 --> 00:05:32,300
here get into the last of these 
Banks throughout the yeah 

104
00:05:32,300 --> 00:05:34,200
there's 11 of these Banks 
throughout throughout the 

105
00:05:34,207 --> 00:05:36,100
country. 
They work as a cooperative and 

106
00:05:36,100 --> 00:05:39,400
they were established in the 
wake of the Great Depression to 

107
00:05:39,400 --> 00:05:45,600
kind of ensure that people were 
able to, To still get loans to 

108
00:05:45,600 --> 00:05:52,300
get a home to build a, you know,
a city hall to whatever it is. 

109
00:05:52,300 --> 00:05:55,200
It may be for their Community. 
The designation of these Banks 

110
00:05:55,200 --> 00:05:57,700
was supposed to be okay, we're 
going to help them do that. 

111
00:05:57,700 --> 00:06:00,300
Now, at some point, things 
definitely got out of control 

112
00:06:00,500 --> 00:06:04,600
because By Night by the 1980s 
when we were in the midst of 

113
00:06:04,600 --> 00:06:07,900
what was called, The Savings and
Loan Savings and Loans crisis, 

114
00:06:08,100 --> 00:06:12,600
the S&L crisis, it was clear 
that the FAA fhlbanks had 

115
00:06:12,800 --> 00:06:15,800
Experienced some sort of 
regulatory capture because they 

116
00:06:15,800 --> 00:06:19,000
were torn apart. 
There was a bank board, that was

117
00:06:20,100 --> 00:06:21,600
ended. 
They stopped the bank board. 

118
00:06:21,600 --> 00:06:23,200
There was no more Bank board 
after this. 

119
00:06:23,300 --> 00:06:27,200
And instead two different 
entities, took over one being 

120
00:06:27,200 --> 00:06:31,100
the office of thrift supervision
and the other being the federal 

121
00:06:31,100 --> 00:06:35,100
Housing Finance board. 
Ultimately, we had another issue

122
00:06:35,100 --> 00:06:39,200
with regulatory capture because 
those, the office of thrift 

123
00:06:39,200 --> 00:06:44,300
supervision was merged and the 
FH, FAA the federal Housing 

124
00:06:44,300 --> 00:06:49,200
Finance Agency took over in 
regulating these Banks, it seems

125
00:06:49,200 --> 00:06:52,200
like now that definitely didn't 
work because well, maybe and 

126
00:06:52,200 --> 00:06:56,800
maybe you want to talk about 
this, somebody who is a chair. 

127
00:06:56,800 --> 00:06:59,100
I don't know if it's for the San
Francisco Branch or if it's for 

128
00:06:59,100 --> 00:07:05,400
the entire Cooperative Banks 
here, but somebody was involved 

129
00:07:05,400 --> 00:07:08,400
with FTX us and works for these 
Banks. 

130
00:07:08,400 --> 00:07:12,500
Now who knows whether that means
they recuse themselves. 

131
00:07:12,700 --> 00:07:14,300
Cough. 
If they weren't a part of this 

132
00:07:14,300 --> 00:07:17,200
loan process. 
I mean, I hope so but it's a 

133
00:07:17,200 --> 00:07:21,200
weird coincidence, I guess. 
Yeah, I remember seeing that 

134
00:07:21,200 --> 00:07:25,200
yesterday and certainly finding 
it unusual, that it was one of 

135
00:07:25,207 --> 00:07:29,600
the board members for FTX us was
also like a board member at one 

136
00:07:29,600 --> 00:07:33,200
of these Banks. 
A vice chairman of one of these 

137
00:07:33,200 --> 00:07:35,700
Banks. 
So he was he was a chairman of 

138
00:07:35,700 --> 00:07:38,700
the board at FTX us and a vice 
chair. 

139
00:07:39,800 --> 00:07:43,500
For either San Francisco or just
the whole thing. 

140
00:07:43,800 --> 00:07:48,600
And either way that just is a, 
it's just a really bad look. 

141
00:07:48,600 --> 00:07:53,000
That one of the main banks for 
FTX would instantly go to this 

142
00:07:53,200 --> 00:07:56,500
thing that nobody has really 
heard of or understands much 

143
00:07:56,500 --> 00:07:59,900
about to receive a 4.3. 
Let's call it alone because 

144
00:07:59,900 --> 00:08:01,600
that's what it is. 
It's not an advanced. 

145
00:08:02,700 --> 00:08:06,700
They got a 4.3 billion dollar 
loan from this governmental 

146
00:08:06,700 --> 00:08:11,100
agency that hardly any of us are
aware of and definitely not for 

147
00:08:11,100 --> 00:08:15,100
home like home purposes, not for
community building. 

148
00:08:15,700 --> 00:08:17,900
So I'm confused. 
What is the purpose here? 

149
00:08:28,500 --> 00:08:33,900
So wait. 
I mean, I'm glad it's dumped you

150
00:08:33,900 --> 00:08:36,299
to be quite on but I'm glad it's
dumped you because it doesn't 

151
00:08:36,299 --> 00:08:39,100
make any sense and like, yes, 
several parts of this mechanism 

152
00:08:39,100 --> 00:08:42,299
are weird. 
Like when I was doing not super 

153
00:08:42,299 --> 00:08:44,600
extensive research in this, but 
when you first sent it to me and

154
00:08:44,600 --> 00:08:46,700
I started reading it, several 
parts were weird. 

155
00:08:46,700 --> 00:08:50,000
Like how you have to buy stock 
in the Co-operative in order to 

156
00:08:50,000 --> 00:08:53,800
like, gain access to the credit.
Like if I saw that mechanism in 

157
00:08:53,800 --> 00:08:55,400
an algorithmic stable Quinn, I 
would go. 

158
00:08:55,400 --> 00:08:58,200
Oh, that looks fragile. 
That looks like the part of this

159
00:08:58,200 --> 00:09:00,500
thing that's going to break. 
My understanding was the way 

160
00:09:00,500 --> 00:09:05,400
they contribute to Home sin 
things like that was because 

161
00:09:05,400 --> 00:09:09,800
they are effectively creating, 
or they're buying up a whole 

162
00:09:09,800 --> 00:09:12,900
bunch, buying originating, 
whatever bunch of mortgages and 

163
00:09:12,900 --> 00:09:16,300
using those to create a line of 
cash flow. 

164
00:09:16,500 --> 00:09:19,800
And then in exchange for a claim
against the assets of these 

165
00:09:19,800 --> 00:09:24,500
member banks are then able to 
extend Advance the expected 

166
00:09:24,500 --> 00:09:26,600
income from the mortgages, 
right? 

167
00:09:26,600 --> 00:09:30,700
Isn't that like ditional e 
traditionally but it's not like 

168
00:09:30,700 --> 00:09:33,400
Silver Gate is doing Al A bunch 
of Home Loans. 

169
00:09:33,400 --> 00:09:36,900
It's not like Silver Gate is 
contributing to De La Hoya area 

170
00:09:36,900 --> 00:09:38,500
significantly. 
You know what I mean? 

171
00:09:38,800 --> 00:09:40,700
Yes. 
And there was a post on American

172
00:09:40,700 --> 00:09:43,000
Banker that I think kind of 
still explains the way. 

173
00:09:43,000 --> 00:09:45,800
They would justify this to 
themselves where they're talking

174
00:09:45,800 --> 00:09:48,300
about how this Cooperative of 
these Banks. 

175
00:09:48,300 --> 00:09:51,500
Effectively when they extend 
these advances get a lien 

176
00:09:51,500 --> 00:09:55,000
against the assets of the bank 
itself that is higher in 

177
00:09:55,000 --> 00:09:57,600
priority than like even the 
FDIC. 

178
00:09:57,800 --> 00:10:01,900
And so if any of these banks are
unable to pay back their loans 

179
00:10:01,900 --> 00:10:05,000
through To effectively step in 
and strip all these asses out of

180
00:10:05,008 --> 00:10:08,500
the bank before the FDIC comes 
in and then has to fill up the 

181
00:10:08,500 --> 00:10:10,800
rest. 
And so, there are people who 

182
00:10:10,800 --> 00:10:13,800
have argued that the existence 
of this Cooperative has 

183
00:10:13,800 --> 00:10:16,300
effectively created. 
This moral hazard where this 

184
00:10:16,300 --> 00:10:20,200
group of banks is incentivized 
to extend more of these loans 

185
00:10:20,300 --> 00:10:23,900
because they have this such. 
They have such this Premiere 

186
00:10:23,900 --> 00:10:26,400
position in the stack. 
If something goes wrong with the

187
00:10:26,400 --> 00:10:29,400
bank, from what I noticed, from 
what I saw, I only looked at San

188
00:10:29,400 --> 00:10:33,200
Francisco but from what I saw 
the Amount of billions of 

189
00:10:33,200 --> 00:10:35,100
dollars that they're extending 
to Banks. 

190
00:10:35,500 --> 00:10:41,000
It's actually for San Francisco.
Let's say, I think it was 

191
00:10:41,000 --> 00:10:43,500
something in the enduring 2020 
of, right? 

192
00:10:43,500 --> 00:10:46,100
So the only two years that I saw
were 2020 and 2021. 

193
00:10:46,300 --> 00:10:51,600
They don't have 2022 out yet. 
But 2020 had a significant 

194
00:10:51,600 --> 00:10:54,300
uptick in advances that they 
gave out, but I think that was 

195
00:10:54,300 --> 00:10:57,800
something still in the, in the 
realm of, I don't know, 25 

196
00:10:57,800 --> 00:11:01,400
billion, something like that and
then it came down in 2021 to 

197
00:11:01,400 --> 00:11:04,000
like 16. 
Alien and I suspect that it's 

198
00:11:04,000 --> 00:11:07,200
going to go back up for 2022 
because we have a down market 

199
00:11:07,200 --> 00:11:10,400
and all that. 
But either way, let's say it 

200
00:11:10,400 --> 00:11:12,900
jumps back up to 25 billion or 
35 billion. 

201
00:11:12,900 --> 00:11:15,600
No matter what right? 
Let's say it's this something in

202
00:11:15,600 --> 00:11:19,200
that range, a 4.3 billion dollar
loan. 

203
00:11:19,200 --> 00:11:23,000
To one entity is like a 
significant chunk of those 

204
00:11:23,000 --> 00:11:26,100
advances and the way it works by
the way. 

205
00:11:26,100 --> 00:11:28,500
So there's these 11 banks that 
work together. 

206
00:11:28,600 --> 00:11:32,100
This loan is extended via the 
bank of San Francisco. 

207
00:11:32,200 --> 00:11:34,500
The federal Home Loan Bank of 
San Francisco. 

208
00:11:34,600 --> 00:11:38,300
And there they are, the main 
bank responsible for this 

209
00:11:38,300 --> 00:11:42,500
Advanced, but ultimately, it's 
all 11 banks that have to deal 

210
00:11:42,500 --> 00:11:44,600
with this. 
So if they can't recoup their 

211
00:11:44,600 --> 00:11:50,300
losses, ultimately, all 11 of 
these Cooperative banks have to 

212
00:11:50,900 --> 00:11:53,000
put that bill. 
Now, like you said, they say 

213
00:11:53,000 --> 00:11:54,300
that has never ever had to 
happen. 

214
00:11:54,300 --> 00:11:55,300
They've never had to deal with 
this. 

215
00:11:55,300 --> 00:12:00,500
They haven't lost money, hard to
believe, but okay, and I don't 

216
00:12:00,500 --> 00:12:07,000
know, like, I find Whole network
to be easily captured regulatory

217
00:12:07,000 --> 00:12:12,800
Ali and to be very opaque, 
despite the fact that we have 

218
00:12:12,800 --> 00:12:18,100
these these SEC filings and 
these other, these other things,

219
00:12:18,100 --> 00:12:21,700
like the idea that I just need 
to buy some stock as a bank or a

220
00:12:21,700 --> 00:12:24,400
credit union to get extended in 
advance. 

221
00:12:25,100 --> 00:12:32,000
I its, it feels strange, it 
feels almost sounds like me. 

222
00:12:32,200 --> 00:12:34,200
Laundering, it almost sounds 
like I'm talking to scribing 

223
00:12:34,200 --> 00:12:36,900
money laundering like I'm, I'm 
like confused how that could be 

224
00:12:36,900 --> 00:12:38,900
so simple but that's fine. 
Whatever. 

225
00:12:38,900 --> 00:12:40,600
Okay, great. 
What do we think? 

226
00:12:40,600 --> 00:12:42,700
Happens? 
Next I think is the question for

227
00:12:42,700 --> 00:12:44,600
Silver Gate, right? 
So they've been they've been 

228
00:12:44,600 --> 00:12:48,100
extended this massive loan from 
the federal Home Loan Bank of 

229
00:12:48,100 --> 00:12:50,200
San Francisco. 
Generally you have a year or two

230
00:12:50,200 --> 00:12:52,700
to pay these things off. 
I think it's not something that 

231
00:12:52,700 --> 00:12:55,000
they need to worry about 
instantly but it's not going to 

232
00:12:55,000 --> 00:12:57,000
last forever either. 
What do we think is going to 

233
00:12:57,008 --> 00:12:59,500
happen next? 
What's the what's are they 

234
00:12:59,500 --> 00:13:01,000
saved? 
I think this might have saved 

235
00:13:01,000 --> 00:13:04,100
them, I'm not sure. 
Well, I mean, maybe right. 

236
00:13:04,100 --> 00:13:08,700
Like hopefully we've set up our 
bank regulations in such a way, 

237
00:13:08,700 --> 00:13:12,900
that even, this type of level of
deposits being pulled out and 

238
00:13:12,900 --> 00:13:15,300
assets being seized because 
silver, get assets, have now 

239
00:13:15,300 --> 00:13:18,100
been seized as part of the FTX 
bankruptcy. 

240
00:13:18,400 --> 00:13:21,700
The bank will still be able to 
tap liquidity in survive. 

241
00:13:21,700 --> 00:13:24,600
The thing that's like the point 
of a lot of the stress testing 

242
00:13:24,600 --> 00:13:29,900
in the building, for resiliency,
in the fear would be that the 

243
00:13:30,000 --> 00:13:34,000
continued limitations and And 
silver Gates diminished ability 

244
00:13:34,000 --> 00:13:37,100
to interact in a meaningful way 
with billions of dollars of 

245
00:13:37,100 --> 00:13:40,700
crypto deposits, makes them a 
less effective business where 

246
00:13:40,700 --> 00:13:44,800
eventually they are unable to 
drive enough profits, or 

247
00:13:44,800 --> 00:13:47,100
whatever, to sustain them. 
One of the things that still 

248
00:13:47,100 --> 00:13:49,500
interesting to me, and I kind of
hinted at this earlier, when I 

249
00:13:49,508 --> 00:13:53,200
was talking about how ft x is 
banking through Silver Gate, was

250
00:13:53,200 --> 00:13:55,600
done through an Alameda, 
research, entity called North 

251
00:13:55,600 --> 00:13:58,600
Dimension Incorporated, that's 
strange. 

252
00:13:58,600 --> 00:14:01,400
That feels like something that 
should not have happened and so 

253
00:14:01,400 --> 00:14:05,700
I am curious, if Silver Gate is 
going to end up getting pulled 

254
00:14:05,700 --> 00:14:09,300
into any of the legal proceeding
surrounding ft x because of 

255
00:14:09,300 --> 00:14:15,100
that, I do want to propose that 
there's This is not, this might 

256
00:14:15,100 --> 00:14:18,100
be a symptom of the financial 
system that we live in is as 

257
00:14:18,100 --> 00:14:19,900
well. 
Where I think a lot of people 

258
00:14:19,900 --> 00:14:22,400
would tell you. 
It's pretty normal for 

259
00:14:22,400 --> 00:14:25,100
conglomerates, massive 
businesses, these these things 

260
00:14:25,100 --> 00:14:28,600
to have, 100, subsidiaries a 
different subsidiaries and doing

261
00:14:28,600 --> 00:14:30,900
different things and if they 
need to get loans via those 

262
00:14:30,900 --> 00:14:33,600
subsidiaries as opposed to the 
main company, that's nothing 

263
00:14:33,600 --> 00:14:37,000
particularly weird. 
But again I think that is a 

264
00:14:37,000 --> 00:14:38,600
symptom of the world that we 
live in. 

265
00:14:38,700 --> 00:14:43,100
That's not to say that I think 
it's acceptable I think it's Not

266
00:14:43,100 --> 00:14:45,800
acceptable. 
I also think that they're right 

267
00:14:45,800 --> 00:14:48,500
when they say this happens with 
a lot of businesses. 

268
00:14:48,500 --> 00:14:53,100
So I think you're probably right
that there's a lot of businesses

269
00:14:53,100 --> 00:14:56,300
that use a lot of subsidiaries 
in a lot of jurisdictions for a 

270
00:14:56,300 --> 00:14:58,800
lot of different reasons. 
I think the difference in this 

271
00:14:58,800 --> 00:15:02,500
case is that they were moving 
money and there's a lot of extra

272
00:15:02,500 --> 00:15:05,500
regulations on like what you 
need to be doing if you're 

273
00:15:05,500 --> 00:15:08,800
moving money, right? 
And so like the fact that they 

274
00:15:08,800 --> 00:15:12,600
saw presumably deposits and 
withdrawals that look like an 

275
00:15:12,600 --> 00:15:15,700
exchange going to what was 
supposed to be. 

276
00:15:15,700 --> 00:15:18,200
Well either in electronics, 
importer exporter or an 

277
00:15:18,200 --> 00:15:21,400
over-the-counter trading desk 
What you think, North Dimension 

278
00:15:21,400 --> 00:15:25,400
Incorporated was that Silver 
Gate thought those flows? 

279
00:15:25,400 --> 00:15:29,500
With the same is strange. 
And like the fact that they were

280
00:15:29,500 --> 00:15:31,700
in a sense, facilitating, 
whatever Behavior. 

281
00:15:31,700 --> 00:15:35,400
Ella M ft x was engaged in there
really interesting point that 

282
00:15:35,400 --> 00:15:38,900
you're making, because I spoke 
to Francis Coppola today who we 

283
00:15:38,900 --> 00:15:42,200
previously had on the on the 
show, she talked to us about 

284
00:15:42,200 --> 00:15:45,000
banking. 
So she is generally a good 

285
00:15:45,008 --> 00:15:48,000
person to reach out to about 
this stuff and she directed me 

286
00:15:48,000 --> 00:15:51,400
to a bank called a He bank, 
which I don't know if you're 

287
00:15:51,400 --> 00:15:54,200
familiar with Bennett, but but 
if you are, I'm going to just 

288
00:15:54,200 --> 00:15:57,000
explain this regardless so that 
every cuz I was not aware of 

289
00:15:57,000 --> 00:16:00,200
them until today, so she she 
describes something called a 

290
00:16:00,200 --> 00:16:05,900
blv, which was a bank in Latvia 
that was established in 1993 

291
00:16:06,200 --> 00:16:10,700
essentially right after the fall
of the Soviet Union and was 

292
00:16:10,700 --> 00:16:15,300
pretty much designed only to 
avoid sanctions for Russian 

293
00:16:15,300 --> 00:16:20,000
Nationals and was continually 
doing it continually ignored. 

294
00:16:20,100 --> 00:16:22,500
Whirring sanction directions 
from the US Treasury 

295
00:16:22,600 --> 00:16:24,900
continually. 
Just disregarding everything us 

296
00:16:24,900 --> 00:16:26,600
Regulators. 
Were trying to tell them to do, 

297
00:16:26,600 --> 00:16:30,300
right? 
And they this cost them 

298
00:16:30,300 --> 00:16:32,300
everything. 
So what ended up happening in 

299
00:16:32,300 --> 00:16:35,600
2018 the treasury said, okay 
we're not fucking around 

300
00:16:35,600 --> 00:16:39,400
anymore, enough of this 
bullshit, you get no US Dollars,

301
00:16:39,500 --> 00:16:41,400
you get none, no more US 
dollars. 

302
00:16:41,600 --> 00:16:44,900
Go into or out of your bank and 
we're going to find anyone who 

303
00:16:44,900 --> 00:16:47,500
does. 
We're going to crucify you if 

304
00:16:47,500 --> 00:16:51,100
you give a b, a b LV, any money,
And guess what happened? 

305
00:16:51,400 --> 00:16:53,900
They went out of business. 
It was that easy? 

306
00:16:54,100 --> 00:16:58,100
And so, and I think a, some 
correspondent Banks got in 

307
00:16:58,100 --> 00:17:01,800
trouble for helping them do 
this, which is what we're going 

308
00:17:01,800 --> 00:17:05,500
to be seeing. 
I suspect with Silver Gate, and 

309
00:17:05,500 --> 00:17:09,900
signature, and Metropolitan, and
evolve, and dud, at edited, like

310
00:17:09,900 --> 00:17:12,400
we could name, 500 of these 
stupid banks that have now 

311
00:17:12,400 --> 00:17:15,099
gotten involved in 
cryptocurrency, but I do think 

312
00:17:15,099 --> 00:17:16,200
we're not going to see prison 
time. 

313
00:17:16,200 --> 00:17:17,500
We're going to see any of that 
stuff. 

314
00:17:17,700 --> 00:17:20,300
Some of them are going to go out
of business and Of them are 

315
00:17:20,308 --> 00:17:23,800
going to get fine to good. 
God hell so they know never ever

316
00:17:23,800 --> 00:17:26,800
to do this again and crypto 
currency becomes Untouchable 

317
00:17:27,000 --> 00:17:30,400
Untouchable for a lot of these 
Banks, not every bank, but a lot

318
00:17:30,400 --> 00:17:34,800
of banks on that note I think 
Metropolitan is in a little bit 

319
00:17:34,800 --> 00:17:36,700
of a different category than 
Silver Gate and signature 

320
00:17:36,700 --> 00:17:39,300
because they've been reducing 
their crypto business and just 

321
00:17:39,300 --> 00:17:42,400
finally announced that they had 
ditched their last say several 

322
00:17:42,400 --> 00:17:45,000
hundred million in deposits as 
an exact number. 

323
00:17:45,000 --> 00:17:47,600
I don't have it written down but
it was less than a billion. 

324
00:17:47,600 --> 00:17:49,800
I'm pretty sure that they had 
left over this last quarter. 

325
00:17:50,000 --> 00:17:52,900
And that they were done with the
business and the precipitating 

326
00:17:52,900 --> 00:17:55,100
event or one of the 
precipitating motivations I 

327
00:17:55,100 --> 00:18:01,500
think for this. 
Might be that on January, 3rd 

328
00:18:01,500 --> 00:18:04,800
the office of the Comptroller of
currency, the Federal Reserve, 

329
00:18:04,900 --> 00:18:09,800
and the FDIC issued, a joint 
statement, reiterating to Banks 

330
00:18:09,800 --> 00:18:12,200
the things they need to be aware
of if they're going to be 

331
00:18:12,200 --> 00:18:15,500
engaging with the crypto space. 
And I think the list of things 

332
00:18:15,500 --> 00:18:18,500
that are highlighted in this 
statement really kind of give 

333
00:18:18,500 --> 00:18:21,200
you a little bit of insight into
how these Regulators are 

334
00:18:21,200 --> 00:18:24,300
interpreting crypto right now. 
They warned of like the obvious 

335
00:18:24,300 --> 00:18:26,200
things. 
Like there's a risk of Fraud and

336
00:18:26,200 --> 00:18:29,800
scams that Legal uncertainties 
related to custody and 

337
00:18:29,800 --> 00:18:32,700
ownership. 
But they also say and when these

338
00:18:32,700 --> 00:18:36,100
companies that some of these 
crypto companies who are using 

339
00:18:36,100 --> 00:18:39,600
them are making inaccurate, 
public statements about FDIC 

340
00:18:39,600 --> 00:18:42,500
insurance and that the banks 
were serving them need to be 

341
00:18:42,500 --> 00:18:46,400
aware of that. 
They also reiterate that like 

342
00:18:47,100 --> 00:18:50,000
any banks that are holding 
assets for stable coins, need to

343
00:18:50,000 --> 00:18:53,900
be aware that stable coins as a 
structure may be vulnerable to a

344
00:18:53,900 --> 00:18:58,300
run which can lead to a huge 
outflow in Assets from the bank,

345
00:18:58,300 --> 00:19:00,700
that's holding the stable coins 
assets. 

346
00:19:01,400 --> 00:19:05,500
They also then like, reiterate 
that there is a large contagion 

347
00:19:05,500 --> 00:19:09,500
risk in the ecosystem because of
how interrelated these entities 

348
00:19:09,500 --> 00:19:11,800
are and how much is shared 
between these different 

349
00:19:11,800 --> 00:19:15,100
cryptocurrency companies. 
And one of the things that I 

350
00:19:15,100 --> 00:19:19,600
really want to bring attention 
to that, they say is that they 

351
00:19:19,600 --> 00:19:24,300
basically tell them that 
engaging with crypto currencies 

352
00:19:24,300 --> 00:19:27,100
that are on public. 
Blockchains is not going to be 

353
00:19:27,300 --> 00:19:31,200
Propriate they say issuing or 
holding as principal crypto 

354
00:19:31,200 --> 00:19:35,900
assets that are issued stored or
transferred on an open public 

355
00:19:35,900 --> 00:19:41,500
and or decentralized network is 
highly likely to be inconsistent

356
00:19:41,500 --> 00:19:43,700
with safe. 
And sound banking practices, 

357
00:19:44,800 --> 00:19:48,100
they are telling these Banks. 
They should not be holding 

358
00:19:48,100 --> 00:19:51,300
cryptocurrencies and that and 
like, they are really 

359
00:19:51,300 --> 00:19:53,700
emphasizing that. 
And then they go on to 

360
00:19:53,700 --> 00:19:58,800
specifically, say the agencies 
have Second safety and soundness

361
00:19:58,800 --> 00:20:02,900
concerns with banking models 
that are concentrated in crypto 

362
00:20:02,900 --> 00:20:06,700
asset, related activities that 
Silver Gate in signature. 

363
00:20:07,000 --> 00:20:10,600
They are like drawing a moon 
down and evolve. 

364
00:20:10,600 --> 00:20:12,100
Yes. 
But I do like drawing a circle 

365
00:20:12,100 --> 00:20:15,300
around the activity of these 
so-called cryptocurrency Banks 

366
00:20:15,300 --> 00:20:17,500
and saying, we don't think 
that's what you're supposed to 

367
00:20:17,500 --> 00:20:19,800
be doing. 
And like the knock-on effect of 

368
00:20:19,800 --> 00:20:22,400
this is that we're going back 
to, like, how hard it was for 

369
00:20:22,400 --> 00:20:25,500
cryptocurrency companies to find
banking in 2017. 

370
00:20:25,900 --> 00:20:27,100
And I expect, we're going to see
them all. 

371
00:20:27,300 --> 00:20:30,200
Back to their same Shenanigans. 
Meaning my don't know if we must

372
00:20:30,300 --> 00:20:32,400
did we mention? 
I suspect we mentioned this 

373
00:20:32,400 --> 00:20:35,400
already last time where it's 
like oh wow you think. 

374
00:20:35,400 --> 00:20:39,100
This is knew that these banks 
are freaking out and running 

375
00:20:39,100 --> 00:20:41,100
away from all of these 
cryptocurrency companies. 

376
00:20:41,300 --> 00:20:45,300
No, no like 2017, that's how bit
for next got screwed, that's how

377
00:20:45,300 --> 00:20:47,600
tether got screwed. 
That's how all these companies 

378
00:20:47,600 --> 00:20:53,800
started essentially, having 
nowhere to go and there's a 

379
00:20:54,100 --> 00:20:57,900
chicken and egg game here that 
that cryptocurrency Tickets and 

380
00:20:57,900 --> 00:21:00,600
critics and Skeptics like us 
play where it's like on one 

381
00:21:00,600 --> 00:21:02,600
hand. 
They say, well, the reason they 

382
00:21:02,600 --> 00:21:05,500
do these Shenanigans with all 
this money is because they can't

383
00:21:05,500 --> 00:21:08,000
get Banking. 
And then we on the other hand 

384
00:21:08,000 --> 00:21:11,400
are saying, well, if they didn't
do all these Shenanigans, maybe 

385
00:21:11,400 --> 00:21:15,000
they could get banking. 
So it's it's a bit of a 

386
00:21:15,000 --> 00:21:17,600
cat-and-mouse chicken and egg. 
Who knows? 

387
00:21:17,600 --> 00:21:21,700
What's the right answer here? 
But we have seen this before and

388
00:21:21,700 --> 00:21:25,000
I do want to, while you were 
talking, it reminded me that we 

389
00:21:25,000 --> 00:21:29,700
had seen in August of 20:22 now,
six months ago, just crazy 

390
00:21:29,700 --> 00:21:34,400
crazy. 
How time flies that Bret 

391
00:21:34,400 --> 00:21:39,000
Harrison, who was the president 
of FTX us had written this 

392
00:21:39,000 --> 00:21:44,100
tweet, saying we are FDIC 
insured and the FDIC almost 

393
00:21:44,100 --> 00:21:48,300
instantly came down on him and 
said, you are not FDIC insured. 

394
00:21:48,300 --> 00:21:51,200
You delete that tweet right now,
you make sure that everyone 

395
00:21:51,200 --> 00:21:55,200
understands that you are not 
FDIC insured and and make sure 

396
00:21:55,200 --> 00:21:57,000
that we have nothing to do with 
you anymore. 

397
00:21:57,200 --> 00:22:01,100
I don't mention us and he had to
come out and apologize and they 

398
00:22:01,100 --> 00:22:03,800
cleared that up. 
But like the FDIC has never 

399
00:22:03,800 --> 00:22:06,900
fucked around with this stuff. 
The FDIC is very they were that 

400
00:22:06,900 --> 00:22:10,800
one of the first Regulators that
I was very proud of what they 

401
00:22:10,800 --> 00:22:17,900
were doing to try to the way 
people discuss, wanting the SEC 

402
00:22:18,100 --> 00:22:23,700
to regulate versus litigate that
is what the f FDIC did. 

403
00:22:23,800 --> 00:22:27,600
They were like stop doing that 
right now and if you Keep doing 

404
00:22:27,600 --> 00:22:28,800
it. 
You're going to get in big 

405
00:22:28,800 --> 00:22:30,600
fucking trouble. 
Stop. 

406
00:22:30,600 --> 00:22:33,500
And lo and behold, here we are a
lot of these guys didn't stop. 

407
00:22:33,500 --> 00:22:36,100
And here we go. 
Now you're in trouble and it's 

408
00:22:36,100 --> 00:22:38,700
not just with the FDIC and so 
with everybody. 

409
00:22:39,400 --> 00:22:44,000
So I am glad on one hand. 
I'm glad we're seeing this now 

410
00:22:44,300 --> 00:22:47,400
on another hand, I'm sorry that 
this is happening and it's 

411
00:22:47,400 --> 00:22:52,700
unfortunate that it has had to 
come to this I guess is what I 

412
00:22:52,800 --> 00:22:56,100
is, what I would say. 
Yeah absolutely. 

413
00:22:57,400 --> 00:23:00,800
It is one of the last things I 
want to kind of put a note on in

414
00:23:00,800 --> 00:23:04,900
that like list of risks was the 
susceptibility of stable coins 

415
00:23:04,900 --> 00:23:08,300
to run signature which we've 
been talking about a bunch. 

416
00:23:08,300 --> 00:23:12,000
In this episode was her at one 
point, had a whole bunch of 

417
00:23:12,000 --> 00:23:16,100
circles deposits there for u.s. 
DC and so that again feels like 

418
00:23:16,100 --> 00:23:19,100
them saying hey we're aware of 
what you're doing. 

419
00:23:19,200 --> 00:23:21,500
Here's our statement, do you 
want to self correct? 

420
00:23:21,500 --> 00:23:24,900
Or do you want the other option 
signature, which was trading at 

421
00:23:25,200 --> 00:23:28,100
roughly? 
Hundred. 

422
00:23:28,600 --> 00:23:33,900
And let's see what that is. $370
ish for its all time. 

423
00:23:33,900 --> 00:23:39,100
High is now trading at $117. 
So also doing significantly, bad

424
00:23:39,500 --> 00:23:42,100
seriously. 
Having some issues we don't know

425
00:23:42,100 --> 00:23:43,700
what this means. 
I want to make sure everyone 

426
00:23:43,700 --> 00:23:46,400
understands that we are not 
lawyers. 

427
00:23:46,500 --> 00:23:48,100
We are not hell. 
We're not doctors were not. 

428
00:23:48,100 --> 00:23:49,500
We're not saying we're not 
saying we're nobody were 

429
00:23:49,500 --> 00:23:53,600
commentators and we don't want 
anybody to take what we're 

430
00:23:53,600 --> 00:23:57,000
saying to mean, that they should
be worried about having money on

431
00:23:57,100 --> 00:23:59,000
A of these platforms that is not
at all. 

432
00:23:59,000 --> 00:24:01,400
What we're saying, I'm not 
trying to imply that at all. 

433
00:24:01,400 --> 00:24:04,100
I'm not trying to suggest be 
scared, get your money out. 

434
00:24:04,108 --> 00:24:08,500
Like, no, I just think that 
these are concerns to look out 

435
00:24:08,500 --> 00:24:14,200
for think, about consider and as
an industry, this is something 

436
00:24:14,200 --> 00:24:16,500
that is we need to be thinking 
about and be concerned about. 

437
00:24:16,600 --> 00:24:21,200
And if you're over the FDIC 
insured limit, it can always be 

438
00:24:21,200 --> 00:24:24,000
valuable to consider 
diversifying the places you're 

439
00:24:24,000 --> 00:24:26,900
storing your cash. 
Hopefully, most people already 

440
00:24:26,900 --> 00:24:29,100
know But yes, I think that's a 
good point to make. 

441
00:24:29,700 --> 00:24:31,600
And I think that's a good point 
for us to actually end on for 

442
00:24:31,600 --> 00:24:35,300
this episode, quick episode 
about banking, which is 

443
00:24:35,300 --> 00:24:37,200
definitely not involved with 
cryptocurrency at all. 

444
00:24:37,200 --> 00:24:38,500
It's totally different 
ecosystem. 

445
00:24:39,800 --> 00:24:42,200
So, yeah. 
Thanks everybody hit the like 

446
00:24:42,200 --> 00:24:46,700
And subscribe button if you want
to finally see cast, coined a 

447
00:24:46,700 --> 00:24:49,400
bow. 
We're going to try to buy a u.s.

448
00:24:49,400 --> 00:24:52,100
federally Chartered Bank. 
Baby, let's do this guy's we're 

449
00:24:52,100 --> 00:24:54,500
gonna we're going to buy Bank. 
We're going to get banking, 

450
00:24:54,500 --> 00:24:57,000
forecast, coin, and then we're 
going to then we're going to 

451
00:24:57,100 --> 00:25:00,800
Leave the United States of 
America and get rated but that's

452
00:25:00,800 --> 00:25:03,800
for another time anyway. 
Yep. 

453
00:25:03,800 --> 00:25:04,900
Take care everybody. 
Thank you. 

454
00:24:57,100 --> 00:25:00,800
Leave the United States of 
America and get rated but that's

455
00:25:00,800 --> 00:25:03,800
for another time anyway. 
Yep. 

456
00:25:03,800 --> 00:25:04,900
Take care everybody. 
Thank you.