1 00:00:05,000 --> 00:00:07,720 Welcome back everyone. I am Cass PNC. 2 00:00:07,720 --> 00:00:10,160 I'm joined as usual by my partner in crime, Mr. Bennett 3 00:00:10,160 --> 00:00:11,560 Tomlin. How are you today? 4 00:00:12,880 --> 00:00:15,240 Don't answer, don't answer. How are you guys? 5 00:00:16,640 --> 00:00:19,000 I'm here. Yeah, we're, we're alive. 6 00:00:19,000 --> 00:00:21,600 We're alive and breathing. But I think it's really cool 7 00:00:21,600 --> 00:00:23,760 'cause we're we're joined by a super special guest today. 8 00:00:23,760 --> 00:00:27,400 Corey Frayer was like the senior advisor for crypto oversight for 9 00:00:27,400 --> 00:00:31,120 the SEC and now is working for the Consumer Federation of 10 00:00:31,120 --> 00:00:34,240 America as the new director of Investor protection. 11 00:00:34,680 --> 00:00:36,680 Corey, welcome to CCC. How are you? 12 00:00:36,760 --> 00:00:38,160 Thank you. It's a it's a rough time right 13 00:00:38,160 --> 00:00:41,640 now. So, you know, not great, but 14 00:00:42,160 --> 00:00:45,240 excited about this new job. I'm excited about the chance to, 15 00:00:45,240 --> 00:00:48,160 you know, continue the work. I've been committed to my 16 00:00:48,160 --> 00:00:50,360 career. So they're ups and downs. 17 00:00:50,400 --> 00:00:53,520 And we should just say at the top here, Corey is here in his 18 00:00:53,520 --> 00:00:55,800 personal capacity. These are Corey's personal 19 00:00:55,800 --> 00:00:57,520 things. They are not the opinions of his 20 00:00:57,520 --> 00:00:59,080 employer. Right, correct. 21 00:00:59,120 --> 00:01:02,720 And on that note, I, you know, I mean, it might be easy, easiest 22 00:01:02,720 --> 00:01:06,920 if we got started by by talking about what your role at the SEC 23 00:01:06,920 --> 00:01:12,440 was and what it looked like, you know, trying to regulate 24 00:01:12,640 --> 00:01:13,920 cryptocurrency. Yeah. 25 00:01:14,320 --> 00:01:19,640 So there was obviously a lot going on and the SEC is a large 26 00:01:19,640 --> 00:01:22,400 organization with a lot of different divisions, a lot of 27 00:01:22,400 --> 00:01:26,040 different policy areas. So my main jobs were essentially 28 00:01:26,320 --> 00:01:31,000 advising on strategy and tactics and then making sure that all of 29 00:01:31,000 --> 00:01:34,400 the disparate parts of the agency, we're consistent in how 30 00:01:34,400 --> 00:01:37,920 we address crypto assets. So on the rulemaking side, 31 00:01:37,920 --> 00:01:40,880 making sure we're using the same language there as we did in 32 00:01:40,880 --> 00:01:44,240 court filings. Just making sure we're sort of 33 00:01:44,400 --> 00:01:48,800 unified in that approach and not in any places where we were 34 00:01:48,800 --> 00:01:51,800 addressing crypto, sort of especially creating litigation 35 00:01:51,800 --> 00:01:53,520 risk for ourselves, saying things that could be used 36 00:01:53,520 --> 00:01:56,120 against us in these, you know, big cases we were developing. 37 00:01:56,160 --> 00:01:59,800 So do you think you could talk a little bit about what the SC CS 38 00:01:59,800 --> 00:02:03,160 mandate is and how that affected the strategy the agency took 39 00:02:03,400 --> 00:02:06,720 when it came to crypto currencies and crypto assets? 40 00:02:06,720 --> 00:02:11,200 Yeah, I think that's one of the big issues that we, we have a 41 00:02:11,200 --> 00:02:13,200 very different mandate. I, I'm going to keep saying we 42 00:02:13,560 --> 00:02:14,520 even though I'm not there anymore. 43 00:02:15,440 --> 00:02:18,640 So the SC CS mandate is very different from like a banking 44 00:02:18,640 --> 00:02:21,520 regulator, which has what's called prudential authority or 45 00:02:21,520 --> 00:02:24,160 essentially safety and soundness authority and they get to look 46 00:02:24,160 --> 00:02:26,840 at a product and say this is bad for the banking system, this is 47 00:02:26,840 --> 00:02:28,920 bad for consumers. You're not allowed to do that. 48 00:02:29,480 --> 00:02:31,920 The SE CS mandate is one of disclosure. 49 00:02:32,400 --> 00:02:35,040 So I think we would often say inside the agency is you can do 50 00:02:35,040 --> 00:02:39,240 a Ponzi if you disclose it. If you say in your registration 51 00:02:39,240 --> 00:02:42,880 like we're a Ponzi scheme, you can do illegal things and 52 00:02:42,880 --> 00:02:45,760 disclose that in your business plan and that's it. 53 00:02:45,760 --> 00:02:48,280 Like that's. We're letting so many bad people 54 00:02:48,280 --> 00:02:49,280 know this right now. You. 55 00:02:49,280 --> 00:02:51,560 Still may violate federal. Laws. 56 00:02:52,200 --> 00:02:55,120 You still may you still may violate federal and state laws 57 00:02:55,120 --> 00:02:56,920 in the. Process you got, you got fraud 58 00:02:56,920 --> 00:02:58,800 you got yeah, yeah, yeah. But it's just, yeah. 59 00:02:59,120 --> 00:03:02,160 But the SC CS goal is to make sure that the investors have all 60 00:03:02,160 --> 00:03:04,000 the information they're supposed to have. 61 00:03:04,080 --> 00:03:05,160 That's correct. That's correct. 62 00:03:05,280 --> 00:03:07,760 The mandate is investor protection, fair and orderly 63 00:03:07,760 --> 00:03:09,600 markets, capital formation. Yeah. 64 00:03:09,600 --> 00:03:13,280 And so how did that, like, interface with or affect how the 65 00:03:13,280 --> 00:03:16,480 agency came up with its cryptocurrency strategy? 66 00:03:16,480 --> 00:03:20,320 So I mean, it, it was actually pretty simple because the issue 67 00:03:20,320 --> 00:03:25,160 with crypto is the vast majority of these tokens meet the Howie 68 00:03:25,160 --> 00:03:27,080 test. They are securities, but they 69 00:03:27,080 --> 00:03:30,120 weren't registered. And so they weren't meeting that 70 00:03:30,120 --> 00:03:34,080 basic disclosure requirement. That's kind of step one is 71 00:03:34,560 --> 00:03:36,960 addressing the fact that they are securities. 72 00:03:37,360 --> 00:03:40,440 They do have an obligation to register and disclose and they 73 00:03:40,440 --> 00:03:43,280 weren't doing that. So that's like a pretty 74 00:03:43,280 --> 00:03:47,920 straightforward step one. And even, you know, to their 75 00:03:47,920 --> 00:03:52,400 credit, Clayton's administration before us took on a lot of those 76 00:03:52,400 --> 00:03:55,440 kinds of cases. You know, obviously we took on a 77 00:03:55,440 --> 00:03:58,000 little bit different strategy, which hopefully we'll talk about 78 00:03:58,000 --> 00:04:01,080 later. But yeah, the first barrier to 79 00:04:01,080 --> 00:04:03,280 everything was demonstrating that these were investment 80 00:04:03,280 --> 00:04:04,600 contracts, securities. OK. 81 00:04:04,720 --> 00:04:07,400 And for our audiences benefit, we've talked about it a couple 82 00:04:07,400 --> 00:04:10,200 times on here before, but could you tell them what the Howie 83 00:04:10,200 --> 00:04:13,280 test is and how that relates to like these being securities? 84 00:04:14,160 --> 00:04:16,560 Absolutely. So there's actually a big 85 00:04:16,560 --> 00:04:19,160 misconception about what we were saying about crypto assets, 86 00:04:19,160 --> 00:04:22,240 which is that the crypto asset itself was a security. 87 00:04:23,160 --> 00:04:28,360 And what we allege is that the crypto asset is part of a scheme 88 00:04:28,520 --> 00:04:32,440 that makes it a security. And so the concept of investment 89 00:04:32,440 --> 00:04:35,960 contract is a long standing concept from the blue sky laws. 90 00:04:36,480 --> 00:04:40,640 And the reason it was included in the act and the reason the 91 00:04:40,640 --> 00:04:44,560 the Supreme Court decision, the Howie decision came down was 92 00:04:44,560 --> 00:04:47,840 because Congress was aware when they passed the law that people 93 00:04:47,840 --> 00:04:51,880 would try to evade it. And so the investment contract 94 00:04:51,880 --> 00:04:56,760 test is a purely economic analysis and it says basically 95 00:04:56,760 --> 00:04:58,880 no matter what you call yourself, if you are 96 00:04:58,880 --> 00:05:01,800 economically the same as security, you're a security. 97 00:05:02,640 --> 00:05:06,360 And so that test is an investment of money and a common 98 00:05:06,360 --> 00:05:10,280 enterprise with the expectation of profits based on the efforts 99 00:05:10,280 --> 00:05:12,480 of others. And quite frankly, like many 100 00:05:12,480 --> 00:05:16,520 securities meet that test regardless of whether that, you 101 00:05:16,520 --> 00:05:18,880 know, they're enumerated in the 33 and 34 Act. 102 00:05:19,480 --> 00:05:22,360 But the Howie test was really meant to sort of capture the 103 00:05:22,360 --> 00:05:25,040 evasion and all the ways that securities could be introduced 104 00:05:25,040 --> 00:05:28,320 in the market as sort of that, you know, something by any other 105 00:05:28,320 --> 00:05:31,240 name. Was the SC, CS goal to get these 106 00:05:31,240 --> 00:05:35,800 cryptocurrencies to come in and try to find a way to register 107 00:05:35,880 --> 00:05:39,240 these things as securities? Because the refrain we've heard 108 00:05:39,240 --> 00:05:42,520 from the cryptocurrency industry over the last several years is 109 00:05:42,520 --> 00:05:47,360 that their tokens were incompatible with existing. 110 00:05:48,120 --> 00:05:51,200 Registration documents so yeah, getting them to come in and and 111 00:05:51,200 --> 00:05:54,000 register was certainly the beginning of the strategy under 112 00:05:54,000 --> 00:05:55,880 under Clayton's term. A thing that kind of morphed 113 00:05:55,880 --> 00:05:58,760 there is that under Clayton's term most of them were calling 114 00:05:58,760 --> 00:06:01,040 themselves IC OS our initial coin offerings. 115 00:06:01,360 --> 00:06:03,840 And so when you walk out into the world and you say we're an 116 00:06:03,840 --> 00:06:08,640 IC O, it's very hard to go in front of a judge having named 117 00:06:08,640 --> 00:06:12,080 yourself after sort of like the most famous layperson 118 00:06:12,080 --> 00:06:15,600 understanding of securities and equities and be like, well, we 119 00:06:15,600 --> 00:06:17,080 didn't really know this was a security. 120 00:06:17,080 --> 00:06:19,280 It's kind of like an absurd argument to try and make. 121 00:06:19,800 --> 00:06:21,880 So those cases were, you know, pretty easy. 122 00:06:21,880 --> 00:06:25,680 And I think that there was a conception at the time that that 123 00:06:25,680 --> 00:06:29,280 market wasn't really gonna get a foothold and expand in the way 124 00:06:29,280 --> 00:06:32,640 that it did. So, yeah, I think that's sort of 125 00:06:34,240 --> 00:06:35,560 that was like sort of the first step. 126 00:06:35,680 --> 00:06:39,800 Well, I guess part of the refrain we, Cass and I have 127 00:06:39,800 --> 00:06:42,040 heard from the crypto industry that these things can't be 128 00:06:42,040 --> 00:06:44,080 registered. The types of questions asked in 129 00:06:44,080 --> 00:06:47,280 these forms are fundamentally incompatible with the types of 130 00:06:47,280 --> 00:06:50,320 things these issuers are doing. To tag on to the back of that 131 00:06:50,320 --> 00:06:52,520 really quick, they also were saying a lot. 132 00:06:52,520 --> 00:06:54,760 And we're, you know, we're still hearing this from like Coinbase 133 00:06:54,760 --> 00:06:58,080 and, you know, major operators in, in the cryptocurrency 134 00:06:58,080 --> 00:07:01,480 industry that like even if they did go in there and try to work 135 00:07:01,480 --> 00:07:05,040 with the SEC on stuff, that ultimately they would just get 136 00:07:05,040 --> 00:07:08,960 bogged down in a mess and told off by the SEC or charged with 137 00:07:08,960 --> 00:07:11,520 something. Or, you know that that 138 00:07:11,520 --> 00:07:15,360 regardless of how they were trying to play nice, the SEC 139 00:07:15,360 --> 00:07:16,720 would come after them no matter what. 140 00:07:16,800 --> 00:07:19,640 In my experience at the time while I was there, absolutely 141 00:07:19,640 --> 00:07:23,200 untrue. No one has ever demonstrated to 142 00:07:23,200 --> 00:07:28,440 me what is fundamentally incompatible about a crypto 143 00:07:28,440 --> 00:07:31,960 asset and the current set of securities regulations. 144 00:07:31,960 --> 00:07:35,360 We went in there very open to hearing that argument and be in 145 00:07:35,360 --> 00:07:39,880 being given detail around that. And we spoke both to crypto 146 00:07:39,880 --> 00:07:44,160 asset issuers and crypto asset platforms and traditional 147 00:07:44,160 --> 00:07:45,840 platforms that we're thinking about getting into the crypto 148 00:07:45,840 --> 00:07:48,280 asset business. And none of them could 149 00:07:48,280 --> 00:07:53,840 demonstrate for us what the technological issue was that 150 00:07:53,840 --> 00:07:56,720 made them unable to register and operate like any other 151 00:07:56,720 --> 00:07:59,800 securities market. The argument essentially boiled 152 00:07:59,800 --> 00:08:04,000 down to, we set up these platforms with these huge 153 00:08:04,000 --> 00:08:06,720 conflicts of interest. If you make us look like the 154 00:08:06,720 --> 00:08:10,160 traditional securities markets, this business is not going to be 155 00:08:10,160 --> 00:08:12,280 economical. So essentially, by making us 156 00:08:12,280 --> 00:08:14,640 follow the law, you're going to shut us down. 157 00:08:14,680 --> 00:08:16,480 That was like, I think that was like really what was going on. 158 00:08:16,480 --> 00:08:18,720 And I also think that has to be taken in the context like 159 00:08:19,400 --> 00:08:21,800 whether those were good faith or bad faith arguments. 160 00:08:22,600 --> 00:08:25,880 The initial idea behind crypto is this is going to be something 161 00:08:25,880 --> 00:08:27,760 that's not subject to government regulation. 162 00:08:28,120 --> 00:08:32,080 Like, no matter like how you look at this, the the underlying 163 00:08:32,080 --> 00:08:35,600 ethos is that they didn't think our regulation was ever going to 164 00:08:35,600 --> 00:08:38,080 be legitimate. The original intent of Bitcoin 165 00:08:38,080 --> 00:08:41,640 was to undermine the existing banking. 166 00:08:41,640 --> 00:08:44,760 So it it wasn't to necessarily like destroy the banking system. 167 00:08:44,760 --> 00:08:47,600 It wasn't to ruin governments or anything like it. 168 00:08:47,600 --> 00:08:52,000 It was just to have a completely different and unregulated form 169 00:08:52,080 --> 00:08:53,760 of yeah, money. Right. 170 00:08:53,920 --> 00:08:56,800 And I guess this comes to the question of like, at what point 171 00:08:57,600 --> 00:09:03,520 does the SEC feel like a asset like Bitcoin or Ethereum or 172 00:09:04,680 --> 00:09:07,400 Ripple? At what point are they quote 173 00:09:07,400 --> 00:09:12,360 sufficiently decentralized at they are no longer a security. 174 00:09:12,560 --> 00:09:15,880 I don't. Think decentralization other 175 00:09:15,880 --> 00:09:19,720 than the concepts of, for example, a, a common enterprise, 176 00:09:19,960 --> 00:09:23,160 right and sort of the organized efforts of others. 177 00:09:23,680 --> 00:09:26,360 I don't think decentralization, decentralization was ever sort 178 00:09:26,360 --> 00:09:29,720 of the right way to look at economic analysis. 179 00:09:29,720 --> 00:09:32,720 And like very unfortunately, before we got there, a former 180 00:09:32,720 --> 00:09:36,840 director of corporation finance, which is sort of like they are 181 00:09:36,840 --> 00:09:39,080 the experts on what is and is not a security. 182 00:09:39,080 --> 00:09:42,880 That's their lane said a lot of things about crypto in its 183 00:09:42,960 --> 00:09:47,680 nascent state that create a lot of problems for the agency. 184 00:09:47,840 --> 00:09:50,280 And I think one thing, you know, getting into the constraints the 185 00:09:50,280 --> 00:09:54,600 agency has is that the courts don't look at the SEC as like a 186 00:09:54,600 --> 00:09:56,440 thing that changes administration to 187 00:09:56,440 --> 00:09:59,400 administration. The court looks the SEC like a 188 00:09:59,400 --> 00:10:02,640 90 year project that is supposed to be consistent with itself. 189 00:10:02,840 --> 00:10:07,600 So we're held accountable to things that have happened before 190 00:10:07,600 --> 00:10:09,960 us. So, like, those statements 191 00:10:09,960 --> 00:10:13,040 carried on, and we're used to challenge Ripple as we continue 192 00:10:13,040 --> 00:10:15,200 to litigate it. That was an enormous challenge 193 00:10:15,200 --> 00:10:17,960 for us. And the other thing is, like, 194 00:10:17,960 --> 00:10:21,320 the fact that this market was allowed to grow so large was a 195 00:10:21,320 --> 00:10:23,160 big challenge because you got to go in front of court and 196 00:10:23,160 --> 00:10:26,920 explain, like, if this was so illegal, if this was obviously 197 00:10:26,920 --> 00:10:29,840 securities, why didn't the SEC do anything about it? 198 00:10:30,560 --> 00:10:32,720 Why'd you let it get so big before telling him this was an 199 00:10:32,720 --> 00:10:35,440 illegal business? And during that era, you had 200 00:10:35,520 --> 00:10:38,680 interesting messages coming out of the SEC with like Clayton 201 00:10:38,680 --> 00:10:42,320 saying basically every IC O I've seen is obviously a security and 202 00:10:42,320 --> 00:10:44,640 then Hinman going, I don't know, some of these seem like they're 203 00:10:44,640 --> 00:10:47,320 sufficiently decentralized and aren't securities anymore. 204 00:10:48,000 --> 00:10:50,360 Plus you had the Dow report coming out in that era, which 205 00:10:50,360 --> 00:10:53,040 was like, this is very clearly a security and things that look 206 00:10:53,040 --> 00:10:56,240 like this are also securities. And so there was a bit of 207 00:10:57,600 --> 00:11:00,280 difficulty in getting everyone unified in the same message 208 00:11:00,280 --> 00:11:03,960 during that period, which seems to have had cost going forward 209 00:11:03,960 --> 00:11:06,720 for years to come. I would just add, you are 210 00:11:06,720 --> 00:11:09,520 absolutely correct that I think prior to US things had been 211 00:11:09,720 --> 00:11:11,640 pretty inconsistent. And I would add one other thing 212 00:11:11,640 --> 00:11:14,560 that that is not well known, which is that there were a 213 00:11:14,560 --> 00:11:20,720 couple of tokens that were issued, they were not 214 00:11:20,720 --> 00:11:25,280 registered, but they were issued legitimately in an exemption to 215 00:11:25,280 --> 00:11:26,680 the registration. So there's a handful of 216 00:11:26,680 --> 00:11:29,040 exemptions registration. Yeah, exactly. 217 00:11:29,040 --> 00:11:33,880 Stacks Maple where they were trading on exchanges. 218 00:11:34,200 --> 00:11:37,720 And the moment you're a platform that facilitates trading of a 219 00:11:37,720 --> 00:11:39,640 security, you're a Securities Exchange. 220 00:11:40,160 --> 00:11:44,920 And even though those securities were on platforms that meet the 221 00:11:44,920 --> 00:11:47,680 definition of exchange, our administration didn't go after 222 00:11:47,680 --> 00:11:51,360 those exchanges. So that was another sort of 223 00:11:51,720 --> 00:11:54,040 inconsistency and interpretation of the law that was challenged. 224 00:11:54,160 --> 00:11:57,520 Well, and I think even since then, one of the stacks like 225 00:11:57,520 --> 00:12:00,240 founders has come out and said they've regretted using that 226 00:12:00,240 --> 00:12:03,240 exemption because it made it harder for them to convince some 227 00:12:03,240 --> 00:12:06,360 cryptocurrency exchanges to list them because they were worried 228 00:12:06,360 --> 00:12:08,520 it would end up drawing SEC attention to them. 229 00:12:08,600 --> 00:12:11,080 That was an enormous hurdle to actually getting someone to come 230 00:12:11,080 --> 00:12:12,560 and register. And I'm, I'm sure you guys have 231 00:12:12,560 --> 00:12:14,960 heard, heard Gary a million times say, hey, just talk to us. 232 00:12:14,960 --> 00:12:18,440 Just come in and register and even people who wanted to come 233 00:12:18,440 --> 00:12:21,320 in and legitimately work with us and we met with a lot of people, 234 00:12:21,320 --> 00:12:23,160 we met with anyone who would, who would come talk to us. 235 00:12:23,160 --> 00:12:26,200 An issue that we also like the an economic issue you couldn't 236 00:12:26,200 --> 00:12:29,440 get around was that if you became a legitimate exchange, it 237 00:12:29,440 --> 00:12:32,520 was really hard to find a token that was willing to register and 238 00:12:32,520 --> 00:12:34,920 join your exchange. And the tokens didn't want to 239 00:12:34,920 --> 00:12:38,000 register because there was no exchange for them to trade on 240 00:12:38,000 --> 00:12:40,000 once they were registered. So you had this like chicken and 241 00:12:40,000 --> 00:12:43,040 egg problem of trying to get both sides of this market to 242 00:12:43,040 --> 00:12:46,880 come together and have one legitimate exchange and 243 00:12:47,080 --> 00:12:49,440 registration process. Which results in like people 244 00:12:49,440 --> 00:12:53,320 like Promethean declaring other tokens securities without those 245 00:12:53,320 --> 00:12:55,440 tokens agreeing to register do anything. 246 00:12:55,760 --> 00:12:58,720 To try to. Solve that chicken and egg 247 00:12:58,720 --> 00:13:01,120 problem. Is there any additional context 248 00:13:01,120 --> 00:13:04,720 you can bring it give it to us here and like what seemed to be 249 00:13:04,720 --> 00:13:07,600 one of the biggest cryptocurrency cases that like 250 00:13:07,600 --> 00:13:11,400 the Clayton SCC brought that ended up being continued on the 251 00:13:11,400 --> 00:13:14,200 Ripple case and like what the strategy and thoughts were 252 00:13:14,200 --> 00:13:16,480 behind that one and. Quickly, just to to jump in here 253 00:13:16,760 --> 00:13:20,200 like if you can, I, I think Bennett and I have like hardly 254 00:13:20,200 --> 00:13:23,520 ever talked about the ripple case at all. 255 00:13:24,560 --> 00:13:25,840 I. Think actually pointless. 256 00:13:26,520 --> 00:13:29,320 Well, not only because it's pointless, I actually think we 257 00:13:29,320 --> 00:13:33,920 largely felt like it once it had become, once you guys went after 258 00:13:33,920 --> 00:13:36,160 them, we were like, OK, well, this is a slam dunk. 259 00:13:36,320 --> 00:13:38,320 Like, I think we genuinely thought that that it was like, 260 00:13:38,320 --> 00:13:40,600 OK, well this is over. We don't really even need to 261 00:13:40,600 --> 00:13:43,240 talk about Ripple anymore. This is done and then years 262 00:13:43,240 --> 00:13:47,480 later it just feels like we really lost the plot on that 263 00:13:47,480 --> 00:13:49,800 one. So if you can help, help our 264 00:13:49,800 --> 00:13:51,680 audience and us understand it a little better. 265 00:13:52,080 --> 00:13:55,120 I will start with the most controversial thing I'm going to 266 00:13:55,120 --> 00:13:57,680 say about this, which is like despite the press and despite 267 00:13:57,680 --> 00:14:01,040 what Crypto said about it, Ripple was a win for the SEC. 268 00:14:01,040 --> 00:14:06,360 It established that at at the very least those first contracts 269 00:14:06,360 --> 00:14:08,800 that went out were in fact securities. 270 00:14:08,840 --> 00:14:12,880 The second part of that decision of the Torres decision was a 271 00:14:12,880 --> 00:14:16,680 pretty wild interpretation of the securities laws that took 272 00:14:16,680 --> 00:14:20,920 this crazy argument about investment contract and gave it 273 00:14:21,360 --> 00:14:23,000 a life that it it shouldn't have had. 274 00:14:23,040 --> 00:14:27,760 The investment contract concept can't be split up into the idea 275 00:14:27,760 --> 00:14:29,480 of an investment in the idea of a contract. 276 00:14:29,480 --> 00:14:32,080 It's like the point isn't literally about a contract. 277 00:14:32,080 --> 00:14:35,000 It's like saying a skyscraper isn't a building because it it's 278 00:14:35,000 --> 00:14:36,560 not in the sky and it doesn't scrape anything. 279 00:14:36,560 --> 00:14:40,480 The fundamental thing you're representing there is a broader 280 00:14:40,480 --> 00:14:43,840 concept, and what crypto was arguing is that you needed 281 00:14:43,840 --> 00:14:47,000 privity because it's a contract. You needed a direct relationship 282 00:14:47,000 --> 00:14:51,280 between the issuer and the buyer in order for it to be an actual 283 00:14:51,280 --> 00:14:53,520 contract. It would be like saying in an 284 00:14:53,520 --> 00:14:58,480 IPO, the first buyer of a share, it's a security, but once it 285 00:14:58,480 --> 00:15:01,120 trades on the secondary market, the securities laws don't apply 286 00:15:01,120 --> 00:15:03,040 anymore. So it's a wild interpretation of 287 00:15:03,040 --> 00:15:05,800 the law. And shortly after it was issued, 288 00:15:06,120 --> 00:15:11,480 Jed Rakoff, who is seen as like the Dean of securities law on 289 00:15:11,480 --> 00:15:14,760 SDN, the the Southern District of New York, where that case was 290 00:15:14,760 --> 00:15:18,240 decided, and the, the the district that Torres is in, 291 00:15:18,960 --> 00:15:22,640 ruled in Terraform on a lot of similar issues that it was they 292 00:15:22,640 --> 00:15:27,920 were obviously securities and it was the way that was phrased. 293 00:15:27,920 --> 00:15:30,720 And, and some of the things that he said after that made it very 294 00:15:30,720 --> 00:15:34,720 clear that he thought the Torres interpretation was really wild. 295 00:15:34,800 --> 00:15:38,040 And so one of those issues is that like we have a very 296 00:15:38,040 --> 00:15:41,400 different court system. A lot of judges have been 297 00:15:41,400 --> 00:15:44,720 appointed and like, you know, this was an Obama appointee, but 298 00:15:44,720 --> 00:15:47,240 a lot of judges have been appointed that that make that 299 00:15:47,240 --> 00:15:49,600 have upset the traditional interpretation of the securities 300 00:15:49,600 --> 00:15:50,760 laws. And that's been an enormous 301 00:15:50,760 --> 00:15:52,800 challenge as well. Sorry, and just to like 302 00:15:53,560 --> 00:15:56,440 backtrack even a little bit more, what exactly is Ripple and 303 00:15:56,440 --> 00:15:58,040 what is XRP? And like what? 304 00:15:58,040 --> 00:16:00,760 Like what what, what was their goal? 305 00:16:00,760 --> 00:16:02,000 Why were they coming to you guys? 306 00:16:02,000 --> 00:16:03,640 Like why? Why were you guys going after 307 00:16:03,640 --> 00:16:04,200 them? Yeah. 308 00:16:04,200 --> 00:16:06,720 So I mean, I'll start by saying that if I were in the position 309 00:16:06,720 --> 00:16:09,800 at the time, I'm not sure Ripple is the case, I would have 310 00:16:09,800 --> 00:16:12,640 chosen. That said, they did pretty 311 00:16:12,640 --> 00:16:17,920 straightforwardly raise capital that they, you know, ask people 312 00:16:17,920 --> 00:16:20,120 to invest money in them, creating an ecosystem that 313 00:16:20,120 --> 00:16:23,200 essentially was first and foremost going to be sort of 314 00:16:23,200 --> 00:16:29,120 like an intra bank payment system and then like eventually, 315 00:16:29,120 --> 00:16:31,520 I guess a world currency and payment system. 316 00:16:31,560 --> 00:16:34,520 So yeah, I like that was the pitch, but it's like really 317 00:16:34,520 --> 00:16:38,720 clear that if you're going to take someone's money to build a 318 00:16:38,720 --> 00:16:42,200 project, they're relying on you and your expertise and you're 319 00:16:42,200 --> 00:16:45,640 pooling a bunch of people's money to build that project. 320 00:16:46,000 --> 00:16:47,920 You're you're squarely within the securities laws. 321 00:16:48,160 --> 00:16:49,600 Now. We ended up running headlong 322 00:16:49,800 --> 00:16:54,000 into, for example, the Hinman statement and there was a huge 323 00:16:54,000 --> 00:16:57,240 fight over not just the statement itself, but getting 324 00:16:57,240 --> 00:16:59,440 sort of all of the staff comments. 325 00:16:59,760 --> 00:17:02,800 And the way staff comments work on those issues is like you 326 00:17:02,800 --> 00:17:05,280 pressure test that stuff. There's a lot of things in those 327 00:17:05,280 --> 00:17:09,000 documents that the SCC didn't necessarily believe, but staff 328 00:17:09,000 --> 00:17:11,520 raised as you should think about this, you should think about 329 00:17:11,520 --> 00:17:14,920 this. And that was a costly set of 330 00:17:14,920 --> 00:17:18,960 facts in that case. And if I remember right, the 331 00:17:18,960 --> 00:17:22,800 Hinman statement was supposed to be a statement in his personal 332 00:17:22,800 --> 00:17:27,119 capacity at some event to like. It wasn't a vetted FCC speech if 333 00:17:27,119 --> 00:17:31,480 I remember right, but it got covered and then he's still in 334 00:17:31,480 --> 00:17:33,840 his role and so they attributed the statement to him. 335 00:17:33,920 --> 00:17:35,320 Yeah. Sort of. 336 00:17:35,320 --> 00:17:38,080 One of the fundamental truths about financial regulation 337 00:17:38,080 --> 00:17:39,920 generally is it's a one way ratchet. 338 00:17:40,120 --> 00:17:43,640 It's really easy to deregulate and it's really hard to regain 339 00:17:43,640 --> 00:17:45,800 ground. You can deregulate by just not 340 00:17:45,800 --> 00:17:48,000 doing something. You can deregulate by having 341 00:17:48,000 --> 00:17:50,000 someone who's in a position of power, even if they're just 342 00:17:50,000 --> 00:17:54,280 staff at the SEC, sending a message to markets that this 343 00:17:54,280 --> 00:17:56,240 stuff is legitimate. Look, I don't I don't agree with 344 00:17:56,240 --> 00:17:57,560 it. And I don't think someone, you 345 00:17:57,560 --> 00:18:01,080 know, one staffer who is not appointed or confirmed by the 346 00:18:01,080 --> 00:18:04,560 Senate should be able to make proclamations that have effect 347 00:18:04,560 --> 00:18:06,520 in the marketplace. But it is a somewhat convincing 348 00:18:06,520 --> 00:18:09,720 argument to a judge to say, hey, this guy who is in charge of 349 00:18:09,720 --> 00:18:12,200 this division at the SEC said it was fine. 350 00:18:12,560 --> 00:18:14,640 Like what give? I'm curious. 351 00:18:14,640 --> 00:18:16,880 I like we, we briefly touched on it before. 352 00:18:17,480 --> 00:18:20,880 I feel like you're you, like you said, you guys are dealing with 353 00:18:20,880 --> 00:18:27,240 90, almost 100 years of history here where you're expected to be 354 00:18:28,320 --> 00:18:32,960 consistent in the structure of how you regulate these markets. 355 00:18:33,480 --> 00:18:39,560 I'm curious how political the SEC is now, maybe even before. 356 00:18:39,760 --> 00:18:44,360 I think it's clear that now there is no like it is the same 357 00:18:44,360 --> 00:18:48,160 as politics and clearly they've decided to do whatever they want 358 00:18:48,160 --> 00:18:50,920 with it. I would also be curious what 359 00:18:50,920 --> 00:18:54,320 your relationship was like in terms of the regulation of 360 00:18:54,320 --> 00:18:57,760 crypto for you personally with I don't even know how to say her 361 00:18:57,760 --> 00:18:59,160 name, but Hester Pierce, I'd like. 362 00:18:59,160 --> 00:19:00,560 I don't know how to say her, her last name. 363 00:19:00,720 --> 00:19:01,280 Purse. Yeah. 364 00:19:01,360 --> 00:19:02,120 Hester Pierce. Yeah. 365 00:19:02,440 --> 00:19:06,960 It's a really good question. I think everybody in the 366 00:19:06,960 --> 00:19:12,520 independent agencies does genuinely try to operate without 367 00:19:13,040 --> 00:19:17,560 political influence, generally tries to recognize that we all 368 00:19:17,560 --> 00:19:21,120 have a bias and try to be consistent and fair in our 369 00:19:21,120 --> 00:19:23,480 decision making. I would also say that there is 370 00:19:23,480 --> 00:19:25,440 nothing in our democracy that is not political. 371 00:19:25,680 --> 00:19:29,280 Like it's just fundamentally true of economics and political 372 00:19:29,280 --> 00:19:32,680 economy is that everything is in fact political. 373 00:19:32,680 --> 00:19:35,400 The person who's charged in charge of the SEC is is chosen 374 00:19:35,400 --> 00:19:38,160 by the president. That is a political position. 375 00:19:38,200 --> 00:19:42,840 So certainly there are politics involved in terms of the 376 00:19:42,840 --> 00:19:47,400 efficacy of political pressure. I don't think, at least in our 377 00:19:47,400 --> 00:19:53,120 administration, we were ever driven by political consequences 378 00:19:53,200 --> 00:19:55,640 or political pressure. Like the closest you could 379 00:19:55,640 --> 00:19:58,880 characterize us as getting that is sort of like trying to 380 00:19:58,880 --> 00:20:02,320 demonstrate reasonableness in response to the fact that 381 00:20:03,000 --> 00:20:06,720 although judges are, you know, supposed to be fair interpreters 382 00:20:06,720 --> 00:20:10,600 of the law, there is inherently a political angle to that. 383 00:20:10,640 --> 00:20:13,920 And just everybody's human. And so we did, I think, sort of 384 00:20:13,920 --> 00:20:17,760 try to speak to some of those things and demonstrate 385 00:20:17,760 --> 00:20:21,120 reasonableness because you kind of have to contend. 386 00:20:21,560 --> 00:20:24,720 With that political issue, certainly the amount of 387 00:20:24,720 --> 00:20:29,040 criticism we got from Congress and a lot of the beatings we got 388 00:20:29,880 --> 00:20:34,040 were because crypto had become a pretty powerful political entity 389 00:20:34,040 --> 00:20:38,080 at that point. So I think the courts really had 390 00:20:38,080 --> 00:20:40,880 a lot more impact on what we were trying to do and what we 391 00:20:40,880 --> 00:20:43,920 did and sort of trying to navigate around that extremely 392 00:20:43,920 --> 00:20:47,240 challenging judiciary environment we were in than any 393 00:20:47,240 --> 00:20:51,360 kind of political influence. One of the most like interesting 394 00:20:51,360 --> 00:20:58,320 political things I observed before was the politicians who 395 00:20:58,320 --> 00:21:03,040 wrote an angry letter because members of the SEC were meeting 396 00:21:03,040 --> 00:21:07,960 with members of FTX and FTXUS. And then a few weeks later, 397 00:21:08,120 --> 00:21:12,400 after FTX declared bankruptcy, they wrote another letter to the 398 00:21:12,400 --> 00:21:17,560 SEC asking why the SEC hadn't taken more aggressive steps on 399 00:21:17,560 --> 00:21:20,440 FTX. Speaking of FTX, that kind of 400 00:21:20,440 --> 00:21:24,640 political things, do you have any thoughts on, oh, how all of 401 00:21:24,640 --> 00:21:27,040 that went down leading up to the collapse? 402 00:21:27,040 --> 00:21:29,440 After the collapse, the interaction between like the 403 00:21:29,440 --> 00:21:31,200 politics and the regulation there. 404 00:21:31,240 --> 00:21:32,520 Yeah. The first thing I want to say 405 00:21:32,520 --> 00:21:34,600 about that is, again, just like one of those fundamental truths 406 00:21:34,600 --> 00:21:37,480 about financial regulation, which is you don't get credit 407 00:21:37,480 --> 00:21:40,200 for the things you prevent and you always get blamed for the 408 00:21:40,200 --> 00:21:42,760 things that you didn't. And I think that's like really 409 00:21:42,760 --> 00:21:45,840 well reflected in this, like the political position of it first 410 00:21:45,840 --> 00:21:48,120 being like, how dare you regulate this? 411 00:21:48,320 --> 00:21:50,840 And then being like, well, how on earth did you miss this? 412 00:21:51,720 --> 00:21:54,720 And that's just sort of like part of being in that space. 413 00:21:54,960 --> 00:21:59,360 Another thing that I think I would like, I would want to give 414 00:21:59,360 --> 00:22:03,920 us lots of credit for because the FDX thing wasn't like a 415 00:22:03,920 --> 00:22:05,960 total surprise. I'm not going to say we like 416 00:22:05,960 --> 00:22:09,280 sort of knew the insurance and outs of what was going on inside 417 00:22:09,280 --> 00:22:10,480 that business. And there are a lot of reasons 418 00:22:10,480 --> 00:22:13,160 for that. Like the hook to US. 419 00:22:13,160 --> 00:22:17,320 Oversight at FTX came fairly late in their development. 420 00:22:17,520 --> 00:22:22,400 As far as FTXUS was concerned, they initially only offered a 421 00:22:22,400 --> 00:22:25,360 handful of things that were really hard to argue were 422 00:22:25,360 --> 00:22:29,280 securities, Bitcoin, Bitcoin cash, Litecoin, a stable coin or 423 00:22:29,280 --> 00:22:31,280 two. I always. 424 00:22:31,560 --> 00:22:34,400 Forget about like when until someone mentions it. 425 00:22:36,120 --> 00:22:41,240 Fair. And it was only in 2022 that 426 00:22:41,240 --> 00:22:44,120 they introduced the Nofi stock trading and that's when like we 427 00:22:44,120 --> 00:22:46,960 really had a hook into that. But that's like pretty late in 428 00:22:46,960 --> 00:22:50,320 the game for where they ended up. 429 00:22:50,320 --> 00:22:54,240 I also tell me if I'm wrong, but like, it seems like regulators 430 00:22:54,240 --> 00:22:56,800 essentially did a pretty good job because what ended up 431 00:22:56,800 --> 00:23:01,200 happening is FTX International did all the fraud and as far as 432 00:23:01,200 --> 00:23:05,200 from what I've heard, like there was very little crime happening 433 00:23:05,200 --> 00:23:08,640 at FTXUS. And that's some I I said very 434 00:23:08,640 --> 00:23:10,080 little. I said very little. 435 00:23:10,120 --> 00:23:12,080 I didn't. Say none, at least most of the 436 00:23:12,080 --> 00:23:15,000 money most of the time, which is vastly different than FTX 437 00:23:15,000 --> 00:23:16,640 International. Exactly, exactly. 438 00:23:16,640 --> 00:23:19,720 I think that's, I think I'm so my point being that you got you 439 00:23:19,720 --> 00:23:23,280 guys along with other regulators kind of are told like, oh, look 440 00:23:23,280 --> 00:23:25,960 at what FTX happened and that was an American company. 441 00:23:25,960 --> 00:23:27,880 And it's like, well. Yeah, where were the both of me 442 00:23:27,880 --> 00:23:29,680 and securities regulators? Yeah, exactly. 443 00:23:29,760 --> 00:23:31,480 Really. Exactly, exactly. 444 00:23:31,920 --> 00:23:34,480 I like, I don't know how you guys can stop fraud all over the 445 00:23:34,480 --> 00:23:35,320 world. I I like it. 446 00:23:35,320 --> 00:23:38,400 That seems like a a tough ask, you know. 447 00:23:38,440 --> 00:23:40,120 Yeah. And I got put that on my list of 448 00:23:40,120 --> 00:23:43,920 constraints is there's a ruling called Morrison which really 449 00:23:43,920 --> 00:23:49,760 narrowed down SC CS authority to deal with foreign securities 450 00:23:50,040 --> 00:23:54,080 that make it into the US market. And so the foreignness of FTC 451 00:23:54,080 --> 00:23:57,840 was also a challenge. I'm sorry, I would say that you 452 00:23:57,840 --> 00:24:00,720 probably don't want to separate the parent company from a 453 00:24:00,720 --> 00:24:03,400 subsidiary in terms of crimes and fraud. 454 00:24:03,400 --> 00:24:06,360 But more than anything, it was that inability to look into the 455 00:24:06,360 --> 00:24:09,840 US entity until fairly late in the game that I think was the 456 00:24:09,840 --> 00:24:13,920 more driving factor of just not knowing what was going on in 457 00:24:13,920 --> 00:24:15,680 there until, you know, it's too late. 458 00:24:15,680 --> 00:24:18,120 And one other thing I want to say about that is, again, 459 00:24:18,120 --> 00:24:20,960 there's a conception that like the fragility of the crypto 460 00:24:20,960 --> 00:24:22,400 market sort of caught us off guard. 461 00:24:22,400 --> 00:24:24,480 And, you know, we weren't doing anything beforehand. 462 00:24:25,200 --> 00:24:28,520 And one thing I'll say is that it takes a long time to develop 463 00:24:28,520 --> 00:24:30,080 cases. As soon as we walked in the 464 00:24:30,080 --> 00:24:32,160 door, we decided we're going to take a different strategy than 465 00:24:32,160 --> 00:24:33,440 Clayton. Instead of playing whack a mole 466 00:24:33,440 --> 00:24:35,200 with all these securities, we're going to hit them in the notes. 467 00:24:35,200 --> 00:24:38,320 We're going to hit them at the intermediaries, at the exchanges 468 00:24:38,560 --> 00:24:42,400 where the stuff was collecting because you have a bigger impact 469 00:24:42,400 --> 00:24:43,840 on that. The other thing I want to say is 470 00:24:43,840 --> 00:24:47,360 that there was an accounting interpretation we did called SAB 471 00:24:47,360 --> 00:24:49,280 121. It's extremely unpopular. 472 00:24:49,640 --> 00:24:54,160 But in April of 2022, working with our accountants, we'd 473 00:24:54,160 --> 00:24:57,000 identified that the custody arrangements and the 474 00:24:57,000 --> 00:24:59,440 safeguarding around crypto, we're actually really 475 00:24:59,440 --> 00:25:02,800 unpredictable in terms of established bankruptcy law, 476 00:25:03,440 --> 00:25:06,640 state treatment under the Uniform Commercial Code. 477 00:25:07,000 --> 00:25:09,560 We identified that was an issue. We thought it was bad for 478 00:25:09,560 --> 00:25:14,640 investors, that investors in crypto companies that they would 479 00:25:14,640 --> 00:25:19,000 not be aware of the potential liability of that company to its 480 00:25:19,000 --> 00:25:21,000 customers. And so we said, look, you've got 481 00:25:21,000 --> 00:25:23,560 to disclose this liability you may have in the case of 482 00:25:23,560 --> 00:25:26,440 bankruptcy or in the case of, you know, being resolved by the 483 00:25:26,440 --> 00:25:29,000 FDIC, something of that nature. It's an example of good 484 00:25:29,000 --> 00:25:31,880 financial regulation, big gets good financial regulation. 485 00:25:31,880 --> 00:25:34,400 So what ended up happening is banks, which are also public 486 00:25:34,400 --> 00:25:39,440 companies, also had to follow that GAP interpretation and the 487 00:25:39,440 --> 00:25:42,200 banking regulators didn't. I mean, they have their own 488 00:25:42,200 --> 00:25:44,800 accounting that is called regulatory accounting instead of 489 00:25:44,800 --> 00:25:47,360 GAP. And they decided not to change 490 00:25:47,520 --> 00:25:51,080 that accounting. And ultimately, banks would have 491 00:25:51,080 --> 00:25:54,720 had to raise more capital in order to justify having those 492 00:25:55,400 --> 00:25:58,920 assets on their balance sheet. And so we sort of fundamentally 493 00:25:58,920 --> 00:26:02,760 kept the traditional markets separate from the crypto markets 494 00:26:03,240 --> 00:26:06,160 before that crash happened. And that was a really big deal 495 00:26:06,160 --> 00:26:08,760 in terms of contagion into our markets. 496 00:26:08,960 --> 00:26:11,800 And I think you if you look at the 2023 regional banking crisis 497 00:26:12,040 --> 00:26:15,160 and three of those banks were heavily involved in crypto. 498 00:26:15,480 --> 00:26:19,920 We bailed out like $3.3 billion of USUSDC reserves. 499 00:26:20,560 --> 00:26:23,480 Signet at Signature was a huge player in the crypto space. 500 00:26:23,480 --> 00:26:24,680 You've walked right into my trap. 501 00:26:24,680 --> 00:26:27,400 I wanted to ask you about about stable coins. 502 00:26:27,400 --> 00:26:29,280 So you're bringing up stable coins. 503 00:26:29,280 --> 00:26:36,480 And I think for Bennett and I, it has probably been the number 504 00:26:36,480 --> 00:26:41,600 one most important systemic risk for cryptocurrency and for the 505 00:26:41,600 --> 00:26:43,320 globe. In which I knew less about 506 00:26:43,320 --> 00:26:45,320 stablecoins. Yeah, me too, me too. 507 00:26:46,160 --> 00:26:48,040 So I I guess I wish we knew less about. 508 00:26:48,040 --> 00:26:51,880 Crypto. Sorry to have you on Courtney, 509 00:26:55,040 --> 00:27:00,040 but I, I think our, our, our Forte at this point is, is 510 00:27:00,440 --> 00:27:04,520 stable coins. And I am curious why I, maybe 511 00:27:04,520 --> 00:27:08,120 I'm wrong again, but I, I think the only stable coin you guys 512 00:27:08,120 --> 00:27:10,600 have really gone after was Luna Terra. 513 00:27:10,880 --> 00:27:15,160 Is that, is that right? Is the, the, the kind of the, 514 00:27:15,280 --> 00:27:20,080 the feeling that the stable coin market just is not something you 515 00:27:20,080 --> 00:27:21,560 guys are supposed to be regulating? 516 00:27:21,560 --> 00:27:25,440 Is this like a, is this a market for different regulators? 517 00:27:25,440 --> 00:27:29,360 Is it like, yeah, I guess I, I'm just curious why that's the only 518 00:27:29,360 --> 00:27:30,880 stable coin you guys have gone after. 519 00:27:30,920 --> 00:27:32,400 Yeah. In terms of your the question 520 00:27:32,400 --> 00:27:35,520 you just asked, in terms of whose whose job it is, the 521 00:27:35,520 --> 00:27:37,160 unsatisfying answer is it depends. 522 00:27:37,160 --> 00:27:39,960 You know, as we talked about earlier, one of the prongs of 523 00:27:39,960 --> 00:27:42,160 the Howie test is an expectation of profit. 524 00:27:42,800 --> 00:27:45,520 So if you're getting a stable coin, it's hard to argue that 525 00:27:45,520 --> 00:27:48,600 you're expecting that to rise in value when the selling, when the 526 00:27:48,600 --> 00:27:50,960 pitch is this is gonna stay at this price. 527 00:27:52,080 --> 00:27:54,840 Now, that doesn't mean there can't be arrangements that do 528 00:27:54,840 --> 00:27:57,520 make a stable coin a security. And what happened in in the 529 00:27:57,520 --> 00:28:01,120 Terraform case with Terra Luna is that they had created a 530 00:28:01,120 --> 00:28:04,800 secondary market and the anchor protocol where they were saying, 531 00:28:05,160 --> 00:28:08,240 OK, like you, you get this. And then if you deposit with us, 532 00:28:08,240 --> 00:28:11,000 you're going to make a profit of the interest rate you get in 533 00:28:11,000 --> 00:28:15,840 this in this account. So there you have a promoter 534 00:28:15,840 --> 00:28:19,280 saying essentially you're going to make a profit off of this in 535 00:28:19,280 --> 00:28:24,040 a way where at the very least, I'm not gonna say none of the 536 00:28:24,040 --> 00:28:27,960 other ones are securities. But it's it takes a lot more 537 00:28:27,960 --> 00:28:31,400 work and it takes a lot more fact finding to try and 538 00:28:31,400 --> 00:28:35,040 demonstrate that there is a profit motive or a promise of 539 00:28:35,040 --> 00:28:37,480 profits as part of that arrangement. 540 00:28:37,480 --> 00:28:40,240 Not impossible, but pretty. Hard, I mean, like I, I just 541 00:28:40,240 --> 00:28:42,320 like off the top of my head, I'm like, Oh yeah, I remember that 542 00:28:42,320 --> 00:28:46,000 time that Tether had all their problems and started their unis 543 00:28:46,000 --> 00:28:49,560 said Leo token where they basically promised like we're 544 00:28:49,560 --> 00:28:52,400 going to give you a return on your money and more cash and 545 00:28:52,400 --> 00:28:54,800 interest at the end of it. And it's like that's Tether 546 00:28:54,800 --> 00:28:56,640 related. That's bit Fenix related. 547 00:28:57,200 --> 00:29:00,600 But I guess you're saying like just the complexity of it and 548 00:29:00,800 --> 00:29:03,600 them not being based in the United States and them saying 549 00:29:03,600 --> 00:29:06,120 they don't serve US customers, Like, does that just throw a 550 00:29:06,120 --> 00:29:07,320 wrench in all of that? Yeah. 551 00:29:07,320 --> 00:29:09,040 I mean, there are lots of challenges. 552 00:29:09,600 --> 00:29:13,440 And again, this gap, this gets back to some of the other 553 00:29:13,440 --> 00:29:15,680 fundamental constraints of the SEC. 554 00:29:15,880 --> 00:29:19,480 We had to apply our resources very, very carefully. 555 00:29:19,800 --> 00:29:24,600 So the SEC has 4800 employees. We have a budget of $2 billion 556 00:29:24,720 --> 00:29:26,360 that is appropriated by Congress. 557 00:29:26,360 --> 00:29:28,880 They set our budget even though we get all that money back by 558 00:29:28,880 --> 00:29:33,440 charging our restaurants and we have 1400 enforcement attorneys. 559 00:29:34,080 --> 00:29:39,760 We oversee $125 trillion market. To sort of give it out of 560 00:29:39,760 --> 00:29:41,960 comparison. There are three banking 561 00:29:41,960 --> 00:29:46,880 regulators, the Fed, the FDIC, and the OCC. the Fed has 25,000 562 00:29:46,880 --> 00:29:49,600 employees. 1500 of those are bank examiners. 563 00:29:49,600 --> 00:29:51,880 The FDIC has about 6300 employees. 564 00:29:52,120 --> 00:29:57,520 The OCC has like 3500. They oversee a $24 trillion 565 00:29:57,520 --> 00:29:59,600 market. You are so. 566 00:29:59,720 --> 00:30:02,520 Addition to that, it's. Like we get we're super resource 567 00:30:02,520 --> 00:30:06,560 constrained and then when you think about the places where 568 00:30:06,560 --> 00:30:12,000 they need to focus their energy, JPMC alone is 1/6 of the assets 569 00:30:12,160 --> 00:30:18,920 in the banking space. The top 6 G Sibs are right 570 00:30:18,920 --> 00:30:22,400 around like 5055% of the market. So you have a play pretty 571 00:30:22,400 --> 00:30:25,560 concentrated place where you can direct your energy. 572 00:30:25,640 --> 00:30:28,640 And that'll also say that even though that's the the banking 573 00:30:28,640 --> 00:30:32,640 regulars issue, most of those banks have a very large broker 574 00:30:32,640 --> 00:30:37,160 dealer, which again comes back to the SEC to regulate the 575 00:30:37,160 --> 00:30:39,200 appropriation process. Even though we're budget 576 00:30:39,200 --> 00:30:42,560 neutral, makes it really hard to plan in advance to try and 577 00:30:42,560 --> 00:30:44,640 recruit. If you hire too many staff and 578 00:30:45,080 --> 00:30:47,560 then you get a budget cut, it's like, well, where are we going 579 00:30:47,560 --> 00:30:50,320 to find the money to run Edgar? You know, how are we going to 580 00:30:50,320 --> 00:30:51,560 keep our computer systems running? 581 00:30:51,880 --> 00:30:53,120 Like that's one of the constraints. 582 00:30:53,120 --> 00:30:55,840 And I would say with regard to the constraints and, and to 583 00:30:55,840 --> 00:31:00,120 folks who think like we didn't really put enough energy towards 584 00:31:00,120 --> 00:31:06,920 crypto, our cybersecurity and crypto unit, we, we doubled that 585 00:31:06,920 --> 00:31:12,280 to, to 50 attorneys. That is 3 1/2 percent of our 586 00:31:12,280 --> 00:31:16,040 enforcement staff. The crypto market was under us 587 00:31:16,040 --> 00:31:19,640 sort of at it's biggest before the very end of our term, maybe 588 00:31:19,640 --> 00:31:23,280 like a $2 trillion market, more than half of which is Bitcoin, 589 00:31:23,280 --> 00:31:25,920 which had already been decided as you know, not a security. 590 00:31:25,920 --> 00:31:29,360 So you're talking about 1% of the market where we're deploying 591 00:31:29,480 --> 00:31:33,760 3 1/2 percent of our enforcement folks. 592 00:31:34,200 --> 00:31:37,400 And also like those things tended to go into litigation. 593 00:31:37,640 --> 00:31:40,680 And as you go into litigation, that team is now committed to 594 00:31:40,680 --> 00:31:44,120 showing up in court, filing briefings like they're doing. 595 00:31:44,280 --> 00:31:47,680 It's harder to get them to do investigations because they have 596 00:31:47,680 --> 00:31:50,200 a lot on their plate in, in terms of going to the court. 597 00:31:50,600 --> 00:31:52,920 And the last thing I'll say about that is when you bring a 598 00:31:52,920 --> 00:31:56,320 case like that, there's no sort of like one person who knows all 599 00:31:56,320 --> 00:31:58,320 of the securities law, it's too much. 600 00:31:58,800 --> 00:32:02,760 And so they work with our rulemaking divisions to to sort 601 00:32:02,760 --> 00:32:05,280 of make sure they're really tightening up those arguments. 602 00:32:05,640 --> 00:32:08,360 So not only is there limited enforcement staff, but those 603 00:32:08,360 --> 00:32:12,200 enforcements are taking up rulemaking time in which you're 604 00:32:12,200 --> 00:32:14,400 trying to, you know, get a handle on the rest of the 605 00:32:14,400 --> 00:32:17,080 traditional markets. And it also leaves, you know, 606 00:32:17,080 --> 00:32:18,800 there are lots of places in traditional markets where 607 00:32:18,800 --> 00:32:22,080 probably we would have liked to bring more enforcement actions 608 00:32:22,360 --> 00:32:26,120 in that very large space where people hadn't signed up for, you 609 00:32:26,120 --> 00:32:29,440 know, the volatility of the crypto markets and just expect 610 00:32:29,440 --> 00:32:32,720 the regular securities laws to protect them perfectly. 611 00:32:33,640 --> 00:32:35,760 And you just have to make these really tough decisions about 612 00:32:35,760 --> 00:32:36,840 where you deploy those resources. 613 00:32:36,840 --> 00:32:39,600 A couple of times here you've referenced like the fundamental 614 00:32:39,600 --> 00:32:42,240 constraints of the SEC. Can you talk a little bit about 615 00:32:42,240 --> 00:32:44,880 what those fundamental constraints are and how that 616 00:32:44,880 --> 00:32:47,520 kind of effects what investigations get started and 617 00:32:47,520 --> 00:32:49,840 what investigations become enforcement actions? 618 00:32:49,840 --> 00:32:53,720 The first and foremost is the limited resources overseeing 619 00:32:53,720 --> 00:33:00,360 such a huge market and also the limited authority in terms of 620 00:33:00,560 --> 00:33:02,200 sort of what we can do proactively. 621 00:33:02,680 --> 00:33:04,960 Again, if you're a banking regulator, you can say, you 622 00:33:04,960 --> 00:33:08,320 know, you, you it's sort of what we called a merit regulator. 623 00:33:08,320 --> 00:33:11,080 We sort of had to take the position that we don't get to 624 00:33:11,080 --> 00:33:13,200 make a judgement about the business you're doing. 625 00:33:13,200 --> 00:33:16,480 Our judgement is purely about the disclosure and then 626 00:33:16,480 --> 00:33:21,400 obviously, you know, fraud. So like that is having to 627 00:33:21,400 --> 00:33:25,680 establish that and then being resourced and trained are two of 628 00:33:25,680 --> 00:33:27,240 the, you know, two of the biggest issues. 629 00:33:28,600 --> 00:33:32,880 In addition to that, unlike prior securities issues, crypto 630 00:33:32,880 --> 00:33:35,560 is able to just print itself limitlessly. 631 00:33:36,160 --> 00:33:42,280 So you have like having 15,000 nationally available non 632 00:33:42,280 --> 00:33:45,400 compliant securities is not something that has happened in 633 00:33:45,400 --> 00:33:48,840 the past. So getting a handle around that 634 00:33:48,840 --> 00:33:50,600 is enormous. There's also procedural 635 00:33:50,600 --> 00:33:53,160 constraints. The Commission itself can slow 636 00:33:53,160 --> 00:33:56,600 down enforcement actions by once they get to the formal order 637 00:33:56,600 --> 00:34:00,400 stage requesting a vote on every subpoena. 638 00:34:00,880 --> 00:34:02,760 And you can only get the Commission together so many 639 00:34:02,760 --> 00:34:06,520 times to vote in a month. And that can, you know, slow 640 00:34:06,520 --> 00:34:08,880 those investigations in such a way that it's like pretty 641 00:34:08,880 --> 00:34:10,480 frustrating for the enforcement staff. 642 00:34:10,719 --> 00:34:13,400 And also just you have to go to court to fight those things. 643 00:34:13,639 --> 00:34:16,480 You have to get all of your depositions and facts seeking in 644 00:34:16,480 --> 00:34:18,080 line. You have to do a less discovery. 645 00:34:18,080 --> 00:34:22,920 Like slowing that process down is a huge, huge drain on 646 00:34:22,920 --> 00:34:26,199 resources. The other thing is every one of 647 00:34:26,199 --> 00:34:29,040 our cases fundamentally starts with proving that there's a 648 00:34:29,040 --> 00:34:31,639 security involved. Even if we go after a large 649 00:34:31,639 --> 00:34:35,760 platform, we have to demonstrate every time that there's a 650 00:34:35,760 --> 00:34:38,360 security here. And so making sure we found 651 00:34:38,360 --> 00:34:43,000 cases where that was at least mostly a slam dunk issue was a 652 00:34:43,000 --> 00:34:45,040 really important and where we wanted to take on cases where 653 00:34:45,040 --> 00:34:47,880 that wasn't the facts. That could be pretty tough. 654 00:34:48,760 --> 00:34:52,360 And then again, you know, inheriting the past positions of 655 00:34:52,360 --> 00:34:55,960 the SEC, a really big problem, a really big constraint. 656 00:34:56,440 --> 00:35:00,560 And there's also an issue with the CFTC where then when they 657 00:35:00,560 --> 00:35:05,520 would establish futures markets in a particular crypto asset, 658 00:35:06,320 --> 00:35:09,440 you know, the challenge to us becomes like we still are 659 00:35:09,440 --> 00:35:11,720 ultimately the arbiter of what is and not is not a security. 660 00:35:11,720 --> 00:35:15,320 That's clearly SCCS job. But going to a judge and trying 661 00:35:15,320 --> 00:35:18,400 to explain why two federal regulators fundamentally 662 00:35:18,400 --> 00:35:21,200 disagree about the status of a particular asset, huge 663 00:35:21,200 --> 00:35:22,600 challenge. It's not a good luck. 664 00:35:23,680 --> 00:35:26,280 So yeah, those are there are more constraints, but I think 665 00:35:26,280 --> 00:35:27,640 those are kind of the the highlight. 666 00:35:27,800 --> 00:35:30,840 And when you've raised there feels very relevant right now, 667 00:35:30,840 --> 00:35:34,240 which is that it's possible for the commissioners to raise the 668 00:35:34,240 --> 00:35:37,160 additional barriers and in so doing slow down a lot of this 669 00:35:37,160 --> 00:35:39,800 action. And there was some reporting 670 00:35:39,800 --> 00:35:43,600 recently that now lower level staff are not even going to be 671 00:35:43,600 --> 00:35:47,040 able to open investigations without approval of the 672 00:35:47,040 --> 00:35:48,880 commissioners that came from Reuters. 673 00:35:49,280 --> 00:35:51,920 So it seems based on what you said, that is going to be a 674 00:35:52,920 --> 00:35:56,200 massive barrier for investigations and enforcement 675 00:35:56,200 --> 00:35:57,800 going forward. That's one of the things that I 676 00:35:57,800 --> 00:36:02,200 would describe as genuinely kind of political interference 677 00:36:03,480 --> 00:36:06,960 coupled with another, you know, really terrible developments 678 00:36:06,960 --> 00:36:08,920 that have happened at the agency with the new leadership. 679 00:36:08,920 --> 00:36:13,440 But yeah, to that end, obviously the chair would come in and 680 00:36:13,440 --> 00:36:15,080 establish some enforcement priorities. 681 00:36:15,440 --> 00:36:17,600 And if we, you know, we saw something that like looked 682 00:36:17,600 --> 00:36:20,120 especially bad, we would we would say to enforcement staff, 683 00:36:20,120 --> 00:36:22,800 hey, you like, you need to devote some resources to looking 684 00:36:22,800 --> 00:36:25,240 at this. That said, most enforcement 685 00:36:25,240 --> 00:36:29,160 attorneys have access, not they all have access to what are 686 00:36:29,160 --> 00:36:31,920 called TCRS, tips, complaints and referrals. 687 00:36:32,200 --> 00:36:35,120 That's a reform we put in post Madoff to make sure there was a 688 00:36:35,120 --> 00:36:38,000 centralized repository of that kind of incoming information. 689 00:36:38,320 --> 00:36:42,160 So it wasn't, you know, it wasn't just like 1 staffer, if 690 00:36:42,160 --> 00:36:45,040 they, they didn't do a good job chasing something down, no one 691 00:36:45,040 --> 00:36:47,160 else would have insight into that kind of complaint. 692 00:36:48,040 --> 00:36:51,560 We got 45,000 of those a year. So typically what an enforcement 693 00:36:51,560 --> 00:36:54,320 attorney would do would sort of be looking at the market, 694 00:36:54,320 --> 00:36:57,960 looking at the news, looking at those TCRS and individually 695 00:36:57,960 --> 00:37:00,360 deciding, here's what I'm going to start an informal 696 00:37:00,400 --> 00:37:02,960 investigation on. And then they had to have the, 697 00:37:03,600 --> 00:37:07,520 the ability, with the cooperation of, you know, the 698 00:37:07,520 --> 00:37:10,320 head of the Division of enforcement to, to do a formal 699 00:37:10,320 --> 00:37:13,320 order where you can actually start issuing subpoenas, taking 700 00:37:13,320 --> 00:37:17,480 depositions, really, you know, get enforceable powers to 701 00:37:17,480 --> 00:37:22,440 collect facts. And, and then only after you had 702 00:37:22,440 --> 00:37:26,280 done that would you present the facts to the Commission for the 703 00:37:26,280 --> 00:37:29,000 ability to bring that complaints into the courts. 704 00:37:29,840 --> 00:37:33,520 And this change now where essentially you, you can't 705 00:37:33,520 --> 00:37:36,400 really spend resources on an informal part of the the 706 00:37:36,400 --> 00:37:38,840 investigation. You got to ask yourself, like, 707 00:37:39,080 --> 00:37:41,400 how are they going to go out and identify the problems in the 708 00:37:41,400 --> 00:37:45,360 marketplace? And then like, what is the 709 00:37:45,360 --> 00:37:48,440 amount of time the commissioners are willing to spend to 710 00:37:48,440 --> 00:37:51,000 authorize these? I mean, if they were, if they 711 00:37:51,000 --> 00:37:54,640 wanted to do that at all, to authorize these investigations 712 00:37:54,640 --> 00:37:58,640 that, you know, 1400 individual attorneys used to sort of suss 713 00:37:58,640 --> 00:38:00,440 out for themselves. The other horrible 714 00:38:00,440 --> 00:38:04,920 politicization that is going on is, and I can't express enough 715 00:38:04,920 --> 00:38:08,080 how amazing career civil servants are. 716 00:38:08,400 --> 00:38:10,120 And it's getting a little bit of attention right now because 717 00:38:10,120 --> 00:38:12,560 we're seeing the interference, but they're typically thought of 718 00:38:12,560 --> 00:38:15,760 as sort of like lazy, bureaucratic, couldn't compete 719 00:38:15,760 --> 00:38:17,320 in the private market, so they end up here. 720 00:38:17,840 --> 00:38:23,360 The SEC staff are some of the most expert and amazing people 721 00:38:23,360 --> 00:38:26,280 I've ever worked with. Almost every one of them could 722 00:38:26,280 --> 00:38:29,160 go to Wall Street and triple or quadruple their salary. 723 00:38:29,720 --> 00:38:32,520 They often sit there. Yeah, I'll be fair. 724 00:38:32,520 --> 00:38:34,800 Enough, but a lot don't. A lot don't. 725 00:38:35,720 --> 00:38:39,760 But like, I mean, fair enough. But you know, a lot of them do 726 00:38:39,760 --> 00:38:43,640 that job purely out of like a belief in justice, a belief in 727 00:38:43,640 --> 00:38:47,120 the SE CS mandate. And the job is really 728 00:38:47,120 --> 00:38:49,400 apolitical. I wouldn't have want to come 729 00:38:49,400 --> 00:38:51,960 into that building and had a bunch of staff being like, we 730 00:38:51,960 --> 00:38:53,720 disagree with where you're going with this. 731 00:38:53,720 --> 00:38:55,520 So we're not going to execute your decisions. 732 00:38:55,920 --> 00:38:58,800 Like when you go in there, Congress has said you get to be 733 00:38:58,800 --> 00:39:00,560 in charge of this agency. You get to direct where it's 734 00:39:00,560 --> 00:39:02,560 going within the bounds of the law. 735 00:39:03,000 --> 00:39:06,320 And like the staff's job is to execute the instructions they're 736 00:39:06,320 --> 00:39:08,360 given. And I'm certain like they did 737 00:39:08,360 --> 00:39:11,200 that with Clayton before us, we changed a lot of direction we 738 00:39:11,200 --> 00:39:13,640 were going in. They faithfully changed 739 00:39:13,640 --> 00:39:16,080 direction when we asked them to. And they would have done the 740 00:39:16,080 --> 00:39:19,280 same for the new leadership. So going after people for taking 741 00:39:19,280 --> 00:39:23,080 on unpopular things with leadership is gonna have an 742 00:39:23,080 --> 00:39:26,960 enormous, enormous impact going forward on the efficacy of these 743 00:39:26,960 --> 00:39:28,680 agencies. We've kind of gone over a lot of 744 00:39:29,240 --> 00:39:33,600 your like the mandate of the SEC and how you are constrained by 745 00:39:33,600 --> 00:39:36,560 that. But I do want to talk about 746 00:39:36,560 --> 00:39:41,200 something else, which is how close do you guys work with the 747 00:39:41,200 --> 00:39:46,400 Department of Justice and other, other agencies in the FBI, you 748 00:39:46,400 --> 00:39:50,240 know, whoever might be involved, like ATF, I don't know who, I 749 00:39:50,240 --> 00:39:53,280 don't know which branches of the government you guys are working 750 00:39:53,280 --> 00:39:56,080 with on a daily basis. But I, I think it's important 751 00:39:56,080 --> 00:40:01,280 for people to understand that, I know we've kind of stated this 752 00:40:01,280 --> 00:40:05,040 already, but you guys can't do criminal charges against these 753 00:40:05,040 --> 00:40:07,360 people. You are a civil agency. 754 00:40:07,520 --> 00:40:09,560 These are civil charges that you are bringing against these 755 00:40:09,560 --> 00:40:12,320 folks. So, for instance, when Bernie 756 00:40:12,320 --> 00:40:16,520 Madoff finally got taken down. You guys didn't throw him in 757 00:40:16,520 --> 00:40:19,160 jail. The DOJ convicted him of 11 758 00:40:19,160 --> 00:40:21,800 felonies. Like, you know, it has nothing 759 00:40:21,800 --> 00:40:24,320 to do with you guys, but like, it does have a lot to do with 760 00:40:24,320 --> 00:40:26,520 you guys still, right? Because you guys are talking to 761 00:40:26,520 --> 00:40:28,400 them. You are passing this information 762 00:40:28,400 --> 00:40:30,640 along. I'm curious if there's times 763 00:40:30,640 --> 00:40:35,240 where you've handed them, you know, a booklet about a 764 00:40:35,240 --> 00:40:38,200 cryptocurrency or something like, well, here's some obvious 765 00:40:38,200 --> 00:40:41,080 criminality happening and then just nothing happens. 766 00:40:41,080 --> 00:40:43,640 Or the opposite, like times where you've handed them 767 00:40:43,640 --> 00:40:46,680 something and then immediately they do something about it. 768 00:40:46,680 --> 00:40:47,680 So you're. Absolutely right. 769 00:40:48,520 --> 00:40:53,800 The SEC is a purely civil enforcer, but they do a lot of 770 00:40:53,800 --> 00:40:55,280 work with DOJ. And when you're going through 771 00:40:55,280 --> 00:40:57,560 these investigations, you're uncovering facts that look like 772 00:40:57,560 --> 00:40:59,120 they may be criminal. Absolutely. 773 00:40:59,120 --> 00:41:01,600 You refer that to the DOJ, you ask them to investigate. 774 00:41:01,600 --> 00:41:04,920 I couldn't tell you what the percentage of DOJ moving forward 775 00:41:04,920 --> 00:41:10,000 or not moving forward is. I would say that with those 776 00:41:10,000 --> 00:41:13,840 attorneys and like state AGS in general, the rest what we call 777 00:41:13,840 --> 00:41:16,240 the resting foot, right? The, the sort of natural 778 00:41:16,240 --> 00:41:19,800 response is I would like to take on big cases. 779 00:41:19,800 --> 00:41:21,480 I would like to raise my profile. 780 00:41:21,960 --> 00:41:25,400 So my general sense would be that when we worked with the 781 00:41:25,400 --> 00:41:29,720 Krims is that good cases generally moved forward. 782 00:41:29,800 --> 00:41:34,320 I don't have like a particular insight or number into anything 783 00:41:34,320 --> 00:41:35,640 that didn't happen or did happen. 784 00:41:35,640 --> 00:41:38,560 And even if I did, I couldn't talk about cases that, you know, 785 00:41:38,560 --> 00:41:40,320 never came to the the public space. 786 00:41:40,360 --> 00:41:43,600 But like, I think generally speaking, that was a really good 787 00:41:43,600 --> 00:41:44,120 relationship. A. 788 00:41:44,120 --> 00:41:47,240 Little bit unrelated, but you talked a bit about the CFTC 789 00:41:47,240 --> 00:41:51,280 regulating futures markets and how that sometimes put the SEC 790 00:41:51,280 --> 00:41:55,120 in a challenging position. One of the cases I saw over this 791 00:41:55,120 --> 00:41:57,800 last administration where that seemed to come up was on the 792 00:41:57,800 --> 00:42:02,480 approval of the ETF's and exchange traded products where 793 00:42:02,480 --> 00:42:06,200 eventually the issuers were able to point towards these regulated 794 00:42:06,200 --> 00:42:10,000 markets of size, these futures markets and use that to 795 00:42:10,800 --> 00:42:16,120 convinced the SEC was no longer worth fighting the approval of 796 00:42:16,120 --> 00:42:19,960 those ETFs. Is there any additional insight 797 00:42:19,960 --> 00:42:24,120 or color on that years long ETF dispute that you can provide us 798 00:42:24,120 --> 00:42:26,040 with? The first thing I would say is 799 00:42:26,040 --> 00:42:33,320 that under Clayton to in order that's so that's called A19B19B4 800 00:42:33,320 --> 00:42:35,200 rule change, which is essentially an exchange comes in 801 00:42:35,200 --> 00:42:40,000 and says we would like to list this product and there's an 802 00:42:40,000 --> 00:42:43,360 evaluation under the securities laws wherein the exchange is 803 00:42:43,360 --> 00:42:47,960 responsible for monitoring and preventing fraud in their 804 00:42:48,000 --> 00:42:51,880 marketplace. And So what the staff had to do 805 00:42:51,880 --> 00:42:57,840 there was to figure out a way that these futures products, I'm 806 00:42:57,840 --> 00:43:01,080 sorry, these the 33 act products, the commodity cool 807 00:43:01,080 --> 00:43:05,520 products could be compatible with the securities laws. 808 00:43:06,200 --> 00:43:08,480 And what ended up happening was called the Winklevoss test. 809 00:43:08,840 --> 00:43:12,640 And that was you needed to have a surveillance sharing agreement 810 00:43:12,800 --> 00:43:14,440 with a market of significant size. 811 00:43:14,640 --> 00:43:18,640 And what essentially that means is, is there needs to be an 812 00:43:18,640 --> 00:43:23,120 agreement with you and a in a large marketplace in the future 813 00:43:23,120 --> 00:43:27,880 space where if the underlying market was being manipulated, 814 00:43:28,000 --> 00:43:30,680 you would see that in the future space. 815 00:43:31,320 --> 00:43:34,440 And that would give you sort of the information you needed to 816 00:43:34,440 --> 00:43:36,800 track whether or not there was fraud happening. 817 00:43:36,800 --> 00:43:39,400 And therefore you could demonstrate your ability to 818 00:43:39,400 --> 00:43:42,680 monitor and prevent that kind of manipulation. 819 00:43:42,680 --> 00:43:45,560 And so sorry just to interject quick, did the Winklevoss test 820 00:43:45,560 --> 00:43:49,360 come after the settlement with Gemini where 2 related party 821 00:43:49,360 --> 00:43:51,360 billionaires were like manipulating one of their 822 00:43:51,360 --> 00:43:53,560 markets by wash trading or something? 823 00:43:53,560 --> 00:43:58,440 I believe it came after the disapproval of an application to 824 00:43:58,440 --> 00:44:02,080 list any TP that initially came from Gemini. 825 00:44:03,240 --> 00:44:06,840 Again, that's that fights kind of started before we got there 826 00:44:06,880 --> 00:44:10,680 and you know, we got handed it. I will say this, we litigated 827 00:44:11,040 --> 00:44:13,200 that case. We like, you know, we like when 828 00:44:13,200 --> 00:44:15,160 they sued us, we could have just thrown up our hands and been 829 00:44:15,160 --> 00:44:18,120 like, this is too hard to do, we'll just approve it and move 830 00:44:18,120 --> 00:44:21,280 on. We litigated that case and the 831 00:44:21,280 --> 00:44:24,680 courts came down with a decision that was fundamentally about 832 00:44:24,680 --> 00:44:27,160 economic analysis that they just got wrong. 833 00:44:29,040 --> 00:44:32,800 And sort of the facts against us were really challenging because 834 00:44:34,560 --> 00:44:37,680 at the SEC you distinguish between an ETF and an ETP, an 835 00:44:37,680 --> 00:44:40,000 exchange traded fund, an exchange traded product. 836 00:44:40,000 --> 00:44:45,600 The ETF process is essentially automatic because of a rule 837 00:44:45,600 --> 00:44:49,120 called 6C11 that got installed, you know, again, years before we 838 00:44:49,120 --> 00:44:52,520 were there. And essentially if you put 839 00:44:52,520 --> 00:44:55,760 together A40 act product, which is an investment Company Act, it 840 00:44:55,760 --> 00:44:58,880 is, you know, mostly the underlying product is 841 00:44:58,880 --> 00:45:01,040 securities. So you'd have these to get a 842 00:45:01,040 --> 00:45:02,920 futures product together, you have to have a bunch of 843 00:45:02,920 --> 00:45:05,400 treasuries and done their securities in that product. 844 00:45:06,040 --> 00:45:11,520 And so they, they came in under the 6011 the ETF rule and those, 845 00:45:11,840 --> 00:45:15,200 there's not a way to kind of stop that with, without a 846 00:45:15,360 --> 00:45:18,320 meeting an extremely high bar. So you have these futures 847 00:45:18,320 --> 00:45:21,400 products coming into the market and then when you try to prevent 848 00:45:21,400 --> 00:45:25,520 the ETP products, it's like, well, you have these like fairly 849 00:45:25,520 --> 00:45:27,880 similar things that are already that are already 40 act 850 00:45:27,880 --> 00:45:29,920 products. Like demonstrate why you can't 851 00:45:29,920 --> 00:45:32,920 have a 33 act product. Now, there are reasons they're 852 00:45:32,920 --> 00:45:34,680 distinct from each other. There are different economics. 853 00:45:34,680 --> 00:45:38,280 There are lots of good fights, but judges are not typically 854 00:45:38,280 --> 00:45:42,080 experts in economics. And once you get a bad decision, 855 00:45:42,320 --> 00:45:45,160 the question is like, how many more resources do I want to dump 856 00:45:45,560 --> 00:45:49,480 into fighting this and appealing this versus taking the L and 857 00:45:49,480 --> 00:45:52,760 moving on and trying to go after things you might win? 858 00:45:52,760 --> 00:45:54,560 Yeah. And I especially I think that 859 00:45:54,560 --> 00:45:58,120 comes in here when you like look at it from a consumer investor 860 00:45:58,120 --> 00:46:00,720 protection standpoint and like the investors in the FORTIAC 861 00:46:00,720 --> 00:46:03,600 product are already paying like the contango because their 862 00:46:03,600 --> 00:46:05,800 futures based. And so like you can construct an 863 00:46:05,800 --> 00:46:09,000 argument that the spot based ones would end up being better 864 00:46:09,000 --> 00:46:10,880 for the investors. Absolutely did. 865 00:46:10,880 --> 00:46:14,680 Yeah, this also, I for me, this brings up a broader kind of 866 00:46:14,680 --> 00:46:18,440 vaguer aspect of, of something that I, I would be interested in 867 00:46:18,440 --> 00:46:21,040 discussing a bit. I don't know if we don't know if 868 00:46:21,040 --> 00:46:25,400 I don't know how to phrase this properly, but I, I guess my, my 869 00:46:25,400 --> 00:46:28,640 question for you is there we, we talked about this with Tuffy a 870 00:46:28,640 --> 00:46:31,520 bit. The cases often times that you 871 00:46:31,520 --> 00:46:37,280 guys were able to settle and I guess essentially win seem to be 872 00:46:37,280 --> 00:46:44,520 these kind of smaller scale frauds or abuses, for instance, 873 00:46:44,680 --> 00:46:52,120 Soldier Boy or the Stoner cats one right where where these 874 00:46:52,120 --> 00:46:57,760 weren't like multibillion dollar frauds, These were like Soldier 875 00:46:57,760 --> 00:46:58,760 Boy. I don't even know how many 876 00:46:58,760 --> 00:47:01,280 securities violations Soldier Boy has probably done in his 877 00:47:01,280 --> 00:47:04,160 lifetime. It's it's got to be upwards of 878 00:47:04,160 --> 00:47:09,280 like 10. So, you know, one, it kind of, I 879 00:47:09,280 --> 00:47:12,240 think, and, and this is coming from, I feel like both sides of 880 00:47:12,240 --> 00:47:15,200 the cryptocurrency sphere where you've got the supporters and 881 00:47:15,200 --> 00:47:16,840 you've got the, the people who hate it. 882 00:47:17,240 --> 00:47:21,560 And both of them are kind of like, OK, we want to clean up 883 00:47:21,560 --> 00:47:24,000 the industry. And on one side it's like that 884 00:47:24,000 --> 00:47:26,360 means get rid of everything. And on the other side that means 885 00:47:26,480 --> 00:47:28,880 there's obvious bad actors who need to be dealt with, right? 886 00:47:28,880 --> 00:47:31,400 There's people like Justin Sun, who I think nobody in 887 00:47:31,400 --> 00:47:34,760 cryptocurrency trusts that man. Like they, they genuinely don't 888 00:47:34,760 --> 00:47:40,880 like him or Tether, who for years kind of lied and abused 889 00:47:40,880 --> 00:47:44,800 their way to being the number one stablecoin forever. 890 00:47:45,000 --> 00:47:48,360 And, and the question is like, is it just too resource 891 00:47:49,120 --> 00:47:52,680 intensive to go after those larger scale frauds or is it 892 00:47:52,680 --> 00:47:56,680 that the case isn't a slam dunk? Or is it that, like, what is 893 00:47:56,720 --> 00:48:00,120 keeping you guys like, OK, let's just go after Soldier Boy and 894 00:48:00,120 --> 00:48:03,560 just get him to plead guilty? So I think I'll, I would want to 895 00:48:03,560 --> 00:48:07,240 talk about sort of three types of cases that I think I've heard 896 00:48:07,320 --> 00:48:11,120 either you or guests sort of put in that bucket of like small fry 897 00:48:11,200 --> 00:48:13,880 cases. So first of all, you've got 898 00:48:13,880 --> 00:48:18,280 touting, right, which is a celebrity that doesn't disclose 899 00:48:18,280 --> 00:48:21,560 their conflict of interest and essentially tries to to sell a 900 00:48:21,560 --> 00:48:25,000 crypto asset into the market. And that is important because 901 00:48:25,280 --> 00:48:27,400 you want to, you don't want that to proliferate. 902 00:48:27,400 --> 00:48:30,320 You don't want celebrities bringing people into the 903 00:48:30,320 --> 00:48:33,160 marketplace. And it's also one of those 904 00:48:33,160 --> 00:48:36,440 things where you're always trying to, through your cases, 905 00:48:36,600 --> 00:48:39,960 move the market, not just win one, but tell people, look, 906 00:48:39,960 --> 00:48:41,880 don't do this because we'll come for you. 907 00:48:42,600 --> 00:48:47,040 And so those are cases where it was helpful to keep people from 908 00:48:47,040 --> 00:48:51,840 getting sort of tricked into this volatile and non compliant 909 00:48:51,840 --> 00:48:54,720 space. And generally, yes, requires 910 00:48:54,720 --> 00:48:58,840 fewer resources than taking on like a big exchange case, but 911 00:48:58,840 --> 00:49:03,000 still important to do. The Stoner cats wasn't just 912 00:49:03,000 --> 00:49:05,600 about touting, but also demonstrating that NFTS could be 913 00:49:05,600 --> 00:49:08,280 securities. So it's like a precedent setting 914 00:49:08,840 --> 00:49:10,720 reason to go after that. And again, it tells the 915 00:49:10,720 --> 00:49:14,000 marketplace like watch yourself, these can be issued as 916 00:49:14,000 --> 00:49:15,600 securities and need to be careful. 917 00:49:16,400 --> 00:49:20,920 And the last thing I would say is early on we went after Block 918 00:49:20,920 --> 00:49:24,160 Fi, one of the lenders, which is sort of seen as smaller. 919 00:49:24,560 --> 00:49:26,920 That was part of our strategy, first of all, to hit the 920 00:49:26,920 --> 00:49:29,360 intermediaries and focus on where this activity was 921 00:49:29,360 --> 00:49:32,880 happening. Second of all, that was a really 922 00:49:32,880 --> 00:49:36,000 good case for us because we didn't have to demonstrate 923 00:49:36,000 --> 00:49:38,360 anything about the underlying crypto assets. 924 00:49:38,960 --> 00:49:42,680 That arrangement is a pretty bog standard arrangement called a 925 00:49:42,680 --> 00:49:46,240 note, sending them out and then paying an interest rate on that 926 00:49:46,240 --> 00:49:48,280 account. It doesn't matter what the asset 927 00:49:48,280 --> 00:49:51,360 inside the account is, you have created a note. 928 00:49:51,520 --> 00:49:54,880 It's an easy case to win. And that was another place where 929 00:49:54,880 --> 00:49:57,280 people being lured into the market by saying like, why keep 930 00:49:57,280 --> 00:50:00,200 your cash in a bank when you can put in this account and get like 931 00:50:00,880 --> 00:50:03,920 86% returns? It's a. 932 00:50:04,120 --> 00:50:07,080 Falsely claim on its website. It's FDIC insured if you're 933 00:50:07,080 --> 00:50:08,440 talking about boys. Right. 934 00:50:09,080 --> 00:50:10,880 Yeah. It's like that was a channel 935 00:50:10,880 --> 00:50:13,360 where we were concerned it would bring lots of people into a 936 00:50:13,360 --> 00:50:16,560 dangerous marketplace where there's like a very good 937 00:50:16,560 --> 00:50:19,680 argument for us with regard to the securities laws and also 938 00:50:19,680 --> 00:50:22,400 where a whole lot of leverage was being created. 939 00:50:22,600 --> 00:50:27,720 Like when you lend out those assets and then use other crypto 940 00:50:27,720 --> 00:50:30,960 assets as collateral and run that up the chain, everybody 941 00:50:30,960 --> 00:50:33,880 down the chain owes each other. And as soon as the top guy can't 942 00:50:33,880 --> 00:50:37,200 pay his obligation, everything underneath him collapses. 943 00:50:37,200 --> 00:50:39,640 I mean like that's what you saw in Perfil Winter Suzu. 944 00:50:39,880 --> 00:50:41,040 And that's like Davies. Yeah. 945 00:50:41,040 --> 00:50:43,560 That's like a standard financial regulation thing. 946 00:50:44,400 --> 00:50:49,120 And so the the leverage, the sort of slam dunk nature of the 947 00:50:49,120 --> 00:50:53,080 case and that aligned with our intermediary idea was why we 948 00:50:53,080 --> 00:50:55,000 went there. Block block fi is one that I 949 00:50:55,000 --> 00:50:57,600 forgot like that. I wish you guys had Yeah, like 950 00:50:57,600 --> 00:50:59,160 that. Like that is a great case. 951 00:50:59,160 --> 00:51:00,600 That's a great example, and it is one. 952 00:51:00,600 --> 00:51:01,760 That I and we changed the market. 953 00:51:01,880 --> 00:51:05,560 We famously got in a spat with Brian Armstrong when we told 954 00:51:05,560 --> 00:51:08,880 him, hey, like you're creating a securities arrangement and, and 955 00:51:08,880 --> 00:51:11,080 Coinbase didn't offer their Lynn products. 956 00:51:11,080 --> 00:51:13,200 Like imagine a world in which all of that stuff had been 957 00:51:13,200 --> 00:51:15,160 allowed to happen, right? Coinbase being one of the 958 00:51:15,160 --> 00:51:16,640 biggest and most influential in the market. 959 00:51:17,000 --> 00:51:19,320 That would have made the the crisis a lot worse. 960 00:51:19,320 --> 00:51:20,920 Yeah, for sure. No, I I agree with you on that. 961 00:51:20,920 --> 00:51:25,960 I think so here, here again, you've entered into it a realm 962 00:51:25,960 --> 00:51:30,640 that I can push back on. So, so, so Stoner Katz, you said 963 00:51:31,440 --> 00:51:35,760 like essentially set precedent that oh, NFTS can be securities. 964 00:51:35,760 --> 00:51:39,720 Considering that our I don't know if you want to even call 965 00:51:39,720 --> 00:51:42,280 him the president. The guy who works for Elon Musk 966 00:51:43,400 --> 00:51:49,960 has done a, you know, an NFTA whole NFT product and has also 967 00:51:49,960 --> 00:51:53,720 done his own coin. Now, in your personal opinion, 968 00:51:53,920 --> 00:51:57,320 one, are those are either of those possibly securities? 969 00:51:57,320 --> 00:52:00,480 And two, is it over? Like in terms of Oh well, now if 970 00:52:00,480 --> 00:52:02,480 the president is doing it, like you might have set that 971 00:52:02,480 --> 00:52:05,480 precedent with Stoner cats, but say, la fucking V, you know what 972 00:52:05,480 --> 00:52:06,440 I mean? Absolutely. 973 00:52:06,440 --> 00:52:11,920 Again, failing to regulate is a deregulatory action that is 974 00:52:11,920 --> 00:52:13,280 really hard to overcome in the future. 975 00:52:13,440 --> 00:52:17,360 So yes, absolutely with regard to mean coins, and I'm not 976 00:52:17,360 --> 00:52:19,760 saying it's a meme coin. I'm just sort of like laying out 977 00:52:19,760 --> 00:52:22,680 this category for the Howie test have to identify a promoter who 978 00:52:22,680 --> 00:52:24,200 said you're going to get a profit off of this. 979 00:52:24,320 --> 00:52:28,320 So like if you look at Dogecoin, I'm not saying it's impossible 980 00:52:28,320 --> 00:52:31,360 to make the argument it's a security, but the guy who issue 981 00:52:31,360 --> 00:52:34,200 it said this is a joke. Don't invest in it is like 982 00:52:34,440 --> 00:52:37,840 please don't it. And so it is hard to make the 983 00:52:37,840 --> 00:52:40,720 case that people, a reasonable investor would have expected 984 00:52:40,720 --> 00:52:44,840 profits from a token, that it was put out as a joke. 985 00:52:44,840 --> 00:52:47,240 So like the meme coin thing can be a little bit challenging. 986 00:52:47,240 --> 00:52:50,200 It doesn't mean it's not. And sort of if I were gonna try 987 00:52:50,200 --> 00:52:52,040 up, and I should say, and I should have said at the 988 00:52:52,040 --> 00:52:54,960 beginning of this, I'm not a lawyer, but if I were gonna try 989 00:52:54,960 --> 00:52:58,160 and create the colorable case around the Trump coin, it would 990 00:52:58,160 --> 00:53:01,960 be, look, he's got this whole like he's got the Truth Social 991 00:53:01,960 --> 00:53:04,800 thing. He has all of these business 992 00:53:04,800 --> 00:53:07,360 interests that are profit making. 993 00:53:08,120 --> 00:53:11,120 A reasonable investor might believe that sort of becoming 994 00:53:11,120 --> 00:53:14,080 part of that ecosystem by buying into the Trump meme coin 995 00:53:14,440 --> 00:53:17,560 suggests the ability to get profit from like that larger 996 00:53:17,600 --> 00:53:20,440 ecosystem of things that the Trump businesses are doing. 997 00:53:20,440 --> 00:53:23,400 Not a slam dunk case. I think that would probably be 998 00:53:23,400 --> 00:53:25,640 pretty novel. But like if you're trying to 999 00:53:25,640 --> 00:53:28,800 establish precedent, it's not exactly the thing I would first 1000 00:53:28,800 --> 00:53:30,440 go after. I think the other thing that's 1001 00:53:30,440 --> 00:53:34,080 really scary about this is that to the extent that these would 1002 00:53:34,080 --> 00:53:37,640 be securities or regulated by another regulator, like this is 1003 00:53:37,640 --> 00:53:39,800 a guy who has the power to choose who's in charge. 1004 00:53:40,200 --> 00:53:45,320 And you're gonna be gutting the laws that you may have broken 1005 00:53:45,560 --> 00:53:49,520 potentially, and also gutting the enforcement arm that would 1006 00:53:49,520 --> 00:53:51,360 have been able to hold you accountable. 1007 00:53:52,560 --> 00:53:55,120 So it's a very scary thing to have a president with these 1008 00:53:55,120 --> 00:53:58,320 conflicting business interests. You talked about how if you 1009 00:53:58,320 --> 00:54:03,720 basically say like it's a Ponzi scheme, then then the SEC might 1010 00:54:03,720 --> 00:54:04,600 be hamstrung. It doesn't. 1011 00:54:04,600 --> 00:54:05,680 It doesn't mean that to be. Clear. 1012 00:54:05,680 --> 00:54:09,080 A little bit of an exaggeration, that hyperbole, but sure, yeah. 1013 00:54:09,440 --> 00:54:13,400 But I guess I'm I'm on the get trumpmemes.com website right now 1014 00:54:14,160 --> 00:54:16,720 and it says Trump memes are intended to function as an 1015 00:54:16,720 --> 00:54:19,960 expression expression of support for an engagement with the 1016 00:54:19,960 --> 00:54:23,960 ideals and beliefs embodied by the symbol dollar sign Trump and 1017 00:54:23,960 --> 00:54:27,080 the associated artwork and are not intended to be or to be 1018 00:54:27,080 --> 00:54:30,720 subject of an investment opportunity, investment contract 1019 00:54:30,840 --> 00:54:33,800 or security of any type. So I guess like. 1020 00:54:33,920 --> 00:54:36,120 I mean, as long as you put those words on the page, I guess 1021 00:54:36,120 --> 00:54:38,080 you're saying? I guess like you said, you know, 1022 00:54:38,080 --> 00:54:40,840 like there, there you have it. Saying it's not a security 1023 00:54:40,840 --> 00:54:45,200 doesn't save you, just not financial some. 1024 00:54:45,200 --> 00:54:47,960 People who have lost cases tried that tactic. 1025 00:54:49,000 --> 00:54:52,120 I've covered some of those cases kind of on the topic of future 1026 00:54:52,120 --> 00:54:57,680 regulation. Tim Scott and French Hill and 1027 00:54:57,840 --> 00:55:01,360 Bozeman and Thompson all are very confident that they can get 1028 00:55:01,360 --> 00:55:05,720 basically fit 21 two point O passed signed out of both the 1029 00:55:05,720 --> 00:55:07,560 House and the Senate within 100 days. 1030 00:55:07,880 --> 00:55:10,080 I think they're wrong. I don't think they have the 1031 00:55:10,080 --> 00:55:11,320 majorities. I don't think they're going to 1032 00:55:11,320 --> 00:55:14,680 get as many Democrat defectors as they thought a week ago, but 1033 00:55:15,280 --> 00:55:20,080 Fit 21 largely punts a lot of cryptocurrency regulation to the 1034 00:55:20,080 --> 00:55:26,240 CFTC and includes a a very broad definition of decentralized in 1035 00:55:26,240 --> 00:55:28,400 order to do that, ignoring the rest of the context. 1036 00:55:28,400 --> 00:55:30,520 Right now, I'm looking just at that piece of legislation. 1037 00:55:30,520 --> 00:55:32,840 We can get to the rest of the context immediately after that, 1038 00:55:33,320 --> 00:55:36,360 that bill alone. What do you think of punting 1039 00:55:36,520 --> 00:55:40,520 such a large portion of crypto regulation to the CFTC? 1040 00:55:40,520 --> 00:55:42,680 Yeah. So, so like I said, I did 15 1041 00:55:42,680 --> 00:55:44,560 years in Congress before coming to the SEC. 1042 00:55:44,920 --> 00:55:49,040 The legislative process is hard. And so a couple observations 1043 00:55:49,040 --> 00:55:53,040 about that legislation, and legislation is in general is 1044 00:55:53,040 --> 00:55:56,560 that first and foremost, it was easy to unite the crypto 1045 00:55:56,560 --> 00:55:59,680 industry against the demon of Gary Gensler and what we were 1046 00:55:59,680 --> 00:56:02,720 doing. It is much harder to unite an 1047 00:56:02,720 --> 00:56:05,480 industry around the particulars of a bill. 1048 00:56:05,480 --> 00:56:06,760 There are a lot of competing interests. 1049 00:56:06,760 --> 00:56:08,680 There are a lot of people who like one thing and not another 1050 00:56:08,680 --> 00:56:12,360 thing or a Maxis in one space that will make that hard to 1051 00:56:12,360 --> 00:56:16,040 construct something that they actually want and actually has, 1052 00:56:16,080 --> 00:56:18,440 you know, the possibility of passing. 1053 00:56:19,280 --> 00:56:24,280 So that's sort of like issue #1 the second thing is that the We 1054 00:56:24,280 --> 00:56:28,360 want Legislation gambit was not about actually wanting the CFC 1055 00:56:28,360 --> 00:56:30,720 to regulate. It was about we don't want the 1056 00:56:30,720 --> 00:56:34,160 SEC to regulate us. When you're going to be in a 1057 00:56:34,160 --> 00:56:37,240 situation where the SEC is not serious about enforcing its 1058 00:56:37,240 --> 00:56:42,040 territory, ideally what you want is to not have the CFCC or any 1059 00:56:42,040 --> 00:56:44,240 other federal regulator looking at you at all. 1060 00:56:44,520 --> 00:56:48,360 So that because that was a dodge in the first place. 1061 00:56:49,440 --> 00:56:51,720 I I don't think, I don't think they're going to be nearly as 1062 00:56:51,720 --> 00:56:55,000 excited about pushing members to get legislation across the line 1063 00:56:55,120 --> 00:56:57,200 because they don't need protection from the SEC anymore. 1064 00:56:57,360 --> 00:56:58,840 Yeah. And the last thing you already 1065 00:56:58,840 --> 00:57:02,680 kind of mentioned this, if you get the definition of blockchain 1066 00:57:02,680 --> 00:57:05,280 or crypto asset or wherever you went, if you get that wrong or 1067 00:57:05,280 --> 00:57:09,360 you get the the way you're hewing in the Howie test wrong. 1068 00:57:10,240 --> 00:57:13,040 First of all, you like calamitous effects the rest of 1069 00:57:13,040 --> 00:57:16,080 the marketplace. And then second of all, everyone 1070 00:57:16,080 --> 00:57:18,920 is going to run like try and get into that loophole. 1071 00:57:18,920 --> 00:57:21,560 This always happens where people say like, it's a tiny market. 1072 00:57:21,560 --> 00:57:23,920 If we do a little bit of deregulation is not going to be 1073 00:57:23,920 --> 00:57:26,120 a big deal. But when you have deregulation 1074 00:57:26,200 --> 00:57:29,920 like water flows and everything is going to take that path to 1075 00:57:29,920 --> 00:57:33,920 get access to the less regulated market and and again going to be 1076 00:57:33,920 --> 00:57:35,640 disastrous. And beyond just the securities 1077 00:57:35,640 --> 00:57:38,840 markets, but the faith in our markets in general and whether 1078 00:57:38,840 --> 00:57:41,320 or not you agree that like we should be the financial center 1079 00:57:41,320 --> 00:57:43,600 of the world. And I certainly think that too 1080 00:57:43,600 --> 00:57:47,720 much of our economy is finance. It's probably not healthy, but 1081 00:57:48,280 --> 00:57:50,640 losing that status has a lot of consequences. 1082 00:57:50,680 --> 00:57:52,440 Yeah. And I'm glad you brought up that 1083 00:57:52,520 --> 00:57:54,520 we talked about this with Sean when he was on a couple weeks 1084 00:57:54,520 --> 00:57:56,560 ago. But like the crypto industry was 1085 00:57:56,560 --> 00:58:01,360 using legislation as kind of a wages to avoid being regulated, 1086 00:58:01,360 --> 00:58:03,280 period. Don't regulate us yet. 1087 00:58:03,280 --> 00:58:05,680 Pass this bill, but don't pass that bill yet. 1088 00:58:05,680 --> 00:58:08,680 We got to get the definitions right and don't focus too long 1089 00:58:08,680 --> 00:58:10,760 on those definitions. There's bigger things going 1090 00:58:10,800 --> 00:58:13,040 along. The SEC missed FTX. 1091 00:58:13,160 --> 00:58:15,560 How are you going to put more things under their control? 1092 00:58:15,760 --> 00:58:18,240 So it's all meant as kind of a delaying thing. 1093 00:58:18,240 --> 00:58:22,720 Is it even worth talking about, like, legislation like this, 1094 00:58:22,720 --> 00:58:26,200 considering the current broader context in which many of these 1095 00:58:26,200 --> 00:58:30,400 regulators are being very quickly disempowered and like 1096 00:58:30,400 --> 00:58:33,880 they're trying to eliminate broadly their ability to 1097 00:58:33,880 --> 00:58:35,600 regulate? Is this kind of missing the 1098 00:58:35,600 --> 00:58:36,920 forest for the trees? Yeah. 1099 00:58:36,960 --> 00:58:40,400 Like, I think the other headwind here is that when you're in the 1100 00:58:40,400 --> 00:58:42,800 House and Senate, you have a limited amount of floor time. 1101 00:58:43,240 --> 00:58:45,480 If you have a constrained amount of time to get all the things 1102 00:58:45,480 --> 00:58:50,320 you want done, as much as Trump made a big deal about crypto, I 1103 00:58:50,320 --> 00:58:53,120 don't think that's like a high priority for them. 1104 00:58:54,000 --> 00:58:57,080 And so even if it's a high priority in the individual 1105 00:58:57,080 --> 00:59:00,520 committees, having your leadership sacrifice floor time 1106 00:59:00,520 --> 00:59:02,880 to getting that done is a high bar. 1107 00:59:03,560 --> 00:59:06,840 And so like that is also going to be a challenge to get 1108 00:59:06,840 --> 00:59:09,760 something like this done. So I think it's, I think that's 1109 00:59:09,760 --> 00:59:10,240 exactly. Right. 1110 00:59:10,240 --> 00:59:14,400 Broadly, white collar crime enforcement and financial 1111 00:59:14,400 --> 00:59:17,480 regulations are being actively gutted. 1112 00:59:17,680 --> 00:59:20,440 The CFPB, they're attempting to like fully eliminate. 1113 00:59:20,640 --> 00:59:23,080 They've talked about eliminating the FDIC. 1114 00:59:23,240 --> 00:59:26,520 They want to cut the budgets and the funding to everything for 1115 00:59:26,520 --> 00:59:30,520 the individuals, the constituents, the investors, the 1116 00:59:30,520 --> 00:59:33,400 consumers. What is the appropriate way to 1117 00:59:33,400 --> 00:59:36,400 view this in like the way to react to this kind of behavior? 1118 00:59:36,400 --> 00:59:40,680 Well, the way to the view it is to view it is only scary like 1119 00:59:40,680 --> 00:59:42,360 that. There's just no way around that. 1120 00:59:43,360 --> 00:59:48,040 In terms of what you can do. I think like narrowly on crypto, 1121 00:59:49,800 --> 00:59:53,960 if the SEC does actually do regulation, there's always a 1122 00:59:53,960 --> 00:59:58,480 notice and comment process. And there are two things about 1123 00:59:58,480 --> 01:00:01,840 that that are to some degree powerful that I think not a lot 1124 01:00:01,840 --> 01:00:07,200 of non financial actors know. And so the APA is pretty strong. 1125 01:00:07,200 --> 01:00:10,520 If you don't follow the process, you make your rule vulnerable on 1126 01:00:10,520 --> 01:00:14,160 just a process foul. And every issue that's raised in 1127 01:00:14,160 --> 01:00:17,120 a comment letter has to be addressed in a final rule 1128 01:00:17,120 --> 01:00:19,840 making. And when you make someone say 1129 01:00:19,840 --> 01:00:24,280 something about why, like to justify why they're doing it, 1130 01:00:24,520 --> 01:00:27,080 you have created for them a litigation risk. 1131 01:00:27,440 --> 01:00:30,480 So it is actually valuable to write in comments about 1132 01:00:30,760 --> 01:00:34,280 regulation. Personalized e-mail, like 1133 01:00:34,440 --> 01:00:36,920 foreign emails, don't shift Congress at all. 1134 01:00:37,240 --> 01:00:40,360 Personalized emails actually do. There are legislative 1135 01:00:40,360 --> 01:00:44,080 correspondents who tally up how many genuine inquiries they got 1136 01:00:44,080 --> 01:00:47,560 on issue and at least on a weekly basis say like, here's 1137 01:00:47,560 --> 01:00:49,040 what people are yelling at us about. 1138 01:00:49,240 --> 01:00:51,120 Here's what should be at the top of our priority list. 1139 01:00:51,120 --> 01:00:53,280 Here's like what we should be politically concerned about. 1140 01:00:53,960 --> 01:00:56,600 So it does matter. But again, it needs to be 1141 01:00:56,600 --> 01:00:58,720 personalized. It it doesn't have to be a lot. 1142 01:00:58,720 --> 01:01:02,480 It could be, you know, just a paragraph, but it's like, it's 1143 01:01:02,480 --> 01:01:04,760 got to be your own words. Like the other thing you know, 1144 01:01:04,760 --> 01:01:07,320 here is like you need to support good journalism. 1145 01:01:07,320 --> 01:01:10,280 And a lot of that is independent journalism, like, you know, you 1146 01:01:10,280 --> 01:01:16,760 guys produce, you know, Molly White's Pro Publica, you know, 1147 01:01:16,760 --> 01:01:19,520 there's like there's a lot of good work being out there in the 1148 01:01:19,520 --> 01:01:21,920 in the independent journalism space. 1149 01:01:21,920 --> 01:01:23,880 And then the other thing I would say in like somewhat self 1150 01:01:23,880 --> 01:01:25,920 servingly is like there are a lot of good nonprofit 1151 01:01:25,920 --> 01:01:30,120 organizations that do this work, that collect sort of and 1152 01:01:30,120 --> 01:01:34,440 represent the broad set of interest from consumers and 1153 01:01:34,440 --> 01:01:36,760 fight on these issues and educate on these issues. 1154 01:01:37,240 --> 01:01:39,840 Obviously, Consumer Federation of America would love if you 1155 01:01:39,840 --> 01:01:42,920 supported us. There are tons of groups, 1156 01:01:43,320 --> 01:01:45,960 Americans for Financial Reform, the National Consumer Law 1157 01:01:45,960 --> 01:01:48,600 Center, the Coalition for Sensible Safeguards. 1158 01:01:49,120 --> 01:01:52,680 They do this work and you know, are are worthy of your support. 1159 01:01:52,680 --> 01:01:54,000 They are effective organizations. 1160 01:01:55,200 --> 01:01:57,920 And then like sort of the broader political issues, I 1161 01:01:57,920 --> 01:02:00,680 mean, for one, direct action showing up in the streets, it 1162 01:02:00,680 --> 01:02:02,120 matters. It brings attention to issues 1163 01:02:02,120 --> 01:02:06,040 and like, it's kind of like the last refuge of protecting 1164 01:02:06,040 --> 01:02:09,160 democracy. Make them like don't give up. 1165 01:02:09,160 --> 01:02:11,680 Make them fight for every inch of territory. 1166 01:02:12,320 --> 01:02:16,840 Cynicism is deadly. You can affect things. 1167 01:02:17,600 --> 01:02:21,280 It it seems slow, it seems ineffectual, but it does matter. 1168 01:02:22,000 --> 01:02:26,320 And you can slow this process by just being every bit of a 1169 01:02:26,320 --> 01:02:29,840 barrier you can be and like, you're gonna get run over, but 1170 01:02:29,840 --> 01:02:31,400 it's harder. And I think the the other thing 1171 01:02:31,400 --> 01:02:33,800 is like they're in addition to like consumer advocacy 1172 01:02:33,800 --> 01:02:39,160 organizations, there are really expert executive overreach and 1173 01:02:39,560 --> 01:02:41,960 government investigatory nonprofits. 1174 01:02:43,320 --> 01:02:45,840 One of those is Protect Democracy, who who do a lot of 1175 01:02:45,840 --> 01:02:48,800 amazing work. One of those is Pogo, the 1176 01:02:48,800 --> 01:02:50,440 progress on government oversight. 1177 01:02:50,720 --> 01:02:52,840 They've been around forever. They have a lot of expertise in 1178 01:02:52,840 --> 01:02:56,560 this space. They bring cases and it's really 1179 01:02:56,560 --> 01:02:59,000 worth it to, again, support those kinds of organizations 1180 01:02:59,000 --> 01:03:00,320 that are out there doing the work. 1181 01:03:00,320 --> 01:03:02,960 Totally agree with that. And I hate to do this to our 1182 01:03:02,960 --> 01:03:04,640 audience because I'm sure some of them were like, okay, well, 1183 01:03:04,640 --> 01:03:07,480 that's the end of the episode now, but I actually want to show 1184 01:03:07,480 --> 01:03:11,400 you just push one more question to you because you and I talked 1185 01:03:11,400 --> 01:03:13,320 about it and I actually found it fascinating. 1186 01:03:13,760 --> 01:03:16,920 And I think a lot of our listeners don't understand this 1187 01:03:16,920 --> 01:03:18,880 and and we'll find this fascinating as well. 1188 01:03:18,880 --> 01:03:22,480 So if anyone hasn't shut the podcast off yet, the President 1189 01:03:22,480 --> 01:03:28,080 of the United States, Elon Musk is, is, is, in my personal 1190 01:03:28,080 --> 01:03:32,120 opinion, the biggest fraud in the history of the world. 1191 01:03:33,360 --> 01:03:37,720 And I think he's done a great job of getting away with it. 1192 01:03:38,240 --> 01:03:42,720 He is manipulative and he's gross and he knows how to play 1193 01:03:42,720 --> 01:03:44,160 people against each other and stuff. 1194 01:03:44,920 --> 01:03:48,080 One of the things we talked about was I said one of the 1195 01:03:48,080 --> 01:03:50,760 things that really bothered me was after that, like whatever it 1196 01:03:50,760 --> 01:03:53,320 was, I don't know if it's the, IT was the four taking, taking 1197 01:03:53,320 --> 01:03:56,040 it private at 4:20 or whatever the whatever the hell he said. 1198 01:03:57,040 --> 01:04:00,600 And the SEC said, OK, you have to have a Twitter sitter. 1199 01:04:00,640 --> 01:04:03,960 Like your days of tweeting whatever you want and having no 1200 01:04:03,960 --> 01:04:06,000 repercussions. Those days are over. 1201 01:04:06,800 --> 01:04:10,560 And then a few months later he was just tweeting whatever the 1202 01:04:10,560 --> 01:04:14,480 fuck he wanted again. And I asked you, I was like, why 1203 01:04:14,480 --> 01:04:17,960 isn't the SEC doing something like every time this man tweets, 1204 01:04:17,960 --> 01:04:20,400 they should be fining him every single like, this man should 1205 01:04:20,400 --> 01:04:24,200 have a billion dollar bill like sent to his door. 1206 01:04:24,200 --> 01:04:26,120 Like, OK, here's all the illegal tweets you did. 1207 01:04:26,240 --> 01:04:29,080 You're tweeting 200 times a day. You owe us a lot of money. 1208 01:04:29,840 --> 01:04:34,160 And you said, here's the problem, We would have to open 1209 01:04:34,160 --> 01:04:38,160 up an investigation for every single one of those tweets. 1210 01:04:38,480 --> 01:04:41,880 But my push back on you again was, so why would you set that 1211 01:04:41,880 --> 01:04:44,560 role up then if you can't enforce the role? 1212 01:04:45,600 --> 01:04:48,360 So I like, I guess I'm, I'm, I'm, I'm pushing this just 1213 01:04:48,360 --> 01:04:50,400 'cause I'm like, there has to be a better way. 1214 01:04:50,800 --> 01:04:54,840 Like there has to be a better way, not just for for the 1215 01:04:54,840 --> 01:04:59,920 American public to have faith in regulators effectuating change 1216 01:05:00,160 --> 01:05:03,280 against people like Elon Musk, but also for you guys so that 1217 01:05:03,280 --> 01:05:05,560 you don't have to open an investigation to find this dude 1218 01:05:05,800 --> 01:05:07,600 every single time that he tweets, you know? 1219 01:05:07,680 --> 01:05:09,160 You actually, you kind of brought up something in that 1220 01:05:09,160 --> 01:05:10,920 question that we we didn't talk about. 1221 01:05:11,080 --> 01:05:13,520 It's a little bit lengthy, but I I would love to talk about it. 1222 01:05:14,040 --> 01:05:17,120 But to your, to your first point, with regard to Elon Musk, 1223 01:05:17,120 --> 01:05:20,200 look like they brought the case in the 1st place and there is 1224 01:05:20,200 --> 01:05:26,080 ongoing litigation, but you are spending a lot of resources 1225 01:05:26,080 --> 01:05:28,120 taking on the richest man in the world. 1226 01:05:28,400 --> 01:05:31,160 There is a cost to rulemaking. There is a cost to all the other 1227 01:05:31,160 --> 01:05:33,280 reforms around the market. Now you have to go after that 1228 01:05:33,280 --> 01:05:34,960 power when they're breaking the securities laws. 1229 01:05:34,960 --> 01:05:38,440 So it, you know, so it's not a free for all, but I mean, it 1230 01:05:38,440 --> 01:05:43,480 cost you a lot in the, the, the, the fundamental unsatisfying 1231 01:05:43,480 --> 01:05:47,520 part of that case is a bigger problem than the SEC. 1232 01:05:47,520 --> 01:05:52,000 It's like, it's a problem of democracy where like the richest 1233 01:05:52,000 --> 01:05:55,200 man in the world that has a lot of resources has a lot of 1234 01:05:55,200 --> 01:05:57,800 political influence. How did we get here in the 1st 1235 01:05:57,800 --> 01:06:01,000 place? Like that's not an SEC prop. 1236 01:06:01,000 --> 01:06:04,800 Like not to dodge, but like that fundamental part of rich people 1237 01:06:04,800 --> 01:06:08,240 get better representation, they can make it a lot harder on you 1238 01:06:08,240 --> 01:06:10,960 to enforce the law. Like the SEC is not the only 1239 01:06:10,960 --> 01:06:14,040 thing he has escaped. Like that's a that's a bigger 1240 01:06:14,040 --> 01:06:17,640 problem than disclosure and and securities fraud. 1241 01:06:19,560 --> 01:06:24,600 You also mentioned like sort of the the idea of faith in these 1242 01:06:24,600 --> 01:06:26,000 regulatory bodies. Yeah. 1243 01:06:26,800 --> 01:06:31,120 So the first thing I would say is that to the extent I'm 1244 01:06:31,120 --> 01:06:36,400 sympathetic with the crypto markets, our our traditional 1245 01:06:36,400 --> 01:06:39,520 markets and market regulators have not clothed themselves in 1246 01:06:39,520 --> 01:06:42,880 glory. There is a lot of genuine 1247 01:06:43,720 --> 01:06:47,240 unfairness, injustice, problems with that marketplace. 1248 01:06:47,600 --> 01:06:51,400 So it, it's not entirely unreasonable for me to see 1249 01:06:51,400 --> 01:06:53,920 investors saying like, well, that system doesn't work. 1250 01:06:54,160 --> 01:06:56,920 There's some people getting rich over here, like I might as well 1251 01:06:56,920 --> 01:07:00,400 try my luck in this other place. It's not a completely 1252 01:07:00,400 --> 01:07:03,280 unreasonable position. Now, that doesn't excuse the 1253 01:07:03,280 --> 01:07:05,640 people making the money and it doesn't excuse the fraud and it 1254 01:07:05,640 --> 01:07:08,640 doesn't excuse all the, the like activity that's going on that 1255 01:07:08,640 --> 01:07:12,200 space, but it is, it is understandable how this other 1256 01:07:12,200 --> 01:07:16,240 thing developed. And a lot of that comes from the 1257 01:07:16,360 --> 01:07:22,760 the 2008 crisis in just the abject failure to demonstrate 1258 01:07:23,000 --> 01:07:27,760 the the way that institutions are supposed to work for regular 1259 01:07:27,760 --> 01:07:30,680 working Americans. We bailed out the the largest 1260 01:07:30,680 --> 01:07:35,480 institutions and then a foreclosure crisis raged on, not 1261 01:07:35,480 --> 01:07:39,480 just to 2010, not just to 2013 through 2016. 1262 01:07:40,440 --> 01:07:43,160 People were losing their homes have like having the the very 1263 01:07:43,240 --> 01:07:47,800 basics of their lives upset, having to move their kids to new 1264 01:07:47,800 --> 01:07:49,800 schools, having to leave their pets behind. 1265 01:07:49,840 --> 01:07:55,680 Like there is correct righteous anger against institutions that 1266 01:07:55,680 --> 01:07:58,000 did not show up for these people. 1267 01:07:58,200 --> 01:08:01,520 And I would blame a lot of the current political position we're 1268 01:08:01,520 --> 01:08:05,760 in on like look, the Tea Party has existed existed much prior 1269 01:08:05,760 --> 01:08:10,400 to the crisis. But being able to say to a lot 1270 01:08:10,400 --> 01:08:14,000 of people like, look, you're getting taxed, we pay all the 1271 01:08:14,000 --> 01:08:16,720 stuff and we have to bail out, bail out the banks, that's 1272 01:08:16,720 --> 01:08:20,640 fundamentally unfair, is a very good recruiting tool in the face 1273 01:08:20,640 --> 01:08:24,479 of a political and leadership vacuum from, you know, people 1274 01:08:24,479 --> 01:08:28,600 with progressive economic views. And I think you could draw the 1275 01:08:28,600 --> 01:08:32,800 line from that straight through to the Trump administration, the 1276 01:08:32,800 --> 01:08:36,120 first Trump administration and the legacy that we've, you know, 1277 01:08:36,600 --> 01:08:37,800 acquired. Now, great answer. 1278 01:08:37,800 --> 01:08:39,040 Yeah, I appreciate it. Thank you. 1279 01:08:39,040 --> 01:08:42,080 Corey, is there anything else you wanted to address? 1280 01:08:42,080 --> 01:08:43,120 No. There are two big issues that I 1281 01:08:43,120 --> 01:08:44,439 think might be worth talking about. 1282 01:08:44,880 --> 01:08:48,920 One is the claim of regulation by enforcement and not doing any 1283 01:08:48,920 --> 01:08:51,319 regulations. And a couple things I would say 1284 01:08:51,319 --> 01:08:53,120 about that and sort of the accusation. 1285 01:08:53,120 --> 01:08:54,640 We didn't meet with market participants. 1286 01:08:55,080 --> 01:08:57,560 We met with everyone who would, who would come in the door. 1287 01:08:57,560 --> 01:09:00,600 It was a lot of people, the vast majority of them wanted those 1288 01:09:00,600 --> 01:09:03,240 meetings to be confidential, which is something that we'll, 1289 01:09:03,439 --> 01:09:07,880 we respect. And again, like nothing came 1290 01:09:07,880 --> 01:09:11,760 from those, but we were genuine about like come in if we need to 1291 01:09:11,760 --> 01:09:13,960 make some small tweaks because you can show us what doesn't 1292 01:09:13,960 --> 01:09:16,640 work, we'll get you registered. We will do this project. 1293 01:09:17,880 --> 01:09:21,160 So I think, you know, the idea that, you know, we didn't do 1294 01:09:21,160 --> 01:09:23,600 enough outreach and we looked kind of bad for doing that. 1295 01:09:23,600 --> 01:09:28,520 I, I think that's unfair. Another issue is inherently how 1296 01:09:28,520 --> 01:09:33,720 you go to the courts and say the rules already apply and then put 1297 01:09:33,720 --> 01:09:37,040 out regulations, changing those rules at the same time it judges 1298 01:09:37,040 --> 01:09:41,120 look very askance at, well, if the rules apply, why are you 1299 01:09:41,120 --> 01:09:42,920 doing new rules? That doesn't make any sense. 1300 01:09:43,240 --> 01:09:46,279 Like that's another challenge. Again, we offered some guidance. 1301 01:09:46,279 --> 01:09:49,800 We tried to be helpful, but there's a fundamental tension 1302 01:09:50,000 --> 01:09:53,279 between enforcing the rules that are already in place and, you 1303 01:09:53,279 --> 01:09:56,920 know, doing something new. And the last thing is there's 1304 01:09:56,960 --> 01:10:00,680 like criticism about sort of what you might call like Gary's 1305 01:10:00,680 --> 01:10:04,680 demeanor or bedside manner. And a couple things about that 1306 01:10:04,680 --> 01:10:08,520 are this like, first of all, when there's a million or even 1307 01:10:08,520 --> 01:10:13,600 $100,000 on the line, like being nice to the industry doesn't get 1308 01:10:13,600 --> 01:10:15,800 you $100,000. It doesn't get you $1,000,000. 1309 01:10:15,800 --> 01:10:19,200 Like it it just, there's not a good reason to sort of like it. 1310 01:10:19,320 --> 01:10:22,920 We didn't lose anything by being confrontational with industry. 1311 01:10:24,080 --> 01:10:28,080 The second thing is like, to go up against this industry, you 1312 01:10:28,080 --> 01:10:31,760 have to be like, if you want good regulators, they're gonna 1313 01:10:31,760 --> 01:10:33,440 have to be contentious. They're gonna have to be 1314 01:10:33,440 --> 01:10:35,640 confrontational. Like that's what it takes to 1315 01:10:35,640 --> 01:10:38,280 fight a very, very large financial interest. 1316 01:10:39,400 --> 01:10:42,360 And there's also just sort of like there's an inherent 1317 01:10:42,360 --> 01:10:43,880 arrogance. And this is not just true of 1318 01:10:43,880 --> 01:10:48,960 Gary, but like of of me myself to say of the 330 million 1319 01:10:48,960 --> 01:10:53,240 Americans, like I'm the one that should say how this $125 1320 01:10:53,240 --> 01:10:57,800 trillion market works. Like to to take that on and 1321 01:10:57,800 --> 01:11:00,880 think that you're sorry you have the answers and we need people 1322 01:11:00,880 --> 01:11:02,440 to do that. But it is like this inherently 1323 01:11:02,440 --> 01:11:07,200 arrogant place to start from. Like that's I think the 1324 01:11:07,200 --> 01:11:09,800 regulation by enforcement arguments were were pretty 1325 01:11:09,800 --> 01:11:12,800 unfair. I think the win record that we 1326 01:11:12,800 --> 01:11:19,520 had, you know, we had we we to the extent that cases got 1327 01:11:19,520 --> 01:11:21,880 judgments, which is not entirely within our control. 1328 01:11:22,960 --> 01:11:30,520 We won a lot library the terraform cases, kick kick Ken 1329 01:11:30,520 --> 01:11:37,120 tokens, Telegram gram tokens, you know like famously, you know 1330 01:11:37,880 --> 01:11:43,960 our our folks caught Doquan at that the New York like crypto 1331 01:11:43,960 --> 01:11:48,080 gathering lending staking as a service the Wahee issue where 1332 01:11:48,480 --> 01:11:50,160 they were giving away information before they listed 1333 01:11:50,160 --> 01:11:53,080 on Coinbase. We won Dow cases which were 1334 01:11:53,080 --> 01:11:57,600 unprecedented, piercing that veil of decentralization NFTS. 1335 01:11:57,600 --> 01:12:00,960 Dow's are like something I haven't thought about again for 1336 01:12:01,080 --> 01:12:03,520 so long. It's going to be an issue. 1337 01:12:04,840 --> 01:12:09,480 We handily won the the Coinbase motion to dismiss. 1338 01:12:10,640 --> 01:12:13,880 We brought a lot of cases that we unfortunately ran out of the 1339 01:12:13,880 --> 01:12:17,760 time to see through Ripple, like I said, big one. 1340 01:12:17,760 --> 01:12:20,920 I think that was actually genuinely a big win for us. 1341 01:12:21,560 --> 01:12:24,400 But those exchange cases that the really big ones we wanted to 1342 01:12:24,400 --> 01:12:27,240 do, they take a lot of time to build. 1343 01:12:27,240 --> 01:12:28,760 They take a lot of time to see through. 1344 01:12:29,000 --> 01:12:32,840 And just very unfortunately we didn't got all the all the time 1345 01:12:32,840 --> 01:12:34,280 we wanted. And look, we're not above 1346 01:12:34,280 --> 01:12:39,680 criticism, but I, I really do believe like we did a, we had a 1347 01:12:39,680 --> 01:12:42,320 good strategy. You can disagree with it, but I 1348 01:12:42,320 --> 01:12:44,600 think we had an intelligent strategy that is very 1349 01:12:44,600 --> 01:12:47,040 defensible. I think we had a lot of wins. 1350 01:12:47,840 --> 01:12:50,280 And I think, you know, our administration did a really 1351 01:12:50,440 --> 01:12:55,040 great job in this issue given the constraints and, and, you 1352 01:12:55,040 --> 01:12:56,480 know, courts that we were dealing with. 1353 01:12:56,520 --> 01:12:58,600 And I think we should note that like the regulation by 1354 01:12:58,600 --> 01:13:03,000 enforcement, criticism is very often coming from people who 1355 01:13:03,000 --> 01:13:06,280 would have been deeply disappointed in almost any 1356 01:13:06,280 --> 01:13:08,280 regulation that would have been presented. 1357 01:13:08,600 --> 01:13:11,760 Best case scenario, they were hoping for exemptions from 1358 01:13:11,760 --> 01:13:13,560 regulations to be written for them. 1359 01:13:14,120 --> 01:13:17,600 And so that's an important context for their criticisms 1360 01:13:17,600 --> 01:13:21,120 they were levying. The fundamental ask was let us 1361 01:13:21,160 --> 01:13:23,720 do this business with the conflicts of interest. 1362 01:13:24,320 --> 01:13:27,240 And that kind of points to, because it's an economic 1363 01:13:27,240 --> 01:13:30,200 argument, it kind of points to like the truth of crypto, which 1364 01:13:30,200 --> 01:13:35,240 is the inherent economic. The argument for it is the 1365 01:13:35,240 --> 01:13:37,360 regulatory arbitrage. And you take away that 1366 01:13:37,360 --> 01:13:39,800 regulatory arbitrage and all of a sudden like there's not 1367 01:13:39,800 --> 01:13:44,400 something profitable there. And you know, the other things 1368 01:13:44,480 --> 01:13:46,680 like I think we talked a little bit about this, about the 1369 01:13:46,680 --> 01:13:49,320 tensions of what it claims to be versus what it is. 1370 01:13:49,640 --> 01:13:56,240 And it is now a more centralized in conflict prone industry than 1371 01:13:56,240 --> 01:13:58,280 the original finance industry, which was like one of the first 1372 01:13:58,280 --> 01:13:59,640 complaints. There are tons of 1373 01:13:59,640 --> 01:14:01,440 intermediaries. It was supposed to be 1374 01:14:01,480 --> 01:14:04,200 peer-to-peer and without intermediaries, it was supposed 1375 01:14:04,200 --> 01:14:08,360 to dip disrupt Tradfi and they banged down the door getting ET 1376 01:14:08,400 --> 01:14:10,360 PS into the original financial system. 1377 01:14:11,960 --> 01:14:15,880 Like they demanded SEC rules for securities while claiming they 1378 01:14:15,880 --> 01:14:19,200 were not securities. So like you go down this line of 1379 01:14:19,200 --> 01:14:22,000 what it pretended to be and where it is now. 1380 01:14:22,000 --> 01:14:25,600 And it's like, look, the fact of the matter is crypto is a 1381 01:14:25,600 --> 01:14:30,280 machine where fraud and money laundering go in one side and 1382 01:14:30,280 --> 01:14:32,120 campaign donations come out the other side. 1383 01:14:32,320 --> 01:14:35,200 And like, that's fundamentally the challenge that is before us 1384 01:14:35,200 --> 01:14:39,920 now. And you know, like it just it it 1385 01:14:39,920 --> 01:14:41,800 was never going to live up to its claims. 1386 01:14:42,240 --> 01:14:46,440 It hasn't everything that was supposed to be the use case of 1387 01:14:46,440 --> 01:14:48,360 crypto has turned out to be vapor Ware. 1388 01:14:49,360 --> 01:14:54,080 But they're now in a position to sort of fundamentally undermine 1389 01:14:54,080 --> 01:14:55,920 the securities laws in a way that's going to be really 1390 01:14:55,920 --> 01:14:59,200 harmful, not just for crypto investors, but for the broader 1391 01:14:59,200 --> 01:15:01,880 investing public generally. Well, and you could argue that 1392 01:15:02,040 --> 01:15:05,520 not just undermining financial regulations, but with the types 1393 01:15:05,520 --> 01:15:08,240 of candidates crypto money supported, undermining the 1394 01:15:08,240 --> 01:15:11,120 constitutional republican democracy at a more foundational 1395 01:15:11,120 --> 01:15:12,480 level. Absolutely true. 1396 01:15:13,040 --> 01:15:15,240 And that's one of the places where and don't get me wrong, 1397 01:15:15,240 --> 01:15:18,840 like Sean is a great guy. We talked about this he and he's 1398 01:15:18,880 --> 01:15:21,640 like knowledge publicly so much to his credit and and this is 1399 01:15:21,640 --> 01:15:24,120 not to it's just like having the audience. 1400 01:15:24,120 --> 01:15:25,720 I would like to correct the record on one thing. 1401 01:15:25,960 --> 01:15:27,880 I worked for Sherrod Brown for five years. 1402 01:15:27,920 --> 01:15:33,400 There was almost he was as loud and confrontational and 1403 01:15:33,400 --> 01:15:36,440 challenging to the industry on crypto as anybody else. 1404 01:15:37,800 --> 01:15:43,400 He essentially risked his seat. And it's not just crypto is why 1405 01:15:43,400 --> 01:15:45,400 he lost, but it was was certainly influential. 1406 01:15:45,920 --> 01:15:47,960 I mean, there was a suggestion sort of like they would have had 1407 01:15:47,960 --> 01:15:51,920 an easier time if he had remained the Democratic head of 1408 01:15:51,920 --> 01:15:54,000 that committee. And I just think like that is 1409 01:15:54,000 --> 01:15:57,800 absolutely untrue. Like, it just incredible 1410 01:15:57,800 --> 01:16:01,880 integrity to continue punching those guys given the threat of, 1411 01:16:02,120 --> 01:16:05,760 you know, dumping hundreds of $1,000,000 in a state that Trump 1412 01:16:05,760 --> 01:16:10,800 won like 5543. So I just want to make sure 1413 01:16:10,840 --> 01:16:14,720 folks know that, like, there was almost no one with as much 1414 01:16:14,720 --> 01:16:17,440 integrity and as as much on the line as Sheridan. 1415 01:16:17,440 --> 01:16:20,600 And that's one of those places where it is truly unfortunate 1416 01:16:20,600 --> 01:16:24,240 that I'd like a progressive lion of the Senate representing Ohio, 1417 01:16:24,240 --> 01:16:27,400 by the way, is lost now. Cast. 1418 01:16:27,400 --> 01:16:28,320 Do you have anything? Yeah. 1419 01:16:28,320 --> 01:16:30,800 I mean, I guess the last thing I want to say is that you heard it 1420 01:16:30,800 --> 01:16:33,560 here first. Cast coin is safe, like one of 1421 01:16:33,560 --> 01:16:35,440 the safest investments you could possibly make. 1422 01:16:35,440 --> 01:16:38,600 Definitely not a security. Everybody should invest 1423 01:16:39,000 --> 01:16:40,760 immediately. We're golden. 1424 01:16:40,760 --> 01:16:41,400 So there you go.