Welcome. Welcome back everyone.
I am Caspian Sea and I'm joined as usual by my partner in crime.
Who's sitting right across from me today, that part's not usual
know that is very unusual. Mr. Bennett Tomlin.
How are you today? I hate know the answer.
I'm doing great. How are you doing?
Casts doing good. We've had a long day but we have
more to talk about. Feels like we've been talking
all all day, but we have a lot to talk about today.
So let's get started. Um all of the Auditors seem to
be Vanishing from the cryptocurrency industry which is
you know for such a vibrant Innovative scene.
You would expect that the Auditors would want to be a part
of it so why don't you why don't you get us started?
Well, I guess let's start with finances.
Auditors, Masters, who was also used to sign off on the Trump
financial statements and now now and then they started doing
Sorry, finances proof of Reserve statements, which they are what
they are. You know.
And now they after doing one of those have decided that
cryptocurrency is too risky for them.
Which you know, says it's something we don't have to get
into exactly what it says but it says something there's other.
There's other Prager metis is the other one that is absolutely
100% confirmed. I believe to be quitting.
The cryptocurrency industry. Is that right?
Yeah, that they were there. Supposedly they were the first
metaverse Auditors and even they have decided that it is too much
for them to be in the cryptocurrency space.
They can't do it anymore. Yeah, not again, not not super
surprising. What do we got?
I don't know what we're gonna do about that.
Okay, so regardless the other one that I want to talk about is
one confirmed seemingly but is our Menino which Forbes reported
with two sources uncannily like unknown sources but two sources
claim that our Menino which was like the king of getting
involved with Currency companies was also deciding to wind up
there cryptocurrency business. They do real-time reserves for
TUSD and neck so so I don't know what those two companies are
going to do, maybe, I guess nothing.
They don't have to do anything, do they?
They never had to do this in the first place, right?
So, yeah. Pretty Prager metis.
Are Menino and Hey, Theo has arisen and last Masters and then
the last one is BDO who again, unconformity, but the suggestion
has been that. It looks like they are also
going to wind up there cryptocurrency.
Auditing Services which we know exactly who claims to be using
video and loves to brag about it which is tether.
So if If they're getting abandoned, what does that mean
for together? I think, is the question.
Well especially since tether is legally audit or legally,
obligated to provide these assurances under the New York
attorney, general. And so more came in, can't do
them anymore. Mha can't do them anymore.
The only people that are left. Like, who's left where they
going to get their assurances from Scientology?
Well, I'm I'm, I'm fascinated by the idea that this is gonna
happen. The I don't know what they would
do, maybe they go revert back to their top. 12 auditor that they
briefly were bragging about. I'm not exactly sure if I go to
their transparency page. No that's not going to have it o
is it? Reports and reserves.
There we go. So let's look at all of them.
How many of they had done so far?
One that certainly doesn't count.
One, two, three, four, five, six, seven, eight.
That is So they're almost done. In February of next year, tether
essentially no longer has to do these assurances, right?
According to the New York attorney general's deal.
Yeah, they had to do two years and after that they're free they
can go back to getting lawyers to sign letters getting their
Bank to sign letters ignoring it entirely.
Like I wonder if that's what they do.
I mean they're right at the tail end of this.
If video decides to quit on them.
No fine, Howard. How are they supposed to have
unrivaled transparency? Then I mean, do they need
unrivaled transparency? At that point.
Um, I don't know what their, I don't know, I don't know.
With unrivalled. Transparency means for them.
Right? And I don't know what their, I
don't know what they're actually off.
I don't know what they're actually offering of value
besides. Not, you know, not being
properly audited. Like, I don't think their
transparency is what is driving, any use case for them period.
Yeah, but like broadly, there were only a few firms, who would
do anything like audit firms, who would do anything in the
crypto space, and we're talking about four of that select few,
who would do anything. And they have all basically
said, no, this is too risky for us.
This is not worth it in there. All withdrawing from the space.
It says something, you know, I don't know what it, I don't know
what it'll end up meaning, I don't know if there's other
Auditors who will end up taking these people's place, it is
curious why all of them are quitting at once.
I guess it's not, everyone's just gonna say it's FTX, I don't
know if it's, I you would think that.
So when we've seen other odd accounting fraud, like with
Arthur Andersen in the late 90s and early aughts, Not every
accounting. Firm was getting slapped in
smashed with fines. They weren't all committing,
massive frauds at the time so I'm wondering like are they all
bouncing? Because they all feel like they
might Be doing like the same, they might all get in some
serious trouble right now, all of them, like, I'm genuinely
curious, I think there's a possibility that they're trying
to avoid them potentially getting in trouble.
One of the things that's interesting to me is Francine
McKenna and we've had on this show before a tree.
The Auditors on Twitter was tweeting about one of the
challenges for Auditors when you're assigned to audit like
ft. Exes were one entity in these
where it is a A. Combination of different related
parties just auditing that entity doesn't actually give you
that much insight. And this is the thing we talked
about when David Morris was on to talk Enron is because of all
the related party transactions. The Auditors didn't actually
have a good understanding of the financial reality and Worldcom
is a little bit different because they were just outright
like creating numbers in their accounting system, that didn't
make sense, but so is ft x, right?
Yeah. And so maybe FTX made these
Auditors realize, oh no, we were doing the same thing.
You've done before in that, we fucked up before and we got to
stop doing that before someone gets turned into Accenture 2.0.
Hmm. Well, I mean, this might bring
us to our next point which is financed which used excuse me.
That I don't remember which auditing firm.
It is matters. Is who did their proof of use
measures to do their proof of reserves that proof of reserves
was taken offline. But the entire sub domain firm
answers, crypto business was just white gone, just gone.
So, um, I am I guess, yeah, I'm wondering what could cause that
but then I'm also thinking we heard from apparently, the CFO
of Finance, right? We heard that, the CFO said the
previous CFO. Sorry, not the currency about
the previous CFO of binary answer it CFO.
I have no idea. the previous seat CFO said that they'd never
been shown the full financial documents which I don't, it's
hard to imagine that looks like it's absurd.
It is blowing my mind to imagine being the Chief Financial
Officer of an entity valued at many billions of dollars, doing
like tens of billions of dollars in trades monthly and you're not
allowed to see the books. What what is your role in the
organization? What do you actually do?
Well, I mean, so, I think this is where we get back to what?
Like what the role of an auditor is.
Like it's funny because we reflect on it and then a full
audit is a procedure that takes a long time.
You have to like, go through all of the all of the entries, all
of the ledgers, you have to figure out who was spending,
what for what, who was buying, what for, what do the numbers
match up with like, are you solvent?
These are like questions that can actually only be answered
with a full audit and so you and I were talking About this.
And I was like, why are we? I guess we address this with
Francine. Mmm but I was like, why, why are
we seeing so much of this at a station?
Assurance is like all this stuff that definitely is not an audit.
Well, the answer is because they can't get audits.
The more interesting question is, why can't these firms get
audit? Is it because these firms are
just stricken with fear about this new unproven 12 year old
technology that they just can't wrap their heads around or is it
that many of these firms have operated at Best in very gray,
areas in order to continue their operations while we still have
Grant Thornton auditing USD coin for the time being.
Yeah. But now that Circle canceled
their Back circles, probably not actually going to keep doing
audits to just going to keep you in debt to stations because
well, they were doing this back. They had to file with the SEC
like their actual audited. Statements yes audited annually
and subject to review by the SEC.
I see huh? Yeah, that isn't up as like it
but your foes they go. You're good.
That is interesting. I hadn't thought about that.
I do wonder if like now the now the go-to is just like Audit.
Why like why would we get in at a station and assurance and
audit? Why bother like, what are you
really accomplishing? I guess they can keep
accomplished trying to accomplish this.
They can keep attempting to I don't know push whatever.
This is on the greater public and expect everybody to kind of
believe it. Maybe I don't know but like
clearly it didn't work for buying ants kind of shot them in
the foot. I would say really backfired for
them almost but what is going on with Finance now, I think that I
don't know, it's it seems like a lot. yes, it's they keep seeming
to be behaving strangely likes easy going, watch out for
exchanges, making big transfers before proof of reserves and
then like two days later he's like, oh no, all these big
transfers were doing or because we're trying to do our proof of
reserves and then like it's it's kind of inexplicable the things
he's been doing and the way they've been behaving, they got
this one proof of reserves and now aren't going to be able to
get any more for a while and, and You were looking a little
more into the past of Finance recently.
Well, I wanted to bring to talk a bit about that.
Yeah, I wanted to bring that up because I was seeing him tweet
about how they had no debt. They were, I don't know if he
was quote. No, he's doing an interview.
They have no debt. They have no investment.
Like, no investors in by Nance. And then I just was, like, wait,
is that even true? I was just like, I want to fact
check that. And the reality is like, no,
it's not true. They do have investors but it's
like for a totally Like stupid amount of money, it's for 88888
dollars. Now being talked about why that
is mainly simply just Chinese superstitious Superstition.
Like it's a lucky number, so, you know, 88888 but why three
funds were able to invest in the finance series?
A that took place on September 1st 2017?
Apparently, I like it. I don't know.
I guess so. But it was a very, very small
amount of money and it was three firms.
One of these firms is called black hole Capital because, of
course it is almost as good as the name is Wormhole.
And what's interesting about this is that black hole Capital
basically only made investments in 2016 and 2017, they made one
investment in 2018, one investment in 2020, but they
have it seems like they're gone. I'm not sure if they're gone or
not, but It seems like they don't exist any longer.
So that's one of the But one of the fun forms.
Yeah, then the second one is fun city.
Capital fun city capital also seems to only have invested in
2017 and 2018 they did one again, one investment in 2020.
So fun city capital. These are both Chinese
china-based funds by the way, not that I mean it doesn't
matter but it matters a little bit with how hard CZ tries to
pretend there's no connections between finance and China.
It matters a little bit. That that's where the money was
coming from. I think that's right.
And I do think we were talking about what it what this
potentially could be, because it's not real Equity.
Like there's not a lot of equity that these people hold for this
little amount of money, or maybe it's more, it's outsized Equity.
I have no idea really. But like, either way, I think
it's, it seems like Quan Chi, which is kind of like you
scratch my back. I'll scratch yours deal in China
with its It's just kind of quid pro quo, kind of working
together to make business of reality anyway.
So these are two out of three of the funds that got in got an
investment, both of them seem to have vanished and then the last
one and we also have financing that they're not a part of the
us at all. Well, one of the investors is a
company called Limitless crypto Investments, which is located in
Houston, Texas, the founder, Matthew Jordan American, dude,
they Only made investments in 2017 and 2018 they have been
gone for four plus years now. And so I guess the question is
what are these companies? Why did they invest in finance
and why did Finance let them invest?
I think that the fact that they decided to do an equity round
for such a de minimis amount for not even one engineer salary for
one year. It's clearly not actually about
capitalizing by Nance and so because of that, they are now in
a position like so and as you mentioned the amount is
symbolic, it's lucky. So I think the implication of
them having this Equity round is because they were trying to
maintain important relationships and they thought that these
entities were ones who would be valuable to have a lined with
them from the beginning. At least, that's the only way I
can interpret them doing that low of an investment.
It's it's really weird. I don't really know how to
interpret it period other than what you said.
It's confusing. I'm like I'm not I'm not
exactly. I tried to get in touch with
some of these guys. I haven't been able to reach
them. Their websites seem to be very
Very much dead. Their Investments are pretty
poor for the most part, you know, they invest in like Ren.
I'm looking at Limitless has stuff right now and let's see,
Power Ledger. I don't even know what that is.
But okay, Power Ledger, tase owes Republic protocol one
chain. Wasn't that from 2017 one chain?
I don't remember, man. 2017 was half a decade ago.
We've been doing this for Half a decade Finance exchange is
listed as their Investments as well.
So yeah, I don't and I think all of it is just really confusing.
Also, he clearly maybe they've exited but none of them, it
doesn't show exits from any of their Finance Investments.
So I'm not sure about that. Well, in which corporate entity
did they invest in and does that entity still exists is that
entity still a part of Finance Finance has switched like
countries entities, everything like six times.
Times may be the current Finance corporate structure doesn't have
any Equity investors maybe. When they restructure, they
either wipe them out or bought them out or did whatever they
had to do. Maybe CZ is telling the truth.
So and this was a naive question that I asked you the other day.
Because I was also thinking about how there's by Nance Labs
outside of, because he's talking about how there's no investments
in by Nance and I was like well by Nance Labs exists and like
what's the deal with that? And it's like, I guess it's
supposed to be entirely separate from Finance itself, right?
These should not be yes. Like by Nancy, u.s. is totally
separate from by Nancy. Even though we saw some
interesting transactions happening with that this past
week. Let's so yeah.
And what your I'm going to pull you away from mine and slabs for
a second and we can go back. I promise fine.
That's fine. But Finance u.s. is buying
voyagers assets. Yeah.
Guaranteeing their liabilities assuming the court accepts it
It's a weird interesting to me because originally coined as
reported that Finance was the one considering it and it was by
Nance that was originally putting in the offer before ft x
one. And like by Nan slabs, as you
mentioned is their Venture Capital arm.
The one you would expect to be doing Investments you know
expect the exchange itself to necessarily be doing Investments
and then instead of by Nance it's Finance us which is
challenging for me because the reason you would buy a defunct
lending platform is because you decide that whatever the gap
between assets, Liabilities is it's worth closing because the
customer relationships, the customer data.
Whatever is going to be more valuable but by Nance u.s.
shouldn't be able to service a lot of the customers of Voyager
because Voyager wasn't like exclusively in the United
States. It was out of Canada on a ton of
their kind of their clients and stuff, we're not in the US.
So what Finance u.s. is going to have a bunch of new customers
who can't use by Nancy us. And then, because by Nancy, u.s.
is totally. Separate.
They're definitely not going to direct them all to finance.
Right? Like, it's, it's confusing.
Yeah, Voyager was Canadian and listed on a on the Canadian
Stock Exchange. Right?
Am I getting that right? Yes, I don't know.
It is it is, it is difficult to parse why they would do this.
I know his suggestion is, hey, hey Burrito, cut it out.
Cats man, I love my cat but anyway sorry I lost my train of
thought there. Yeah, okay so it's confusing to
me. It's confusing to me why Finance
us would buy this Canadian company.
And how they intend to utilize this in a positive way for
themselves. That's, that's the business
question, right? Because it's not about like, oh,
is this to help the customer? Because I never believed that
when these CEOs, or whatever, say it's to help the people.
Like, no, it's not. I need to understand why this
helps your bottom line. I'm not sure.
I totally understand that with this, but let me get back to
this other point, which was binding on slabs, which has a
fun named startup fund. So they gave that a lot of
thought. Well, now they also have the
Industry Recovery Fund. Well, is that from Finance Labs?
Yes. Oh, well, that hasn't been
listed yet. Okay that's good.
Is it as it probably hasn't actually been set up?
The probably never actually set up like an entity for the fund.
It was just easy going. Yeah, maybe we'll throw some
money in their wallet as they're confirmed wallet for the, for
that fun. I don't think so.
And they're not using that to do to do this purchase as they
haven't said, they are as far as we And also that would eat away
the entire half of it, I would eat away half of the Recovery
Fund that they had created, right.
Is it the only doing 500 million for Voyager that they're bit?
I thought they were paying a billion and their Industry
Recovery Fund was a billion. It's too, isn't it isn't that
their claim? I thought the goal was that,
eventually they'd find other people ended up to that get,
they never found other people. Fair enough.
Okay, so by not Finance Labs has this startup fund.
And there's two investors in it for apparently money, raise 500
million. Apparently, this is all I assume
is all outside capital. I have no idea, actually, but
500 million dollars and the two companies, rdst, Global and
Breyer capital. There.
I mean DST I can't imagine possibly spent half of it.
It didn't spend 250 million dollars on this Briar Capital
has one to ten employees. And I don't know, I don't even
know what they have assets under management but I don't think
that these are ginormous companies so that 500 million
mostly probably came from Finance.
I would assume. Yeah.
Well, maybe by NASA's just making so much money that you
just can't even understand it Cass.
Maybe there's just so many fees and so many opportunities for
money, this is the pushback that we got.
This is the real pushback that we get.
And so, let's, let's actually acknowledge that as like a
possibility. Like, maybe they genuinely are
making so much money that they can dump 500 million dollars
into a fund at once. Like maybe that actually isn't
that much money to. They can't show it to their CFO
that they're doing that, right? And I guess I'm curious.
Why? Why I'm curious why they are not
just hiding their financials. But like, It just doesn't seem
like the most prudent thing to do.
And why are they asking for help to establish these recovery
funds? If they have so much money that
they can just dump 500 million dollars into a start-up fund at
once? It doesn't seem super realistic
to me, but I'm not sure. Maybe I don't have like, they
are the number one Exchange in the world and crypto currency
exchange in the world. Yeah, they're up to what?
Like, 70% of total volume. That's decentralization.
Who doesn't want fine? It's controlling basically the
entire Global Market for cryptocurrencies.
I can't think of anyone who would be better suited for that
job but you have a theory right now about Finance, I'm not sure
if you want to talk about it in full but let's just say, no I
can talk about that. Okay, so there was some writers,
reporting suggesting that a couple of different prosecutors
were ready to indict finance and CZ and money laundering charges.
There was also reporting that the indictment was being held
up. Because of the money laundering
and asset recovery service. Part of the Department of
Justice who needs to sign off on this type of indictment for
money, laundering indictment for something this large.
We also found out that Finance hired, the former head of em
Lars to go and negotiate in Washington, to try to strike a
deal, which is weird. And my gut instinct is that they
are going to be successful in Striking a deal because we saw
with bit mix, right? Like you can violate quite a few
things and as long as you're eventually cooperate, the
prosecutors are going to take the win over the death.
You know they don't want to. And so like Well here here's a
counter that I hadn't thought of when Initially had brought this
up here, the two other people that were subpoenaed or indicted
or whatever with Arthur. Yeah.
Greg Dwyer was the one who went straight up on the like I don't
even know. Did if he eventually got caught.
I think he did. Maybe, I'm not sure, but the
other the other guy, Samuel something he also didn't
immediately get like they were all On the run.
I think at first and I think Arthur was the first one to flip
which again I think if you're the first one to flip it gives
you some room for leniency in the prosecutors eyes, like
Caroline is going to be treated way better than Sam is going to
be. And it's not simply, it's not
because she necessarily did less wrong, who knows?
Yeah. But like it's because she went
straight to New York, turned herself in and said, I'm
talking, I'm Hansel. You everything.
You want to see the secret signal?
Check old wire fraud, I'll show you the secret here.
Yeah. Come on.
You know you want to see it. Oh, I think I think that could
be part of this. And when you look at CZ like
sorry, who's on, who's ahead of him like, who else would they
want to catch besides easy? I can't think of anybody.
I don't even, I don't even know if he actually is in control of
Finance like he is but he isn't. I it seems weird.
I we were talking about that too.
I think he's in control of Finance.
I think he might, I think there might be some people who at
least have a say in what's going on.
And he has to, at least hear them out.
Like people he had to have a special Equity round with very
symbolic number kind of thing. That's those painted reason.
Is that what you're saying? That's something that rings a
bell. Yeah, I mean.
Yeah it's possible. And honestly I think this kind
of segues us into like our last kind of challenging topic we
wanted to talk about today which is like the role of regulators
in like this kind of increasingly globalized thing.
Like what is the appropriate response to a by Nance to an ft
x to a tether and like what is that?
That really mean, it's really, it's tough because I've been
thinking about it and it's so it's so weird.
The two side, the two heated sides that we hear on
cryptocurrency Twitter. Like one side says, if you guys
had figured out the right regulatory regime then FTX never
would have left the us and this never would have happened which
is like a pretty bold claim. But then also then the other
side says like But like FTX happened out there in the wild
was was like driven off because it was a bad actor and therefore
regulatory regime is working perfectly fine and I think
really, neither are exactly true.
Like, I don't think actually either of those.
I don't think it's a duality here.
I don't think it's either or, and I think there's probably
something. I'm in the middle of that, that
is right. The idea that Ft x went into
been a massive fraud if the US had a different regulatory
regime is in sync, that's an insane thing, but they stole
billions of dollars in customer funds would quadriga.
Have not been a fraud if they had been set up in the u.s. it's
absurd. And so like, that is nonsense
and like on a more practical level.
We talked about this a little bit.
When John Reed's, Turk was on, they keep requesting regulatory
Clarity, but they keep getting Clarity and Get like both
Clayton and genzler been quite clear that basically every token
they've seen as a security, which would mean all the
exchanges trading basically any token need to be registered as
Securities exchanges and that a lot of these issuances are
probably illegal. They just fundamentally don't
want that to be true and they're sore trying to ignore it so that
they can continue to persist in the act in their activities in
the hope that there won't be serious intervention.
Because there hasn't been political will for serious
intervention but even if there Air is like, what do you do if
okay, X or Y, OB or Polonia? Acts are doing all sorts of
weird stuff like that. Why would that possibly be the
SE c--'s jurisdiction? Or why, why should they bother
caring about it? Probably I would assume I guess
I have no idea but I would assume most customers on those
exchanges are not Americans. Like, I don't know, I don't know
what role, the SEC plays in a global regulatory regime.
We've the world is changed drastically.
Since the SEC was formed even since the cftc and like for god,
sakes the Department of Justice, like the world has the world has
shifted dramatically and we're talking about like, you know, we
talked about do Quan, you have Interpol.
That's like the clearest International police force that
exists. That's literally what it is, but
even that you can seemingly outrun it.
What Interpol is less than International?
Police force and more of a way for police forces, around the
world to communicate. They've got a few of their own
agents but they're not like really an investigator to ever
like serious independent Force while 195 different countries
are on board. Yeah, would probably like, okay,
some level of cooperation with that, right, right.
But yet do Quan is in Serbia or Kosovo anyway.
But but my point being here. That we've seen previous, we
view you Talked about pokers Black Friday being an example of
like regulators and law enforcement agencies working
across the globe. So yeah, enforce actions on
these illegal money, transmitters and services
providers and stuff. Yeah, but in order to pull it
off, it was like a many part investigation, involving all
these, all this Global cooperation, and you kind of
need to get the buying in then for wherever these individuals
and companies and stuff. R2, like let you go ahead with
shutting it down for political and other reasons.
And in many of those and like, so back to like you mentioned,
these other exchanges will be okay, exploding X, whatever.
My guess is, many of them have. At least one u.s. person
treating them, right. Like someone has been able to
evade their kyc or whatever and so they probably could get a
Nexus right? But like is there the political
will to go after a bad actor? Just because an American happens
to be using it for this company that's outside his ass.
And is it worth it? Worth the resource?
What and what do you do? How do you even enforce that
action, right? Like if this is a Chinese
company or Singaporean company or like a company in a country
that isn't keen on working with you financially to stop them,
what how, how would you possibly make a?
That's I mean that when the China hustle came out like
that's a, I don't know, everyone should watch it.
It's a pretty great documentary and it's just about these short
sellers who essentially the only way one especially once I Once
they're able to, these companies are able to list on America, the
American Stock markets, and It ultimately hurts American
investors. But the worst thing that The
Regulators can do is kick, then delist them from the exchange.
Like nothing happens to them back in China.
China doesn't care when they steal a bunch of American
consumers dollars. It doesn't matter to China.
And so I think like it's perhaps the ideal outcome, right?
That company. Exactly.
And so that's I guess that's what I'm saying is like, We're
entering a global. I like a strong globalized
world. Now I think we were opening up
to globalization and like the early aughts and like it started
to spread through the internet and communication and now we
just see like true globalization and I just wonder like, it seems
like Regulators are just going to be endlessly.
Chasing And trying to put out fires that I like it.
I don't even know how they could and like just bring this kind of
back together. One of the complaints that you
mentioned is that there is no regulatory Clarity but like I
think there has been clear communication and what US
exchanges are supposed to do, and they don't want to because
doing that means they can't compete with the exchanges that
aren't in the US, right? And like, I think this is going
to become increasingly a problem because regulators and lawmakers
now have this clear example of a bad Actor and FTX and Alameda
that they can point to to justify a whole bunch of other
stuff that's going to primarily affect the companies that are
easy to go after. Not by Nance, not will be not
Polonius, not just in Sun, not any of those people because that
requires internet International coordinated, law enforcement
efforts, and that's a hard thing to do.
So I think part of where my issue comes from though, with
the way American Regulators have handled all of This is the best.
The best example I have in my mind right now is moonstone,
Bank where you have, I'm just going to run it, run through it
really quick. Basically Alameda.
Research invested 11.5 million dollars into a very small Bank
in Southeastern Washington State.
It was valued at twenty times Book value which is unheard of
in banking in most Industries. It's just unheard of evaluate
the bank at 115 million. They had ten million dollars in
customer deposits and then seemingly and one can confirm
this because of Bank, secrecy laws, but seemingly that allowed
Alameda, research and FTX to deposit funds onto Moonstone
Banks platform into their bank. And who knows what kind of you
know, suspicious activity reports were conducted, who
knows like who knows what that? That investment allowed Alameda
research to do. But that isn't the end of the
story because the person who owns moonstone Jean Charles
Payne who is a French Bamiyan citizen.
I actually have no idea if he's only French or if he's French
Bamiyan or if he has who knows how many citizenships he has.
But he's not American is what I will say.
And I don't know, like, I don't want this to sound, maybe it
will, maybe it will sound this way, but it's like I would
prefer if there were really, really strict regulations
around. Whoo, What foreigners can buy US
banks that are federally Federal Reserve regulated, and this guy
owning or being chairman of the board for deltek Bank & Trust,
which is one of the most mentioned banks in the Bahamas
leaks. It's troubling to me that the
Federal Reserve was like, yeah, it seems fine.
It seems like a fine cat, let him by Moonstone.
Well, and what was interesting is after like protest had the
conversation with the Federal Reserve in which Washington DF
fi there was this piece and Shadow Banker by a former
Federal Reserve chairman where they basically described what
Moonstone was about, how a company could come in.
Purchase one of these small banks that already has OCC
approval. Apply at the FED for fed
approval that basically gets rubber-stamped.
And if you're lucky the more thorough analysis, the FED might
do isn't going to come for a couple years.
And so you have a couple years where you can hypothetically, of
course do absolutely chaotic things before The Regulators.
Like, look at the data retrospectively.
And go. Well that was crazy and she or
he was it was a she yes, she argued that this is like not
uncommon. That is a thing that is
absolutely happened before. And I am just like Doesn't that
my question for some of these Regulators was like, okay.
So what new tools would you need to be able to have caught this
stuff that you didn't catch. And almost all of them are just
saying, like, well, nothing we don't really want to catch it.
Well, I don't know if that's their, I think their answer is,
they don't need new tools, which I think is a fair response.
They're probably right, they probably don't need new tools.
They aren't doing their job but they're they don't under not
interpreting. That is what they're saying.
They're they think what they're saying to me is like we do it
perfectly. Find job, leave us alone but
what they're actually saying to me.
What I actually here is we don't regulate like that's not the
federal reserve's job, is it? We deal with monetary policy, we
check interest rates and blah, blah blah, like yeah and big
huge portion of that is Regulation.
Yeah, and honestly it kind of comes back to what we've talked
about in here before is that broadly in the United States?
And I think globally there hasn't been the political will
for like serious regulatory intervention since like at least
Reagan right like chaotic cat. And so, because of that, lack of
political will any Regulators who would have been interested
in doing Really strenuous regulation, really thorough.
Looks at all these things have are incentivized, not to stay
with. The Regulators are incentivized
to find other roles and other things to do, because often it
can be challenging for those individuals to advance in those
types of roles. One of the things that struck me
in Reading, Sam Cooper's book. Willful blindness is that many
of the top like RCMP investigators, who started at
you like identified the Vancouver model of money
laundering, Eventually got forced out because they were so
frustrated at continually running into walls and their
superiors and stuff and being unable to pursue the
investigations and go after that kind of thing.
And I and in the United States, I think that problem is a little
more diffuse but like especially when you have a political
climate where there is not even agreement on what that
regulation should exist, you can't even get both parties to
agree that there should be regulation.
Let alone what that regulation should be.
It becomes very challenging for The Regulators to operate
becomes very challenging. Lunging to get Regulators the
resources they need. And when you start to develop
that culture, more resources, won't even necessarily fix the
problems because you lack the like institutional will and
knowledge to pursue that kind of thing.
So, this is a kind of what we keep coming back to.
I think we talked about this when Rohan was on because he was
talking about deal, the former head of the mint who, like, came
up with the state quarter program and really
reinvigorated. The mint is we should expect
more from our Regulators. We should demand more from her
bureaucrats but it is very challenging.
To find bureaucrats and Regulators right now, who want
to do those challenging things? Yeah, the pushback I got from
regulators and I talked to them was really disheartening and,
and the, the lack of it. They, it seemed like they were
definitely not motivated. And I like, I don't know what to
say about that. You know, you hope that these
people actually love their jobs and care about what they're
doing. There's that dirty money episode
about HSBC, which I urge everybody to watch And in that
episode, it's just a dude. It's just a dude who has no
special banking education. Like didn't going.
Didn't get any special degree to be doing what he's doing.
He got the job because they wanted to find someone who
wouldn't be passionate about what they were doing and they
thought will hire this guy off the street.
He'll check the Stars minimally and if it doesn't match, then
he'll let it go. But he just started noticing all
these really weird things that were just slightly misspelled or
slightly slightly off kilter and he just started pursuing it and
it's screwed their whole business up.
And that's where you're like, why aren't their Regulators who
were at least like you don't want the Mexican drug cartels
and the Colombian drug cartels moving billions of dollars into
the US banking system. You don't want that.
Stop it from happening. And why aren't you?
And I don't. And it's like, it is lack of
passion. Its lack of motivation is lack
of but if caring and its lack of reward for caring, right?
Because these things are so set up to be.
So resistant to, that kind of thing like, Government is about,
I like I guess I think of these people who are in these
positions, making a hundred twenty-five thousand dollars, a
year with Benefits getting the best medical getting a nice
retirement. Like that is the benefit of
working within government. Like that doesn't mean you get
to just sit and be lazy and not care about your work.
It means that's the incentive and you should still be
passionate. Meanwhile.
Yeah like Jerome Powell is a sent a millionaire or whatever.
I don't know man I like I definitely think That we're
witnessing systemic failure of the regulatory system us and
otherwise dare Act. And the Bahamas is a joke is a
joke, the entire Caribbean in general, like almost all of
those countries just the banking structures and the offshore, you
know, captive insurance and just the wildest schemes.
To totally flout Financial regulation and nobody cares.
Nobody cares whether it's there or here or in Europe or in in
Asia. I don't know.
And I don't know what the, I don't know what the solution is
in the end. I guess that's at the kind of
bring this back to where we started.
We were seeing the global. Is it globalization take its
toll on all of this stuff, taking its toll on Regulators
abilities to accomplish their goals.
I mean, how do they fix it? They can they turn this around?
I don't know. I really don't know that we can
turn around the regulatory. Some of the regulatory issues
because like We are so fundamentally divided and if you
look at like the Supreme Court decision on the EPA, their
General tenor seems to be that they are going to reduce every
Regulators power to the bare minimum interpretation of the
very letters of the law that created them.
And like, even in the case of the SEC, we've talked about,
like, they part of their mandate, at least, their soft
one is that they're not supposed to like, bankrupt or takeout
companies. Like they are not supposed to do
that, if the company is still existing.
And like so when you can't really clearly tell what your
intervention is going to cause can you really intervene in that
way? And that's also kind of true
when it comes to like Brito, like judges.
Like it's very rare in America for there to be a case where the
final sentence is like killing me.
Corporate dissolution, right? Like a corporate death sentence,
that is a penalty that can be used, but it's very rarely used
in America. And I think it's kind of related
to the same kind of things. We're seeing here is that
there's this kind of expectation that you shouldn't go after
these people. You shouldn't try to destroy
this value. It More important to protect it
than to punish some of this bad behavior.
And that's true. Even when the bad behavior like
HSBC, which you talked about before?
The cartels had boxes that were designed to be like one inch
smaller than the teller window in each Dimension that they
would stack full of 20s, wrapped in elastic bands, and shove
through there, like it was blatant and they're fine was
large, but it was a fraction of the amount they laundered.
Yeah. I mean, I guess I wish that more
of these, more of these Leaders and law enforcement agencies
were going after going after these companies that were
committing this stuff and doing these these wrongs and not
necessarily trying to put them out of business.
But like I don't know. People should get in trouble for
this stuff. It's so it's silly to me.
It's silly to me and I know it's thick.
It's a classic like white collar, crime.
People, you're killing me. Oh, this is my little white
collar Criminal come here. But yeah no I think you're right
that like you want these people have consequences, you went
there to be punishments but like it's a challenging thing to
develop the political will for and like if we lack it to even
do it internally in America, like trying to Envision some
Global cooperation between Regulators that results in some
kind of serious impediment to buy Nance will be Polonia X or
whatever is spun up. Now, that ft x is gone.
I really struggled to Envision. What that would look like?
like, I mean, I hope I hope that I don't know.
I don't know what we're going to see.
I'm I'm I'm I'm reaching a weird hopelessness wave right now.
But we'll see how that pans out. I think I said to you, there's a
specific bank. I would rather see that bank go
down then. See tether go down at this
point. Like not that tether can
burrito. That's who I really want to see.
Go down now is burrito. Had enough of this nonsense.
She's gonna just keep going. Hey gal, get over here.
Okay, well I think that's going to probably do it.
We thankfully before this took a complete turn we were able to
discuss the Auditors finance and the future of future of
regulatory regime will see how that.
Turns out, I don't think I don't think it looks good.
Thank, thank you all for tuning in.
I'm probably going to re-upload this in like an hour or so, to
fix some of the freezing we had in the beginning and maybe some
of the audio issues. So if you experience those in
the beginning, check back on our Channel and like an hour.
Thank you all. Turns out, I don't think I don't
think it looks good. Thank, thank you all for tuning
in. I'm probably going to re-upload
this in like an hour or so, to fix some of the freezing we had
in the beginning and maybe some of the audio issues.
So if you experience those in the beginning, check back on our
Channel and like an hour. Thank you all.