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EMERGENCY POD: FTX sells to Binance with Vinny Lingham and Sunny Madra | E1607 — Transcript

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0:51off for the first four weeks all right
0:54everybody all hack is broken loose with
0:56Sam bankman Freeds FTX exchange Molly
0:59maybe you could tee up as best you can
1:01yeah this one has happened we're having
1:04an emergency podcast for those of you
1:06joining us live we haven't been live in
1:07a while it's a double red flag situation
1:09I mean you know we're we're gonna dive
1:12into this but I think we can safely say
1:13that we have this is a hinge event in
1:16the crypto economy Sam bakeman Freed's
1:18FTX exchange is being acquired by its
1:22primary competitor binance after what
1:23appeared to be a run triggered by
1:27binance on FTX primarily related to ftt
1:31if I'm doing this right the currency
1:33that FTX created and then now there's
1:37this buyout in process where you have
1:38two competitors like they just basically
1:40fought to the death like Godzilla and
1:41King Kong and Godzilla in the form of CZ
1:44yeah binance is emerging Victorious
1:46there are still however very large
1:48questions about Alameda research sbfs
1:51hedge fund and Market maker related to
1:54ftt it's all an insane hot mess
1:58guys tell me what I got right and what I
2:00got wrong here and what's happening yeah
2:02let's go to Sunny because I thought all
2:04of this stuff was supposed to be on the
2:05blockchain and completely transparent
2:06isn't that the value of crypto
2:09yes
2:13too he's like yeah these exchanges are
2:16centralized and they're showing that
2:18they're they're you know Cubs and
2:19weakness um no that's mostly correct let
2:21me just add a couple other interesting
2:23tidbits because they they add the right
2:25color to it so binance was actually an
2:28investor in FTX and that's how they
2:32ended up with their ftt token so as the
2:35two started out in the early days they
2:37were quite friendly and then uh and over
2:40the course of the years and I think uh
2:41sometime maybe within the last 24 months
2:44binance wanted to sell it stake in um in
2:48FTX and FTX gave binance ftt tokens
2:53roughly about two billion dollars worth
2:54of tokens for for the for their you know
2:57stake that they had in there and then
2:59what subsequently happened as FTX has
3:01grown and we've seen super high profile
3:03right they have Stadium sponsorships
3:05they have F1 sponsorships they have Tom
3:08Brady
3:09um you know all kinds of great stuff had
3:11had had okay well they still might but
3:16um you know what what also happened is
3:18Sam and had spent a lot of time in
3:21Washington and talking about crypto
3:24regulation in fact we even spoke with
3:25that in the last podcast Jayco actually
3:28did an interview with SPF and he can
3:29touch on this and what really hit the
3:32head in the last say seven days was an
3:35article came out that was questioning
3:37the assets the balance sheet of Alameda
3:41and that the balance sheet of Alameda
3:43was holding a lot of FDT tokens and that
3:47also pointed back to some liabilities
3:49associated with FTX and ultimately that
3:53also tied back into some word I guess CZ
3:57who's the founder of binance was getting
3:58about what Sam was saying about him uh
4:01you know on uh in Washington and that
4:04led to him you know basically saying Hey
4:06I want to sell my tokens and that
4:08started the run on
4:10um the business in the last 24 48 Hours
4:13here
4:13right Vinnie yeah what is your take on
4:17this insane chess match and what just
4:21happened because it does seem like Sam
4:24overplayed his hand and maybe flew a
4:27little close to the sun the sun in this
4:30uh metaphor being regulators
4:32is that what is the spark here is that
4:35Sam was talking smack about
4:39Finance to regulators and then that made
4:43CZ go are you trying to get into the are
4:46you trying to get the reason why it
4:47unraveled are you trying to get to that
4:48yeah like what what what less
4:51fundamentally I was like okay Sam's a
4:53U.S citizen he was living in Hong Kong
4:54and then he moved to Bahamas to run his
4:57operations okay why would you do that
4:58why would you be operating offshore like
5:02that because he ran to organizations he
5:04ran elevator and he ran FTX and and
5:08these two should have been barred from
5:10doing any business with each other I
5:12mean I'm from a corporate governance
5:13perspective you know I can like you guys
5:16know you can't have a you're kind of a
5:18situation where you're you know you have
5:19another another company that's borrowing
5:21from a company uh that you have deposits
5:23of funds where you can just issue your
5:25own currency like ftt
5:27Etc so there was just no like corporate
5:30governance across these structures
5:31because they were based outside the US
5:32and there was no real regulation
5:34regulatory oversight and and it
5:37basically created a mess
5:38um if you look at the way that element
5:40is a trading organization
5:43um and FTX is a trading platform but
5:45it's owned effectively by the same
5:46person
5:47and so you you know even though there's
5:49this illusion of two separate entities
5:51elevator would invest in crypto projects
5:53and companies uh FTX would list the
5:55perps and there's lots of reasons why
5:57this is a bad thing but like they list
5:58the perps a Perpetual swap space 16
6:00allows you to just hedge out your wrist
6:02so they would take maybe a a 12-month
6:05Shaft or 24 month shaft they'd list the
6:07perp and then we'll just hedge out and
6:09make the margin so they don't really
6:10care about the project they take
6:11liquidity out of the market that sort of
6:13thing so this has been going on for
6:14years this is not news it's all over
6:15Twitter people have been talking about
6:16this for months now and the bottom line
6:19is you had double dealing here and it
6:21eventually unraveled
6:23so let's yeah let's break down let's
6:25start with the relationship between FTX
6:28and Alameda that you're alluding to so
6:29for people who don't know
6:31um and what this kind of looks like even
6:33though these are separate businesses
6:36sister companies let's say alameda's
6:39balance sheet included a large amount of
6:42ftx's ftt token in fact ftt is the
6:46largest asset
6:48what we have is like these we have these
6:50rumors what's on there and by the way
6:52for you know the way Batman sheets work
6:54is you have eight billion on the one
6:55side you have eight billion liabilities
6:57on the other side whatever like it's not
6:58as simple as like I mean I can you can
7:00have a balance sheet with a trillion
7:02dollars of liabilities and throwing
7:03those assets and it's a net zero balance
7:05sheet so no matter how big the bet it's
7:06really like what's it what's the nav and
7:09then I should clarify this is based on
7:12this leaked balance sheet seen by coin
7:14desk dated June 30th those numbers don't
7:16look right for example like the Solana
7:18that they've quoted on the balance sheet
7:20it wasn't there isn't that much locks
7:22along in the markets that number is just
7:24wrong because they would have to have
7:26more locks along than what is out there
7:28so that number is used to see as of June
7:3030th Alameda holds 3.66 billion dollars
7:33of unlocked ftt and 2.16 billion of ftt
7:36collateral if you're saying you think
7:38those numbers are wrong you think
7:41about it I'm not saying I think but here
7:44but here's the point which is that that
7:46document is what started to create
7:49questions right about this conflict of
7:52interest the doc the document basically
7:54started off you know a rumorable cycle
7:57where people started digging in and when
7:59people start looking at the actual
8:00untrained wallet since they're tracing
8:02things you know there's a lot of good
8:03crypto sleuths out there and they find
8:05this stuff and I think it created some
8:07sort of a a catalyst way CZ was looking
8:10at this going why am I holding a half a
8:12billion dollars with this FDT which may
8:14not be worth this and these guys are
8:15printing money they probably don't have
8:16you know like look there's no guard
8:19rails right and he he knows but just as
8:21well as everyone that Alameda and ftt
8:23FTX are you know if two separate
8:27entities for legal reasons but reality
8:29is just controlled by the same person on
8:31both sides even though it has its own
8:32CEO
8:34um and you know if you look
8:37it's very clear I mean it's always in
8:39hindsight it's clear but like if you go
8:41if you just look back six months 12
8:42months the ascent of of Sam three years
8:46from zero to you know the next Warren
8:48Buffett I mean there's just not that
8:50much money to be made in crypto that
8:52fast I mean you can't just go in a mass
8:5415 billion dollars worth of Fortune
8:56money in crypto that quickly during
8:59running an exchange for all the reasons
9:01and you know so something had to be up
9:03so it was pretty money I I don't know it
9:06so you had red flag one this connection
9:09and the fact that alameda's balance
9:12sheet appeared to include a significant
9:15portion of a token that FTX and SPF made
9:19up issues so that was issue one right
9:21then issue two is SBF starts making a
9:25ton of noise he is buying uh
9:29so they didn't make up the token so
9:31binance has the BNB token if the inside
9:34the ftt token these tokens are used by
9:36Traders to to reduce fees there's some
9:38utility people hold it it's an
9:40investable asset that wasn't the issue
9:42it actually works you know there's a
9:43there's a burn down there's whatever
9:45that's not the issue the issue is it's
9:47just not as liquid as it should be for
9:50the purpose but they were trying to use
9:51it as collateral so they would go and
9:53say can we borrow dollars we'll give you
9:55we'll print two billion dollars or two
9:57billion worth of FDT it's Unchained
9:59everyone knows it's there but if you try
10:01and sell two billion worth of ftt in a
10:03day to get your your loan back you can't
10:06it's not liquid enough so basically it's
10:08a liquidity issue and but but let's not
10:12go get away from the fact that like this
10:14couldn't happen in the US legally right
10:16you couldn't do this in the US
10:18so then SBF starts to make a bunch of
10:22noise he is rescuing companies he's also
10:25it seems courting regulation maybe in a
10:29way that the community starts to dislike
10:30well whoa whoa so hold on so rescuing
10:32companies doesn't mean so the blockify
10:36and and block fine FTX elementa we'll
10:39just lump them together for now had a
10:40relationship where there was some
10:42collateral post to two block fight he
10:44had to save him otherwise the otherwise
10:47what happens is and he knew this the
10:49regulars come in the administrator of
10:50the company comes in and they just dump
10:52it and so they're going to be dumping
10:53all the collateral that they posted into
10:55the open market because they have to get
10:57funds back for the depositors ETC so you
10:59had to save it yeah and I suspect
11:01something similar with voyager happened
11:03as well however so his goal is to
11:05prevent them from selling ft 100 and it
11:09seems that some of these actions started
11:10to court some controversy he seemed to
11:12be maybe promoting some regulation that
11:15would make things less decentralized
11:18yeah CZ got the impression that SPF was
11:22smack talking him like there was there
11:23were some precipitating events that
11:25caused CZ and binance to all of a sudden
11:27liquid liquidation all this ftt and
11:30effectively caused a run on FTX right
11:32it's uh Sunny if this had been this
11:34color yeah well Vinnie if this had uh or
11:37sunny rather if this had been uh these
11:40assets were all held in Bitcoin or
11:42ethereum or something and there had been
11:44buyers available then CZ liquidating a
11:47bunch of Bitcoin he had or this would
11:49not have been an issue this is all based
11:53on the fact that Sam SBF as he's called
11:56printed his own currency and then
11:59splashy cashy used that token uh to do
12:03Commerce in the world while having this
12:05conflict of interest so there's three
12:07possibilities here of how to operate a
12:10business in crypto one is to be in the
12:12United States and follow as closely as
12:15possible to the extent it's possible
12:17Securities regulation
12:19then there's to be on chain and let the
12:22algorithms or you know the rule set
12:25operate in complete transparency as
12:27Bitcoin does as ethereum does
12:30and then there's a third choice to have
12:33some centralized
12:34Luna I guess falls into this or did at
12:38some point
12:39um what was the other one that collapsed
12:41recently and SPF right it seems like
12:45there's a group of people who tried to
12:46centralize what should have been
12:48essentially a Bitcoin or ethereum like
12:52processes is that correct Sonny yeah I
12:54mean kind of Vinnie's theme was was
12:56correct here so I'll just jump in till I
12:58really run with it I think it just comes
12:59down to when you print your own money
13:02which is what you know ftt was and you
13:05start using that as an analog for money
13:08and then someone wants to turn it into
13:10Fiat in in the case of what you know say
13:13CZ was trying to do yesterday and
13:15there's not enough liquidity there the
13:18price of that thing will crash and if on
13:20the flip side someone has taken that
13:22same printed money and borrowed against
13:25it we're levered with it or you know
13:27done any of the financial things that
13:29you can do with these type of things
13:30that's going to create a serious problem
13:32and that's what we saw unfold very very
13:34quickly
13:36listen Squarespace is the platform where
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15:03website or domain related to all this
15:06the noise that got created yesterday and
15:09this has nothing to do with ftt started
15:11to create a lot like a bank run and you
15:14know that's happened in traditional
15:15Finance I think the number that I saw
15:18and you guys can confirm was six billion
15:20dollars with withdrawn from FTX in the
15:23last 24 hours now what that circles back
15:25to is nothing to do particularly with
15:27ftt although that's what probably
15:28started that run because people got
15:30afraid that it was you know because of
15:31what's happened recently but now the
15:33secondary question that comes in is how
15:36much of that 6 billion was actually
15:37there or had they further lent out or
15:40levered or you know pledged in other
15:42places so they could go by Voyager and
15:44these other assets so this is the
15:46intermingling that's happened here that
15:48we don't fully understand it'll take us
15:50months to understand what happened yeah
15:52it's this is not a simple thing I mean
15:54let's just get I want to go back to
15:55basics Jason and with FTX started off
15:58they allowed anyone out of the platform
16:00to trade things which U.S persons are
16:02not allowed to trade so you could log
16:04into FDX with a VPN with no limits no
16:06kyc no AML and they built their business
16:09that way and so you had a ton of people
16:11coming in from America using FTX as a
16:14fast platform you could get 100 times
16:16leverage whatever it was I didn't use it
16:18but I have a ton of friends of American
16:19and when everyone is trying to clamp
16:21down and not let the U.S citizens use
16:23these products FDX opened it up he did
16:25it for a year or two and he grew the
16:27exchange massively and then they kind of
16:29cleaned it up it's kind of uber style
16:30Jason like you know I think okay well
16:32we'll have this FTX Us site and then
16:34we'll do these other things and and but
16:36but the company culture was Regulators
16:39you know we'll just get around them and
16:40we'll keep doing this stuff and and
16:42that's the company culture and then what
16:44happened recently was I think with all
16:46this collapse Sam was trying to go to
16:47Washington and figure out and you know
16:49donating a billion dollars to the
16:50Democrats whatever he was trying to like
16:52you know it's part of the keynap act
16:54right you you first you make your money
16:55with a little bit of shade and then you
16:57try and clean it up afterwards but it
16:59failed because CZ was CZ saw right
17:01through him to some extent and said well
17:03this is gonna affect me and he and and
17:05that was it and Vinnie if I can add
17:07something like look like this type of
17:09situation is not unheard of In
17:10traditional banking you know if we
17:12remember back to the great financial
17:14crisis we had very similar situations
17:16there where Banks uh were not able to
17:19handle this you know not a stress test
17:21an actual test of of the banking system
17:23and they were about to go under and then
17:25the government had to come in and save
17:27them so this type of situation is not
17:29isolated to crypto it's happened in
17:31traditional Finance for a long time now
17:33those banks have stress tests and rules
17:35that say that you know govern how much
17:37they have you know what kind of Holdings
17:39they have to have around that and that
17:41regulation doesn't exist in this space
17:43the irony here a little bit SPF was out
17:45there talking to these regulators and
17:47clearly you know they didn't have a
17:48one-for-one situation because if they
17:51did the run on their
17:53um assets yesterday wouldn't have
17:54created a problem they could have just
17:56given everybody their assets back and
17:57they would have had less inside their
17:59platform and so I think that to me is
18:01like the real if you're really kind of
18:03zooming into everything that's the real
18:05problem yesterday is that that people
18:07get unnerved they see ftt crashing then
18:09they say I want to get my Bitcoin out I
18:11want to get whatever asset I may have
18:12inside fftx and they don't have all
18:15those assets and that's what you know
18:16they I think even said today they've
18:18Frozen that now
18:19just so I'm clear FTX The Exchange just
18:23so everybody who's listening who maybe
18:24is in neophyte uh to this is similar to
18:27coinbase or even Robin Hood when they
18:29trade cryptocurrency
18:31they had six billion dollars pulled out
18:33but that six billion dollars pulled out
18:35is not this ftt
18:37token uh that they created I guess
18:40essentially like a stable coin their
18:42in-house token they're in here it wasn't
18:45a stable not a stable it's just it's
18:46variable okay so their in-house token
18:48that they use to move money around
18:49without fees
18:51the 6 billion taken out were people who
18:53just saw the headline oh FTX is having a
18:56problem well Spirit I'll just pull down
18:58my Bitcoin I'll take my ethereum out
19:00I'll take my salon out whatever they're
19:01holding so what impact I wonder does
19:04that take because I don't know what
19:05their complete holding is at FTX I don't
19:08know if that's public but essentially
19:09they're losing all their customer base
19:11is that what's happening
19:14and they don't have the money to cover
19:16those withdrawals yeah so let's just say
19:19you know the they've we're gonna
19:21theoretical example right this is not
19:23accurate but just for illustrative
19:24purposes let's just say they had taken
19:26in 10 000 Bitcoin and ten thousand
19:28ethereum and ten thousand sold and
19:31yesterday people show up and ask for
19:34um those 10 000 back but they had in
19:37turn gone and lent that in other places
19:39to generate fees or to use that to get
19:42the capital to go by Voyager like you
19:44know they're you know your bank does
19:46that as well it takes your deposits and
19:48goes and lends it out to other people
19:49does mortgages and other things like
19:51that and so we don't know what that
19:53ratio was but whatever that it was that
19:55six billion caused a real problem for
19:58them yesterday to that led to you know
20:00CZ coming in and go ahead Vinnie I have
20:02a bit of speculation yeah and I'll I'll
20:04throw it out there now the the leaked
20:07document that you saw Molly was it says
20:11there's a bunch of luxolana now let's
20:13just assume it's you know it's 800
20:16million but let's just say it's 500 or
20:17300 million or whatever it is if you
20:19melt if you like multiply that back up
20:21for what Solana's price was a year ago
20:23so go 5x on that that's probably 1.5 to
20:262 billion dollars in Seoul which they
20:29bought at market prices in theory now I
20:33I don't think they would have bought
20:34that much salon at market prices I think
20:36what they would have done is bought the
20:37bought the safs the luxafs and they
20:40explain what that is
20:41but basically basically it's like a yeah
20:45with token projects you can get you can
20:47acquire the rights tokens that they get
20:49distributed over time so let's say it's
20:5024 months worth of distributions so you
20:52buy that but Alameda is a trading
20:54company they don't really want to take a
20:56position in anything they they just
20:57trade us they you know they'll buy it
20:58buy for five sell for seven like they
21:00don't care so when you buy something
21:02with a 24 month unlock or even longer
21:04whatever it is you want to hedge out so
21:07you wouldn't say okay I I'm guaranteed a
21:09hundred sold over the next 24 months can
21:12I go in get can I go borrow 100 sold
21:15from someone pay a pay a fee and then
21:17sell that into the market and get the
21:19cash right now and there's a spray that
21:21you make and you know whatever the
21:22percentages now if the if it's purely
21:26like a you know a theory if they did do
21:29that because I think it's very likely
21:31that they hedged off the position okay
21:33sell spot by by you know 24 months
21:36whatever they're effectively net short
21:39sale right now so the people that they
21:41gave the collateral to so if I go to
21:42Sunny and borrow 100 sold from him he's
21:44like what's your collateral hey Sunny
21:45I'll give you three times the value in
21:47ftt and you're like okay fine I'll lend
21:49you the soul now if if the ratio between
21:51the two drops too fast I have to you get
21:54a margin call I've got to either top up
21:55or whatever once you get down to a
21:57liquidation threshold Sonny is going to
21:59sell it at ftt and buy Saul back from
22:01the market because he take he you know
22:03he's bought us all for one of his
22:04customers and he's making a margin on
22:06the interest this could unravel in a
22:08weird way in the next
22:1024 hours where the market suddenly
22:13realizes that these guys sold short a
22:16whole bunch of Solana and now the market
22:18has to go repurchase it and you could
22:19see the process a line of Skyrocket
22:21because it went down from very high
22:23numbers lower down and my suspicion is
22:25that someone sold it heavily down and I
22:27think it was possibly them last year
22:29that's just a theory I don't have
22:31anything to back it up but we will see
22:33you in the next 24 hours to be clear you
22:35do own a ton of soul and you were
22:36involved yeah
22:37exactly yeah but it sounds like what
22:39you're saying is there are likely if
22:42there if there are some Shenanigans
22:43there are others so there are likely a
22:45lot of knockoffs well the thing is it's
22:47a so what's strange to me is how they
22:50would have so much locked Soul on the
22:51balance sheet or a statement that you
22:54saw 863 million is what that leaked
22:58sheet said and Caroline said in the
23:01Tweet the CEO of Alameda said that
23:02they've got hedge positions that was one
23:04that was probably one of the biggest
23:06positions they can't hedge ftt because
23:08that's their position right so they
23:10would they second biggest position
23:11looked like it was Solana and they may
23:13have hedged it no I don't know for
23:15certain it's a speculation but it makes
23:17perfect sense to me that that someone
23:19lent them soul and held ftt is
23:22collateral
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24:37which way you want to take this model
24:38I'll let you direct it
24:39um and maybe this is where you're ready
24:41to go didn't a bunch of venture
24:42capitalists
24:44pour hundreds of millions of dollars
24:47into FTX
24:48and wouldn't they as Venture capitalists
24:51have done some level of diligence and
24:53understood more fully Molly
24:56she's laughing at me
24:59I'm sorry wait I need my flag
25:02I don't want to pick out any ones that
25:04either I'm friendly with or whatever but
25:06I specifically have stayed away from
25:09this whole mess because I was like I
25:10don't understand
25:12you know what's going on here but if a
25:15bunch of venture capitalists poured
25:17hundreds of millions of dollars while
25:19this was all going on
25:21would they not have understood these
25:23positions and done some sort of risk
25:25assessment Molly and then if the
25:27research team could pull up who's
25:28invested and when
25:30I'd like to maybe hear from our panel
25:32here and some speculation as to what
25:36impact this will have on Venture
25:37capitalists going forward and them
25:39wanting to participate in crypto because
25:43this to me seems like one of the biggest
25:45somebody correct me if I'm wrong I think
25:47the two biggest bets in crypto
25:49Adventure which is a subset of all
25:51crypto
25:52were the nft sites like openc
25:56if my memory serves me correctly and
25:58specifically FTX am I right Am I Wrong
26:00Molly here
26:02I think that's correct and I think
26:03before we even get there we should we
26:06should sort of say that there's still a
26:08pretty outstand there was a great
26:09Twitter thread today about what is still
26:11an outstanding question so we know that
26:14CZ and binance came in and said and and
26:17by the way Susie I thought was a little
26:19salty in his tweet in which he because
26:21SBF had tried to sort of say
26:22everything's fine there's no liquid
26:23liquidity crisis CZ comes in tweets
26:26there is a significant liquidity crisis
26:29we are coming in with this rescue but
26:32there's still an outstanding question of
26:33Alameda research which is not included
26:35in this deal
26:37between FTX and binance and which may
26:40still have this huge hole in its balance
26:43sheet related to ftt meaning to come
26:45back to your point J Cal that VCS might
26:48still lose a ton more money
26:50here if Alameda research comes apart is
26:53that accurate
26:55yeah what do you think Sunny let's get
26:56Sunny yeah what do you think Sunny
26:57either of those topics
27:00yeah can I actually just frame one thing
27:02on top of it and I'll dive into those
27:04short things real quick I think one one
27:06thing that we really mix up the in the
27:09the broader industry mix-up there's like
27:10sort of and you know I'm happy to
27:12iterate this with you guys but I think
27:13there's three different things to look
27:15at there's cryptocurrencies there's
27:17blockchain Technologies and then there's
27:20like kind of web3 related you know
27:23um apps and infrastructure and that all
27:25gets mixed into into different things I
27:28think when we looked at the biggest
27:29class of investment
27:31um you're right it covered the exchanges
27:34that were trading nfts it covered
27:36um our marketplaces and then exchanges
27:38the other thing that a lot of investment
27:40has gone into L ones right so basically
27:43people trying to create the equivalent
27:45of like the next ethereum or the next
27:46Solana and because in the rationale
27:49there is those things become quite
27:50liquid as soon as the utility starts
27:53running on them and so those would be
27:55the I would just add l1s as another area
27:57where we've seen a lot of investment go
27:59into
28:00um you know we talked about Aptos and a
28:02bunch of different things in the
28:03previous podcasts right and so I think
28:05those are the three areas where the
28:07probably the heaviest investment has
28:08been so far but then you have to kind of
28:10step back up and say well what is
28:12cryptocurrency investing what is
28:13blockchain technology investing and what
28:15is like people investing in applications
28:17and services built around those
28:19Technologies like let's call that web3
28:20apps
28:23where does FTX fall for you and ftt for
28:26you ftt is a startup yeah that is a
28:30Marketplace uh you know like coinbase is
28:33and then ftt is just a tote so what I
28:36see is that Marketplace ftt is the token
28:38yeah so I'm I'm not like I'm not a big
28:41fan of what's kind of the so let me
28:44frame it from from my perspective I
28:46believe FTX and it was primarily a
28:50cryptocurrency exchange now they've
28:51added more features over time they allow
28:53people to to trade I think in the US you
28:55can even trade stocks on it now but
28:57primarily in first months it was a
28:59cryptocurrency exchange so that was
29:00built around the speculation around
29:02cryptocurrencies and Vinnie touched on
29:04this earlier and we've seen it and they
29:05they would list assets that maybe
29:07shouldn't be listed or we don't know
29:08what's happening behind them and allow
29:10people to trade those things so that
29:11falls into the cryptocurrency
29:13speculation and then what they did along
29:15the way is they created their own
29:16currency in ftt so that it all is
29:20amongst the same first bucket of like
29:21cryptocurrency speculation
29:24that it falls into and then they have a
29:26sister company that is a market maker a
29:29market maker to their exchange yeah to
29:32their exchange exactly so really
29:33fundamentally everything we've been
29:35saying since the first time we did this
29:36round table is you financialized before
29:38you made the financialization the
29:40product
29:41and right and it seems like it got a
29:43little out of hand but so
29:45fundamentally before like fundamentally
29:48when it comes to this entire ecosystem
29:49and then let's talk more about VC
29:52how big a deal is this
29:56I think it's really huge right and then
29:58Vinnie jump in right after because
30:00you're about to say something why is it
30:01huge well Sam was in front of all the
30:04Regulators right with from the funny
30:06pictures of the shoes not tied properly
30:08to him speaking in front of folks you
30:11know Jayco we sat in a session with him
30:13with a bunch of really you know uh high
30:15profile institutional LPS right he
30:18wouldn't say the name but we will not
30:20right but
30:22um you know these type of things like he
30:23was he was he was one everyone was
30:25pointing to as you know credibility he
30:27was donating a lot of money to
30:30um the political uh parties uh and so
30:33this really shakes the stability of of
30:36the ecosystem pretty heavily
30:39so because he was so credible because he
30:42was so out front
30:43he was supposed to be The Golden Child
30:46in a way that would take crypto from
30:49this dark alley put it in the light and
30:52he would lead it to a clean regulatory
30:55environment which when I did a favor for
30:58a friend and interviewed him at this
31:01event which I won't say the name of
31:02because I was asked not to
31:05um it was unpaid by the way Molly I made
31:070.0 for this incredible interview why
31:10friends like these we can't even run it
31:12okay I can't we can't run it it's just
31:15lost in time I mean there's this
31:16recording out here because well somebody
31:18can lead
31:20um I'm not asking them to but well
31:21that'll be interesting anyway this just
31:23happened two or three weeks ago Molly
31:24and so at that interview there was a lot
31:26of discussion I kept going back to
31:28regulation and he is he he had set up I
31:32think he was the number two donor in
31:34this cycle of elections in on the
31:36Democratic side it was either one or two
31:38and it was very interesting
31:41that he was going to be the one to clean
31:42it up and now the person who was meeting
31:44with all these people Vinnie
31:46is the person who blew it up
31:48that takes huge credibility away from
31:51crypto this makes anybody who was saying
31:52hey let me get in here and work with
31:54this guy to clean it up
31:55and it blew up in their laps am I am I
31:57correct video I mean was that too
31:59cynical
32:01the issue is like I thought it was
32:03really rich for a guy to be up there you
32:05know trying to regular is when he
32:07flooded all the laws initially when he
32:08set up his company and he's based
32:10offshore based in the Bahamas throwing
32:12money around of politicians I thought it
32:14was kind of weird and uh yeah and it's
32:17it's just disingenuous you know
32:20I mean obviously he was running a facade
32:22and he knew it and when the market
32:23started taking you know he was kind of
32:25scrambling and when Celsius blew up and
32:27three AC blew up and you know it's
32:29contagion contagion spreads it just
32:31takes a while sometimes but Bitcoins on
32:33a precipice right now I mean it's trying
32:34to hold the 18 000 level but did a bit
32:36of a spike down
32:38um it's climbing back up this could be
32:40the bottom because quite frankly after
32:42this there's just no one else that's big
32:43you know there's no one left there's no
32:47one left right that has to be yeah yeah
32:49so yeah this this is the this is
32:51probably the bottom and if the bottom
32:52doesn't if the bottom holds it's a
32:54double bottom from the earlier crash
32:56earlier this year that's actually a good
32:58thing and I think we're up from there
32:59but um if the bottom a good thing why is
33:03the double from a technical analysis
33:05perspective uh double bottoms tend to
33:07show that there's lots of buy support
33:09below a certain level and so if we hit
33:12you know we really we're already in the
33:13double bottom zone right now if it
33:15breaks then crypto's basically gone
33:17backwards look we're going backwards
33:19anyway for a while there's is you know
33:21the developer needs to slow down there's
33:22just there's too many people trying to
33:23make money out of crypto and crypto
33:24doesn't make money by itself so the
33:27industry is pretty big big ecosystem I
33:30mean I still think it's I think I still
33:32think the play is Bitcoin funny enough
33:33right now I think with all those drama
33:35that's happened globally in crypto I put
33:38a tweet about it today I think Bitcoin
33:40is probably the best risk adjusted uh
33:42BET right now in crypto so owning
33:44Bitcoin is
33:45um you know reasonably safe it's going
33:46to be you know it's a global effectively
33:49it's a reserve asset for the crypto
33:50industry and you know I've had my
33:53criticism of Bitcoin but I think it's
33:55it's it's got a lot less
33:57um dependencies and in fact if you're
33:59looking at a hard currency to borrow
34:01money against you should like lend money
34:03against Bitcoin not ftt for example
34:05right and so that's the issue Sonny I
34:08saw you give a little head tilt there
34:09does your neck hurt or do you disagree
34:11with this Bitcoin assessment no no sorry
34:13never I don't ever disagree with the
34:15Bitcoin assessment I think like it it to
34:18me is just a different class of asset
34:19now it's not related to any of these
34:21other things that we're seeing and so
34:22when we kind of start merging them it's
34:24it's unrelated for me I think it's
34:26uncorrelated to all this stuff exactly
34:29exactly exactly it's actually it's
34:31recently uncorrected it's like yeah
34:32that's the point that's the good that's
34:35a good thing yeah okay so I think I
34:36think I think the these are this is
34:38probably like let's just keep keep this
34:40in mind like Bitcoin right now is ten
34:43percent below below the peak five years
34:45ago and before you adjust for all the
34:48inflation that's happened in the US
34:49dollar and just the time and how the
34:51Network's been built out it's actually
34:53pretty cheap at these levels if you
34:55assume you know like I mean five like
34:57five years ago Bitcoin hit 20 000 bucks
35:00it said 18K right now
35:01I I just think that you know as a former
35:04former Bitcoin Maxi I'm like and then I
35:06got reformed I'm kind of heading
35:08background I wouldn't say I'll ever be a
35:10maxi again but Bitcoin is uh Bitcoin is
35:12probably going to be the the Saving
35:14Grace for crypto because it's just you
35:16know it's just widely held well Molly
35:18here's that one your chart we were just
35:19referring to with the double bottom if
35:21you remember a year ago uh this is an
35:23exactly one year chart so this shows
35:26November of last year remember we hit
35:28that 70k-ish moment and people are like
35:31wow it's going to a million dollars a
35:33coin it comes crashing down to the 40.
35:36and then comes crashing down again to 30
35:38and that was arguably a double bottom
35:41there
35:41and then uh the triple down to 1918
35:44which is where we live today so this is
35:47either two or two and a half bottoms as
35:49Vinnie is talking about but your point
35:50Vinnie if I may summarize it is you saw
35:54support at 40K people wanted to own it
35:56there you throw some support at 30 and
35:57you're so and you see very long support
35:59at 18 to 20 and even if it goes down to
36:0212 to 15 you're suspecting there's going
36:05to be support there as well
36:07yeah I think I think uh I think Bitcoin
36:10is uh look Bitcoin dominance should go
36:12over 50 the crypto industry shouldn't be
36:14operating with the Bitcoin dominance of
36:16less than 50 dominance basically is the
36:17measure of the relative value of crypto
36:19cryptos market caps I think the top 152
36:22Bitcoin and that should always be in my
36:25opinion about 50 if it's below 50
36:27there's a lot of speculation going on
36:28especially in a tight monetary
36:30environment 50 should be the minimum so
36:33Bitcoin you know either alt is going to
36:35collapse further and you know and
36:37Bitcoins dominance goes up or Bitcoins
36:40undervalued I think it's the latter I
36:42think the whole sub inhabit nobody's
36:43selling nobody wants to sell stuff at
36:45these levels anyway so I just think
36:47Bitcoin needs to go up in value and I
36:48think Bitcoin
36:50you know if you look at what's happening
36:51in the rest of the world of Fiat and
36:53government printing and debt and
36:54everything else Bitcoin is probably the
36:56right play right now so is Bitcoin this
36:59might have done but is it decoupled
37:01compromise I mean and is it decoupling
37:03like do you feel like it's so safe
37:04because it has so much institutional
37:06backing at this point no it's safe
37:08because no one can mess with it you know
37:10someone like Sam bank and freed like you
37:13know if he had to go borrow against
37:14Bitcoin we wouldn't be having this issue
37:16right now because the people who you
37:18know they would liquidate the Bitcoin
37:19into liquid markets and everything would
37:21be fine it wouldn't be liquid issues the
37:22the moment you saw the further and
37:24further away you move from Bitcoin the
37:26more you know volatile them I mean it's
37:29it's highly it's just highly leveraged
37:31place
37:33take it from me hiring developers is
37:36really hard and so many startups
37:38struggle to hire fast enough to keep up
37:40with demand so lemon.io is going to help
37:43you hire better developers and they're
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38:09in under a week and of course it's more
38:12affordable I can't tell you how many
38:13companies I know are burning money every
38:17month but their products not improving
38:19and if your product doesn't improve well
38:21then you can't make money you can't hit
38:23your Milestones you need developers to
38:24hit your Milestones you don't hit your
38:26Milestones investors will not put more
38:28money in and you won't get Revenue
38:30coming in from your customers okay so if
38:32you want to save time you want to get a
38:34great developer you want to save money
38:36all you have to do is go to lemon.io
38:38twist and they'll give you 15 off your
38:41first four weeks that's right 15 off
38:44your first four weeks when you go to
38:46Lemon
38:47l-e-m-o-n dot IO slash twist it is so
38:51hard to find developers they are so
38:54expensive and that's why you need
38:56lemon.io and a lot of times like I feel
38:58like you know in this industry we just
39:00relive the moments of the past like this
39:03is the difference between trading like a
39:05you know an S P 500 stock or like a oh
39:08you know OTC a stock right uh pink
39:13sheets exactly right where you know you
39:15can see those stocks have tremendous
39:17volatility when they don't have a lot of
39:19liquidity and I think this is what
39:21really just happened with um with ftt
39:23and and then what's tied behind it is
39:27people were allowing them to use FDT uh
39:31as as like something that's quite liquid
39:33even someone as sophisticated as CZ you
39:36gotta remember he took 2 billion in ftt
39:38as part of his return on his investment
39:41in FTX so there's a lot of sophisticated
39:43players here that are all kind of
39:45intermingled into the same story he
39:47didn't say hey if you so much shell game
39:51somewhere yeah some might argue a bit a
39:55shell game
39:56one thing I'm unclear of Molly did CZ
40:00actually sell his ftt and get Fiat and
40:04cash or Bitcoin
40:06was he able to get out some amount of it
40:10did he find a buyer yeah yeah well he's
40:12ftt yesterday he dumped it he dumped it
40:15but dumped it that's what that's what
40:18called that's what caused the Run yeah
40:19so he got cash somebody he got cash
40:22there's the bag or something yeah
40:24somebody was on the other side of that
40:26trade bought it and it's down 75 now
40:29okay let's wrap with the impact and the
40:31CEO just as well the CEO of Alameda the
40:33CEO of Alameda offered 22 dollars for it
40:36and a tweet as well
40:37what is it at now
40:39five I think oh there's three three
40:42three three three I wonder if they're
40:44the ones who bought it so wait if they
40:46bought all that
40:48they would then have been depleting
40:50their cash Reserves
40:51clearing his position and all of a
40:54sudden they're giving us all of their
40:55ammunition Jason let me explain to what
40:58happened yesterday so basically the
41:00Margin Call number was I think 21 okay
41:02so at 21 you get a margin call from
41:04whoever you've borrowed money from and
41:06you have to put up more collateral so
41:08they couldn't Let It Go below 22. so 21
41:10was like the threshold but they so then
41:12it dropped down and it hit 21. what
41:15event happens is now they're in Margin
41:16Call so they're going to get liquidated
41:18if it drops any further and the number I
41:21think was 14 so the moment it hit 14
41:23today then the liquidations happened and
41:26so anyone who was holding FDT were just
41:30dumping it and selling it because they
41:31had to because they remember when you
41:33borrow money from someone typically they
41:35give let's say for example it was Solana
41:37right so you go borrow salon and give
41:38FDT when it hits a set number you're at
41:41risk as the effectively the middleman
41:44the transaction because you you took
41:45Solana from one of your clients and you
41:47lent it to to
41:49um you know to Alameda and now the price
41:51of the because that's what isn't worth
41:52it so you've got to sell that collateral
41:53and buy back what you what you learned
41:55to replace it otherwise you know you're
41:57on the hook um and so that that's why I
42:00mean as this thing hits so I think it's
42:02gone down so fast that some of the
42:04collateral holders couldn't get rid of
42:06the FDT fast enough and now they're all
42:09underwater so we're gonna find out very
42:11soon whether or not well first of all we
42:13found out who these lenders are because
42:14it's not guys this is not 50 million 100
42:16million this is billions there's someone
42:18out there there's billions of dollars of
42:20loans on the books right now that are
42:22going to get Pennies on the dollar back
42:23and it was collateralized by FDT
42:27and now that's my presumption based upon
42:29the leagues that I've seen so far I
42:31don't know I haven't seen anything
42:32audited I don't know but on the
42:34presumption that there's three to five
42:36billion dollars out there it's they're
42:38sitting with and it's going down to zero
42:40very soon they're sitting with no
42:41collateral and Alameda owes them money
42:45we don't know what element is balance
42:47sheet looks like whether the nav exceeds
42:49you know whether assets exceed the
42:50liabilities or not we don't know we're
42:52gonna figure out where these liabilities
42:53sit we just don't know where they are
42:55right now all right well we do know that
42:56some of the jet fuel let's do the VC
42:59part of this and then we'll let you get
43:01to your dinner there in Lisbon okay
43:02let's just look at FTX January 2020 FTX
43:06raises 40 million dollars out of 1.2
43:08billion dollar valuation investors
43:10include Pantera Capital Evangelion never
43:12heard of a bit scale Capital BR Capital
43:14the 15x valuation
43:17in 20 months by July 2021 FTX raises a
43:22billion dollars at 18 billion investors
43:25include altimeter Toma Bravo Tom Brady
43:27thomasack Sequoia multi-coin SoftBank
43:30tiger and coinbase VC
43:33then three months later
43:36more jet fuel they raise at a 40 higher
43:39valuation 420 million at a 25 billion
43:42valuation in October of 2021 with tiger
43:45Sequoia Paradigm temasek light speed
43:48BlackRock Bond iconic you can see that
43:50as we go on these names are getting more
43:51and more recognizable and then finally
43:54in January 2022 they raise at yet
43:57another 30 higher valuation
44:00500 million raise at a 32 billion
44:02valuation investors are insight
44:04Lightspeed Paradigm tiger and SoftBank
44:07I mean yeah that's how you're going to
44:10zero right I personally passed on those
44:12rounds I was offered positions so now
44:15it's it's going to go to zero now right
44:16this thing gets liquidated CZ owns it
44:19people get some equity in finance those
44:22guys no those guys go I I personally I
44:24personally think it's all going to go to
44:25zero uh yeah wow because because you can
44:30see these stepped in to protect the
44:31positive funds because this is the thing
44:32like effectively leverage was used okay
44:35so using the ATT tokens it's not hard
44:39it's not hard collateral it's leverage
44:40you know it's like it's like it's like
44:42Jay can I can I like borrow a thousand
44:45bucks from you I'll give you an IOU
44:46that's leverage you know yeah because
44:48you don't have a collateral for it it's
44:49just an IOU and ftts ftt was just ious
44:53from from FTX and so if you wipe out all
44:56the leverage they've got nothing I mean
44:58at the very least they've just lost a
44:59seven billion dollar asset in one day
45:03so the balance sheets basically tilted
45:06they basically have liabilities now no
45:07assets because that whole thing's been
45:09marked down to zero why did you pass
45:12well I mean I I just never believed in
45:15I'm not a big fan I never was I never
45:17have been
45:19uh sunny as we wrap here uh a year from
45:21now when we look back at this moment in
45:23time will this be uh framed as the the
45:27end of crypto the beginning of crypto
45:292.0 what when we were here a year from
45:32now we have some clarity and distance
45:33and maybe they do the post-mortem and
45:35they figure out what the hell happened
45:36here
45:37what is this going to look like is
45:39somebody going to jail uh say I'm going
45:41to be
45:42um you know like uh our friend uh dokwan
45:45at Luna on the Run what is this what
45:47will this look like we we never wish
45:49that on people but I I think you know
45:51we'll just come back to something which
45:53is like a fundamental I think there's a
45:56lot of goodness that can come out of
45:57Regulation here's another reason that
46:00we've seen now in terms of limits and
46:02rules that the government provides to
46:04protect you know the depositors in the
46:06users of these platforms so I think
46:08we're going to see more of that here I
46:09think what we'll also see is a push back
46:12towards sort of decentralized Technology
46:14right you know at the end of the day the
46:16reason we don't know what's happened
46:17here is that these exchanges are
46:20centralized and we don't have a full
46:22view as opposed or what blockchain
46:24promises us to say how much is levered
46:26and how much of the deposits are there
46:27and what's been lent out against it and
46:29so when you go into decentralized like
46:32the D5 world you can see that and so I
46:35think we'll see a push towards that and
46:36there's been a lot of folks that have
46:38been saying that's been a key problem in
46:40in the ecosystem is that we are really
46:43been celebrating centralized exchanges
46:45uh and that you know those kind of sorry
46:48go ahead and check out well I'm just
46:49gonna say so we trust decentralized
46:52Technologies trust in regulation do not
46:55trust centralization and individuals
46:58Vinnie the final word for you what will
47:01this look like in a year I I just posted
47:03it in the chat so five years ago
47:05unfortunately my My article uh vision is
47:08a little too far ahead sometimes I
47:10posted a Tweety saying exactly what
47:11Sunny just said I'm almost certain for
47:13those who are not watching us live I'm
47:14almost certain we will see a top 25
47:16crypto exchange fail or be shut down in
47:19the coming months this will be the
47:20Catalyst for the emergence of
47:22decentralized exchanges and this is a
47:24key theme I'm expecting in 2018.
47:29four years too soon
47:32yeah so but yeah but the principles
47:34exactly as as Sunny said like that we
47:37have to move to decentralized exchanges
47:38and
47:39um and and by the way like you know I
47:41might as well plug this while I'm at it
47:42like this is what civic's been building
47:44right we decentralized on chain kyc
47:46we've worked with like uh you know uh we
47:49have the solarized decks where it's a
47:50decentralized exchange with kyc built
47:52into it on chain like this stuff is out
47:54there nobody wants to use it they still
47:56want to use uh centralized exchanges but
47:58they don't realize when using
48:00centralized exchange you have no
48:01visibility no transparency and this
48:03happens and we keep making the same
48:04mistakes over and over as a community
48:06and it's just going to stop guys we're
48:08just going to move to transparency yeah
48:10we should say one last thing before we
48:12let you go FTX investors tell Dan per
48:14Mack the company has not yet sent them
48:16any information on the deal and says all
48:19he knows is what he's seeing on Twitter
48:22so wow so those PCS who put in millions
48:26of dollars in communication wow there's
48:29nothing to say there's a due diligence
48:31it's a non-binding Loi it's a it's an
48:34expression of interest to acquire to try
48:36and stabilize the markets which it
48:37hasn't really done this is be frank it
48:39hasn't stabilized anything things are
48:41just getting getting worse from seven to
48:43three while we were talking yeah walk
48:46away tomorrow yeah yeah walk away at any
48:49point in time so so let's be frank
48:51there's like there's nothing to tell
48:52investors and if you're an investor
48:54watching this or you're looking at all
48:55you should do right now is say okay it's
48:57a write-off and move on you don't spend
48:59any more time thinking about it don't
49:00stress about it if you have FTX shares
49:02what will B will be okay so that's it
49:05that's it hello eyes we call them in the
49:08business letters of insignificance
49:10gentlemen thank you for doing this
49:12emergency pod and educating everybody
49:13here I mean thank you literally when a V
49:16when his early stage sharp says I got
49:17three rois I said great let us do
49:19nothing let's let me know when somebody
49:21puts a deposit down this is going to be
49:23crazy and it's just so great to have you
49:26two gentlemen come at a moment's notice
49:28to explain this all to us uh and it
49:31actually makes me I gotta say Molly
49:33while the centralized stuff collapses it
49:35makes me more attracted to the power of
49:37the decentralized options that these
49:40gentlemen are working on and the power
49:42of Regulation and centralized ones I I
49:43do wonder if this means hey coinbase uh
49:47you know as a public company and here uh
49:50you know in the in the U.S market
49:52becomes more valuable because hey you
49:55know if you're operating here and not
49:57the Bahamas you know you got a lot more
50:00at risk the management team and the
50:02board over there are uh insignificant
50:04risk they can't go on the lamb if in
50:06fact that's what do Quan has done Molly
50:08any final thoughts while we're up
50:09coinbase is back up so maybe it's a sign
50:13I just checked my tiny little portfolio
50:15and the app is working again so maybe
50:18the sign no I I'm with you I think the
50:20future is I talk about this with energy
50:22markets all the time the future is
50:24decentralized
50:25all right there's too much risk in
50:27centralization we'll see everybody next
50:29time bye bye

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