WEBVTT - SEC Attorney predicts a bigger crypto crash coming 0:00:00.040 --> 0:00:02.519 Hello, and welcome to another episode of The Mark Moss Show, 0:00:02.520 --> 0:00:05.720 where we talk about the decentralized revolution, of course, each 0:00:05.720 --> 0:00:08.360 and every week, looking at through the lens of politics, finance, 0:00:08.440 --> 0:00:11.920 and technology, which of course technology is bitcoin and the 0:00:11.920 --> 0:00:15.920 decentralized technology that's bringing. Now I am sitting down today 0:00:16.040 --> 0:00:19.880 with a special guest, James Murphy. You can find him 0:00:19.960 --> 0:00:25.840 on Twitter at meta law Man on Twitter and um 0:00:25.960 --> 0:00:28.120 he's a securities lawyer. Now, I don't have a lot 0:00:28.120 --> 0:00:30.680 of lawyers on and securities lawyers, but you know, I've 0:00:30.680 --> 0:00:36.200 been talking extensively about the FTX situation that's that's happened there. 0:00:36.360 --> 0:00:38.680 I put out a video on YouTube talking about how 0:00:39.080 --> 0:00:42.960 I think we might have seen the last crypto bull run, 0:00:43.280 --> 0:00:46.479 and I said, because I think securities are going to 0:00:46.680 --> 0:00:49.680 finally kind of make their way into the space, which 0:00:49.720 --> 0:00:53.400 will stop a lot of this venture capital money that's 0:00:53.440 --> 0:00:55.480 created these kind of pump and dump situations that are 0:00:55.480 --> 0:00:58.160 going there. And I thought, hey, let's just talk to 0:00:58.320 --> 0:01:01.760 an sec lawyer about that. So James, so welcome to 0:01:01.800 --> 0:01:04.440 the show. Hey, Mark, I love your show. Thank you 0:01:04.480 --> 0:01:06.200 so much for having me on. I'm looking forward to 0:01:06.200 --> 0:01:10.360 the conversation. Now, I know you just wrote an article 0:01:10.520 --> 0:01:14.319 for Coin Desk and you were talking about UM things 0:01:14.360 --> 0:01:19.200 that you think Andrew Sorkin should be asking. UM, SBF, 0:01:19.240 --> 0:01:22.120 Sam Bankman freed. So for the audience that's not caught up, 0:01:22.920 --> 0:01:25.200 how could you have missed it by now f t X, 0:01:25.319 --> 0:01:30.080 the second largest cryptocurrency exchange, blew up. Um. It looks 0:01:30.120 --> 0:01:33.399 like clear cut fraud to me. I know that the 0:01:33.480 --> 0:01:35.559 security laws are in a little bit of gray area, 0:01:36.240 --> 0:01:39.679 but fraud has always been fraud. That doesn't change that 0:01:39.800 --> 0:01:42.680 in my opinion. UM. And instead of Sam Bankman Freed 0:01:42.800 --> 0:01:46.880 defrauding and now even admitting too in messaging UH in 0:01:46.920 --> 0:01:49.520 the last week or two that he's done these things 0:01:49.520 --> 0:01:51.840 that I think are fraud, Um, he's still walking around 0:01:51.840 --> 0:01:54.600 as a freeman. And even worse than that, he's going 0:01:54.720 --> 0:01:56.800 to go speak at an event I think set up 0:01:56.840 --> 0:02:00.080 by New York Times. UM. Sharing the stage with are 0:02:00.120 --> 0:02:05.240 criminals like Janet Yelling, Secretary of the Treasury, UH, Ben Affleck, 0:02:05.600 --> 0:02:11.000 H Zuckerberg, UH, Larry Fink from Black Rock, etcetera. So, UM, 0:02:11.080 --> 0:02:13.959 he's going to be interviewed by H Andrew Sorkin probably 0:02:13.960 --> 0:02:16.400 going to be given up a bunch of softball lobs 0:02:16.440 --> 0:02:18.120 that he can just knock out of the park, or 0:02:18.480 --> 0:02:21.959 he can spread some misinformation on and uh, James, I 0:02:22.000 --> 0:02:23.800 know you had written this article said here's what he 0:02:23.880 --> 0:02:27.280 should be asking. So walk us through some of that. 0:02:27.400 --> 0:02:31.359 To start out with, Yeah, well, uh, great lead up. 0:02:31.600 --> 0:02:35.360 I am interested in the world of digital assets and 0:02:35.360 --> 0:02:38.360 have been paying a lot of attention to you know, 0:02:38.400 --> 0:02:42.080 what looks like a number of dominoes that have fallen 0:02:42.240 --> 0:02:46.720 and will follow fall yet and there will be, of course, 0:02:46.800 --> 0:02:51.320 this impact on the overall market. Uh, and we can 0:02:51.360 --> 0:02:55.520 talk about that at great length. It's not just prices 0:02:55.600 --> 0:02:59.680 and viability of companies. But you know, when you have 0:03:00.320 --> 0:03:08.040 a spectacular collapse, it creates tremendous latitude for policy makers 0:03:08.040 --> 0:03:12.519 and regulators to go after everybody else. And so I 0:03:12.560 --> 0:03:17.800 think I buy a significant part of your thesis about 0:03:17.840 --> 0:03:21.320 what is to come. But in any event, with respect 0:03:21.360 --> 0:03:26.359 to SBF, I am pretty uh plugged into the ft 0:03:26.560 --> 0:03:30.280 X bankruptcy and what's going on there. And um, you know, 0:03:30.360 --> 0:03:34.280 he has tweeted a little bit in ways that are nonsensical, 0:03:34.320 --> 0:03:37.560 and I thought, Wow, if he's really going to answer 0:03:37.800 --> 0:03:42.839 questions of a legitimate reporter, wouldn't it be nice if 0:03:42.920 --> 0:03:48.080 some real tough questions were asked, UH, and so I 0:03:48.120 --> 0:03:51.400 started tweeting them out. You know, I said, hey, look, 0:03:51.680 --> 0:03:54.440 I've been doing this for thirty years. I've questioned con 0:03:54.560 --> 0:03:59.119 men many times, dozens of times, and other kinds of fraudsters. 0:03:59.320 --> 0:04:01.880 Here's how I would go about it. And so I 0:04:01.920 --> 0:04:05.520 started putting out some of these questions on Twitter. And 0:04:05.560 --> 0:04:10.480 then all of a sudden last night, UH, an editor 0:04:10.520 --> 0:04:13.240 at coin Desk called me and said, we like what 0:04:13.280 --> 0:04:17.320 you're doing. Can you put this into a format that 0:04:17.400 --> 0:04:22.320 we can run it on on coin Desk? And I said, yeah, 0:04:22.320 --> 0:04:25.440 I would do that under one condition. And my condition 0:04:25.600 --> 0:04:29.800 is I want that out there in public before this 0:04:30.279 --> 0:04:34.760 interview of SPF happens. And so it's out there, people 0:04:34.760 --> 0:04:37.960 are talking about it. And so if I did want 0:04:38.000 --> 0:04:42.080 to make it harder for Andrew Ross Sorkin to throw softballs, 0:04:42.800 --> 0:04:46.360 there's now quite a little tiny army. You have a 0:04:46.440 --> 0:04:49.440 huge following. I've got a microscopic following because I just 0:04:49.480 --> 0:04:52.440 started Twitter or two months ago. But they're they're pretty 0:04:52.440 --> 0:04:55.960 worked up. They do not want softballs thrown because many 0:04:56.000 --> 0:04:59.920 of them have lost their life savings, and so questions 0:05:00.160 --> 0:05:06.480 like hey, Sam, you understand that the terms of service 0:05:06.880 --> 0:05:11.680 for your platform, f t X say very clearly the 0:05:11.800 --> 0:05:16.400 assets that customers deposit on f t X are the 0:05:16.520 --> 0:05:20.320 property of the customer and not the property of f 0:05:20.440 --> 0:05:23.800 t X. It's in black and white, a simple statement 0:05:24.160 --> 0:05:27.719 in their terms of service. You took that money that 0:05:27.800 --> 0:05:31.240 didn't belong to you and shifted it over to your 0:05:31.279 --> 0:05:38.200 hedge fund, Alameda, you understand, I'm sure that action is illegal, right, 0:05:39.000 --> 0:05:43.000 So you know this is why I am certain that 0:05:43.160 --> 0:05:46.920 any lawyer he has is has strongly advised him not 0:05:47.800 --> 0:05:51.480 to answer any of these questions. But I've seen this before, 0:05:51.520 --> 0:05:54.480 and you've seen it before. These con men who are 0:05:54.520 --> 0:06:00.960 really really smooth, slippery, whatever, believe that they and convince 0:06:01.560 --> 0:06:06.240 the whole audience about totally different narrative that is not 0:06:06.360 --> 0:06:09.160 rooted in the facts. And so that's I'm afraid he 0:06:09.240 --> 0:06:11.279 may try that. They want to win in the court 0:06:11.320 --> 0:06:14.119 of public opinion. Um, not in law, but in public opinion. 0:06:14.160 --> 0:06:15.440 So let's let's talk about some of this. So I 0:06:15.440 --> 0:06:17.840 know your securities, attorney, but to the point that you made, 0:06:18.080 --> 0:06:21.799 you've interviewed lots of people, con men and mobsters, et cetera. 0:06:22.240 --> 0:06:24.080 So um, let's talk about some of these things. Because 0:06:25.200 --> 0:06:29.279 some people I can't believe it. People that known people 0:06:29.279 --> 0:06:31.839 in the space are saying, well, you know this happened 0:06:31.880 --> 0:06:35.120 in in this gray area, that these aren't really security 0:06:35.200 --> 0:06:38.520 so maybe it wasn't really illegal. But to your point, 0:06:39.000 --> 0:06:41.520 I believe fraud is always fraud. And so if you 0:06:41.640 --> 0:06:44.320 said in the terms that these are your deposits, but 0:06:44.320 --> 0:06:47.680 then I take those and use them for my own use, 0:06:48.160 --> 0:06:52.200 misappropriating them to the words you used, regardless of what 0:06:52.279 --> 0:06:55.680 type of asset that is, isn't that still considered fraud, 0:06:55.680 --> 0:06:59.400 which is still considered illegal. Yes, okay, and you don't 0:06:59.560 --> 0:07:03.640 and you rarely get unequivocal answers from any lawyer, But 0:07:03.720 --> 0:07:07.039 the answer your question is yes. If you are a 0:07:07.120 --> 0:07:12.160 valet at a fancy restaurant and somebody hands you the 0:07:12.240 --> 0:07:16.760 keys to your to their car, it doesn't become the 0:07:16.880 --> 0:07:20.240 valet's car to do whatever they want with it. But 0:07:20.280 --> 0:07:23.640 if the valet takes that car, it goes and crashes it, 0:07:24.040 --> 0:07:27.640 he doesn't hand the keys back and say, hey, you know, sorry, 0:07:27.800 --> 0:07:31.120 stuff happens. No, that's a crime. What what what just 0:07:31.200 --> 0:07:34.600 happened there? That's a criminal offense. When you when you 0:07:34.840 --> 0:07:36.920 when you give your money to the bank, though that 0:07:36.960 --> 0:07:39.880 money is not yours anymore. They owe you that money, 0:07:40.040 --> 0:07:42.160 and there's a legal difference. And I thought that it 0:07:42.280 --> 0:07:45.080 might be the same with these crypto exchanges, where once 0:07:45.120 --> 0:07:47.120 you give it to them, they owe it to you 0:07:47.360 --> 0:07:49.840 and it's not actually your property anymore. But you're saying 0:07:49.840 --> 0:07:52.800 that's not the case in f t X. Now you're 0:07:52.800 --> 0:07:57.600 getting somewhere, Mark, What you just described is the situation 0:07:57.960 --> 0:08:01.640 at Celsius, and in terms of service are very very 0:08:01.680 --> 0:08:05.600 clear that it is like the bank paradigm. You give 0:08:05.720 --> 0:08:09.280 us the money, then we you know, you are our 0:08:09.320 --> 0:08:12.280 credit or we owe you that money, but we take 0:08:12.360 --> 0:08:16.080 dominion over that money and lend it out to other people, 0:08:16.520 --> 0:08:20.840 just like a fractional reserve model of a bank. F 0:08:21.000 --> 0:08:25.200 t X was different. Coin base is different. Uh in 0:08:25.400 --> 0:08:30.040 saying no, that's not our money, that's your money, and 0:08:30.680 --> 0:08:35.680 you are the one who has complete control and all 0:08:35.800 --> 0:08:39.240 ownership rights over that money when you deposit it here. 0:08:39.440 --> 0:08:42.960 We cannot borrow it from you and lend it or 0:08:43.040 --> 0:08:46.199 spend it, you know, in some other way. That's a 0:08:46.480 --> 0:08:48.960 that's a point and distinction. That's a big point. I'm 0:08:48.960 --> 0:08:51.160 gonna cut you off right there, James. You're listening to 0:08:51.240 --> 0:08:54.400 the Mark mos Show. UM in the studio with James Murphy. 0:08:54.440 --> 0:08:56.680 He is an attorney and we're talking about the f 0:08:56.800 --> 0:08:59.880 t X situation, the blow up, the biggest blow up 0:09:00.000 --> 0:09:02.840 in the cryptocurrency space right now, the second largest cryptocurrency exchange, 0:09:03.240 --> 0:09:05.360 and we're talking about some of the legality of what's 0:09:05.400 --> 0:09:07.400 going on with this. Uh, if you've got money in 0:09:07.400 --> 0:09:10.120 the crypto space, you want to hear what we are 0:09:10.120 --> 0:09:13.240 going to talk about next. So don't go away. Um again, 0:09:13.320 --> 0:09:14.920 just listening to the Mark mo Show talking about the 0:09:14.920 --> 0:09:18.199 decentralized revolution and the f t X blow up. We're 0:09:18.240 --> 0:09:19.920 back with more in a minute. Don't go away, We 0:09:20.080 --> 0:09:22.160 right back. All right, welcome back. If you're just tuning in, 0:09:22.200 --> 0:09:24.520 you're listening to the Mark Moss Show. I'm sitting down 0:09:24.520 --> 0:09:28.000 with attorney James Murphy talking about f t X, the 0:09:28.040 --> 0:09:31.160 second largest cryptocurrency exchange that blew up and disappeared with 0:09:31.200 --> 0:09:34.120 people's money and a lot of people say there's maybe 0:09:34.160 --> 0:09:36.080 some gray air there, and I'm talking to an attorney 0:09:36.160 --> 0:09:39.400 about that. So, James, before the break, you were saying 0:09:39.440 --> 0:09:42.960 how um Celsius and some of these other exchanges are 0:09:43.080 --> 0:09:46.000 are like a bank model where the money that's there is, 0:09:46.040 --> 0:09:48.080 actually there's and they owe it to But with f 0:09:48.160 --> 0:09:51.240 t X, UM they said that it was actually customer funds, 0:09:51.240 --> 0:09:54.120 and that changes things on what they're able to do. 0:09:54.200 --> 0:09:58.800 I'm guessing yeah very much so, yeah, very much so. Um, 0:09:58.960 --> 0:10:03.520 they cannot use the money to invest in something else. 0:10:04.240 --> 0:10:11.520 They cannot use your asset assets and UH lend them 0:10:11.559 --> 0:10:16.760 to UH traders who want to short assets. They explicitly 0:10:16.960 --> 0:10:21.120 cannot do that. And they of course can't just take 0:10:21.200 --> 0:10:23.720 the assets and give it to a different company to 0:10:23.800 --> 0:10:26.960 see if they can invest it profitably and put and 0:10:27.000 --> 0:10:30.640 then put it back later. Um. You know, that's how 0:10:30.720 --> 0:10:36.199 many Ponzi schemes evolve. Very often, a Ponzi scheme does 0:10:36.240 --> 0:10:40.120 not begin as a Ponzi scheme. The person who is 0:10:40.200 --> 0:10:42.240 at the heart of it believes they can earn a 0:10:42.320 --> 0:10:45.640 return on the money that they are receiving from investors, 0:10:45.960 --> 0:10:48.240 and when that proves them not be the case or 0:10:48.280 --> 0:10:52.040 not be reliably be the case, that's when they start, 0:10:52.600 --> 0:10:56.839 you know, taking new money to pay off old investors 0:10:56.840 --> 0:10:59.480 and they find themselves in an impossible spot of a 0:10:59.679 --> 0:11:03.160 of a Hanzi scheme. So the rules were really clear. 0:11:03.960 --> 0:11:09.600 F t X made the rules there Uh, there, there's 0:11:09.600 --> 0:11:12.000 no way to get around it. It is a very 0:11:12.480 --> 0:11:18.960 solid case of male fraud and wire fraud under US statutes. Yeah, 0:11:19.559 --> 0:11:23.400 now what about um, I'm guessing this is pretty big encompassing. 0:11:23.440 --> 0:11:27.400 But um, if we found out that there was customers 0:11:27.679 --> 0:11:31.360 had about one point four billion dollars worth of bitcoin 0:11:32.240 --> 0:11:34.960 that they had bought and that we're on the exchange, 0:11:35.040 --> 0:11:38.640 but then f t X actually had no bitcoin at all, 0:11:38.920 --> 0:11:41.199 So they sold one point four billion dollars worth a 0:11:41.200 --> 0:11:43.880 bitcoin to customers but actually didn't have it on their behalf. 0:11:44.480 --> 0:11:50.160 I mean, that's another big piece of fraud. I would imagine, yes, 0:11:50.320 --> 0:11:54.840 that that is fraud. So whether this is a flower 0:11:54.920 --> 0:11:58.360 like a tulip, or it's a share of stock like apple, 0:11:58.679 --> 0:12:01.120 or it's a cryptocurrency, it doesn't really matter what it is, 0:12:01.160 --> 0:12:04.800 it's still fraud and that's still illegal, right, That's right. 0:12:04.880 --> 0:12:08.800 People do really fixate on does this, you know, fill 0:12:08.840 --> 0:12:12.000 in the blink the f t T token qualify as 0:12:12.040 --> 0:12:16.280 a security. It's interesting, you know, if the answers yes, 0:12:16.880 --> 0:12:20.120 that means that the SEC could get involved to the 0:12:20.200 --> 0:12:25.640 extent that there are US citizens who are victims of 0:12:25.640 --> 0:12:31.120 of the you know, f t T fraud. Um, but 0:12:31.240 --> 0:12:35.000 they don't have to be that, the US prosecutors. It 0:12:35.080 --> 0:12:38.920 doesn't have to be a security. It's money, it's mail fraud, 0:12:38.920 --> 0:12:42.280 wire fraud, all day long. Yeah. Now, several of the 0:12:42.360 --> 0:12:46.520 questions that you had, UM that you that you hoped 0:12:46.920 --> 0:12:49.280 he just thought maybe they should ask him these questions. 0:12:49.320 --> 0:12:52.480 But some of these would be UM, missing money, so 0:12:52.760 --> 0:12:58.240 fifteen million that was suspiciously, suspiciously transferred from wallets, um, 0:12:58.280 --> 0:13:01.640 these loans that were issued to himself and other people, 0:13:01.760 --> 0:13:04.920 things like that, and so several of these questions basically 0:13:05.920 --> 0:13:08.760 hone in on that, like where is the money? Obviously 0:13:08.760 --> 0:13:10.600 we know lots of money is missing. Is there any 0:13:10.640 --> 0:13:13.040 reason why you would ask him specifically like hey, this 0:13:13.080 --> 0:13:17.760 money it was misappropriated? Like where is it? Yes, there 0:13:17.920 --> 0:13:22.040 there is, Mark, And this is part of my training, Uh, 0:13:22.559 --> 0:13:28.080 trying cases for for thirty years on cross examination, quite 0:13:28.120 --> 0:13:31.840 often you really don't care what the answer is. The 0:13:32.120 --> 0:13:38.040 entire point is the question itself. So that's why I 0:13:38.120 --> 0:13:41.199 was tweeting out these questions so people would be aware. 0:13:41.920 --> 0:13:49.120 Sam Bankman Freed personally borrowed one billion dollars from Alma Alameda, 0:13:49.360 --> 0:13:54.560 which is now bankrupt. Sam therefore owes Alameda a billion 0:13:54.600 --> 0:13:58.440 dollars which could pay off a lot of creditors. Sam's company, 0:13:58.960 --> 0:14:04.640 paper Bird, borrowed two point three billion dollars from Alameda, 0:14:04.800 --> 0:14:08.120 So we've got a total of three point three billion 0:14:08.160 --> 0:14:12.000 dollars that this guy borrowed. He needs to put it back. 0:14:12.400 --> 0:14:14.880 You know, we need to know where that is, because 0:14:14.880 --> 0:14:18.679 if you think about, uh, the entire context of the 0:14:18.800 --> 0:14:23.240 scope of the problem, three point three billion dollars would 0:14:23.360 --> 0:14:29.560 solve a significant chunk the entire problem. But who knows, 0:14:29.880 --> 0:14:32.360 you or you and I have no idea if he's 0:14:32.480 --> 0:14:36.400 lost the money gambling, or or it's it's on some 0:14:36.600 --> 0:14:41.000 ledger or treasure wallet hidden underground in a bunk or somewhere. 0:14:41.160 --> 0:14:44.200 You know, we don't know. The point of the questions 0:14:44.640 --> 0:14:48.160 was simply to communicate to the world these issues and 0:14:48.200 --> 0:14:51.840 what his answers are. You know, unless he surprises us 0:14:51.880 --> 0:14:54.720 and says, hey, James, thanks for asking, I can have 0:14:54.840 --> 0:14:58.760 that three point three billion back over to John Jay Ray, 0:14:58.840 --> 0:15:01.800 the new CEO, you know, in forty eight hours. I 0:15:01.840 --> 0:15:06.040 will say that the point is the questions themselves. So 0:15:06.080 --> 0:15:08.640 then the next question, which would be asking about which 0:15:08.640 --> 0:15:11.720 news organizations has he given money to? UM probably the 0:15:11.760 --> 0:15:14.600 answer again isn't isn't important as the question which you're 0:15:14.640 --> 0:15:17.360 just showing to the people, like, look, he bought off 0:15:17.400 --> 0:15:19.320 a lot of these people, would that be a fair 0:15:19.320 --> 0:15:22.560 assumption on that question as well? Yeah, well it's documented, 0:15:22.800 --> 0:15:25.920 you know, I've seen documentation. I'm not going to name 0:15:25.960 --> 0:15:27.880 him because I'm not sure of like three or four, 0:15:28.320 --> 0:15:30.720 but it's just the tip of the iceberg. So he 0:15:30.760 --> 0:15:34.960 can't say none. But he probably has done it so 0:15:35.000 --> 0:15:39.840 many times he doesn't even remember how many news outlets 0:15:39.840 --> 0:15:43.880 that are supposed to be objectively reporting on f t 0:15:44.320 --> 0:15:49.480 X and the boy wonder Sam may have been somewhat compromised. 0:15:50.640 --> 0:15:53.640 M hmm, yeah, definitely. And then of course all the 0:15:53.720 --> 0:15:57.400 ties with the political situation that we have, you know, uh, 0:15:58.000 --> 0:16:00.720 millions of dollars of their I know kind of had 0:16:00.760 --> 0:16:02.920 maybe some questions about that. He came out now and 0:16:02.920 --> 0:16:06.000 said that he actually gave money to Republicans as well, 0:16:06.040 --> 0:16:08.280 but he didn't want to say that because it would 0:16:08.320 --> 0:16:10.400 be looked at very bad. He only wanted to claim 0:16:10.400 --> 0:16:13.520 that he gave money to Democrats. However, lots of people 0:16:13.560 --> 0:16:16.880 have done diligence through open finance, and seeing that there 0:16:16.920 --> 0:16:20.040 has there was no money claimed. Is that an even 0:16:20.040 --> 0:16:23.880 bigger can of warms? Now to go open up? This 0:16:24.040 --> 0:16:25.400 is a can of warms. I get a lot of 0:16:25.480 --> 0:16:30.280 questions from people about this. It makes customers who may 0:16:30.280 --> 0:16:33.920 be out all of their money or a substantial portion 0:16:34.000 --> 0:16:37.360 of it makes them pretty mad that where did this 0:16:37.440 --> 0:16:40.720 money come from? Are those my assets? Um? And the 0:16:40.720 --> 0:16:44.520 thing about Democrat versus Republican, just to get some clarity 0:16:44.680 --> 0:16:51.080 on that, he gave two Democrats with a couple of exceptions. 0:16:51.080 --> 0:16:55.280 And those exceptions were Republicans who were willing to co 0:16:55.520 --> 0:16:59.520 sponsor his bill in Congress, and one of them was 0:16:59.800 --> 0:17:07.000 the Senator from Arkansas. Um, but it was, you know whatever, Democrats. 0:17:08.080 --> 0:17:12.800 His partner, however, UM, now I'm forgetting his name. It's 0:17:12.840 --> 0:17:17.280 something like salom A, who was the quote unquote president 0:17:17.760 --> 0:17:22.359 of f t X, was a Republican. He gave less, 0:17:22.400 --> 0:17:26.000 substantially less than than Sam, but he did give principally 0:17:26.080 --> 0:17:30.160 to Republicans. And so if you look at the overall 0:17:30.600 --> 0:17:35.040 organization there there it's you know, some bipartisan giving there. 0:17:35.240 --> 0:17:41.359 But to me, the most brilliant move he made was 0:17:41.520 --> 0:17:43.600 when he gave an interview and said, you know what 0:17:44.520 --> 0:17:49.400 I'm really thinking, I just might spend one billion dollars 0:17:49.640 --> 0:17:54.400 to get the Democratic candidate elected in think about that. 0:17:54.760 --> 0:17:57.679 They got to cut you off right there. You're listening 0:17:57.680 --> 0:17:59.879 to the Mark Moa Show. I'm talking with James Murphy, 0:18:00.160 --> 0:18:02.439 attorney about the ft X fiasco. I'll be back with 0:18:02.440 --> 0:18:04.000 more in a minute. Don't go away, we'll go back. 0:18:04.560 --> 0:18:06.240 All right. Welcome back. If you're just tuning in, you're 0:18:06.240 --> 0:18:08.320 listening to the Mark Moss Show. I'm sitting down with 0:18:08.400 --> 0:18:12.360 attorney James Murphy, securities attorney. We're talking about the ft 0:18:12.600 --> 0:18:15.199 X fiasco. And if you're just tuning in, we've been 0:18:15.200 --> 0:18:18.160 talking about a lot now. Right before the break, James, 0:18:18.200 --> 0:18:20.000 I had to cut you off. You were saying that 0:18:20.240 --> 0:18:22.160 one of the most brilliant things that he had done 0:18:22.320 --> 0:18:25.080 was saying that he was projecting he would give a 0:18:25.119 --> 0:18:29.359 billion dollars to two Democrats in the future. Um and 0:18:29.680 --> 0:18:33.600 why is that even the more an interesting piece? Well, um, 0:18:33.680 --> 0:18:38.760 so they certainly were grateful, you know, to receive five 0:18:38.800 --> 0:18:43.280 thousand dollars, twenty thousand dollars whatever individual congress people or 0:18:43.280 --> 0:18:48.480 their packs, whatever, um. But to say I will spend 0:18:48.520 --> 0:18:52.720 a billion this is unheard of. Basically, what he is saying, 0:18:53.600 --> 0:18:58.159 is I single handedly can push a candidate over the 0:18:58.200 --> 0:19:02.880 finish line? That is what a billion dollars could do. 0:19:03.440 --> 0:19:06.959 So think about it. This gives him a two year runway, 0:19:07.000 --> 0:19:11.600 how do you think Democrats will treat any human being 0:19:12.000 --> 0:19:14.239 who says, you know what, I may just give you 0:19:14.280 --> 0:19:17.080 all a billion dollars to spend as you see fit 0:19:17.359 --> 0:19:22.160 to elect your nominee. You know, he had meetings at 0:19:22.160 --> 0:19:26.320 the White House, he was calm, He was meeting privately 0:19:26.359 --> 0:19:29.960 with Converse people, meeting privately with Gary Gensler. He did well, 0:19:30.040 --> 0:19:33.000 He got a good return on investment of his money 0:19:33.000 --> 0:19:35.879 in the twenty two cycle. But to say you'll spend 0:19:35.880 --> 0:19:39.919 a billion was really a stroke of genius because nobody 0:19:40.280 --> 0:19:43.919 would say anything against him, nobody on the Democratic side 0:19:44.320 --> 0:19:47.320 for at least two years. Uh, if he was still 0:19:47.359 --> 0:19:50.600 able and not now kind of run out and the 0:19:50.640 --> 0:19:52.040 money now, I don't know if I don't know how 0:19:52.119 --> 0:19:55.360 much favors he's going to get anymore. Now, um let's 0:19:55.400 --> 0:19:57.520 jump to another another piece. So I put out a 0:19:57.600 --> 0:20:00.159 video on YouTube and then put out a with a 0:20:00.240 --> 0:20:03.080 thread on it, and basically I was making the case 0:20:03.160 --> 0:20:07.240 that uh, there would not be another crypto bull run 0:20:07.280 --> 0:20:09.239 and what I was talking about was if you look 0:20:09.240 --> 0:20:14.520 at and then you look at basically the entire cryptocurrency 0:20:14.560 --> 0:20:17.840 market cap went up. You could, you know, basically close 0:20:17.880 --> 0:20:20.880 your eyes and throw a dart um and and everything 0:20:20.960 --> 0:20:23.040 just went up at this crazy amount. And I was 0:20:23.080 --> 0:20:26.639 saying that most that you have to understand how the 0:20:26.680 --> 0:20:30.440 cryptocurrency market worked in order to understand why it may 0:20:30.480 --> 0:20:32.359 not happen again. And so a lot of people just 0:20:32.400 --> 0:20:34.639 looked at the headline. They didn't like that. But the 0:20:34.640 --> 0:20:37.040 part that I was talking about, James, was that most 0:20:37.040 --> 0:20:40.600 people don't know, but most of the cryptocurrency market was 0:20:40.960 --> 0:20:43.400 driven by venture capital money because they could get these 0:20:43.400 --> 0:20:46.520 tokens at extreme discounts and then instantly have liquidity and 0:20:46.520 --> 0:20:49.199 flipped them on the market onto retail at five, ten x, 0:20:49.200 --> 0:20:51.159 twenty x or whatever. They loved it, and then they 0:20:51.160 --> 0:20:54.159 spent all this money to then drive hype, including uh 0:20:54.480 --> 0:20:57.280 hundreds of millions of dollars in advertising on Google and 0:20:57.320 --> 0:21:00.679 mainstream media, et cetera. Obviously Super Bowl whatnot, and so 0:21:00.880 --> 0:21:03.400 they loved it. All the hype was built. People thought 0:21:03.400 --> 0:21:05.480 everyone was getting rich, but really it was just vcs 0:21:05.560 --> 0:21:08.800 driving this. Now, my assumption was that based off of this, 0:21:08.880 --> 0:21:11.119 and you kind of started talking about this in the beginning. Um, 0:21:11.200 --> 0:21:13.879 these big events that cause a lot of harm then 0:21:14.000 --> 0:21:17.000 allow governments to kind of run and maybe push policy. 0:21:17.640 --> 0:21:21.680 And if they push securities regulations on these tokens, then 0:21:21.840 --> 0:21:24.920 vcs can't keep doing what they've been doing, which would 0:21:24.920 --> 0:21:27.320 then drive up a lot of that capital. I'm not 0:21:27.359 --> 0:21:30.159 saying the technology goes away or that progress happens, but 0:21:30.200 --> 0:21:32.879 we maybe don't see these big bumps. So let's break 0:21:32.920 --> 0:21:37.200 that down little by little. So, UM, let's start with 0:21:37.480 --> 0:21:43.000 why these maybe securities? And there's four pieces of this. 0:21:43.160 --> 0:21:45.399 How we test? I mean, should we start there and 0:21:45.480 --> 0:21:47.760 kind of look at that. Are these token securities? Will 0:21:47.800 --> 0:21:52.960 the sec maybe cracked down on them as securities? Well, 0:21:53.040 --> 0:21:57.240 I can tell you they've hired so taking taking a 0:21:57.280 --> 0:21:59.480 step back. At my at my firm where I worked 0:21:59.560 --> 0:22:03.480 until eleven months ago, we had sixteen of our partners 0:22:03.480 --> 0:22:08.840 had worked at the SEC. We were constantly engaged to 0:22:09.040 --> 0:22:13.000 help people assess their risk that what they were doing 0:22:13.359 --> 0:22:18.440 was issuance of an unregistered security um and many of them, 0:22:18.720 --> 0:22:22.560 once they got our advice, many of them moved off 0:22:22.680 --> 0:22:27.800 shore to places like Estonia and the Isle of Man. 0:22:28.080 --> 0:22:31.440 Places I have not yet visited to do their their 0:22:31.480 --> 0:22:35.679 token offering, and then then they had to avoid issuance 0:22:35.720 --> 0:22:41.400 to um uh to US residents. UM. So the Howie 0:22:41.400 --> 0:22:45.879 test uh to me is a is an artifact. And 0:22:45.960 --> 0:22:50.000 I disagree with Gary Gensler when he goes on every 0:22:50.080 --> 0:22:54.040 show and says, I don't know why people are clamoring 0:22:54.480 --> 0:22:58.320 for new rules or clarity of rules. Nothing could be 0:22:58.440 --> 0:23:02.679 more clear. There's a case at the Supreme Court in 0:23:02.840 --> 0:23:08.400 nineteen forty six that deals with Orange Groves in Florida 0:23:08.480 --> 0:23:13.080 that clearly explains what a native token on a decentralized platform, 0:23:13.080 --> 0:23:15.600 whether that's a security to me, it's a non sequit, 0:23:15.680 --> 0:23:19.240 or it's ridiculous. It is square peg and round hole. 0:23:19.880 --> 0:23:22.800 And so now we have briefs. I filed these briefs 0:23:22.840 --> 0:23:26.399 where you try to apply the Orange Grove test to 0:23:26.760 --> 0:23:31.359 something that was not unheard of certainly in nineteen six, 0:23:31.960 --> 0:23:38.120 and I think that UM clearly the last two chairman 0:23:38.200 --> 0:23:42.240 of the SEC has said basically, everything they've seen is 0:23:42.280 --> 0:23:49.440 a security. Accept bitcoin and maybe accept ethereum. And so 0:23:49.920 --> 0:23:53.560 whatever the law is, that's a pretty interesting data point 0:23:54.080 --> 0:23:59.040 if you are in the business of minting tokens that 0:23:59.119 --> 0:24:03.080 the SEC has said those are securities. So one thing 0:24:03.160 --> 0:24:08.800 people miss they see these SEC enforcement cases against UM 0:24:09.200 --> 0:24:12.879 issuers of these tokens. What they miss is it is 0:24:12.920 --> 0:24:18.840 a crime in all fifty states to sell an unregistered security, 0:24:18.920 --> 0:24:21.600 which is what the SEC is saying. These things are 0:24:22.240 --> 0:24:27.520 people have gone to jail for selling unregistered securities. So 0:24:27.800 --> 0:24:31.920 the risk is quite significant, and so you have many 0:24:32.000 --> 0:24:35.280 many projects. It's it's astounding. Really, if you go on 0:24:35.359 --> 0:24:41.000 coin market cap mark you know this. There's was about 0:24:41.000 --> 0:24:45.760 to say twenty one, there's UH twenty two thousand tokens 0:24:45.880 --> 0:24:50.680 and the vast majority of them have the the inditia 0:24:51.119 --> 0:24:55.679 of securities UM. But you know what, in fairness, I 0:24:55.960 --> 0:24:58.199 what I would say is the how he tests is 0:24:58.240 --> 0:25:01.360