Speaker 1: This is Bloomberg Crypto, a daily Bloomberg I Heard podcast,
Speaker 1: and I'm Stacy Marie Ishmael, Managing editor of Crypto for
Speaker 1: Bloomberg News. It's Friday, December. It's been another wild week
Speaker 1: in crypto, especially if your name is Sam Bankman. Freed,
Speaker 1: the crypto founder and former CEO of f t X,
Speaker 1: has been spending time in a Bahamian jail after having
Speaker 1: been denied bail related to multiple serious criminal charges. On Tuesday,
Speaker 1: he signed documents formally agreeing to be extradited to the
Speaker 1: US to face the courts there about those allegations, and
Speaker 1: on Wednesday, a Bahamian judge approved that petition. So what
Speaker 1: that means is, you know, we're out of stage of
Speaker 1: this ongoing ft X crypto winter that's about to get
Speaker 1: even more interesting. We'll talk about those latest developments here
Speaker 1: as well as what's playing out at Finance, which is
Speaker 1: by far the largest crypto exchange in the world by volume,
Speaker 1: to help me contextualize all of the big stories this week,
Speaker 1: I am delighted to be joined by my colleague Bloomberg
Speaker 1: editor Beth Williams. What we're seeing is the depressed crypto
Speaker 1: prices combined with high energy costs are really squeezing bitcoin miners.
Speaker 1: But so I feel like Sam Bagoon Free is running
Speaker 1: our lives right now, just in terms of you know,
Speaker 1: we wake up every day around the world look to
Speaker 1: see what thing has happened in terms of the dissolution
Speaker 1: of this former crypto empire, whether it's hearings or filings,
Speaker 1: what's the latest on that will face a slew of
Speaker 1: charges criminal and civil over the implosion of of f
Speaker 1: t X, which appears caused by alleged mismanagement and potential
Speaker 1: misappropriation of funds. What we'll see is as as the
Speaker 1: backdrop of this these proceedings is going on, they will
Speaker 1: be further bankruptcy proceedings trying to get any of that
Speaker 1: money back. Are the crypto back with investors from you know,
Speaker 1: very large VC funds and investment funds to small time investors,
Speaker 1: all looking and hoping to get the money return that
Speaker 1: has been locked since the bankruptcy. It does seem to
Speaker 1: your point that we're at a stage where things might
Speaker 1: move potentially very slowly, given you know that the U. S.
Speaker 1: Court system is now going to have to bring a
Speaker 1: bunch of people forward, possibly as witnesses what does that
Speaker 1: mean for what we might be thinking about in January
Speaker 1: and onward into I think you're right, at least in
Speaker 1: terms of looking at it in terms of crypto reporting
Speaker 1: from the you know, market and company perspective, it had been,
Speaker 1: as you point out, very fast paced, very much development
Speaker 1: after development in terms of f t x is implosion
Speaker 1: and then these criminal charges and then Sam Bank and
Speaker 1: Free getting arrested, and now it's not that things won't proceed,
Speaker 1: but they sort of shift into a new phase where
Speaker 1: we're looking at sort of how it plays out in
Speaker 1: the legal framework, and as we've seen in past instances
Speaker 1: in crypto and elsewhere, it can take a bit of time. Uh.
Speaker 1: In terms of the crypto world, we are still looking
Speaker 1: at potential contagion and where these events will lead in
Speaker 1: terms of potential regulation, which should be a big theme
Speaker 1: going into after what we've seen this year. And one
Speaker 1: of the companies that we've been coveringing in that context
Speaker 1: is really a company that was around before FTX, and
Speaker 1: that's Binance, right which the world's largest exchange and you know,
Speaker 1: Binance over the past several months has been under a
Speaker 1: lot of scrutiny for a couple of reasons. One, you know,
Speaker 1: the feud between Sam Bank Win Freed and the Binance
Speaker 1: ceo you know who goes by cz really spilled into
Speaker 1: public on Twitter, and you know, you could you could
Speaker 1: definitely point to kind of a timeline of how this
Speaker 1: very interpersonal battle between these two Crypto Titans or former
Speaker 1: titans had major consequences for the rest of the market.
Speaker 1: But what are people worried about with Binance? So why
Speaker 1: have they been facing, you know, in some weeks withdrawals,
Speaker 1: What are some of the issues that they're dealing with
Speaker 1: in terms of their reserves, and how have they been
Speaker 1: trying to, as they would put it, defund the speculation
Speaker 1: around them. There was a few happening between spn f
Speaker 1: as as sand Bank and Freed's known and and c
Speaker 1: Z at Binance, And coming out of this implosion of
Speaker 1: f t X, you have Binance and c Z saying
Speaker 1: you we're not like them. Are balance sheet is clean
Speaker 1: and you can trust our exchange. But the problem is
Speaker 1: with Crypto and with Binance in particular, there's a lack
Speaker 1: of transparency in exactly what they have or what they own.
Speaker 1: We don't know, we don't even know where they're based.
Speaker 1: They have many different affiliates around the world, but no
Speaker 1: particular place that they call home. Even though c Z
Speaker 1: would seem to set himself apart from something like f
Speaker 1: t X plaguing Binance that plague f t X. If
Speaker 1: you're from an investing standpoint, you don't know what finance
Speaker 1: is doing with your crypto. You only can take what
Speaker 1: c Z says, and you have to, you know, believe
Speaker 1: it or not. And after we've seen you know, collapse
Speaker 1: after collapse this year, culminating in sand Bankman freed, which
Speaker 1: we're pre seated by reassurances that ended up not being true.
Speaker 1: When we hear this from c Z and Binance, we
Speaker 1: wonder as well. He also faces several other charges related
Speaker 1: to money laundering. And so I think all of these
Speaker 1: things lead one to say, you know, fool me once,
Speaker 1: shame on me. You know, not that will be fooled
Speaker 1: by by by nancer CZ, but it causes investors to
Speaker 1: take pause. And that's why you're seeing some withdrawals from exchanges.
Speaker 1: Investors just don't know who to trust, right and you know,
Speaker 1: just to kind of reussories and recap what you're saying.
Speaker 1: There's no evidence that Finance isn't fine. The problem for
Speaker 1: some more skeptical investors is that they've also not presented
Speaker 1: any evidence that they are fine, right like, this is
Speaker 1: this is the kind of the tension around the fact
Speaker 1: that crypto and the crypto industry is like you can
Speaker 1: just look at the blockchain and see what we're up to,
Speaker 1: which only it works up to a point, and that
Speaker 1: point stops when it's like internal company financials. And so
Speaker 1: there's been this outpouring of requests for should crypto companies
Speaker 1: be formally audited? Right like? Should they really have to
Speaker 1: go through much more rigorous reviews and scrutiny as it
Speaker 1: relates to their financial health? In an attempt to give
Speaker 1: investors a little bit more reassurance and interesting fact, Finance
Speaker 1: had retained an accounting firm not to do an audit,
Speaker 1: but to at least to say kind of provide a
Speaker 1: statement of like, yeah, this looks fine as far as
Speaker 1: we can tell, and that firm mas ours sometimes when
Speaker 1: US Mazars, depending on the side of the Atlantic that
Speaker 1: you're on, have now decided they're just not going to
Speaker 1: do any crypto stuff anymore. In a very short amount
Speaker 1: of time, they went from being introduced as you know,
Speaker 1: the accounting firm for cou coin, Binance, a couple of others,
Speaker 1: and then they were like, oh nope, we've changed our minds,
Speaker 1: which again is not the most reassuring thing to happen
Speaker 1: in crypto this year, right, And as you point out,
Speaker 1: even what they were providing was not a complete snapshot,
Speaker 1: but it was something, and it raises an interesting question
Speaker 1: just in terms of accounting. You can sort of understand.
Speaker 1: It's fascinating you've got crypto companies that want these so
Speaker 1: called proof of reserves, which is a way of showing
Speaker 1: at least the assets they have at a snapshot point
Speaker 1: in time, if not a full picture, and then you
Speaker 1: have accounting firms where perhaps maybe there's a lack of
Speaker 1: transparency that they can't even get through that makes them
Speaker 1: perhaps paused before they want to proceed on this work.
Speaker 1: I want to talk about the World Cup, just very briefly,
Speaker 1: because I feel like we have to because that final
Speaker 1: match was wild, and also because there was an absolutely
Speaker 1: stunning photograph of you know, Messy celebrating scoring a goal
Speaker 1: and then in the background just see crypto dot com.
Speaker 1: Because again, it wasn't a major sporting event unless there
Speaker 1: was some kind of sports sponsorship, and our colleague Carly Wanna,
Speaker 1: who has been on this podcast before, had written previously
Speaker 1: kind of of the curse of some of these crypto sponsorships,
Speaker 1: like what you know just as a as the person
Speaker 1: who edits our wonderful Crypto newsletter? What did Carly right
Speaker 1: for the newsletter? As an update to that after the
Speaker 1: World Cup Final she was talking about sports sponsorships and
Speaker 1: how you know f t X was one of the
Speaker 1: biggest sports sponsors Tom Brady, Steph Curry all over the
Speaker 1: Super Bowl, which was started the year on a little
Speaker 1: bit of a hot brighter note. They've had to backtrack
Speaker 1: a bit and the sports teams affiliated with them and
Speaker 1: organizations have also severed ties that made it a little
Speaker 1: bit more challenging for some company like crypto dot com
Speaker 1: to gain a lot of enthusiasm and gained attention, but
Speaker 1: maybe not the same kind of mojo as it might
Speaker 1: have otherwise. And what she is wondering was wondering in
Speaker 1: the newsletter is we've seen sports sponsorship deals decline pretty
Speaker 1: precipitously from the first half of the year, So I
Speaker 1: find it fascinating just looking at the year in crypto
Speaker 1: From the sports angle, you look at the book ends
Speaker 1: of the Super Bowl, which was called by some the
Speaker 1: Crypto Bowl, uh, and football super Bowl of Crypto American football,
Speaker 1: something I know a little bit better than the other kind.
Speaker 1: But then you have the other kind where you know,
Speaker 1: crypto dot com is sort of an afterthought or maybe
Speaker 1: it gives people a little heartburn when they see it.
Speaker 1: Actually And as you are a person who also is
Speaker 1: a big baseball fan, what's going on with the Washington Nationals?
Speaker 1: Are they still sponsored by Tara and Luna as far
Speaker 1: as I know? And uh Tara is. Last I saw
Speaker 1: was you could see it on on some of their
Speaker 1: luxury seats, and that was quite something in the spring
Speaker 1: as that was the beginning of the baseball see reason
Speaker 1: and um, that was the beginning of the major collapses
Speaker 1: of of the terror implosion that caused this wave of
Speaker 1: contagion that ultimately ended up with the collapse of f
Speaker 1: t X. We'll be right back with more of the
Speaker 1: week's top stories, and you'll hear more from Bloomberg Deputy
Speaker 1: editor for Crypto, Beth Williams. Beth, you know we've talked
Speaker 1: about exchanges, but one of the other players in this
Speaker 1: market and not just a player like an essential parts
Speaker 1: of the ecosystem are, of course, the bitcoin miners. And
Speaker 1: I feel like our colleague David Pan probably didn't expect
Speaker 1: to spend most of his year writing about how bad
Speaker 1: the financials of so many of these companies were. You know,
Speaker 1: just this week we had yet another bitcoin miner file
Speaker 1: for bankruptcy, Like what's been going on over there? When
Speaker 1: I think of miners, I think of distressed when it
Speaker 1: when it comes to crypto. This week we saw Core Scientific,
Speaker 1: which was one of the biggest bitcoin miners, file for
Speaker 1: bankruptcy after warning that it was under distress. What we're
Speaker 1: seeing is the depressed crypto prices combined with high energy
Speaker 1: costs are really squeezing bitcoin miners. And then of course
Speaker 1: you've got a backdrop of an increasing interest rate environment,
Speaker 1: so that any kind of financing is going to get
Speaker 1: more expensive. You add that all together and it's a
Speaker 1: it's just a grim environment for miners. Uh. And we
Speaker 1: even saw another major minor called Greenage, also warned that
Speaker 1: it may be headed that down that path. It's trying
Speaker 1: to do a debt restructuring, but a lot of these
Speaker 1: do have debt, so you've got debt, you've got high costs,
Speaker 1: and you've got low bitcoin prices. It's a very bad combination.
Speaker 1: And a lot of these folks borrowed money from other
Speaker 1: players in the crypto ecosystem who are themselves kind of
Speaker 1: facing distress. And you know, that kind of brings us
Speaker 1: back to this idea of interconnection. We've just published sort
Speaker 1: of a year in review Year in Crypto that was
Speaker 1: that was really defined by two graphical elements. Shout out
Speaker 1: to our colleagues who worked on this for several weeks,
Speaker 1: and one of the things that really struck me is
Speaker 1: you could really see those interconnections, right like how you
Speaker 1: go from a terror Luna collapse to a three Arrows
Speaker 1: collapse to everything happening with FTX and then a bunch
Speaker 1: of names scattered in between. Does that concentration surprise you
Speaker 1: given that, you know, when you were coming into crypto,
Speaker 1: everybody was like it's old decentralized, Like you know, there's
Speaker 1: there's no one single point of failure. It does surprise me. Um,
Speaker 1: But it also, I guess in a way doesn't because
Speaker 1: even though it's it is meant to be decentralized, it's
Speaker 1: meant to that there is supposed to be this mainstream
Speaker 1: appeal trying to bring in sort the little guy, the
Speaker 1: little investor. It is very concentrated. It always was very concentrated,
Speaker 1: and I think even some of the bitcoin whales, you know,
Speaker 1: you could see that ownership of some of the bigger
Speaker 1: tokens is very concentrated. This is something I found out
Speaker 1: over time. It's an all for one, We're all in
Speaker 1: it together sort of in some ways, and some of
Speaker 1: these big players they relied on each other, even though
Speaker 1: they sometimes point fingers at each Other's a lot of
Speaker 1: egos involved, but at the end of the day, there's
Speaker 1: this sort of faith that they all had in this
Speaker 1: sort of new new thing. And as long as everybody
Speaker 1: had that faith and everyone was still willing to keep
Speaker 1: keep it going, it all worked great. And then as
Speaker 1: soon as there was a little bit of crack showing,
Speaker 1: it's stunning how quickly it all unraveled. So I am
Speaker 1: nos all persuaded that everyone in crypto is in it together,
Speaker 1: just based on like public statements of CEO is going
Speaker 1: on Bloomberg TV and saying that other CEOs or complete
Speaker 1: criminals and should be in jail immediately. That's another thing
Speaker 1: that doesn't seem to have reassured a lot of retail
Speaker 1: investors about what's going on in the market in some ways,
Speaker 1: and perhaps this is just my my own opinion, but
Speaker 1: it's it's sort of a lack of maturity in dealing
Speaker 1: with business. This is business that had become multi multibillion
Speaker 1: dollar business. It's not a sandbox. But I think some
Speaker 1: of these executives treated it that way or they felt
Speaker 1: that they could make these comments but there would be
Speaker 1: no consequences. And I just think there's a lot more
Speaker 1: in the sort of traditional business environment and world. There's
Speaker 1: a sense of how you comport yourself. There's a sense
Speaker 1: of how you communicate, there's a sense of even how
Speaker 1: you compete, and it's just totally warped in different in
Speaker 1: crypto uh, such that sometimes in quote competing or or communicating,
Speaker 1: they end up sabotaging or self sabotaging. You've just made
Speaker 1: me think kind of as a closing thought about an
Speaker 1: episode we did earlier this year in which we talked
Speaker 1: to a person who's an executive recruiter for like very
Speaker 1: senior positions, right like you know, the C suite on
Speaker 1: and one of the things that she said, is there's
Speaker 1: a time and a place for different kinds of CEOs.
Speaker 1: Like sometimes in the beginning, you want to have that
Speaker 1: CEO who's got that big personality and as a trash
Speaker 1: talka and it's super competitive, but that's not necessarily the
Speaker 1: CEO you want if you are being called to testify
Speaker 1: on Capitol Hill, or you know, have to be in
Speaker 1: repair and clean up and restore credibility and confidence mode.
Speaker 1: And so I think it will definitely be interesting to
Speaker 1: see in twenty three whether any of these folks either
Speaker 1: higher media consultants or executive coaches, or if we see
Speaker 1: another round of executive shake ups in the way that
Speaker 1: we did in the summer. This is true. We we
Speaker 1: were even talking about that before, as you say, in
Speaker 1: the summer, before even what happened with their t X,
Speaker 1: we saw a number of C suite executives depart or
Speaker 1: be replaced, and the thought that we had going forward
Speaker 1: was that again, yes, if this industry is to mature,
Speaker 1: perhaps a new skill set needs to be used to
Speaker 1: get the industry to that next level. We'll see if
Speaker 1: it happens. Yes, it's like the famous closing words of journalists, well,
Speaker 1: you know, too early to tell, but we'll see. Thank you, Beth,
Speaker 1: It's always a pleasure to have you on the show. Thanks.
Speaker 1: You can find more of Beth's work on the Bloomberg Terminal,
Speaker 1: on Bloomberg dot com and on Twitter. And Beth is
Speaker 1: the main editor for the twice weekly Bloomberg Crypto newsletter,
Speaker 1: so you definitely want to sign up for that. This
Speaker 1: is Bloomberg Crypto, a daily podcast from Bloomberg and I
Speaker 1: Heeart Radio. For more shows from I Heart Radio, visit
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Speaker 1: for the show to Crypto at Bloomberg dot net. The
Speaker 1: supervising producer of Bloomberg Crypto is Vicky Vergelina. Our senior
Speaker 1: producer is Janet Babin. Our producers are Mohammed Farup and
Speaker 1: Sharon Barriro. Our associate producers are Ty Butler and Moses
Speaker 1: on Them. Desta wonder At is our engineer. Original music
Speaker 1: by Leo Sidron. I'm Stacy, Marie Ishmael have a great
Speaker 1: legit