WEBVTT - This Week in Crypto: The Latest on Sam Bankman-Fried

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<v Speaker 1>This is Bloomberg Crypto, a daily Bloomberg I Heard podcast,

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<v Speaker 1>and I'm Stacy Marie Ishmael, Managing editor of Crypto for

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<v Speaker 1>Bloomberg News. It's Friday, December. It's been another wild week

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<v Speaker 1>in crypto, especially if your name is Sam Bankman. Freed,

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<v Speaker 1>the crypto founder and former CEO of f t X,

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<v Speaker 1>has been spending time in a Bahamian jail after having

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<v Speaker 1>been denied bail related to multiple serious criminal charges. On Tuesday,

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<v Speaker 1>he signed documents formally agreeing to be extradited to the

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<v Speaker 1>US to face the courts there about those allegations, and

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<v Speaker 1>on Wednesday, a Bahamian judge approved that petition. So what

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<v Speaker 1>that means is, you know, we're out of stage of

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<v Speaker 1>this ongoing ft X crypto winter that's about to get

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<v Speaker 1>even more interesting. We'll talk about those latest developments here

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<v Speaker 1>as well as what's playing out at Finance, which is

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<v Speaker 1>by far the largest crypto exchange in the world by volume,

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<v Speaker 1>to help me contextualize all of the big stories this week,

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<v Speaker 1>I am delighted to be joined by my colleague Bloomberg

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<v Speaker 1>editor Beth Williams. What we're seeing is the depressed crypto

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<v Speaker 1>prices combined with high energy costs are really squeezing bitcoin miners.

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<v Speaker 1>But so I feel like Sam Bagoon Free is running

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<v Speaker 1>our lives right now, just in terms of you know,

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<v Speaker 1>we wake up every day around the world look to

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<v Speaker 1>see what thing has happened in terms of the dissolution

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<v Speaker 1>of this former crypto empire, whether it's hearings or filings,

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<v Speaker 1>what's the latest on that will face a slew of

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<v Speaker 1>charges criminal and civil over the implosion of of f

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<v Speaker 1>t X, which appears caused by alleged mismanagement and potential

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<v Speaker 1>misappropriation of funds. What we'll see is as as the

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<v Speaker 1>backdrop of this these proceedings is going on, they will

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<v Speaker 1>be further bankruptcy proceedings trying to get any of that

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<v Speaker 1>money back. Are the crypto back with investors from you know,

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<v Speaker 1>very large VC funds and investment funds to small time investors,

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<v Speaker 1>all looking and hoping to get the money return that

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<v Speaker 1>has been locked since the bankruptcy. It does seem to

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<v Speaker 1>your point that we're at a stage where things might

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<v Speaker 1>move potentially very slowly, given you know that the U. S.

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<v Speaker 1>Court system is now going to have to bring a

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<v Speaker 1>bunch of people forward, possibly as witnesses what does that

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<v Speaker 1>mean for what we might be thinking about in January

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<v Speaker 1>and onward into I think you're right, at least in

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<v Speaker 1>terms of looking at it in terms of crypto reporting

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<v Speaker 1>from the you know, market and company perspective, it had been,

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<v Speaker 1>as you point out, very fast paced, very much development

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<v Speaker 1>after development in terms of f t x is implosion

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<v Speaker 1>and then these criminal charges and then Sam Bank and

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<v Speaker 1>Free getting arrested, and now it's not that things won't proceed,

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<v Speaker 1>but they sort of shift into a new phase where

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<v Speaker 1>we're looking at sort of how it plays out in

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<v Speaker 1>the legal framework, and as we've seen in past instances

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<v Speaker 1>in crypto and elsewhere, it can take a bit of time. Uh.

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<v Speaker 1>In terms of the crypto world, we are still looking

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<v Speaker 1>at potential contagion and where these events will lead in

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<v Speaker 1>terms of potential regulation, which should be a big theme

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<v Speaker 1>going into after what we've seen this year. And one

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<v Speaker 1>of the companies that we've been coveringing in that context

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<v Speaker 1>is really a company that was around before FTX, and

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<v Speaker 1>that's Binance, right which the world's largest exchange and you know,

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<v Speaker 1>Binance over the past several months has been under a

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<v Speaker 1>lot of scrutiny for a couple of reasons. One, you know,

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<v Speaker 1>the feud between Sam Bank Win Freed and the Binance

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<v Speaker 1>ceo you know who goes by cz really spilled into

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<v Speaker 1>public on Twitter, and you know, you could you could

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<v Speaker 1>definitely point to kind of a timeline of how this

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<v Speaker 1>very interpersonal battle between these two Crypto Titans or former

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<v Speaker 1>titans had major consequences for the rest of the market.

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<v Speaker 1>But what are people worried about with Binance? So why

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<v Speaker 1>have they been facing, you know, in some weeks withdrawals,

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<v Speaker 1>What are some of the issues that they're dealing with

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<v Speaker 1>in terms of their reserves, and how have they been

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<v Speaker 1>trying to, as they would put it, defund the speculation

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<v Speaker 1>around them. There was a few happening between spn f

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<v Speaker 1>as as sand Bank and Freed's known and and c

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<v Speaker 1>Z at Binance, And coming out of this implosion of

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<v Speaker 1>f t X, you have Binance and c Z saying

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<v Speaker 1>you we're not like them. Are balance sheet is clean

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<v Speaker 1>and you can trust our exchange. But the problem is

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<v Speaker 1>with Crypto and with Binance in particular, there's a lack

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<v Speaker 1>of transparency in exactly what they have or what they own.

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<v Speaker 1>We don't know, we don't even know where they're based.

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<v Speaker 1>They have many different affiliates around the world, but no

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<v Speaker 1>particular place that they call home. Even though c Z

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<v Speaker 1>would seem to set himself apart from something like f

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<v Speaker 1>t X plaguing Binance that plague f t X. If

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<v Speaker 1>you're from an investing standpoint, you don't know what finance

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<v Speaker 1>is doing with your crypto. You only can take what

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<v Speaker 1>c Z says, and you have to, you know, believe

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<v Speaker 1>it or not. And after we've seen you know, collapse

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<v Speaker 1>after collapse this year, culminating in sand Bankman freed, which

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<v Speaker 1>we're pre seated by reassurances that ended up not being true.

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<v Speaker 1>When we hear this from c Z and Binance, we

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<v Speaker 1>wonder as well. He also faces several other charges related

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<v Speaker 1>to money laundering. And so I think all of these

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<v Speaker 1>things lead one to say, you know, fool me once,

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<v Speaker 1>shame on me. You know, not that will be fooled

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<v Speaker 1>by by by nancer CZ, but it causes investors to

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<v Speaker 1>take pause. And that's why you're seeing some withdrawals from exchanges.

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<v Speaker 1>Investors just don't know who to trust, right and you know,

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<v Speaker 1>just to kind of reussories and recap what you're saying.

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<v Speaker 1>There's no evidence that Finance isn't fine. The problem for

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<v Speaker 1>some more skeptical investors is that they've also not presented

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<v Speaker 1>any evidence that they are fine, right like, this is

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<v Speaker 1>this is the kind of the tension around the fact

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<v Speaker 1>that crypto and the crypto industry is like you can

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<v Speaker 1>just look at the blockchain and see what we're up to,

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<v Speaker 1>which only it works up to a point, and that

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<v Speaker 1>point stops when it's like internal company financials. And so

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<v Speaker 1>there's been this outpouring of requests for should crypto companies

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<v Speaker 1>be formally audited? Right like? Should they really have to

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<v Speaker 1>go through much more rigorous reviews and scrutiny as it

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<v Speaker 1>relates to their financial health? In an attempt to give

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<v Speaker 1>investors a little bit more reassurance and interesting fact, Finance

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<v Speaker 1>had retained an accounting firm not to do an audit,

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<v Speaker 1>but to at least to say kind of provide a

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<v Speaker 1>statement of like, yeah, this looks fine as far as

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<v Speaker 1>we can tell, and that firm mas ours sometimes when

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<v Speaker 1>US Mazars, depending on the side of the Atlantic that

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<v Speaker 1>you're on, have now decided they're just not going to

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<v Speaker 1>do any crypto stuff anymore. In a very short amount

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<v Speaker 1>of time, they went from being introduced as you know,

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<v Speaker 1>the accounting firm for cou coin, Binance, a couple of others,

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<v Speaker 1>and then they were like, oh nope, we've changed our minds,

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<v Speaker 1>which again is not the most reassuring thing to happen

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<v Speaker 1>in crypto this year, right, And as you point out,

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<v Speaker 1>even what they were providing was not a complete snapshot,

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<v Speaker 1>but it was something, and it raises an interesting question

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<v Speaker 1>just in terms of accounting. You can sort of understand.

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<v Speaker 1>It's fascinating you've got crypto companies that want these so

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<v Speaker 1>called proof of reserves, which is a way of showing

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<v Speaker 1>at least the assets they have at a snapshot point

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<v Speaker 1>in time, if not a full picture, and then you

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<v Speaker 1>have accounting firms where perhaps maybe there's a lack of

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<v Speaker 1>transparency that they can't even get through that makes them

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<v Speaker 1>perhaps paused before they want to proceed on this work.

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<v Speaker 1>I want to talk about the World Cup, just very briefly,

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<v Speaker 1>because I feel like we have to because that final

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<v Speaker 1>match was wild, and also because there was an absolutely

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<v Speaker 1>stunning photograph of you know, Messy celebrating scoring a goal

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<v Speaker 1>and then in the background just see crypto dot com.

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<v Speaker 1>Because again, it wasn't a major sporting event unless there

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<v Speaker 1>was some kind of sports sponsorship, and our colleague Carly Wanna,

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<v Speaker 1>who has been on this podcast before, had written previously

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<v Speaker 1>kind of of the curse of some of these crypto sponsorships,

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<v Speaker 1>like what you know just as a as the person

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<v Speaker 1>who edits our wonderful Crypto newsletter? What did Carly right

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<v Speaker 1>for the newsletter? As an update to that after the

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<v Speaker 1>World Cup Final she was talking about sports sponsorships and

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<v Speaker 1>how you know f t X was one of the

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<v Speaker 1>biggest sports sponsors Tom Brady, Steph Curry all over the

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<v Speaker 1>Super Bowl, which was started the year on a little

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<v Speaker 1>bit of a hot brighter note. They've had to backtrack

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<v Speaker 1>a bit and the sports teams affiliated with them and

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<v Speaker 1>organizations have also severed ties that made it a little

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<v Speaker 1>bit more challenging for some company like crypto dot com

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<v Speaker 1>to gain a lot of enthusiasm and gained attention, but

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<v Speaker 1>maybe not the same kind of mojo as it might

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<v Speaker 1>have otherwise. And what she is wondering was wondering in

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<v Speaker 1>the newsletter is we've seen sports sponsorship deals decline pretty

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<v Speaker 1>precipitously from the first half of the year, So I

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<v Speaker 1>find it fascinating just looking at the year in crypto

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<v Speaker 1>From the sports angle, you look at the book ends

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<v Speaker 1>of the Super Bowl, which was called by some the

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<v Speaker 1>Crypto Bowl, uh, and football super Bowl of Crypto American football,

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<v Speaker 1>something I know a little bit better than the other kind.

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<v Speaker 1>But then you have the other kind where you know,

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<v Speaker 1>crypto dot com is sort of an afterthought or maybe

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<v Speaker 1>it gives people a little heartburn when they see it.

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<v Speaker 1>Actually And as you are a person who also is

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<v Speaker 1>a big baseball fan, what's going on with the Washington Nationals?

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<v Speaker 1>Are they still sponsored by Tara and Luna as far

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<v Speaker 1>as I know? And uh Tara is. Last I saw

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<v Speaker 1>was you could see it on on some of their

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<v Speaker 1>luxury seats, and that was quite something in the spring

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<v Speaker 1>as that was the beginning of the baseball see reason

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<v Speaker 1>and um, that was the beginning of the major collapses

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<v Speaker 1>of of the terror implosion that caused this wave of

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<v Speaker 1>contagion that ultimately ended up with the collapse of f

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<v Speaker 1>t X. We'll be right back with more of the

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<v Speaker 1>week's top stories, and you'll hear more from Bloomberg Deputy

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<v Speaker 1>editor for Crypto, Beth Williams. Beth, you know we've talked

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<v Speaker 1>about exchanges, but one of the other players in this

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<v Speaker 1>market and not just a player like an essential parts

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<v Speaker 1>of the ecosystem are, of course, the bitcoin miners. And

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<v Speaker 1>I feel like our colleague David Pan probably didn't expect

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<v Speaker 1>to spend most of his year writing about how bad

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<v Speaker 1>the financials of so many of these companies were. You know,

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<v Speaker 1>just this week we had yet another bitcoin miner file

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<v Speaker 1>for bankruptcy, Like what's been going on over there? When

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<v Speaker 1>I think of miners, I think of distressed when it

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<v Speaker 1>when it comes to crypto. This week we saw Core Scientific,

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<v Speaker 1>which was one of the biggest bitcoin miners, file for

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<v Speaker 1>bankruptcy after warning that it was under distress. What we're

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<v Speaker 1>seeing is the depressed crypto prices combined with high energy

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<v Speaker 1>costs are really squeezing bitcoin miners. And then of course

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<v Speaker 1>you've got a backdrop of an increasing interest rate environment,

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<v Speaker 1>so that any kind of financing is going to get

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<v Speaker 1>more expensive. You add that all together and it's a

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<v Speaker 1>it's just a grim environment for miners. Uh. And we

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<v Speaker 1>even saw another major minor called Greenage, also warned that

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<v Speaker 1>it may be headed that down that path. It's trying

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<v Speaker 1>to do a debt restructuring, but a lot of these

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<v Speaker 1>do have debt, so you've got debt, you've got high costs,

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<v Speaker 1>and you've got low bitcoin prices. It's a very bad combination.

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<v Speaker 1>And a lot of these folks borrowed money from other

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<v Speaker 1>players in the crypto ecosystem who are themselves kind of

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<v Speaker 1>facing distress. And you know, that kind of brings us

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<v Speaker 1>back to this idea of interconnection. We've just published sort

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<v Speaker 1>of a year in review Year in Crypto that was

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<v Speaker 1>that was really defined by two graphical elements. Shout out

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<v Speaker 1>to our colleagues who worked on this for several weeks,

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<v Speaker 1>and one of the things that really struck me is

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<v Speaker 1>you could really see those interconnections, right like how you

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<v Speaker 1>go from a terror Luna collapse to a three Arrows

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<v Speaker 1>collapse to everything happening with FTX and then a bunch

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<v Speaker 1>of names scattered in between. Does that concentration surprise you

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<v Speaker 1>given that, you know, when you were coming into crypto,

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<v Speaker 1>everybody was like it's old decentralized, Like you know, there's

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<v Speaker 1>there's no one single point of failure. It does surprise me. Um,

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<v Speaker 1>But it also, I guess in a way doesn't because

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<v Speaker 1>even though it's it is meant to be decentralized, it's

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<v Speaker 1>meant to that there is supposed to be this mainstream

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<v Speaker 1>appeal trying to bring in sort the little guy, the

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<v Speaker 1>little investor. It is very concentrated. It always was very concentrated,

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<v Speaker 1>and I think even some of the bitcoin whales, you know,

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<v Speaker 1>you could see that ownership of some of the bigger

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<v Speaker 1>tokens is very concentrated. This is something I found out

0:14:14.840 --> 0:14:18.480
<v Speaker 1>over time. It's an all for one, We're all in

0:14:18.559 --> 0:14:22.080
<v Speaker 1>it together sort of in some ways, and some of

0:14:22.120 --> 0:14:25.520
<v Speaker 1>these big players they relied on each other, even though

0:14:25.520 --> 0:14:27.640
<v Speaker 1>they sometimes point fingers at each Other's a lot of

0:14:27.680 --> 0:14:30.720
<v Speaker 1>egos involved, but at the end of the day, there's

0:14:30.800 --> 0:14:33.200
<v Speaker 1>this sort of faith that they all had in this

0:14:33.280 --> 0:14:36.920
<v Speaker 1>sort of new new thing. And as long as everybody

0:14:36.960 --> 0:14:39.720
<v Speaker 1>had that faith and everyone was still willing to keep

0:14:40.000 --> 0:14:42.920
<v Speaker 1>keep it going, it all worked great. And then as

0:14:42.960 --> 0:14:45.040
<v Speaker 1>soon as there was a little bit of crack showing,

0:14:45.360 --> 0:14:51.080
<v Speaker 1>it's stunning how quickly it all unraveled. So I am

0:14:51.080 --> 0:14:55.680
<v Speaker 1>nos all persuaded that everyone in crypto is in it together,

0:14:55.920 --> 0:14:58.720
<v Speaker 1>just based on like public statements of CEO is going

0:14:58.760 --> 0:15:02.280
<v Speaker 1>on Bloomberg TV and saying that other CEOs or complete

0:15:02.320 --> 0:15:05.560
<v Speaker 1>criminals and should be in jail immediately. That's another thing

0:15:05.600 --> 0:15:08.040
<v Speaker 1>that doesn't seem to have reassured a lot of retail

0:15:08.080 --> 0:15:10.840
<v Speaker 1>investors about what's going on in the market in some ways,

0:15:10.960 --> 0:15:13.720
<v Speaker 1>and perhaps this is just my my own opinion, but

0:15:13.760 --> 0:15:17.680
<v Speaker 1>it's it's sort of a lack of maturity in dealing

0:15:17.680 --> 0:15:21.040
<v Speaker 1>with business. This is business that had become multi multibillion

0:15:21.080 --> 0:15:24.600
<v Speaker 1>dollar business. It's not a sandbox. But I think some

0:15:24.680 --> 0:15:28.080
<v Speaker 1>of these executives treated it that way or they felt

0:15:28.080 --> 0:15:30.480
<v Speaker 1>that they could make these comments but there would be

0:15:30.480 --> 0:15:33.640
<v Speaker 1>no consequences. And I just think there's a lot more

0:15:33.960 --> 0:15:38.160
<v Speaker 1>in the sort of traditional business environment and world. There's

0:15:38.200 --> 0:15:40.680
<v Speaker 1>a sense of how you comport yourself. There's a sense

0:15:40.760 --> 0:15:44.560
<v Speaker 1>of how you communicate, there's a sense of even how

0:15:44.600 --> 0:15:48.640
<v Speaker 1>you compete, and it's just totally warped in different in

0:15:48.760 --> 0:15:54.440
<v Speaker 1>crypto uh, such that sometimes in quote competing or or communicating,

0:15:54.880 --> 0:15:59.680
<v Speaker 1>they end up sabotaging or self sabotaging. You've just made

0:15:59.680 --> 0:16:03.360
<v Speaker 1>me think kind of as a closing thought about an

0:16:03.360 --> 0:16:06.320
<v Speaker 1>episode we did earlier this year in which we talked

0:16:06.400 --> 0:16:09.760
<v Speaker 1>to a person who's an executive recruiter for like very

0:16:09.800 --> 0:16:12.120
<v Speaker 1>senior positions, right like you know, the C suite on

0:16:13.040 --> 0:16:16.520
<v Speaker 1>and one of the things that she said, is there's

0:16:16.560 --> 0:16:18.840
<v Speaker 1>a time and a place for different kinds of CEOs.

0:16:18.960 --> 0:16:20.840
<v Speaker 1>Like sometimes in the beginning, you want to have that

0:16:20.960 --> 0:16:23.600
<v Speaker 1>CEO who's got that big personality and as a trash

0:16:23.640 --> 0:16:26.760
<v Speaker 1>talka and it's super competitive, but that's not necessarily the

0:16:26.760 --> 0:16:28.800
<v Speaker 1>CEO you want if you are being called to testify

0:16:28.880 --> 0:16:32.800
<v Speaker 1>on Capitol Hill, or you know, have to be in

0:16:33.840 --> 0:16:38.240
<v Speaker 1>repair and clean up and restore credibility and confidence mode.

0:16:38.320 --> 0:16:41.160
<v Speaker 1>And so I think it will definitely be interesting to

0:16:41.160 --> 0:16:45.040
<v Speaker 1>see in twenty three whether any of these folks either

0:16:45.560 --> 0:16:48.800
<v Speaker 1>higher media consultants or executive coaches, or if we see

0:16:48.840 --> 0:16:52.040
<v Speaker 1>another round of executive shake ups in the way that

0:16:52.080 --> 0:16:54.760
<v Speaker 1>we did in the summer. This is true. We we

0:16:54.760 --> 0:16:57.520
<v Speaker 1>were even talking about that before, as you say, in

0:16:57.520 --> 0:17:00.520
<v Speaker 1>the summer, before even what happened with their t X,

0:17:01.040 --> 0:17:05.919
<v Speaker 1>we saw a number of C suite executives depart or

0:17:06.080 --> 0:17:10.159
<v Speaker 1>be replaced, and the thought that we had going forward

0:17:10.359 --> 0:17:13.959
<v Speaker 1>was that again, yes, if this industry is to mature,

0:17:14.640 --> 0:17:17.879
<v Speaker 1>perhaps a new skill set needs to be used to

0:17:18.000 --> 0:17:21.520
<v Speaker 1>get the industry to that next level. We'll see if

0:17:21.520 --> 0:17:25.639
<v Speaker 1>it happens. Yes, it's like the famous closing words of journalists, well,

0:17:25.640 --> 0:17:29.920
<v Speaker 1>you know, too early to tell, but we'll see. Thank you, Beth,

0:17:29.960 --> 0:17:31.919
<v Speaker 1>It's always a pleasure to have you on the show. Thanks.

0:17:32.840 --> 0:17:35.119
<v Speaker 1>You can find more of Beth's work on the Bloomberg Terminal,

0:17:35.160 --> 0:17:38.000
<v Speaker 1>on Bloomberg dot com and on Twitter. And Beth is

0:17:38.040 --> 0:17:41.000
<v Speaker 1>the main editor for the twice weekly Bloomberg Crypto newsletter,

0:17:41.040 --> 0:17:49.359
<v Speaker 1>so you definitely want to sign up for that. This

0:17:49.480 --> 0:17:52.520
<v Speaker 1>is Bloomberg Crypto, a daily podcast from Bloomberg and I

0:17:52.640 --> 0:17:55.880
<v Speaker 1>Heeart Radio. For more shows from I Heart Radio, visit

0:17:55.920 --> 0:17:58.919
<v Speaker 1>the i Heart Radio app, Apple Podcasts, or wherever you

0:17:58.960 --> 0:18:03.000
<v Speaker 1>get your podcast. Send us your comments, questions, or suggestions

0:18:03.040 --> 0:18:08.679
<v Speaker 1>for the show to Crypto at Bloomberg dot net. The

0:18:08.720 --> 0:18:12.679
<v Speaker 1>supervising producer of Bloomberg Crypto is Vicky Vergelina. Our senior

0:18:12.680 --> 0:18:16.320
<v Speaker 1>producer is Janet Babin. Our producers are Mohammed Farup and

0:18:16.320 --> 0:18:20.040
<v Speaker 1>Sharon Barriro. Our associate producers are Ty Butler and Moses

0:18:20.080 --> 0:18:24.359
<v Speaker 1>on Them. Desta wonder At is our engineer. Original music

0:18:24.480 --> 0:18:29.560
<v Speaker 1>by Leo Sidron. I'm Stacy, Marie Ishmael have a great

0:18:29.600 --> 0:18:29.879
<v Speaker 1>legit