WEBVTT - FTX 'Horror Stories' in the Bahamas 0:00:14.160 --> 0:00:17.919 Hello, and welcome to What Goes Up, a weekly markets podcast. 0:00:18.000 --> 0:00:20.840 My name is Mike Reagan, I'm a senior editor at Bloomberg, 0:00:20.920 --> 0:00:24.160 and I'm Danna huk Across Acid reporter with Bloomberg. At 0:00:24.239 --> 0:00:27.000 this week on the show, Well, it seems like every 0:00:27.120 --> 0:00:30.520 day there are more alarming revelations about the mess that 0:00:30.640 --> 0:00:34.400 was left behind when Sam bankman Fried's f TX crypto 0:00:34.600 --> 0:00:39.080 empire collapsed, and as the bankruptcy case gets underway, there 0:00:39.080 --> 0:00:41.600 are plenty of questions swirling around about whether all of 0:00:41.640 --> 0:00:44.840 the contagion has yet to play out and how much 0:00:44.880 --> 0:00:48.239 permanent damage has been done to the industry. We'll get 0:00:48.240 --> 0:00:51.040 into it with the CEO of a Canadian company that's 0:00:51.080 --> 0:00:54.960 at the intersection of crypto and traditional capital market investors. 0:00:55.680 --> 0:00:57.840 But first, Phil Donna, I have to ask, are you 0:00:57.840 --> 0:01:01.680 watching the World Cup. I'm not. I'm being a very 0:01:01.840 --> 0:01:05.320 very diligent, hard working person when I'm at my desk. 0:01:05.360 --> 0:01:08.560 I'm definitely not watching soccer. I don't believe that, unlike you. 0:01:08.840 --> 0:01:10.880 Unlike you, I actually took a half day on Monday 0:01:10.880 --> 0:01:13.760 to actually watch the US game at the pub and no, 0:01:13.920 --> 0:01:15.880 you didn't, bitter sweet well at that and to do 0:01:16.000 --> 0:01:19.640 my Thanksgiving shopping, so I two for one, a very 0:01:19.680 --> 0:01:22.199 bitter sweet tie. But I bring it up because two 0:01:22.240 --> 0:01:26.000 of my craziest things are World Cup related. So little 0:01:26.000 --> 0:01:28.880 tease for the end of the show there. Yeah, no, 0:01:28.959 --> 0:01:30.960 that's a good tease. I wonder what it could be. 0:01:31.200 --> 0:01:33.040 I'm trying to think of all the headlines. I'll give 0:01:33.040 --> 0:01:34.479 you a hint that they go all the way back 0:01:34.520 --> 0:01:37.880 to the nineteen eighties, which, oh no, incidentally is the 0:01:37.920 --> 0:01:42.680 last time I've actually played soccer, so a little bit 0:01:42.680 --> 0:01:45.679 about my skills in that game. It's possible that we 0:01:45.720 --> 0:01:48.000 can bring in our guests from this week into this 0:01:48.080 --> 0:01:50.560 conversation as well. I want to bring in Stefano Lett. 0:01:50.800 --> 0:01:55.160 He's the chief executive officer of f R and T Financial. Stefan, 0:01:55.280 --> 0:01:57.440 thank you so much for coming on the show. Thank 0:01:57.440 --> 0:01:59.560 you for having me. I'm not a soccer star, but 0:01:59.560 --> 0:02:02.680 I will be watching with going on right now. It's 0:02:02.960 --> 0:02:05.760 a welcome, welcome, positive that we can have on in 0:02:05.760 --> 0:02:10.360 the background. You're calling in from a very special place, 0:02:10.639 --> 0:02:14.760 or it's special at least up today in the crypto world, 0:02:14.760 --> 0:02:17.320 which is the Bahamas, and I want to start with that. 0:02:17.400 --> 0:02:19.119 I want to ask you to tell us a bit 0:02:19.440 --> 0:02:22.880 about why you're there, what you're thinking about, and what 0:02:22.919 --> 0:02:26.079 that trip has been like. Yeah, no, I'm in the Bahamas. 0:02:26.080 --> 0:02:31.840 I've been here basically since I arrived, not this Sunday, 0:02:31.840 --> 0:02:35.160 this Sunday before. You know, our organization as a presence 0:02:35.160 --> 0:02:37.840 down here. We have a lot of partners and clients 0:02:37.960 --> 0:02:40.160 and just people that are are friends that are down here. 0:02:40.240 --> 0:02:42.880 So I came. I came here to be close to them, 0:02:42.960 --> 0:02:44.840 try to be on the boots on the ground and 0:02:44.880 --> 0:02:47.280 really get a feel of of of how everyone was 0:02:47.320 --> 0:02:50.920 thinking about the situation and how it was unfolding. It 0:02:51.040 --> 0:02:53.640 is really ugly down here, you know. This is uh, 0:02:53.680 --> 0:02:56.079 this was a real point of excitement for the Bahamas, 0:02:56.120 --> 0:02:58.120 the fact that they had become such a such a 0:02:58.120 --> 0:03:01.000 crypto hub. You know, this is this is a country 0:03:01.000 --> 0:03:03.760 that very much kind of missed out on that. Something 0:03:03.760 --> 0:03:05.600 it's not very well known about the Caribbean is that 0:03:06.000 --> 0:03:09.040 in the early nineties, when the tech boom was exploding, 0:03:09.160 --> 0:03:12.480 a lot of the dot com enterprises, including firms like Amazon, 0:03:13.040 --> 0:03:16.040 We're also having issues with kind of the US financial system, 0:03:16.080 --> 0:03:18.600 and they're were slow and the willingness to bring them 0:03:18.600 --> 0:03:20.600 on board, and so they came down to the Caribbean, 0:03:20.840 --> 0:03:24.160 and the Caribbean basically said, you know, if that, you know, 0:03:24.200 --> 0:03:25.519 if the US banks don't want to work with you, 0:03:25.560 --> 0:03:27.600 we don't want to work with you either. And obviously 0:03:27.680 --> 0:03:29.360 if they made a different decision at that time, they 0:03:29.360 --> 0:03:31.360 could have had a very different experience over the last 0:03:31.400 --> 0:03:34.359 you know, five years. So this was seen as something 0:03:34.400 --> 0:03:36.280 they didn't really want to miss out on, and they 0:03:36.360 --> 0:03:38.880 really you know, moved quickly and they brought in a 0:03:38.880 --> 0:03:41.280 lot of the top firms, uh, and to see that 0:03:41.360 --> 0:03:44.960 all unravel as quickly as it did is extremely disappointing 0:03:45.240 --> 0:03:48.560 to everyone involved, not not to mention the fact that, uh, 0:03:48.600 --> 0:03:50.640 you know, they're the ft X was a position to 0:03:50.680 --> 0:03:53.760 themselves as a banking alternative, particularly in regions where they 0:03:53.800 --> 0:03:56.760 operated like the Bahamas. So there's even more horror stories 0:03:56.960 --> 0:03:59.720 of people treating ft X like bank like infrastructure, and 0:03:59.720 --> 0:04:01.880 there are leaving you know, a significant amount of their 0:04:01.880 --> 0:04:03.640 assets just kind of lating on f t X, which 0:04:03.680 --> 0:04:06.040 are now and you know, you know, now they can't 0:04:06.040 --> 0:04:08.720 get access to just like everybody else. So there's a 0:04:08.760 --> 0:04:11.640 lot of different kind of angles to this story that 0:04:11.760 --> 0:04:15.800 just get really ugly. Um and you know, unfortunately, you know, 0:04:16.040 --> 0:04:17.720 uh you know, the Bahamas is bearing some of the 0:04:17.760 --> 0:04:19.400 runs of it right now. And I should have been 0:04:19.400 --> 0:04:22.000 super super clear. Um I should have mentioned this earlier. 0:04:22.160 --> 0:04:26.360 You're there because f t X is headquartered there, right, Yeah, 0:04:26.480 --> 0:04:28.080 just just to give a little color on that. I 0:04:28.080 --> 0:04:30.920 mean f t X basically when China kind of changed 0:04:30.960 --> 0:04:33.880 their strategy about foreign relations in general, ft X was 0:04:33.920 --> 0:04:37.039 launched in Hong Kong, and they've very quickly kind of 0:04:37.040 --> 0:04:39.279 turned around and used Bohmas as a new jurisdiction and 0:04:39.320 --> 0:04:41.640 came down here and they brought their whole organization to 0:04:41.760 --> 0:04:44.520 live here. Not only to kind of be regulated out 0:04:44.520 --> 0:04:46.800 of here, but there was you know, tons of FTX 0:04:46.800 --> 0:04:49.840 employees that moved down here. They all started to you know, 0:04:49.960 --> 0:04:52.120 to to rent, to invest in property, They bought a 0:04:52.160 --> 0:04:55.159 lot of office space and all that. So they really quickly, 0:04:55.200 --> 0:04:58.320 within about a year, you know, fifteen months, got very 0:04:58.480 --> 0:05:01.719 ingrained in the fabric of the country. And you know, 0:05:01.760 --> 0:05:03.360 it was one of the biggest, one of the biggest 0:05:03.360 --> 0:05:05.479 companies operating out of here, and brought a lot of 0:05:05.520 --> 0:05:07.200 other companies that wanted to kind of be in the 0:05:07.200 --> 0:05:10.320 f t X sphere and ecosystem with them. Well, Stefan 0:05:10.400 --> 0:05:13.320 as far As. Uh, I understand, Uh, your firm f 0:05:13.480 --> 0:05:16.160 R and C didn't have any direct exposure to to 0:05:16.240 --> 0:05:19.400 f t X. That's correct, That's correct. We didn't have 0:05:19.400 --> 0:05:21.880 any direct exposure f t X. In addition to that, 0:05:22.080 --> 0:05:24.440 you know, the we did see some red flags in 0:05:24.480 --> 0:05:26.280 f t X. I mean, you know, red flags and 0:05:26.360 --> 0:05:28.880 counterparty risk aren't as much of an issue in in 0:05:28.920 --> 0:05:33.080 a in a period one. I mean, you know, I 0:05:33.120 --> 0:05:35.800 would imagine that Sam, even if he did have a 0:05:35.800 --> 0:05:37.280 hole that he was covering up, would have been able 0:05:37.279 --> 0:05:40.159 to raise capital just you know, uh at the snap 0:05:40.240 --> 0:05:44.360 of his fingers. As two the credit cycle turned over, 0:05:44.720 --> 0:05:47.839 you know, those opportunities went away for even someone like Sam. 0:05:48.000 --> 0:05:50.080 So at that point, you know, you start to say 0:05:50.120 --> 0:05:52.200 to yourself, Okay, well, how do I feel about these 0:05:52.200 --> 0:05:55.200 counterparties and you know, the risk that they're taking, the 0:05:55.520 --> 0:05:57.479 even like the ethos of the way that they operate, 0:05:57.680 --> 0:06:00.279 and so from my perspective, and this is come and 0:06:00.560 --> 0:06:02.520 started to come out kind of as as the veil 0:06:02.560 --> 0:06:04.599 has been lifted on f t X. I thought they'd 0:06:04.640 --> 0:06:07.880 been extremely aggressive on the regulatory side. They're you know, 0:06:08.040 --> 0:06:10.599 very associated with the the US A lot of the 0:06:10.640 --> 0:06:14.200 principles or US persons, they use US banking system. You know, 0:06:14.200 --> 0:06:17.000 when I'd seen what happened to bit max, where essentially 0:06:17.080 --> 0:06:19.400 the d o J claimed jurisdiction over them and it was, 0:06:19.680 --> 0:06:21.920 you know, really aggressive, I thought that that was also 0:06:21.920 --> 0:06:23.800 a similar risk to f t X, that the U 0:06:23.920 --> 0:06:25.840 S regulators were going to try to claim jurisdiction and 0:06:26.000 --> 0:06:28.919 essentially say that they hadn't been ambided by US regulations. 0:06:29.400 --> 0:06:33.000 Now that's not that bad from a customer standpoint, because 0:06:33.040 --> 0:06:35.640 in the bi Mex case, the platform wasn't impacted at all. 0:06:35.680 --> 0:06:37.799 They really just came after the founders, so that wasn't 0:06:38.040 --> 0:06:40.120 f t X has was a fiat on ramp, which 0:06:40.120 --> 0:06:42.960 bit Mex was not, and so you know, I did 0:06:42.960 --> 0:06:44.960 think that there was a potential that assets would be 0:06:45.000 --> 0:06:47.120 you know, held up for a while, but ultimately I 0:06:47.200 --> 0:06:50.640 felt as though the creditors were going to would just 0:06:50.839 --> 0:06:52.240 have to deal with that for a little while when 0:06:52.320 --> 0:06:55.360 we get resolved. The second thing that I was really 0:06:55.400 --> 0:06:57.760 concerned with with f t X, which is definitely a 0:06:57.760 --> 0:07:01.080 part of what actually has trans are it was they 0:07:01.080 --> 0:07:03.680 grew so quickly. But I mean the reality is is 0:07:03.720 --> 0:07:06.960 that in crypto there are really unique security risks that 0:07:07.040 --> 0:07:10.400 you have. The accounting is also very unique. There aren't 0:07:10.400 --> 0:07:12.480 as many services that are willing to support you with 0:07:12.520 --> 0:07:15.360 things like accounting, So these are kind of limitations to 0:07:15.680 --> 0:07:18.480 growth that when you just look at the FTX timeline 0:07:18.480 --> 0:07:20.600 and how fast they moved, you had to think that 0:07:20.680 --> 0:07:22.800 they were playing a little fast and loose with things 0:07:22.800 --> 0:07:25.679 like security and accounting, right, And you know, we happen 0:07:25.720 --> 0:07:28.640 to just with our you know, our our presence down here. 0:07:28.720 --> 0:07:30.640 I've come to the bombs a lot. You know, we 0:07:30.760 --> 0:07:33.480 also were quite well aware of just kind of how 0:07:33.520 --> 0:07:35.559 they were operating their security, and it was in ways 0:07:35.600 --> 0:07:38.440 that you know, we wouldn't feel comfortable with. So I 0:07:38.520 --> 0:07:40.600 was I was definitely thinking that there was a potential 0:07:40.600 --> 0:07:42.120 that they'd wake up one day and then you know, 0:07:42.240 --> 0:07:44.240 there wouldn't be there would be money missing from whether 0:07:44.280 --> 0:07:48.080 it was a hack or just accounting mistakes, etcetera. Did 0:07:48.240 --> 0:07:52.040 you know the last piece of the puzzle was that 0:07:52.200 --> 0:07:55.600 al Mida was very well known to be seeking leverage 0:07:55.960 --> 0:07:58.720 through different crypto participants over the last nine months, and 0:07:58.760 --> 0:08:01.520 I mean that you know, made its way to our door, etcetera, etcetera. 0:08:02.000 --> 0:08:04.440 And you know, the last nine months has not been 0:08:04.440 --> 0:08:06.920 a good trading environment for cryptocurrency, it's been you know, 0:08:06.960 --> 0:08:10.720 there was a counterparty with Scares following the Luna and Celsius, 0:08:11.120 --> 0:08:13.120 and then kind of moving to the summer, opportunity really 0:08:13.120 --> 0:08:15.600 went away. The market was very quiet, so you know, 0:08:15.720 --> 0:08:18.080 when there was a few firms that we're looking for 0:08:18.280 --> 0:08:22.360 leverage and almost all of them ultimately announced that they 0:08:22.400 --> 0:08:24.200 had taken a big los so would say, okay, you 0:08:24.200 --> 0:08:27.240 know this is something that Celsius was doing, so you go, okay, 0:08:27.600 --> 0:08:30.760 this has been a bit of a telltale sign of 0:08:30.800 --> 0:08:35.319 financial issues with an organization, and you know, given all 0:08:35.440 --> 0:08:38.760 the interconnectivity between Alameda and FT, actually started to say, okay, well, 0:08:38.800 --> 0:08:41.199 I mean I really hope that this isn't is that 0:08:41.240 --> 0:08:43.520 there isn't customer assets that have gone into the mix here. 0:08:44.080 --> 0:08:47.360 But from what transpired, I would never have anticipated that 0:08:47.400 --> 0:08:49.400 it was this bad. I mean there there was, I 0:08:49.400 --> 0:08:53.560 mean just every kind of financial mouthfeasance that you could imagine, 0:08:53.679 --> 0:08:57.080 it seems to have occurred here. And that was beyond 0:08:57.200 --> 0:09:00.679 even what I thought was possible for sure, right right, 0:09:00.960 --> 0:09:03.600 And you know we should point out still no criminal 0:09:03.679 --> 0:09:06.920 charges against anyone, who knows if they're coming, but as 0:09:06.960 --> 0:09:10.120 of now, you know, I'm not sure if anyone is 0:09:10.840 --> 0:09:13.320 sure if it's actual you know, criminal intent or just 0:09:13.400 --> 0:09:16.320 incompetence or what. But well, well, well I'm not gonna 0:09:16.320 --> 0:09:18.800 be a person who's gonna say that either. Unfortunately, just 0:09:18.840 --> 0:09:20.760 with the way that the media is, and it's no 0:09:20.800 --> 0:09:23.600 one's fault, is that everyone is afraid to make those determinations, 0:09:23.880 --> 0:09:26.439 which definitely makes it seem that that Sam's getting a 0:09:26.440 --> 0:09:29.640 little bit of softball behavior in the media, right because 0:09:29.960 --> 0:09:32.320 I'm also not gonna stand here and say like it 0:09:32.360 --> 0:09:35.600 was this or it was that. But it's certainly it's 0:09:35.679 --> 0:09:37.280 very hard to imagine what else he could have been. 0:09:37.400 --> 0:09:41.320 So it's I'm not exactly sure why charges haven't been 0:09:41.400 --> 0:09:43.000 levied yet. I think a lot of people are confused 0:09:43.040 --> 0:09:46.080 about that. But obviously this is a bit of a 0:09:46.280 --> 0:09:49.960 pro Sam news cycle until something like that does happen, 0:09:50.080 --> 0:09:52.280 which a lot of people are getting very upset about 0:09:52.320 --> 0:09:55.440 because they think it's relatively black and white. Right, and 0:09:55.480 --> 0:09:58.640 just before before we delve deeper into this, can you 0:09:58.640 --> 0:10:01.280 actually just tell us a bit more about your company, 0:10:01.320 --> 0:10:04.080 like what you guys do and layout for listeners, what 0:10:04.160 --> 0:10:07.720 you do um your headquartered in Canada, right, so just 0:10:07.760 --> 0:10:10.040 tell us a bit more of that background so that 0:10:10.480 --> 0:10:13.400 we have a sense of f R and T as 0:10:13.400 --> 0:10:18.720 we're discussing su UM. Basically, we are an institutional service 0:10:18.720 --> 0:10:22.040 provider hit within cryptocurrency. Refer to ourselves as an institutional 0:10:22.040 --> 0:10:25.040 capital markets and advisory platform focused on digital assets and 0:10:25.080 --> 0:10:27.679 web based finance. And ultimately what that means is that 0:10:27.720 --> 0:10:31.240 we try to offer a similar service suite that that 0:10:31.559 --> 0:10:34.400 uh you know, that firms would experience from something like 0:10:34.440 --> 0:10:38.679 an investment bank uh to emerging from crypto. And so 0:10:38.720 --> 0:10:41.200 we have several trading which is what I produced cap 0:10:41.320 --> 0:10:44.679 of markets and advisory business lines. In trading, we we 0:10:44.800 --> 0:10:47.600 are what I think, we have some very interesting structured 0:10:47.640 --> 0:10:50.800 products that are institutionally focused that focused on some of 0:10:50.840 --> 0:10:53.640 the you know, very interesting alpha trades in this space 0:10:53.640 --> 0:10:56.560 which have persisted over time, such as you know, access 0:10:56.600 --> 0:11:00.280 to basis. But creating a synthetic layer on top of 0:11:00.320 --> 0:11:03.000 the crypto ecosystem that is regulated and allows people to 0:11:03.040 --> 0:11:06.360 interact without touching crypto directly a lot of different commodities 0:11:06.400 --> 0:11:09.640 and asset classes. It's inconvenient to deal in the underlying 0:11:09.679 --> 0:11:11.840 like the oil market. You know, people don't when they 0:11:11.840 --> 0:11:14.120 do an oil trade. Generalists don't hold physical barrels of 0:11:14.200 --> 0:11:16.720 proud and store it UH. You know, they trade synthetic 0:11:16.720 --> 0:11:18.959 exposure in most cases. So we've built what we think 0:11:19.040 --> 0:11:21.959 is the world's kind of most sophisticated synthetic structure products 0:11:21.960 --> 0:11:26.040 platform UH targeted to institutions. We have deliverable service lines 0:11:26.120 --> 0:11:29.000 where we have you know ODC trading technology, and we 0:11:29.040 --> 0:11:33.240 have treasury management technology that we allow different organizations implement 0:11:33.280 --> 0:11:36.560 if they want to trade large blocks of crypto or 0:11:36.640 --> 0:11:39.120 earned yields on crypto, and we have a bit of 0:11:39.120 --> 0:11:41.240 a different way of doing them than than has been 0:11:42.080 --> 0:11:43.840 was done in the last in the last year or so. 0:11:44.120 --> 0:11:46.679 Then in addition to that, we have the advisory business, 0:11:46.679 --> 0:11:50.200 which is UH we do general advisory for traditional firms 0:11:50.200 --> 0:11:52.760 that are looking to create some kind of crypto product 0:11:52.800 --> 0:11:55.000 on their side, or enter crypto or just looking for 0:11:55.000 --> 0:11:58.280 some advice. We do merchant banking like services where we 0:11:58.640 --> 0:12:01.920 take we know where we get crypto companies and and 0:12:02.120 --> 0:12:05.439 help them you know, sell themselves or you know, get financing, 0:12:05.720 --> 0:12:08.079 and we think we bring to the table, you know, 0:12:08.320 --> 0:12:11.760 real expertise and cryptocurrency. Whereas the traditional investment banks that 0:12:11.800 --> 0:12:14.560 are doing that kind of activity in a lot of cases, 0:12:14.800 --> 0:12:16.920 they don't know crypto well enough to give the strategic 0:12:16.960 --> 0:12:19.559 advice that maybe these companies are looking for. They really 0:12:19.600 --> 0:12:22.199 just kind of fulfill the agency function. We we think 0:12:22.200 --> 0:12:24.360 we fit very nicely into their We also have an 0:12:24.360 --> 0:12:27.200 asset management license which allows us to you know, work 0:12:27.240 --> 0:12:29.240 with large asset managers if they want to build out 0:12:29.240 --> 0:12:32.920 their own crypto portfolios. And really just we find ourselves 0:12:32.920 --> 0:12:35.240 to be extremely well positioned for what we think will 0:12:35.320 --> 0:12:38.200 ultimately be a lot of institutions entering the space. You know, 0:12:38.240 --> 0:12:42.040 these these down market cycles impact that, but we we 0:12:42.120 --> 0:12:51.199 ultimately continue believe in our thesis. Well, yeah, I was 0:12:51.240 --> 0:12:52.800 gonna ask you that stuff in I mean, how much 0:12:52.920 --> 0:12:57.560 damage has been done to sort of the enthusiasm among 0:12:57.679 --> 0:13:02.240 institutional investors to crypto for this FTX fiasco. I mean, 0:13:02.360 --> 0:13:05.120 I would assume that there's been some real sort of 0:13:05.160 --> 0:13:09.120 second guessing and perhaps you know, clients pulling back on 0:13:09.160 --> 0:13:12.600 what we're more aggressive plans previous. What's kind of the 0:13:12.600 --> 0:13:15.960 mood among among clients seft for all this, Yeah, I mean, 0:13:15.960 --> 0:13:18.240 you're entirely right. You know, this has definitely impacted the 0:13:18.280 --> 0:13:21.080 mood of clients. There's definitely a lot of constitutional clients 0:13:21.080 --> 0:13:24.040 that are going to kill all of their crypto plans. Absolutely, 0:13:24.320 --> 0:13:26.080 but I will say, you know, our our businesses were 0:13:26.120 --> 0:13:30.360 launched in the market cycle. There's absolutely more interest from 0:13:30.400 --> 0:13:34.320 institutions in crypto now than there was. I mean when 0:13:34.360 --> 0:13:36.599 the market rolled over, institutions basically said, okay, well that 0:13:36.640 --> 0:13:38.360 thing went away, see you later, not don't need to 0:13:38.360 --> 0:13:41.400 worry about that. You saw really aggressive moves to pull out, 0:13:41.440 --> 0:13:44.320 such as something like the cbo E killing their bitcoin future. 0:13:44.800 --> 0:13:47.640 I don't know that, but I would imagine that it's 0:13:47.679 --> 0:13:50.000 costs about as much to kill a bitcoin future as 0:13:50.040 --> 0:13:52.079 it does to just leave it. So you know, there 0:13:52.160 --> 0:13:55.040 was a real kind of dissociation with the space, which 0:13:55.040 --> 0:13:57.440 you're also seeing right now. But then you are also 0:13:57.480 --> 0:14:00.600 seeing other other organizations that are viewing this as an opportunity. 0:14:00.920 --> 0:14:03.560 You have you know, well known independent investment banks like 0:14:03.600 --> 0:14:05.480 Mollis that announced that they were going to be doing 0:14:05.760 --> 0:14:07.920 merchant banking style activities in space. And this is post 0:14:08.040 --> 0:14:10.840 Luna and Celsius. Man Group came out last week and 0:14:10.840 --> 0:14:12.959 said that they were launching edge fund. There are a 0:14:13.040 --> 0:14:16.080 certain amount of institutional investors that are saying, okay, uh, 0:14:16.120 --> 0:14:18.080 this space was run by a bunch of people who 0:14:18.080 --> 0:14:20.320 didn't really know what they're doing. None of this is 0:14:20.360 --> 0:14:23.280 Bitcoin's fault, right, you know, maybe you could argue that 0:14:23.440 --> 0:14:29.160 the financial services around bitcoin have been extremely, extremely impacted, 0:14:29.560 --> 0:14:31.440 and I've got it. I think I have a bunch 0:14:31.480 --> 0:14:36.600 of thesis as to why that has happened so so aggressively. 0:14:37.000 --> 0:14:40.200 But if you view bitcoin as a potentially, you know, 0:14:40.200 --> 0:14:43.320 growing an alternative financial system, or or crypto as a whole, 0:14:43.320 --> 0:14:46.560 developing an alternate financial system, I mean, just because someone 0:14:46.920 --> 0:14:49.920 someone operating in exchange did so in a way that 0:14:50.000 --> 0:14:52.480 was either as you said, incompetent or as also, as 0:14:52.960 --> 0:14:55.520 you know, as many people think, fraudulent, I mean, it 0:14:55.520 --> 0:14:57.560 doesn't change your thesis on the space. You just think, Okay, 0:14:57.600 --> 0:14:59.400 these people didn't do it right, we can do it better. 0:14:59.600 --> 0:15:02.720 So it's a it's a mix. It's definitely the sentiment 0:15:02.800 --> 0:15:05.120 is horrible, but there are some at least this time 0:15:05.120 --> 0:15:07.400 that are that are sticking with it. Is there more 0:15:07.440 --> 0:15:09.360 contagion to come? Do you think, I mean, have all 0:15:09.400 --> 0:15:12.320 the sort of shoes drop that that are about to 0:15:12.400 --> 0:15:14.840 drop from FTX, or do do you think there's more 0:15:15.240 --> 0:15:19.040 sort of bad news ahead in the space? Well, I 0:15:19.040 --> 0:15:22.680 think that the Genesis news is really really bad news, 0:15:22.800 --> 0:15:25.480 and that itself could create knock on effects that you 0:15:25.520 --> 0:15:28.200 know in firms that you know haven't quite played out yet. 0:15:28.840 --> 0:15:30.640 I do think that there's going to be more bad 0:15:30.720 --> 0:15:34.440 news amongst kind of smaller almost definitely amongst kind of 0:15:34.440 --> 0:15:37.440 midsize smaller firms will be more bad news because there, 0:15:37.480 --> 0:15:40.040 you know, everyone's kind of jumping all over firms right 0:15:40.040 --> 0:15:42.080 now that haven't kind of given there, you know, there 0:15:42.160 --> 0:15:44.560 I'm safe. I'm not safe thing. But the reality is 0:15:44.680 --> 0:15:47.120 that those are a little bit those are complicated terminations 0:15:47.120 --> 0:15:49.600 to make. In some cases, maybe you're a firm that 0:15:49.640 --> 0:15:51.920 has a lot of investments with different you know, funds, 0:15:51.960 --> 0:15:55.160 and you have to wait till they communicate with you, you 0:15:54.640 --> 0:15:57.760 you know fully, and if someone's trying to figure their 0:15:57.760 --> 0:15:59.280 situation out and is a little slow, then you don't 0:15:59.320 --> 0:16:01.840 feel comfortable with having your full communication yet in terms 0:16:01.840 --> 0:16:03.120 of what you're doing, because you only want to do 0:16:03.120 --> 0:16:06.360 it once, right. So there, there's definitely going to be 0:16:06.360 --> 0:16:09.840 more bankruptcies. I feel as though, you know, just given 0:16:09.880 --> 0:16:12.680 the market pricing, the market price what you see with 0:16:12.760 --> 0:16:15.960 Genesis essentially saying that there's a very strong chance that 0:16:16.000 --> 0:16:19.320 they will declare bankruptcy and seeing relatively little market impact. 0:16:19.840 --> 0:16:22.160 I think that a lot of the kind of mid 0:16:22.240 --> 0:16:26.680 size to large bankruptcies have been somewhat priced in. I 0:16:26.720 --> 0:16:30.000 think if another major exchange platform was also found to 0:16:30.000 --> 0:16:32.440 be insolvent, that would create a whole bunch of other issues. 0:16:32.480 --> 0:16:36.280 But so far, so good on that front. But definitely 0:16:36.760 --> 0:16:39.000 everyone's pulling back their their capital to what they believe 0:16:39.040 --> 0:16:41.200 to be the safest corners of whatever they have access 0:16:41.240 --> 0:16:43.960 to and are just waiting to see what happens. So uh, 0:16:44.000 --> 0:16:45.760 you know, I think that even if we don't get 0:16:45.760 --> 0:16:48.680 any major bankruptcies for the next month or so, people 0:16:48.720 --> 0:16:51.120 are still gonna wait and see, you know, until the 0:16:51.160 --> 0:16:54.120 new year, at least until they start kind of redeploying 0:16:54.240 --> 0:16:57.360 in a significant way. Okay, I have a difficult question 0:16:57.360 --> 0:17:00.920 for you, which is that there's just so much interconnectedness 0:17:01.040 --> 0:17:03.480 within the space. Can you actually just lay out, like 0:17:04.359 --> 0:17:07.960 maybe the big picture of you layout for us, how 0:17:08.040 --> 0:17:11.840 it is that there are knock on effects where you have, 0:17:12.440 --> 0:17:14.239 you know, the collapse of f t X and what 0:17:14.280 --> 0:17:17.199 it means for these other lenders or other exchanges, Like 0:17:17.240 --> 0:17:18.879 how is it that that happened? Like what is it 0:17:18.920 --> 0:17:21.960 about the crypto space that allowed that to to sort 0:17:22.000 --> 0:17:23.919 of happen. Well, I would I would also say that 0:17:23.920 --> 0:17:26.040 this is not unique to crypto, right, like there's there's 0:17:26.200 --> 0:17:30.160 you know, the interconnectiveness of financial markets is there everywhere, 0:17:30.200 --> 0:17:31.960 and in fact, a lot of what a lot of 0:17:31.960 --> 0:17:35.879 what I think cause the honest failures, let's say, like 0:17:35.920 --> 0:17:39.800 the honest failures is really just people bringing things like 0:17:39.880 --> 0:17:42.639 unsecured lending into the crypto space, Like, well, before this 0:17:42.760 --> 0:17:45.159 market's ready for something like that, And you know, the 0:17:45.200 --> 0:17:48.040 biggest move from Wall Street employees we've seen into the 0:17:48.080 --> 0:17:50.639 crypto space, I think a lot of people just pulled 0:17:50.640 --> 0:17:53.320 out their old Wall Street playbook and started applying it 0:17:53.359 --> 0:17:55.920 to crypto and some of the stuff the markets ready 0:17:55.960 --> 0:17:57.600 for and some of the stuff the market isn't. So 0:17:57.640 --> 0:18:00.240 I think a large part of kind of the like said, 0:18:00.280 --> 0:18:03.199 the honest failures, we're just implying allowing business practices like 0:18:03.280 --> 0:18:05.280 un secure lending that just don't work right now. I mean, 0:18:05.840 --> 0:18:08.120 this is an asset class where if you own five 0:18:08.160 --> 0:18:11.480 assets in your portfolio, they could go to zero within 0:18:11.560 --> 0:18:13.480 a couple of days. Right, It's just and that's just 0:18:13.560 --> 0:18:16.640 not something that you typically see at scale and traditional 0:18:16.680 --> 0:18:19.240 finance like you do in crypto. But what's happening, you know, 0:18:19.280 --> 0:18:22.280 the the actual kind of knock on operational effects are 0:18:22.720 --> 0:18:25.960 I mean, it's relatively simple. It's it's say, I you know, 0:18:26.040 --> 0:18:27.840 if you were a fund that was involved in the 0:18:27.840 --> 0:18:29.720 ft X bankruptcy and you were using them as a 0:18:29.720 --> 0:18:32.560 massive counterparty. Okay, well, first of all, you may just 0:18:32.600 --> 0:18:34.639 have so much of your assets tied up on that 0:18:34.680 --> 0:18:37.639 platform and written it down to zero that you just 0:18:37.760 --> 0:18:40.320 wind down your operation altogether, right because you said, okay, 0:18:40.400 --> 0:18:42.560 I lost of my assets, we're writing them all down 0:18:42.600 --> 0:18:45.159 to zero. And ft X, you know what seems apparent 0:18:45.200 --> 0:18:47.040 now is we're going to go through a long bankruptcy 0:18:47.119 --> 0:18:49.280 that's probably gonna end up being a zero. I'll give 0:18:49.280 --> 0:18:52.240 my my investors back the little money that's left and 0:18:52.440 --> 0:18:54.399 call it a day. So that's kind of like the 0:18:54.400 --> 0:18:58.040 most vanilla unwind. Then you get into situations where say 0:18:58.160 --> 0:19:00.960 you had debt, you were you were using leverage in 0:19:01.000 --> 0:19:03.400 your in your fund. Well, now you may not even 0:19:03.400 --> 0:19:05.720 have the opportunity to give back money to equity holders 0:19:05.720 --> 0:19:08.560 because debt holders that stand in advance of your equity holders, 0:19:08.560 --> 0:19:10.720 and so you know, your dead holders say, we're taking 0:19:10.720 --> 0:19:12.600 whatever you have left and your equity holders are wiped out. 0:19:12.600 --> 0:19:16.000 So that's another version of a bankruptcy. The Genesis situation, 0:19:17.200 --> 0:19:19.520 to me, is still quite complicated in terms of what 0:19:19.640 --> 0:19:22.680 really happened there. I think that you know, clearly they 0:19:22.680 --> 0:19:26.720 were extremely impacted by the Three Arrows bankruptcy. They released 0:19:26.720 --> 0:19:29.119 that they had six d some odd million of exposure 0:19:29.119 --> 0:19:32.200