1 00:00:02,520 --> 00:00:03,560 Speaker 1: All Zone Media. 2 00:00:05,880 --> 00:00:09,240 Speaker 2: Hello and welcome to Better Offline. I'm your host ed Zetron. 3 00:00:09,840 --> 00:00:11,760 Speaker 2: This is a weekly tech show where I walk you 4 00:00:11,800 --> 00:00:14,079 Speaker 2: through the good, the bad, and the stupid of a 5 00:00:14,160 --> 00:00:18,520 Speaker 2: multi trillion dollar industry that's changed and monetized almost every 6 00:00:18,520 --> 00:00:32,680 Speaker 2: part of our lives. So you're likely aware of the 7 00:00:32,720 --> 00:00:35,800 Speaker 2: tale of Sam Bankman Free, the curly haired fraudster who 8 00:00:35,840 --> 00:00:38,720 Speaker 2: conned millions of people out of billions of dollars, crushing 9 00:00:38,720 --> 00:00:41,879 Speaker 2: the cryptocurrency markets in the process. He did so by 10 00:00:41,920 --> 00:00:45,440 Speaker 2: creating a cryptocurrency exchange called ftx, where people could buy 11 00:00:45,479 --> 00:00:49,120 Speaker 2: things like bitcoin and ethereum, except it had one little catch. 12 00:00:49,680 --> 00:00:52,880 Speaker 2: He was stealing the customer funds, keeping only a little 13 00:00:52,880 --> 00:00:55,480 Speaker 2: around at any given time for people to withdraw. This 14 00:00:55,600 --> 00:00:58,480 Speaker 2: meant that when hundreds of thousands of people went to 15 00:00:58,520 --> 00:01:01,560 Speaker 2: withdraw their funds at once, the entire scheme fell apart 16 00:01:01,640 --> 00:01:05,480 Speaker 2: and FTX collapsed. Bankman Fried currently sits in prison awaiting 17 00:01:05,560 --> 00:01:09,360 Speaker 2: sentencing after being convicted and several counts of fraud, including 18 00:01:09,360 --> 00:01:12,800 Speaker 2: wirefraud and wirefraud conspiracy, which is appropriate as him and 19 00:01:12,840 --> 00:01:16,160 Speaker 2: his co conspirators at one point genuinely used their group 20 00:01:16,319 --> 00:01:20,600 Speaker 2: called wirefraud Chat and I am not kidding yet. This 21 00:01:20,640 --> 00:01:24,760 Speaker 2: isn't about SBF. There are actually two other villains in 22 00:01:24,800 --> 00:01:28,600 Speaker 2: this story, two villains of the recent crypto crash that 23 00:01:28,680 --> 00:01:30,759 Speaker 2: you might have missed, despite the fact that they're both 24 00:01:30,959 --> 00:01:34,480 Speaker 2: six foot five and lost their customers over a billion dollars. 25 00:01:36,080 --> 00:01:40,399 Speaker 2: I'm talking about Cameron and Tyler Winklevoss, two brothers, both 26 00:01:40,400 --> 00:01:44,120 Speaker 2: alike in dignity and appearance, the gay notoriety by suing 27 00:01:44,160 --> 00:01:47,440 Speaker 2: Mark Zuckerberg of Facebook now known as Metta in the 28 00:01:47,480 --> 00:01:49,919 Speaker 2: early days of the social network back in two thousand 29 00:01:49,960 --> 00:01:54,440 Speaker 2: and four. In the Winklevi's defense, Zuckerberg dig screw them 30 00:01:54,480 --> 00:01:57,080 Speaker 2: as a student at Harvard, where he pretended to work 31 00:01:57,080 --> 00:02:00,600 Speaker 2: on the Winklevoss's social network, Harvard Connect while actually working 32 00:02:00,600 --> 00:02:04,840 Speaker 2: on the earliest version of Facebook, effectively sabotaging the competition 33 00:02:04,920 --> 00:02:09,239 Speaker 2: from within. When Facebook finally launched the identical Moist, Riverboat 34 00:02:09,280 --> 00:02:12,080 Speaker 2: Giants alleged that Zuckerberg had stolen their idea for a 35 00:02:12,120 --> 00:02:15,200 Speaker 2: social network and used their code, resulting in a year's 36 00:02:15,240 --> 00:02:17,960 Speaker 2: long back and forth and a sixty five million dollar 37 00:02:18,000 --> 00:02:20,960 Speaker 2: settlement that the Winklevosses were forced by a court to accept. 38 00:02:21,080 --> 00:02:24,760 Speaker 2: In twenty eleven, I think the had Zuckerberg kept his 39 00:02:24,800 --> 00:02:27,800 Speaker 2: filthy little hands to himself, we'd likely never have heard 40 00:02:27,800 --> 00:02:31,399 Speaker 2: of Tyler and Cameron Winkelvoss, and I believe the world 41 00:02:31,400 --> 00:02:34,800 Speaker 2: would have been a better place if they weren't already. 42 00:02:34,880 --> 00:02:38,480 Speaker 2: The Winklevoss twins were now millionaires. In twenty ten, Aaron 43 00:02:38,560 --> 00:02:42,120 Speaker 2: Sorkin's Oscar nominated retelling of the Facebook origin story the 44 00:02:42,160 --> 00:02:45,800 Speaker 2: social network would raise their profiles even further, portraying them 45 00:02:45,840 --> 00:02:51,120 Speaker 2: as victims of a calculated, misanthropic opportunist, Mark Zuckerberg. Of course, 46 00:02:51,639 --> 00:02:53,520 Speaker 2: you could almost feel sorry for them, even if they 47 00:02:53,520 --> 00:02:57,959 Speaker 2: were portrayed by Armie Hammer, the famous cannibalism fan and 48 00:02:58,919 --> 00:03:03,760 Speaker 2: potentially perverted in enjoyer of other things too. But you 49 00:03:03,840 --> 00:03:06,840 Speaker 2: really shouldn't feel sorry for Army Hammer. But you definitely 50 00:03:06,840 --> 00:03:10,560 Speaker 2: shouldn't for the Winklevosses either. In the years following their 51 00:03:10,600 --> 00:03:13,520 Speaker 2: legal dust up with Mark Zuckerberg, the Winklevoss twins remained 52 00:03:13,560 --> 00:03:16,080 Speaker 2: active in the tech scene, launching an investment fund in 53 00:03:16,120 --> 00:03:19,600 Speaker 2: twenty twelve that focused on early stage, consumer centric startups. 54 00:03:20,160 --> 00:03:23,000 Speaker 2: A year later, they acquired eleven million dollars of bitcoin, 55 00:03:23,080 --> 00:03:25,800 Speaker 2: and while it's unclear exactly how much they bought. A 56 00:03:25,800 --> 00:03:28,560 Speaker 2: New York Times article about their acquisition, which of course 57 00:03:28,600 --> 00:03:32,600 Speaker 2: featured no verification of that actual purchase, ran on April eleventh, 58 00:03:32,680 --> 00:03:35,760 Speaker 2: twenty thirteen, when bitcoin was around one hundred and fourteen 59 00:03:35,800 --> 00:03:39,720 Speaker 2: dollars apiece, meaning that the Winklevoss brothers likely bought somewhere 60 00:03:39,840 --> 00:03:43,600 Speaker 2: in the region of ninety thousand bitcoin. Based on today's valuation, 61 00:03:43,920 --> 00:03:46,280 Speaker 2: those holdings would be worth an excess of three point 62 00:03:46,320 --> 00:03:51,080 Speaker 2: eight billion dollars. It was a big, stupid bet, and 63 00:03:51,160 --> 00:03:54,600 Speaker 2: it absolutely paid off. In the same year, they'd pursue 64 00:03:54,640 --> 00:03:58,440 Speaker 2: creating a bitcoin exchange traded fund also known as an ETF, 65 00:03:59,040 --> 00:04:01,440 Speaker 2: a thing that allows you to invest in something, in 66 00:04:01,440 --> 00:04:04,200 Speaker 2: this case bitcoin, much like you would trading a stock, 67 00:04:04,600 --> 00:04:07,600 Speaker 2: without all of the complexity and risk associated with actually 68 00:04:07,640 --> 00:04:11,480 Speaker 2: owning the thing in question, in this case bitcoin. While 69 00:04:11,480 --> 00:04:14,320 Speaker 2: this never materialized, the winklevoss Is cozied up with New 70 00:04:14,360 --> 00:04:17,520 Speaker 2: York's Department of Financial Services and realized they could found 71 00:04:17,640 --> 00:04:22,600 Speaker 2: their own cryptocurrency exchange to rival the other American rival, Coinbased, 72 00:04:22,600 --> 00:04:26,120 Speaker 2: which had launched two years earlier. A cryptocurrency exchange, as 73 00:04:26,120 --> 00:04:28,120 Speaker 2: I've discussed, is a place where you can buy and 74 00:04:28,200 --> 00:04:31,560 Speaker 2: sell your crypto using generally a credit card or a 75 00:04:31,560 --> 00:04:34,440 Speaker 2: debit card. At the time very focused on debit cards, 76 00:04:34,480 --> 00:04:38,800 Speaker 2: though in twenty fifteen they launched Gemini, what would eventually 77 00:04:38,839 --> 00:04:42,360 Speaker 2: become a major and highly respected cryptocurrency exchange that from 78 00:04:42,360 --> 00:04:45,160 Speaker 2: the very beginning tried to swaddle its ugly and often 79 00:04:45,240 --> 00:04:48,880 Speaker 2: fraudulent industry in a blanket of legitimacy, winning approval from 80 00:04:48,920 --> 00:04:53,520 Speaker 2: New York state regulators to provide certain financial services. Gemini 81 00:04:53,560 --> 00:04:56,880 Speaker 2: now sits as one of the top ten largest cryptocurrency 82 00:04:56,920 --> 00:04:59,159 Speaker 2: exchanges in the world and one of the few remaining 83 00:04:59,160 --> 00:05:03,080 Speaker 2: American exchange. One might be forgiven for thinking they were trustworthy, 84 00:05:04,160 --> 00:05:07,679 Speaker 2: and they'd be wrong. Toward the end of twenty twenty, 85 00:05:07,720 --> 00:05:11,000 Speaker 2: the price of cryptocurrencies began to climb rapidly, with bitcoin 86 00:05:11,040 --> 00:05:14,000 Speaker 2: climbing from nineteen thousand dollars in December to over forty 87 00:05:14,040 --> 00:05:17,159 Speaker 2: thousand dollars in January, cresting over fifty thousand dollars a 88 00:05:17,160 --> 00:05:21,360 Speaker 2: bitcoin by March twenty twenty one. The cryptocurrency industry would 89 00:05:21,400 --> 00:05:24,200 Speaker 2: see more venture investment in the first quarter of twenty 90 00:05:24,240 --> 00:05:27,800 Speaker 2: twenty one than it had in the entirety of twenty twenty, 91 00:05:28,040 --> 00:05:30,600 Speaker 2: with one hundred and twenty nine crypto and blockchain startups 92 00:05:30,640 --> 00:05:33,640 Speaker 2: receiving two point six billion dollars in the space of 93 00:05:33,680 --> 00:05:37,000 Speaker 2: three months, compared to three hundred and forty one cryptocurrencies 94 00:05:37,040 --> 00:05:40,280 Speaker 2: receiving two point three billion in the entirety of twenty twenty. 95 00:05:41,560 --> 00:05:45,680 Speaker 2: As an explanation for those listeners that don't know, venture 96 00:05:45,680 --> 00:05:49,640 Speaker 2: capital investments are generally investing inequacy in the companies. They 97 00:05:49,680 --> 00:05:51,839 Speaker 2: buy a piece of the company for a certain amount 98 00:05:51,880 --> 00:05:54,279 Speaker 2: of money, venture capitalists, of course, taking the risk that 99 00:05:54,320 --> 00:05:57,120 Speaker 2: the company will fall apart. What differs with a lot 100 00:05:57,160 --> 00:05:59,480 Speaker 2: of these companies is that they will sometimes sell you 101 00:05:59,480 --> 00:06:03,240 Speaker 2: a token. This isn't necessarily relevant for this story. I 102 00:06:03,320 --> 00:06:05,159 Speaker 2: just want you to know the fact that this industry 103 00:06:05,560 --> 00:06:08,680 Speaker 2: at its core is based on the idea of basically 104 00:06:09,080 --> 00:06:14,240 Speaker 2: selling securities, you know, like stocks, but hiding from the 105 00:06:14,320 --> 00:06:18,000 Speaker 2: law and conning people. That's not how the Winklevosses fucked 106 00:06:18,000 --> 00:06:23,280 Speaker 2: people over, though, no. So another thing to realize about 107 00:06:23,279 --> 00:06:26,200 Speaker 2: these crypto companies is that they didn't really do anything. 108 00:06:26,520 --> 00:06:28,880 Speaker 2: They'd sell tokens. They would claim that they would build 109 00:06:28,960 --> 00:06:31,400 Speaker 2: something in the future on something called a roadmap. They 110 00:06:31,400 --> 00:06:33,919 Speaker 2: would sometimes have a white paper which would describe some 111 00:06:34,120 --> 00:06:37,680 Speaker 2: underlying technological stuff. But there are really none of them 112 00:06:37,720 --> 00:06:41,279 Speaker 2: that had a feature or a function. They were mostly 113 00:06:41,400 --> 00:06:45,960 Speaker 2: just nonentities that promise things. But because you could trade 114 00:06:46,080 --> 00:06:49,880 Speaker 2: their tokens, which much like a stock, should have been 115 00:06:50,600 --> 00:06:53,000 Speaker 2: regulated by the government, but were not because they were 116 00:06:53,040 --> 00:06:58,520 Speaker 2: such new financial devices and objects. Well, this whole market 117 00:06:58,640 --> 00:07:02,080 Speaker 2: was growing and growing and growing, and along with it, 118 00:07:02,120 --> 00:07:06,400 Speaker 2: the Winklevosses were getting even richer. Then they got greedy. 119 00:07:07,560 --> 00:07:10,920 Speaker 2: To understand how the Winklevosses bungled a billion dollars, I 120 00:07:10,960 --> 00:07:12,520 Speaker 2: have to give you a little bit of background on 121 00:07:12,560 --> 00:07:16,200 Speaker 2: the last few years of hell in the cryptocurrency industry. 122 00:07:16,280 --> 00:07:19,920 Speaker 2: In February twenty twenty one, Gemini, that's their cryptocurrency exchange 123 00:07:19,920 --> 00:07:23,640 Speaker 2: where you could buy and sell different cryptocurrency began something 124 00:07:23,720 --> 00:07:27,520 Speaker 2: called Earn, their Earn program. It was an interest earning 125 00:07:27,600 --> 00:07:31,840 Speaker 2: program where users could feed their cryptocurrency like Bitcoin, for example, 126 00:07:32,160 --> 00:07:36,160 Speaker 2: into Gemini through a few clicks and earn interest. And 127 00:07:36,200 --> 00:07:38,720 Speaker 2: you should put quotation marks around those so you would 128 00:07:38,720 --> 00:07:42,560 Speaker 2: get a percentage return on the crypto that you put 129 00:07:42,600 --> 00:07:46,360 Speaker 2: into Gemini Earn. One might be forgiven for believing that 130 00:07:46,400 --> 00:07:48,400 Speaker 2: as a result, they were putting money into some sort 131 00:07:48,440 --> 00:07:51,880 Speaker 2: of secure protected account like a certificate of deposit. They 132 00:07:51,960 --> 00:07:55,000 Speaker 2: really were not, I must be clear, how not like 133 00:07:55,040 --> 00:07:58,720 Speaker 2: a bank. This was Gemini, a New York based trust 134 00:07:58,760 --> 00:08:02,040 Speaker 2: company that promised to security protocols on par with those 135 00:08:02,080 --> 00:08:06,320 Speaker 2: offered by top financial institutions. Claimed to generate this interest 136 00:08:06,400 --> 00:08:10,280 Speaker 2: by working with and I quote institutional borrowers who were 137 00:08:10,320 --> 00:08:12,960 Speaker 2: partners who had been vetted through Gemini's and I quote 138 00:08:13,000 --> 00:08:17,280 Speaker 2: again risk management framework. What's also important to know is 139 00:08:17,280 --> 00:08:18,960 Speaker 2: that none of what you're about to hear was the 140 00:08:19,000 --> 00:08:23,200 Speaker 2: security issue. It was entirely the result of two greedy 141 00:08:23,280 --> 00:08:27,520 Speaker 2: riverboat giants pissing away money because they were greedy little pigs. 142 00:08:28,400 --> 00:08:31,000 Speaker 2: And as a result of trusting this company that was 143 00:08:31,040 --> 00:08:34,240 Speaker 2: a trust company, a New York based trust company, a 144 00:08:34,360 --> 00:08:37,520 Speaker 2: regulated one allegedly, but not regulated for the thing that 145 00:08:37,559 --> 00:08:40,839 Speaker 2: I'm about to tell you, people trusted them, and as 146 00:08:40,840 --> 00:08:44,760 Speaker 2: a result, customers deposited somewhere between seven hundred million and 147 00:08:45,040 --> 00:08:48,440 Speaker 2: a billion dollars of funds into Gemini Earn, believing that 148 00:08:48,520 --> 00:08:52,160 Speaker 2: Gemini was offering something akin to an interest generating savings account. 149 00:08:52,679 --> 00:08:56,760 Speaker 2: After all, Gemini had institutional partners, and that is plural. 150 00:08:56,880 --> 00:08:59,520 Speaker 2: That's what they said and they had vetted said partners 151 00:08:59,679 --> 00:09:03,920 Speaker 2: through their collateralization management process, which means, in the case 152 00:09:03,960 --> 00:09:06,559 Speaker 2: of a loan, you collateralize the loan, you give them something. 153 00:09:06,760 --> 00:09:09,160 Speaker 2: For example, you would collateralize the loan for a house 154 00:09:09,200 --> 00:09:11,640 Speaker 2: by giving them a down payment of twenty percent. In 155 00:09:11,679 --> 00:09:14,040 Speaker 2: the case of a loan, you might borrow a certain 156 00:09:14,040 --> 00:09:16,000 Speaker 2: amount of money, but put some money down so they 157 00:09:16,000 --> 00:09:18,960 Speaker 2: have something in the event that you default on the loan. 158 00:09:20,400 --> 00:09:23,400 Speaker 2: In plain English, they were claiming to work with institutional 159 00:09:23,440 --> 00:09:27,040 Speaker 2: investors like banks and hedge funds that would pull Gemini 160 00:09:27,120 --> 00:09:30,120 Speaker 2: earn customers, so people giving them their Bitcoin ethereum and 161 00:09:30,160 --> 00:09:33,680 Speaker 2: all that they would pull those resources to allow them 162 00:09:33,920 --> 00:09:36,520 Speaker 2: to get involved in big trades with better returns than 163 00:09:36,640 --> 00:09:38,680 Speaker 2: users will be able to get on their own. Indeed, 164 00:09:39,400 --> 00:09:43,920 Speaker 2: classical financial markets have larger loans that have preferential rates 165 00:09:43,920 --> 00:09:46,520 Speaker 2: and get involved in deals that the regular customer would 166 00:09:46,520 --> 00:09:49,040 Speaker 2: not be able to. That's what people thought they were getting. 167 00:09:50,120 --> 00:09:53,360 Speaker 2: The other suggestion was that Gemini had diversified its risk 168 00:09:53,840 --> 00:09:56,160 Speaker 2: and there's actually an archived version of the Gemini earned 169 00:09:56,160 --> 00:09:58,360 Speaker 2: Patron twenty twenty one that said that Gemini worked with 170 00:09:58,480 --> 00:10:02,959 Speaker 2: multiple accredited party borrowers to do so. As a result, 171 00:10:03,040 --> 00:10:06,600 Speaker 2: as a customer, you may believe, well, if one fails, 172 00:10:06,760 --> 00:10:11,199 Speaker 2: that won't be the end of the world. Right. It's 173 00:10:11,200 --> 00:10:13,480 Speaker 2: also important explaining that the way that a lot of 174 00:10:13,520 --> 00:10:16,720 Speaker 2: these companies in crypto made their money was by loaning 175 00:10:16,720 --> 00:10:20,360 Speaker 2: it to others in the form of margin trading, where investors, 176 00:10:20,400 --> 00:10:24,240 Speaker 2: both retail and institutional, borrowed a massive amount of cryptocurrency 177 00:10:24,240 --> 00:10:27,199 Speaker 2: in returned for collateral which was usually less than the 178 00:10:27,240 --> 00:10:29,440 Speaker 2: amount they were borrowing. As I mentioned, kind of like 179 00:10:29,480 --> 00:10:32,760 Speaker 2: putting a damn payment for a house, except the asset 180 00:10:32,800 --> 00:10:37,160 Speaker 2: is a token on a blockchain like bitcoin. In fact, 181 00:10:37,480 --> 00:10:41,240 Speaker 2: as you'll find out, most of the cryptocurrency industry was 182 00:10:41,240 --> 00:10:46,280 Speaker 2: held up by these loans. Now, all of this supposedly 183 00:10:46,480 --> 00:10:50,760 Speaker 2: legal and cool and normal stuff. All this sounded very trustworthy. 184 00:10:51,000 --> 00:10:54,000 Speaker 2: This was, of course not the case. Neither was it 185 00:10:54,080 --> 00:10:57,480 Speaker 2: the case that Gemini had diversified their investments at all, 186 00:10:58,600 --> 00:11:02,400 Speaker 2: or actually really any risk management of any kind. Although 187 00:11:02,480 --> 00:11:05,520 Speaker 2: Gemini had the outward appearance of being a highly diversified, 188 00:11:05,559 --> 00:11:09,880 Speaker 2: sophisticated and well run financial services business, it actually wasn't. 189 00:11:10,480 --> 00:11:13,480 Speaker 2: They placed the vast majority of their eggs in one 190 00:11:13,760 --> 00:11:19,679 Speaker 2: single basket, and that was a cryptocurrency brokerage called Genesis. 191 00:11:21,120 --> 00:11:25,520 Speaker 2: Genesis provided a variety of cryptocurrency related services for large 192 00:11:25,520 --> 00:11:29,680 Speaker 2: institutional investors and high net worth individuals. Their money was 193 00:11:29,720 --> 00:11:33,600 Speaker 2: made by offering these institutions and individuals loans leveraged by 194 00:11:33,600 --> 00:11:38,120 Speaker 2: their cryptocurrency, which Genesis would in turn invest, theoretically profiting 195 00:11:38,120 --> 00:11:41,240 Speaker 2: in the process through their access to large deals. As 196 00:11:41,280 --> 00:11:45,600 Speaker 2: I previously mentioned, when I say leverage, I mean the 197 00:11:45,760 --> 00:11:48,840 Speaker 2: very simple thing of I give you some money and 198 00:11:48,880 --> 00:11:52,040 Speaker 2: then you lend me money in return, and there is 199 00:11:52,120 --> 00:11:54,400 Speaker 2: usually some sort of interest deal, or there is some 200 00:11:54,520 --> 00:11:57,400 Speaker 2: way where both parties benefit. Sometimes it will be that 201 00:11:57,920 --> 00:12:01,400 Speaker 2: they are borrowing an asset like bitcoin. The price can change, 202 00:12:01,920 --> 00:12:04,560 Speaker 2: then the collateral they give maybe an excess of the 203 00:12:04,600 --> 00:12:07,360 Speaker 2: amount they're borrowing in dollars, but the price of bitcoin 204 00:12:07,400 --> 00:12:09,840 Speaker 2: may go down. Thus, as a result, if I loaned 205 00:12:09,920 --> 00:12:11,959 Speaker 2: somebody a billion dollars a bitcoin, but the price of 206 00:12:12,000 --> 00:12:14,280 Speaker 2: bitcoin went down and they gave me, I don't know, 207 00:12:14,480 --> 00:12:18,840 Speaker 2: one point something billion in return, They're gambling the idea 208 00:12:18,840 --> 00:12:21,160 Speaker 2: that bitcoin will go up from there, and I'm gambling 209 00:12:21,160 --> 00:12:22,439 Speaker 2: that it will go down, and I would have made 210 00:12:22,480 --> 00:12:25,720 Speaker 2: money on that loan. This is a messy stupid assholes 211 00:12:25,720 --> 00:12:29,720 Speaker 2: industry one built on sand and you're about to find 212 00:12:29,720 --> 00:12:34,480 Speaker 2: out how badly it can go. So Genesis was also 213 00:12:34,600 --> 00:12:37,600 Speaker 2: part of a huge empire called the Digital Currency Group, 214 00:12:37,760 --> 00:12:41,439 Speaker 2: a holding company for multiple different parts of the cryptocurrency ecosystem, 215 00:12:41,520 --> 00:12:46,600 Speaker 2: including cryptocurrency news outlet coin Desk, which ironically was a 216 00:12:46,679 --> 00:12:49,040 Speaker 2: large part of the reason that Sam Bankman Freed has 217 00:12:49,040 --> 00:12:52,559 Speaker 2: gone to prison. I could do an entire episode on 218 00:12:52,640 --> 00:12:54,480 Speaker 2: this company, but all you really need to know is 219 00:12:54,520 --> 00:12:57,040 Speaker 2: that they own Genesis, and while Genesis was meant to 220 00:12:57,080 --> 00:13:01,640 Speaker 2: be independent, it absolutely was not. And what's really important 221 00:13:01,640 --> 00:13:04,679 Speaker 2: to know is how stupidly Genesis was run. They weren't 222 00:13:04,720 --> 00:13:08,560 Speaker 2: simply bad at investing. They were so bad at investing 223 00:13:08,600 --> 00:13:11,360 Speaker 2: that they somehow managed to invest in not one, but 224 00:13:11,520 --> 00:13:15,200 Speaker 2: two of the entities that brought down the entire cryptocurrency 225 00:13:15,240 --> 00:13:19,360 Speaker 2: industry in twenty twenty two. Their first mistake was investing 226 00:13:19,400 --> 00:13:23,440 Speaker 2: two point four billion dollars in Three Arrows Capital, a 227 00:13:23,480 --> 00:13:26,920 Speaker 2: major cryptocurrency hedge fund that ended up being a significant 228 00:13:26,920 --> 00:13:29,640 Speaker 2: scam that also led to the collapse of FTX, the 229 00:13:29,679 --> 00:13:33,120 Speaker 2: other entity that Genesis had trusted with its capital, and 230 00:13:33,240 --> 00:13:37,520 Speaker 2: again that's the subject of another episode. Three Arrows Capital 231 00:13:37,640 --> 00:13:40,800 Speaker 2: was a Singapore based cryptocurrency hedge fund with over a 232 00:13:40,880 --> 00:13:44,880 Speaker 2: decade worth of history. Run by two guys. It started 233 00:13:44,880 --> 00:13:47,560 Speaker 2: life in arbitrage, essentially making money on the differences in 234 00:13:47,600 --> 00:13:50,640 Speaker 2: prices of products in two separate locations, with a niche 235 00:13:50,679 --> 00:13:53,320 Speaker 2: in smaller traditional currencies like the ty bart and the 236 00:13:53,520 --> 00:13:57,440 Speaker 2: Indonesian Rupia. This business model often relied on a healthy 237 00:13:57,480 --> 00:14:01,000 Speaker 2: relationship with legacy banks. We had some success on that front. 238 00:14:01,000 --> 00:14:04,560 Speaker 2: It's relationship soured in twenty seventeen, forcing the company to 239 00:14:04,559 --> 00:14:07,959 Speaker 2: pivot to the wild West of cryptocurrency. It started investing 240 00:14:07,960 --> 00:14:10,840 Speaker 2: its client's money in early stage crypto projects, hoping for 241 00:14:10,880 --> 00:14:13,680 Speaker 2: a big return when their values went up. One of 242 00:14:13,720 --> 00:14:17,240 Speaker 2: these projects was terror Lunar, an algorithmic stable coin which, 243 00:14:17,280 --> 00:14:20,560 Speaker 2: in plain English is meant to be a cocoon on 244 00:14:20,600 --> 00:14:23,760 Speaker 2: the Ethereum blockchain that is always related to the price 245 00:14:23,760 --> 00:14:26,880 Speaker 2: of a dollar, except in this case. You may have 246 00:14:26,960 --> 00:14:30,720 Speaker 2: heard that word algorithmic. You know what The problem with 247 00:14:30,760 --> 00:14:33,760 Speaker 2: algorithms is they need to be perfect in they almost 248 00:14:33,800 --> 00:14:39,120 Speaker 2: never are. But this bit kind of requires some explanation, 249 00:14:39,280 --> 00:14:43,240 Speaker 2: so bear with me. Cryptocurrencies like Bitcoin and Ethereum, they're 250 00:14:43,280 --> 00:14:46,160 Speaker 2: wildly volatile, which is bad if you want to actually 251 00:14:46,160 --> 00:14:48,720 Speaker 2: transact with them. If a currency could be twenty five 252 00:14:48,760 --> 00:14:52,040 Speaker 2: percent more or less the next day, how do you 253 00:14:52,040 --> 00:14:54,840 Speaker 2: actually know what to charge for something? And that's where 254 00:14:54,880 --> 00:14:58,680 Speaker 2: stable coins come in. These are cryptocurrencies that aim to 255 00:14:58,680 --> 00:15:02,360 Speaker 2: fix their value to that of a traditional fiat currency 256 00:15:02,560 --> 00:15:06,160 Speaker 2: like the US dollar or the Euro. Most stable coins have, 257 00:15:06,480 --> 00:15:09,960 Speaker 2: or say they have, at least a cash reserve equivalent 258 00:15:10,080 --> 00:15:13,720 Speaker 2: to the amount of tokens in circulation. Terror Lunar differed 259 00:15:13,960 --> 00:15:18,200 Speaker 2: using an algorithm to maintain price parity rather than any reserves. 260 00:15:18,440 --> 00:15:22,240 Speaker 2: The algorithm worked until it suddenly and violently did not. 261 00:15:22,880 --> 00:15:26,320 Speaker 2: On May third, twenty twenty two, a Terror stable coin 262 00:15:26,680 --> 00:15:29,640 Speaker 2: was worth one dollar. A few days later, it was 263 00:15:29,680 --> 00:15:43,560 Speaker 2: worth a fraction of a penny. The Bearre offline theme 264 00:15:43,600 --> 00:15:46,760 Speaker 2: song by Mattasowski will be dropping this Friday, March first, 265 00:15:46,760 --> 00:15:50,120 Speaker 2: on all streaming platforms. You can find the Spotify presab 266 00:15:50,200 --> 00:16:11,240 Speaker 2: link in the episode notes. Terr Luna collapsed in May 267 00:16:11,280 --> 00:16:14,640 Speaker 2: twenty twenty two with the loss of forty five billion 268 00:16:14,760 --> 00:16:18,960 Speaker 2: dollars in market capitalization, meaning the total value of all 269 00:16:19,000 --> 00:16:23,680 Speaker 2: of the tokens on the blockchain. Three arrows capital's entire 270 00:16:23,960 --> 00:16:28,480 Speaker 2: five hundred million dollar position in Lunar was now effectively worthless. 271 00:16:29,560 --> 00:16:33,080 Speaker 2: This collapse also shaved off and estimated one trillion dollar 272 00:16:33,200 --> 00:16:37,720 Speaker 2: value from the wider crypto market. Three Arrows Capital, the 273 00:16:37,720 --> 00:16:41,720 Speaker 2: so called hedge fund to quote research firm fs insight, 274 00:16:42,080 --> 00:16:45,360 Speaker 2: was an old fashioned, made off style Ponzi scheme where 275 00:16:45,440 --> 00:16:48,760 Speaker 2: founders Suzo and Carl Davis would use client funds to 276 00:16:48,840 --> 00:16:51,600 Speaker 2: borrow from basically anywhere that would let them in the 277 00:16:51,720 --> 00:16:55,880 Speaker 2: entire crypto ecosystem. And because Three Arrows didn't bother collateralizing 278 00:16:55,920 --> 00:16:58,840 Speaker 2: these loans sufficiently or managing the risk behind them, there 279 00:16:58,920 --> 00:17:03,160 Speaker 2: was very little money to turn to customers. The failure 280 00:17:03,320 --> 00:17:06,920 Speaker 2: of Three Arrows Capital left a multi billion dollar hole 281 00:17:06,960 --> 00:17:10,399 Speaker 2: in Genesis balance sheet that if paypered over with a 282 00:17:10,400 --> 00:17:13,840 Speaker 2: one point one billion dollar promissory note from its holding company, 283 00:17:13,880 --> 00:17:17,040 Speaker 2: Digital Currency Group that was due in twenty thirty two. 284 00:17:18,160 --> 00:17:21,920 Speaker 2: This sounds like it would be helpful, right. The problem 285 00:17:22,000 --> 00:17:25,080 Speaker 2: is this maneuver never appeared to involve the conveyance of 286 00:17:25,119 --> 00:17:28,719 Speaker 2: any actual money. It pretty much existed only to pretend 287 00:17:28,720 --> 00:17:31,439 Speaker 2: that Genesis had another one point one billion dollars on 288 00:17:31,480 --> 00:17:35,400 Speaker 2: the books. To be abundantly clear, no money actually ever 289 00:17:35,440 --> 00:17:39,119 Speaker 2: got sent to anybody. This promissory note only existed to 290 00:17:39,200 --> 00:17:42,760 Speaker 2: mislead creditors about the financial health of Genesis. As you 291 00:17:42,800 --> 00:17:46,919 Speaker 2: can understand, those creditors would probably want to know, well, okay, 292 00:17:46,960 --> 00:17:49,040 Speaker 2: do you have enough money in case we need our 293 00:17:49,080 --> 00:17:52,760 Speaker 2: money back? Little bit of a spoiler for you, they didn't. 294 00:17:53,760 --> 00:17:56,639 Speaker 2: The Terror Lunar and Three Arrows capital fiasco trash the 295 00:17:56,720 --> 00:17:59,840 Speaker 2: value of cryptocurrencies, with Bitcoin dropping from around thirty thousand 296 00:18:00,240 --> 00:18:02,439 Speaker 2: in mad twenty twenty two to less than twenty grand 297 00:18:02,480 --> 00:18:06,560 Speaker 2: in October. And in November twenty twenty two, ftx collapsed 298 00:18:06,600 --> 00:18:09,200 Speaker 2: as a result of the coin Desk article, again owned 299 00:18:09,200 --> 00:18:12,720 Speaker 2: by DCG, that revealed that most of ftx's assets were 300 00:18:12,720 --> 00:18:15,360 Speaker 2: held in FTT, a token that they owned the majority 301 00:18:15,400 --> 00:18:17,720 Speaker 2: of and could never sell because doing so would crash 302 00:18:17,720 --> 00:18:22,120 Speaker 2: the FTT market, making said asset worthless. Indeed, in cryptocurrency, 303 00:18:22,240 --> 00:18:25,840 Speaker 2: this is a big problem. If you have a big 304 00:18:25,880 --> 00:18:28,640 Speaker 2: market and say there's twenty billion dollars of a token 305 00:18:28,680 --> 00:18:30,600 Speaker 2: out there, but one person owns a billion of it, 306 00:18:30,840 --> 00:18:34,359 Speaker 2: they actually can't sell it because in doing so, the 307 00:18:34,400 --> 00:18:36,840 Speaker 2: market would suddenly think, oh, this is worthless because someone 308 00:18:36,840 --> 00:18:40,320 Speaker 2: wants to dump him. The results of this revelation that 309 00:18:40,480 --> 00:18:44,080 Speaker 2: FTX was holding most of the world's FTT and thus 310 00:18:44,119 --> 00:18:46,200 Speaker 2: could never sell it, and indeed that in the process 311 00:18:46,200 --> 00:18:50,959 Speaker 2: made their company pretty much insolvent. This left both retail 312 00:18:50,960 --> 00:18:55,920 Speaker 2: investors and institutional investors out to dry. Now eager ide 313 00:18:56,040 --> 00:18:58,720 Speaker 2: and eager eared listeners may have probably guessed by this 314 00:18:58,800 --> 00:19:04,440 Speaker 2: point that Genesis was inexhoribly entangled in this disaster, quickly 315 00:19:04,480 --> 00:19:07,000 Speaker 2: going from saying that they had no material exposure to 316 00:19:07,119 --> 00:19:10,320 Speaker 2: FDx on November eight, twenty twenty two, to then saying 317 00:19:10,320 --> 00:19:13,000 Speaker 2: they had seven million dollars of exposure on November tenth, 318 00:19:13,359 --> 00:19:15,760 Speaker 2: to saying that they had one hundred and seventy five 319 00:19:15,800 --> 00:19:18,439 Speaker 2: million dollars in exposure a day later, to saying that 320 00:19:18,440 --> 00:19:21,399 Speaker 2: they needed to freeze all customer withdrawals and new loans 321 00:19:21,520 --> 00:19:24,520 Speaker 2: entirely and that they would likely be going bankrupt, which 322 00:19:24,560 --> 00:19:27,920 Speaker 2: they said on November eighteenth, twenty twenty two. They entered 323 00:19:28,000 --> 00:19:31,320 Speaker 2: Chapter eleven bankruptcy. In the early twenty twenty three. The 324 00:19:31,359 --> 00:19:34,639 Speaker 2: Digital Currency Group, which of course owns Genesis, had also 325 00:19:34,720 --> 00:19:37,400 Speaker 2: borrowed five hundred and seventy five million dollars from them, 326 00:19:37,800 --> 00:19:40,639 Speaker 2: which has since led to the hilarious situation of Genesis, 327 00:19:40,680 --> 00:19:42,920 Speaker 2: suing the company that owns it as part of its 328 00:19:42,920 --> 00:19:47,440 Speaker 2: own bankruptcy proceedings. This is the company that the Wingovoss 329 00:19:47,480 --> 00:19:51,080 Speaker 2: twins and Gemini their cryptocurrency exchange, had allegedly run through 330 00:19:51,080 --> 00:19:55,879 Speaker 2: their risk management framework and despite allegedly reviewing the collateralization 331 00:19:56,000 --> 00:20:00,600 Speaker 2: management process that Genesis underwent, which means how they lateralized 332 00:20:00,600 --> 00:20:02,560 Speaker 2: the loans, what money they took in to make sure 333 00:20:02,600 --> 00:20:04,840 Speaker 2: that the loans did not just fall apart if something 334 00:20:04,880 --> 00:20:09,880 Speaker 2: bad happened. Well, Gemini hadn't diversified their investments at all. 335 00:20:10,560 --> 00:20:13,800 Speaker 2: They put over a billion dollars of customer funds into Genesis, 336 00:20:13,800 --> 00:20:18,280 Speaker 2: money which is most likely gone now. In many respects, 337 00:20:18,359 --> 00:20:21,960 Speaker 2: Gemini was the cryptocurrency equivalent of Green Seal Capital, a 338 00:20:22,040 --> 00:20:24,560 Speaker 2: company that at one point was the highest profile lender 339 00:20:24,600 --> 00:20:28,200 Speaker 2: in the supply chain financing space, touting former British Prime 340 00:20:28,240 --> 00:20:31,680 Speaker 2: Minister David Cameron as one of its advisors. Like Gemini, 341 00:20:31,840 --> 00:20:34,520 Speaker 2: green Seal Capital pretended to be a diversified business, when 342 00:20:34,560 --> 00:20:37,760 Speaker 2: in reality it borrowed money from large institutional investors to 343 00:20:37,880 --> 00:20:41,000 Speaker 2: lend to a handful of companies. The circumstances behind its 344 00:20:41,040 --> 00:20:43,639 Speaker 2: collapse are slightly more complicated than those of Genesis, but 345 00:20:43,680 --> 00:20:46,680 Speaker 2: not by much. Green Sill's implosion in twenty twenty one 346 00:20:46,960 --> 00:20:49,679 Speaker 2: rippled throughout the industry, contributing to the demise of the 347 00:20:49,720 --> 00:20:53,200 Speaker 2: already troubled credit sueese which were acquired really they were 348 00:20:53,240 --> 00:20:56,280 Speaker 2: rescued by UBS in early twenty twenty three for the 349 00:20:56,320 --> 00:20:59,000 Speaker 2: bargain price of just three point twenty five million dollars. 350 00:21:00,119 --> 00:21:03,840 Speaker 2: Since November twenty twenty two, when Gemini froze, withdrawals from 351 00:21:03,920 --> 00:21:08,080 Speaker 2: Gemini earned the interest bearing account, the Winklevosses and Barry Silbert, 352 00:21:08,200 --> 00:21:10,840 Speaker 2: CEO of Digital Currency Group, who, as I've mentioned, are 353 00:21:10,840 --> 00:21:15,040 Speaker 2: technical owners of Genesis, have engaged in an embarrassing back 354 00:21:15,080 --> 00:21:18,560 Speaker 2: and forth publicly on Twitter, where the Winklevosses have attempted 355 00:21:18,560 --> 00:21:21,480 Speaker 2: to frame themselves as victims of a scam rather than 356 00:21:21,520 --> 00:21:26,159 Speaker 2: bad actors acting badly. If they were remotely competent, they 357 00:21:26,160 --> 00:21:29,399 Speaker 2: could have yanked their customers' funds the ones loaned to 358 00:21:29,480 --> 00:21:32,639 Speaker 2: Genesis from the Gemini ern program. When it was revealed 359 00:21:32,680 --> 00:21:35,600 Speaker 2: that Genesis loaned two point four billion dollars for three 360 00:21:35,600 --> 00:21:39,000 Speaker 2: hourrows capital in July of twenty twenty two, call it 361 00:21:39,040 --> 00:21:42,280 Speaker 2: what you want. Prudent's diligence or just risk management, but 362 00:21:42,320 --> 00:21:45,320 Speaker 2: it would have been the sensible thing to do, unless, 363 00:21:45,359 --> 00:21:47,480 Speaker 2: of course, they didn't believe they'd be able to get 364 00:21:47,520 --> 00:21:52,440 Speaker 2: the money out. On October nineteenth, twenty twenty three, New 365 00:21:52,520 --> 00:21:55,680 Speaker 2: York Attorney General Letitia James filed a massive fraud suit 366 00:21:55,800 --> 00:22:00,159 Speaker 2: against Gemini, Genesis Global Capital, and Digital Currency Group, ring 367 00:22:00,200 --> 00:22:04,080 Speaker 2: a conspiracy to mislead customers and cover up of rebillion 368 00:22:04,160 --> 00:22:07,600 Speaker 2: dollars of losses. The Attorney General's office found that the 369 00:22:07,600 --> 00:22:11,440 Speaker 2: twin brothers named Cameron and Tyler Winklevoss had misled investors 370 00:22:11,640 --> 00:22:15,600 Speaker 2: about the risks associated with Genesis, and that Genesis not 371 00:22:15,720 --> 00:22:19,159 Speaker 2: only failed to disclose its losses, but took steps to 372 00:22:19,200 --> 00:22:23,480 Speaker 2: actively hide them from their clients and the public. The 373 00:22:23,520 --> 00:22:26,040 Speaker 2: New York Attorney General's suit is damning and shows that 374 00:22:26,080 --> 00:22:29,119 Speaker 2: Gemini was well aware of the rotten condition of Genesis 375 00:22:29,280 --> 00:22:32,920 Speaker 2: from the launch of the program in twenty twenty one. 376 00:22:32,960 --> 00:22:36,480 Speaker 2: With Gemini and I quote the Attorney General suit here 377 00:22:37,320 --> 00:22:41,120 Speaker 2: their internal risk analysis showing that Genesis Capital's loan book 378 00:22:41,240 --> 00:22:45,040 Speaker 2: was undercollateralized, which means that they did not have enough 379 00:22:45,080 --> 00:22:48,040 Speaker 2: money to give back the money that they owed to 380 00:22:48,119 --> 00:22:51,960 Speaker 2: their customers and that only a year into the program, 381 00:22:52,119 --> 00:22:56,359 Speaker 2: Gemini revised its estimate of Genesis Capital's credit rating, which 382 00:22:56,359 --> 00:22:58,840 Speaker 2: is the way in which you measure whether a creditor 383 00:22:58,960 --> 00:23:02,200 Speaker 2: or someone who is borrowed or loaning money whether they're 384 00:23:02,240 --> 00:23:05,359 Speaker 2: worthy of doing so. They provised its testiment of their 385 00:23:05,400 --> 00:23:08,399 Speaker 2: credit rating from an investment grade of BBB to a 386 00:23:08,440 --> 00:23:11,960 Speaker 2: non investment or junk grade of CCC. Don't need to 387 00:23:11,960 --> 00:23:15,480 Speaker 2: get too technical here, just know that's pretty bad. Genesis 388 00:23:15,560 --> 00:23:18,600 Speaker 2: also routinely reported to Gemini from May twenty twenty two 389 00:23:18,720 --> 00:23:21,640 Speaker 2: through November twenty twenty two that he had failed its 390 00:23:21,720 --> 00:23:24,840 Speaker 2: own internal loan book risk assessments, to the point that 391 00:23:24,920 --> 00:23:28,080 Speaker 2: in July twenty twenty two, a Gemini board member compared 392 00:23:28,119 --> 00:23:31,639 Speaker 2: Genesis Capital to Layman Brothers prior to the financial collapse 393 00:23:31,640 --> 00:23:33,560 Speaker 2: of two thousand and seven and two thousand and eight. 394 00:23:34,320 --> 00:23:37,000 Speaker 2: At this point, you're probably thinking, so all the money's 395 00:23:37,000 --> 00:23:42,359 Speaker 2: gone and your raim. Gemini and the Winklevosses decided they 396 00:23:42,359 --> 00:23:46,360 Speaker 2: would terminate the EARN program on September second, twenty twenty two, 397 00:23:46,880 --> 00:23:49,320 Speaker 2: but only decided to inform Genesis that it would do 398 00:23:49,400 --> 00:23:53,399 Speaker 2: so on October thirteenth, twenty twenty two. It continued to 399 00:23:53,480 --> 00:23:57,560 Speaker 2: send customer funds to Genesis throughout this period until an 400 00:23:57,560 --> 00:24:00,880 Speaker 2: indeterminate time, with all of this information coming from the 401 00:24:00,960 --> 00:24:04,399 Speaker 2: Attorney General's suit, and they failed to let customers know 402 00:24:04,440 --> 00:24:07,880 Speaker 2: that the program was fully terminated until January twenty twenty three, 403 00:24:08,280 --> 00:24:10,399 Speaker 2: though I should add that they froze with drawals in 404 00:24:10,440 --> 00:24:14,680 Speaker 2: November twenty twenty two. All of these dates are very confusing, 405 00:24:14,960 --> 00:24:18,000 Speaker 2: but the important facts to know is that Gemini knew 406 00:24:18,080 --> 00:24:21,960 Speaker 2: from twenty twenty one that they were sending customer funds 407 00:24:22,040 --> 00:24:28,880 Speaker 2: into an unreliable, unstable, undercollateralized lender for years, and indeed, 408 00:24:28,960 --> 00:24:32,159 Speaker 2: even when they froze their own program when they decided 409 00:24:32,240 --> 00:24:35,600 Speaker 2: that the party had to stop in September twenty twenty two, 410 00:24:35,800 --> 00:24:38,560 Speaker 2: they were still taking customer funds and putting it in 411 00:24:38,600 --> 00:24:43,640 Speaker 2: Genesis's hands. They didn't freeze the withdrawal process, the way 412 00:24:43,640 --> 00:24:46,720 Speaker 2: in which customers have withdrawn their funds, until November twenty 413 00:24:46,720 --> 00:24:52,240 Speaker 2: twenty two, So that's months of throwing customer money into 414 00:24:52,280 --> 00:24:55,520 Speaker 2: the toilet and aggressively flushing it like you're trying to 415 00:24:55,520 --> 00:25:02,280 Speaker 2: get rid of a basketball. They knew. Cameron and Tyler 416 00:25:02,320 --> 00:25:07,040 Speaker 2: Winklevos knew. They knew what they were doing. They knew 417 00:25:07,240 --> 00:25:11,920 Speaker 2: they were losing customers money, and they didn't care. Two 418 00:25:12,160 --> 00:25:17,120 Speaker 2: American billionaires put a billion dollars of customer funds into 419 00:25:17,160 --> 00:25:21,800 Speaker 2: deeply questionable lenders' hands, then proceeded to obfuscate the risks involved. 420 00:25:22,760 --> 00:25:26,919 Speaker 2: They claimed that Genesis had appropriate risk ratios and healthy 421 00:25:26,960 --> 00:25:31,280 Speaker 2: financial condition as recently as November fourteenth, twenty twenty two, 422 00:25:31,840 --> 00:25:35,240 Speaker 2: a full month after it had formerly terminated their agreement 423 00:25:35,320 --> 00:25:38,400 Speaker 2: with Genesis, who was the company that they were lending 424 00:25:38,400 --> 00:25:42,479 Speaker 2: this too. This wasn't a casual fling with a risky 425 00:25:42,520 --> 00:25:46,919 Speaker 2: asset class. It was a near billion dollar swindle of 426 00:25:47,520 --> 00:25:51,679 Speaker 2: and I quote Cameron Winklevoss in his abominable letter to 427 00:25:51,680 --> 00:25:55,040 Speaker 2: Barry Silbert, a swindle of a single mother who lent 428 00:25:55,080 --> 00:25:59,120 Speaker 2: her son's education money to them, a father who lent 429 00:25:59,160 --> 00:26:02,560 Speaker 2: his sons by me for money to Gemini earn, a 430 00:26:02,680 --> 00:26:05,919 Speaker 2: husband and a wife who lent their life savings. A 431 00:26:05,960 --> 00:26:11,560 Speaker 2: school teacher who lent his children's college funds. Cameron and 432 00:26:11,640 --> 00:26:15,280 Speaker 2: Tyler Winklevoss, as well as Barry Silbert, who runs Digital 433 00:26:15,280 --> 00:26:19,720 Speaker 2: Currency Group and by proxy, Genesis, have defrauded investors at 434 00:26:19,760 --> 00:26:23,160 Speaker 2: a similar scale to Sam Bankman freed. As I mentioned 435 00:26:23,200 --> 00:26:28,040 Speaker 2: the disgraced and now incarcerated CEO of FTX, They convinced 436 00:26:28,080 --> 00:26:31,720 Speaker 2: customers that they were putting money into an interest generating account, 437 00:26:31,880 --> 00:26:34,560 Speaker 2: tricking them into believing that this was a stable, risk 438 00:26:34,600 --> 00:26:38,280 Speaker 2: managed investment, one that was continually liquid, and they indeed 439 00:26:38,320 --> 00:26:41,880 Speaker 2: advertised that you could withdraw your assets instantly, as opposed 440 00:26:41,880 --> 00:26:45,800 Speaker 2: to the reality that Cameron and Tyler Winklevoss knowingly funneled 441 00:26:45,840 --> 00:26:51,840 Speaker 2: customer funds into an unstable undercollateralized lender. They intentionally and 442 00:26:51,880 --> 00:26:55,400 Speaker 2: repeatedly misled customers, claiming to an Earn investor on June 443 00:26:55,400 --> 00:26:58,840 Speaker 2: twenty seven, twenty twenty two, that they periodically would conduct 444 00:26:58,840 --> 00:27:02,000 Speaker 2: an analysis of their partner's cash flow, balance sheet, and 445 00:27:02,080 --> 00:27:06,439 Speaker 2: financial statements to ensure that appropriate risk ratios and healthy 446 00:27:06,480 --> 00:27:10,200 Speaker 2: financial condition of their partners happened, and that they said 447 00:27:10,240 --> 00:27:13,320 Speaker 2: their partners were vetted through a risk management process, heavily 448 00:27:13,359 --> 00:27:17,480 Speaker 2: implying that said process would protect their customers. And on 449 00:27:17,560 --> 00:27:20,560 Speaker 2: October twentieth, twenty twenty two, less than a month before, 450 00:27:20,560 --> 00:27:24,080 Speaker 2: the winklevoss Is frozen withdrawals from Gemini Earn, leaving their 451 00:27:24,080 --> 00:27:27,640 Speaker 2: customers unable to access their funds or their interest digital 452 00:27:27,640 --> 00:27:32,119 Speaker 2: currency groups. CEO Barry Silbert, also the owners of Genesis, 453 00:27:32,440 --> 00:27:35,240 Speaker 2: met with Cameron Winklevoss and told him that Gemini was 454 00:27:35,280 --> 00:27:38,679 Speaker 2: Genesis Capital's largest and most important source of capital, and 455 00:27:38,720 --> 00:27:42,280 Speaker 2: that they couldn't withdraw Gemini earned customers funds without bankrupting 456 00:27:42,280 --> 00:27:46,879 Speaker 2: the firm. Cameron and Tyler Winklevoss not only deceived customers, 457 00:27:47,119 --> 00:27:50,240 Speaker 2: but turned their assets into a load bearing part of 458 00:27:50,320 --> 00:27:53,800 Speaker 2: Genesis's balance sheet so that they could funnel them into 459 00:27:53,840 --> 00:27:56,840 Speaker 2: billions of dollars of loans, which would then go into 460 00:27:56,960 --> 00:28:01,680 Speaker 2: places like Three Arrows Capital and FDx. And the Winklevosses 461 00:28:01,760 --> 00:28:03,639 Speaker 2: have spent the best part of a year playing the 462 00:28:03,720 --> 00:28:06,800 Speaker 2: victim with pathetic open letters that they post on Twitter 463 00:28:06,840 --> 00:28:10,280 Speaker 2: to Barry Silbert, demanding the returns of funds that they 464 00:28:10,320 --> 00:28:13,600 Speaker 2: knew were gone, claiming that Silbert hid in his ivory 465 00:28:13,760 --> 00:28:17,480 Speaker 2: tower and he should take responsibility and do the right thing, 466 00:28:18,320 --> 00:28:21,160 Speaker 2: as Cameron and his brother continued to mislead the world 467 00:28:21,280 --> 00:28:25,800 Speaker 2: about what actually happened. While I'd never refer to the 468 00:28:25,840 --> 00:28:31,159 Speaker 2: Winklevosses as victims, one cannot ignore how thoroughly fraudulent Barry 469 00:28:31,200 --> 00:28:35,920 Speaker 2: Silbert's empire had become. On January twenty fourth, twenty twenty two, 470 00:28:36,480 --> 00:28:40,200 Speaker 2: Genesis Capital loaned one hundred million dollars to DCG, the 471 00:28:40,280 --> 00:28:43,640 Speaker 2: company that owned it, due on July twenty fourth, twenty 472 00:28:43,680 --> 00:28:47,000 Speaker 2: twenty two, only for Digital Currency Group to tell them 473 00:28:47,040 --> 00:28:49,680 Speaker 2: that they and I quote the suit literally did not 474 00:28:49,800 --> 00:28:53,160 Speaker 2: have the money. Barry Silbert's solution was to and I 475 00:28:53,240 --> 00:28:56,960 Speaker 2: quote repaper the loan, delaying its due date by ten 476 00:28:57,000 --> 00:29:01,480 Speaker 2: months to May twenty twenty three, and you'll be surprised 477 00:29:01,520 --> 00:29:03,600 Speaker 2: to hear that they never actually paid it back, along 478 00:29:03,640 --> 00:29:06,680 Speaker 2: with several other loans that were either unpaid or paid 479 00:29:06,680 --> 00:29:09,640 Speaker 2: back in shares of another part of Digital Currency Group 480 00:29:09,680 --> 00:29:15,640 Speaker 2: called Greyscale Bitcoin Trust, another enterprise involved in crypto. According 481 00:29:15,720 --> 00:29:18,880 Speaker 2: to Sam Bankman Freed's testimony during his own criminal fraud 482 00:29:19,040 --> 00:29:23,400 Speaker 2: and conspiracy trial, Barry Silbert begged him for help, which 483 00:29:23,440 --> 00:29:27,000 Speaker 2: he declined to provide, despite Genesis Capital having loaned FDx 484 00:29:27,040 --> 00:29:30,600 Speaker 2: billions of dollars in the past, which trustees agreed to 485 00:29:30,600 --> 00:29:33,600 Speaker 2: settle for a puzzling one hundred and seventy five million dollars. 486 00:29:33,600 --> 00:29:37,080 Speaker 2: And just to be clear, the bankruptcy trustee just was 487 00:29:37,160 --> 00:29:38,960 Speaker 2: just like, I'll take one hundred and seventy five million. 488 00:29:39,000 --> 00:29:41,640 Speaker 2: I don't need the billion back, and one can really 489 00:29:41,680 --> 00:29:45,480 Speaker 2: see where they misled Gemini and the Winklevoss brothers. The 490 00:29:45,560 --> 00:29:49,080 Speaker 2: one point one billion dollar promisory note from Digital Currency 491 00:29:49,080 --> 00:29:51,920 Speaker 2: Group to Genesis, the one that was completely fake and 492 00:29:52,040 --> 00:29:55,880 Speaker 2: was literally just words on paper, was marked in genesis 493 00:29:55,960 --> 00:29:59,680 Speaker 2: balance sheet, which Gemini was occasionally shown as one point 494 00:29:59,680 --> 00:30:02,760 Speaker 2: one b billion dollars in receivables from related parties, with 495 00:30:02,840 --> 00:30:05,600 Speaker 2: no designation of what it was or how it was amortized. 496 00:30:06,000 --> 00:30:10,040 Speaker 2: In plain English, that just means to any financial analysis 497 00:30:10,120 --> 00:30:12,560 Speaker 2: that would appear as just money in the bank. We 498 00:30:12,680 --> 00:30:16,880 Speaker 2: are receiving cash from someone one point one billion dollars actually, 499 00:30:17,000 --> 00:30:21,520 Speaker 2: and that's good. That would make you a little bit calmer. However, 500 00:30:21,920 --> 00:30:25,080 Speaker 2: one cannot ignore the fact that Gemini knew that something 501 00:30:25,200 --> 00:30:28,200 Speaker 2: was up. In a March fifth, twenty twenty one email 502 00:30:28,240 --> 00:30:31,240 Speaker 2: to an earn investor, Gemini claimed that Genesis was and 503 00:30:31,320 --> 00:30:34,800 Speaker 2: I quote only lending assets to posited it inter earned 504 00:30:34,840 --> 00:30:41,040 Speaker 2: to institutional borrowers in an overcollateralized way. Overcollateralization meaning that 505 00:30:41,080 --> 00:30:44,960 Speaker 2: they were loaning more money than they were borrowing. How 506 00:30:45,000 --> 00:30:49,080 Speaker 2: does that work? It doesn't. Gemini never sought to correct 507 00:30:49,120 --> 00:30:53,040 Speaker 2: a coin Desk article from February twenty twenty one that claimed, 508 00:30:53,200 --> 00:30:57,480 Speaker 2: and I quote that the Genesis loans are overcollateralized, the 509 00:30:57,560 --> 00:31:02,120 Speaker 2: loans in question being the ones where Gemini earned funds. 510 00:31:02,160 --> 00:31:04,520 Speaker 2: The funds that people put into Gemini earned to earn 511 00:31:04,560 --> 00:31:08,120 Speaker 2: interest were going It's all just a big pile of 512 00:31:08,160 --> 00:31:28,280 Speaker 2: dog shit. In May twenty twenty one, Gemini's risk management 513 00:31:28,360 --> 00:31:32,320 Speaker 2: team determined that Genesis Capital was and I quote highly leveraged, 514 00:31:32,360 --> 00:31:35,600 Speaker 2: with an over ninety five percent debt to asset ratio, 515 00:31:36,000 --> 00:31:38,960 Speaker 2: meaning that most of their money was in debt rather 516 00:31:39,000 --> 00:31:42,480 Speaker 2: than things they actually had, and that Genesis has low 517 00:31:42,520 --> 00:31:45,520 Speaker 2: liquidity and that the business is just able to cover 518 00:31:45,640 --> 00:31:49,480 Speaker 2: its short term obligations. Think of it like living paycheck 519 00:31:49,520 --> 00:31:52,880 Speaker 2: to paycheck to the tune of billions. By August twenty 520 00:31:52,920 --> 00:31:57,040 Speaker 2: twenty one, Gemini Earn had placed three billion dollars of 521 00:31:57,080 --> 00:32:02,840 Speaker 2: customer assets in Genesis's hands, and this whole situation enrages me. 522 00:32:03,720 --> 00:32:06,920 Speaker 2: This is one of the largest and most gratuitous acts 523 00:32:06,960 --> 00:32:10,560 Speaker 2: of negligence in the history of finance, a craven and 524 00:32:10,680 --> 00:32:14,480 Speaker 2: deliberate swindle that flowed through every vein of the organization. 525 00:32:15,400 --> 00:32:20,920 Speaker 2: Gemini intentionally and repeatedly misled customers into investing in an 526 00:32:21,080 --> 00:32:25,360 Speaker 2: undercollateralized and risky lender by dressing their fraud in the 527 00:32:25,400 --> 00:32:30,600 Speaker 2: trappings of conventional retail banking. Gemini was well aware and 528 00:32:30,680 --> 00:32:35,320 Speaker 2: continually reminded of how unstable and disorganized Genesis was and 529 00:32:35,360 --> 00:32:38,920 Speaker 2: how risky its customer's assets were held, and yet it 530 00:32:38,960 --> 00:32:41,320 Speaker 2: continued to hype the scheme in the hopes that nothing 531 00:32:41,320 --> 00:32:44,800 Speaker 2: would ever change. They put billions of dollars into an 532 00:32:44,920 --> 00:32:48,480 Speaker 2: entity that from the very beginning they knew was rotten. 533 00:32:48,840 --> 00:32:52,760 Speaker 2: They knew could barely cover their bills. They could have 534 00:32:52,800 --> 00:32:56,800 Speaker 2: predicted this, and indeed they tried to. They just wanted 535 00:32:56,840 --> 00:33:01,640 Speaker 2: to keep the party going. Cameron and Tyler Winklevos are villains, 536 00:33:02,280 --> 00:33:06,280 Speaker 2: and while they didn't outright steal customer funds, they intentionally 537 00:33:06,320 --> 00:33:11,440 Speaker 2: and willfully misled customers into investing in Genesis Capital, an 538 00:33:11,560 --> 00:33:15,600 Speaker 2: unstable and recklessly managed lender. They were fully aware of 539 00:33:15,640 --> 00:33:18,920 Speaker 2: these dangers, yet they chose to launch a program that 540 00:33:19,000 --> 00:33:22,240 Speaker 2: their own risk management team believed was riskier than other 541 00:33:22,280 --> 00:33:26,440 Speaker 2: partners that Gemini had considered loaning that money to, saying 542 00:33:26,480 --> 00:33:30,920 Speaker 2: in February twenty twenty two, the Genesis Finances were weaker, 543 00:33:31,080 --> 00:33:35,200 Speaker 2: with a higher leverage ratio and low liquidity ratio, meaning 544 00:33:35,240 --> 00:33:38,080 Speaker 2: that they were more risky and they had less money 545 00:33:38,120 --> 00:33:40,840 Speaker 2: to give back to customers when they need it. And indeed, 546 00:33:40,960 --> 00:33:43,880 Speaker 2: they worried that a market downturn would mean that a 547 00:33:43,920 --> 00:33:46,800 Speaker 2: fifty to sixty percent default rate for Genesis was an 548 00:33:46,800 --> 00:33:50,560 Speaker 2: appropriate assumption, meaning that more than half of their loans 549 00:33:50,600 --> 00:33:53,320 Speaker 2: would go under, and that a market downturn would mean 550 00:33:53,400 --> 00:33:56,360 Speaker 2: that a fifty to sixty percent default rate for Genesis 551 00:33:56,400 --> 00:33:59,280 Speaker 2: loans was an appropriate assumption, meaning that more than half 552 00:33:59,320 --> 00:34:01,520 Speaker 2: of their loans default in the event that there was 553 00:34:01,560 --> 00:34:05,360 Speaker 2: a change in the cryptocurrency market. The risk management team 554 00:34:05,520 --> 00:34:08,480 Speaker 2: repeated this language several times, and it took until May 555 00:34:08,520 --> 00:34:11,560 Speaker 2: twenty twenty two for Cameron Winklevoss to personally ask for 556 00:34:11,600 --> 00:34:14,399 Speaker 2: a one pager on the risk profile of Gemini Earn 557 00:34:14,640 --> 00:34:16,799 Speaker 2: and Genesis, the company that they had lent at that 558 00:34:16,960 --> 00:34:21,000 Speaker 2: time of rebillion dollars two and indeed whether Ern adequately 559 00:34:21,040 --> 00:34:24,840 Speaker 2: compensated Gemini for the risk. In plain English, they were saying, 560 00:34:25,480 --> 00:34:28,400 Speaker 2: in a war, is it really worth it for us 561 00:34:28,600 --> 00:34:31,160 Speaker 2: to risk all of this customer money? And when they 562 00:34:31,200 --> 00:34:33,600 Speaker 2: said worth it, they mean is it making us enough 563 00:34:33,600 --> 00:34:36,879 Speaker 2: money for the pain in the ass we're creating. I 564 00:34:36,960 --> 00:34:39,799 Speaker 2: hope it wasn't. I hope they burned for this one. 565 00:34:40,880 --> 00:34:44,200 Speaker 2: Having read the entire New York Attorney General suit, I 566 00:34:44,239 --> 00:34:48,240 Speaker 2: cannot find a single instance of concern for the hundreds 567 00:34:48,280 --> 00:34:51,880 Speaker 2: of thousands of people the Gemini and Cameron and Tyler 568 00:34:51,920 --> 00:34:56,640 Speaker 2: Winklevoss failed despite Gemini's pledge to uphold and I quote, 569 00:34:56,880 --> 00:35:02,359 Speaker 2: the highest level of fiduciary obligations. The Winklevosses represent their 570 00:35:02,400 --> 00:35:05,840 Speaker 2: position as the trusted stewards of the digital currency industry, 571 00:35:06,080 --> 00:35:08,640 Speaker 2: claiming to live by a policy of asking for permission 572 00:35:08,880 --> 00:35:12,600 Speaker 2: rather than forgiveness, as they brazenly funneled billions of dollars 573 00:35:12,600 --> 00:35:15,920 Speaker 2: of customer funds into a lender that they clearly didn't trust. 574 00:35:16,600 --> 00:35:20,319 Speaker 2: They ignored the science, they ignored the risk management profiles, 575 00:35:20,520 --> 00:35:25,359 Speaker 2: they ignored the worries, and they continually rambled about being 576 00:35:25,400 --> 00:35:28,680 Speaker 2: licensed and regulated by the New York Department of Financial Services, 577 00:35:28,719 --> 00:35:32,359 Speaker 2: which means absolutely nothing. As Gemini earned deposits were being 578 00:35:32,400 --> 00:35:35,680 Speaker 2: loaned to Genesis for the terms of Gemini Earns agreement, 579 00:35:35,880 --> 00:35:39,040 Speaker 2: which in turn took them out of the regulation of 580 00:35:39,120 --> 00:35:45,200 Speaker 2: the mydfs. The Winklevosses, the so called self regulators of crypto, 581 00:35:45,280 --> 00:35:48,640 Speaker 2: according to Paul Vinya of The Wall Street Journal, built 582 00:35:48,640 --> 00:35:52,440 Speaker 2: a reputation as the trustworthy party in a lawless industry, 583 00:35:52,960 --> 00:35:55,440 Speaker 2: only to use it as a means of making twenty 584 00:35:55,440 --> 00:35:58,400 Speaker 2: two million dollars in agent fees and ten million dollars 585 00:35:58,400 --> 00:36:02,760 Speaker 2: in commission from risking billions of dollars of customer funds 586 00:36:03,760 --> 00:36:06,560 Speaker 2: and in this case Gemini earned customers are likely going 587 00:36:06,600 --> 00:36:10,319 Speaker 2: to lose forty to fifty percent of their holdings if 588 00:36:10,320 --> 00:36:13,160 Speaker 2: they get anything back at all. A good comparison point 589 00:36:13,160 --> 00:36:16,920 Speaker 2: here is the creditors related to Voyager, which was another 590 00:36:17,000 --> 00:36:21,480 Speaker 2: cryptoponzi scheme, only got back thirty five percent of their holdings. 591 00:36:23,000 --> 00:36:25,680 Speaker 2: Now I have to get into some more annoying financial stuff. 592 00:36:25,719 --> 00:36:27,960 Speaker 2: You'll forgive me. I just want you to know how 593 00:36:28,000 --> 00:36:32,200 Speaker 2: loathsome these wet river giants are. These boat boys have 594 00:36:32,320 --> 00:36:36,319 Speaker 2: really buggered this up. In October twenty twenty three, the 595 00:36:36,320 --> 00:36:40,040 Speaker 2: Winklevosses filed something called an adversary proceeding in court against 596 00:36:40,120 --> 00:36:43,720 Speaker 2: Genesis in bankruptcy court to be specific, seeking to recover 597 00:36:43,840 --> 00:36:47,000 Speaker 2: one point six billion dollars in value for the benefit 598 00:36:47,040 --> 00:36:49,440 Speaker 2: of earned users in an attempt to paper over their 599 00:36:49,480 --> 00:36:54,080 Speaker 2: financial mismanagement. On August fifteenth, twenty twenty two, Gemini accepted 600 00:36:54,080 --> 00:36:57,720 Speaker 2: over thirty point nine million shares of Greyscale Bitcoin Trust, 601 00:36:58,080 --> 00:37:00,120 Speaker 2: a STOG tied to the price of bitcoin, with the 602 00:37:00,120 --> 00:37:03,200 Speaker 2: minimum investment of fifty thousand dollars and the ticker of GBTC. 603 00:37:03,680 --> 00:37:06,920 Speaker 2: They accepted this as collateral for customer funds invested in 604 00:37:07,000 --> 00:37:10,960 Speaker 2: Gemini Earn, valued at the time at around fifteen bucks apiece, 605 00:37:11,000 --> 00:37:13,760 Speaker 2: somehow taking on what they call an and I quote 606 00:37:13,760 --> 00:37:16,720 Speaker 2: initial collateral stake over a year after the program started, 607 00:37:16,800 --> 00:37:19,440 Speaker 2: just to be clear, no collateral when they learned the 608 00:37:19,480 --> 00:37:22,560 Speaker 2: money out. It was worth around four hundred and sixty 609 00:37:22,600 --> 00:37:25,360 Speaker 2: three million dollars at the time, and the Winklevosses for 610 00:37:25,440 --> 00:37:28,760 Speaker 2: some reason decided to foreclose upon it on November sixteenth, 611 00:37:28,840 --> 00:37:32,200 Speaker 2: twenty twenty two, selling it when its price was around 612 00:37:32,400 --> 00:37:35,120 Speaker 2: nine dollars a share. This left them with two hundred 613 00:37:35,120 --> 00:37:37,319 Speaker 2: and eighty four million dollars a little bit over that, 614 00:37:37,640 --> 00:37:40,680 Speaker 2: or roughly sixty four point one percent of its original value. 615 00:37:41,040 --> 00:37:43,480 Speaker 2: They didn't have to sell it, and indeed, one might 616 00:37:43,600 --> 00:37:47,000 Speaker 2: argue they legally shouldn't have because it was collateral from alone, 617 00:37:47,760 --> 00:37:51,240 Speaker 2: in the same way that the bank can't immediately foreclose 618 00:37:51,280 --> 00:37:53,359 Speaker 2: in your home when you're in it and you've missed 619 00:37:53,360 --> 00:37:56,040 Speaker 2: a few payments. They probably weren't meant to do so, 620 00:37:56,400 --> 00:38:00,120 Speaker 2: But I continue now. The Winklevosses are claiming that they 621 00:38:00,120 --> 00:38:02,800 Speaker 2: should be considered oded. The difference between two hundred and 622 00:38:02,800 --> 00:38:05,880 Speaker 2: eighty four million dollars and the amount oede to earns creditors. 623 00:38:06,640 --> 00:38:11,080 Speaker 2: Genesis argues, I should say, the bankruptcy trustee of Genesis, 624 00:38:11,120 --> 00:38:13,960 Speaker 2: which has no interest in anything to do what Genesis 625 00:38:14,000 --> 00:38:16,320 Speaker 2: is doing other than getting money back for the creditors, 626 00:38:16,520 --> 00:38:20,600 Speaker 2: most of which are institutional customers, come last. That trustee 627 00:38:20,640 --> 00:38:24,680 Speaker 2: is arguing that it actually didn't give Gemini two hundred 628 00:38:24,680 --> 00:38:27,640 Speaker 2: and eighty four million dollars in credit. They gave them 629 00:38:28,000 --> 00:38:30,719 Speaker 2: thirty million, nine hundred and five thousand, seven hundred and 630 00:38:30,719 --> 00:38:33,879 Speaker 2: eighty two shares of GPTC, and that the collateral should 631 00:38:33,880 --> 00:38:36,839 Speaker 2: be valued at the price of GBTC today, which would 632 00:38:36,920 --> 00:38:38,960 Speaker 2: value the stake that they had given them at eight 633 00:38:39,080 --> 00:38:42,120 Speaker 2: hundred million. This is confusing, but what you need to 634 00:38:42,160 --> 00:38:45,640 Speaker 2: realize is Gemini earned customers have lost somewhere between eight 635 00:38:45,760 --> 00:38:48,759 Speaker 2: hundred million and a billion dollars. Had the Winklevosses not 636 00:38:48,880 --> 00:38:51,800 Speaker 2: sold their shares, they would have got a lot more back. 637 00:38:53,040 --> 00:38:56,040 Speaker 2: In essence, the Winklevosses rushed to sell these shares for 638 00:38:56,120 --> 00:39:00,719 Speaker 2: effectively no reason, potentially flaunting very basic foreclosure rule, and 639 00:39:00,800 --> 00:39:03,279 Speaker 2: Genesis argument is that they shouldn't have to make up 640 00:39:03,280 --> 00:39:07,920 Speaker 2: the difference for their massive fuck up. Interestingly, Gemini was 641 00:39:07,960 --> 00:39:11,120 Speaker 2: also meant to receive another thirty one million shares of 642 00:39:11,160 --> 00:39:14,600 Speaker 2: GPTC on November tenth, twenty twenty two, and Genesis just 643 00:39:14,680 --> 00:39:17,719 Speaker 2: didn't send it. And guess what the bankruptcy court isn't 644 00:39:17,719 --> 00:39:21,920 Speaker 2: going to help with that. Let's be clear, both of 645 00:39:21,960 --> 00:39:24,879 Speaker 2: these parties are scum, and in a just society, they'd 646 00:39:24,960 --> 00:39:27,680 Speaker 2: rotten the depths of the worst jails under the terms 647 00:39:27,680 --> 00:39:33,440 Speaker 2: of genesis reorganization plan. Under bankruptcy, Gemini earn customers those people, 648 00:39:33,560 --> 00:39:37,120 Speaker 2: regular people, the people's college funds, the bar mits for funds, 649 00:39:37,440 --> 00:39:40,040 Speaker 2: the single mothers who had lost their money. They'd be 650 00:39:40,120 --> 00:39:44,440 Speaker 2: considered Class four unsecured creditors getting paid out behind Genesis 651 00:39:44,520 --> 00:39:48,680 Speaker 2: institutional creditors, secured creditors and priority claims, which is why 652 00:39:48,719 --> 00:39:50,960 Speaker 2: Genesis had to pay one hundred and seventy five million 653 00:39:51,000 --> 00:39:54,800 Speaker 2: dollars to fdx's bankruptcy. A single mothers waited to retrieve 654 00:39:54,800 --> 00:40:07,840 Speaker 2: their son's college funds. Yet there may be hope that 655 00:40:07,920 --> 00:40:11,680 Speaker 2: Gemini Earned customers will be made whole. Mere hours after 656 00:40:11,719 --> 00:40:14,759 Speaker 2: the original broadcast of this podcast, the New York State 657 00:40:14,800 --> 00:40:18,239 Speaker 2: Department of Financial Services announced that Gemini had committed to 658 00:40:18,280 --> 00:40:21,960 Speaker 2: return at least one point one billion dollars to EARNS customers, 659 00:40:22,480 --> 00:40:25,799 Speaker 2: though only after the resolution of Genesis Global Capital's bankruptcy. 660 00:40:26,640 --> 00:40:29,839 Speaker 2: Assuming that the bankruptcy courts approved the settlement, Gemini Earned 661 00:40:29,840 --> 00:40:33,840 Speaker 2: customers can, according to Gemini, expect to receive approximately ninety 662 00:40:33,840 --> 00:40:37,200 Speaker 2: seven percent of their assets in kind within two months 663 00:40:37,239 --> 00:40:39,600 Speaker 2: of February twenty eight, twenty twenty four, and the rest 664 00:40:39,600 --> 00:40:43,200 Speaker 2: about ten months after that. Unlike the proposed FTX settlement, 665 00:40:43,280 --> 00:40:46,480 Speaker 2: customers will also receive the actual crypto they committed. In 666 00:40:46,520 --> 00:40:49,120 Speaker 2: the case of FTX, they're getting the dollar equivalent on 667 00:40:49,160 --> 00:40:51,680 Speaker 2: the day that FTX went bankrupt, which means they're getting 668 00:40:51,760 --> 00:40:53,560 Speaker 2: much less than they'd make if they were selling their 669 00:40:53,560 --> 00:40:57,319 Speaker 2: crypto today. This means that these customers might actually make 670 00:40:57,400 --> 00:41:00,000 Speaker 2: money because on the day that Gemini Earned shut down, 671 00:41:00,160 --> 00:41:04,080 Speaker 2: bitcoin was somewhere between eleven and fifteen thousand dollars. This 672 00:41:04,200 --> 00:41:06,520 Speaker 2: means that they're actually going to make a profit somehow, 673 00:41:06,560 --> 00:41:09,640 Speaker 2: which is pretty good. It's rare to find good news here, 674 00:41:10,360 --> 00:41:13,239 Speaker 2: and don't get too excited yet, though all of this 675 00:41:13,320 --> 00:41:16,719 Speaker 2: is dependent on the tedious pace of bankruptcy courts that 676 00:41:16,960 --> 00:41:20,000 Speaker 2: in this case especially, we've kind of considered Gemini Earns 677 00:41:20,040 --> 00:41:24,279 Speaker 2: customers second class citizens. This landmark settlement is being spun 678 00:41:24,400 --> 00:41:27,799 Speaker 2: by the Winkelvoss brothers as and I quote a successful 679 00:41:27,840 --> 00:41:31,439 Speaker 2: resolution of Gemini Earn that was reached and I quote 680 00:41:31,480 --> 00:41:34,680 Speaker 2: again with Genesis and other creditors, one in which these 681 00:41:34,760 --> 00:41:38,200 Speaker 2: identical River twins are considered. And I can't believe they're 682 00:41:38,200 --> 00:41:42,560 Speaker 2: willing to say this responsible stewards of the crypto ecosystem. 683 00:41:42,880 --> 00:41:46,800 Speaker 2: This couldn't be further from the truth. Superintendent Adrian Harris 684 00:41:46,880 --> 00:41:49,719 Speaker 2: of New York State's Department of Financial Services said in 685 00:41:49,760 --> 00:41:52,840 Speaker 2: a statement that Gemini had failed to conduct due diligence 686 00:41:52,960 --> 00:41:57,000 Speaker 2: on an unregulated third party later accused of massive fraud, 687 00:41:57,320 --> 00:42:00,560 Speaker 2: harming EARNED customers who were suddenly unable to access their assets. 688 00:42:00,920 --> 00:42:05,040 Speaker 2: The nydfs IS investigation revealed and I quote that Gemini 689 00:42:05,080 --> 00:42:09,440 Speaker 2: engaged in unsafe and unsound practices that ultimately threatened the 690 00:42:09,480 --> 00:42:12,759 Speaker 2: financial health of the company, and they collected hundreds of 691 00:42:12,760 --> 00:42:15,399 Speaker 2: millions of dollars in fees from Gemini customers that could 692 00:42:15,400 --> 00:42:20,400 Speaker 2: have gone to Gemini, substantially weakening Gemini's financial condition. The 693 00:42:20,440 --> 00:42:24,759 Speaker 2: Winklevosses are not responsible stuarts. They're towering con artists that 694 00:42:24,800 --> 00:42:27,200 Speaker 2: got core and they were forced to pay up only 695 00:42:27,239 --> 00:42:29,359 Speaker 2: because they ran a foul of one of the few 696 00:42:29,440 --> 00:42:33,520 Speaker 2: responsible regulators left in America. While I'm hopeful to earn 697 00:42:33,600 --> 00:42:36,080 Speaker 2: customer as a main whole, I also fear that the 698 00:42:36,080 --> 00:42:39,880 Speaker 2: bankruptcy courts may drag their feet, and even if they don't, 699 00:42:40,480 --> 00:42:43,560 Speaker 2: kind of just want more here. The Winklevosses aren't even 700 00:42:43,600 --> 00:42:47,200 Speaker 2: the ones paying the fines. Their company is. Gemini will 701 00:42:47,239 --> 00:42:50,480 Speaker 2: pay the thirty seven million dollar fine from the NYDFS, 702 00:42:51,120 --> 00:42:52,680 Speaker 2: and I think they're going to pay the one point 703 00:42:52,719 --> 00:42:56,600 Speaker 2: one billion dollars in cryptocurrency too. What's weird is I 704 00:42:56,600 --> 00:42:59,879 Speaker 2: can find no evidence about where that money is coming from. 705 00:43:00,239 --> 00:43:03,840 Speaker 2: I'm also worried that Genesis, as they have multiple times, 706 00:43:04,080 --> 00:43:06,520 Speaker 2: will kind of stone wall this deal. They want to 707 00:43:06,520 --> 00:43:08,480 Speaker 2: get out of this. They recently settled with the SEC 708 00:43:08,560 --> 00:43:11,160 Speaker 2: for twenty one million dollars, so they have a reason 709 00:43:11,719 --> 00:43:15,640 Speaker 2: to do well with the US government. But I fear 710 00:43:15,680 --> 00:43:18,480 Speaker 2: for this. All of this is condentent on bankruptcy. Courts 711 00:43:18,800 --> 00:43:23,560 Speaker 2: don't really care regardless of this landmark settlement. It is great, 712 00:43:24,160 --> 00:43:27,680 Speaker 2: it's great that the regulator has got the customer's money back, 713 00:43:28,360 --> 00:43:32,160 Speaker 2: but my blood is still boiling. Cameron and Tyler Winklevoss 714 00:43:32,160 --> 00:43:35,440 Speaker 2: will continue to run Gemini, which is a multi billion 715 00:43:35,520 --> 00:43:39,960 Speaker 2: dollar financial services company, despite the fact that it's very 716 00:43:39,960 --> 00:43:42,719 Speaker 2: clear that they really didn't do any due diligence, and 717 00:43:42,719 --> 00:43:46,239 Speaker 2: that due diligence which they did they completely ignored. They 718 00:43:46,400 --> 00:43:49,720 Speaker 2: knew that this was a bad deal. They sent tens 719 00:43:50,080 --> 00:43:53,600 Speaker 2: hundreds over a billion dollars to a company that they 720 00:43:53,640 --> 00:43:57,080 Speaker 2: knew as early as twenty twenty one was bordering on insolvent. 721 00:43:57,760 --> 00:44:00,919 Speaker 2: Yet they're still allowed to walk around as free men 722 00:44:01,360 --> 00:44:04,520 Speaker 2: and stewards of the financial industry. It's kind of taken 723 00:44:04,560 --> 00:44:07,760 Speaker 2: the piss and even though the New York Attorney General's 724 00:44:07,800 --> 00:44:10,319 Speaker 2: sue is still out there, it's not over yet, and 725 00:44:10,360 --> 00:44:13,800 Speaker 2: they're still seeking three billion dollars in restitution. They're doing 726 00:44:13,840 --> 00:44:17,000 Speaker 2: so from Gemini and digital currency group, the Winklevosses are 727 00:44:17,080 --> 00:44:22,200 Speaker 2: still left unscathed. These are craven fraudsters that continued again 728 00:44:22,239 --> 00:44:25,359 Speaker 2: and again to operate without oversight or restrain, and now 729 00:44:25,360 --> 00:44:28,200 Speaker 2: they're going to profit handsomely off of an industry built 730 00:44:28,200 --> 00:44:32,760 Speaker 2: on the back of manipulating and conning people. And despite 731 00:44:32,840 --> 00:44:36,719 Speaker 2: how good this settlement is, these guys are still billionaire 732 00:44:36,719 --> 00:44:40,799 Speaker 2: boat boys. They're unscathed. They robbed their own company, they 733 00:44:40,840 --> 00:44:44,680 Speaker 2: robbed their customers, They laughed in our faces. And at 734 00:44:44,680 --> 00:44:47,560 Speaker 2: this time in society, when tens of thousands of people 735 00:44:47,560 --> 00:44:51,600 Speaker 2: are being laid off, when people can't get houses, when 736 00:44:52,000 --> 00:44:55,520 Speaker 2: the regular person that cannot seek wealth, people that go 737 00:44:55,600 --> 00:44:58,680 Speaker 2: out and fuck over customers again and again and again 738 00:44:58,880 --> 00:45:02,680 Speaker 2: in broad daylight, lying to us, lying to you and 739 00:45:02,719 --> 00:45:05,920 Speaker 2: me in a way that is so craven, nothing happens 740 00:45:05,920 --> 00:45:09,480 Speaker 2: to them. Oh god, they got slightly embarrassed. They can't 741 00:45:09,480 --> 00:45:11,759 Speaker 2: be kicked out of Gemini. They own the bloody thing. 742 00:45:12,560 --> 00:45:15,480 Speaker 2: The crypto industry isn't attacking them, despite the fact that 743 00:45:15,600 --> 00:45:19,280 Speaker 2: two of your so called stewards are fucking con artists. 744 00:45:20,600 --> 00:45:24,160 Speaker 2: Anyone who's listening to this, who's a big fan of crypto, 745 00:45:24,400 --> 00:45:27,360 Speaker 2: who believes that these guys are good people, or indeed 746 00:45:27,400 --> 00:45:29,600 Speaker 2: that really there are any good people in this industry. 747 00:45:29,920 --> 00:45:33,439 Speaker 2: Should read the New York Attorney General suit. They should 748 00:45:33,520 --> 00:45:37,279 Speaker 2: read everything that the Winklevosses did. They should listen to 749 00:45:37,320 --> 00:45:41,319 Speaker 2: this podcast again, perhaps, and recount the many ways, the 750 00:45:41,400 --> 00:45:46,160 Speaker 2: manifold ways in which these two giant freaks shat all 751 00:45:46,160 --> 00:45:49,799 Speaker 2: over their customers, lied to them, lied to regulators, lied 752 00:45:49,840 --> 00:45:53,279 Speaker 2: to their own company, and sat there with their thumbs up, 753 00:45:53,280 --> 00:45:57,000 Speaker 2: their asses not digging into their own personal piggybanks, making 754 00:45:57,000 --> 00:46:00,800 Speaker 2: the dumbest calls again and again, and nothing has happened 755 00:46:00,800 --> 00:46:05,440 Speaker 2: to them. I pray Letitia James and then New York 756 00:46:05,480 --> 00:46:08,520 Speaker 2: Attorney General's Office finds a way to exile these two 757 00:46:08,640 --> 00:46:13,280 Speaker 2: bastards from this goddamn financial services industry. But I'm gonna 758 00:46:13,280 --> 00:46:25,719 Speaker 2: be honest, I'm not holding my breath. Thank you for 759 00:46:25,800 --> 00:46:29,040 Speaker 2: listening to Better Offline. It's a weekly tech podcast. You 760 00:46:29,080 --> 00:46:31,600 Speaker 2: can find it on iheartradios, app or anywhere else you 761 00:46:31,640 --> 00:46:34,560 Speaker 2: find podcasts. The editor and composer of the Better Offline 762 00:46:34,600 --> 00:46:37,279 Speaker 2: theme song is Matasowski. You can check out more of 763 00:46:37,320 --> 00:46:40,920 Speaker 2: his music and audio projects at matasowski dot com. M 764 00:46:40,960 --> 00:46:45,440 Speaker 2: A T T O s o w Ski dot com. 765 00:46:45,520 --> 00:46:47,400 Speaker 2: If you want to get in touch with me, email 766 00:46:47,480 --> 00:46:50,160 Speaker 2: me at easy at better offline dot com, or visit 767 00:46:50,280 --> 00:46:53,279 Speaker 2: me at edzitron on Twitter or zitron dot Besky dot 768 00:46:53,360 --> 00:46:56,080 Speaker 2: Social on Blue Sky. Check out my newsletter and more 769 00:46:56,160 --> 00:46:58,640 Speaker 2: of my work on better offline dot com. Thank you 770 00:46:58,680 --> 00:46:59,240 Speaker 2: for listening. 771 00:47:06,800 --> 00:47:09,480 Speaker 1: Better Offline is a production of cool Zone Media. For 772 00:47:09,560 --> 00:47:13,640 Speaker 1: more from cool Zone Media, visit our website Coolzonemedia dot com, 773 00:47:13,719 --> 00:47:16,600 Speaker 1: or check us out on the iHeartRadio app, Apple Podcasts, 774 00:47:16,680 --> 00:47:18,160 Speaker 1: or wherever you get your podcasts.