Speaker 1: This is Bloomberg Crypto, a daily Bloomberg I Heard podcast,
Speaker 1: and I'm Stacy Marie Ishmael, Managing editor of Crypto for
Speaker 1: Bloomberg News. It's Friday, January six. Welcome to the first
Speaker 1: segment of this Week in Crypto for three. We're kicking
Speaker 1: off the year with can You Guess? I'm sure you
Speaker 1: can guess. Sam Bankman Freed, the former FTX CEO, had
Speaker 1: quite the wild holiday season. His company's filed for bankruptcy,
Speaker 1: and November he was arrested in the Bahamas. In December,
Speaker 1: Bankman Freed faces multiple criminal charges, and at least two
Speaker 1: of his closest colleagues and confidence are providing evidence against him. SBF,
Speaker 1: as he's commonly known, flew back to New York this
Speaker 1: week after spending the holidays in California on bail. At
Speaker 1: that hearing in New York on Tuesday, he pleaded not guilty,
Speaker 1: as was widely expected to those charges wild times indeed.
Speaker 1: Here to help me break down the top crypto developments
Speaker 1: of the week and the year so far is Bloomberg
Speaker 1: Senior Editor Philip Logger Coranzo. Everything from when f TX
Speaker 1: started unraveling in that first week of November, it felt
Speaker 1: like it went on hyper drive speed. Philip, I feel
Speaker 1: like I ask you this question every single time, but like,
Speaker 1: what is going on just in general? What is going
Speaker 1: on in general? Yeah, I mean we have to talk
Speaker 1: about SPF, don't we. It's coming to a head now,
Speaker 1: dam Bankman Free's trial on those fraud charges in the
Speaker 1: New York City Court room are set to begin in
Speaker 1: October two quite sometimes not unexpectedly, we had the not
Speaker 1: guilty ply trial set for early October, and as we
Speaker 1: point out in our story, it is looking like one
Speaker 1: of the most high profile white collar trials in recent memory.
Speaker 1: It's exciting, it is exciting, but I'm I'm just wondering
Speaker 1: about this October twenty three dates. It fields both very
Speaker 1: far away in that we're recording this episode, it's the
Speaker 1: first week of January, and like what, who knows what's
Speaker 1: going to happen between now in October, like ten more
Speaker 1: people can file for bankruptcy. But also, as my colleagues
Speaker 1: on legal, our colleagues on legal have been reporting, this
Speaker 1: is moving at a pretty fast clip by the standards
Speaker 1: of you know, criminal prosecutions. Have you noticed this sort
Speaker 1: of tension in Krypto where we spent a good chunk
Speaker 1: of the end of last year hearing people say over
Speaker 1: and over, oh, nobody's ever going to be prosecuted for anything.
Speaker 1: Investigators are slow rolling, we don't understand why anything is
Speaker 1: not why nothing is happening, and then bam, you know
Speaker 1: bank when free, it's arrested. Multiple of his colleagues are
Speaker 1: facing similar charges, some of them have agreed to cooperate
Speaker 1: with investigators, and now we're staring down and October date.
Speaker 1: Just as an editor, like, how do you sort of
Speaker 1: balance these competing timelines. Everything from when f t X
Speaker 1: started unraveling in that first week of November, it felt
Speaker 1: like it went on hyperdrive speed. And I mean the
Speaker 1: the sort of the sense you got working on these
Speaker 1: stories and watching these developments when it comes to the
Speaker 1: speed at which the prosecution and the s s SEC
Speaker 1: and the c s C, c FTC moved um, was
Speaker 1: that A they felt obviously that there was a lot
Speaker 1: of evidence here. B that after the year that we've
Speaker 1: had and so much going wrong, and as you said,
Speaker 1: the growing spare or questions about whether or not somebody
Speaker 1: would end up paying the price for everything, all the
Speaker 1: billions of dollars lost hundreds of billions of dollars lost.
Speaker 1: I don't I don't know what the final tally is.
Speaker 1: You get the sense that there was really a sense
Speaker 1: of pressure to to move quickly and make sure that
Speaker 1: there was no doubt left that you know, we are
Speaker 1: taking this extraordinarily seriously and you know this will not stand.
Speaker 1: And then yeah, I mean, as it comes to the
Speaker 1: actual trial date ten months out from now almost nine
Speaker 1: and change, I don't know. That is a little bit
Speaker 1: more outside my my regular purview, but based on his
Speaker 1: not guilty plea, um, it looks like the trial will
Speaker 1: also take a little bit longer than it otherwise had,
Speaker 1: even though we have some legal experts seemed to leave
Speaker 1: room for the fact that he might change course during
Speaker 1: this process. I have felt for the past year and
Speaker 1: a bits of this as the class in this podcast,
Speaker 1: that it's like running a marathon at sprint pace, which
Speaker 1: people who run marathons are like, yeah, that's how fast
Speaker 1: people run marathons, like they're very very fast. Actually, you're
Speaker 1: just a normal person and not an Olympic athlete. Um. Yeah,
Speaker 1: so as a normal person and not an Olympic athletes,
Speaker 1: it's definitely been fairly brutal, just in terms of the
Speaker 1: perception that things are taking very long, but the reality
Speaker 1: that actually things are moving quite quickly, because even October
Speaker 1: would still be less than a year from when all
Speaker 1: of those FTX companies were placed into bankruptcy protection. So that's,
Speaker 1: you know, that is a pretty accelerated timeline. I want
Speaker 1: to also just mention one of the to me weirder
Speaker 1: slash more interesting elements of how this trial has been
Speaker 1: playing out so far, and that has to do with
Speaker 1: the desire for secrecy. Our colleague Jeremy Hill on the
Speaker 1: Credits and Distress team has talked a lot about how
Speaker 1: one of the things that bankruptcy is supposed to do
Speaker 1: is provide clarity and transparency, including for things like the
Speaker 1: lists of creditors. And you know, f t X has
Speaker 1: taken the position that publishing the names of it's a
Speaker 1: top fifty creditors could expose those folks to some kind
Speaker 1: of of risk. And now bank Man Freed's lawyers, and
Speaker 1: again in bank Win Freed no longer represents or speaks
Speaker 1: for f t X in any capacity, but bank Win
Speaker 1: Freed's own personal lawyers have sought to hide or redact
Speaker 1: to use the formal phrase the names of two people
Speaker 1: who have to co sign his very large bond package. Right,
Speaker 1: He's he was able to be out on bail with
Speaker 1: his parents in California because he has agreed to a
Speaker 1: two hundred and fifty million dollar bail package, which does
Speaker 1: not mean that he personally has to put up two
Speaker 1: million dollars. And you know, there's we we have some
Speaker 1: stories on this that we can we linked to in
Speaker 1: the show notes that folks can find out how that works.
Speaker 1: But it does mean that as part of it, he's
Speaker 1: got to find two people who are not his family
Speaker 1: who will sign on as guaranteurs. Which is that like
Speaker 1: if for some reason he like tries to top on
Speaker 1: a private jet to Dubai, say, then those two people
Speaker 1: are actually going to be on the hook for a
Speaker 1: large chunk of that change. And under ordinary circumstances, the
Speaker 1: names of those two people would be public, but his
Speaker 1: lawyers want the judge to hide that information from everybody else,
Speaker 1: saying that they're worried that those folks might also face
Speaker 1: some kind of threat or potential harm. How does this
Speaker 1: square with cryptos wanted transparency. There's a lot, there's a
Speaker 1: lot lately that hasn't really squared with transparency. Um. Transparency
Speaker 1: was a bye word, a keyword, a buzzword for for
Speaker 1: a while, until you know that the winds kind of turned. Huh.
Speaker 1: I do think that. I mean it does look from
Speaker 1: reading our own coverage, like and the case of his
Speaker 1: Lane Maxwell there there seems to have been president for
Speaker 1: keeping the identities of people back in bail bonds secret
Speaker 1: in the sense where you can expect that they would
Speaker 1: be subject to harassment, to threats or otherwise. And I
Speaker 1: think that that was the argument that SPF lawyer made
Speaker 1: as well. I don't know if they referred explicitly to
Speaker 1: that case, but I do know that we have mentioned
Speaker 1: it in our coverage. And you know, to be fair,
Speaker 1: we've seen other fallen crypto figures like the three A
Speaker 1: C founders um. We also the terror USD do Quan
Speaker 1: have made references to their own personal safety and and
Speaker 1: threat to it um um. So it's a it's a
Speaker 1: delicate balancing act, certainly, you have and in industry that
Speaker 1: has always built itself as big on transparency and information
Speaker 1: for all, and now you're seeing things play out very differently.
Speaker 1: One of the things that happened this week was a
Speaker 1: pretty robust statement from various major regulators around the risks
Speaker 1: that crypto might pose two banks. And we've said on
Speaker 1: the show a couple of times that robust regulatory speak
Speaker 1: sounds like very mild to to normal people. It's things
Speaker 1: like we have concerns, and you're like, WHOA, that's that's huge.
Speaker 1: They're practically shouting um. But certainly one of the things
Speaker 1: that we heard that was practically shouting this week is
Speaker 1: this idea of you know, two really demonstrated the risks
Speaker 1: of crypto andree you know, folks are not just going
Speaker 1: to sit back and watch while other things collapse. And
Speaker 1: it made me think of what you said about this
Speaker 1: idea of people wanting to be seen as taken this
Speaker 1: taking this very seriously, because perhaps the most vocal and
Speaker 1: not unjustified criticism of policymakers last year is they didn't
Speaker 1: really protect people from being burned by crypto. And it's
Speaker 1: this statement, which came out from a combination of the
Speaker 1: US Federal Reserve, the Office of the Control of the Currency,
Speaker 1: and the Federal Deposit Insurance Corps or fd I c
Speaker 1: essentially said we know we are watching and we are
Speaker 1: going to be paying a lot of attention to this,
Speaker 1: but it didn't come with any action, right, It just
Speaker 1: said we're paying attention, here are expectations, but there isn't
Speaker 1: necessarily any action attached to this specific thing. Where there
Speaker 1: was action was as often happens in New York, where
Speaker 1: the big finale so regulator there, which has not proven
Speaker 1: to be a fan of crypto in any way, came
Speaker 1: after coin base. And so for me, one of the
Speaker 1: themes that's already shaping up in three is this idea
Speaker 1: of what's sometimes called jaw boning, which is like a
Speaker 1: bunch of people saying a bunch of stuff but not
Speaker 1: necessarily doing anything, coupled with pretty strident action from states
Speaker 1: regulators in the US, right, Like, this is not the
Speaker 1: first time that New York has said, you know what, Feds,
Speaker 1: you are taking too long, or you're not you're not
Speaker 1: doing the things that we needed to do. We're gonna
Speaker 1: go after this ourselves. Is there any kind of equivalent
Speaker 1: tension in Europe where you're based, where like either countries
Speaker 1: or certain individual regulators in certain countries are looking at
Speaker 1: the relative and action of the EU and saying, actually,
Speaker 1: we're going to take this into our own hands. I
Speaker 1: think the main discrepancy we've seen here is between the
Speaker 1: EU appears to be standing fairly firm behind MICA right now,
Speaker 1: which is the market thing Crypto Assets Act, which will
Speaker 1: take effect well a year from now actually, and so
Speaker 1: we haven't seen to the same extent certain countries regulators
Speaker 1: springing ahead. What we do see is the UK, obviously
Speaker 1: post Brexit, charting its own path here, and we had,
Speaker 1: for instance, members of Parliament putting some questions to finance
Speaker 1: in the aftermath of the FTX fall, but it's not
Speaker 1: been accentuated. I guess you call it as in the
Speaker 1: States where New York regulators have you know, we're making
Speaker 1: targeted moves like this one with coin base. It could
Speaker 1: still happen during this year in the run up to
Speaker 1: MICA taking effect, and that's actually something that I think
Speaker 1: will be paying a lot of attention to. As the
Speaker 1: final print gets written on MICA ahead of its launch,
Speaker 1: you might see regulators. It wouldn't be completely wild for
Speaker 1: some regulators to take matters into their own hands. I
Speaker 1: guess it all depends on what what what happens now,
Speaker 1: what happens with firms that are for instance based here.
Speaker 1: But the main thing that I've seen so far is
Speaker 1: the UK kind of trying to chat its own path
Speaker 1: on crypto right well, now that they have a government,
Speaker 1: we'll see how that goes for them exactly. We'll be
Speaker 1: right back with more of the week's top stories with
Speaker 1: Philip Lagerkranza. There are certainly a lot of folks who
Speaker 1: are hoping that bitcoin isn't going to be down another
Speaker 1: six But at least so far this week in January,
Speaker 1: we're not seeing a lot of trading volumes were nowhere near,
Speaker 1: you know, like the highs of liquidity that we were
Speaker 1: seeing around this time last year. And that's certainly an
Speaker 1: indicator that a lot of folks are going to be
Speaker 1: paying attention to in terms of his sentiment coming back
Speaker 1: for crypto. And there's this interesting problem and it's a
Speaker 1: little bit chicken and egg e here for you know,
Speaker 1: folks who are enthusiasts of this asset class, which is
Speaker 1: because liquidity is so thin, any price declines tend to
Speaker 1: be fairly dramatic, and so you actually need a lot
Speaker 1: more people coming back into the market and being willing
Speaker 1: to trade to you know, get some momentum back. That
Speaker 1: will mean one there's more potential for sustained upside and
Speaker 1: to you, you limit your downside risk a little bit,
Speaker 1: and we're not seeing that yet. But the other thing
Speaker 1: is one of the reasons people aren't necessarily coming back
Speaker 1: into the markets is because they spent a lot of
Speaker 1: time being like there's nothing interesting to do right now,
Speaker 1: that there's nothing, I can't take any interesting speculative positions,
Speaker 1: like I don't know, I'm not super optimistic about what
Speaker 1: might happen with with regulation, or you know, there's not
Speaker 1: enough going on for me to take a position in this.
Speaker 1: And you're hearing that from institutional investors certainly who love
Speaker 1: an arbitrage opportunity, but also retail ones and so I
Speaker 1: guess you know. One thing we're gonna be looking at
Speaker 1: in our coverage is where is their activity? And certainly
Speaker 1: a theme that we're starting to see isn't what's sometimes
Speaker 1: known as old coins, right like the Solanas of the world,
Speaker 1: or in the case of the inevitable meme coins, there's
Speaker 1: something called bunk, which we will talk about on a
Speaker 1: future episode. Are there any unusual coins, Philip that you're
Speaker 1: paying attention to? Three you mentioned Solana already, it's up,
Speaker 1: it's a thirty. I believe UM this year alone, it's
Speaker 1: it's by far the biggest gainer, and it was also
Speaker 1: the one that got the most pummeled by all the
Speaker 1: top old coins in December, So in a sense that's
Speaker 1: kind of you can you can assign that to being
Speaker 1: a bounce back from extreme pessimism embarrassness. But you do
Speaker 1: also have other coins like um light coin um that
Speaker 1: I've done well and we we we are actually seeing
Speaker 1: now and it's interesting to see what can we make
Speaker 1: of this? What can we make of is it is
Speaker 1: it just a function of when the market moves up,
Speaker 1: al coin moves up, move up more or is there
Speaker 1: more risk willingness creeping back into the markets, And you
Speaker 1: know that al coins would be the first barometer or
Speaker 1: the first sign that we are seeing more risk appetite
Speaker 1: creeping back. From that perspective, it's quite interesting too to
Speaker 1: follow um Salona does. As you say, it is it
Speaker 1: is a little bit of a special case at this point.
Speaker 1: But I think if if other alt coins start catching
Speaker 1: up to Salona's performance UM so far this year, then
Speaker 1: you know that that is something to really pay attention to.
Speaker 1: And as you mentioned, you know you you don't want
Speaker 1: to be making too much of price advances and ald
Speaker 1: coins without the benefit of also having ideally volumes picking up.
Speaker 1: For Salona, volumes are definitely picking up a litt little bit,
Speaker 1: but I think we'll want to see whether or not
Speaker 1: that remains in the next few few days a few
Speaker 1: weeks um, and it could be quite an important interesting
Speaker 1: at least it may be storyline. You've given me the
Speaker 1: opportunity to wheel out one of my favorite journalistic cliches.
Speaker 1: Too early to tell. Thank you, Philip, Talk to you
Speaker 1: again soon. Thank you. You can find more of phillips
Speaker 1: work on the Bloomberg terminal and on Bloomberg dot com.
Speaker 1: This is Bloomberg Crypto, a daily podcast from Bloomberg and
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Speaker 1: for the show to Crypto at Bloomberg dot net. The
Speaker 1: supervising producer of Bloomberg Crypto is Vicky Vergalina. Our senior
Speaker 1: producer is Janet Babin. Our producers are Moham Farup and
Speaker 1: Sharon Barrero. Our associate producers are Ty Butler and Moses
Speaker 1: on them. Desta wonder At is our engineer. Original music
Speaker 1: by Leo Sidrn. I'm Stacy, Marie Ishmael. Have a great weekend.