WEBVTT - Tech News: FTX Co-Founder Arrested! 0:00:04.400 --> 0:00:07.800 Welcome to tech Stuff, a production from I Heart Radio. 0:00:11.880 --> 0:00:15.320 Hey there, and welcome to tech Stuff. I'm your host, 0:00:15.520 --> 0:00:18.800 Jonathan Strickland. I'm an executive producer with I Heart Radio. 0:00:19.160 --> 0:00:22.200 And how the tech are you. It's time for the 0:00:22.239 --> 0:00:28.200 tech News for Tuesday, December twenty twenty two, and we've 0:00:28.200 --> 0:00:32.680 got a lot of updates on big stories today. It's 0:00:32.680 --> 0:00:36.160 gonna be I think a chunker of an episode. So first, 0:00:36.920 --> 0:00:40.040 let's tackle the total mess that is the collapse of 0:00:40.159 --> 0:00:43.480 f t X and the consequences that collapse has had 0:00:43.520 --> 0:00:47.240 in the world of finance in general and cryptocurrency in particular, 0:00:47.680 --> 0:00:54.200 and co founder Sam Bankman freed specifically. But first, in 0:00:54.240 --> 0:00:57.120 case you're not familiar with f t X, I'll set 0:00:57.160 --> 0:01:02.000 a little foundation. So f t X was the second 0:01:02.120 --> 0:01:07.320 largest cryptocurrency exchange in the world. So a cryptocurrency exchange 0:01:07.360 --> 0:01:11.240 is an organization designed to take currency in one form 0:01:11.480 --> 0:01:15.240 and exchange it for an almost equal value in some 0:01:15.480 --> 0:01:18.319 other form, just like you would do if you were 0:01:18.319 --> 0:01:20.800 to visit a foreign country and you wanted to swap 0:01:20.840 --> 0:01:25.000 out your native cash for the cash of the country. 0:01:25.120 --> 0:01:29.039 And I say almost equal value because the exchange, of 0:01:29.040 --> 0:01:32.480 course takes a little cut of each transaction. That's one 0:01:32.480 --> 0:01:35.320 way that the exchange makes money. And like a lot 0:01:35.360 --> 0:01:39.880 of exchanges, customers can also choose to store their currency 0:01:40.040 --> 0:01:43.280 in whatever digital form it might be in within the 0:01:43.319 --> 0:01:47.280 exchange itself, rather than extracting the money to put into 0:01:47.280 --> 0:01:51.560 a separate digital wallet. Sometimes taking money out also means 0:01:51.560 --> 0:01:54.480 that you get a cut taken out of it. So 0:01:54.680 --> 0:01:57.840 once those cuts start adding up, a lot of customers say, 0:01:57.880 --> 0:01:59.520 you know what, I'll just leave it in there, so 0:01:59.600 --> 0:02:03.840 that way I'm not losing more money by taking it 0:02:03.880 --> 0:02:06.840 out of the system. So, as I said, f t 0:02:07.040 --> 0:02:10.280 X was the second largest cryptocurrency exchange. It was behind 0:02:10.360 --> 0:02:13.520 another company called Finance, which we are also going to 0:02:13.520 --> 0:02:16.640 talk about in this episode. And f t X also 0:02:16.760 --> 0:02:20.799 issued its own cryptocurrency token that was called f t T. 0:02:21.720 --> 0:02:24.440 And yes, one major problem with this story is that 0:02:24.440 --> 0:02:27.240 we use a lot of initialisms and it stinks and 0:02:27.280 --> 0:02:30.320 I'm sorry, but that's just how it is. So f 0:02:30.360 --> 0:02:34.720 t X the exchange would award f t T tokens 0:02:35.200 --> 0:02:38.120 to customers, and you could also trade your money in 0:02:38.360 --> 0:02:41.560 for f t T. You could actually just cash into 0:02:41.639 --> 0:02:43.840 f t T if you wanted to, and you can 0:02:44.000 --> 0:02:46.720 use f t T to hold your wealth. Now, while 0:02:46.720 --> 0:02:50.400 ft t was native to f t X is exchange, 0:02:50.840 --> 0:02:54.440 it was also an accepted token on other exchanges. Now, 0:02:54.440 --> 0:02:56.160 one of the co founders of f t X, as 0:02:56.160 --> 0:02:59.000 I said, was Sam Bankman freed or s b f 0:02:59.680 --> 0:03:01.840 as a was known in the crypto world, and I 0:03:01.880 --> 0:03:04.600 hate that. So I'm just calling him Sam so that 0:03:04.639 --> 0:03:08.360 we don't just have initials everywhere. Before co founding f 0:03:08.480 --> 0:03:11.720 t X, Sam had also co founded a hedge fund 0:03:11.960 --> 0:03:14.160 that focused on crypto. He did this a couple of 0:03:14.240 --> 0:03:19.119 years previously. That company was called Alamator Research. Well. Back 0:03:19.120 --> 0:03:23.320 in November, a crypto news outlet called coin Desk published 0:03:23.320 --> 0:03:27.560 a leaked records sheet that indicated that f t X 0:03:27.639 --> 0:03:32.680 was funneling money from exchange customers to go to Alamator 0:03:32.760 --> 0:03:36.480 Research in order to cover investment losses and loans and 0:03:36.520 --> 0:03:39.640 things like that, which is kind of like robbing Peter 0:03:40.040 --> 0:03:43.800 to pay Paul. You take cash that isn't yours from 0:03:43.840 --> 0:03:48.080 one source in order to cover debts that are yours elsewhere. 0:03:48.480 --> 0:03:51.840 The publication of that leaked record sheet led to a 0:03:51.880 --> 0:03:54.680 full on collapse of f t X, which was exacerbated 0:03:54.760 --> 0:04:00.880 first when financed chairman Cheung Peng c z Jo, we'll 0:04:01.000 --> 0:04:05.360 just called Chong Peng said that Finance, which had been 0:04:05.400 --> 0:04:09.160 an early investor in f t X, was dumping its 0:04:09.240 --> 0:04:13.120 holdings of f t T. So Binance had millions of 0:04:13.320 --> 0:04:16.719 f t T tokens that it kept as a result 0:04:16.760 --> 0:04:19.160 of being an early investor in f t X. So 0:04:19.240 --> 0:04:22.159 Binance says, we're dumping it, We're getting ready, we're cashing out. 0:04:22.640 --> 0:04:26.000 That sent the value of f t T into the crapper. Right, 0:04:26.040 --> 0:04:28.480 if you flood a market with an asset, the value 0:04:28.480 --> 0:04:33.080 of that asset decreases. So then Binance said, you know what, 0:04:33.960 --> 0:04:36.840 we're gonna help you out. We're gonna buy f t X, 0:04:38.000 --> 0:04:41.440 and then almost immediately backed out of that non binding agreement, 0:04:41.880 --> 0:04:46.279 which really it was like a shot to the heart, 0:04:46.680 --> 0:04:50.240 and Finance was to blame. So f t X really 0:04:50.240 --> 0:04:53.400 took it that time. And there's also the question of 0:04:53.839 --> 0:04:57.000 hundreds of millions of dollars of f t X customer 0:04:57.080 --> 0:05:00.880 funds having just gone missing. You know, there are there 0:05:00.880 --> 0:05:03.279 are records of transactions that happened that went to some 0:05:03.440 --> 0:05:08.120 mysterious recipient, where all this money that should have belonged 0:05:08.120 --> 0:05:13.520 to ft X customers was essentially at least by appearance stolen, 0:05:14.240 --> 0:05:16.359 and there are a lot of people who suspect that 0:05:16.400 --> 0:05:19.719 either Sam or one of as many crypto bros took 0:05:19.760 --> 0:05:23.120 the money before things totally fell apart. The collapse of 0:05:23.120 --> 0:05:25.200 f t X, which was already coming at a time 0:05:25.200 --> 0:05:26.960 when crypto was having a rough go of it sent 0:05:27.040 --> 0:05:29.400 a huge ripple out in the crypto world, and we 0:05:29.440 --> 0:05:32.320 saw investors start to lose even more confidence in crypto 0:05:32.560 --> 0:05:36.400 and values would drop across the board. Pretty much. That's 0:05:36.400 --> 0:05:40.120 our foundation. Now we can actually talk about what's happened recently. 0:05:40.680 --> 0:05:43.840 So first up, Sam's headquarters for f t X was 0:05:44.000 --> 0:05:47.360 in the Bahamas over the last year or two. So 0:05:47.440 --> 0:05:51.479 a lot of these crypto exchanges maintain their headquarters overseas 0:05:51.480 --> 0:05:57.080 and places that have let's say, relaxed laws and regulations 0:05:57.080 --> 0:06:03.000 regarding financial institutions somewhere that's out of the purview of 0:06:04.040 --> 0:06:08.560 major financial regulators, like like what we have here in 0:06:08.560 --> 0:06:12.880 the United States. But you know, rich people they really 0:06:12.920 --> 0:06:16.400 hate it when someone else steals their money or causes 0:06:16.480 --> 0:06:18.760 them to lose money. So rich people will go to 0:06:18.880 --> 0:06:22.240 really great links in order to get justice, as opposed 0:06:22.240 --> 0:06:25.039 to say, if a poor person is robbed, you don't 0:06:25.080 --> 0:06:29.440 see nearly as much effort to help that person. Yes, 0:06:29.480 --> 0:06:33.440 this is commentary, but it's also true. Okay, so yeah, 0:06:33.640 --> 0:06:37.560 it stinks anyway. In the wake of this collapse, with 0:06:37.600 --> 0:06:40.400 all these rich people losing lots of money and then 0:06:40.400 --> 0:06:43.440 the revelations about f t X and alimated research, the 0:06:43.440 --> 0:06:46.440 police in the Bahamas launched an investigation into f t 0:06:46.720 --> 0:06:49.360 X and our buddy Sam. Folks over here in the 0:06:49.440 --> 0:06:52.000 United States were likewise eager to look into the matter, 0:06:52.480 --> 0:06:55.360 and the Senate Banking Committee wished to hold a hearing 0:06:55.400 --> 0:06:57.680 about f t X this week. In fact, it was 0:06:57.720 --> 0:07:01.440 supposed to happen today, and they wanted Am to testify 0:07:01.560 --> 0:07:06.880 at this hearing. Sam reportedly declined to acquiesce to their request, so, 0:07:06.920 --> 0:07:09.400 in other words, he told him to pound sand and 0:07:09.480 --> 0:07:12.080 senators said they had offered two different dates for Sam. 0:07:12.160 --> 0:07:14.600 They had included the option for him to attend virtually 0:07:14.640 --> 0:07:17.440 where he wouldn't have to actually travel to the United States, 0:07:17.760 --> 0:07:20.040 and he still declined, and his attorney said he had 0:07:20.040 --> 0:07:24.080 no intention of obeying any subpoenas that the Senate might request. 0:07:24.440 --> 0:07:26.640 So it sounded like Sam was really holding out to 0:07:26.800 --> 0:07:31.120 avoid being pinned down. But that would not last because 0:07:31.200 --> 0:07:34.560 while we were hearing about Sam deciding not to appear 0:07:34.600 --> 0:07:39.600 before the Senate. The Bahamanian authorities were preparing to arrest him, 0:07:39.920 --> 0:07:43.480 and they did on Monday evening. So last night, the 0:07:43.600 --> 0:07:46.320 U S. Attorney for the Southern District of New York 0:07:46.480 --> 0:07:50.120 indicted Sam and sent the sealed indictment to the Bahamanian 0:07:50.160 --> 0:07:53.560 authorities and they acted upon it. So presumably this also 0:07:53.640 --> 0:07:57.360 sets the stage to extradite Sam from the Bahamas to 0:07:57.440 --> 0:08:00.800 the United States, where he will face new risk charges. 0:08:01.200 --> 0:08:04.480 Now this is a separate but parallel effort with what 0:08:04.520 --> 0:08:07.400 we're hearing about the Senate hearings. In fact, senators were 0:08:07.400 --> 0:08:11.280 surprised to learn of Sam's arrest and some have expressed 0:08:11.280 --> 0:08:14.720 disappointment that he will not appear before the Senate to 0:08:14.800 --> 0:08:17.800 explain the situation that led to f t x's collapse. 0:08:18.640 --> 0:08:22.400 As for the charges that Sam faces, they reportedly include 0:08:22.440 --> 0:08:28.600 counts of securities fraud, conspiracy, securities fraud itself, wire fraud conspiracy, 0:08:28.840 --> 0:08:33.840 wire fraud itself, and money laundering. Yeah, rich people really 0:08:33.880 --> 0:08:36.760 don't like it when folks take their money. The U S. 0:08:36.760 --> 0:08:41.000 Securities and Exchange Commission, or SEC, accuses Samba committing a 0:08:41.120 --> 0:08:46.240 quote years long fraud end quote, meaning this isn't just 0:08:46.440 --> 0:08:50.640 about the months that led up to f t x's demise. Essentially, 0:08:50.640 --> 0:08:53.200 the SEC seems to be saying that f t X 0:08:53.640 --> 0:08:57.960 was really not so much a cryptocurrency exchange as it 0:08:58.080 --> 0:09:02.440 was a funnel that would collect money from customers and 0:09:02.480 --> 0:09:05.199 then send that to Alimated Research in order to fund 0:09:05.320 --> 0:09:09.040 trades and real estate deals and to give out massive 0:09:09.160 --> 0:09:13.160 loans to the company's founders, including Sam, who, according to 0:09:13.200 --> 0:09:17.800 the SEC, borrowed a staggering one point three three eight 0:09:17.920 --> 0:09:22.760 billion dollars from Alameda. That's a lot of money to borrow. 0:09:23.160 --> 0:09:27.760 Right on top of the SEC's charges against Sam, there 0:09:27.800 --> 0:09:31.320 are other agencies waiting to get in line to take 0:09:31.360 --> 0:09:33.920 their shot. They include the U. S. Attorney's Office for 0:09:34.000 --> 0:09:36.360 the Southern District of New York, which we mentioned earlier, 0:09:36.600 --> 0:09:40.560 and also the Commodity Futures Trading Commission or c f TC. 0:09:41.520 --> 0:09:44.680 Sam will appear in court in the Bahamas today. He 0:09:44.760 --> 0:09:47.760 does not have the luxury of saying no to that appointment, 0:09:48.120 --> 0:09:51.600 and the Bahamanian government is pretty darn eager to talk 0:09:51.679 --> 0:09:54.680 to Sam outside his discussions with the US because the 0:09:54.679 --> 0:09:57.520 government very much wants to reclaim more than two hundred 0:09:57.600 --> 0:10:02.440 fifty million dollars worth of Bahamas property that Sam and 0:10:02.679 --> 0:10:07.840 f t X executive Ryan Salami. Um, it's maybe it's Salame. 0:10:08.240 --> 0:10:10.720 It's s A L A M E that I'm gonna 0:10:10.760 --> 0:10:14.760 say Salami anyway, Ryan, I'll say Ryan and Sam purchased 0:10:14.760 --> 0:10:19.520 two million plus dollars of Bahama, Bahamas property in the past. 0:10:20.240 --> 0:10:24.400 That's actually thirty five different properties across New Providence, Bahamas. 0:10:24.840 --> 0:10:28.320 Those properties have been tangled up in the bankruptcy proceedings 0:10:28.400 --> 0:10:31.800 for f t X because uh, you know, ft X 0:10:31.840 --> 0:10:35.360 brought in a new CEO in order to oversee the 0:10:35.400 --> 0:10:39.960 company going into bankruptcy. But the Bahamanian government says that 0:10:40.040 --> 0:10:44.079 one having a U S court handled Bahamanian property is 0:10:44.120 --> 0:10:47.240 inefficient because it could be done much more smoothly in 0:10:47.280 --> 0:10:50.960 the Bahamas. So it's a waste of resources, is what 0:10:51.000 --> 0:10:54.880 they're saying. But more importantly to having a foreign court 0:10:55.000 --> 0:10:59.880 handled that sort of thing is illegal by Bahamanian law anyway, 0:11:00.200 --> 0:11:04.280 That it's against the law in the Bahamas for property 0:11:04.320 --> 0:11:07.560 in the Bahamas to be handled by a foreign you know, 0:11:07.880 --> 0:11:11.440 legal system essentially, is what it comes down to. I 0:11:11.520 --> 0:11:13.439 only include this part of the story to show how 0:11:13.480 --> 0:11:16.640 incredibly complicated. This whole crypto issue has become because it 0:11:16.679 --> 0:11:21.199 affects both digital and real world assets. Current fd X 0:11:21.360 --> 0:11:26.480 CEO John I, dismantled in Ron Ray, probably doesn't want 0:11:26.559 --> 0:11:30.520 any of that to happen. He doesn't want the properties 0:11:30.559 --> 0:11:34.760 to be relegated over to the Bahamanian authorities because it's 0:11:34.840 --> 0:11:37.280 his job to try and squeeze as much out of 0:11:37.320 --> 0:11:40.280 the corpse of f t X in order to return 0:11:40.520 --> 0:11:44.160 assets to investors as he possibly can, So surrendering two 0:11:44.840 --> 0:11:47.600 million bucks worth of real estate doesn't really fit in 0:11:47.640 --> 0:11:51.240 with that plan. And y'all, I cannot wait for the 0:11:51.360 --> 0:11:54.120 flood of TV series and films that will cover this 0:11:54.200 --> 0:11:58.720 mess in the future. Now, before I go to break 0:11:58.880 --> 0:12:02.040 and then move on to a related topic, I have 0:12:02.160 --> 0:12:04.520 one last thing to say about f t X. The 0:12:04.559 --> 0:12:09.800 Australian Financial Review reports that an inner circle I called 0:12:09.840 --> 0:12:12.920 it a cabal, but an inner circle running f t X, 0:12:13.120 --> 0:12:16.320 had created a secret chat group in the days leading 0:12:16.360 --> 0:12:19.400 up to the collapse, and that chat group had the 0:12:19.559 --> 0:12:26.320 name according to the Australian Financial Review of wire Fraud. Now, 0:12:26.400 --> 0:12:31.000 that seems like it's a supremely stupid thing to do 0:12:31.200 --> 0:12:34.800 to me, Like I just I just can't see why 0:12:34.880 --> 0:12:39.280 anyone would make a chat group called wire Fraud. I mean, 0:12:39.320 --> 0:12:42.160 maybe it was gallows humor, right, maybe it was done 0:12:42.200 --> 0:12:48.120 as a tongue in cheek, snarky way of of trying 0:12:48.160 --> 0:12:51.960 to deal with the situation, because otherwise you're you're leaving 0:12:51.960 --> 0:12:56.560 a smoking gun laying around on purpose. But then the 0:12:56.600 --> 0:12:59.440 group was also using Signal, which is a messaging and 0:12:59.520 --> 0:13:02.920 chat at that's known for you know, secrecy and encrypted messaging. 0:13:03.000 --> 0:13:07.120 So it's possible that wire Fraud wasn't meant to be 0:13:07.200 --> 0:13:11.240 humorous or ironic or or sarcastic. It was just you know, 0:13:11.320 --> 0:13:14.520 to get everyone on the same page. Now, Sam for 0:13:14.640 --> 0:13:17.720 his part, denies knowing of such a group and said 0:13:17.760 --> 0:13:20.400 that if it does exist, he was not in it. 0:13:21.280 --> 0:13:25.800 Uh yeah, wild, Okay, we're gonna take a quick break. 0:13:25.800 --> 0:13:28.360 When we come back, we'll talk about some other issues 0:13:28.400 --> 0:13:30.640 in the crypto world and a couple of other stories, 0:13:30.640 --> 0:13:45.319 but first let's go to these messages. Okay, we are 0:13:45.400 --> 0:13:49.040 done talking about the recent developments with f t X 0:13:49.040 --> 0:13:52.880 and Sam Bankman Freed, But now let's talk about Finance, 0:13:53.000 --> 0:13:57.200 the largest cryptocurrency exchange in the world. Uh. The former 0:13:57.400 --> 0:14:01.080 investor into f t X, and then arguably slayer of 0:14:01.200 --> 0:14:03.840 f t X, and now it is at the center 0:14:03.920 --> 0:14:07.120 of its own turmoil. Although to say now is being unfair, 0:14:07.320 --> 0:14:11.120 because it turns out Finance has been under serious investigation 0:14:11.200 --> 0:14:14.040 for years, well before the collapse of f t X. 0:14:14.679 --> 0:14:17.439 The Wall Street Journal reports that Finance has been trying 0:14:17.480 --> 0:14:21.680 to mollify customers and reassure them that unlike f t X, 0:14:22.720 --> 0:14:27.200 Finance has the reserves to cover all customer funds that 0:14:27.280 --> 0:14:30.840 are stored within the exchange, and then a little extra 0:14:30.920 --> 0:14:34.960 as a reserve. But the journal sites and accounting professor 0:14:35.040 --> 0:14:39.280 named Douglas Carmichael, which side note, if you have the 0:14:39.360 --> 0:14:42.200 name Douglas Carmichael, I think it's the law that you 0:14:42.360 --> 0:14:45.800 have to be an accounting professor. Anyway, He says that 0:14:45.840 --> 0:14:48.800 the quote unquote proof that Finance has offered so far 0:14:49.280 --> 0:14:52.840 is probably not sufficient to back up what the company 0:14:52.880 --> 0:14:55.480 is claiming. It's probably not going to be enough for 0:14:55.640 --> 0:15:01.440 serious investors to feel comfortable with the situation. Shan Now, 0:15:02.200 --> 0:15:05.280 it's not necessarily the case that Finance doesn't actually have 0:15:05.520 --> 0:15:07.880 the funds, but so far the evidence being shared is 0:15:07.880 --> 0:15:11.320 not enough to support the claim that everything is hunky dory. 0:15:12.040 --> 0:15:15.480 And the proof so far is a single report which 0:15:15.520 --> 0:15:18.920 is more like a five page letter from a quote 0:15:19.200 --> 0:15:22.760 partner at the South African affiliate of the global accounting 0:15:22.760 --> 0:15:26.720 firm Mazaars end quote in the county in the Land 0:15:26.760 --> 0:15:31.320 of Oz. According to the journal, the report included three 0:15:31.520 --> 0:15:38.359 whole numbers in it an exhaustive report of finances, systems 0:15:38.160 --> 0:15:42.800 and policies. No, it was not that, obviously, um, it 0:15:42.960 --> 0:15:45.840 was not an audit report. It did not actually go 0:15:46.040 --> 0:15:51.360 into what control systems, if any, that finance uses. Uh So, 0:15:51.440 --> 0:15:55.520 in other words, a lot of stuff that investors might 0:15:55.560 --> 0:16:00.400 want access to, a lot of transparency did not come 0:16:00.480 --> 0:16:03.920 forward in this letter, in this report. So that's part 0:16:04.000 --> 0:16:08.080 of why Carmichael says investors are probably not really satisfied 0:16:08.080 --> 0:16:11.400 with this report because all they got were these three numbers. 0:16:11.640 --> 0:16:15.600 Two of those numbers also had a bit of concern 0:16:15.680 --> 0:16:20.640 to them. So one of the numbers is about how 0:16:20.760 --> 0:16:25.560 much total currency in bitcoins are in the exchange, and 0:16:25.600 --> 0:16:30.840 the other numbers how many total bitcoins customers held in 0:16:30.880 --> 0:16:34.080 the exchange. So, in other words, let's say you all 0:16:34.160 --> 0:16:38.080 bank at the same place, does the bank actually have 0:16:38.840 --> 0:16:41.320 enough money so that if every single person who had 0:16:41.360 --> 0:16:44.000 an account came in and withdrew all of their money, 0:16:44.400 --> 0:16:47.200 the bank would be able to cover it in this case. 0:16:47.640 --> 0:16:49.840 You know, what Finance had been saying is, yes, we 0:16:49.920 --> 0:16:53.320 have a one to one cover for all currency held 0:16:53.360 --> 0:16:56.280 in our exchange. But as it turns out, those numbers 0:16:56.280 --> 0:17:00.000 are not the same. They the currency actually has few 0:17:00.040 --> 0:17:06.320 were bitcoins in its reserves than customers have quote unquote 0:17:06.320 --> 0:17:08.760 held in the exchange, by the tune of our almost 0:17:09.080 --> 0:17:13.200 well actually a little bit more than fifteen thousand bitcoins. Now, 0:17:13.320 --> 0:17:15.159 this is an exchange that has more than half a 0:17:15.240 --> 0:17:17.479 million of those ding dang darn things. So it's not 0:17:17.560 --> 0:17:22.440 like it's not like fifteen thousand represents a huge percentage, right, 0:17:22.480 --> 0:17:26.000 But it's still concerning. Right if if everyone suddenly got 0:17:26.040 --> 0:17:29.560 nervous and decided to withdraw their money out of the exchange, Well, 0:17:29.640 --> 0:17:32.560 based upon this, the exchange does not have the currency 0:17:32.640 --> 0:17:34.720 to cover all of that, and that was one of 0:17:34.760 --> 0:17:37.240 the big concerns with f t X and really lead 0:17:37.280 --> 0:17:42.119 to its collapse. However, Finance also says, hey, the reason 0:17:42.160 --> 0:17:46.359 for this is that we also issue loans to customers, 0:17:46.920 --> 0:17:51.080 you know, loans of cryptocurrency. So some of the money 0:17:51.119 --> 0:17:54.600 that belongs to US is outstanding. It's not it's not 0:17:54.680 --> 0:17:58.480 currently in our reserves, but it's where we hold it 0:17:58.480 --> 0:18:00.080 in the form of loans that have been is you 0:18:00.160 --> 0:18:02.679 to customers, and those loans will be repaid with interest, 0:18:02.720 --> 0:18:05.840 which means ultimately, yes, we can cover everything. In fact, 0:18:05.840 --> 0:18:11.280 we have one collateral. Our collateralization is really what we 0:18:11.359 --> 0:18:15.399 call it. It's just that right now, technically they don't 0:18:15.400 --> 0:18:20.640 have it. So things are just kind of shaky on 0:18:20.680 --> 0:18:23.760 an investor front. But uh, that's not the end of 0:18:23.800 --> 0:18:26.159 finance's troubles by a long shot. So the U s 0:18:26.160 --> 0:18:31.000 Department of Justice has actually been actively investigating finance for years, 0:18:31.040 --> 0:18:35.960 particularly in realms of money laundering and processing payments that 0:18:36.080 --> 0:18:40.800 sidestep international sanctions, such as money that gets funneled to 0:18:40.880 --> 0:18:45.920 places like Iran uh where which should otherwise be subjected 0:18:46.000 --> 0:18:50.680 to UH two sanctions. Reuter's reports that Binance has been 0:18:50.720 --> 0:18:56.879 responsible for processing ten billion dollars in illegal payments this year, 0:18:57.520 --> 0:19:01.320 and that does not sound good. Apparently, the US government 0:19:01.680 --> 0:19:05.160 has even been in discussions with finances legal teams over 0:19:05.200 --> 0:19:08.040 the matter of plea deals. You know, when you start 0:19:08.080 --> 0:19:11.120 talking plea deals, that's just things are starting to build 0:19:11.200 --> 0:19:13.639 up against the crypto exchange here in the States at least. 0:19:14.000 --> 0:19:17.280 But Reuters also reports that the various departments within the 0:19:17.359 --> 0:19:19.720 d o J that are involved in this investigation, and 0:19:19.720 --> 0:19:22.399 there are three major departments that are part of this, 0:19:23.240 --> 0:19:27.720 they aren't completely aligned on when to move forward with 0:19:27.800 --> 0:19:31.080 any charges filed, and some of those departments have a 0:19:31.119 --> 0:19:34.320 more methodical approach than others. So by that, I mean 0:19:34.359 --> 0:19:38.680 there are divisions within the d o J that are 0:19:38.800 --> 0:19:43.040 very thorough when they build a case, which can be 0:19:43.160 --> 0:19:46.840 frustrating to other departments that tend to act more aggressively. 0:19:47.320 --> 0:19:50.719 And I think there are valid arguments for both approaches. Right, 0:19:50.840 --> 0:19:54.520 being methodical leads to building a better case against a 0:19:54.600 --> 0:19:57.439 suspect if in fact, you determine that there is a 0:19:57.480 --> 0:19:59.920 case to be made, or it might save you lots 0:20:00.040 --> 0:20:02.159 of time and money if you realize, oh, you know, 0:20:02.880 --> 0:20:07.400 there's not enough there there. Meanwhile, being aggressive can mitigate 0:20:07.520 --> 0:20:10.359 ongoing harm, right You can cut off the harm that 0:20:10.440 --> 0:20:14.040 is happening right now by acting faster. That is, assuming 0:20:14.119 --> 0:20:16.640 of course, that the case has merit. If the case 0:20:16.680 --> 0:20:21.800 doesn't have merit, then being aggressive can cause more harm. Obviously, anyway, 0:20:21.840 --> 0:20:24.359 there's no telling where this is going to end up 0:20:24.400 --> 0:20:26.800 in the long run yet, but it does mean things 0:20:26.920 --> 0:20:32.680 are increasingly chaotic, so much so that Finance temporarily halted 0:20:32.760 --> 0:20:36.360 withdrawals of U s d C earlier today in an 0:20:36.359 --> 0:20:39.760 effort to stem a transactional problem on the platform. So 0:20:39.960 --> 0:20:42.520 U s d C is a stable coin that is 0:20:42.640 --> 0:20:46.960 linked to the US dollar. UH. Investors sometimes use us 0:20:47.040 --> 0:20:51.080 DC to swap one form of cryptocurrency to another without 0:20:51.119 --> 0:20:55.200 actually having to convert it to real US dollars. Uh. 0:20:55.320 --> 0:20:57.480 It's just you know, a digital version of the US 0:20:57.520 --> 0:21:00.560 dollar in in many ways, it's a stable coin, is 0:21:00.600 --> 0:21:06.119 what's called. Anyway. The issue, according to Chung paying himself, 0:21:06.320 --> 0:21:09.119 is that if a Binance customer wants to convert p 0:21:09.240 --> 0:21:12.840 a X or b U s D into USDC, so 0:21:12.880 --> 0:21:16.520 in other words, these specific forms of crypto into the 0:21:16.560 --> 0:21:20.520 stable coin U s DC, that process requires routing through 0:21:20.600 --> 0:21:23.400 a bank that's in New York, and at the time 0:21:23.400 --> 0:21:25.560 where people were trying to do this, the bank had 0:21:25.600 --> 0:21:28.560 not yet opened. So Binance decided to clamp down on 0:21:28.600 --> 0:21:31.439 those transactions in an effort to swap out a different 0:21:31.480 --> 0:21:37.520 token two facilitate these switches from one cryptocurrency to another. 0:21:37.560 --> 0:21:40.719 In the meantime, over the last twenty four hours, Binance 0:21:40.760 --> 0:21:43.159 has seen customers would draw more than one point six 0:21:43.280 --> 0:21:46.640 billion dollars worth of assets from the exchange. So even 0:21:46.720 --> 0:21:51.800 if all these investigations ultimately lead nowhere Finance, this situation 0:21:51.880 --> 0:21:56.040 right now is a bit rocky because investors have freaked 0:21:56.080 --> 0:22:01.800 out due to multiple red flags. So crypto is in 0:22:01.880 --> 0:22:05.439 a really delicate place right now. I'm not suggesting that 0:22:05.480 --> 0:22:09.600 crypto is gonna completely collapse and that it will no 0:22:09.680 --> 0:22:13.200 longer be the grand experiment that it was, but rather 0:22:13.840 --> 0:22:17.159 it's in for a real hard time in the at 0:22:17.200 --> 0:22:19.640 least the short term, if not the long term, as 0:22:20.119 --> 0:22:23.600 these major exchanges that have kind of built themselves up 0:22:23.600 --> 0:22:27.840 into being pillars of the crypto community, a community that 0:22:27.960 --> 0:22:33.800 infamously values itself on being decentralized, are now in potential 0:22:34.160 --> 0:22:38.320 jeopardy either because of a lack of investor confidence or 0:22:38.359 --> 0:22:42.639 in the case of Finance, being the active subject of 0:22:42.880 --> 0:22:48.920 massive investigations into money laundering and other violations. Like that's 0:22:48.960 --> 0:22:52.720 bad news. That does not necessarily mean that there would 0:22:52.760 --> 0:22:56.960 be a direct effect on the cryptocurrency values themselves, but 0:22:57.119 --> 0:23:00.359 frequently what you'll see is investors get worried, they start 0:23:00.400 --> 0:23:04.280 pulling their investments, they convert it back into a different 0:23:04.359 --> 0:23:07.639 form of currency, and in some cases they may just 0:23:07.880 --> 0:23:11.560 cash out entirely and say you know what, Uh, this 0:23:11.720 --> 0:23:15.480 was an interesting approach, it's not for me. I'm done, 0:23:15.880 --> 0:23:20.280 and that ultimately ends up hurting the entire crypto community. Personally, 0:23:20.640 --> 0:23:25.199 I think that crypto is not great. I think there 0:23:25.200 --> 0:23:27.119 are a lot of reasons why crypto is not great. 0:23:27.480 --> 0:23:30.960 I think that the the selling point of it being 0:23:31.000 --> 0:23:34.679 decentralized is a smoke screen. It's really just centralized in 0:23:34.680 --> 0:23:40.320 a different way, um, and that it consolidates wealth in 0:23:40.359 --> 0:23:42.320 a different group of people than what we saw before. 0:23:42.400 --> 0:23:44.639 So it's not like it's I wouldn't say it's worse 0:23:45.040 --> 0:23:47.200 than what we already have, but I wouldn't say it's 0:23:47.240 --> 0:23:50.720 better either. It's just different, um, and different in a 0:23:50.760 --> 0:23:55.280 way that's very unstable. So I am very much against 0:23:55.320 --> 0:24:01.200 the whole crypto thing from that perspective. Maybe it survives 0:24:01.280 --> 0:24:04.760 all of these trials and tribulations, it will mature to 0:24:04.880 --> 0:24:11.800 a stage that is more reliable, less volatile, more acceptable 0:24:11.840 --> 0:24:15.679 as an actual currency as opposed to a commodity. But 0:24:16.400 --> 0:24:18.320 that's all. Those are a lot of ifs, and I 0:24:18.440 --> 0:24:21.600 remained skeptical. I'd love to be proven wrong. It's just 0:24:21.840 --> 0:24:25.400 I suspect I will not be all right, that's enough 0:24:25.440 --> 0:24:27.879 of that. We're gonna take another quick break when we 0:24:27.920 --> 0:24:30.520 come back. We've got a few more tech stories to cover. 0:24:30.800 --> 0:24:32.520 Quite a few actually, as I look at my lineup, 0:24:33.000 --> 0:24:36.119 but they're shorter as they involve lots of other stuff. 0:24:36.480 --> 0:24:39.520 So we're gonna take a break, come back and tackle 0:24:39.560 --> 0:24:52.440 those in just a moment. Okay, we're back. So one 0:24:52.600 --> 0:24:55.720 ongoing story we have talked about several times on this 0:24:55.760 --> 0:24:59.719 show is Microsoft's bid to acquire the video game company 0:24:59.800 --> 0:25:03.199 at division Blizzard, and of course, Activision Blizzard itself is 0:25:03.240 --> 0:25:07.359 the source of lots of stories, many of them dark ones. 0:25:07.720 --> 0:25:11.880 But anyway, the US Federal Trade Commission, or FTC, has 0:25:11.920 --> 0:25:15.240 sued Microsoft. In fact, it did this last week in 0:25:15.280 --> 0:25:19.359 an effort to block this acquisition, and has called the 0:25:19.440 --> 0:25:22.639 merger and anti competitive move that or reduce competition in 0:25:22.680 --> 0:25:26.520 the video games market. Now, The New York Times predicts 0:25:26.560 --> 0:25:29.000 that this is going to be a very tough case 0:25:29.320 --> 0:25:33.560 for the FTC to prove in court because courts typically 0:25:34.200 --> 0:25:38.320