Coinbase & Binance Sued by the SEC?! with Ryan & David

Transcript

just this morning has sued coinbase yesterday they dropped a lawsuit against binance Gary Gensler and the SEC naming a whole bunch of tokens tokens that you may own calling them Securities in the complaints issued by the SEC it seems like the SEC and Gary Gensler is attacking crypto this week and out and out assault of course this comes on the back of months of U.S government hostility what we've been calling operation choke point 2.0 and we want to dive into this subject today see what's going on there are a few key questions we need uh to to ask and to try to answer today

um David where do you want to take this episode where should we start I think the first big question that everyone is asking is did is this a surprise or did we see this coming uh I saw this uh on on like pop-up on my Twitter notifications SEC Sues coinbase and I was like oh man today days the day and I think we should remind bankless listeners and viewers that six weeks ago coinbase was served a Wells notice which means what is a Wells notice a Wells notice says hey we are the SEC and we are going to sue you and coinbase was like why why are you gonna do that and they didn't they didn't say anything so it's worth noting that like we knew that this was coming the SEC told coinbase

hey we're going to sue you they didn't tell them why um but not only that uh about in the last March the SEC told a federal court court overseeing the Voyager bankruptcy uh that binance was uh operating in unregistered Securities Exchange inside the us but they had yet to bring charges uh and so they the SEC had officially stated that binance was an unregistered Securities Exchange and so both of these things we've had in history recent history uh so I think there's a lot of fear out there this is a this is a scary headline SEC sues coinbase the SEC sues binance SEC is suing the two largest crypto marketplaces that we have and so for first cyclers out there who are

questioning or having fear who are scared I'll say no this is this is not a surprise uh everything in these two complaints against coinbase and binance I will say coinbase and binance both saw coming and are probably prepared for so I will say this is not a reason to freak out and then probably the industry we've got this we've got this under control that's my high level take up for the intro of this how do you feel about that Ryan you're muted yeah I think I want to unpack that with you David and before we maybe get to kind of conclusions or how we're feeling about it I feel like we should get to kind of the the intro of what actually happened to get people up to speed because it just started um yesterday yesterday the first complaint was filed against binance on the SEC charged

binance and CZ for operating an unregistered Securities Exchange and for the unregistered sale of Securities so here's the Tweet uh that David is displaying right now from SEC at secgov because of course this is where these things are published these days on Twitter today we charge binance Holdings Limited us-based affiliate bam trading Services which together with binance operates binance.us and their founder CZ with a variety of security violations they also by the way include kind of a a parent tweet like an influencer tweet I'm going to read that quote we are operating as an effing unlicensed Securities Exchange in the USA bro Finance Chief compliance officer blown

up quote this was a quote from 2018 that somehow the SEC procured via internal binance chat log so of course they were making a big deal out of this and you could see details in the on the press release so that's what happened yesterday okay so that was June 5th this SEC filed charges against binance entities 13 charges yes against all of the binance entities and CZ himself so it was a pretty comprehensive uh set of charges against binance so we had that to absorb and then just today as well the SEC charged coinbase for operating an unregistered security exchange broker and clearing agency here is the uh the influencer Tweet here uh here's the

blown up quote coming from the SEC Twitter account and this was I think a quote that this was something also posted in the complaint itself you simply cannot ignore the rules because you don't like them or because you'd prefer different ones the consequences for the investing public are far too great while coinbase's calculated decisions may have allowed it to earn billions it's done so the expense of investors by depriving them of the protections to which they are entitled this is the director of the SEC skewering scoinbase coinbase for uh I guess ignoring the rules in his words and that was the charge that that came this morning and the accompanying uh press release and David we have some

Market reaction from this already you want to get into that yeah so uh Bitcoin when this news broke yesterday was at twenty six thousand eight hundred dollars fell all the way down to 25 500 so down about five to six percent and interestingly in the last few hours or so has recovered back to up to 26 000 and a half dollars so we're seeing some recovery in in both Bitcoin and ether so here's ether ether is actually back up to the price it was uh when this news dropped yesterday about binance uh and so it was at eighteen hundred and seventy dollars it got down to as low as 1780 uh and now it was up back back up to eighteen hundred and seventy dollars so interestingly uh when the binance news dropped when SEC announced their

lawsuit against Finance uh Bitcoin dropped about five percent ether dropped about four percent uh some of the tokens dropped up to ten percent but since the SEC dropped the news about coinbase things have recovered uh the blue trips are almost back up to their to where they were um Solana which is one of the tokens listed as a security in both the binance and the coinbase charges uh is still down at the price that it fell to yesterday at twenty dollars so it's about down about eight percent uh Adam uh the cosmos token recovered a little bit but it's still down a little bit South so the blue trips Ryan interestingly have recovered um the tokens listed which is the subject of this episode The Tokens listed as Securities in both the coinbase and the binance suits uh are still um still

hammered a little bit uh but it's it's what does it reacts what are those tokens by the way David could we just list them at the in the intro here because I know we'll get into them a little bit later but yeah so there's there's a number of them the big ones are Solana cardano uh Matic AKA polygon file coin axi flow uh dfinity and near there are other tokens as well but these are the big ones that got that named as Securities so yes to be clear the SEC actually named these tokens called these token Securities in both of their suits in both of their complaints uh that they put down how about how about the price of coin uh shares I heard that took a nosedive after the the complaint against coinbase was released this morning maybe

like down 17 at one point in time yeah that's right I don't have that pulled up uh actually yes I do just kidding um coined down 17 uh as of the uh as of this morning um following the SEC lawsuit so down it started the week at about 66 is now at 48 and a half dollars so that's that's pretty rough that's a big bleed of the market cap how about some of the other tokens David I know uh BNB token was that bad of course BNB was another one of the tokens that was listed as a security and maybe the SEC has more like to stand on with that one uh as opposed to others I'm not sure but um what is what are we looking at here what's this chart showing us yeah so this is all of the tokens that were listed named as Securities uh so cardano

Matic filecoin Adam uh the the best one of the case Matic is down 5.5 the worst one of the case which is uh sand which is I think one of the lowest market cap ones is like a metaverse token 10 percent um uh let's see final coin down nine and a half percent uh cardano down seven percent uh we don't have soul in here uh but we do have solo on the uh the Kraken charts uh so uh like I said Seoul is down uh how much not not too bad it could be worse yeah [Music] um six and a half percent I think the markets are still reeling and trying to figure out um what uh how to react to this um one high level take I have in the intro before we kind of get into the

specifics here I know there's four big questions we really want to ask in this episode but one high level uh take I have is that this is an attack on crypto so yesterday I was sort of thinking this was um you know maybe this in the rest of crypto Industries maybe thinking this was an isolated incident right this is maybe maybe the SEC is trying to clean things up on the binance side of things they certainly um very explicitly made some comparisons with CZ to SPF and to binance to FTX right they're certainly using that as much as they could drawing from that comparison um but one thing I want to draw everyone's attention to that they didn't but the binance uh complaint and then this is that they named specific tokens they declared specific tokens a security

and to me that is not an isolated incident that is not and isolated attack on binance as a whole and CZ or on a particular set of products at coinbase when you name specific tokens that are in kind of top 10 top 25 market cap that have existed for a very long time in crypto and you declare them Securities Soul Ada Matic Adam AXS that to me is a direct attack on crypto and here's why um I'm reeling from this is I I was even looking at binance and like I trust binance at this point more than I trust the SEC and I don't put a lot of trust in binance David you know what I mean

like this agency has lost a ton of credibility in its response uh to this space they have not provided clear guidelines instead they're taking this kind of Rogue enforcement action and it seems like genzler is on a Warpath to absolutely tear into crypto to try to kill it in the U.S to try to damage it to try to rein it in to try to completely control it and that is why this is more than an isolated complaint against two particular exchanges this to me is an all-out assault on crypto and it couldn't be more clear look at these events Monday and then Tuesday we get a coinbase attack it goes without saying that coinbase has tried its best I mean their thing is being like you know the

the kid in the class hand always up always answering a question kind of teacher's pet with respect to compliance and they are getting busted as well that's why this feels like an attack on crypto it goes straight to the roots of why we are here in this industry like one of our favorite podcasts Ryan the the crypto Renaissance crypto is powerful because we can now make Financial assets anyone can make Financial assets without asking for permission um like it or not that technology that cat is out of the bag and now people are experimenting with this ability to produce new tokens to produce new assets and to deem these things broadly sweepingly saying that's a security that's a security that's a security go straight to what makes this technology

so powerful and it is exactly what this the is predicted by when this new disruptive technology comes to power uh the incumbents say like Hey we're going to make that illegal uh and so this whole like your asset is a security like the bitcoiners are saying like ether's a security this is not the time to be tribal there are the having the nation state name certain crypto asset Securities is not for any one tribe's victory over the other this is like you are saying an attack on crypto are an attack on our fundamental right to do Finance on the internet and to produce an experiment with new crypto assets uh even though that offends Gary Gensler

that is that is too bad uh for him uh so I've got four questions Ryan that I think uh the rest of the show are going to is going to be thematic under four big questions right um and so the first one here is uh binance questions it's like okay so the the suit against binance the complaint against binance has facts and circumstances that is unique from the suit against coinbase what about the binance uh suit is uh alleged and is this really a case against binance versus the people which is which is one perspective to have or is this binance versus the law who what are we trying to unpack here did binance offend humans do they agree with customers did they do

something wrong to people's monies or did they just violate the law in in a bureaucratic way so that that's a big theme of the whole binance suit the and and so that that's a a topic of conversation that we'll go through when we talk about binance then there's the coinbase questions the big one to me is why did the SEC allow coinbase to IPO if they knew that it was an unregistered illegal Securities Exchange and if it did know that why what is the motivation to going back on that choice now so those are the that's the coinbase question the the third question is everything a security now because apparently that if you put these two suits together that is the common denominator is that both by enhance and coinbase are illegal unlicensed

Securities exchanges and they're now naming which tokens are securities now for the first time ever so that is a development in Clarity even though they're saying everything's in security that is a topic of discussion is like well is does does Gary Gensler have one more hat like uh one more trick to pull out of his Leaf uh maybe that's the last the last thing here uh and then the big question the final big question is why is the SEC doing this uh they haven't even won their case against Ripple but now they're taking on both coinbase and binance like Gary Gensler he's no idiot he knows that coinbase will fight him tooth and nail same with binance so what's his Edge why does he feel so confident in this like what is his

motivation these are the big categories of questions that I have is there anything you want to add to that no I just think we're we're gonna want to conclude as well with where do we go from here like what happens next and how can we as uh residents the United States at least for a subset of bankless listeners or worldwide and whatever jurisdiction you're you're part of how can we fight back how can we resist what can we do as individuals so we'll conclude with some of those thoughts David uh we got to cut to sponsors real quick before we get to the rest of this episode so let's do that now has easily become the best crypto trading platform in the industry the place I use to check the charts and the crypto prices even when I'm not looking to place a trade on

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Guardians eluvium Ember sword and metalcore so join web 3's largest ecosystem of games and players build play and connect at immutable.com so Ryan uh Gary Gensler was on Squawk Box this morning uh making his influencer debut uh made some statements about the uh two suits that just dropped in the last uh 48 Hours uh is let's hear what he's got to say in public these trading platforms they call themselves exchanges or co-mingling a number of functions which in traditional Finance we don't see the New York Stock Exchange also operating a hedge fund making markets uh and as we alleged and finance having a Sister organization uh

flooding the platform with transactions called wash trading and the lack of controls on the platforms uh is really uh a web of deception oh my God uh along with a control person Mr Zhao trying to evade U.S law so he was talking about uh binance not coinbase in that I'm pretty sure he talks about binance in in all of these clips um but it's so much easier for him to talk smack about Finance by the way than it is than it is coinbase and he knows that and he's using that to his uh Advantage isn't he so a web of deceptions right is what deception is what he just called uh binance right

there and I think the in timing of the binance yesterday coinbase today is a strategy to coinbase's disadvantage because now coinbase is shoulder to shoulder with binance and binance does have skeletons in the closet that it makes it a lot harder to defend against and so so here's a here's another clip who I'm pretty sure Gary gunzers is talking about binance once again there's uh complaint we note that they have through the coinbase wallet you can trade 16 000 different tokens and there's a line-based wallets use cases

look we don't need more uh digital currency we already have digital currency it's called the US dollar it's called the Euro what oh baby why does he get to decide and you you have digital you have entrepreneurs representing digital Investments on this program all day long and it's it's whether it's the big tech companies the automobile companies uh you name it It's All Digital right now the investing World wow is the real underlying value of these tokens and that's why you need full fair and truthful disclosures and that's the regime the Securities

loss was set up when there's a group of entrepreneurs there's entrepreneurs should be able to put their case in front of the investing public in what's called a filing and what is called a filing wow this guy just cannot let the market determine the price for things can he he has to control it all what is the use case of all of those coins and tokens that's did you did you hear the transition he goes what is the use case for these coins and tokens that's why we need disclosures those are you can can question the value of crypto but you just can't question the value of crypto and then also bridge that too and everything is like undisclosed blah blah blah blah blah

blah blah those are separate issues this is a guy like as if he is responsible for like AOL regulating AOL and he's going and he's looking at the rest of the internet and he's like what's the use of all of these websites we have everything we need already in America America online and so there's no utility to go outside of our closed Garden all right you ready for the last one I don't know I'm getting sick any one set of conversations between the agency and a company but we've had discussions with literally dozens of crypto incumbents including the wines that you just mentioned and what we find is this is a field that's built the whole business

model is built on non-compliance with the US Securities laws and we're asking them to come into compliance and they're going a bit of catches if you can that's a sort of generalization so that's talking about binance and like that that's what this problem is is like if you go and look at the binance uh what's in the suit and the messages that they apparently got from binance internal comms that was the strategy of binance a finance there's like evade regulations but like but like the regulations suck David all right here's the thing why why do we need a binance.us why do we need like a DOT us version of all of our exchanges

coinbase institutional and then a coinbase uh us and we get the kind of the Fisher Price version that's made for kids rather than like grown ass adults it's because this guy it's because this guy does not make it easy to comply has not offered any Clarity is just using stick oh okay so let's go let's get into the SEC charges coinbase for operating an unregistered security exchange broker and clearing agency uh and so there's a formal complaint that you can read there's a it will be a link in the show notes this is a very very lengthy document but uh Mike selig our friend and lawyer at bankless here not our lawyer but our lawyer free reoccurring guest um

yeah good specification uh he uh tweets out this uh thread and so I'll summarize it here first the sec's uh complaint against coinbase says that coinbase is operating as an unregistered exchange broken dealer and clearing agency this staking programs our Securities offerings so that's CBE Ryan which is a there's a lot of CBE out there and then several coins including a new ones that were not named in the binance suite from yesterday like near uh were dubbed as Securities uh and so I think the the interesting tweets are tweet number six uh let's see where is that uh an interesting aspect and you heard this in the in the eclipse just now interesting aspect of the complaint is the assertion that coinbase offers brokerage Services via coinbase wallet a

non-custodial digital wallet novel Theory and asserting that offering a non-custodial software product is somehow providing a brokerage service going after the non-custodial independent wallet yeah SEC bases its conclusion that offering a wallet is broker-deal or activity on the fact that while the wallet enables users to access DFI trading protocols outside of the coinbase platform that offer security unregistered uh Securities Exchange anything that I can trust with any decks because adapt adex connects to unregistered Securities your Ledger Hardware wallet is you are an unregistered exchange my friend hey I

hate to break it to you but you are too brother what well where's my Wells notice I want one uh that's crazy so I didn't realize it went that that day it went that far this is a treat number nine from Mike selig this I thought was a pretty big deal the SEC uses risk disclosures from coin bases to full screen by the way so everyone can see that oh is this is this not full screen oh this is my eyes this is my desktop browser uh well that's not too bad at all uh one more time uh the SEC uses risk disclosures from coinbase's S1 registration the S1 is what you need to file with the SEC in order to be a public company which the SEC approved so the SEC is using risk disclosures from

coinbase's S1 against coinbase despite having allowed coinbases registration statement to go effective the complaint asserts that coinbase knew of the risk space on S1 disclosure that certain crypto assets may be deemed Securities because the law is so unclear wait so do you do you get this so the the the SEC approves coinbase S1 and then uses coinbase's S1 as evidence evidence yeah coinbase knew that there were potentially Securities on the exchange because coinbase knew that the sec's lab was so unclue how much more bad faith can you actually get here it is unreal it is unreal so so like first coinbase States in their S1 that there is a risk

to the company that they might have Securities on the exchange because the SEC is not providing any guidance or Clarity so they don't know and the SEC is using that statement in the S1 that they approve that saying like oh well you guys knew that you had Securities because you guys said that right here right because it is this scripting on this could not be any better okay okay and then the last three I think that is worth pointing out is coinbase has expressed willingness in its Wells response and elsewhere to register with the SEC if the SEC believes that this is needed the SEC complaint does not appear to acknowledge this fact that coinbase is trying to be so responsive to the SEC

but instead attempts to characterize coinbase as knowingly attempting to evade Securities laws so this is why just now when we listen to Gary genselon's squawkbox Gary genzer was like oh these these crypto trading platforms are trying to operate intentionally outside of regulatory control yes not you know playing by the rules and just like a scamming investors out of their their Capital yeah Gary Right which is which is why the timing on coinbase and binance is so dubious because they're trying to use the dark gray cloud of Finance to shroud coinbases sparkly clean good attempt to come into compliance and talk to the SEC but even Finance before that I mean

they're they're using uh SPF and FDX and saying there's another one we caught another one right here it is it's binance that they're using that as well I um you know that parent tweet too and I know we'll get back to this us but the Mike mentions that it's increasingly clear that Seca agrees with chair Gensler that virtually all cryptos except Bitcoin are securities yeah so again that list of tokens that they named this isn't the complete list but Solana Ada Matic file coin actually Infinity Stan token C uh HZ what's that flow ICP near vgx Dash nexo just a random assortment of coins just like yeah these ones yeah absolutely

infuriating we'll get back to that but um you've got some more analysis on on coinbase still what's this yeah this is Colin belton's another lawyer that we've actually also had on on Bank list he also pulled out the wallet um part of this complaint and said like hey this is actually pretty significant he says uh wallet mentioned in a few places as essentially being part of their exchange infrastructure I suspect that they are trying to position themselves to go after some defy apps or interfaces that are non-custodial with this approach basically if they do this you can't be a crypto wallet or a crypto company or do anything that you find the United States of America it goes back to that I can't remember when this was but it was like that law that was proposed that would have made every single node operator uh

custodian and broker dealer because they're processing transactions it goes back yes uh yeah like you know attempted this um okay so that's crazy um one thing we should mention though is of course coinbase actually has to prove this in court so these are complaints yeah SCC needs to actually prove these allegations in court okay so Gary Gensler even though he seems to think he's God king and the SEC seems to think that they can kind of um dictate everything in the space they actually have to prove these allegations in court and for the judge a judge and a court system to actually agree uh with them so so this is still at the allegation phase it it

does seem like the SEC is throwing everything they can at the wall here this is a meta law man who is a reoccurring uh law a lawyer who's tweeted out about the coinbase and SEC and all these other subjects that have themed 2022 and 2023 he goes uh the SEC alleges that coinbase has acted as an illegal unregistered Securities Exchange since 2019 but in April of 2021 the SEC approved coinbase going public with the listing on the NASDAQ and in May of 2021 SEC chairman Gary genzer testified before Congress that under the current law the SEC has no regulatory authority over crypto exchanges interesting uh he concludes in saying the SEC should lose this case uh so he's just as a lawyer

predicting that the sec's grounds just aren't strong um so some respite there how do you feel about that I mean if they are if if they're just throwing spaghetti at the wall and against her in the SEC expect to lose this case if they have nothing kind of you know backing this and the court system just turns them away then you have to wonder like what is the point right that is such the like I I we we've called this like Gary genser's Icarus moment but he's not dumb he's strategic right he's not that dumb he's got what's he doing then what's he doing what's he doing Ryan I don't know okay Brian Armstrong tweeted out not too long ago like within the last few hours

a pretty long tweet uh so I'll do my best to read it quickly regarding the SEC Brian Armstrong the CEO of coinbase by the way uh regarding the SEC complaint against us today we're proud to represent the industry in court to finally get some clarity around crypto rules thank you coinbase for going toe-to-toe with the SEC Brian uh continues goes remember the SEC reviewed our business and allowed us to become a public company in 2021. two there is no path to quote coming in register and quote we tried repeatedly so we don't list Securities we reject a vast majority of assets that we review three the SEC and cftc have made conflicting statements and don't even agree on what is a security and what is a commodity and four this is why the U.S Congress is introducing new legislation to fix the

situation and the rest of the world is moving to put clear rules in place to support this technology instead of publishing a clear rule book the SEC has taken a regulation by enforcement approach that is harming America so if we need to Avail ourselves of the courts to get clarity so so be it by the way in case it's not obvious the coinbase suit is very different from the others out there he's talking about the binance suit the compliant the complaint filed against us is exclusively focused on what is or is on a security implying that there's we're not doing any other Shady things it's just about the assets that was on the marketplace we are confident in our facts and the law we'll get the job done in the meantime let's all keep moving forward and building as an industry America will get this right

in the end that makes me feel good refreshing yeah he's like against her in the suit doesn't have a case in fact um it's kind of good that they've made this that this is just about uh what is the definition of a security right and uh you know Brian uh portraying confidence that um they'll be able to beat the SEC in court that's optimistic yes so that is the uh more optimistic of the two cases I think we I think we're all feeling good about coinbase they are feeling good about themselves they are have very firm ground to stand on and they are prepared for this because coinbase told them that they were going to sue them six weeks ago are you ready for finance yeah okay so the binance different situation is the same kind of attack and assault

certainly has a component where binance is um being labeled as an unregistered security exchange and so all of the tokens that we previously mentioned were in this case as well but there are some different facts and circumstances that the SEC is alleging against Finance so what's this one David yeah so binance SEC accuses binance of mishandling funds and lying to Regulators uh so this is a this one's a different Beast uh so this document 136 page document much longer than the coinbase uh suit um make some pretty big claims about binance uh some of them are kind of par for the course the more or less the carbon copy of why the SEC is suing coinbase but there's also a bunch of additional stuff which kind of goes to

represent like the differences between you know if I'll just go back to the intro where we have our two influencer tweets out of the the SEC uh the first one today we have charged binance Holdings and then we have this the the the graphic right we are operating as an effing unlicensed Securities Exchange in the USA Pro which is binance's Chief compliance officer a quote from a binance executive member any of you I'm sure from this this person's in like internal telegram account or signal account or something to a friend or something yeah yeah this is not this is not tweeted out or like uh you have a right statement by this executive exactly and then if you compare like the the Tweet about coinbase it is a quote from the SEC about how you simply can't

ignore the rules and so like I feel like that kind of like summarizes the difference in Vibes of these two things is finance is like Finance is the wild west yep coinbase is is the East it is suit and tie it is playing the same the regulatory game binance is like oh it balance is a cowboy and these two suits reflect these two things uh and so and the SEC suing binance due to blatant disregard of federal Securities laws the defendants have enriched themselves by billions of dollars while placing investors assets at significant risk binance has unlawfully solicited U.S investors to buy sell and trade crypto asset Securities through unregistered trading platforms us what has enriched themselves with billions of dollars mean that just means

Rand and profitable exchange right I'm not no it means they have ran an illegal Securities Exchange Ryan according to see sorry well I didn't know what a security was okay so it does get worse it does get worse um so so hold your breath a little bit uh binance defrauded Equity retail and institutional investors about purported surveillance controls over manipulative trading on the binance US platform which were in fact virtually non-existent binance under sees these leadership unlawfully offered three essential Securities Market functions exchange broker dealer and clearing Agency on the binance platforms without registering with the SEC acutely aware that U.S Law requires registration for these uh functions defends nevertheless chose not

to register so that they could evade critical regulatory oversight designed to protect themselves investors and markets here's where it gets a little bit worse binance and has unlawfully engaged in unlawful unregistered offers in sales of crypto asset Securities including BNB and busd as well as profit generating programs called the BNB Vault and so-called staking investment schemes available in the binance US so that's e-saking that's actually not the the worst part the worst part is let's see let me skip down to this part uh it was SEC also alleges that CZ and binance exercise control over the platform's customers assets permitting them to co-mingle customer assets or divert customer assets as they please please including to an entity out CZ

owned and controlled called stigma chain uh further the complaint alleges that the defendants concealed the fact that it was co-mingling billions of dollars of investors assets and sending them to a third-party Merit Peak limited that is also owned by Zao and so this is uh kind of like oof SBF FTX uh mislabeled bank accounts we'll send customers money wherever we need to whenever it suits us because it's the wild west and we can kind of do whatever we want so it's not binance is not nearly as squeaky clean as coinbase is you're muted they're definitely not nearly as as squeaky clean I mean the first set of

those allegations it was just like you didn't file the paperwork right and you didn't do AML kyc types of things and you listed unregistered Securities and that sort of thing right um okay that that's one piece the most concerning bit is what you said about co-mingling funds but to be clear I like I don't know fully what that means do you know what that means I mean it's freaking impossible right merging on impossible to actually get a bank account for crypto the United States of America I mean like again I have no idea whether binance is clean or not I'm guessing that there was some fast and loose I'm guessing that there was some issues here but like I just David I have zero trust in the SEC to actually paint

a fair picture here and to actually trust uh actually actually protect investor interests so like my faith in any of the sec's like charges here is um like at an all-time low so I don't know who to believe but you're right in that coinbase had kind of no skeletons in the closet right it seems like binance has some that you can pull out and card around and um you know tweet about and and and show the world uh you know and and try to make an example of so it's a different situation I don't know what what's your take when you hear all of this I I think that's right and so here's a line from the complaint lacking regulatory oversight defendants

were free to transfer investor assets as defendants pleased at times commingling them and diverting them in ways that properly registered broker dealers exchanges and clearing agencies would not have been able to do so so my take on this is the line properly registered Brokers dealers exchanges and clearing agencies would not have been able to do they wouldn't have been able to do anything of value for the crypto world like because of what they are they could not have been binance they could not have given like however many hundreds of millions of people people the private keys that binance did so to me this is one big point for this is a case of binance versus the law not binance versus the people this is the commingling fund's bad that's not great

like you're you're don't touch users monies in ways that they don't want here's where here's the other half of this part Ryan where I haven't brought this up yet okay there's this busd issue where the complaint is that binance used customer funds to purchase busd so the SEC complaint that that's not good billions of US dollars of US dollars of customer funds from both binance and binance us were co-mingled in an account held by a cz-controlled entity known as Merit Peak limited binance then funneled these customer funds to Merit Peak to purchase binance's own stablecoin busd the SEC said that the use of Merit Peak as an intermediary to transfer platform custom ones to buy Bose buse presented

an undisclosed counterparty risk for investors the regular irregular later also said that you at Merit peak's U.S bank account held at the now defunct silvergate Bank received as a passer account over 20 billion dollars that customer that included customer funds from both Finance platforms those funds were then sent out to an unnamed Trust Company and transfers that appear to relate to the purchase of busd oof not great this is using customers funds passing through various entities in ways that like the protections of a broker dealer and into all that stuff would have prevented and in order to use customer funds in ways that the customers would not have approved of they did not sign up for the counterparty risk of all these companies they did not sign up to have their money

end up ultimately purchasing busd this goes to one point towards this is actually binance versus the people um and so that that's bad no I agree I I agree I mean so one I'll say allegedly of course unless the court filings this has to be approved um but secondly yes if they did indeed do those things that is bad and actually that is what we want someone like the SEC right this this part of the complaint this section of the complaint this is exactly what we want an agency like the SEC to go after but they didn't stop there if this suit and this complaint was just that right then I don't think I would have a problem with it Go investigate go figure

this out that would be great that would be fantastic like thank you for doing your job would have been nice if you helped with FTX and did some of the same work with FTX uh months before you know all of those events happened but for that part so here's the thing is like um them declaring soul and cardano and Matic and Adam as Securities and calling both finance and coinbase an unregistered Securities Exchange that tells you that the intent is broader than rooting out Bad actors and protecting investors and finding out where the frauds are that this is like a collective action to bring all crypto under the sec's control or like maybe

worst case scenario try to stifle it try to stymie it try to kill crypto in the United States that's why I don't trust these guys David right it does not appear that the motivation for this suit is actually finances it's like skeletons in the closet it appears that that is just a really convenient fact for the SEC so uh binance put out a statement yesterday responding to the SEC complaint uh and like the quotes are kind of like more or less like two like binance's benefit of being indiscernible from what coinbase would say so we are disappointed in the SEC we have engaged in extensive good faith discussions to re to reach a negotiated settlement to resolve their investigations we intend

to defend our platform vigorously the SEC is misguided and continues to not provide Clarity and guidance at the digital asset industry uh they regulate with blunt weapons of enforcement the sec's actions undermine America's role as a global hub for financial Innovations and Leadership uh well alongside the industry we will defend crypto for misguided lawsuits and we continue to deliver a safe and trusted platform for our users that holds true to our core value of furthering the freedom of money so like the this is the some speech and I think binance is actually benefiting from the fact that coinbase also has to fight this fight but like coinbase it's like you guys we have to deal with euroskeleton in the closet and finance is like yeah what do you do you're muted

didn't they make a comment here David that this is like um something to the effect of like the SEC chasing clout as well like they were doing this for like posturing rather than actual substance uh there's certainly an element to that too um all right so so where do we go from here we talked to coinbase we talked binance well now we got to talk about the tokens I mean excuse me Securities all the Securities that are out there everything is a security I guess everything's a security yeah so um really just to drive this point home these are not just a long tail of crypto assets that are definitely scams and pump and dumps this is not the low hanging fruit this is Gary Gensler and the SEC going after the big ones uh the the brothers in arms that we have in the

crypto industry these are the big chains the top 10 crypto market caps uh the ones that we as an industry need to defend from the SEC because this is just an enbridgement of power uh so we're going to talk about all the tokens that are now listed as Securities uh not listed as security so they're now deemed to be Securities by Gary Gensler alleged we should it starts to prove this in court I'm being facetious here uh and so like Solana polygon Adam near cardano uh so we're going to talk about the the details in these suits and the Really the discussion about like all right what does this really mean and like how how does this impact us so we're gonna get to that part next in the conversation but first a moment to talk about our fantastic sponsors that make the show possible if we have used any confusing

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was uh so it's interesting that the The Ether also was not named although everyone is kind of waiting with baited breath because like all right is there one more shoe to drop that Gary genser goes after ether um can I ask you if it was named do you think it would completely tank the the markets or do you think there would be some sort of like a you know a quick tank and then a v-shaped recovery as we're seeing here I think that I barely a tank at all in fact does this thing mean the market thinks all this is smoke I think so well also we're just tired of selling like we're at the depths of the bear like for other reasons like we're kind of done just being bearish uh let's see what what the sole price is doing right now so Salon I think is like it's

recovering like a little bit like people are tired of selling that one um what else is there out there Ada let's look at cardiano um cardano yeah so like the ones that got listed as Securities are kind of hammered uh Matic let's see what's Maddox like when you say hammered though it's like we're talking down like um you know five ten percent kind of thing yeah exactly okay um yeah well hammered by by comparison uh I need to log into Kraken Pro um so yeah like between negative five and negative 10 um uh or for all the ones that are list named as Securities uh and so interestingly both the binance and the coinbase suit has like 30 to 40 pages each dedicated to naming certain tokens

and saying why they are securities they both start with Solana these were like they were like copy pasted between both exactly yeah complaints right exactly so yeah they go through like so here's Solana um created Solana was created by Solana Labs uh founded in 2018 by anatola yakovanco and Raj gork uh uh how you pronounce raja's last name gokal um and then they go through like the the sale details uh all that stuff they uh and then some some claims about the Solana blockchain like here's cardano cardano blockchain was created in 2015 by ethereum co-founder Charles hoskinson uh and then like there's like the road map these three entities have used the proceeds from ad sales so fun of the road map from the website yeah right uh

then then there's Matic right um uh polygon Network originally called Matic rebranded in 2021 uh named the founders uh sold at the 0.26 cents uh per one Matic uh and so I thought this was funny um uh in line number 159 polygon has explicitly encouraged Matic purchasers to view Matic as an investment in other ways for example in a February 5th 2021 tweet 14 months after matic's biggest single price drop Sandeep compared the token to a prize fighter that came back from defeat to become a champion oh my God to me this is what just gives crypto Twitter culture and and fun and like yeah we this is what happens when you

give us the ability stupid man you give us when we discover the ability to have a printing press for financial assets like this is what happens like for better for worse you could take like uh I mean Pokemon you could you could Pokemon cards you could take like baseball Collectibles you could you could take just about any asset and like people are excited when when price goes up of course it just because price goes up does not make it a security and the SEC is not given any clear guidelines uh with respect and nor do they have a kind of a like to to um to stand on this is why I think they're doing these in in these types of filings and I mean David they haven't even told us in Congress they were asked the question uh Gensler

was before Congress is ether security and against well that question is still on answering that yeah so file coin and uh the protocol labs and Juan Benet are named uh this is in the coinbase suit I believe um let's see what else oh man that was a long one sand tokens it's like one of the metaverse tokens out there uh axi Infinity uh so these are also some of the tokens that have some of the most trading volume on these uh platforms um both of that Sandeep quote that I read out is in both the binance and the coinbase suit so like I'm just because there's so much overlap between both of these uh complaints between binance and coinbase like a lot of this work is just like copied and pasted and included in both

um here's zachymanian who tweets out the sec's facts on Adam are pretty poorly researched the SEC claims the atoms were sold in 2017 no one received an atom until April 2019 when the network voted to enable transfers um so he's just saying like hey the SEC labeling Adam has a Securities dumb and bad um interestingly here's uh somebody who's tweets out uh part of the Solana um suit in either the coinbase or the binance I think they're relatively interchangeable further Solana Labs markets that the burn or destroys of the sole tokens as part of a deflationary model as jakaveenko explained in April 14 2021 article entitled Solana scaling crypto to the masses posted on gemini.com

Solana transaction fees are paid in stolen burnt as a deflationary mechanism to reduce the total Supply and therefore thereby maintain a healthy sole price as explained on the Solana website since then Solana Network launched the total current supply of Soul has been reduced by burning transaction fees and a planned token reduction event this marketed burning of Soul as part of the Solana's Network deflationary mechanism has led investors to reasonably view their purchase of Seoul as having the potential for profit to the extent that there is a built-in mechanism to decrease the supply and therefore increase the price of Soul does that sound familiar Ryan these words these words sounds like something that I don't know perhaps your favorite crypto podcast talks about I guess uh where's the Wells notice huh

it's so depressing man so everything everything's a security just because it has a price attached to it and it's a digital token and according to Gensler uh you know in his um CNBC interview that we that we opened with nothing else needs to be created other than the we already have digital Finance we already have the digital guns and the dollar we have digital brokerages everything's already digital and how come this thing is worth a trillion dollars right like how come the market values it differently it's just this is just gatekeeping uh yeah by the way one point I want to make is like this is uniquely an American problem here this debate as whether every all these assets are

security like the the Mika legislation yeah has this already figured out I mean the the Europeans have already figured this out like no no other jurisdiction is um talking about Securities in the way that the U.S regulatory apparatus is and like there's a there's a clear understanding of the difference between a commodity and a security and any other type in it like a stable coin for that matter and we don't have any legislative uh Clarity in the U.S so this gives a hole for Gensler to you know a security-shaped hole that Gensler can go fill and he can indiscriminately he feels like he can just name whatever token he wants a security and then

suddenly it's his this is mine now this is under my jurisdiction it's so ridiculous so I want to go back to uh put on our 2018 to 2019 caps on when you and I were like pounding the table like hey eat his money eth is valuable eth and ethereum are inherently intertwined and we need ethereum needs ether to be valuable in order for ethereum to be secure and so I want to reread the same sentence um about Solana with the framing of not sole price but Solana security um let's see uh Solana transaction fees are paid in Seoul and burnt as a deflationary mechanism to reduce the total Supply and therefore maintain a healthy Solana security level is Sim is the is a synonymous statement with

healthy sole price and so to Gary Gensler and the SEC that says hey Solana is a security because of a deflationary mechanism you are basically saying hey you cannot make your cryptosystem secure you are not allowed to create secure and healthy ecosystems in your crypto networks because that makes them security Securities which goes against like it's basically saying you cannot have crypto at large it goes back down to the very roots of why we are here in in order to have secure blockchains we need to have healthy healthily valued crypto assets which in the eyes of Gary Gensler makes them Securities so we cannot have we neither we cannot have our cake and neither can we eat it like we can have neither of them and so this

goes straight to the heart of why we're here in crypto uh and Gary Ganser just doesn't care for that that so this is the big elephant in the room why didn't Gensler in the SEC name eth David as one of their you know you know 10 or 15 or so tokens that they named in these uh complaints and that is a fantastic question because like I would like to answer that question that Gary Gensler doesn't want to bite off more than he can chew but that's fine it seems to be fine he seems to be fine with that uh so Pete Kim uh tweets out the SEC will come for eth next the SEC lawsuit mentions the burning fee mechanism of Solana and polygon stating that the deflationary fact has led investors to view their

purchase of the tokens that have potential for profit polygon's feed burning mechanism is particularly literally brought over from ethereum This Is The Moment For Us in crypto Community to lay aside the petty differences in tribalism to unite and take a stand to protect our economic and technological Freedom this is the right point the Gary Gensler doesn't is not allowing for these crypto networks to exist because there is an inherent like I said an inherent relationship between the healthy price of a crypto asset and the security and sustainability of the network that it runs on and so his whole like um we already have digital Finance we already have the digital dollar I want to I want to skip forward in a conversation to a tweet from uh Jake

travinsky um let me see if I can find it uh is it this one yes I often think of a line This is Jake travinsky we've had him on the podcast I often think of a line Matt Levine wrote last September about SEC chair Gensler his message is basically I should be the main regulator of crypto and as the main regulator my plan is to mostly ban it oh my forget regulation by enforcement the SEC wants banned by enforcement wow he's coming he's coming to ban crypto this is not this is not coinbase it's not binance this is crypto this is the whole exactly what it is his message is basically I should be the main regulator of crypto and as the main main regulator my plan is mostly to ban it because as

he says it's pointless there's no need for it we already have digital Finance we already have the dollar we already have digital uh Finance you don't need any Capital assets outside of what the um S P 500 and the NASDAQ provide we already have full transparency like I've solved it it's done it's called the you know the SEC and the US government uh how absolutely ridiculous Okay so is everything a security I guess the question the answer to that question is uh certainly the SEC thinks so um and uh so they want everything under their control at this point in time and they they don't see any use case for crypto so they want to ban it I I guess

this this um brings in the last question that we are hoping to answer in this episode David which is why are they doing this why are they doing this why is Gensler fighting this fight like what's the point is it is it really all about you know control about him kind of enlarging his regulatory apparatus him scoring uh political points is this part of you know some shadowy group of Elizabeth Warren's uh anti-crypto Army uh like what is going on here does any of this make sense to you I I tried to take a moment and just like reflect on this question and really think about think about this answer and like the only thing I can really do is look at the actions of course don't don't bother with what Gary Gensler is saying nothing

is the coming out of his mouth is worthwhile look at his actions so here's a here's another tweet from Jake Stravinsky the sec's our mission is to protect investors also the SEC reviews coinbase's business model approves coinbase to go public allows coinbase to sell stocks to retail investors then the SEC alleges coinbase's business model is illegal tanks the stock by 20 it causes losses to investors and these are not crypto investors these are tradfi Equity investors who bought their coinbase security on all the legal brokerages that coined the Gary Gensler is saying are so great and he's he's willing to trash 20 of those investors money even under when the guys of the SEC is to protect investors and so he's on a

rampage and we'll stop at nothing there's there's no he won't he'll he'll bite off as big as a cookie as he can chew he'll he'll destroy capital in the traditional Securities Market which he is also the regulator of he's just on a rampage to end crypto and my big question is why is he so confident that he can do this is the same question I asked a while ago it's like why does he feel like he can actually get away with this like who is supporting him in the background well that's that's kind of what I want to know is like who actually wants this right what is the code like you would think that um if he was doing something to protect investors right the crypto Community we are the investors in this asset class

mainstream doesn't care about crypto like especially during a bear Market they're gone all the tourists have left it's just the crypto Community it's the settlers it's the True Believers which of us as retail investors are asking him to do this none of us so who wants this who who is what like what is the hidden Force pushing him towards doing this because I can't think of any investor it's like me Main Street doesn't care about this somebody who doesn't have any crypto assets doesn't care about this at all it's just the one in ten Americans that hold crypto asset it's that are affected by this and from what I can tell none of them want this none of them want Gary Gensler to interfere in the ways and like get crypto assets banned

like who is he protecting where's this coming from so we said this on before and this will be just reiteration because this theme of the last year has been the SEC versus crypto so this is uh another tweet that I thought was useful let's be clear the SEC gov complaint does not mention this but there's no currently no way for a platform like coinbase to register as a Securities Exchange broker or clearing agent that's why they've been begging the SEC for years to give them a path to compliance instead of working constructively with U.S market participants to come up with a working model and knowing that Congress is actively considering legislation do the same the SEC sues no allegations of fraud just accusing coinbase of failing to do the impossible failing to do the impossible and so like we've like

previously the crypto industry is like hey coinbase or hey SEC like you're doing you're you're doing this wrong like you need to provide more guidance you need to provide more rules and I think Gary genser is like yeah that's the point it's supposed to be impossible you don't get to exist it is impossible by Design and I want you to die I like that is The Logical conclusion if you judge Gary Gensler in the SEC by their actions there's no other other incentive or no other outcome for the crypto industry to die they want to kill the biggest crypto uh exchange inside the United States they want to kill the biggest crypto Exchange in general they want all of the tokens other than after ether

and like I'm holding my breath breath on ether at this point to be Securities like they just want the whole industry to go away so like is Gary Gensler like once upon a time we thought he was just trying to ladder climb his way into a bigger and bigger position of power and man is that pretty sociopathic like what other Industries are out there that really benefit from this stance by the SEC and also the Biden Administration so he just wants to kill it we don't know why but we can tell by his actions he just wants to kill the SEC wants to kill it and if that's the case David I gotta say that is some Bleak authoritarian [ __ ] right there and uh what else can we do but resist this I mean I think that's what we have to do at this point oh my

God is this uh you remember this meme yeah yeah like uh yeah somebody with a chippy oh it's perchary the creative trippies tweeted this out uh this is how today feels and this is like the the Star Wars meme of Gary Gensler as the Sith Lord Elizabeth Warren is Darth Vader uh Brian Armstrong is Han Solo um yeah I still do by the way I think that this is kind of episode one of um kind of the war with uh with the nation state and he is just like the first boss of many but um he's certainly uh proving to be a pretty big boss here um in our boss fights all right we we get we have some takes here too David where should we get to next uh so Jake Stravinsky again I sensed two reactions to the sec's case against

binance and coinbase one outrage at the sec's underhanded tactics and open hostility and a flagrant disregard for its own mission and two relief that the SEC finally took its shot and it's not really that bad life and business goes on and I will pull back up the charts and I've loaded up too many charts um but last time we looked at the charts uh they were pretty good so Jake is saying that this is the SEC shot this is the worst that they can do right and crypto crypto assets Bitcoin and ether are higher than they were when the binance suit dropped interesting I mean this is why I'm like man like that the SEC is suing coinbase and crypto assets went down 10 and now

are higher and you know if they could find anything else yeah in the coinbase loss if they would yes they would cram it all in that 140 page report yeah if there was any skeleton in the closet coinbase it would be there uh here's another another take um June 1st Hong Kong government approves trading for the following tokens sand cardano polygon Solana axis Adam dot uni link Litecoin avax eth June 5th SEC sues binance for having the markets for sand cardano Maddox hold on this is like a tale of two two hemispheres at this point of the free huh I mean how is America falling behind Hong Kong with respect to Financial Freedom that's uh incredibly disappointing here yeah this is a longer

take from Charles hoskinson but it'll be the the first legit take that I except from Charles hoskinson with respect to binance I'm reading through the SEC complaint it's over 130 pages but seems to be like the next series of steps to implement choke point 2.0 in the United States the end goal is an agenda based cbdc partnership with a handful of massive Banks and end-to-end control over every aspect of your financial life a regulatory event and where you have a debate about compliance with a law or guidance uh the event seems to be a political philosophical disagreement with the very existence of cryptocurrencies and what they represent an unelected group of people have decided that Concepts like self-sovereign identity owning your own wallet the freedom to control your economic agency should be removed from

the classes and given to an enlightened few however what is happening isn't anything new it's always the same fight between freedom and authoritarianism dressed like with different players Technologies and words and it does seem like this event is a perfect opportunity for the entire industry to set aside its fragmented nature and to unite for a common sense set of rules and guidelines that can prevent the United States from slipping into a dystopia that would make 1984 look like a vacation Charles hoskinson giving me shivers good job Charles nice job Charles this is a time to kind of unite and fight the common enemy here and uh maybe we should have Charles on the podcast maybe we should re-extend that invite I think that's right I have them on the podcast to talk more about this what else we got David

uh this guy Ryan Sean Adams says I think we might have already talked about this uh we did talk about this uh where you say you're not sure if binance is clean here but man I'll take CZ over Gary Gensler any day of the week I mean if I had if we had to pick right it seems like they're making us pick here one other question I have David is um if you think this is the top of Gary gensler's personal stock has he outstretched his hand too far is this his Icarus moment is he doing the dokwon suzu thing of like just dropping lawsuits and again who is this for and um will I mean instead of just going after binance in the scams he's just decided to take on the entire crypto industry and let me

remind listeners in in the United States that's one in ten Americans who own crypto assets um I mean I feel pretty determined at this point the market is kind of shrugging this off too like I'm not going anywhere so um maybe this is his Icarus moment maybe he will no longer be here in the near future and uh the settlers in the crypto investors will will remain when he's out of a job um what do you think about that do you think we we could be rid of him through the events maybe not now but like but because of these events because of these events yeah uh I I hope the best for Humanity and so

therefore I think that that is inevitably true um there was a time where we didn't think SPF was going to jail and then he went to jail um there is a time where Gary Gensler seems invincible and immune but eventually due process court of law will get him and I'm going to hold my breath and assume that that just happens over over time the courts take time this will take time coin the coinbase will take time props to coinbase for sticking up and fighting this fight because if they didn't there would literally be no one left um I do think that this is like the inverse of SPF uh so SPF was once at his Peak and now he's in jail

um or house arrest um Gary Gensler is at his Peak it's got to be down only from here it's got to be done only there's nothing left well let's wrap this up any other concluding thoughts that was uh really the um the episode I think we needed to do just to update everybody I want to maybe Echo Charles uh hoskinson's thoughts I didn't think I'd be saying this but he ends his tweet his Twitter tweet with this everything's all right and the future is bright for this industry I feel like that too like I feel like um Jake said it too Gary Gensler has shot his shot the SEC has fired all its missiles what more can they do and we're still here and the markets haven't reacted that poorly right and uh what else he got I mean you go next week you're gonna call

Ether security and try to cancel ban the bankless podcast I don't know man um bring it is what I have to say so I feel like down and on that note David I also feel like um it's time for us to take action and fight back I feel like we've been on the defensive too much I think we have to file the lawsuits I think we have to call the Senators I think we have to send money to organizations that will push this in DC I think we have to ask our legislators to do their job and actually legislate so that Rogue Regulators can't get away with this I think we have to coordinate and so I put out a tweet asking what's the best way for U.S citizens to push back a bunch of people are giving their suggestions we have Ryan sulcus on the

podcast tomorrow and he is in the midst of launching a new um organization a non-profit that is going to help education and marketing and crypto I think that's an exciting opportunity as well and I think what we need to do you and I and the rest of the bank list Community is Wrangle together all of these legitimate ways to push back and fight back against Gary Gensler in the SEC if you're in the United States that's important of course if you're in another jurisdiction it's important for you to do what you can outside of your jurisdiction so maybe we need to rally the troops and organize the U.S and then outside of the us as well and publish this information so that people can take an active hand in their future and can actively push back

that's where I am right now in conclusion like I'm I'm ready to fight like like let's go I mean that's that I think is is where we are but um do you have any final takeaways for us yeah for the uh 700 people that are watching us live on the YouTube thanks for for tuning in um appreciate y'all y'all being here we are in talks with Paul Gray Wall the chief legal officer of coinbase to be on the show at five a little bit after five PM Eastern that's not um totally confirmed but um we're talking about the coinbase team so we can hear from coinbase uh so if you want some more uh SEC versus coinbase commentary straight from the stories of coinbase that'll be happening around around 5 p.m eastern time here on the YouTube tube so thanks everyone for

tuning in make sure to subscribe to the the channel for that um I don't have any further thoughts um for you Ryan but I do have a meme you ready I'm ready uh show it to us I think this is the right man and this is the uh the South Park I didn't hear no Bell meme we're not going anywhere that's a good way to end it uh guys um wrists and disclaimers gotta let you know none of this has been Financial advice it's not even regulatory advice but we know not what not to do and that is whatever Gary Gensler is doing do the opposite I gotta remind you that crypto is risky you could always lose what you put in but we are headed west this is the frontier it's not for everyone but we're glad you're with us on the bank

list Journey thanks a lot