62 – Sam from FTX’s arrest story & all the weekly updates, a Goldman Sachs crypto play & Celebs in Trouble over NFT Pump & Dump

Tracey: [00:00:19] Welcome to the Crypto Curious podcast designed to help you navigate the dynamic world of cryptocurrencies. We're here for anyone who is interested in crypto at all. Maybe you already dip your toe in the water, or maybe you don't know anything about it. And this is the very beginning. But we recommend heading back to the early episodes to get your footing. However, if you think you're ready to dive in headfirst, then let's do it. In this week's episode, we discuss the FTX's update, which include an arrest finally. Plus Goldman Sachs lust for bargain crypto businesses. The Coinbase coaxing users from USDT to USDC. Plus celebs in hot water for promoting bored apes. So stay tuned to find out more. My name is Tracey and I'm joined this week by my pal Blake from the Bamboo App as Craig cannot make it today. So just the two of us. Blake holding the fort. How you going?

Blake: [00:01:07] Very well, Tracey. Great to be here. Great to be back. Talking through more exciting things that have happened over the past week. 

Tracey: [00:01:16] Never a dull moment. Never a dull moment. 

Blake: [00:01:19] Certainly isn't ever a dull moment. In crypto, we're always going to have something to talk about. 

Tracey: [00:01:24] That really is in there. Always. I love doing this podcast because there's always something exciting to talk about. But let's go straight to the breaking news from the last few hours. Disgraced CEO of FTX's Sam Bankman-Fried has finally been arrested in the Bahamas. So according to a statement from the Royal Bahamas Police Force, he has now been arrested. And I'll just say this one, too. So the US attorney stated that earlier this evening the Bahamian authorities arrested Samuel as requested by the US government, based on a sealed indictment filed by the Southern District Attorney of New York. We expect to move to unseal the indictment in the morning as we'll have more to say. So let's unpack this a little bit, Blake. 

Blake: [00:02:07] Yes. So first of all, it's interesting, the jurisdiction that has created that indictment, you know, I don't know if FTX was trading in the state of New York, but generally it's quite hot in only a few crypto exchanges are able to do that. So we just don't know where the indictments come from or who's responsible for it. 

Tracey: [00:02:30] Will more will come out, though, like will they? Is that what happens? They unseal it. And we read a bit more into what actually is happening 

Blake: [00:02:38] Yeah, exactly. Though provide a bit more detail around that tomorrow morning when the information is less sensitive. So yeah, I'm sure we'll be tuning in next week to talk about exactly what he's been arrested for. 

Tracey: [00:02:52] Yeah, interesting. And literally, apparently four or 5 hours before he was in the spaces on Twitter, someone asked him the question, do you think you'll be going to jail? Do think of you arrested? And he answered, I don't I don't think so. Quite categorically so. Bam bam wrong. Look and look we actually added this in and there was plenty more news over the last seven days on this FTX saga. So let's kind of go through there's plenty more crypto news, but let's filter through the other FTX SAM news that had come to light in the last six or seven days, Blake. 

Blake: [00:03:27] Over the last week there's been a clearer picture emerge about all the investments that were made by the FTX sister firm Alameda Research. Well, it wasn't just through Alameda, but it was about through 11 subsidiaries of FTX web. And this included about $5.4 billion in investments into other crypto companies and defi ventures. 

Tracey: [00:03:50] And a lettuce farm in Ohio.

Blake: [00:03:52] And a lettuce farm in Ohio. So that's pretty interesting. But I think this is a really great thing for creditors because, you know, if we're at the bottom of the market and their venture investments are valued at $5.4 billion, you know, it could be the case that over time that the credit is through this venture book, which are genuinely illiquid. So it means that the FTX is investing to other crypto companies. The equity may not be liquid right now, but down the track, hopefully at a bull market there's opportunities for a liquidity event. And you know, hopefully this $5.4 billion inflates to, you know, ten, 15, $20 billion over time if they've been able to make savvy enough investments And then and then creditors may actually get their money back over time. So this is super optimistic, I think. 

Tracey: [00:04:47] You know, I've just got one question I'm thinking of. So, you know, I made fun of that and let us farm in Ohio. But there are some others. Like there was a Chinese news site I was looking at. There was some miracle face cream. There's a few other really unknown. The usual things that were quite clearly outside of their mandate. So how do they get around that? Because they are a web3 defi business or are they these because I'm thinking alameda research here, but you're talking about the fact that those ones may have been part of these other subsidiaries? Yes. 

Blake: [00:05:18] Just my general understanding of it was that FTX had a venture fund fund. Right. And most of the venture investments were made through that entity. Now, there may have been some through Alameda and other other vehicles or other entities. But yeah, I don't know how it was structured. And even if they did have a mandate, really, it's up to the discretion of their investment committees and the directors of those entities whether or not those investments are made. 

Tracey: [00:05:46] Well, that will come out. Look, moving on to our next bit of SBF news. So it appears he had agreed to testify in a congressional hearing which was actually set for tonight at time of recording. So it's Wednesday US time. So whether he'll actually do that now that he's arrested, I don't know whether that actually will go ahead. But, you know, whether he'll be saying the same excuses that he's been repeating multiple times in media interviews over the past two weeks is different. You know, that goes. We'll see what happens there. But I don't know whether he'll actually appear in that or not. 

Blake: [00:06:21] It was also revealed this week that SAM loans $27 million to Michael McCaffrey, the CEO of crypto news site The BLOCK, to help the organisation stay afloat. Now, the block is a great reference point that I use all the time I don't know about you Tracey. 

Tracey: [00:06:39] It's a great publication.

Blake: [00:06:40] And it's pretty surprising to see that they were propped up by Sam. Now, this could obviously just be a bit of a facade that, you know, the CEO had an opportunity to take some money from Sam in order to, you know, obviously spread great narratives about Sam. But the CEO or Michael apparently brought a $6 million apartment in the Bahamas and penthouse. Wow. So, you know, I don't know how much of this money was actually going to propping up the business, but certainly to CEO bonuses, it seems. 

Tracey: [00:07:17] Well, they're saying the first two loans went to prop up the business and that second one was to. But apparently, apparently the like when he brought this to light late last week, over the weekend, apparently the employees are all absolutely gutted. And there was a lot of, you know, big media storm about this. And they were all saying that they honestly had no idea. There's been you know, there's their journalism, their integrity is still intact. But I mean, look, you know, he did clearly go after a lot of news sites. So, yeah, not a great look for the block. And it looks like things are headed for a big legal battle between Sam and Caroline, as Caroline was the ex-CEO now of Alameda, ex-boyfriend of girlfriend battle here. Sam has just revealed recently that he has hired top attorney Mark Cohen to represent himself. So this guy apparently defended socialite sex offender Ghislaine Maxwell. We know from the. Yeah, horrible, horrible stuff that we won't go into. And Caroline has reportedly hired Preet Bharara, a lawyer that's helped bust Raj Rajaratnam, a bunch of insider trading guys, Bernie Madoff's banker, some other people mixed up with Jp morgan and some other people that were. 

Blake: [00:08:32] Convicted. 

Tracey: [00:08:32] That got convicted of things that yeah, al Qaeda, some some really messed up people. So, look, they've both gone and hired themselves. Some top notch people that have that are, you know, that are potentially going to help them. 

Blake: [00:08:45] Criminal lawyers. 

Tracey: [00:08:46] Criminal lawyers that are going to fight the good fight for them. So it is fixing to be a good fight. And interesting. We'll see how that one plays out as well.

Blake: [00:08:56] So our final bit of ftx news this week, the NFT on FTX folks have gone missing. FTX dropped in if tease for Cacho, Stephen Curry, the F1 and Lewis Hamilton's NFT's. And now they've all disappeared into thin air. So luckily we have the blockchain so we can see where they end up. But when you click the direct links to the FTX and NFTs, it sends you to the restructuring page with information on the bankruptcy. So, you know, I, I've recently tried to get my trading data from FTX, but it doesn't look like you can even enter the site anymore. So it's going to be really interesting to see what happens here. 

Tracey: [00:09:42] Yeah, I also did try and get more. I tried to get mine really early on and was unable to get it as well. So interesting. Well, and that's it for our FTX news, folks. We'll leave it there. No doubt there'll be a few more bits of news next week. So moving along. Winter doesn't last forever. And there are some smart people that are. Preparing for summer. Goldman Sachs are set to spend tens of millions on discounted crypto investments, which may have come about as a result of the FTX's implosion. So a report this week has said that the investment bank sees a bigger need for trustworthy and established players in the crypto market. So they're basically saying, hey, look, there's some bargains to be had out there because there's some really great little businesses that may not have been able to weather this storm. We're going to swoop in by them and make sure that they continue on. Blake, wondering what they're looking at. What are your thoughts here? 

Blake: [00:10:31] Obviously looking at buying, snapping up some bargains and you're a prudent or they call it smart money. You know, this is the time in the market cycle when these groups come in to take positions, you know, when they're getting when they're getting equities and cryptos that are potentially undervalued. So know this is this is opposed to the cryptos and businesses that were overvalued about 12 months ago. 

Tracey: [00:10:57] Yeah, exactly. So Goldman Sachs is making a play there, which is a good sign for the crypto industry when someone that big is coming in to help us out. Look, let's head to a break now. But when we get back, we'll look at some celebrities in trouble for promoting their nfts and the progress on some Aussie regulation. Welcome back to listening to the Crypto Curious podcast with Tracey and Blake today. Crypto Exchange Coinbase has asked its users to swap from the USDT to USDC. Why? Well, Coinbase is highlighting questions around Tether's reserves in a campaign to get users across to Usdc. So Coinbase are even waiving the conversion fees for users who make the switch. This new campaign from Coinbase highlights the quality of reserves that backed Circle owned us de coin, USDC and these go, I don't know, I'm not sure about this one, Blake. I feel like they're kind of pissing in their own pockets a bit here. I'm a bit I'm a Coinbase fan, and I think they've done a lot of things right over the last few months. But I wanted to get your take on this because I know this doesn't feel right to me. 

Blake: [00:12:07] Coinbase investors in circle. 

Tracey: [00:12:09] I believe they are. 

Blake: [00:12:10] Yeah, that would make a lot of sense, you know. And yeah, I believe that USDC is far more regulated than USDT, so USDT is offshore. You know, it was one of the first stablecoins and still the biggest stablecoin and has done the industry well. And you know, for the last six years that I've seen there's been rumours about, you know, Tether's solvency. But yeah, I think these guys would have made so much money that outweighs the solvency issues, but that's just my personal opinion. They've been able to stay afloat all this time through a couple of different market cycles, and I'd just be pretty surprised that they weren't solvent or they weren't backed one for one. However, saying this, it's very difficult for an organisation or product like this to be audited here because I'm sure it would be a big challenge for any auditor and not many orders would want to put their name to it because, you know, who knows where some of this or what some of these updates have been used for?

Tracey: [00:13:18] Yeah, it would be a mammoth task. I just don't understand how they'd be able to do it, to be honest. But interesting. Interesting play from Coinbase though. 

Blake: [00:13:26] Yeah. So yeah, they're just going with American made, American owned and. Yep, American regulated, I believe.

Tracey: [00:13:34] Okay. Looking closer to home now and looking at some regulation chat. As Stablecoins become widely used as a means of payment, Australia is preparing to regulate them accordingly. The Aussie financial regulators are working on options for incorporating payment stablecoins into regulatory framework. 

Blake: [00:13:53] Yeah. Last Thursday, on the 8th of December, the official site of the RBA, the Reserve Bank of Australia, published a report on Stablecoins assessing their recent developments, risks and regulatory prospects. The report is quite optimistic in acknowledging the stablecoins have the potential to enhance the efficiency and functionality of a range of payment and other financial services. So they obviously see the value in the technology and they're just really assessing its implications on the broader economy. 

Tracey: [00:14:26] I know you pointed this article out like so you think this is a positive step forward. I know this is going to be like we keep saying the narrative for next year, you know. In September, local Senator Andrew Bragg, who we were lucky enough to chat with on the programme. Earlier in the year, he released a draft bill titled the Digital Assets Market Regulation Bill, and the document calls for the introduction of licences for digital assets exchange, digital asset custody services and stablecoin issuers. So he's been going really hard on this and I think that, you know, crossbenchers are listening and things are finally starting to happen. 

Blake: [00:15:07] Yeah, for sure. Lee Just kind of leading on from this Tracey, Brad Jones, the assistant governor to the Reserve Bank of Australia, recently shared that it's central bank digital currency. The pilot programme that they're doing for the CBDC in Australia has received more than 140 use case proposals, which is awesome to see. So lots of lots of market participants looking to, you know, test out how they use this technology, which I think is really highlighting the innovation of the technology and that people want to use it. So yeah, exciting times and you know, obviously this programme is going to go for a while. 

Tracey: [00:15:45] That's awesome. It's good to know that that's all happening right here in Australia. Hundred and 40 use cases. That's awesome to hear and we will keep you up to date with anything that is happening in the regulatory framework here in Australia. Moving on to our next story. Dozens of celebrities, including Justin Bieber, Snoop Dogg, Paris Hilton and others are being sued in a class action lawsuit alleging they were secretly paid to misleadingly promote nfts like Board eight yacht club without disclosing their financial interests. The complaint was filed last Thursday in an L.A. federal court claiming that bored ape parent company Yuga Labs perpetrated a vast scheme in which they discreetly paid highly influential celebrities to pump up the value of the nfts. So I remember all this going down, you know, JImmy Fallon on his show had Paris Hilton on, and they were both showing pictures of their bored apes and getting all excited about it. So will this class action lawsuit go anywhere? Blake, I was going to ask Craig about this one, but Craig is not here. Well, is this just angry investors who've lost money looking for another scapegoat in saying that these guys who bought apes haven't even lost that much money? So why are they ticked off with you guys here? What's the. What's the beef?

Blake: [00:17:02] Hmm? Yeah, well, obviously, you know, they promoted the project. They may or may not have been paid in cash or in nfts. 

Tracey: [00:17:12] So I think part of the problem is one of the guys who works and is one of the founders of Yuga Labs also is heavily involved with a lot of celebrities and used to manage them. He also runs MoonPay, which is how they were paid. So what's happened is we know instead of them being paid cash, they were paid through moon pay or metamask and given the funds that way. So it's all about how they were paid. That's the issue.

Blake: [00:17:42] Why is that the issue? 

Tracey: [00:17:43] They were told they were given them for free, but they were paid for them. That was it. They didn't disclose that they were paid advertisers. That's the problem. Say they got told they were gifted them. We got these for free. Look at our little you know, we just, you know, they're promoters.

Blake: [00:17:58] Yeah. Well, it sounds like a bit of a scheme between Yuga Labs and these celebrities to pump up the price of the nfts. And consumers may not have known that. You know, the relationship between the influencers and the organisation and yeah, some people could be pissed off. You know, they like, you know, these got pumped by these parties with insider knowledge and it was made to look a certain way to consumers. And yeah, I can understand why some people would be pissed off at this. And, you know, this happens all the time. Ladies and gentlemen, I think, you know, more often than not in the NFT space where, you know, celebrities or influences are paid to promote projects and they may or may not believe in them, well. 

Tracey: [00:18:44] Then they might think this could be an opportunity for someone to be made an example of in court. So we'll see, you know, see what happens with that is interesting. Let's move on now to our short, sharp news bites for the week. I'll go first. Warner Music Group is releasing on the Polygon Music NFT through a legend platform. The major record label continues to streak ahead with Web3 partnerships by teaming up with this new music collectables platform. And this one, set to launch in January on the marketplace, will offer things like songs and other digital collectables, which NFT fans can purchase and listen to online. So Warner jumping into the NFT space there. 

Blake: [00:19:27] So you'll be able to listen to your song through your NFT that's being minted on Polygon. Cool. Yes. The European Union hosted a 24 hour party and it's in its $400,000 metaverse, but only a handful of people turned up. So no surprise here, they needed some celebrities. It sounded like, according to a number of news sites and one of the very few that attended the party apparently sucked. The EU told the news site that its metaverse aimed to increase awareness amongst young people 18 to 35, primarily on TikTok and Instagram who aren't politically engaged. So it sounds like a pretty, pretty stupid idea, to be honest. And yeah, it clearly didn't. 

Tracey: [00:20:15] People aren't happy, apparently. People really didn't want to do this in the first place and they're up in arms like people are dying from drought all over the place and you're going to spend all this money on a metaverse. And then it didn't work. There was literally I've seen the video footage, there was like a dozen people in there. It was a disaster. I see where they were trying to go with it, but it didn't work. So the EU fallen flat. Okay, so some home-grown news here. The Australian Defi Association has announced a partnership with Stone and Chalk to create a web3 innovation centre and support the new wave of innovation in the space. The Australian First Partnership will play an integral role in helping realise the untapped potential of the emerging web3 ecosystem, bringing public and private sectors together to unlock the industry's capabilities. This launches in 2023 and we look forward to hearing more about it, hoping to get out from defi association legend on the show soon. So that's some of. The good news. 

Blake: [00:21:17] So some good news in relation to Crypto.com. They released their proof of reserves. According to the audit, customer balances for cryptos like Bitcoin, ETH and Usdc are over 100% backed. But you know, these proof of reserves are always what they seem, you know. 

Tracey: [00:21:35] Okay, tell us why. Negative, Nancy.

Blake: [00:21:37] Well, you know, at the end of the day, you don't know who owns these BTC in a theorem in these wallets. You don't know if they've been lent or borrowed or are you seeing a snapshot of a certain number of crypto in a wallet and groups. You could potentially send crypto to one another to bolster their reserves. They could all sorts of things. They could co-mingle operational assets together with client assets. There's all sorts of things. So yeah, I think there's more to see here, but I guess it's a good start. 

Tracey: [00:22:06] Okay, some negative but positive news there. Alright. I think we maybe need to chat a bit more about proof of reserves in another episode because that's an interesting stuff to unpack there. But let's move on. Metagood, a for profit social impact nft startup who have just raised 5 million in its pre-seed round. And Blake and I've got a bit of a connexion to these guys. I had the pleasure of moderating a panel at last week's West Tech Fest here in Perth, which was awesome. So mandatory. The co-founder was on the panel and she is a delight. Awesome lady. So and Blake, you've had some dealings with these guys as well. So awesome that these guys got the five mil and check out Metagood yeah if you dare. That's it folks for our short, sharp news bites and all of the news goodies for the week, please join us again next week. Tracey and Blake signing out. But before we do, please send us any emails or insights that you might have. We've we've missed some good bits of news this week and let us know podcast@getbamboo.io Check us out on all the regular social channels and please don't forget to write and review us wherever you're listening to your podcast right now, please join us next week. Bye for now. 

Blake: [00:23:17] Bye guys. Thanks for listening.