wtf... SEC absolutely LOSES it [Interview] | DEFENDING CRYPTO

your game I don't think there is anybody

in the crypto world that would say

no we want the exchanges to rip people

off of course not nobody wants the

exchanges to rip people off of course

not so if like exchanges are doing Shady

things

they should not do that

everybody would agree

everybody would agree that if there was

a registration process for coins to Ico

just like companies IPO that is they

are underwritten they're audited and

they provide disclosures and financial

statements and they prove this

then it could be in a standardized

method up to individual investors

whether or not it is reasonable to

invest in that security or token or or a

coin or whatever you want to call it

doesn't matter it would be up to the

investor to make that choice and the

investor should have that choice as long

as there's not somebody ripping them off

like an exchange ripping them off that's

fair

but I think at least three times during

this discussion Gary ganzer is like you

know we've already got digital currency

you know we've

we've we have a dollar we have a Euro

what do we need crypto for

in so many words

that's bad that is not the argument you

want to make because now what you do is

you actually you take

Common Sense people who would go yeah I

want disclosure yeah I don't want to get

ripped off I'm on board and then you go

wait a minute

is there a bigger thing going on are you

afraid of Cryptid you just not want

crypto we are operating as a curse word

unlicensed security Exchange in the USA

bro they also have C they have ceoa and

cop on the inside

criminal Enterprise that's the line that

stood out yesterday how does how do we

explain getting past the IPL process

then

well no it's different what for the

frequences yeah well coinbase uh I think

just they bulldozed their way in

no no

complete misunderstanding remember when

you list on an exchange what you're

doing is you're offering shares for sale

of a company for example when a spat

goes public maybe only eight percent of

the actual underlying companies public

and the rest gets held privately all

you're doing is offering those shares up

for sale you're saying I got a security

and I want to sell it it's shares of

coinbase the SEC doesn't look and say is

your business

doing everything legally is it uh in

other words is every operation of it

legal is it a good investment they look

at it do we have our disclosures did

they follow the forms and then they go

yeah I guess you could sell those shares

and then that way investors can look at

the sec.gov website and look at filings

for the companies and go okay do I have

the information available for me to

evaluate if this is a good investment

see it's not the sec's job to make sure

you're making a good investment it's

just that it would be a fair investment

now I know it seems unfair that it's

like okay well like wouldn't it make

sense to then investigate the company at

the time they register for their IPO but

then the counter argument is well should

the SEC just tell everybody F you you

can't list your shares for sale in a

bull market because we want to decide

whether you know we're okay with crypto

brokerages in the first place

those potentially are completely

different parts of the the SEC like

hey if you remember it's the government

so like it doesn't always make sense

it's kind of like you know

I I I'm trying to think of an analogy

here but it's like to some extent

it's like let's say you're a drug dealer

and you go into the DMV

and you're like yo I need a driver

license the DMV is like

all right go do a vision test and do a

three-point turn here's your driver

license

so like should the drug dealer not have

gotten the driver license because the

DMV should have investigated they were a

drug deal that would be kind of a

potential analogy again I'm not trying

to like defend the SEC here or whatever

like I don't care I don't have a horse

in this race

I'm just trying to like I like to think

about these things from a logical point

of view and and challenge

why you could register a security

to to sell it without necessarily

qualifying whether what is happening

after that is is 100 within all bounds

of the law same as with a driver license

right that's my thesis it's my thesis

I'm sticking to it

enrich people now the reason I point

Adam the reason I'm pointing at us that

a lot of our viewers have traffic to

these things and what you find out in

the very long finances

well let's just say polygon Matic

you've been hacked and now this Daniel

that's a really good follow-up here did

the DMV know he was a drug dealer I mean

really what you're saying is like oh but

the SEC would have known this was a

crypto brokerage right

but then the does the SEC even know that

it is illegal to operate a crypto

brokerage they can allege that it is

ultimately it's up to a judge and

ultimately after that it's up to society

who gets to decide via Congress

so it's kind of like nobody actually

knows

it's like is that a legal jug or is it

an illegal drug I I don't know

to make it so that they were bigger than

anyone realized when they weren't super

great there's my background uh with that

let's get and I think because it's so

Gray

you don't actually have

uh a reason to disqualify the offering

oh here we go with you sir we've had you

on several times and we've tried to get

from you a sense of timing when there

would be more clarity regarding the

space it feels like now is that moment

look I think there's been Clarity for

years the investing public has the

benefit of the U.S Securities laws

crypto should be no different and these

platforms these intermediaries uh need

to come into compliance and protect the

investing public

which of the of the of the cases we're

talking about would you want to take

them one by one which is more important

than your view

you're leading this interview I want to

follow you where you are but let me just

say this to the investing 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 and conflicts

along with a control person Mr Zhao

trying to evade U.S law okay that's

binance binance doing the wash trading

in that state of viewers who wonder why

enforcement has taken arguably at least

several years so long

okay it takes time we do things by the

book that's what the American public

would want us to do we follow the facts

and the law and I couldn't be more proud

of the investigative teams at the uh SEC

working together with colleagues in our

various divisions of trading at markets

our general consulate's office five

Commissioners but it really it's it's a

lot of uh as a you know a gumsho uh

walking the beat uh investigation uh to

build a case like what you've seen

alleged in 136 page complaint

Mr chairman a lot of it is hard to

understand for instance in the binance

complaint you say Mr chairman I need to

know this the sec's finance complaint

also seeks emergency relief like an acid

freeze expedited Discovery and even the

appointment of a receiver

are there more pleadings coming because

if you do this

that's the end of Finance

look we have concerns and I think that

the investing public should be aware of

putting their hard work hard-earned

assets onto these platforms but we have

concerns

when

a platform like this puts themselves out

to the public

consciously trying to evade U.S law and

customer funds

you didn't even know who was custody of

them was it custody here in the U.S on

the U.S platform is it custody overseas

or were some of your funds in crypto

possibly moved to affiliates

there were a number of Affiliates named

in this called Merit Peak and sigma

chain uh

uh it's fundamentally a lack of controls

deception conflicts and yes we're going

to do that which we can uh in front of

the courts and make uh to the extent we

can uh the facts noun and the public

protected yeah but what about coinbase

your binance I cannot understand

how anyone can assign a value to crypto

it seems entirely predicated

on the greater full Theory do you

disagree

look we as an agency are meant to be

Merit neutral gem there's a lot of

questions

10 to 20 000 tokens actually in the

coinbase uh uh complaint

we note that they have through the

coinbase wallet you can trade 16 000

different tokens and there's a lot of

debate as to the use cases and whether

there's any there there 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 it's called

the Yen they're all digital right now we

already have digital Investments and you

you have digital you have kind of makes

it sound like he just doesn't like

crypto

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 so what 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

yes kind of the Bedrock of what

president Roosevelt and Congress worked

on 90 years ago I agree

chair Gensler is David so let him do it

so let let the people do it that's what

coinbase and and crypto enthusiasts have

wanted to do let it be registered

but Gary Gensler can't let it be

registered because there is no process

to register crypto because Congress

hasn't done anything that's the problem

I just assume obviously given the

complaint they didn't quite get there

but can you give our viewers any sense

as to what's happened to get to this

point

look I'm not going to go into any one

set of conversations between the agency

and a company but we've had discussions

with literally dozens of crypto

incumbents including the ones 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 U.S 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

and they're co-mingling various

functions the traditional Finance we

don't allow I mean the public would be

aghast if they thought the New York

Stock Exchange was also running a hedge

fund trading against them or allowing

wash trading or lacked controls to

protect against fraud and manipulation

on the platform

and so the conversations have been

constructive but it's also about them

bringing a business model into

compliance we have had success there is

even in the last two weeks an entity

filed as as a crypto entity filed as a

what's called a special purpose broker

dealer and and got registered that way

we've had successes with tokens

but now it's about these crypto

exchanges in the middle of the market

where frankly the public should really

be careful but all right so they should

double down on this idea of like okay

well how did they succeed and maybe how

could coinbase succeed but why sue them

no longer have a business

look I think if there's a real value in

these crypto tokens

then compliance will build trust and the

business model might change it's the

hard work of earning the investing

Public's Trust

the Innovations what we're doing at the

SEC is pro Innovation because without

trust

the capital markets really don't work

that that's that's the casino capitalism

might work Wild West capitalism might

work for the people that are picking the

pocket of the public but I'm talking

about really work for issuers raising

money and investors alike and to do that

you need integrity and rules of the road

in the middle

uh chairman

in your binance brief

U.S the following

soldana

88 Cordon here we go Matic polygon Phil

falcon Adam Cosmos Hub ethereum native

token with a Sandbox platform manage the

central win ago algorithm Cody digital

infrastructure payments are these not

completely concocted counterfeits

counterfeit currencies counterfeit

Securities manufactured to enrich the

dealers and not to be able to help

anyone who purchased these

but let me help the investing public it

on these platforms they often have

hundreds of tokens uh coinbase has about

250 on their coinbase platform and 16

000 that you can trade on their wallet

Finance is measured in the hundreds as

well and all we have to show is that one

of them is a security

and they should be properly registering

and having rulebooks against fraud

manipulation as an exchange broker and

the like you asked a question Jim about

individual tokens and we laid out

for a judge and the public and we're

very confident in this uh I think it was

a dozen uh tokens in each of these

complaints

it's for the public to decide what they

want to invest in but it it by law that

it should be based on proper disclosure

and without that proper disclosure the

public can't answer the question as to

whether it's just as you say

counterfeiting or it's a scam or

something else it's those disclosures

that helps the public understand

otherwise uh you're just chasing after

something and this is a field with a lot

of hype and uh hucksters and frosters I

know it's not your job

to talk about what these are worth

that's my job

sir they're worthless

look there's there's

some s by some estimates 20 plus

thousand tokens and I would just say uh

many of these will fail because many

entrepreneurial projects fail but

there's a second thing

frankly is we have not seen over the

centuries

that economies are the public

needs more than one way to move value

people talk about well this is an

innovation about moving value on the

internet and Satoshi Nakamoto did have

fundamental uh Innovations about

distributed Ledger technology and the

like but do we collectively will an

economy support more than the US dollar

the Euro or the yen

and so what we really have here are

tokens that are

speculative investment

vehicles and people are betting on a

group of entrepreneurs in the middle and

they're reading websites they're reading

Twitter posts uh you know many of those

tokens that you mentioned are hiring

lawyers or already have lawyers so there

are somebody it it belies logic that

these are just you know out there from

the thin air uh uh tokens that are

so-called decentralized and there's

nobody in the middle

it's just Belize logic and the American

public understands this there's a group

of entrepreneurs there's CEOs go to

crypto conferences they hire lawyers uh

they can test what we say but by and

large these meet the test uh of an

investment contractor or security and

then the public can decide whether

there's any value there or whether it's

thin air as you say I mean I hate to say

but it really sounds like Gary's like we

only have room for the dollar there's no

room for crypto it's one thing if he's

like look we just want them to register

and file a set of disclosures just like

when a company files and then let them

all register

but when he's that would be okay I'd be

okay with that it's like yeah have your

disclosures but this idea of like

we only got room for the dollar

I don't think that's a convincing

argument actually Gary through

appropriate regulation of the Securities

markets for 90 years we have helped this

economy the U.S economy grow and prosper

our Capital markets or 40 percent of the

world's Capital markets were only 23

percent of the world's economy and only

four percent of the world's population

we punch above our weight class in the

capital markets in part because of

robust oversight of the markets and it's

for one reason it builds trust in the

investing public you become the

destination of choice if you build trust

the crypto markets are undermining that

trust and I would say this it undermines

our overall Capital markets one sector a

hundred trillion dollar Capital markets

and one sector is kind of running around

like the wild west catches if you can

that undermines trust in the hundred

trillion dollar yeah I mean I believe

binance is doing that but let people do

it right and it seemed like coinbase was

trying to do it right so what now what

next uh are do these two complaints

represent your main move here legally uh

or is there potentially more to come and

just give up yourself

yeah I I think it's we've got one goal

is protecting the investing public

ensuring that issuers can access a

market that people trust this is about

both investors and issuers

and in the crypto space is to bring them

into compliance uh okay we brought a

number of actions We Stand ready to

continue to work with the industry to

have them come into compliance then

don't tell us there's no room for them

and there's only room for the dollar

operations

properly do the disclosures segregate

segregate your customer funds from your

own don't trade against your customers

that's fair it's a lot of work fair for

the crypto field but we stand ready to

work to get them into compliance Jim

again so after I read what you have

which is Bam CEO a b a m c e o b you

obviously have inside people what it

tells me is it probably is co-mingling

here this is no different from SBF and

if you have your money with Finance you

should get it out right now

look I I I've already read the articles

in the last day you know drawing

parallels to the to the we've also

alleged uh fraud and manipulation uh at

FTX and with regard to Sam backman freed

uh let me just say the business model of

crypto intermediaries intermingles

co-mingles funds trades against

their customers in this case in the

binance case yes we have alleged that

sister organizations Sigma chain and

Merit Peak

we're we're being controlled by Mr Zao

and used on the platform

Sigma chain uh uh

was helping uh trade on that be a market

maker boost

as we allege boost the volumes corrupted

the numbers uh because of the lack of

controls and uh and Merit Peak that

billions of dollars of customer funds

were flowing there so you draw the

parallels as you wish but I do think

that the public should be aware uh and I

would say this to investment advisors

registered investment advisors that's

really a role from 2009 about proper

custody and how you custody funds and

securities

make no mistake it is not proper custody

to have funds and crypto Securities on

platforms like Finance

or if it's not properly segregated with

a qualified custodian on any of these

platforms

dude that's definitely going to ring in

the halls of advisors today yeah that's

a threat that's a threat to every

investment advisor that has money on

behalf of their clients in crypto

exchanges even like Gemini potentially

when we come back wall Street's reaction

to Apple's new mixed reality headset wow

that's a threat to investment advisors

he just left off on that's intense like

I like okay like on one hand

let's make it very clear if Gary genzer

is like look

if you're going to be in exchange have

one entity that is an exchange have one

entity that holds your clients money and

don't trade against your clients trades

like don't rip your clients off

fair game I don't think there is anybody

in the crypto world that would say

no we want the exchanges to rip people

off of course not nobody wants the

exchanges to rip people off of course

not so if like exchanges are doing Shady

things

they should not do that

everybody would agree

everybody would agree that if there was

a registration process for coins to Ico

just like companies IPO that is they

are underwritten they're audited and

they provide disclosures and financial

statements and they prove this

then it could be in a standardized

method up to individual investors

whether or not it is reasonable to

invest in that security or token or or a

claim or whatever you want to call it

doesn't matter it would be up to the

investor to make that choice and the

investor should have that choice as long

as there's not somebody ripping them off

like an exchange ripping them off that's

fair

but I think at least three times during

this discussion Gary ganser's like you

know we've already got digital currency

you know we've

we've we have a dollar we have a Euro

what do we need crypto for

in so many words

that's bad that is not the argument you

want to make because now what you do is

you actually you take

Common Sense people who would go yeah I

want disclosure yeah I don't want to get

ripped off I'm on board and then you go

wait a minute

is there a bigger thing going on are you

afraid of Cryptid you just not want

crypto so is it about you not wanting

crypto because you are trying to protect

the dollar

or is it about disclosure and being

ripped off by the brokerages

which one is it Gary

because if it's just one we can all

agree on then let's just talk about that

if it's any degree

we just don't want crypto

then I don't know that that's reasonable

because Society at least some part of

society wants crypto

and I don't know if it is the place of

the chairperson of the SEC to determine

what Society wants

that's congress's job

not the sec's job

so a little confusion there

something to be clarified

I gotta go

to the bathroom now

so if you like my perspectives and you

want to join me in the course member

live streams please join me in the

courses linked down below I've got to go

and uh I am going to go live for the

course member live stream right away now

I want you to know this when it comes to

AI

time is what's going to make you money

and if you can prove that value to an

employer you'll always be able to be

employed so this is another way of

making sure that you don't get replaced

but

[Music]