FTX 'Horror Stories' in the Bahamas

and I'm Danna huk Across Acid reporter with Bloomberg. At this week on the show, Well, it seems like every day there are more alarming revelations about the mess that was left behind when Sam bankman Fried's f TX crypto empire collapsed, and as the bankruptcy case gets underway, there are plenty of questions swirling around about whether all of the contagion has yet to play out and how much

permanent damage has been done to the industry. We'll get into it with the CEO of a Canadian company that's at the intersection of crypto and traditional capital market investors. But first, Phil Donna, I have to ask, are you watching the World Cup. I'm not. I'm being a very very diligent, hard working person when I'm at my desk. I'm definitely not watching soccer. I don't believe that, unlike you.

Unlike you, I actually took a half day on Monday to actually watch the US game at the pub and no, you didn't, bitter sweet well at that and to do my Thanksgiving shopping, so I two for one, a very bitter sweet tie. But I bring it up because two of my craziest things are World Cup related. So little tease for the end of the show there. Yeah, no, that's a good tease. I wonder what it could be.

I'm trying to think of all the headlines. I'll give you a hint that they go all the way back to the nineteen eighties, which, oh no, incidentally is the last time I've actually played soccer, so a little bit about my skills in that game. It's possible that we can bring in our guests from this week into this conversation as well. I want to bring in Stefano Lett. He's the chief executive officer of f R and T Financial. Stefan, thank you so much for coming on the show. Thank

you for having me. I'm not a soccer star, but I will be watching with going on right now. It's a welcome, welcome, positive that we can have on in the background. You're calling in from a very special place, or it's special at least up today in the crypto world, which is the Bahamas, and I want to start with that. I want to ask you to tell us a bit about why you're there, what you're thinking about, and what that trip has been like. Yeah, no, I'm in the Bahamas.

I've been here basically since I arrived, not this Sunday, this Sunday before. You know, our organization as a presence down here. We have a lot of partners and clients and just people that are are friends that are down here. So I came. I came here to be close to them, try to be on the boots on the ground and really get a feel of of of how everyone was thinking about the situation and how it was unfolding. It

is really ugly down here, you know. This is uh, this was a real point of excitement for the Bahamas, the fact that they had become such a such a crypto hub. You know, this is this is a country

that very much kind of missed out on that. Something it's not very well known about the Caribbean is that in the early nineties, when the tech boom was exploding, a lot of the dot com enterprises, including firms like Amazon, We're also having issues with kind of the US financial system, and they're were slow and the willingness to bring them on board, and so they came down to the Caribbean, and the Caribbean basically said, you know, if that, you know,

if the US banks don't want to work with you, we don't want to work with you either. And obviously if they made a different decision at that time, they could have had a very different experience over the last

you know, five years. So this was seen as something they didn't really want to miss out on, and they really you know, moved quickly and they brought in a lot of the top firms, uh, and to see that all unravel as quickly as it did is extremely disappointing to everyone involved, not not to mention the fact that, uh, you know, they're the ft X was a position to themselves as a banking alternative, particularly in regions where they

operated like the Bahamas. So there's even more horror stories of people treating ft X like bank like infrastructure, and there are leaving you know, a significant amount of their assets just kind of lating on f t X, which are now and you know, you know, now they can't get access to just like everybody else. So there's a lot of different kind of angles to this story that just get really ugly. Um and you know, unfortunately, you know, uh you know, the Bahamas is bearing some of the

runs of it right now. And I should have been super super clear. Um I should have mentioned this earlier. You're there because f t X is headquartered there, right, Yeah, just just to give a little color on that. I mean f t X basically when China kind of changed their strategy about foreign relations in general, ft X was launched in Hong Kong, and they've very quickly kind of turned around and used Bohmas as a new jurisdiction and came down here and they brought their whole organization to

live here. Not only to kind of be regulated out of here, but there was you know, tons of FTX employees that moved down here. They all started to you know, to to rent, to invest in property, They bought a lot of office space and all that. So they really quickly, within about a year, you know, fifteen months, got very

ingrained in the fabric of the country. And you know, it was one of the biggest, one of the biggest companies operating out of here, and brought a lot of other companies that wanted to kind of be in the f t X sphere and ecosystem with them. Well, Stefan as far As. Uh, I understand, Uh, your firm f R and C didn't have any direct exposure to to

f t X. That's correct, That's correct. We didn't have any direct exposure f t X. In addition to that, you know, the we did see some red flags in f t X. I mean, you know, red flags and counterparty risk aren't as much of an issue in in a in a period one. I mean, you know, I would imagine that Sam, even if he did have a hole that he was covering up, would have been able to raise capital just you know, uh at the snap

of his fingers. As two the credit cycle turned over, you know, those opportunities went away for even someone like Sam. So at that point, you know, you start to say to yourself, Okay, well, how do I feel about these counterparties and you know, the risk that they're taking, the even like the ethos of the way that they operate, and so from my perspective, and this is come and started to come out kind of as as the veil has been lifted on f t X. I thought they'd

been extremely aggressive on the regulatory side. They're you know, very associated with the the US A lot of the

principles or US persons, they use US banking system. You know, when I'd seen what happened to bit max, where essentially the d o J claimed jurisdiction over them and it was, you know, really aggressive, I thought that that was also a similar risk to f t X, that the U S regulators were going to try to claim jurisdiction and essentially say that they hadn't been ambided by US regulations.

Now that's not that bad from a customer standpoint, because in the bi Mex case, the platform wasn't impacted at all. They really just came after the founders, so that wasn't f t X has was a fiat on ramp, which bit Mex was not, and so you know, I did think that there was a potential that assets would be you know, held up for a while, but ultimately I felt as though the creditors were going to would just have to deal with that for a little while when

we get resolved. The second thing that I was really concerned with with f t X, which is definitely a part of what actually has trans are it was they grew so quickly. But I mean the reality is is that in crypto there are really unique security risks that

you have. The accounting is also very unique. There aren't as many services that are willing to support you with things like accounting, So these are kind of limitations to growth that when you just look at the FTX timeline and how fast they moved, you had to think that they were playing a little fast and loose with things like security and accounting, right, And you know, we happen to just with our you know, our our presence down here.

I've come to the bombs a lot. You know, we also were quite well aware of just kind of how they were operating their security, and it was in ways that you know, we wouldn't feel comfortable with. So I was I was definitely thinking that there was a potential that they'd wake up one day and then you know, there wouldn't be there would be money missing from whether

it was a hack or just accounting mistakes, etcetera. Did you know the last piece of the puzzle was that al Mida was very well known to be seeking leverage through different crypto participants over the last nine months, and I mean that you know, made its way to our door, etcetera, etcetera.

And you know, the last nine months has not been a good trading environment for cryptocurrency, it's been you know, there was a counterparty with Scares following the Luna and Celsius, and then kind of moving to the summer, opportunity really

went away. The market was very quiet, so you know, when there was a few firms that we're looking for leverage and almost all of them ultimately announced that they had taken a big los so would say, okay, you know this is something that Celsius was doing, so you go, okay, this has been a bit of a telltale sign of financial issues with an organization, and you know, given all the interconnectivity between Alameda and FT, actually started to say, okay, well,

I mean I really hope that this isn't is that there isn't customer assets that have gone into the mix here. But from what transpired, I would never have anticipated that it was this bad. I mean there there was, I mean just every kind of financial mouthfeasance that you could imagine,

it seems to have occurred here. And that was beyond even what I thought was possible for sure, right right, And you know we should point out still no criminal charges against anyone, who knows if they're coming, but as of now, you know, I'm not sure if anyone is sure if it's actual you know, criminal intent or just incompetence or what. But well, well, well I'm not gonna

be a person who's gonna say that either. Unfortunately, just with the way that the media is, and it's no one's fault, is that everyone is afraid to make those determinations, which definitely makes it seem that that Sam's getting a little bit of softball behavior in the media, right because I'm also not gonna stand here and say like it was this or it was that. But it's certainly it's very hard to imagine what else he could have been. So it's I'm not exactly sure why charges haven't been

levied yet. I think a lot of people are confused about that. But obviously this is a bit of a pro Sam news cycle until something like that does happen, which a lot of people are getting very upset about

because they think it's relatively black and white. Right, and just before before we delve deeper into this, can you actually just tell us a bit more about your company, like what you guys do and layout for listeners, what you do um your headquartered in Canada, right, so just tell us a bit more of that background so that we have a sense of f R and T as we're discussing su UM. Basically, we are an institutional service

provider hit within cryptocurrency. Refer to ourselves as an institutional capital markets and advisory platform focused on digital assets and web based finance. And ultimately what that means is that we try to offer a similar service suite that that uh you know, that firms would experience from something like an investment bank uh to emerging from crypto. And so we have several trading which is what I produced cap

of markets and advisory business lines. In trading, we we are what I think, we have some very interesting structured products that are institutionally focused that focused on some of the you know, very interesting alpha trades in this space which have persisted over time, such as you know, access to basis. But creating a synthetic layer on top of the crypto ecosystem that is regulated and allows people to interact without touching crypto directly a lot of different commodities

and asset classes. It's inconvenient to deal in the underlying like the oil market. You know, people don't when they do an oil trade. Generalists don't hold physical barrels of proud and store it UH. You know, they trade synthetic exposure in most cases. So we've built what we think is the world's kind of most sophisticated synthetic structure products

platform UH targeted to institutions. We have deliverable service lines where we have you know ODC trading technology, and we have treasury management technology that we allow different organizations implement if they want to trade large blocks of crypto or earned yields on crypto, and we have a bit of a different way of doing them than than has been was done in the last in the last year or so.

Then in addition to that, we have the advisory business, which is UH we do general advisory for traditional firms that are looking to create some kind of crypto product on their side, or enter crypto or just looking for some advice. We do merchant banking like services where we take we know where we get crypto companies and and help them you know, sell themselves or you know, get financing, and we think we bring to the table, you know,

real expertise and cryptocurrency. Whereas the traditional investment banks that are doing that kind of activity in a lot of cases, they don't know crypto well enough to give the strategic advice that maybe these companies are looking for. They really just kind of fulfill the agency function. We we think we fit very nicely into their We also have an asset management license which allows us to you know, work with large asset managers if they want to build out

their own crypto portfolios. And really just we find ourselves to be extremely well positioned for what we think will ultimately be a lot of institutions entering the space. You know, these these down market cycles impact that, but we we ultimately continue believe in our thesis. Well, yeah, I was gonna ask you that stuff in I mean, how much damage has been done to sort of the enthusiasm among

institutional investors to crypto for this FTX fiasco. I mean, I would assume that there's been some real sort of second guessing and perhaps you know, clients pulling back on what we're more aggressive plans previous. What's kind of the mood among among clients seft for all this, Yeah, I mean, you're entirely right. You know, this has definitely impacted the mood of clients. There's definitely a lot of constitutional clients

that are going to kill all of their crypto plans. Absolutely, but I will say, you know, our our businesses were launched in the market cycle. There's absolutely more interest from institutions in crypto now than there was. I mean when the market rolled over, institutions basically said, okay, well that thing went away, see you later, not don't need to worry about that. You saw really aggressive moves to pull out, such as something like the cbo E killing their bitcoin future.

I don't know that, but I would imagine that it's costs about as much to kill a bitcoin future as it does to just leave it. So you know, there was a real kind of dissociation with the space, which you're also seeing right now. But then you are also seeing other other organizations that are viewing this as an opportunity. You have you know, well known independent investment banks like Mollis that announced that they were going to be doing

merchant banking style activities in space. And this is post Luna and Celsius. Man Group came out last week and said that they were launching edge fund. There are a certain amount of institutional investors that are saying, okay, uh, this space was run by a bunch of people who didn't really know what they're doing. None of this is Bitcoin's fault, right, you know, maybe you could argue that the financial services around bitcoin have been extremely, extremely impacted,

and I've got it. I think I have a bunch of thesis as to why that has happened so so aggressively. But if you view bitcoin as a potentially, you know, growing an alternative financial system, or or crypto as a whole, developing an alternate financial system, I mean, just because someone someone operating in exchange did so in a way that was either as you said, incompetent or as also, as you know, as many people think, fraudulent, I mean, it

doesn't change your thesis on the space. You just think, Okay, these people didn't do it right, we can do it better. So it's a it's a mix. It's definitely the sentiment is horrible, but there are some at least this time that are that are sticking with it. Is there more contagion to come? Do you think, I mean, have all the sort of shoes drop that that are about to drop from FTX, or do do you think there's more

sort of bad news ahead in the space? Well, I think that the Genesis news is really really bad news, and that itself could create knock on effects that you know in firms that you know haven't quite played out yet. I do think that there's going to be more bad news amongst kind of smaller almost definitely amongst kind of midsize smaller firms will be more bad news because there, you know, everyone's kind of jumping all over firms right now that haven't kind of given there, you know, there

I'm safe. I'm not safe thing. But the reality is that those are a little bit those are complicated terminations to make. In some cases, maybe you're a firm that has a lot of investments with different you know, funds, and you have to wait till they communicate with you, you you know fully, and if someone's trying to figure their situation out and is a little slow, then you don't feel comfortable with having your full communication yet in terms of what you're doing, because you only want to do

it once, right. So there, there's definitely going to be more bankruptcies. I feel as though, you know, just given the market pricing, the market price what you see with Genesis essentially saying that there's a very strong chance that they will declare bankruptcy and seeing relatively little market impact. I think that a lot of the kind of mid

size to large bankruptcies have been somewhat priced in. I think if another major exchange platform was also found to be insolvent, that would create a whole bunch of other issues. But so far, so good on that front. But definitely everyone's pulling back their their capital to what they believe to be the safest corners of whatever they have access

to and are just waiting to see what happens. So uh, you know, I think that even if we don't get any major bankruptcies for the next month or so, people are still gonna wait and see, you know, until the new year, at least until they start kind of redeploying in a significant way. Okay, I have a difficult question for you, which is that there's just so much interconnectedness

within the space. Can you actually just lay out, like maybe the big picture of you layout for us, how it is that there are knock on effects where you have, you know, the collapse of f t X and what it means for these other lenders or other exchanges, Like how is it that that happened? Like what is it about the crypto space that allowed that to to sort

of happen. Well, I would I would also say that this is not unique to crypto, right, like there's there's you know, the interconnectiveness of financial markets is there everywhere, and in fact, a lot of what a lot of what I think cause the honest failures, let's say, like the honest failures is really just people bringing things like unsecured lending into the crypto space, Like, well, before this market's ready for something like that, And you know, the

biggest move from Wall Street employees we've seen into the crypto space, I think a lot of people just pulled out their old Wall Street playbook and started applying it to crypto and some of the stuff the markets ready for and some of the stuff the market isn't. So I think a large part of kind of the like said, the honest failures, we're just implying allowing business practices like

un secure lending that just don't work right now. I mean, this is an asset class where if you own five assets in your portfolio, they could go to zero within a couple of days. Right, It's just and that's just not something that you typically see at scale and traditional finance like you do in crypto. But what's happening, you know, the the actual kind of knock on operational effects are

I mean, it's relatively simple. It's it's say, I you know, if you were a fund that was involved in the ft X bankruptcy and you were using them as a massive counterparty. Okay, well, first of all, you may just have so much of your assets tied up on that platform and written it down to zero that you just wind down your operation altogether, right because you said, okay, I lost of my assets, we're writing them all down

to zero. And ft X, you know what seems apparent now is we're going to go through a long bankruptcy that's probably gonna end up being a zero. I'll give my my investors back the little money that's left and call it a day. So that's kind of like the most vanilla unwind. Then you get into situations where say you had debt, you were you were using leverage in

your in your fund. Well, now you may not even have the opportunity to give back money to equity holders because debt holders that stand in advance of your equity holders, and so you know, your dead holders say, we're taking whatever you have left and your equity holders are wiped out. So that's another version of a bankruptcy. The Genesis situation, to me, is still quite complicated in terms of what really happened there. I think that you know, clearly they

were extremely impacted by the Three Arrows bankruptcy. They released that they had six d some odd million of exposure to them, and I mean Three Arrows has been accused of kind of you know, taking taking an asset and and depausing his collateral of multiple platforms, which would if that was true, that would be fraud. So you know, Genesis may the Genesis collapse may also have been have been the subject of other frauds as well. It could have been fraud could have played a role into that.

So I think, you know, the two kind of things that are there's two components that are that are leading to these collapses. One is over leverage and poor risk management, which I think is very very evident in the miners right. The miners, a lot of them don't seem to have modeled bitcoin price below thirty thousand for a persistently long time at all where their business would effectively evaporate, which

has happened. You know, you have definitely things that smell a lot like fraud going on in the space, which is which is another component and so and then you just have this cascading effect of you know, if I lend to this minor and they go out of business, do I go out to business, I can't pay my dad's etcetera. And it just then it becomes quite a traditional financial you know, like a contagion like environment. Yeah. I wonder how the space will have changed once all

the dust settles from this. You know. Obviously, I think the issue of an exchange being so closely tied to a trading firm is a big deal. Uh. There's a lot of talk about how exchanges should have to uh sort of show proof of what reserves they have, that sort of thing. Where Like, where do you see the industry going from the centralized exchange perspective, especially after all this. I mean, I'm guessing it's gonna look a lot different

than what it did prior. Yeah, there's been a lot of kind of I would say, jumping the gun on talking about oh well this means that defy is the way to go toes centralize change of the way to go Okay, a little bit early for the de centralized exchange crowd to be doing a victory lap after about fift of assets were hacked out of that ecosystem last year, and you know, they had their own collapses and all

of that. So de centralized exchanges in a lot of ways are very new technology, and I would and I would argue, you know, aren't ready to be the core of any kind of financial ecosystem. Maybe in the future,

but right now that's a little early. So, you know, unless everyone's going to start passing around ledgers like hardware wallets and stuff like that, there is some kind of centralized exchange infrastructure that needs to persist so that that so that people can continue to transact in biitcoin and

whatever their cryptocurrancies they're interested in. There's a very strong argument to say that regulation will be important, and I am one of the people that you know that that also thinks that regulation would help because the reality is is that there's a lot of discipants in the bitcoin ecosystem that really can't do their own due diligence or don't feel comortable doing their own diligence. Doesn't matter how many financial proof of reserves or balance sheets the show

in front of them. They're never gonna understand whether or not that the exchange should be worked with or not. And for those people to have kind of a regulated avenue in crypto, like within crypto, to participate in the space where they can feel comfortable that the same controls are there versus what they're familiar with in the other financial ecosystem I think will help the adoption of bitcoin, uh and other cryptocurrencies. But that can't be just it.

Regulation is not a panacea in in this context. The regulators, you know, can't play whack a mole with every single platform that just pops up. I mean, this is a relatively new paradigm. You've got an environment where anybody can start their own exchange overnight. This is a new phenomenon. This isn't something that was around in the eighties. You couldn't just launch an exchange for very little cost overnight and get into business. Right, So this is how a

free market educates itself. If you look at the if you look at the if you look at this evolution of a kind of new financial system as a hundred year cycle, right, doesn't make sense that there would be a two year period where no one really understood the elements of counterparty risk because they're used to dealing with completely fully regulated ecosystem and they kind of have to learn, right, you know, hopefully the next time, you know, uh, an

SPF comes around, everyone doesn't just like just take him at his word no matter what, and there's a little bit more critical, critical, critical discussion around whether or not this person should be as trusted as they are. And you know, I think proof of reserves is a good step, it doesn't fully create the the what you need because you need some visibility to in to exchange liabilities as well.

You know, just because in Exchange has fifty billion, if their liabilities are a hundred, it doesn't you know, you still have an issue there. So those transparency structures I think are going to evolve. But then that then people need to go to those platforms that are being more transparent.

People have to choose that they want that. If we get into another market cycle where you know, coin Base and you know, all these other firms that have committed to transparency aren't getting the asset, it's because they don't have the The newest defy yield farming thing. Then it's hard to really sympathize, right, It's it's the typical investor

has to learn. And then what happens with with why institutions kind of get hit or market makers is really what institutions are in this context is that they kind

of have to just go where retail is. I mean, you can say I'm not gonna use ft X at all, but when it has all the volume there, I mean, you're highly incentivized to to have to you know, that's your business that you get involved in that, right, So you know, retail needs to needs to understand that there is no you know, there's no there's no one that's going to save you in this market. There's no one.

You know, it's your your very limited recourse if something goes wrong and you really need to do your due diligence. And if one platform is transparent and another platform is not, then you gotta go with a transparent one or else you run this huge risk. Can I ask you what in reality regulation would look like because obviously we're talking

big picture, but like what specifically would be regulated? And I want to ask this question of you specifically because you have you know what things are like in Canada, you know what things are like in the US and obviously in the Bahamas and other places as well. Yeah, so, I mean our platforms relatively straightforward to regulate, to be honest, Like we're basically taking kind of drivative structures that have like driving structures that do fit in the existing regulatory framework.

The problem with a lot of this regulatory discussion is that they're trying to take like an equity framework and apply it to you cryptocurrency, or take commodity framework and applied to cryptocurrency, and it's just it's it's it's it's a struggle to kind of to to fit these these round holes into square pegs right for it typically for

the for retail exchanges. And in addition to that, you know, if the if the retail traders, if you limit the activities that are available on one exchange, right, then you know, it incentivizes people to go sure, and then you know, that's been a criticism of the regulatory environment and the US that they didn't move fast enough and was forced people off shore. Now I don't buy that entirely. You know, everyone could have traded on coin based which looks to

be fine. They just wanted to get more access to leverage, etcetera, etcetera. You know you, I think that you have to look at this this space with with fresh eyes. Unfortunately, you probably have to re write a regulatory framework from the ground up if it takes an account cryptocurrency. It's a very difficult task. You know, there's not a lot of regulators that even themselves would count themselves experts and cryptocurrency.

But if we want a regulatory framework that really applies to what we're doing here, I mean, that kind of thing needs to happen. You know. The really where the regulators have focused on is like, oh, we don't want this product, we don't want that product, we don't want you know, I think that that is that's just it's silly, like we look at the issue we had here. Who

cares what products they are? You need to make sure that the exchanges had the assets that they claim to, like those are the key controls, right, so that all this discussion around like oh there's too much leverage, retails is gonna blow themselves up. It's like, well, if they if they traded on this platform, they blew themselves up.

The trick too much leverage, I can get my head around that if they traded on a platform, because and it was a huge fought and the people didn't have the assets, you know, that's a whole different story, and that's where regulators should come in, right. Yeah, I wanted to rewind a little bit, Steffan and talk about that

notion of yield farming that you brought up. You know, whether uh, you know, we're talking about locking up your tokens at a centralized finance platform or even you know, depositing them with um a high yield account that's say Gemini or one of these centralized counterparties. Where do you see that whole space going. You know, so many people criticize these high yields is too good to be true? I mean, are they truly too good to be true? Or is there a way to do this that's um yeah,

I mean it's definitely a nuanced question. And you're entirely right. There are ways to actually get yields in crypto, and then there are ways that are completely fictitious. And top of the list and fictitious yields is yield farming. I mean, I don't think there's a lot of yield farming supporters left to be honest with with what's happened. You know, this was a dynamic that we saw kind of emerge

very like, very from the ground. You know, the whole decentralized exchange model was considered a bit of an afterthought and cryptocurrency and interesting experiment for the future, and it all really changed in the summer of I believe that the first platform that did this was Compound Finance, where they launched a comp token where you would deposit bitcoin, eth, you know, stable cooin, other mature assets and receive comp token. And because we are in the middle of a bowl market,

I don't want to beat up on comp token. They seem like religive, you know. I mean, I haven't had any occase and they're not honest operators. But all these ut plumbing platforms, you deposit bitcoin and they'd start paying you in their token, which they invented like weeks ago

and is now trading for whatever reason. Because we're in the middle of an insane crypto market at a multibillion dollar valuation, so yes, your yields are high in this token that has evaluation that's unsustainable, right, So and when the market sells off, okay, then all of a sudden If Okay, you got token worth of a project where two billion. If if if the token collapses and the market cap of it is now fifty million, what's your

yield now, it's probably pretty bad, right. And in addition to the fact that there's all these other issues that have come up with DeFi because it's an experimental situation, such as regulatory risk, hack risk, etcetera. If you take all of that and you add it all together, the yields are probably negative, right, And so so the whole yield farming dynamic needs I I don't think it has much of a as much of a future it was really and it really kind of pushed the defy exchanges

and platforms. You know that the argument for defy exchange decentralized exchanges is self custody in a lot of cases, which is which is a which is you know, as we've seen, definitely a value add use case. There's other elements that you know that I would say that the DeFi crosism needs to kind of figure out. But anyways, and then and then moving into the centralized lending, which was the other element that you that you discussed, I mean that should be that should be fine. I mean,

centralized lending itself is a risk management exercise, right. It's saying, hey,

I'm lending you. You know, a safe form of lending, right, would be if someone lent me overcollateralized you with U S dollars because they wanted to borrow bitcoin or some other asset and you're overcollateralized, and because I or I lend you bitcoin overcollateralized to get US dollars because I don't want to lose my upside on bitcoin, but I need U S dollars for right now, Okay, that kind of stuff can be risk managed, right And and and if you have kind of segregated accounts there you have

access to you can you can manage that stuff. There are other real ways to get yields, such as people like you know, peer to peer lending markets on exchanges like bitfin x. Those things have held up amazing if if if you believe bitin x is a solid counter party, which which I do, then the peer to peer lending markets have worked perfectly. And that's really just people either borrowing stable coin because they want to go margin long

or boring crypto because they want to go short. And that's really what's created yields, Like historically it's it's all based off this kind of borrow lend lend margin long short dynamic. That's why you can get yields in option markets. That's the same thing that you can get yield trading basis.

I mean, those are all very real opportunities that unfortunately are getting a little bit noised out right now because of these blending dynamics that have exploded, and it's made our pitch a little bit tougher for our clients because we think those are great trades they should be involved in, right So, you know, I think that over time will be able to do the education process again. Have this discussion explained that, Like, yes, that wasn't a real dynamic.

This is and we'll get back to it, but obviously it's going to take a little time. Speaking of that, I actually wanted to ask you what specifically your clients are coming to you with, Like what are they asking of you right now? And maybe you can talk a little bit about what is going on in the market

in terms of how much things have scaled back exactly. Yeah, So our clients are coming to us right now and a couple of different different contexts they're coming to uh, you know, they're they're speaking us a lot about physical crypto trading because there's been a lot of their counterparties that you know, aren't haven't made it, they can no longer service them, so they're looking for new counterparties. There's also a lot of people that were using FTX to

hedge themselves. You know, they're you know, cryptodesks that need to hold balances so they can facilitate kind of you know, their their whole all of their activity, and so they don't want to just be long, you know, one asset and have that move with their treasury, so they choose to hedge. You know, miners off are you know, potentially hedging. It's less of a market right now, But the advisory side is really where we're getting a lot of the

interest right now. I mean, there's a lot of people that have projects that are struggling to raise money right now, and we have a really strong network of investors that are going anywhere in crypto and are still very well capitalized. So we're trying to make some introductions on that side. There's people that are looking for a general statue overview from us because they think we have, we're well positioned in the market to judge is this business going to

work going forward is it not. You know, we're trying to lend a hand where we can and some of these various restructurings which we think we're very well suited to do, and we are, you know, making a lot of progress on that side. Um, we're in a nice position here where where where the impact to us has been relatively modest. So you know, we're not ourselves kind of in a bunker right now. We can have conversations with people and go out and try to help them out.

And so I would say that it's it's really kind of advising the crypto native side. And we've seen a lot of clients coming to us on the trading side because their prior serius survivors have gone away. M hm. So for for like the FTX case, would you you could possibly work as an advisor to to one of the debtors or one of the creditors rather Yeah, I mean I don't want to get into the weeds too

much on that because there's just a lot going on. Unfortunately, the situation was messy enough to begin with, and it became messier just with how the whole thing's played out, you know, from from not halting withdrawals when they probably should have, to not shutting down the exchange when they should have, and now there's money flowing in and out still.

But you know, we think that uh, you know, we think we have some ideas for how this situation can be man edged, and we encourage other institutions to reach out and and kind of her ideas. But it is there's a lot of competing interests in this right now, and it's it's very difficult to even if you do have something really valuable to contribute to to stand out. Um. But you know, we think we we think will ultimately we'll be able to provide some insights on on how

to manage some of the FTX situation in particular. Great, uh, really appreciate your time stuff in Hey, at least you know you get to get to a warmer uh climate there for a little while. Yeah for Cape Toronto, good time of year at least to be making making them the switch. Well, U vil data, I think it's our time now to get into the craziest things. You've got something crazy for us so adjacent, but it's not really about crypt job. But this is a boomerk headline. Actually,

I'm going to pose a question to you, Mike. All right, if I told you the one person's wealth loss for this year exceeds a hundred billion dollars, who would you guess it is? A hundred billion? I think i'd guess Ellen, Yeah, you're right, I mean, okay, this was, this was this is. There's not not that many with that with that much to lose, you know, exactly exactly, but it's a striking bluemo head right, So okay, so he um, what's happened is Tesla shares are down obviously all the Twitter stuff

that's going on, etcetera. He's worth roughly a hundred seventy billion dollars right now, but it's down from three hundred forty billion around this time last year. Wow. Yeah, that's a rough year. I think. I think all land on his feet stuff. All right, Well, that's pretty good filled out a hundred billion cheese. Puts it in perspective when the rest of us check our four in one case, I guess I'm gonna dip into the alternative assets space here. As I said, I've got two soccer balls World Cup

where he ended. Soccer balls that are up for auction, one already sold, one's still up for auction. The first is I think we talked about this before. Diego Maradonna, the great Argentina star of the eighties, he had what's known as the hand of God, had right where they he clearly scored a goal in the World Cup quarter finals. I believe it is with his hand, and they asked him afterwards, did you use your hand? And he said, now, it was the head of Diego Maradonna and the hand

of God that scored that goal. But replay clearly shows it was his hand. They're still very sore about this. In England, I will I will point out and then the referee who missed the calls has had the lion judge who missed the calls, uh, kind of ruined his life. But the actual referee of the game was able to take home the game ball. They all used one game ball back then, believe it, and I think the guy was in his seventies, uh, and he put it up

for auction. So that's one soccer ball or i'm sorry, football that went up on American football that went up for auction. The other one LDNA was there auctioning off all sorts of gifts that we're giving to the various UH mayors of New York over the year, and one included a one of a kind Louis Vatton soccer ball given to Mayor Giuliani in commemor fans World Cup Prices Precise, I'm gonna ask you both, which one do you think's worth? Moore? And what's what do you think it's worth? Okay, I'll

go first. It's definitely hand of God ball, and I'm going to go with two point five million dollars. Two point five million dollars, all right, Stefane, what do you think I'll go with the Hand of God ball as well. But I'm gonna take the under. In this market, I think it's probably I think it's yeah, under two point five million. I was going to say in the hundred thousands, but let's say a million. Oh my gosh, can I revise? No? You could? She always wants to revise. You're not allowed

to revise. This might be the closest call we've ever had in a game of prices precise precise. It's all for two million pounds, so two point four million, So I think we got to give it to Stefane for taking the under on the come on that one, sure well done, believe it or not. The Louis Baton soccer ball Vildonna. It's only six hundred bucks, that's it. Not crazy? That seems less than the price of a Louis Baton purse. You could cut the top of it, make a purse

out of it. And yes, but uh, that's all I got Stefan. I'm guessing, um, you being in the Hamas, I think we have a clue as to what your craziest thing of the week is. Yeah, yeah, no, this, this FTX situation is the craziest financial situation I could ever imagine. I mean it was. It's not just me that saying that. John Ray, who's who's the quarter point in CEO during the bankruptcy proceedings, Who did Enron nor tell?

I mean, he's been at the epicenter of everything. He went out of his way in the bankruptcy filings to say that this was the craziest thing you've ever seen. And honestly, that's an extremely unusual approach, Like usually you stick to facts and it's under and all those things are under under the threat of perjury if you're wrong, and so, like you know, it's just for someone of his professionalism and stature to come out and say that,

I mean, just underscore is just what we're dealing with here. Unfortunately, for a lot of people, it's it's really mind boggling. And when you read some of these statements in the bankruptcy filings, like you're saying, you know, they they just seem flabber guested that a company could have been run the way it was exactly that's a good way to put it. So well, Uh, Stefan, we really appreciate your time.

We know it's a it's a very busy time for you, a very uh sort of risky and i'm sure stressful time. So we really appreciate you taking some time out to to explain how you're doing all this and what happens next, um, and uh what'sh your the best luck and hopefully we can bring you back some day and happier times. No, I love to, I'd love to. Yeah, it's uh, it's definitely a little bit of a fog right now. You know, we'll see how they does settles, but uh, I think

that will be We'll be back in. You know, the industry will be back in business probably sooner a lot of people are are expecting. All right, thanks again, yeah, thank you so much for joining us. Thank thanks guys, Talcu latter What Goes Up. We'll be back next week and so then you can find us on the Bloomberg Terminal website and app or wherever you get your podcasts. We love it if you took the time to rate and review the show on Apple Podcasts, so more listeners

can find us. And you can find us on Twitter, follow me at pak Anonymous, Bildana hierarch is at Bldana Hirach. You can also follow Bloomberg Podcasts at podcasts. What Goes Up is produced by Stacy Wong. Thanks for listening, See you next time. Just not want