Speaker 1: I can't guarantee they won't continue to try to make
Speaker 1: that case that the token somehow embodies an investment contract,
Speaker 1: which is ridiculous. With respect to candidates to replace Gary Gensler,
Speaker 1: I think just about anybody you know who has a
Speaker 1: background in the crypto industry. Dan Gallagher is mentioned, he's
Speaker 1: the GC at Robin Hood. It would be a vast,
Speaker 1: vast improvement.
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Speaker 2: So if you'd like to learn more about Gemini, visit
Speaker 2: the link in the description. Welcome into the Thinking Crypto Podcast.
Speaker 2: I'm your host, Tony Edward, and with me is attorney
Speaker 2: James Murphy, who's the founder and principal at met Lawman. James.
Speaker 2: Great to have you on.
Speaker 1: Great to be with you, Tony. I've been watching your
Speaker 1: show and wow have you been getting some really a
Speaker 1: list guests. I'm grateful to be on with you today,
Speaker 1: given you know Hester Perse and Tim Draper. I mean,
Speaker 1: it's a real testament to what you've been accomplishing.
Speaker 2: Thank you, man, and I had to get you back on.
Speaker 2: You've been on, I believe a couple of times and
Speaker 2: I always appreciate your insights and knowledge. And boy, the
Speaker 2: timing is perfect because as we're recording this, just about
Speaker 2: an hour ago, we got news Ripple has filed a
Speaker 2: cross appeal against the SEC. But let's back up a bit.
Speaker 2: The SEC file an appeal. What are they trying to
Speaker 2: achieve here? Are they trying to get more money or
Speaker 2: are they really trying to go after Judge Towards is ruling.
Speaker 1: Well, we don't know for sure just yet. So it's
Speaker 1: going to be fourteen days from when they filed that
Speaker 1: simple one sentence notice of appeal where they explained to
Speaker 1: the world exactly what issues they are appealing, but I
Speaker 1: think we can make pretty good guesses on that. I mean,
Speaker 1: first of all, they are going to appeal the ruling
Speaker 1: that sales by Ripple and by Garland House and Larsen
Speaker 1: on exchanges. The ruling was those are not securities transactions,
Speaker 1: and they were. They the sec were horrified by that decision,
Speaker 1: and you will recall they tried to get an interlocatory
Speaker 1: appeal immediately, which was denied, and so I think it
Speaker 1: is extremely likely that that will be brought up as
Speaker 1: issue number one. And then issue number two is they
Speaker 1: got zeroed out on disgorgement because of a Second Circuit
Speaker 1: case that holds that you have to have losses. You
Speaker 1: have to prove that somebody's lost money a pecuniary loss
Speaker 1: as a consequence of the securities violations. They had no
Speaker 1: evidence of that, and so they got zeroed out. Now
Speaker 1: that rule in the second Circuit is at odds with
Speaker 1: the rule in the Fifth Circuit Court of Appeals, and
Speaker 1: so the sec would really really like to undo that
Speaker 1: limitation on disgorgement. So I think that will be part
Speaker 1: of the appeal. And then the open question really is, thirdly,
Speaker 1: will they appeal the one hundred and twenty five million
Speaker 1: dollar penalty and argue that it should be higher. They
Speaker 1: certainly argued that it should be hired to Judge Torres,
Speaker 1: But the judge has a lot of discretion based on
Speaker 1: all of the facts that she observed to decide what
Speaker 1: the appropriate penalty is. So it's unlikely that that would
Speaker 1: be disturbed on appeal. But that would be the third
Speaker 1: thing that might conceivably be appealed by the SEC.
Speaker 2: James, what's your best guess how strong of a case
Speaker 2: or a percentage does the SEC have here of winning
Speaker 2: these respective appeals.
Speaker 1: Well, that's what everybody wants to know. I'm pretty much
Speaker 1: an expert on the process and how it works at
Speaker 1: the Second Circuit, but predicting what a three judge panel
Speaker 1: on the Second Circuit will do is difficult. And so
Speaker 1: now I'm sounding like a lawyer again and caveating everything.
Speaker 1: And they're about twenty judges on the Second Circuit and
Speaker 1: you get three, and you know they are people that
Speaker 1: immediately once you know the panel, you go and you
Speaker 1: look at the decisions they've made previously and see if
Speaker 1: there are any hints, and sometimes you see issues that
Speaker 1: you really want to push with one particular judge that
Speaker 1: they seem to be receptive to. And of course that's
Speaker 1: done a lot at the US Supreme Court, where you know,
Speaker 1: particular arguments will be pitched at one particular judge because
Speaker 1: they could make the difference in a five to four decision. Anyway,
Speaker 1: if we review the bidding Tony, remember when that summary
Speaker 1: judgment decision came out. There are a lot of people
Speaker 1: that said this is crazy. You know. Charlie Gasparino wrote that,
Speaker 1: you know, scathing article saying this is crazy. You know,
Speaker 1: this is a dangerous ruling, and he said, I have
Speaker 1: spoken to prominent people in the securities bar who all
Speaker 1: say this will be reversed. So the people that come
Speaker 1: from the tradifi tradition, including the lawyers, I think, believe
Speaker 1: that there's a good chance that the case will be reversed.
Speaker 1: The determination that those trades on the secondary market were
Speaker 1: not securities, that that will be reversed. I don't believe that.
Speaker 1: I believe that Judge Tours will be affirmed on that,
Speaker 1: but it's not a sure thing by any stretch of
Speaker 1: the imagination. It's been my view from the beginning that
Speaker 1: Ripple's chances improve on appeal as you have judges that
Speaker 1: can focus on the big picture and look at what
Speaker 1: the Supreme Court has been signaling about agencies kind of
Speaker 1: getting too far over their skis in asserting jurisdiction in
Speaker 1: various places and really questioning agencies. And so my guess,
Speaker 1: and it's only a guess, and nobody in the right
Speaker 1: mind should make any financial decisions or trades based on
Speaker 1: some guy on TV guessing, is that she will be
Speaker 1: affirmed on that determination that we've been talking about.
Speaker 2: And of course, if Congress is able to do their
Speaker 2: job and get regulations through and let's say a new
Speaker 2: president comes in. Let's say is Trump and it's fit
Speaker 2: twenty one bill makes it out of the House signed
Speaker 2: into law, that could play a factor in all of
Speaker 2: this being put to bed, right.
Speaker 1: Could be a very big factor, very big factor. So
Speaker 1: the way the timeline works, my best guess is it
Speaker 1: ends up with a decision in the first quarter of
Speaker 1: twenty twenty six, and so that means we have the
Speaker 1: entire legislative year of twenty twenty five, and I think
Speaker 1: it is very possible that will either have legislation establishing
Speaker 1: the trades of crypto tokens on exchanges are not covered
Speaker 1: by the securities laws, or we have very different leadership
Speaker 1: at the SEC where this you know, regulation by enforcement
Speaker 1: tactic will be rained in significantly, which could result in
Speaker 1: you know, a favorable settlement or even dismissal potentially of
Speaker 1: the case and other cases like it, exchange cases. And
Speaker 1: so I think that political dynamic is being under considered
Speaker 1: in this whole thing, and everybody's saying, oh my gosh,
Speaker 1: that's gonna have the way until twenty twenty six and then,
Speaker 1: oh my gosh, on to the Supreme Court. Possibly. I
Speaker 1: really think there's a better than fifty to fifty chance
Speaker 1: that something's going to happen in Congress with legislation signed
Speaker 1: by one of the you know, by the president, or
Speaker 1: significant direction change and pivot at the SEC, which would
Speaker 1: change the entire dynamic of this case.
Speaker 2: Yeah. Absolutely, because I saw Chuck Schumer, a top Democrat.
Speaker 2: I've saw Patrick McHenry and some of the other Republicans
Speaker 2: talk about they want to get something done in the
Speaker 2: lame duck session by the end of the year. And
Speaker 2: I don't know that that's going to happen. But to
Speaker 2: your point, we at least have all of twenty twenty
Speaker 2: five to get this sorted out. And I think I
Speaker 2: think there's a high probability because no one saw the
Speaker 2: FIT twenty one getting passed this year through the House
Speaker 2: and seventy one Democrats joining Republicans, and not to mention,
Speaker 2: Crypto's the biggest spender in this election. So I think
Speaker 2: a lot of Democrats are like, yeah, we're not dying
Speaker 2: on hill with Elizabeth Warren and Gary Ginzer and they're
Speaker 2: partnering with their colleagues to get things done at least.
Speaker 1: Yeah, I think that's right. And you know, TV matters,
Speaker 1: and so the way Richie Torres, you know, the very
Speaker 1: liberal congressman from the Bronx in New York, is able
Speaker 1: to just you know, skewer and really make fun of
Speaker 1: of Gary Gensler and his approach to Crypto, that hurts because,
Speaker 1: you know, Richie Torres is a star in the in
Speaker 1: the Democratic Party, and he's an up and coming star.
Speaker 1: I was looking at his his website, uh, and he's
Speaker 1: got nine million dollars in a campaign war chest. I
Speaker 1: don't think anybody's running against him, you know. So this
Speaker 1: is this is a guy to watch, and it's just
Speaker 1: not good for the administration to be putting up at
Speaker 1: ahead of an important agency like this to get humiliated,
Speaker 1: you know, with some regularity. So even if you know
Speaker 1: Kamala Harris wins, I just don't think Gary Gensler is
Speaker 1: going to serve out his term. I could be wrong.
Speaker 2: Yeah, And it's the SEC has become so politicized, and
Speaker 2: it's embarrassing because now the industry is suing them. It's wild,
Speaker 2: which I love, by the way.
Speaker 1: Yeah. Yeah, you know, there's no choice really with Congress
Speaker 1: kind of stuck in neutral. You can either take just
Speaker 1: cover up and take a beating, or you can fight back.
Speaker 1: And so the industry is fighting back in two ways.
Speaker 1: It's fighting back in the political realm very effectively. You know,
Speaker 1: a message is being sent. Regardless of how these races
Speaker 1: across the country come out, the message is being set.
Speaker 1: If you are anti innovation and you're going to oppose
Speaker 1: any kind of innovation that has cryptography involved with it,
Speaker 1: then you're going to pay a price. You're going to
Speaker 1: find a wall of money coming for you. And they
Speaker 1: don't like that. What they like is being re elected,
Speaker 1: you know, And so that message is being sent. And
Speaker 1: then finally the industry has decided that they are going
Speaker 1: to you know, take the initiative and go to court
Speaker 1: and sue the SEC and put them on their heels.
Speaker 1: And it's about time. And you know, they don't have
Speaker 1: unlimited resources there, so that's also an effective strategy. And
Speaker 1: they've seen how effective Ripple has been in really fighting
Speaker 1: back aggressively for four years now. Yeah.
Speaker 2: Absolutely. Now, speaking of Ripple, the news that broke about
Speaker 2: an hour ago is that Ripple is going to file
Speaker 2: across appeal. I don't know if you get a chance
Speaker 2: to look at the details, but I would love to
Speaker 2: get your take on that.
Speaker 1: Yeah, well, there really aren't much in the way of details.
Speaker 1: It like the original notice of appeal by the SEC
Speaker 1: is kind of one sentence saying we're appealing in this case,
Speaker 1: and then they've got a couple of weeks to say
Speaker 1: what issues they are going to be bringing up on
Speaker 1: the cross appeal. And so my guess would be that
Speaker 1: they're going to cross appeal the determination that the sales
Speaker 1: to institutional investors were investment contracts. That finding, including the
Speaker 1: sales to Odel, which I think is on really weak ground.
Speaker 1: That's my thought that they'll appeal that if the SEC
Speaker 1: appeals the amount of the penalty. Then Ripple will cross
Speaker 1: appeal simply because they want the flexibility to argue no,
Speaker 1: it should be lower. If they don't file across appeal,
Speaker 1: then all they can argue is one twenty five is right.
Speaker 1: If they cross appeal, I could say no, it should
Speaker 1: be much lower, you know which you want that flexibility,
Speaker 1: So that will depend on what the SEC includes in
Speaker 1: their statement of issues on appeal.
Speaker 2: Do you think when Ripples moved across appeal, this may
Speaker 2: you know, maybe forced the sea. I don't know if
Speaker 2: that's a great word to say. You know what, let's
Speaker 2: just take the one hundred and twenty five million and
Speaker 2: get the hell out of here. Or Ginzer he's he
Speaker 2: doesn't care, and he's just going to cause as much
Speaker 2: chaos because he's an agent of chaos. But maybe the
Speaker 2: election changes things, but until he's kicked out, he's just
Speaker 2: going to create chaos.
Speaker 1: I think that what we see from him is as
Speaker 1: the political landscape turns against him, he doubles down on aggression.
Speaker 1: So I don't believe he's interested in settling. There is
Speaker 1: a process at the second circuit that all the litigants
Speaker 1: have to go through, where you meet and have a
Speaker 1: settlement discussion, but I think it's at this point unlikely
Speaker 1: because there's there's not a great spot to find common ground,
Speaker 1: because it is really the underlying issues that are more
Speaker 1: important than the one hundred and twenty five million dollars.
Speaker 1: Believe it or not, it's a lot of money. But
Speaker 1: you know, our trades on the secondary market where the
Speaker 1: seller is the company or the senior executives at the company,
Speaker 1: if those are not securities transactions, and that certainly impacts
Speaker 1: all of the exchange cases where you've got even a
Speaker 1: more remote scenario where it's just some miscellaneous person unrelated
Speaker 1: to the issue, who's deciding to sell their salona, you know,
Speaker 1: to somebody else who wants to buy the salon. I
Speaker 1: hope it goes up. That's once removed from what we
Speaker 1: have here in Ripple, and so you know, it undermines
Speaker 1: It's not a binding precedent. You and I have talked
Speaker 1: about that before. It's not a binding on other judges,
Speaker 1: but it is out there as persuasive President. We've seen
Speaker 1: a couple judges explicitly say I think Judge Torres was right.
Speaker 1: I'm adopting her reasoning. You know, so they want to
Speaker 1: change that and they think, you know, probably like the
Speaker 1: experts who talk to Charlie Gasparino, they think they have
Speaker 1: a good a good chance at getting that reversed.
Speaker 2: Now, Coinbase, speaking of exchanges, they asked the judge in
Speaker 2: their case to certify their interlocatory appeal so that they
Speaker 2: may present their case at a second circuit alongside Ripple.
Speaker 2: Break that down for us, what are you trying to
Speaker 2: do there?
Speaker 1: Well, when the judge denied Coinbase's motion to dismiss, I
Speaker 1: was at that hearing and it was pretty clear to me,
Speaker 1: and I was sitting right next to John Deaton that
Speaker 1: this was not going to go Coinbases way. And when
Speaker 1: that happened, Coinbase immediately requested that the judge certified her
Speaker 1: decision for interlocatory appeal to address the fundamental question of
Speaker 1: are these tokens traded on the secondary market? Securities?
Speaker 2: Are?
Speaker 1: Aren't they? And she never ruled on it, which is
Speaker 1: really weird because an interlocatory appeal should get going quickly.
Speaker 1: So the whole point is to like say time, by
Speaker 1: getting the appellate court to decide a critical issue in
Speaker 1: the case that will bring everything or virtually everything you know,
Speaker 1: to a head and bring the case to an end,
Speaker 1: and she never ruled on it. They filed it in April,
Speaker 1: and so when when the SEC appealed Ripple the Ripple decision,
Speaker 1: Coinbase logically said, hey, here's another chance to ask the judge, Look,
Speaker 1: this issue is going up and the second Circuit should
Speaker 1: have the perspective of your ruling and the broad and
Speaker 1: address the broader question of tokens in general, because remember, Ripple,
Speaker 1: the Ripple case is only going to be about the
Speaker 1: facts and circumstances around the sale of XRP, and it
Speaker 1: probably will not announce a new rule of general applicability
Speaker 1: to all the tokens. And so that's what Coinbase wants
Speaker 1: to kind of short circuit all of this and bring
Speaker 1: it to a head. And it makes sense, and that
Speaker 1: was a really good move by them. And interestingly, I
Speaker 1: was just looking at the docket earlier today. The judge
Speaker 1: got all the lawyers on a telephone conference yesterday after
Speaker 1: Coinbase sent their letter in and it doesn't say what
Speaker 1: they talked about, but it wouldn't surprise me if they
Speaker 1: were talking about interlocatory appeal, and the judge could have
Speaker 1: asked the SEC, hey, look, your appealing and Ripple related issues.
Speaker 1: Aren't you in favor of interlocutory appeal too? But they
Speaker 1: probably won't be, and so she hopefully will make a
Speaker 1: decision one way or another about that. But I think
Speaker 1: it would be great for Coinbase to be in on
Speaker 1: the same track as the Ripple case and heard by
Speaker 1: the same panel at the second circuit, so that they
Speaker 1: get the full you know, impact of the entire crypto
Speaker 1: industry explaining the significance of this determination. I think it'd
Speaker 1: be really good if they're not allowed in interlactory appeal. Nevertheless,
Speaker 1: I expect a wave of amekas briefs from the industry
Speaker 1: and hopefully from some key politicians coming in on the
Speaker 1: side of Ripple.
Speaker 2: Rookie questions, James, why didn't the judge complete the work
Speaker 2: there in that Coinbase case? Is that some sort of malpractice?
Speaker 1: Well, this happens, and this is one of the most
Speaker 1: frustrating things for clients. So I was just thinking about
Speaker 1: this the other day. You know, I'm retired, but this
Speaker 1: happened all the time. Client would say, James, it's been
Speaker 1: three months since the argument. Why is there no decision?
Speaker 1: I don't know. She's you know, judge's busy clerks are busy.
Speaker 1: She's got two hundred cases to deal with, you know,
Speaker 1: and then it's six months. James, We're trying to run
Speaker 1: a business here. We don't know if what you know,
Speaker 1: the thing that is an issue in the case is
Speaker 1: critical to our business. We want to know yes or no,
Speaker 1: is this good or bad? And they want you know,
Speaker 1: they're always asking, hey, could you just call the judge
Speaker 1: reminder And the answer to that is, of course, no,
Speaker 1: you can never do that. Hey, could we send in
Speaker 1: a letter prompting the judge to rule. No. They take
Speaker 1: offense at that by saying, hey, you're not doing your job.
Speaker 1: You're awfully slow. What's up with that? So the beauty
Speaker 1: of the scenario for coinbase is they were given a
Speaker 1: reason to send in this letter with the appeal in ripball,
Speaker 1: so that they had cover for and you could see
Speaker 1: in the letter they don't say, you know, it's been
Speaker 1: a lot of several months, your honor, you haven't done anything.
Speaker 1: They kind of didn't say that, but put it back
Speaker 1: on the front burner for her, And so that was
Speaker 1: a good move by them, and I think it would
Speaker 1: be good for the entire industry if that interlocatory appeal
Speaker 1: was granted, for sure.
Speaker 2: Yeah, so many exchanges right now locked up in battle.
Speaker 2: I mean Robin hood unis even though they got just
Speaker 2: Wells notices. But usually Wells notice is a precursor to
Speaker 2: what is going to come with a you know, a lawsuit.
Speaker 2: But you got cranking and so forth. Let's talk about
Speaker 2: XRP ets. You got a lot of filers, well, I
Speaker 2: should say not a lot, but two, and then Gray
Speaker 2: scarably launched their XRP trust. However, these things have to
Speaker 2: be approved by the SEC. Do you think this appeal
Speaker 2: by the SEC is kind of the It will be
Speaker 2: a roadblock. They're going to say, you know, we're not
Speaker 2: gonna we're not going to prove this because hey, we're
Speaker 2: not sure what's going to be the outcome here.
Speaker 1: Do I think that they would use that as a
Speaker 1: rationale to deny. I think they would, And they could say, look,
Speaker 1: there is uh uncertainty here, which would make the disclosures
Speaker 1: really tricky in launching an e t F because in
Speaker 1: order for the for there to be an e t F,
Speaker 1: the asset has got to be a commodity because these
Speaker 1: are called commodity based trusts, these e t ps and
Speaker 1: so I don't think they want to grant uh the
Speaker 1: x RP E t P. That's that's their inclination. I
Speaker 1: think they felt a little trap. They certainly felt trap
Speaker 1: with the Bitcoin, and then with the Bitcoin precedent, they
Speaker 1: went ahead with the with the ether, and so I
Speaker 1: my this pure guess work. I don't know. My guess
Speaker 1: is they're going to drag it out. They might force
Speaker 1: somebody to sue them again like what happened with the
Speaker 1: Bitcoin thing, and you know, ultimately probably lose and be
Speaker 1: forced to approve at some point. But again, this is
Speaker 1: another one of those instances, as you pointed out, where
Speaker 1: there's this whole political dynamic, and so if the leadership
Speaker 1: of the SEC were to change, then you'd have certainly
Speaker 1: a lot more openness to these kinds of products.
Speaker 2: Yeah, and you know what I thought about as you're
Speaker 2: saying that the hearing, We had just a couple of
Speaker 2: weeks ago where all five commissioners were before the House
Speaker 2: Financial Committee and the question was asked to each commissioner,
Speaker 2: yes or no, would you be open to Congress providing
Speaker 2: updated legislation and so forth. You got yeses from you
Speaker 2: in the Democrat commissions, like Crenshaw and so forth, and
Speaker 2: obviously hesseburst Mark, Youada begins her couldn't even answer that,
Speaker 2: and he's just like, you know, trying to answer a
Speaker 2: question with a question and stalling and you know, deflecting.
Speaker 2: It's pathetic. And boy, I can't wait for this guy
Speaker 2: to get out of there. And I know, just this
Speaker 2: was it this week. Yet we got some candidates who
Speaker 2: could potentially replacing or replace him that came out from
Speaker 2: the Trump camp. What are your thoughts on some of
Speaker 2: those guys.
Speaker 1: Well, a couple of things. One, as I watched that hearing,
Speaker 1: I really felt like this whole discussion of fair notice
Speaker 1: was really helped a lot. I mean, there have been
Speaker 1: many many statements by hester person dissentse and Uda, but
Speaker 1: this one it seemed like it was dialed up. You know,
Speaker 1: on the stereo up to eleven that there's no way
Speaker 1: of knowing what the guy at the end of the
Speaker 1: table here Gary might be up to next. You know,
Speaker 1: it's impossible to predict. And that's not the way our
Speaker 1: system is supposed to work. You're supposed to have a
Speaker 1: rule of law that is clear so that people can
Speaker 1: comply with that rule of law. And if they choose
Speaker 1: to violate that rule of law, great, they get prosecuted
Speaker 1: for that, but you've got to start with a rule
Speaker 1: of law. And now the thing is just morphing to
Speaker 1: where the SEC apologized for using the digital asset security
Speaker 1: term to imply that the token is itself a security.
Speaker 1: That they apologize the one judge, but I can't guarantee
Speaker 1: they won't continue to try to make that case that
Speaker 1: the token somehow embodies an investment contract, which is ridiculous.
Speaker 1: With respect to candidates to replace Gary against Ler, I
Speaker 1: think just about anybody you know who has a background
Speaker 1: in the crypto industry. Dan Gallagher is mentioned, he's the
Speaker 1: GC at Robin Hood. It would be a vast, vast improvement.
Speaker 1: But you know, the question is what do you really
Speaker 1: really want to accomplish. If if your goal is to
Speaker 1: open up you know, the potential for innovation in the
Speaker 1: United States around blockchain technology and financial technology built on
Speaker 1: blockchains and all of that, that's great, that's important, that
Speaker 1: should happen. But if you're of a mind that what
Speaker 1: you really want is to reduce the size and scope
Speaker 1: of our government, starting you know, with these agencies that
Speaker 1: just get larger and larger budgets every year and hire
Speaker 1: more people. And so you have the SEC who now has,
Speaker 1: you know, its own climate change policy and it's implementing
Speaker 1: ESG policies, which there's no congressional authorization for that. So
Speaker 1: my point is, if you are looking to really really
Speaker 1: grow the government smaller so that it matches what is
Speaker 1: authorized in the United States Constitution, then you might not
Speaker 1: actually want somebody who used to work at the agency
Speaker 1: whose inclination is to defend the agency, defend the size
Speaker 1: and scope of the agency and the authority of the
Speaker 1: agency against others in the administration who want to you know,
Speaker 1: let's get rid of fifty percent of the people here,
Speaker 1: let's get rid of fifty percent of the regulations. If
Speaker 1: you have somebody who grew up the SEC. And by
Speaker 1: the way, there's like this network of SEC alums and
Speaker 1: I'll get once they leave, you kind of join the
Speaker 1: SEC alumni network and get together and you trade cases. Hey,
Speaker 1: i've got a conflict in this case, you want to
Speaker 1: handle it, you know, and then of course you'll send
Speaker 1: one back to me, you know, And they work together
Speaker 1: and all, and that's not a terrible thing. But anyway,
Speaker 1: they defend the institution instinctively. And so my point is,
Speaker 1: what do you want to accomplish. If you want to
Speaker 1: just you know, make sure you innovation has a runway
Speaker 1: here in the United States, that would be one thing,
Speaker 1: and that's an important thing. But if you really want
Speaker 1: to reduce the scope of government, you may not want
Speaker 1: somebody who grew up at the SEC.
Speaker 2: Now, speaking of the alumni who got SEC Director of
Speaker 2: Enforcement is leaving gerbier Griwall. He's going to be out,
Speaker 2: I think by tomorrow, and there's talks that he's going
Speaker 2: to go to a law firm that is supposedly defending
Speaker 2: cryptocomp And I'm just like, what the hell is this
Speaker 2: is this crazy revolving door. And I know it's not specifically,
Speaker 2: this happens as you mentioned, these government agencies get so big,
Speaker 2: these people get so much power and so forth, and
Speaker 2: I'm just like, how do you spend years attacking in
Speaker 2: the industry and now you're going to go work in
Speaker 2: the industry. And we saw Jay Clayton do that too,
Speaker 2: Bill Hinman and so forth.
Speaker 1: Well, this is interesting something I've I was heavily involved
Speaker 1: with in my career and recruiting people from the SEC,
Speaker 1: the law firm. Mill Bank is a very old, established,
Speaker 1: old line law firm that's been around for a long
Speaker 1: long time, well well over one hundred and fifty years,
Speaker 1: and it has a fantastic reputation. I was a little
Speaker 1: surprised by this hire. I don't think mill Bank is
Speaker 1: on the forefront of representing the crypto industry. That's not
Speaker 1: to say they don't have crypto clients, but if you
Speaker 1: were to ask me to write down a list of
Speaker 1: ten law firms, they would not be on that list
Speaker 1: of those fighting for the crypto industry. But when I
Speaker 1: was recruiting from the sec we would do very significant
Speaker 1: background checks on anybody we would bring in a certainly
Speaker 1: as a partner. You know, there's hiring from law schools
Speaker 1: of young lawyers just starting out, but when you hire
Speaker 1: a partner, you don't want to make mistakes. You do
Speaker 1: a deep study, or at least we did, because we
Speaker 1: may maintained a very very high bar for talent, and
Speaker 1: it's the reason that we went from non existent in
Speaker 1: twenty ten to being recognized as the number one securities
Speaker 1: regulation law firm in the Entry in twenty twenty one.
Speaker 1: Because we were really strict about our hiring so why
Speaker 1: am I saying all this stuff? Well, the reason is
Speaker 1: this guy had a role in the debt box case.
Speaker 1: He was not the guy on the ground in Utah
Speaker 1: handling the debt box case day to day, for sure.
Speaker 1: But what happened was when those guys got in trouble
Speaker 1: and the judge issued an order asking the SEC to
Speaker 1: explain why they should not be sanctioned. Then grew All
Speaker 1: got involved and the judge was not impressed by his involvement,
Speaker 1: and the judge pointed out that the SEC misrepresented some
Speaker 1: case law to him after the misconduct had come to
Speaker 1: the surface, and that it was at the same time
Speaker 1: that grew All submitted an affidavit in the case personally
Speaker 1: hands on involved and there were more problems at that time.
Speaker 1: The problems were compounded and the judge said that it's
Speaker 1: not me saying this, and they doubled down on misrepresentations
Speaker 1: to the judge. And so what exactly the role of
Speaker 1: mister Garral was in all of this, I do not know,
Speaker 1: but he was certainly involved and that would have given
Speaker 1: me personally some pause in hiring him.
Speaker 2: Yeah, but I think eleanor Turned of Fox Business highlighted
Speaker 2: that there's already a former SEC official there who's actually
Speaker 2: defending Binance working in the Binance case, and Grewall is
Speaker 2: the one who launched the enforcement action against Finance. So
Speaker 2: part of me is like, you know, are these guys
Speaker 2: not really true believers in what they're doing and they
Speaker 2: just follow order some Genzert But when they leave, they're like, Okay,
Speaker 2: I'm going to go work for the crypto industry because
Speaker 2: maybe I can get a nice paycheck. I'm not saying
Speaker 2: is anything necessary wrong with going work in doing that,
Speaker 2: but like you were just on the forefront of attacking
Speaker 2: the industry, it's just so weird.
Speaker 1: Yeah. I would say too that the Ripple case itself
Speaker 1: is a little bit weird and why that was brought
Speaker 1: in the first case. In general, I would say this
Speaker 1: is very typical and normal because, let's face it, Ripples
Speaker 1: got Mary Joe White and Andrews Siresny representing them, Siresney
Speaker 1: being the former Director of Enforcement, you know, an exact
Speaker 1: parallel situation in Binance. They've got Bill McLucas, who was
Speaker 1: a legend at the SEC and Enforcement, and so when
Speaker 1: you're looking for the best lawyers to defend you typically
Speaker 1: That's why I hired so many SEC lawyers. We had
Speaker 1: a couple dozen in my firm. You want people who
Speaker 1: are experienced in the SEC high really good smart people
Speaker 1: in general. So and then they learn, you know, inside
Speaker 1: the agency, how everything works, and the strategies that are
Speaker 1: effective those that are not. And so it's not unusual
Speaker 1: at all in our business. And you know, my I
Speaker 1: remember distinctly one of my partners. We were in the
Speaker 1: Division of Enforcement there for what's called on the record testimony,
Speaker 1: which is essentially a deposition, and we were walking down
Speaker 1: the hallway with my client and I brought my partner
Speaker 1: because he worked at the Division of Enforcement for a
Speaker 1: long time. And what happened was a number of lawyers
Speaker 1: came out of their offices and hugged my partner. And
Speaker 1: so my client was looking at this saying, this is great,
Speaker 1: I must have the right lawyers here. They're hugging my lawyers.
Speaker 1: So that just gives you sort of an indication there
Speaker 1: is a value there to hiring people who have been there,
Speaker 1: done that, and still have relationships where you can have good,
Speaker 1: honest exchange of information. Hey, where is this investigation actually going,
Speaker 1: you know, and can we work something out? It's easier
Speaker 1: to settle perhaps with someone that you've known for a
Speaker 1: long time, with more frank dialogue between the two of you.
Speaker 1: So in general, it's not unusual. I think with Gruel
Speaker 1: and his involvement in the debt box thing, would me personally,
Speaker 1: I'm just speaking for me, would give me a little
Speaker 1: bit of pause.
Speaker 2: Man. Anyway, let's move on because I'm upset about that.
Speaker 2: So now Crypto dot Com launch a proactive lawsuit against
Speaker 2: the SEC. We saw Consensus did this and it was
Speaker 2: one out of Texas legilex as well. I think it
Speaker 2: was earlier to sear her last year. What are your
Speaker 2: thoughts on Crypto dot com proactively going against the SEC
Speaker 2: after getting a wells notice.
Speaker 1: Well, I think it's good to be aggressive. I think
Speaker 1: they've got a tough challenge because the SEC always counters
Speaker 1: with the case is not ripe. You don't have standing
Speaker 1: because under the Constitution there must be a ripe case
Speaker 1: or controversy. And all we did at the SEC was
Speaker 1: threatened to sue you. We didn't decide to sue you.
Speaker 1: If we had decided to see you, then maybe you'd
Speaker 1: have you know, And this is this is really sophistry,
Speaker 1: but it works. Often in court to say it's not
Speaker 1: yet ripe, because the Wells notice means that the staff,
Speaker 1: distinct from the commissioners themselves, the staff of the Division
Speaker 1: of Enforcement, has come to the conclusion that they are
Speaker 1: going to recommend to the commission to institute a lawsuit,
Speaker 1: and that the Wells notice gives the defendant the targeting
Speaker 1: investigation and opportunity to submit something called a wealth submission
Speaker 1: to try to change their mind, either change the staff's
Speaker 1: determination to do that, or it's also shared with the
Speaker 1: with the commissioners and they read it and on a
Speaker 1: rare occasion they might might decline to approve what the
Speaker 1: enforcement people want, but in general they do rubber stamp
Speaker 1: their recommendations of enforcement if it gets all the way
Speaker 1: up to that point. But in any event, it's it's
Speaker 1: gonna be tough for crypto dot com to get over
Speaker 1: the hurdle of this initial motion to dismiss if the
Speaker 1: SEC is going to bring saying it's not right. And
Speaker 1: you know, that's what they said in response to Freddie
Speaker 1: Rispoli's case about I'd like to know whether ethereum is
Speaker 1: or is not a security because I'm using it in
Speaker 1: my in my practice it's it's you know, it's so
Speaker 1: fundamental that we're entitled to know what the rule of
Speaker 1: law is so that we can comply, particularly lawyers we have,
Speaker 1: well most lawyers, almost all lawyers really really want to
Speaker 1: comply with the law. And that's what Freddy was doing.
Speaker 1: And the SEC said, yeah, incredibly, they said we haven't
Speaker 1: decided yet whether athereum is a security or not. And
Speaker 1: they got away with that, you know, and it was
Speaker 1: just hurt at the Ninth Circuit and the hearing didn't
Speaker 1: go very well, you know. So unfortunately, I think, UH
Speaker 1: Crypto dot Com has got an uphill battle just to
Speaker 1: stay in court down there, but you know, I'm pulling
Speaker 1: for him.
Speaker 2: M M. Final item here John Deeton versus Elizabeth Warren
Speaker 2: debate coming up one of the UH, I would say
Speaker 2: important election items aside from being the president, because Elizabeth
Speaker 2: Warren in power is Gary Gins her big time, she
Speaker 2: has a lot of power or seeing the financial markets.
Speaker 2: What do you think about this debate coming up? And
Speaker 2: are you you know, are you expecting some fireworks and
Speaker 2: things like that?
Speaker 1: I think so, you know, John has acknowledged that he's
Speaker 1: got an uphill, difficult, narrow path in Massachusetts just by
Speaker 1: the nature of you know, the demographics there in the
Speaker 1: you know, the the very large advantage that there is
Speaker 1: a Democratic registration versus Republican registration, although there are a
Speaker 1: lot of a lot of independents there and they have
Speaker 1: a tendency to vote for Republicans for governor. You know,
Speaker 1: they've done that quite a bit, so they are open
Speaker 1: minded people. You know, there's been some polling coming out
Speaker 1: that says that Elizabeth Warren's approval numbers are the lowest
Speaker 1: they have ever been. You know, she's been up there
Speaker 1: for twelve years. So I'm very excited to see the debate,
Speaker 1: as I know many people are. I think, if I've
Speaker 1: said this from the beginning, if John gets his message out,
Speaker 1: he's gonna win. You know, but it takes money to
Speaker 1: get get his message out. And she's got an enormous advantage,
Speaker 1: you know, being such a powerful senator. It tends to
Speaker 1: attract campaign money, and so she's got a lot of money,
Speaker 1: and John, you know, could really use some support from
Speaker 1: the crypto industry and from people who just care about
Speaker 1: common sense leadership in the Senate. And we've got to
Speaker 1: you know, get this illegal immigration problem under control. You know,
Speaker 1: it's not the top one percent who are hurt or
Speaker 1: impacted by this. It's the people at the bottom, the
Speaker 1: working poor, you know, who are you know, being crowded
Speaker 1: out in terms of the availability of support from the
Speaker 1: government by this this large influx of illegal immigration. And so,
Speaker 1: you know, there are a number number of issues that
Speaker 1: that I look forward to to hearing about. But fundamentally,
Speaker 1: John understands the people who are struggling from you know,
Speaker 1: inflation and are really really worried that their children or
Speaker 1: their grandchildren are not going to have the opportunity that
Speaker 1: we call the American dream. You know. And my mother
Speaker 1: immigrated here when she was nineteen years old, and that's
Speaker 1: all she wanted from me was to live the American dream.
Speaker 1: And education was really beat into my head about how
Speaker 1: important it is. And and so I've been, you know,
Speaker 1: a beneficiary, just just as John, you know, as the
Speaker 1: amazing story of what John has overcome and what he
Speaker 1: stands for is no, we're not giving up on the
Speaker 1: American dream. That thing is alive and well and he's
Speaker 1: going to fight for it. And the indispensable element of
Speaker 1: the American dream is freedom. Part of the motto of
Speaker 1: the United States Marine Corps is first to fight for freedom.
Speaker 1: That's who John is, and I think that's what the
Speaker 1: people in Massachusetts want, and so I hope a bunch
Speaker 1: of people will tune in and really get to know
Speaker 1: John and get behind it.
Speaker 2: Absolutely, I'm rooting for John and fingers crossed you can
Speaker 2: get this done. And obviously there's multiple issues, you know,
Speaker 2: as you clearly stated, and you know crypto is obviously
Speaker 2: one of them because Warren formed the anti Crypto Army.
Speaker 2: I don't know what made her decide to do that,
Speaker 2: but I'm hoping she gets taken down in the election.
Speaker 1: World.
Speaker 2: Yeah, James, always a pleasure. Thank you so much. I
Speaker 2: appreciate your insights.
Speaker 1: Thanks Tony, always enjoy the conversation with you.