Kathryn (KK) (3:33)

And we're back. So let's kick things off with some exciting news. So very recently the CFTC announced their Innovation Council and what is interesting is this is actually formerly the Technology Advisory Committee. It is not uncommon for the CFTC or other regulators to have external advisory committees. You know, the CFTC has had ones like the Market Risk Advisory Committee, the Global markets advisory committee, etc. So what they did is they took the Technology Advisory Committee and they changed up and they have announced 35 new members of this committee. Most of These members are CEOs and I think we have some thoughts about this committee, good and bad. So the idea behind this is that the committee is providing recommendations relating to the impact and implications of technological change on financial markets in the US economy. So I want to kick this off by saying that I love this theoretically, right that regulators should be sourcing thoughts and and intel and industry specific intel from the private sector, from their constituents. It is meant well and these committees are important and can be useful. I have a couple problems with this committee, Candy. First, it is all CEOs so good and bad. I think CEOs occupy a very specific role, a strategic role in a company. But when you talk about regulatory policy or interaction with regulators, oftentimes it should really be the policy people or the lawyers or the product leads kind of providing this direct feedback. And I'm also extremely skeptical that you're ever going to get 35 CEOs in a room together and accomplish anything productive whatsoever. I mean at one point that is very notable is the first White House meeting on Clarity that really made any progress. They didn't invite the CEOs, they invited the policy people because everyone needed to get their hands dirty. The second point I'll make, and it is interesting because I think V. Jesse and I all observed this immediately upon the release of the announcement and others either did not or chose not to comment on it, is that three out of 35 of these individuals are Women. So I know that in 2026 we're not allowed to talk about representation anymore. This pod.

V (6:03)

We're allowed to talk about whatever we

Kathryn (KK) (6:05)

feel is, come on. I mean, it's 2026 and I'm the biggest believer of if you can see it, you can be it. Every time I've had a notable speaking engagement, I put my 5 year old daughter in front of the screen and make her watch me. In part because I want her to be proud of her working mom, but I also want her to understand and internalize as a little girl that women should have a voice and should have a voice in important regulatory strategy.

V (6:35)

And I'm sure you put your son in front of it too. Because it's important that when we talk about building this great future of finance, that the future of finance doesn't look exactly like the past. Because we're trying to build something better and more inclusive where everybody can have access to finance, everyone can have access to equal financial instruments. And we use this narrative of like that crypto is for everybody and we want to make it accessible to everybody. And some of the best people I know in crypto are strong, powerful women building in the space. Absolutely. So many that could have been on, you know, this advisory committee. And I'm just, I'm honestly shocked. Not just that it's so few, but that there really hasn't been any conversation about why there are so few. I just know that we can do better.

Kathryn (KK) (7:26)

And this is, this goes to my point of some people will say where there's, well, there's not enough female CEOs. Well, why should this be CEOs in the first place? Like CEOs have every right and privilege to send their deputy to designate their representative on this committee. Maybe a representative of the entity that is best suited to engage with regulators, for example. And so there's females at every single one of these companies, I'll just note. And so you can have a cross section of market participants that reflect the ecosystem. And we spend so much time fighting against this whole crypto bro, crypto bro perception. And then we see this and obviously this is not just a committee of crypto. There are entities represented that are not crypto. But everyone has noted that we're looking at a very wide, you know, kind of emerging technology, crypto focused council. So it's a bunch of crypto bros, which is problematic, I guess. I don't know. It's so disappointing.

V (8:29)

I have a question about that. Kk, you had talked early on about the purpose of the Committee being not just crypto but you know, the entire financial system. And there are not just a lot of men, but a lot of representatives from crypto companies. And so is the committee supposed to be about incorporating crypto into the markets or is it supposed to be much broader? And it's sort of an interesting question because right now, as we think through clarity and the debates and the different coalitions of crypto versus traditional finance and banking versus stablecoin providers, you know, is it just further entrenching those coalitions? Like how do we think about the distinction here?

Kathryn (KK) (9:13)

Well, it's a great question because look, Chair Selig specifically said that this committee's work is, you know, hopefully helping the CFTC future proof its markets and you develop clear rules of the road. So you need innovation, you need emerging tech. Of course it's going to be crypto, emerging tech oriented. And the other interesting thing is the vast majority of the representatives on the committee are from entities. There are a few academics, but I think pretty much all of the entities, or the majority of the entities I should say, that are not crypto are engaged or touching or invested or experimenting in crypto. So almost no one is immune from this asset class. Like if you're looking at CME and CBO and occ, obviously they're touching crypto to some degree. I think the question that you raise is a good one. How do you come up with the cross section like of any type of committee? You go straight to your major constituents like the CMEs of the world. No committee would ever not have CME in this room. But you also have kind of the young and hungry entities. Like I noticed that we have the CEO of Rothera, which is a new and a new prediction market, for example, started by Tom Chippas. It's really hard to figure out who's going to be most beneficial in taking that private sector intel that you only understand as a market participant and guiding, you know, Mike Selig as the standalone chair to ensure that the CFTC is best accommodating for kind of this emerging technology.

V (10:55)

Do these. Yeah, I think GoFi.

Jesse (10:58)

Yeah, I sold. One observation I had was like I didn't feel like there was that much defi representation on the committee. So that's the first thing. And then going back to your guys comments about the composition of it, to me it feels like just based on who it consists of, that it's probably going to be or maybe was intended to be more symbolic than actually substantive. Right. So I don't know what you guys Think about that.

V (11:24)

But I wonder if we have to take into consideration the fact that there's like one commissioner right now of the cftc. Is that right? And so does this advisory committee matter more than normal because there aren't other brains to sort of bounce ideas off of.

Kathryn (KK) (11:41)

It's a great point. And you know, it is interesting. Prior to very recently, it was completely unprecedented to only have one commissioner. Now, it is obviously legally permissible to have one commissioner. There's nothing in the Commodity Exchange act that says you need more than one. However, it was obviously not the intent, in part evidenced by the fact that when commissioners are appointed their commissioner, they're appointed to staggered terms by design, so they'll never have a situation where there's one. So, you know, Chair Selig can effectively do anything he needs to do and wants to do. But if I were a commissioner, I would want other commissioners to work together and to debate and to provide those different perspectives. I don't think that this committee is going to replace that back and forth, that balance that you see with a full suite of commissioners. I think that obviously, again, the intent behind creating a resource for cutting edge innovation in the derivatives and commodity markets, that's a good goal. Right. We all support that. But really, if you look at the names on this list, it's like, I don't know, like, how much time does Don Wilson really have to sit and

V (12:53)

work through the cea?

Kathryn (KK) (12:54)

Like, I just, I don't think he has that much time. Maybe he has more free time than I anticipated. So to me, practically, I'm dubious that they're really going to get meaningful work and perspective from this committee.

Jesse (13:08)

Yeah, that's why I think it is meant to be just more symbolic and will probably end up being la.

Kathryn (KK) (13:13)

Yeah, yeah, yeah. So on that note, I want to switch gears because this is not a CFTC podcast. I promise, as much of a CFTC nerd as I am, this is not that there's just a lot of stuff happening from the cftc. So the other thing happened is Chair Mike Selig, who really kind of sailed through the confirmation process, published kind of a spicy op ed in the Wall Street Journal yesterday using, and I'm forgetting the specific language, but he said something about the CFTC would no longer stand idle and watch the states kind of infringe on their jurisdiction, referring to prediction markets, and made a video. Yeah, yeah. And then he did a video today which weirdly gave me PTSD from Chair Gensler's office hours videos in like. So this was fascinating. To me. And then I just noticed, like literally minutes ago, he released a statement going after, I believe, Chris Christie or saying, yeah, Chris Christie is leading a campaign to ban American prediction markets in states across the country. We're simply not going to allow that to happen. So this is really like, oh, no.

Jesse (14:25)

He responded to him like last week also, like, they've kind of been going head to head.

Kathryn (KK) (14:29)

So. So this is guns blazing politician Chris Christie is involved.

Jesse (14:34)

Yes. When was the last time you thought of him?

Kathryn (KK) (14:38)

I missed that. Okay, so I need to obviously bone up on Chris Christie's involvement here. I have not heard of that name in a while, but look like there's a lot of things happening here and we are going to dig in more on prediction markets generally in a future episode for sure. But for now, I'll just say I conceptually agree with Chair Selig. I do believe that prediction markets should be appropriately in the purview of CFTC jurisdiction. And the most dangerous prediction markets are actually the offshore, unregulated prediction markets. I also believe that this litigation environment where the states are suing the prediction markets and the prediction markets are suing the states. And it's just, I'm honestly losing track of how many active suits there are. It's something like 10. It's constant. Obviously this is going to end up in the Supreme Court's kind of lane, but this does raise some interesting questions as to why Chair Selig is being so, so aggressive on this front, particularly after his commentary during his confirmation hearings where he said he hadn't made up his mind on this or that he

Jesse (15:47)

would like, defer to the courts. And now they're like actively inserting themselves right into these state court cases.

V (15:55)

It's just, where did states rights go in this conversation? I mean, the AI bill came out saying states can't regulate AI. Now the CFTC should not be involved in prediction markets, even if it touches sports betting. Although it's not sports betting. And it's just an interesting narrative and direction that all the agencies are sort of moving to. Like, states don't get to decide what happens within their borders. And that's a much larger constitutional federalism question that it seems like it's becoming pretty clear from this current administration which direction they're going in. And that is going to create strange bedfellows. It already is, as you can see, particularly in the AI debate, where a lot of states, whether they're red or blue, really want to assert their ability to control what happens in their borders, because that is sort of the default for under our Constitution that states should be regulating unless it says otherwise. Right. So I think that this is leading to a huge constitutional debate, which is, is that where we really want prediction markets to be stuck in this interim until we figure out what the Supreme Court decides or whether preemption like, applies here and does it apply everything else? Like, I'm not sure if we even have a path to clarity right now. Small C clarity.

Kathryn (KK) (17:25)

Yep. Yep. And I was having an interesting back and forth with Adam Cochran on Twitter, who I really respect. And it's funny, there's like a very small group of people within crypto that really understand commodities. It is a very small group of people. So I would say PSA be very dubious of the information you're getting off crypto Twitter when you're talking about commodities. It's just most people don't understand it. It's very complicated. But Adam made a great point. He noted that 90% of the issues prediction markets are facing is that they have no idea how to actually communicate the and concept of event contracts in a way that captures their history and helps users understand the value. And I like that point. He responded to my tweet actually with a fun history fact. You know, that's my M.O. that there historically have been prediction markets for hundreds of years. And there were prediction markets, or prediction markets, I should say, political betting markets that were open, openly operated on Wall street in a very significant scale, like hundreds of millions of dollars in today's dollars betting on presidential elections. And this was perfectly acceptable.

Jesse (18:34)

The.

Kathryn (KK) (18:34)

The landscape changed when actually the. The world's thinking on gambling evolved in a. In a negative sense. Now this brings us to kind of the crux of this issue is, is this gambling or is this product that should be regulated by the Commodities Exchange act in this case, I believe it is. It's. It's a binary option, a swap which neatly falls under the cea. But I also understand how reasonable minds can differ. And that goes to these points of who should decide that? Should it be the chair or should it be the courts? Well, I mean, I can tell you

Jesse (19:10)

one thing, it's going to be the Supreme Court. Like, I think there's no doubt that this issue will eventually end up there. And I think it will probably happen sooner than most people think. Like, I saw someone saying it'll be like three years at least, and by that time, like, the markets will have basically like, run away with all of this. I don't think that's true. Right. Appellate courts can take up issues that they, they know are like, in the public interest and are a priority. They can take them up sooner and you could have like a notable circuit split or whatever. You can have circumstances that would take, that would allow the Supreme Court to take this up a lot sooner than people think. So I think this might be settled. I, I mean, I don't think it'll be settled like this term, but like, maybe as soon as next year.

V (19:54)

How many Supreme Court justices have been on a prediction market or how many will have been by the time they have to decide? Very important.

Jesse (20:01)

I don't know, maybe a lot of them.

Kathryn (KK) (20:03)

There's got to be a contract on like, Polymarket or CalSHI about how the Supreme Court is going to rule. Oh, for sure.

Jesse (20:13)

There's probably multiple.

Kathryn (KK) (20:14)

I, I was a little freaked out because I have a cousin chat with like, all of my cousins, most of which are younger than me because I'm the second oldest, and they, they really don't talk about crypto ever. Like, a couple of my, like, boy cousins have been trading crypto a little bit, but the other day they were all talking about prediction markets and I got a little freaked out. I was like, please be careful.

Jesse (20:39)

Well, because the ads and stuff are like, all over TikTok and, you know, it's everywhere, right?

Kathryn (KK) (20:43)

Yeah.

Jesse (20:44)

They're like, directly appealing to, like, bad demographics.

Kathryn (KK) (20:47)

Yeah. And it's. And hey, this may be part of the future of finance, so it's something we need to understand. Okay. So on that note, we are going to take a quick break and go hear from our sponsors yet again. And when we come back, we are going to talk about some spicy criminal stuff. Frankly, Sam Brakeman Fried is trying again. What does that mean? And crypto ransom and real world risk. We'll be back in a minute.

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Kathryn (KK) (23:30)

Okay, and we're back. So obviously there's always something going on with crypto crime. We always like to remind people that most of crypto is not for crime and is not involved in bad things and is not bad a guy, as evidenced from the three of us. But our our favorite favorite, and by favorite, I mean least favorite crypto villain, Sam Bankman Fried SBF just filed a new motion seeking a retrial in federal court. Go away. SBF v. Tell us more about this.

Jesse (24:05)

Okay, so first off, I really wish that, like, we wouldn't have to think about this for another 25 years, which was the length of his sentence. But alas, SBF is back in the news. So two years after being convicted and sentenced, Right, for fraud relating to the FTX collapse, he has filed what's called a Rule 33 motion seeking a new trial. He claims that there is new evidence and he alleges that witnesses were pressured by prosecutors. So from prison, I don't know if he's doing it like himself or through other people. Well, he's been actively posting on X, trying to reframe the narrative, claiming that FTX wasn't insolvent, alleging government misconduct, and tying his case into just a lot of the broader political stuff that's been happening. So just to take a step back, I think there's three things going on here. One is what is going on with the legal posture? What does this all mean? There's the political stuff, which I just mentioned and then there's the narrative that he's trying to put forth. Right? So from a legal standpoint, asking for a new trial is nothing surprising, right? Almost every high profile federal defendant does this. You preserve issues to raise in your motions, you test the jury instructions. All of that is like par for the course. But federal judges do not grant new trials lightly. Like, this almost never happens. The burden is really, really high. You need to prove that there was a material reversible error. Not just like I was misunderstood or the political environment has changed or something like that. Right. And like, what I think is really funny, I didn't read his Rule 33 motion. I've seen summaries of it. What I think is funny is that this trial, from my perspective, actually seemed like unusually straightforward, like a pretty straightforward case of fraud. The jury instructions were clear. There was like overwhelming documentary evidence. Like I, I worked at the SEC on really complex financial fraud cases, like where it would literally take us years to investigate and unwind complicated accounting maneuvers and emails and financial records. This fraud was not that like, it actually wasn't that interesting. It was literally some stuff in a few Excel spreadsheets by someone like in a hoodie. Right. So, which is also, by the way, why I don't understand how the lawyers made like a gabillion dollars in fees from this. But that is another issue. But anyway, all I'm saying is I don't have high hopes for this motion. And then as for the pardon. Right. Obviously there's like a big political aspect to this. It's not like all legal. We all know presidents can pardon federal crimes, not state crimes, but federal crimes. And the President has done this. He has pardoned folks in crypto like Czechoslovak, like Arthur Hayes, like Ross Ulbricht. Am I missing anyone?

V (27:13)

No.

Jesse (27:14)

I mean, those are.

V (27:15)

SBF posted a sheet of a list of all the people pardoned and wrote his name at the bottom and posted.

Jesse (27:23)

Okay, so those were some like high profile crypto examples.

Sponsor/Ad Reader (27:27)

Right.

Jesse (27:27)

But historically, large scale retail financial fraud is like, doesn't tend to be a very strong pardon and candidate, especially when you're talking about like customer funds that were stolen and misused and especially like when in this situation, I mean, from my point of view, I think I can safely say this would be like universally unpopular within the crypto community. Like maybe one of the one things that might unite us these days. So I really don't see like what the President would be getting out of this. Anyway, that's my take on pardon. Do you guys have anything to add I agreed.

Kathryn (KK) (28:03)

The only thing I'll add is that look like there are some parameters or limitations to pardon, like pardon can't extend impeachment, for example, future crimes, civil matters. So as a reminder, even if SBF were to be pardoned, which I agree would be horrendous, he would still be on the hook civilly. And like, it's like I like to remind people, even though the glove doesn't fit, you need to acquit. Certain criminal actors have been not convicted. They're still on the hook civilly. So in this case, there's still civil implications.

V (28:41)

Even if he were pardoned, civilly is much less.

Kathryn (KK) (28:44)

Yeah. And there have also been historically extremely controversial pardons, like Richard Nixon, Mark Rich, like Patty Hearst, all kinds of interesting pardons from Democratic and Republican presidents. This would probably be one of the more controversial or at least from crypto's perspective. My only take that I'm going to add here is go away, sbf. I never want to hear your name again. You inflicted so much collateral damage on this industry. You put us back from the legislative and policy front. So far, you weaponize the Democrats. I'm going to get off my soapbox in a minute, but it makes me furious that we still have to talk about this sociopath.

V (29:25)

I don't think he. I don't. And there are political pardons all the time. I'm not even just in crypto. Like, yeah, that politics don't ever drive pardons. It's just that there does not seem to be any push politically to have this pardon except from SBF or whomever tweeting. And just to add to your, you know, 33 emotion, like, it is purposely a very brutal hate Hail Mary legal standard because we need to ensure that people get fair trials. But if they get a fair trial, then they shouldn't be allowed to reopen over and over again. There's a lot of other methods for doing that. And there is something interesting about the pro se. I think we defined it a moment ago, but essentially he's not using a lawyer to file this motion. And that could mean he doesn't have the money to pay for it, or it could mean no, none of his lawyers that he spent a gazillion dollars on or whatever number you used me

Jesse (30:22)

really, like, willing to do this ethically.

V (30:24)

So there's something interesting there as well that I'm sure we'll find out about because he will tweet about it.

Kathryn (KK) (30:31)

Oh, God. And FYI, inmates are not permitted to tweet from prison. As Jesse And I both know some inmates are allowed limited access to the Internet. It was actually a Bureau of Prisons, like, pilot program for a while. But most of the time, when you see inmates tweeting, they're actually having someone tweet on the outside. You know, they're sending comms through their lawyer friends. Or Russ Ober, for example, his wife was sending his tweets.

V (30:58)

There are a lot phones in prison, though, so we don't really know. Like, the number of secret cell phones, not so secret in a prison, are pretty extensive.

Kathryn (KK) (31:10)

Spice.

Jesse (31:11)

So to your point about, like, okay, like, let's get. You know, let's be honest. Like, a lot of pardons are political in nature. What I. What I'm concerned about here is that I don't even get what, like, the political justification for this would be. Right? Like, there's this. I think there is this growing narrative that crypto enforcement, like, under the previous administration, was too aggressive or it was too politicized, right? And then, like, you have pressure right now from Democrats arguing that there hasn't been enough accountability, right? And they're, like, criticizing the SEC for dropping all of these enforcement actions ever since, like, the leadership change. So what I'm worried about is that SBF is becoming sort of a proxy for that fight. And we have to be really careful not to confuse those two debates, right? One debate is, how should we regulate crypto? Like, what was wrong with the approach, like, of the last four years?

V (32:07)

Right?

Jesse (32:07)

How do we regulate decentralized systems? And then the other is about, is it illegal to steal customer money and lie about what you're doing with it?

Kathryn (KK) (32:15)

Right?

Jesse (32:15)

Those are not the same conversations. So let's be clear that, like, even if you agree with the political. The narrative that, like, crypto enforcement was politicized, that is not what this trial was about. And so we need to be really careful not to let sbf, like, try to push that narrative.

Kathryn (KK) (32:33)

V was. V. You raise a great point, because as we all know, or as anyone who saw this, Chair Atkins recently testified, and the Democrats hit him really hard. He was asked a lot about corruption. You know, there was definitely an insinuation or an allegation that the SEC dismissal of cases was linked to, effectively, corruption and political influence inappropriately. And I think, you know, we all believe that a lot of these dismissals were not that, you know, the SEC dismissed these cases because they never should have been brought in the first place. Regulators should not pursue an enforcement action where the law is clearly gray. But regulators should definitely have brought all the cases and all the things against sbf, and he should stay in prison involving fraud. Yeah, yeah.

V (33:21)

Just hate how little nuance there is in, like, any of these conversations. Because, like, the corruption thing to me is like a perfect example, like SEC dismissing cases that should not have been brought. That is not corruption. That's assessing legal theory. Right. And there are some substantive allegations about corruption in the administration and certain tokens. And like, that is a corruption conversation that maybe the Dem should bring up. But conflating it with what Atkins is doing at the SEC just, it minimizes the entire corruption argument. It makes crypto on its, you know, become on the defensive about things it shouldn't have to be defensive about, and it further entrenches these coalitions. And maybe that's my big takeaway for this week of we are just further going into our holes, hiding under blankets with people who agree with us rather than engaging like we should to develop

Kathryn (KK) (34:16)

this tech up tldr, call your mom, call your friends in tradfi, call your friends who work in manufacturing, get out of your crypto bubble, touch grass, and talk to the normies. Talk to the civilians. Okay, so on that note, not to be a buzzkill with our topic three, but there's also been some crazy normie stuff going on with crypto. So I'll just tell you anecdotally, I am on a text message chat with 25 other suburban Chicago moms, okay? It's my mom chat. Most of the time. It's like trading recommendations for your electrician or a tutor or something like that. So my chat, for the first time ever, was blowing up the other day about crypto. Why? Because every mom in America is following the kidnapping of Nancy Guthrie with bated breath. And for those crypto people who aren't aware of this, Savannah Guthrie, a very prominent news anchor, her elderly mother was kidnapped. It's actually beyond belief, devastating. I don't think anyone can contemplate how horrifying and sad this is. And she has been missing for weeks now. Well, crypto, unfortunately, has entered the chat because the kidnappers have left, I believe now, two ransom notes requesting payments in, of course, bitcoin. And it's also created some additional press. Again, back to the same old, oh, bad guys using crypto, because only bad guys use crypto. And we haven't heard enough of the narrative describing that. These bitcoin payments would, of course, be traceable on chain, but we all know that. We'll get to that later. So, Jesse, tell us more about the Guthrie kidnapping and how this relates to the. To some other data we've seen about crypto crime.

V (36:09)

Where is the freaking nuance in any of this? But I think it's really important to talk about this topic because crypto crime is leaving just being on the blockchain, and it's entering the real world more and more. And it's interesting that the Nancy Guthrie, you know, Savannah Guthrie's mom, is the one that sort of has brought it back into the purview. Although there are people who go missing all the time. But essentially you gave a good overview on how it connects to crypto. You can find out a lot of details about it. It's a devastating story. Nancy Guthrie, 84 years old, taken from her bed in Tucson. She has a pacemaker. I mean, her being away from a comfortable place and medical care is just freaking horrible. The ransom note demanded bitcoin, and then people who are sort of fake sending ransom notes demanding different bitcoin is now also popping up. It's just not a good showing for humanity. Not really have anything to do with crypto. Just not a good showing for humanity. The point, I think, is really special for this pod to talk about is that Guthrie is not even close to an outlier, because last year, there were over 70 physical attacks on crypto holders, and that's just people who reported it. Think about all those who were scared, who had to hand it over, who had secret ransom notes. That's a 75% increase year over year. One of them is the Ledger co founder I'm sure many of y' all heard about in France. Had his finger cut off for a seed phrase.

Kathryn (KK) (37:36)

There's been a.

Jesse (37:36)

Why are so many of them in France, by the way?

Sponsor/Ad Reader (37:39)

Like, does anyone.

Kathryn (KK) (37:40)

Out of control.

Jesse (37:41)

Yeah. What's going on?

V (37:43)

I have theories, but I don't want to fully speculate, but just let them eat their croissants in peace. Two high schoolers. High schoolers last week in Arizona broke into a house dressed up as delivery people, tied people up, and tried to steal 66 million in crypto. That's in Arizona. So a pattern is emerging. I can go through so many of these, but let's not depress everybody with each one. Hacks and rug pills. Like, mostly about financial loss, which is obviously also devastating, but it's becoming much more savage and just a tool for violent criminals. And that's just one side of the keyboard, one side of the blockchain. Right. What's happening on the other side is equally, if not more, terrifying. So a report from Chainalysis came out Last week, I guess that on top of the physical wrench attacks that I've been talking about, the 75% year over year increase, crypto flows to human trafficking operations. Just like I talked about illicit finance being a phrase that I want to dive into, I want to talk about human trafficking for a second. Because 85% doesn't capture the human toll of what's happening. So how this all works is that criminal networks lure people with fake job ads. So it's tech work, good pay, maybe a beautiful location. And they're pulling them from situations where maybe they're vulnerable or don't feel safe in their country. Right. And so these people are lured, they arrive, their passports are taken, so they are trafficked at that point, they're locked inside, they're beaten if they don't comply. And they're put in these huge compounds. We have pictures of them in Cambodia and Myanmar. And these kidnapped people are forced to run scams targeted targeting victims around the world. Right now an estimated 220,000 people are in these compounds right now being forced to scam you. And they're being held against their will. And that's not historically 220,000 people. That is right now. And that's like a, you know, estimate based on what we can possibly know and investigate. And there's a bunch of cases happening here. There's someone on the lam who organized millions of dollars of this. But crypto is powering a lot of sides of this, both sides. An 84 year old missing, it's like a devastating story and a man losing his finger over money. And on the other side, we have hundreds of thousands of people locked in buildings running scams. And I'm not really sure what to do about this because we wanted crypto to be treated like a real financial infrastructure and that's what we're all building for. But that means also real power and vicious criminals that will get at money in any way that they can. Whether it's crypto, whether it's fiat, we're beginning to realize that like individual vigilance just isn't enough because the risk is becoming systematic and it's exploiting people. And that's what happens with systematic risk. So like, what can we do as an industry to make this better? Because it's not move our money to custodial places if you believe in non custodial. But it can't also be. Everyone just needs to take care of themselves. And if you're rich enough, you hire security because that's what's beginning to happen too.

Kathryn (KK) (40:55)

It's one thing I want to note for any regulators that are listening, this is all devastating, but this is also a fraction of the crime that occurs with fiat. Like you see criminals use crypto for the same reasons that crypto offers benefits to real world individuals. Like it's fast, it's easier than lugging around cash. I mean it's, it's cheaper, it's immediate. These are all things that should be valued and utilized for everyday use cases for real world individuals. So of course it is always going to get abused. I think the question we need to be asking ourselves is, is how do we use this technology to mitigate these issues and to create a safer environment for crypto holders and for average individuals, which then of course you know me, like one of my passions is privacy, privacy technology. This is definitely a very important conversation to be had. A lot of the most radical advocates for privacy in crypto, they are advocates for privacy not just on the fundamental rights perspective or on the economic perspective as markets move on chain, but also from a personal safety perspective. You know, if you have privacy technology on chain and it is appropriately and responsibly used, then theoretically you can mitigate things like kidnappings, wrench attacks, individuals being targeted. Obviously you're always going to have the issue where it's CEOs or founders potentially being targeted because everyone understands that their net worth is likely in crypto. But for individuals, as they engage more and more with crypto, we need to discuss and think about what kind of technology could improve these problems or mitigate these issues. One of those is privacy technology, the use of zero knowledge proofs. You know, obviously very close to my heart, starkware's heart.

Jesse (42:43)

Yeah, I think this, all of this like it's so tragic but it, but it like raises an interesting question about, you know, a lot of, kind of like what you guys were saying, like a lot of the benefits of crypto and things like self custody, it's a double edged sword, right. And so like how do we address that without like compromising or eliminating those benefits, like which are the purpose of crypto in the first place.

Kathryn (KK) (43:10)

Right.

Jesse (43:10)

Like are we going to start making it so that transactions are not instantaneous? Are we going to start making transactions reversible? Right. Like these are things that I think like stablecoin issuers are starting to do not just to you know, like address some of these security issues, but also so that you know, it's, it's something that is more usable I guess in the real world by like real people But I think, you know, the risk with that is that we go too far and just end up sort of like eliminating the benefits of crypto in the first place. That said, I do agree with you. There probably are creative technological solutions that we can explore that would largely preserve those benefits but make incidents like this less likely. Right. I think this was a few months ago. I don't know if you guys saw this, but Revolut in the UK at least, they implemented this new security feature because muggings were becoming very common, where muggers would come up to people on the street and force them to give over their Revolut password and then transfer, make them transfer their assets to the mugger's account. Right. So Revolut implemented this thing where transfers all have like a one hour or something. I think it was one hour time delay, like during which time you could potentially, you know, like call them or take some sort of action to like stop the transaction or reverse it. Right. So that I think it still, you know, preserves something like that could preserve the technological benefits of crypto, but still address all of the risks involved and make things more secure. So I don't know. This is not a space I work on, I'm sure, and I hope that smart people are trying to come up with creative solutions for this, but I hope we do it in a way that doesn't totally eliminate the benefits of self custody and other things.

V (45:11)

Everything you guys are saying is accurate. And kk, I'm going to comment on one thing that you said because every fact you said is true. Crypto does not have as much crime as traditional finance and this is just a technological tool. But I am so exhausted of that argument because I'm just like, what is the point of this is Every single time there is some sort of criticism of crypto, we just say, well, it's not as bad as fiat, because why do we want to be compared to that? And these are actual people one is talking about the victims in all this, unless they are related to a celebrity or something. There are so many people getting physically attacked, having their money stolen, and we can't just be going on crypto podcasts and panels and saying, well, well, it's worse in fiat because it does. I don't give a crap about fiat. I care about crypto. That's what we're here for. And these victims matter and they should have a voice. And so I think that we need to make sure that that leads conversations because the narrative of it's traceable on chain is one that I think we've done a very good job explaining and most people understand and the narrative of fiat or traditional finance is worse, is not sticking and it doesn't help the person who had their money stolen or whose mom got kidnapped or whatever it is. And so I, I v, I like think your point is a really important one and revolut what they're doing is really interesting, but it's sort of just putting the friction that we didn't want in traditional services back into the system. And I'm not here with a solution unfortunately, but like that to me sounds like the financial fraud kill chain for wires that the FBI implemented. So are we just realizing that that friction is okay?

Jesse (47:10)

So not to get like too philosophical, but I, but I do think the relevance of bringing up the comparison to fiat is to say there are things that we accept, right, as a society where we know that there are risks and harm potentially, but we think the benefits outweigh it. That's why we haven't banned cash. That's the point of bringing up the fiat comparison. Right? Like obviously a lot of bad stuff happens with respect to cash, a lot of illicit activity, a lot of crimes, but we don't ban it nor would we ever think to because there are benefits to it. Right? That's, that's the relevance of the comparison. I don't, but I agree with you, like from a narrative standpoint, it's problematic as well.

Kathryn (KK) (47:52)

Well, there's a knee jerk reaction in crypto and actually Jesse and I saw this with our programmable Risk management paper where you don't want to talk about solutions or, and you don't wanna talk about crypto crime because crypto is, and this is 100% valid, afraid of being targeted in an outsized way, because we have been for years, you know, we have been like unfairly targeted and demonized as a bunch of criminals for years. And so there is a kind of a gut reaction. I admit I have a visceral reaction to hearing someone very vocally and loudly talk about crypto crime. Because my fear is, well, this is exactly what certain legislators and regulators are going to use to try to stamp crypto out of existence. Now, does that mean we shouldn't be talking about these issues? No. But I think that explains why crypto doesn't like talking about crypto crime. You know, for so many years crypto was like Tradfi's secret girlfriend. Like Tradfi would not introduce us to their friends. Okay?

V (49:01)

Right.

Kathryn (KK) (49:01)

In part because Tradfi was afraid that if they talked about their engagement in crypto, they too would be unfairly targeted by regulators. So I think we need to get it. Get to a point where we can have open and productive discussion about these issues without then being, you know, having that discussion be weaponized against us.

V (49:20)

I think that's a really fair point. And part of the narrative that's problematic on both sides in my mind is this phrase crypto crime, which I use too. So not attacking it or using it, I used it too. There isn't crypto crime and it's just crime crime that is using whatever financial services or technology is available. Y and this is a crypto podcast, obviously, so we're talking of the Guthrie story. But what I would p. Not just let's focus on the victims, but also that narrative just hasn't worked. Think about how there's one reference to bitcoin, really, in this horrible kidnapping of an elderly woman, right? And now the story is back to, oh my God, bitcoin so dangerous. And there's a reason that your younger cousins are not really talking about crypto right now. Our whole view and narrative has been co opted by the maybe positives of AI Although there's a beginning of a backlash against that. And people aren't focusing as much on crypto as this exciting new tech unless you're really deep in the space. So go talk to your friends, go talk to your mom groups or whatever. You were right, K.K.

Kathryn (KK) (50:31)

right, absolutely. I'll get on my mom chat. I'm literally live time explaining how crypto is traceable on chain to, like, my mom group. Someone has suggested that I host a party and explain crypto to them and I'm like leaning in and I've suddenly become most. Both the most popular and unpopular member of the mom's chat because of this discussion. So anyway, we have talked about a lot of not so happy things. I just wanted to, very briefly, as we wind down, mention our crypto good news of the week. We want to keep featuring crypto good news, so send us your crypto good news because it is important, particularly during a bear market, that we continually remind ourselves that great things, good things are happening in crypto. There are many crypto companies that are good citizens. The one that we're going to feature this week is not always viewed as a crypto good citizen. But Ripple delivered a crypto donation to help fund the construction of a new children's cancer center to the Great Ormond street hospital opening in 2028. And this donation actually builds on an earlier pledge and ongoing support for the hospital. So I liked this one because I think it's important. Crypto, we need to support our community, but we also need to support the broader world and the broader community, especially in times where crypto companies are, you know, hugely profitable. Let's take care of each other. So good on you, Ripple. Everybody's mom, everybody's grandma loves to, loves to buy xrp. So I'm glad some of those profits are going to something good. And that's it for this week. Thank you so much for joining us. And we'll see you next week, Tuesday noon, livestream on Decks in the City.