Alameda, FTX, FDX discussed on Unchained



Or how does that work? But the compliance team at the exchange, you know, in terms of FTX and Alameda were completely crooked. I mean, if anyone doesn't think that that's a criminal operation at FTX, something's terribly wrong with you. So FTX had no compliance. Alameda had no compliance. The chief regulatory officer at FTX was a poker a poker criminal. Right. Was the guy who cheated people in cart. He was the chief regulator. So assume there was no compliance at FDX and no compliance at all in the media. And it's come out that they commingled customer deposits as well. So at a minimum, when forensically everything gets unwound, someone is going to have their head so far up silver Gates ass. They're not going to be able to see. And every transaction will be scrutinized. Every transfer at the end of the day is going to get scrutinized here. So obviously, I mean, there was like 5 million investigations of FTX and Alameda, so regulators are clearly looking at that. But we'll regulators also probably enforce something on silvergate. That's kind of what I'm asking. The KYC program, and then we can just create more structure for this. So let me educate the audience here. So silver gate has to have a BSA AML program in accordance with the U.S. Patriot Act and bank secrecy act. So there's initial and then ongoing. Initial mean that there's a KYC and AML program also known as a sip program or customer identification program. And they'll have a very set of activities, including negative new screening, and they will subject their clients to what's called enhanced due diligence, particularly because in the crypto sector. They will take extra efforts above and beyond a bank opening up a non crypto account because of the nature and the potential for higher propensity of illicit activity. Then there's ongoing activity. So what the compliance team will do is they'll look at the nature of the customer's activities and they'll say, if there's a change in behavior, just to change in behavior, then they further policy and procedures should issue a suspicious activity report certainly notified their compliance team. That suspicious activity report would go to the regulator. And that's the standard framework for BSA and I'll compliant program. Now, the question is, were they in good standing, first of all, it's one way to look at it. Did the regulator view on silvergate change? I can say that they must have been in good standing. Here's why. First off, they bought DM, which was a stablecoin issued or intended to be issued by Facebook. That requires regulatory approval, regulators have to prove an M and a transaction. They would not approve that if they thought silver Gates, equity was at risk or that that business activity would be untoward in some way. Second, it has no public consent order, and they're permitted to grow their business. They have not been directed to curtail the activity. Lastly on the regulators, regulators, the FDIC has issued a non objection required meaning if you're a bank that you want to be active in crypto, you have to seek non objection for the regulator. Is active in crypto, which the inference is that they've obtained regulatory approval. And the regulars want to keep crypto activity within banks that they deem have appropriate systems that controls. They don't want to spill this up to other banks. They want to keep scrutiny. I agree with Mark that these transactions will be scrutinized. And the scrutiny will be around did silver gate faithfully apply and adhere to the stated policy and procedures in accordance with law one and two were those policy and procedures of sufficient stringency. That's really the analysis of the regulators will do office transactions. Your points are good, but the problem is they're as of or before 9 30 in the Titanic sank in November that the regulators nor no one saw coming. That's the problem. The problem is the analysis of this company is through the front window, the front windshield rather than the rearview mirror. And everything you talk about is rearview looking. Yeah, in the past, prior to 9 30, they were in accordance. I'd love I can not wait to see what they're going to report come 1231. I can't wait to see what those 12 hundreds are. And everyone is going to be beyond surprised of the regulatory scrutiny that's going to come down on these guys. Then I can promise you. Mark, can I ask you a question? Do you believe there was any willful neglect at silvergate or do you believe is assistance and controls issues of failure to apply procedures or insufficient procedure? I'm trying to just distinguish between willful. They're one final chapters retin Allen lane's going to say he was deceived as well. He's going to pull the benign neglect. What's your view? Do you think that was complicit somehow and engage in willful? No, I don't think they were, I don't think they were complicit. Okay, so it's a controls issue. It's a systems and controls policy procedure. I think these guys were operating on 1990 technology 1990 procedures. I think it's a publicly traded company that was run by a family owned bank. And I think these crypto exchange swindlers criminals took advantage of them essentially being like a drug mule. I think they found a sleepy bank that wanted to be become a big time player that thought it was going to be simple that grew like crazy that had zero controls. They weren't in on it. I don't think they were in on it. Now I think a couple directors are sideways. And I think a couple directors are going to have problems. And I mean, just think about it. Why would you have SPF is your spokesperson? And then after SDF, you go to another guy who has similar

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