Mt. Gox's Mark Karpelès on Navigating Crypto Exchange Bankruptcy

nine ignition sequence Stars hello and welcome to up only TV I'm Ledger we got Kobe online of course and the founder of Mount gox Mark carpelli's we're excited to have him let's just get straight to it we got nothing else to do here there's a little football on apparently but uh forget that we don't need them the us is going to win FIFA yeah and quit it quidditch World Cup uh yeah Kobe how's it going no bad man I bit my tongue I made a gun like I keep like blading into my mouth so I just like need to pray one anyone that's watching in case it's just like blood sucks I'm actually fine I just like it'll make a good uh picture like that scene from Fight Club it's a very bear Market grit type of scene we need that we need bloody toothed Kobe fighting through the bear Market that's what it feels like right now uh anyway mark thank you for joining us um you know I think you're the first like sort of crypto personality um you know CEO that I ever sort of knew existed maybe competing with big Vern if you remember big Vern from crypty um I don't know which one of you I knew existed first but um so I've no I know I've known about you for I guess 10 years or so uh now so it's um a little bit surreal to get to chat to you um for people that have joined crypto I guess in the last three four five years um they might it's strange but they might not know even Mount like what mountain Cox was they might not recognize you um do you want to give a the real tldr um version on like what was Mark's what

happened to mount gox and why it's relevant to you know the current FTX situation yeah actually for mongos I think I go through a little bit of History uh because I joined the crypto committee back in 2010 uh back where there were only a few hundred people uh actually doing crypto stuff and at the time I was running a hosting company which uh I had well something completely and I had a customer who lived in Peru and asked me uh hey I have always had issues paying with my uh bomb because I need pero it's a pain I want to use Bitcoins on it was the first time I heard about Bitcoins and actually enjoyed the community uh back in 2010 uh at the time there already was uh this exchange that was funded by Jed Mark Caleb um I got involved I found Bitcoin interesting so I started accepting payments uh in Bitcoin and I thought about with the community and I actually was approached by Jed at the time about helping with some issues they had uh so my company in Japan uh started accepting payments for mongooks back then um in early 2011 he asked me do you want to take over mongooks are you willing to buy the company uh I don't think I didn't have the cash to buy it I just offered me okay do you want it I can just give it to you under some kind of agreement and I run with it because it sounded interesting and it turned out to be a lot bigger as I was expecting because when I talk about mongooks we have three thousand customers uh three months later we had sixty thousand uh customers uh we had this article in I think it was times at the time that published about Bitcoin and this new technology coming on it was very first uh mainstream price coverage of Bitcoin um things got recreated from there uh it only took two more years to go from 60 000 customers to 1 million customers uh which basically means that everyday operations what about trying to scale uh to the kind of uh customers coming in and Banks and regulated Amazon didn't hear about Bitcoin until because it was still very new so we actually hit lots of issues uh going through this uh in 2014 uh we found out that Bitcoins were missing from the mongooks system so we investigated into it uh found out a lot of it can work missing and I were very strongly advised by lawyers to file for bankruptcy which I did bankruptcy on February 28th of 2014. uh we had about 1 Million results I mean a bit more than 100 original customers at the time uh and about 10 percent had a balance on the exchange um from then the Democracy process uh started on this deal ongoing to this day so we eight years later almost nine um we're finally uh seeing some uh light at the end of the tunnel because uh very likely the submissions will be happening next year uh but we've had around 20 000 people who actually filed for claims uh most of the accounts at the time either sold their claims or had very small balances uh that probably where it was uh like even a fraction of a cent or something like that uh not what's going after uh distribution as they are right now we have a deadline uh in January for everyone to provide their banking information so I'm guessing uh payment shouldn't be too long after that because the longer it is the more likely some people's bank account will have changed and it's going to need to be done all over again so I'm really hopeful to see a payment on this uh early next year when you say bank account is that because the funds that are made up in this process have been converted to USD over time or is how is it paid through bank accounts versus through Bitcoin addresses uh actually the trustee uh asking people to provide either bank accounts or uh account with an exchange approved by the trustee depending on the balance the person has everything has been converted to Japanese Yen for all the Fiat currencies but Bitcoins on bitcoin cash are available for distribution on will be distributed as such unless people ask other state to get cash instead that makes sense and those Bitcoin that are being distributed that was like a portion of what uh uh the balances that were left right so some is still stolen and lost and like I think not hasn't moved in a long time it's just sat on some with the one fees address is it yeah actually monk dogs run through a lot of events over time uh the one fee address uh is actually 80 000 Bitcoins who has stolen from mongooks right before uh the uh transfer operates happened so for that actually Jay contacted me and told me like there's this introduction and something happened and when I looked into it looked like someone managed to get access to the Bitcoin uh Diamond running the mangocs wallet and transfer Trends out of it uh but this is just one thing the main largest uh event happened over time um was actually quite uh Insidious I'd say because it was small transfers done over the course of multiple years uh that were likely meant to not be easily seen uh this is something that started around September of 2011 and because mongooks actually process so many transfers uh this didn't really stand out uh until much later like even after when you filed for bankruptcy and we knew that because we're missing it took another one to two years before uh people investigating this including uh very large uh generalizations on similar companies that also joins the inquiry before we found out that Bitcoins were actually stolen from the trade using private keys that were taken from the original system made by Jed and those private keys were used to just siphons little by little Bitcoins um we know list of 500 000 Bitcoin stolen this way oh my God uh the good thing is those Bitcoin went to a guy that he is actually named Alexander Winnick that was arrested uh in 2017 in Greece btce guy yes so he was arrested he there was a kind of tug of war game between uh the US and Russia trying to pull the guy out of Greece uh while they were fighting at some point France just came up and said we want this guy too and for Greece it was much easier to just give him to France that is also a European country uh so he was actually judging France for something else completely and spent a few years in jail in France um in the meantime the war with Russia started so there was no really any possibility for sure to try to pull him out of Greece uh report to the US so it was written to Greece to then we fly back directly to the US and right now he's written in the U. S banding trial wow so he's been in custody for a very long time then um but I didn't never even knew that so they were just had the private keys from the original Mount gox build that Jed put together um and they were just stealing coins I mean at the time I remember all this stuff about transaction malleability and trying to learn what that was so just them having the private keys that makes more sense to me um so um youth of bankruptcy I guess nine years ago in a couple of months time

um and you hope it'll wrap up within uh within the year or so um so with regards to the FTX situation who have filed for bankruptcy I guess a month ago um do you see this being another 10-year um like stint before anyone can see a like a cent on the door honestly it's very hard to say uh there are a lot of things that went through during the bankruptcy that uh Health um doing things basically how it would happen uh should have new bankruptcies going much faster but at the same time FTX has a very complex legal structures mongox was he had Mongols with explorland uh you are the US company was for the company in the island uh where we're trying to get a license and also in Taiwan but it was much more limited in terms of scale and each company had a very specific purpose while FTX has this whole 130 something companies all across around the world with many companies in Antigua Seychelles or different kind of places that are typically known as tax Havens or not being very Cooperative with us the bankruptcy has been filed for every single company under in the US in Delaware but for most countries uh filing for accuracy in the foreign country is not going to count because it's not the same laws the competition file for democracy protection which is chapter 11. it's a U. S law but it's only basically a big Force inside the US so for example for the Bahamas company there also was democracy fighting inside Bahamas and they've ISO filed for chapter 15 in the US which is recognition of rain democracy proceeding which is typically the correct way to do that but at the same time you cannot just fight at the same time or another 30 uh democracy is in so many countries uh accurately so the goal when you're doing that is to say you file for bankruptcy when whatever jurisdiction is required and then you try to file some kind of motion or something to essentially allow one jurisdiction to acknowledge the bankruptcy process in another jurisdiction so that you can uh consolidate your efforts I guess but basically the goal for bankruptcy protection is to protect the company's assets against lawsuits so when like FTX everything is going bad you file for democracy protection you reorganize the company so it can run again and make profits or you just liquidate everything and you distribute all the assets equally to uh every single creditor so the goal really is to protect the assets of the companies so typically you will want to file uh the Democracy where the company has assets which would be at least as a country where the company is incorporated so for example the US is a very big place and it's a very well known for lawsuits so most companies fighting for bankruptcy for example in Japan we also want to fight photography uh recognition in the US to stop losses since U. S from taking assets uh indirectly if there's anything that could be taken from the U. S but a company for example that is Incorporated in Antigua and I believe FTX trading on element icons are inside Antigo because from the uh deposit information that was posted by some customers on Twitter actually they got is an Antigua so filing for bankruptcy protection inside Antigo is probably a very big priority unless those funds were moved somewhere else they um the a clip came out of I think about half an hour ago of some um who appear sounds like he's on the beach on the phone talking to some um non-journalist called Tiffany um and he said that he was he felt like he was forced into filing for bankruptcy by lawyers he wishes he hadn't done it and and he says that eight minutes after he filed for bankruptcy four billion dollars of liquidity was offered to him by someone who knows might be a lie maybe he's delusional who knows um but I like did you ever feel like pressured into the bankruptcy by lawyers was it the correct path was it the only path that you had available and like yeah how did that go down for you and how is has sound done the right thing by filing for bankruptcy well honestly uh seeing how long it's taking with the bankruptcy to go through everything I did uh question this Choice quite a few times um back in the day uh the lawyers from did pressure me on were very clear in that situation at that point the only option was to file for bankruptcy uh as not funny photography would mean that we had impending lawsuits that would start to be uh keeping away friends from the company which would mean that some Critters would get some money back on whoever fought for uh lawsuits for first were more likely to get back money so in a purely legal way of thinking the Democracy makes sense um where you run a company of course you don't want it to land on that's very normal to doubt did I make the right uh decision at the time but it turns out the bankruptcy helps a lot in protecting against lawsuits I mean it's made for it so of course it helps uh we've seen some exchanges that lost a lot of money uh just issue tokens um kind of managed to get back on track many of these actually were in jurisdictions that were kind of difficult to access so you wouldn't know exactly who to Sue and anyway if most people were happy with it uh you could run it and turned out that the largest creators and people who actually uh tried to Sue or didn't actually see but just say they would be suing to get their money back uh if you just pay back those people uh typically you can move forward with the kind of plan not using bankruptcy but it's not exactly fair to everyone because some people are getting more assets and so on and it sounds like some has been doing something similar by reopening uh visuals for people inside the Bahamas because they are more likely to Sue and actually get something back because uh when you sue someone you can ask the court to seize their assets uh if you believe they might not be able to pay later or try to run away so that's typically the kind of uh things people do uh but that's why we have bankruptcy protection on this whole process the other thing is about uh this incoming uh money I think it was something like mentioned four billion dollars or something like that I dubbed very much at whoever was really uh ready to put four billion dollars would be still putting this kind of money uh knowing how FTX was actually right now uh it takes a special kind of management to have the uh guy who went through everyone uh John Ray uh within Channel FTX no say that this is the worst case of his career yeah yeah he's probably seen a decent amount of bad stuff um and yeah it seems seems to me like there's got to be a blend of Sam trying to provide some form of verbal cover for his own future liability or like criminal or civil liability either one where incompetence or some other non Criminal Intent type of behavior would be seen favorably like if he's just stupid or delusional um or negligent that's all better than if he's like a criminal mastermind in terms of his personal liability and so it's hard to balance is he saying what he's saying or doing what he's doing because he's trying to set himself up for that or is he still like on some kind of Hangover where he's not faced reality and he's he thinks he's telling the truth it's that's a difficult balance I mean it looks like he's trying to Freestyle something in that direction uh typically when you are in this kind of situation you need to hire communication experts uh supposing you have enough money to do that will get you interviews with people that uh actually rewrite whatever you want them to write and you never just publish whatever you say directly you always go through a review process to make sure that whatever is said is not going to create extra valuability and for example trying to deny there was any kind of uh back door might work with some people asking questions uh but there was definitely something considering all the discussions there is around it um I do think some knows something just not trying to say yeah I didn't do it it's not me I don't didn't know about it uh it's just the same thing with the hidden cash account uh that was eight billion dollars uh when you have a company on typically I mean they did go through some kind of audit I don't know how trespasses the auditing company based in the metabus is or not uh same thing from what we see in the fighting uh by John Ray he doesn't believe it at all um this eight billion dollars account in the company's accounting should have raised questions during the audit uh um it's something we don't know about right now that you clearly need clarification that was an element where it was a little confusing because there were different Auditors for different entities and the U. S side of things wasn't real seemed better shape and was

operating normally even when the. com side had already shut off and the Auditors for those entities were also different the metaverse auditor was one that was of um questionable um you know quality and the US auditor was one that the uh the bankruptcy organizer John Ray said he had heard of was you know thorough whatever and it seems like at least from my point of view there may have been some kind of key man control that still existed but otherwise the U. S side was operating as a different exchange until you hit this point where all the money you left at once and went into the same bucket What complications could have been created by that last effort especially if it was organized by Sam we actually there's a lot of questions around this uh how much cryptocurrencies each company has and so on and it looks like it's all but together I'm guessing the cryptocurrencies were held inside the wallet uh in Bahamas which means that typically Obama's Regulators could claim that this belongs to the Bahamas company in terms of location uh some of the companies like for example FTX in Japan actually Japanese Regulators are very uh strong requirements for cryptocurrencies and assets to be held inside Japan and separately from the company's assets so there was a publication by FTX Japan actually showing that they've got all the assets ready for distribution to customers and there's nothing lost uh I'm guessing in series we have higher requirements uh for example in terms of accounting on auditing company which would mean that the metabus auditing company maybe didn't make the cut uh in terms of regularly requirements well it was a metaverse ordering company yeah I'll have to look at the name okay we forgot the name but it really turns out that it's based in the metabolous because I think the only thing people remember about it yeah and John oh my God he like threw some serious shade at it as well in his day one filing uh can you tell us about the day one filing like what is that actually what what's the importance of that and what they're saying there well there's actually quite uh a lot of important piece in it uh basically the way it looks like uh things were done until now uh you have this FTX International FTX us one of the turkey companies around the world um accounting is done I guess through slack uh you know how you can create custom emoticons like uh to create reactions so I would guess you would have a custom memory for approved on one for denied uh which I mean some Japanese companies running it's like some use a lot of custom emoticons with Japanese walls commonly used uh to make slack feel more at home uh and also some discussions about the automatically disappearing messages and so on uh but one thing mongok's heart actually is because mongox was in Japan uh Japan tends to be a very paper-based so like if you want to send the wire through uh one of the Box version we're using we had to write uh via request on paper filiform but to stamp on it and then bring it to the bank uh which means we always had some kind of paper tray remaining um mongooks did also have uh an accountant full-time on board which uh FTX uh didn't have which while being like 30 billion dollars company uh which makes no sense to me you want to have someone inside the company full time looking at your accounts yeah um there's been a little bit of

sentiment about uh you know the this John Enron Liquidator guy he's built his you know huge reputation and now this is his sort of uh whale-sized meal to live on for him and his buddies for the rest of his career um you know it's like it's typical in these things um that some people place anger in different places so whether he's catching those as Strays who knows um I want to ask is any of that fear in your opinion um Justified do you see people um circling like vultures on these bankruptcy was just trying to take um like trying to take salaries or take whatever out for them themselves out of the whatever remains for customers um or is it not something to worry about well people are bound to try to come and get whatever they can get you have a kind of a protocol the company was maybe 100 millions of dollars uh in assets that's basically without management and it turns out everything is a mess um in order to kind of clean up everything you need uh people on wild genre is I mean he's getting a very uh good pay on this but at the same time you're still getting a very large piece of work on the realizer so exposure with a lot of people seeing his name uh whatever happened with this bankruptcy is going to reflect on him um it's not just about getting everything right and clearing up all the accounting it's also uh about having his name but out there going through uh twiling you have this huge mess and you need to get something out of it so it makes sense that he would get uh I mean some kind of payment for it so typically the kind of amounts he would be getting would have to be approved by the court I believe and people are able to challenge it creators can most likely fight with a quote and say why uh with why did this money was spent why what is it going for and so on uh but it's very likely going to cost a lot of money to go through everything and clean up all the accounting so that's something people are waiting for our friends from FTX need to get ready is whoever you put on top of this either is going to do a bad job uh things are going to get messy or likely going to cost a lot more but do a proper job and hopefully uh get resolution not so far in the future so I don't know exactly how long it's going to take for this FTX democracy to go on uh it's not going to be forever uh typically the most of the course will come at the beginning because you don't know anything about how the companies are formed you don't know where the accounting is uh it looks like you don't even know who are employees of the company and once you've got everything put together and so on you don't need as many people to go through records and so on and the company can start operating more like a company yeah the other thing I want to ask a little bit about is when these situations happen um you have all these sort of unusual ties that look a little bit like corruption so um there was the you know were allowing withdrawals only to Bahamian citizens thing and then there was the Bahamas have actually like asked Sam to send all of the assets to their wallet um which is like who knows maybe that's a fine and normal then there's the Sam donating you know hundreds of millions of dollars to Democrats and Republicans uh in um in the US and cozying up to uh like directly to The Regulators themselves um and um you know who knows who knows what else who knows like how these things go behind the scenes and then I remember and I know it was a long time ago and I did no research as his classic for me but I remember in the uh in the mount gox days there were um the corrupt DEA agents uh who were stealing Bitcoin from Silk Road and trying to cash out through Mount gox around the same time as all these events unfolding how do you think um uh corruption in the um systemic powers of these countries play out in situations like this and why do they seem so frequent um and what actually happened with those da agents are they in jail now or what uh okay so yeah I mean money is going to corrupt people it's very well known uh you've got money you're going to get corruption uh cryptocurrencies are kind of money that's Anonymous and that's very well suited for corruption and you've got those large companies like FTX crawling around with millions and millions of dollars so of course you're going to have a lot of people that may be going to approach FTX and offer their help uh for some kind of money or you're going to have people who have like this uh Karl marks Force I believe was the name uh the uh DEA agent actually I think money was an agent when I was a special service guy uh who stole money from Silk Road and were looking for ways to uh cash out those Bitcoins without getting caught so they thought that using mongocs and then just destroying mongocs would be enough to hide all the evidence so as I see it anyways the main reason why they tried to get mongooks uh out of the picture was to make sure that whatever dropper they did would disappear uh bad luck for them because actually in Japan we have paper accounting a lot of things that means that evidence is always going to remain uh they were arrested evidence was used they didn't go to Trails they just uh agreed to plead guilty and get uh new Sundowns and stuff like this so like many criminal cases in the U. S I just don't go up to a jury trial and so on you think that much earlier because when you're guilty you know you're guilty you just say okay I'm guilty uh let's get things done and move on with it because I mean it's going to cost a lot more money time and nobody's enjoying all of this so might I always get done with it uh that's I saw one reason why so many kids in criminal justice in the U. S go with people pleading guilty even sometimes when they are not actually healthy because you can spend 10 years fighting something other than 10 years in jail or you can just pledge guilty do one year of jail and be done with it yeah uh by the way I pulled up the initial docket um so we got some gems in here this is The wrs Silo is the name for the FTX us side so what he says the audit firm for The wrs Silo armam Amino LLP was a firm uh with which I am professionally familiar the audit firm for the. com Silo was pragermedis a firm with which I am not familiar and whose website indicates that they are the first ever CPA firm to officially open its metaverse headquarters in the metaverse platform decentraland so that's part of that initial docket It also says stuff in here like um you know they effective cash management requires liquidity forecasting which I understand was also generally absent from the FTX group historically so it's just like over and over again talking about how everything was a dumpster fire there um and then one other clarification that I was going to try to find I don't know if it's in this document or another I believe that John Ray is actually I say only but in lawyer terms it's kind of an only charging like 1200 bucks an hour something like that um which I think I read a little bit more but uh yeah um I think for the initial stuff I don't know what they're like longer term contract is but um yeah it's the his documentation so far has been highly critical at a bare minimum in terms of ftx's practices yeah as I see from all the fighting and something else I've been very productive uh uh so things have been moving fairly quickly yeah the size of the companies the number of available parties and companies uh so actually I'm a little bit uh impressed by the kind of speed it's going uh ways I'm worried at the same time because uh some has been mentioning that he wants to do battle between the Bahamas and U. S and who has jurisdiction on this uh I don't know exactly how it's going to go but it looks like the Bahamas are going on with it um the potential seizure of cryptocurrencies and so on might makes the U. S bankruptcy more difficult people who file with the U. S democracy may not make get as many assets as people for with the Bahamas bankruptcy or we don't know exactly who is going to go and honestly I didn't have much doubt about Bahamas as a country until they aired this attorney general announcement about the FTX situation and how Obamas can be trusted to regulate all of this and so on and the more someone is trying to say you can trust us the less yeah um in terms of trying to visualize this for people they broke it into four major silos and then there's all of these entities within each one and yeah exhibit B actually to be lower than that we have more uh detailed view of it with all the single companies and the country for each company written behind below the name yeah it's not letting me scroll well I'm gonna have to fix it yeah if you want I have the you can look at my Twitter account I've got this file uh standalone I actually exported this page only so it's easier to read or maybe you're going to send you a link yeah I can I can get it I just had the I got a Wrangle it a little bit but it's much more complicated if you look uh through this and there's just there's a lot going on so this is what they have to navigate as they're trying to figure out which of these entities hold which assets uh what liabilities do

they have what creditors does each one have and I guess what I would like to know if you just had to take a shot at it how long you think this will take a year before they get to anything truly productive in the sense of start liquidating assets or like taking action like what's the curation phase length that people should expect there are actually a good question there's two side of it and one of the main thing is that right now FTX integrates has filed for chapter 11 uh which means that before trying to just liquidate everything maybe some parts of this can be solved uh I mean you have a Exchange in the US with a proper license we have a nation in Japan who is not only a proper license but also assets so it could be sold um the money from the cell could be used to repay creditors so it's not just a matter of just taking everything uh selling every single building and everything but to try to find what can be sold at a higher value because if you just close the company and sell the building you might not get as much as selling it as a set with its employees uh computers and so on provided in Spanish correctly so it's going to be first a job of trying to go through everything and create a proper list of all the assets and the situation for every single company in this graph so basically you want to know is this company solvent or not does it has any kind of assets that have our value uh does the company as a company that has a kind of resale value and if it has retail value you need to find a buyer for it uh it looks like genre has some connection with some uh investment Banks and some things like that may be willing to put money to buy some of those assets um for anything that don't have any kind of value you need to actually get rid of it and sometimes it may need uh it may mean paying money to actually uh recycle computers or whatever is there and pay legal fees to close the companies and so on so it's a very long process and the complexity of the whole structure is not going to help uh at all so if there's any kind of Branch out of this like for example the west rim show you think your highlighting white noise like a whole bunch of 10 companies and a few more below it if you can find someone who want to buy this whole thing as a lot it might make sense because you don't have to worry about anything inside it anymore uh you have money for it but you need to make sure that the money you sell it for is actually a fair value uh the court is going to look into it uh generally cannot just try to find a friend and tell it okay I'm going to say we use this for cheap and uh give me some cashback on stuff like that it's going to be actually uh reviewed by the court and everything will be on the record so they shouldn't be any kind of any business there so it's actually it's not super easy for someone to just come in swoop in offer a super cheap price for a component of this and it not go through proper due diligence because at this point anything that can carry value their job is to extract as much value as it can for the parent uh one way this is typically done is by taking whatever as value making sure it's clean and then putting them up for auction so you will have anyone can join the auction and the highest byte we don't get the thing anyway but you often see like bankruptcy options so quite often bankruptcy auctions tend to go as much cheaper price and regular auctions because there's typically some kind of a hidden defect or things that may be there and you cannot compact uh you don't have any kind of post purchase support so you buy something you do whatever you can with it but it's also the first way to get a good value for this kind of assets because it means you're not just uh selling like a company to someone Undercovers and I'll come after one and say okay we got this much cash you're going to go with okay we have this number of assets we make lots for each company that may have some value uh published documentation and announce like next month we're going to do an auction for all those companies if you want to participate in the ocean you need to restore uh people with reservable to bid on the different pieces and make sure that FTX democracy state gets the most value out of it I saw that you tweeted um two SPF earlier today saying if you're taking calls I'd love to talk to you even off the records clarify a few things like this cash account everyone's talking about without knowing what it is exactly I know what it's like running an exchange and being pressured into bankruptcy by lawyers um and having I guess eight nine years to reflect on um what um you know what played out and you know having been through I guess some of what he's going through now once what should he be doing now that he might not be doing like what do you want to tell him basically uh typically the one thing you want to do with this kind of care is to be quiet to uh the right guy I mean I don't want to use uh I could use a different way of saying this but uh sure say can and will be uh used against you so he's not been quiet really he's nice making a lot of things worse uh like for about this story about no I'm not only putting giving money to Democrats also give to Republicans but we hit it yeah I mean it sounds weird I mean I don't maybe representative way to accept uh what's he called Dark cash uh because I mean many times Republicans tend to be more uh I mean having more complex um opinions on things but uh if it's true it's making him look was uh so I don't know why he's talking about this um the same thing for different things he talked into this 20 minutes call uh which actually listened to before we got on the uh chat here so I so a little bit of it um I don't know why he's telling a lot of these kind of things but he will find very likely after some time that maybe it would have been better to not say anything and you mean just like his personal circumstance outcome like he's like much more likely to go to jail or you think he mean for the outcome for like FTX users and creditors I mean for everything and lawyers they are telling him to stay quiet and not talk to the press and so on and there's a very good reason for that is when you have a very complex case like this one the way things will turn out uh depend on a lot of factors uh um sometimes something that often actually quite a lot incorporate law is that you set things after the facts like you have a trump projection and after all okay this was a loan or actually you have some money to pay it back to making zero and so on so quite often you have this kind of process which are not ideal but a part of the reality of running a large business is that traction need to go quickly but you don't know yet how you're going to uh put it on the books as a loan as a payment are you going to issue an invoice for it or are you going to do a loan contract are you and so on and it's the same thing uh for this is whatever he says he cannot take back after a while so it's going to stay in stone um things like for example this mysterious cache account that has been kind of mentioned a few times uh the more he talks about it the less further politicals uh I mean if somehow he ends in a criminal court uh need to defend himself he won't be able to say like yes this was for the polar loan by Alameda uh that because we didn't have a bank account we made transfers to this and it's actually on the books of this but it's alone it's like this we know about this because criminal law is all about intent um if you talk about your intent now you're just looking ways uh and you could defend yourself after a while listen if he keeps blabbing and makes things worse for himself I'm fine with that yeah Sam if you are listening and you'd like to blab about yourself on this show we can have a live therapy session with you and Mark I'm not exactly why I offered to call with him because a lot of things actually need to be uh clarified uh it may not be for the best for him on the long term to clarify a lot of things but if he's willing to I'm happy to uh ask very specific questions on what this uh cash account is or what this back door is because he claims doesn't know about it I mean he couldn't actually didn't code it but he cannot not know about it uh it was in the press for some time it definitely looked into it but he's not willing to talk about it so uh they probably need to be more specific question asked to make sure of what this is about yeah when you first heard about the um FTX insolvency I guess did you have like a PTSD flashbacky type episode or did like we I

guess were you shocked did you think you know it's like been almost 10 years and crypto's sort of still in like we're just repeating the same stuff that we did we've already done this once we've done this a few times actually do we need to do be doing this again do you think the industry should have matured Beyond this by now um maybe I'm even asking like what should like do you do much crypto stuff at all anymore and what's your opinion on how the industry's evolved over the last 10 years yeah actually there's quite a few interesting things there to say uh I didn't get any kind of PTSD on I was not shocked nor was I surprised uh I mean I was expecting this kind of thing to happen because when we had the democracy a lot of exchanges are starting to do some uh proof of reserve on proof of liabilities which we have done quite nicely actually one of the first experience to go on with that was Kraken where they published a list of all their assets and they used the abilities that was a Json file where you had the hash of every single uh account of Kraken user on the balance and you could very easily check if you were on this list because uh you just harsh record ID you see if she was there and it means that Kraken couldn't really lie about anything because if anyone was not on the list of the liabilities it meant there was something wrong uh so it was actually a very nice process at the time broke a little bit of the Privacy you get uh from using a centralized Exchange but it made it impossible for the dictionaries to cheat on this um this actually went on it was updated weekly uh for some time on the monthly and then it was not updated anymore I think about six months later they just removed it because nobody was looking at it anyway so things went back to how they were before mongolox with exchange is being opaque and people just pressing everything quite blindly and I think actually people are a little bit uh I mean could have done something to prevent this because when exchange is but the actual effort to go through all this process and actually it takes time and resources to generate audits uh everything got liabilities and assets uh and just people didn't care so when you're an exchange and you try to fight with other exchanges and who's going to get the most sales and so on I mean it's a competition so doing something that nobody looks at is basically spending resources for nothing uh it makes sense that exchange rate will stop doing it if nobody cared about it and it's bad and the thing is right now we're going through the same kind of thing binance says I'm going to do proof of reserves uh some interest is also moving with that but it's very likely that a few months from now nobody will care about it anymore and we'll get back to the previous situation and it's something I want to challenge that's why actually I don't know if you've seen a talk a little bit about it before on Enterprise and so on uh but I've created a company called unbox which goal is to audit and review exchanges crypto businesses and so on uh to see who is actually uh legit or not and giving a risk uh score to every single exchange and project out there so the idea I guess is for most people looking through audit report by uh Kraken or another exchange I'm trying to find the account ID do the hash thing and someone is a pain but if they can just go to a third party confirm everything it's fine on inbox can check with crack and every single exchange regularly to get some of this information and update the information now it might actually be more long-lived than the original process when you say you haven't been surprised seeing these things happening 10 years later is it because of you expect that level of greed that level of incompetence or is it like some uh result of rapid growth that just gets away from people during you know good times and then they get stuck in some kind of hole what do you what do you attribute it to but actually it's a little bit of everything uh following mangocs and seeing how things went back to how they were before it was only a matter of time uh before we had one very large exchange uh messing up on I mean it could have been Greed from the oh no this could it be a lack of security that caused uh between to be stolen or it could have been a lot of things uh the only thing that kind of surprised me that he took so long for this to happen uh because when we talked about this Mong box I actually published an article back in 2015 uh telling basically didn't really understand about this um I kind of tried to make my mission in life to find a way to make sure we don't get the second Mong ox it's not easy because while democracy is still ongoing uh I have a lot of block uh on this point like people don't want to hear me talking about how we can protect from doing another mongooks until they actually get that money so I was planning on opening and gogs after the actual payment is made or at least well it was announced we had a specific date for it and download the FTX democracy happened before that uh I was hoping mongol's division last year so we could have actually been up by then um FTX on some companies out there actually uh did display or are displaying uh some symptoms or signs that things are not going as they should so for TX actually it was quite uh obvious on various points you had people talking about how FTX uh was range for people to get loans with uh that were really paid like 50 percent a year or something like that very high kind of rates that shouldn't be needed for FTX to raise money I mean if you have people just willing to invest for billion dollars or large amounts of money like that you don't try to get a 15 loan uh um a lot of things like this that happen the fact that there was no Senior Management in FTX we didn't have anyone with uh very long experience running companies and the kind of complexities you run into when you run exchange actually typically you need to have a uh some people at least that are knowledgeable in running large companies and especially if your company is worth tens of billions of dollars and many little things like that add up together and the fact that the action was issuing its own ftt token to uh is typically a little bit of a I mean it's not a red flag by itself alone but it's something you need to watch and it can be a bad sign depending on how it's issued or it's audited and so on so there's a lot of little things that add up together into uh kind of warning signs and some people have been voicing on Twitter that say yes they saw it they knew if they're going to go bankrupt and they were talking about like four months ago uh but the problem is most people who deal with FTX directly are not going to read every single person on Twitter and try to uh see what kind of Agreements are crucial or not is it just some filter is it real um that's something I want to do with engulf is to actually investigate this kind of claims on uh provide information based uh on verifiable uh evidence and how do you feel about this sort of um like D5 decentralized Finance non-custodial

non-custodial um uh attempts at rebuilding you know um centralized experiences I guess so like you have your uniswaps but you also have like uh GMX and like decentralized perps exchanges now I don't know how to centralize these things actually are so um I used like D5 and scare quotes or whatever um but do you think that there's any Merit to this sort of um uh last few years of people building these kind of things or do you think it's kind of nonsense actually I do like technology and I like a lot of things going on in this sector uh trying to improve uh the ability for people to not rely on a single entity and interact only with systems that are smart contracts or on the blockchain uh audited is a good thing but the problem is it's still a lot more complex to go through so you're not going to do a Super Bowl about a defy exchange because the kind of people that watch the Super Bowl may not be able to go through all the steps you need to actually get on the device change um that's what people I believe need to be more careful about some parts of the centralized things that you interact with in defy uh because no matter if you have a defy contract if someone behind still has the for the ownership rights and is able to update it uh you have to trust that person um if you use a stablecoin typically it means that stable communication by a company you need to trust uh just saying yes I'm trading on a D5 exchange I'm 100 safe if you're using a stablecon you're not decentralized so you may get your assets uh you I mean you could still go into very bad uh things um the other thing is even if you're trading on a default exchange and you're fully uh separate from anything sometimes you will still be impacted by a very large centralization going down because it's going to version price down and so on so your project may go I mean the market may lose value and so on that's just a reality of things right now did you um did you have confidence that the Bitcoin Market would recover after Mount glass because I got a little bit this is my first like real major market crash and um uh I remember the time quite well because there was the Roger video where it looked like you had him at gunpoint and he was reading the thing like yeah and then um uh Charlie SRAM as well was also like talking on Reddit about these things and then the crash just seemed like Relentless to me I think Bitcoin was it like 89 or something like a hundred dollars or something at the bottom um did you have confidence that the that Bitcoin in the industry would survive Matt goxa did you think that you'd potentially taken down this like budding new industry uh well I mean the difference here I need to say with this first would be that I'm very sorry uh to Roger on the road that supported mongods at the time and that uh taking for it because at the time even I didn't know about all the problem we had and the fact that we are missing so many Bitcoins um I knew at the time I believed I knew at least that we were okay uh we are fighting with this uh sacred lawsuit in the U. S the US has seized five billion dollars from us and we were getting very close to solve it actually and the fact that U. S agents initiated this and tried to take down mongooks uh allowed us to get a good kind of process with here that who developed us to get more assets back that you typically get uh when the golden mat returns these funds so we were very close to solving this situation when we found out that the missing Bitcoins on uh internal everything we fought for was kind of all for notes very I'm sorry for all the people that I try to help and that uh taking a lot of shade of this uh but basically what happened after the failure of Mongols uh it was kind of similar to the uh Bitcoin winter of 2012 where we had the many months of the price around three to five dollars not going up um uh nothing happenings for Monsoon um did some I believe some part of what uh happening with Bitcoin is surprise uh on the market activity depends on kind of news on how people are helpful about Bitcoin on seeing a large exchange going on is always going to bring people down uh but it's only temporarily because we're going to see uh new things happening again between to go up again uh crypto is going to get back uh let us say on I believe actually with FTX the impact is much lower than uh but even for mongox when mongooks uh crashed we already started to see some larger exchanges we had coinbase uh in Japan us to add beat flyer I mean different editions that need to be stable around the world uh if mongooks crashed during 2012 for example uh it would have been much worse uh there were no other exchange out there um there would have been any way to buy on sales Bitcoin anymore except for the OTC Channel there was um I was new in 2017 so I had heard of Bitcoin and I heard of uh when Mount gox crashed on the news and I was like well yeah that kind of makes sense um just as a general skeptic at the time and then found out about um the program at a program wow I can't talk today Kobe uh not just today the programmatic capabilities of ethereum and all that and you know kind of went all in 2017 and learned about Bitcoin over time and then in the bear Market there were all these rumors of the mount gox creditor like Panic dumping Bitcoin at various times what was what is what was the process for like when they sold coins why they sold coins um which coins they kept and yeah and like what was the strategy there were they trying to maximize value produce funds for like certain milestones in the bankruptcy process what the heck was actually happening there that you're aware of well actually there's a very good reason why uh mangoc sold about 50 000 Bitcoins back in 2017 I believe is initially when mongooks filed for bankruptcy 2014 we actually filed for the equivalent of chapter 11 democracy protection which in Japan is called civil Rehabilitation with the goal of trying to either reorganize the company or see what can be done to get the company back afloat at that point there was a lot of pressure from Critters for mongox to go into liquidation democracy which would be Chapter 7 bankruptcy in the US where the trustee just sells everything and distributes everything uh to the greatest um I believe a few months later so in April or May after the 14th Among Us went to the liquidation bankruptcy which means uh we just set everything and then it was replacing it's much simpler creators get paid sooner and everyone's happy uh except there was this U. S company named uh coin lab that tried to file a limited edition in the US against Mongols initially and try to get money out of it asking some insane amount of money from mongooks and holding on uh everything and basically blocking the process because the first of all them on that's so large that they would be the only person basically getting money out of democracy if they are right uh and for the bankruptcy the problem is if you don't know I mean you cannot say for sure I mean I can know that this lawsuit based on of course my knowledge on being involved with this is without Merit uh but the trustee cannot just act on this information because uh the stress you need to work with the court and investigate everything so uh it delayed the bankruptcy uh quite a few years um by the time this kind of move forward the price of Bitcoin went up again um suddenly mongox was not in bankruptcy anymore because uh the assets mongox held which are 200 000 Bitcoin at the time where was more than the liabilities under the Democracy process so typically in 2014 in uh end of February when mongooks fought for bankruptcy every single customer's liabilities were calculated in Japanese Yen so it was one Bitcoin equal uh 50 000 Yen give or take and that was the base for the bankruptcy when the assets were worse more than that what typically happened in democracy is whatever remains uh after all if you see distributed goes to the shareholders which would be me um Jed um that would have been quite a headache actually for me and for everything everyone involved uh of course it would also been bad for creators because they could have been getting more money and they wouldn't be getting more money um I tried to make sure people knew about it at the time I did talk with quite a few Critters about what could be done I talked to lawyers too um one of the solutions that was about by lawyers is to bring back mongooks from Liquidation bankruptcy to CV rehabilitation so that mogoks can distribute its assets as Bitcoins so that wouldn't mean I wouldn't get anything but quite frankly I didn't expect to get anything from the beginning so uh getting like one billion dollar and having 100 000 people hating me uh sounds like a bad deal I'd rather not get any money uh so I covered yeah good deal I'm gonna say which way are you going or I mean make it at least one trillion maybe I'll think about it but one billion it's nothing near enough so just don't understand correctly the the liability that customers had pegged to one Bitcoin to 50 000 Japanese Yen would have been covered by only a percentage of the Bitcoin because bitcoin's price went up so high and that all of the remaining Bitcoin would have been yours which was over a billion dollars um yeah so you fought to give back the all this Bitcoin to customers basically yeah um there was some limits on what I could do because I don't directly have a standing inside democracy I'm just the director of a fail company uh which limits what I can do but the one thing I could do is to make sure creators knew about it so I would go to people I would be on Reddit and explain yes as things are right now I'm about to be due to receive one billion dollars uh so people what you what would you distribute this one billion dollars to create us uh I say I mean I wouldn't want to but there are a lot of implications there are taxable applications and also implications that anyone suing me while I'm holding one billion dollar could be able to seize part of those funds um try to get a larger piece of the cake so that was definitely not the way to go um but the fact of the redemptions being in Bitcoin was something that was definitely up in the air because an option was just liquidate everything make it more simple even though it's not the best investment if you will for the creditors and that could have been the outcome there could have been a whole bunch of Bitcoin that just got sold on the open market by the trustee pay out the creditors and then the rest goes back to shareholders and essentially a profit because it's chapter 11 not chapter seven yeah I mean because it's chapter seven but basically because the bankrupt company comes out to have more assets and liabilities yeah wow but yeah I mean that was not going to be a good thing for anyone on uh hitting 200 000 Bitcoin sold on the market would have had a very bad impact on the price uh I would have been receiving money but at the same time uh everyone would hate me even more I could try to dissipate it but then anyone suing me might have been able to get some piece of it uh before I distribute it on uh it would have been even a worth of a headache plus uh as part of the income tax I will need to pay on this kind of a month I guess about 15 percent I wouldn't go to Kratos but some people may not like it or may want to sue me for whatever amount I would have to pay personal taxis foreign that's one of the reasons why I talk with scriptures on I mean listen guys we need to find I mean the way things are right now are not good the lawyers are saying if we go back to civil repetition we have a chance to visit Bitcoins as Bitcoins um this whole issue disappears and that's what happened because uh a group of creative filed uh with the code to move back the liquidation to civilization uh the court appointed uh someone to look into it that person said uh it should be okay to go back to a civil rotation but we need to make sure the situation doesn't get worse for kritos so the trustee needs to sell Bitcoins to ensure at least the amount people would have received under the bankruptcy you're about 500 billion dollars liabilities and democracy so the trustee sold about 50 000 Bitcoins which many allow these literacy to collect uh yes they are kind of amount that was needed uh this amount was put into a trust and uh thanks to that we're back into a civil repetition and even if tomorrow bitcoin price drops to zero uh Mongols Critters will still be able to receive from the stressed uh the kind of amount they were expecting initially into bankruptcy so they cannot get a worth deal from the decision to move from uh

liquidation back to civil repetition so there is an opportunity I think with the FTX bankruptcy perhaps not to the same degree because they didn't own any Bitcoin the things they own are different um but they do have like these volatile assets that somewhere in that basket of companies are owned you know a lot of Salon a lot of things on the FTX Venture side or Alameda Venture side whatever and some of those may have a lot of future value so there'll be a lot of decisions to make in terms of what do you do and how do you approach it and I just wonder is there going to be some kind of investment strategy as a piece of that or is it going to be this liquidation sale and people end up getting Pennies on the dollar but had there been an ability to distribute in kind or something that there could be this kind of upside call essentially for those creditors sounds like that was relatively unique to y'all situation though because so many of the assets were Bitcoin specifically and they got tied up for so long whereas in this situation it's a much broader basket of assets and seems like liquidation is going to be more likely at least for most of it yeah I think so too because uh I mean there's too many assets to try to get the distribution back to Kratos as those assets in a fair way uh four Critters that are in companies that can get back afloat or that can be sold there might be a chance for all the assets to come back to Twitter uh I'm thinking about with FTX in Japan it could be sold I don't know to uh another example could rename the company and resume activity in Japan where everyone gets back the balance uh but if this is not possible it's unlikely uh to be an option to just with different kind of assets people so in that case uh those that will need to be sold uh liquidated and the distribution will happen as US Dollars most likely there are quite a few other entities and some of them got yanked out um as well in like amended bankruptcy filings um was it Ember or something like that um it was a it was an acquisition that I think FTX us made that was worth quite a lot of money and there's some kind of portfolio of or like regulatory you know things that they had available and that carried value and it's just this weird mix of assets and trying to figure out how all that's going to blend out it seems like it's just going to take a lot of time and um it doesn't seem like it's as good of a scenario as Mount gox was in terms of turning into like a force total and you actually make money out of it where you wouldn't have expected to at this point but it's sounds unlikely to get something like what happened with Mong ox y CRM tokens are going to go up in value larger well there's a lot of other stuff in there there's Maps oxy feeder there's loads yeah it's I don't know Solana and other like Equity positions I think that they had that across the Spectrum I mean they invested in almost everything so it's like this slice of the pie of global crypto market cap for whatever survives um yeah especially we want to sell all of this uh maybe to investment Banks or to whatever they can uh the goal will not to be to wait until you get small value uh but to find the right timing to sell between uh repaying crittles and maximizing the value so if it can be solved this is interesting may decide to start with the more complex assets uh I'm hoping maybe the value can increase over time uh but as we get closer to the step in democracy what this version could actually happen uh this kind of assets are very likely to be sold it's too bad the SoftBank guy got so wrecked already could have gotten a lot of this at a discount that's so right and tiger Global as well tiger globals and losing an amazing amount of money yeah um did you say earlier that the one fees address was uh is it 80 000 Bitcoin in the one fees address it was hacked yeah before you um received the exchange from Jed yes

so isn't the one fees address also the address that Craig Wright um says he has a legal claim on and it's one of the Satoshi addresses or something yeah it's indeed one of the address factors she has been uh so you you're on the Craig Wright as a fraud train yeah I mean I've I was there back in the time and I know most of the very large mongos accounts and uh customers uh I know actually this guy wasn't there back in the time um and he claims he was there and he has claimed like about those Bitcoins from someone over the Mark I mean very weird claims of buying Bitcoins but just within private keys and not movies of Bitcoins after everything is right because it makes absolutely no sense uh So based on my experience on my knowledge of how all these works I can say uh that it's my professional opinion that Craig is a fraud so he so his claim is that he bought that private key but didn't move the coins from the private key I don't even understand what his claim is yeah it doesn't make much sense uh but he say that it was kind of a loan or something like that way about this and got the correct key before or something like that and quite frankly it makes no sense uh that's something actually that's used by a lot of fraud studies to try to create claims that cannot be easily verified um this way you can just run with it longer I've seen a couple of people in the chat say um do you did you feel deceived by Jed do you think he gave the exchange to you in bad faith like knowing that there was problems uh or um yeah do you think he uh do you think he stole the Bitcoins um like just some questions about your relationship with Jed I guess um from people watching and actually I didn't have much contact with jet after uh taking over mongooks I had some employees handling uh shareholders communication and so on uh on when Mongols were in democracy I didn't hear from it for him at all uh so yeah at the very beginning I bought I mean we made the contract to for the sale of Mong Ox in early of February I think February the third and uh I didn't login into the server until actually Jed contacted me on Skype and told me yeah we're missing eighties and because can you look into it and he gave me access to several times so I kind of came here and I had this copyright which has had the specific clothes that Jerry would have to be uh kept uh immune for any kind of liabilities claimed and so on from running mongodbs um we had like this 80 000 Bitcoins missing and at the time I didn't really have time to think about the result and so on why uh and from the next three months I found out that there was a lot of issues with mongooks where initially Jed told me that yes at some point actually mango so I saw how the theft of fifty thousand dollars on Liberty reserve but that was the value that was sold on that said he was fairly confident there were no other security issues with Mong ox and I took this representation at face value uh which in retrospect I shouldn't have uh but yeah the main issue at the time it was dealing with all the trouble coming with mongox uh the way the system was made was not really scalable on I had actually to fix a lot of issues every single day until uh in June where there was a very big hug and I had to turn everything offline I took a couple of weeks at the time to recreate and rebuild everything uh but I'm not able to comment on the jedive knowledge of this kind of issue specifically or did he do anything but uh at all and anyway it's been so long I don't think anyway there could be anything be brought around this but what I did see with mongbox is uh weight was called it was not great uh I had to just wipe everything at some point because of how bad it was uh but there was potentially the way it was built on the ID uh the fact I mean mongooks did grow to be the largest uh for a long time after that uh there was just a lot of thing I didn't know back in the day when I took over Mongols and I did the contract with Jed uh I didn't have any lawyers to look after the contract and so on and I'm pretty sure a lawyer would have let me sign this uh this yeah so he was as from the moment you signed a contract he had like Indemnity for anything to do with Mount dark confusion to pass the liability 100 to you um interesting um like just playing up his picture now like with his net worth is that how has anybody dumped on absolutely everyone else more than dead Michaela I mean between like letting go of liability for Mount gox and then he sold like all of this xrp over eight years and came out with billions um there may be actually as a way to look into the future because it's been doing moves that turned out uh afterwards to be a very profitable for him not even counting like all I mean that's not it's just two things you know it's stellar and who knows what else he's worked on I can't even remember but maybe I mean yeah back in the day it was known for itunkey file sharing application um and went from the tomong to Ripple to Stellar uh they don't know what is we know

know the um another thing that keeps coming up in uh in comments is for I didn't even I think maybe I knew about this but I forgot about it for a while you were accused of being dread pirate Roberts um and I said that you were running Silk Road was this before um uh DPR went to jail or was it I guess it must have been before that it was during DPS uh trial uh so it brings the trail his lawyers tried to uh use the argument that nobody could say for sure who DPR was uh the way they did this was to yes the uh US government for a while did things that I was DPR and actually investigated me uh and I did learn actually from that during more than a year all my emails and everything was read by the U. S law enforcement uh because I thought you were the they thought you were DPR so they were just investigating you for a year I guess yeah they thought I could be deep yeah because I mean running mongooks on SQL at the same time made sense like you create an exchange and then you create a need for the exchange it's perfect um so it was Jed it was dead foreign actually there are different things happening uh you know as I said I was doing a hosting company and I was the first company accepting Bitcoin payments uh Russell Bridge actually saw this um about the domain sacredmarket. org and he put a simple web page explaining how to get to the dark web and accessing SQL on it so when you were through our investment look into thick Road and they saw this sick World domain and they thought it was handled by my company they said oh yeah it's a guy definitely wait so who registered that domain uh resume actually was registered anonymously on um using Bitcoins as payment uh I see oh god um with all the like corruption that was going on at the time with you know the secret service agent and the da agent do you think Ross um was treated fairly because at the time of the um trial there was all this stuff about you know this murder for higher charge and then it came out that actually multiple people could have written um those logs because people had access to like the Silk Road admin system including these corrupt um agents who were trying to launder money through Mount gox do you think that Justice's Edge you think he should be a free man today do you think it's somewhere in the middle uh if I had to say on this he would be free and I don't think it was traded fairly but he was treated very harshly as an example because it was the first case of this kind where you have a dark net exchange on Thor using Bitcoins to facilitate illegal transactions and for the US the goal was really to show that if you do that uh things that would be to be nice for you um it's very unfortunate for him because I mean we're not very fine type of Ages or on from what I hear he had some IDs uh political ideas and so on that he tried to uh make realistic role and it may have been uh training like for hiring people for murders and so on doing things like that went way too far uh in terms of what wasn't but there was no evidence that anyone actually died on this um I don't know exactly how much of this went through in the end uh but at least in terms of evidence he was charged uh for running sick Road and only this and they decided to put him in jail for Life uh I don't remember exactly how many times uh how many lifetimes object is got yeah I think it's several yes the um the person who was the target of the murder For Hire contract um testified in favor of Ross in the end um and yeah no one died um do you think it's likely that there were at the time that you were active with mount gogson it was kind of the largest uh Target um and that there are now state level actors that are trying to hamstring the

crypto industry or view it as some form of threat to the Fiat uh monetary system to the degree that to which they would you know try to create chaos in the ecosystem well there are definitely people inside governments that think like that uh quite often when you think about government sometimes you have like uh people who think that the government actually has a background side with people um ready to act under the shadows to do specific things also but typically government actually turns out to be a lot more different people with different opinions doing different things at the same time and you don't really have a united front for many of the actions governments will take uh but there are definitely people in different countries that are not enjoying or cryptocin and how things are moving forward here um trying with whatever Authority they have to make things harder for crypto or just doing things like that so there are different people like that I don't think any large government is uh doing a united front against crypto I didn't see anything like this so far at least uh um like trying to do things in the background to make things worse or uh do things like that but there are other definitely people who don't like it and there are also people who like crypto very much on training to use the authority to uh bring more things to crypto there's also been some talks about what FTX has been doing talks with the SEC uh on Jose we try to block uh defy uh into us and so on I don't know how far all of these instrumental but it makes sense that people inside governments will try to make things go their way either because they have a profit from it or because they believe crypto uh is a tool used by uh hackers or even North Korea to try to raise money to prepare for a while something like this so governments typically who have a lot of people each of them have their own opinions on they just act the way they want to work uh generally um when all the maglock stuff like came out did you end up with uh you ended up going to jail was it about a year you spent a year in jail actually yeah it was the pre-trial detention uh yeah so I was arrested in 2015 uh on August the 1st uh the goal was uh okay these guys stole all the Bitcoins we're going to get him uh to confess a very typical process in Japan and when they arrested me and starting to question me look into my computer on Sunday so that I didn't uh do what they thought I did with the Bitcoins uh they actually had uh these two uh prompt approach where one side was uh okay you stole the Bitcoins you did something bad with the accounting and we have reculturing it and the other side was human-based uh customers money so the approach for the second side about the embezzlement which uh actually was the main uh thing they had after the theft of Bitcoins was uh fairly simple on paper is for the last year of mongooks they had numbers that say mobox had 12 million dollars in revenue and 60 million dollars of money spent which means that mugok spent more than the end which means spent customers money equal embezzlement that was very simple uh um it turned out actually to be wrong because they didn't get the right recording figures mostly because actually mongooks filed for bankruptcy one month before the end of financial year and the last year of accounting was not finalized for the trustee just I mean it's not going to be any kind of taxes or anything for company so the academic was just closed as is uh many of the actions taken by mongox during the final time uh were not accountant for so while I was in detention pending trial by lawyers uh try to get the prosecution documents it took six months before I actually got uh all the recommendation of what I was accused of this detention's not like in your home right it's a nice yes I was in uh actually I spent the first four months and a half at the police station which is a solar process in Japan so I would be interrogated every single day and spend about 80 or eight hours integrated a day seven days a week and after they were done with that they sent me to the Tokyo data center where I was put into a small room alone and just waiting for something to happen and actually turned out to be not the best experience because you hear you're alone you don't have anyone to talk to and you don't know what's going to happen when anything is going to open so I was waiting and my lawyers got the document so inside the room in the Tokyo that doesn't Center I had about 20 to 30 000 pages of uh legal documents including 20 000 pages of accounting for mongooks and I thought the prosecution argument was weird because I knew we had more sales and I wanted to find evidence of it so I started looking at the accounting and while I didn't have any computer mobile phone or anything I did manage to buy a calculator uh which actually is a specific exclusion like in the technical store if you are arrested on something Financial you may be able to buy a calculator uh it's not written anywhere but uh I managed to find this um I spent I think uh three four weeks uh going through all of the accounting and recomputing everything and I found about 5. 5 million dollars of Revenue uh the protection didn't count um it was enough to invalidate the argument because the limits mongooks add more Revenue than spending on of course and the whole argument just falls together solve this on paper sent it to my lawyers my brother brought it to the prosecution uh actually the prosecution person changed in April because there's a lot of uh movements in April in Japan it's typically when people uh get to new position in compilation and so on so we had new prosecutors in April that started to look into this I had meeting with the prosecution where I explained yes this is the accounting for mooncox and so on um the prosecution found it was kind of difficult for them to continue on this so they went through a process which exists in the Japanese law where they can add new charges before the trial uh the accused me of embezzling not customers money but companies money uh which kind of still could be difficult because I was the only person in charge uh that could decide to spend money uh being the sole uh voting rights shoulders on the sole director if I decide to spend money on behalf of Mongols and it's not customers money uh it's not really a crime anymore it's much more difficult to show each other crime so uh prosecution was not really to move on with the case yet uh the judges told them okay if it's going to take longer just get him out on bail and you can do your case uh where you thought on bail so that what finally triggers the prosecution like the case was not uh holding anything and they were not ready to go to Trail so they wanted more time and I mean when you're a foreigner in Japan it's very difficult to be Freedom bail it's not something that happens uh quite often uh you only have a few very high profile cases that gets things like that like later you've got Carlos gun uh the Nissan director that actually run away while so that a whole other story actually involves in that one too so if you want I can tell I can talk about this uh maybe another time uh wait you were involved in that yeah I met Carlos gone before he left Japan because he wanted to meet me to talk about uh how I got my Reddit because incident on the Westford Innocent but all the embellishment and everything these voucher they ran off uh I actually told Carlos guns that yeah in Japan it's difficult to get a non-gilty verdict but it's possible I'm the proof of it you just need to be ready to fight for many years uh based on what he told to uh journalists or that as I've actually convinced him to leave Japan because he didn't want to fight for many years you know this is oh my God it's been a relatively uh common story worldwide

where someone in crypto is detained or put in something like this where there's no formal charges filed the latest is the tornado cash developers arrest in the Netherlands and then recently extension for yet another 90 days without charges um and I think this is a kind of scary reality of all of this where you have someone who in your case was cleared uh to where they at least could not bring any charges yet you were in detention for months in isolation and something that you said it wasn't jail but it sounded a heck of a lot like jail to me um just not from a criminal punishment perspective it's like a hey in case we get to charge you for this later we're gonna hold you here now there's not any recourse in that for you like I mean really recourse is uh when you are in there you can try to apply for bail and I did apply a few times but each time I was I barely get a calculator like yeah uh you think it should be actually nearby oh yeah you still have the calculator you can sell it as an aft for a million dollars yeah a year ago because I never buying a calculator I got a computer or I've got stuff so I don't need to buy a calculator and I'm not but it's a very simple one like you know the addition subtraction uh it could be your only friend for several months yeah it was my friend it was quite some time too the um the thing I find remarkable is that you have to do the reaccounting by yourself you would hope that like someone was out there doing that yeah for you but you were just sat in a cell uh actually uh pro bono for the most part so it was very difficult situation I was bankrupt because actually the Mongol democracy filed photography against me too why there was uh after I was arrested so I didn't have anything and I needed to at least fight and try to prove that no I'm arrested for initially I thought I was doing something with the Bitcoins I don't have any Bitcoins then I thought you took customers money no I didn't take customers money uh that's something I wanted and I really had to prove uh on you know to prove something like this when you have uh 20 000 pages of accounting uh typically you want this into an accounting software on just that queries and you get results uh but I didn't get the chance to do that so the only option I add remaining was uh this calculator well 20 000 pages in a little calculator uh but anyway the only good thing is that is I had all the time in the world uh actually when you found guilty and you send to the guilty people's jail you have work you can do every day so I mean you're forced to do work every day so time goes much faster but when your pre-trail because you're supposedly uh yeah adoration because I was VIP so I was kind of uh there were like uh 20 30 other people like this on the floor most of them are actually uh death for inmates because uh in Japan when you are on death row or when you are panicked well you're in the same situation of uh waiting for judgment uh so we I was there it was a very quiet floor of course because nobody's talking um you don't have anything to do so I had some books with me uh which helped me spend a little bit of time I also try to spend time writing novels uh but in this kind of environment actually all the stuff I watch is uh crap I don't want anyone to look at it and when I finally had something to read it was more than 20 000 pages of uh accounting and also all of the um uh testimony from the different people the police and the prosecution talk to so I did go through every single page of everything because uh it was a good way to kill time but I thought it was the only way I could defend myself um I asked this question originally because I wanted to ask does Sam uh go to jail in your opinion uh I would say it's like 90 likely Elizabeth Holmes type sentence all right 11 years or 15 or something like that yeah it's probably going to get a little bit less on based on time sales as well or good behavior or typical thing uh but I would guess it makes sense uh for this kind of uh crime I mean he didn't kill anyone um the only thing is there's a lot of media attention but it's the same kind of thing uh but because of the media attention it's not likely to get scot-free uh because people who just accept it but it's probably going to get some kind of sometimes that makes sense uh just enough so people are not too angry but not too much either because you know uh he's good with friends yeah um all right I only have a couple of questions left uh Legend uh anything on your um your mental list I know you don't make a real list I just continue to be kind of sad

uh yeah oh in life like do you want to talk about it yeah um no just at the like disparity of like Global Justice systems and who's trying you were supposedly protecting versus who we actually are and like Mark I don't know your whole story I don't know what you're actually guilty of from a negligence perspective or whatever in the earlier days prior to the collapse but post collapse it seems like you had opportunities to take an easy Road where you didn't take that easy abroad and where you were trying to advocate for the people who were affected by your exchange failing and I think that there's a lot of credit to be had there and yet at the same time you see like it's nobody charged you with a crime or certainly we're not convicted of a crime and yet you've been kind of like guilty in the court of public opinion for a very long time which I think is um quite a sentence served in addition to this isolation that you were in that a government didn't even have anything to bring against you I think that it just kind of makes me sick for the system and now we're looking at what we see in this current ERA of crypto where there appear to be some fairly clear examples of fraud at least again in the court of public opinion maybe we're wrong maybe we don't understand but um like where is justice being served now um and what is that what does that look like um I think everyone does deserve their day in court but like we've seen some stuff where it's like the likelihood of a crime seems quite High um so where are the where are we going to actually do our jobs like as Governor like these people these enforcers if you will going to do their jobs to protect customers um it's kind of insane to me that um things worked out the way they did for Mount Cox I think it's a huge blessing honestly when you look at how long it was locked up some of these people got better outcomes than they possibly could have had I'm afraid that we're not going to have that this time around this is more of a monologue Kobe than a question um I noticed yeah I uh I guess if I'm gonna summarize with a question I would ask like what do you hope can happen here that would be a best case outcome for the people who've truly been affected like forget the funds and forget the you know corporate interests and what about the individual investor interests what do you think's the best possible outcome the first thing that we need I'm guessing you're talking about of course FTX but the first thing that's really required here is transparency uh because we are learning uh bit by bit from the call filings um the right investigation into what happened with FTX uh that we hear that for example uh there were so many companies we hear that uh money was stolen from FTX right after the funding for bankruptcy but maybe it was not a hug maybe it was actually uh the Bahamas government making a seizure but then why would they sell it and make classes converting it to ethereum or whatever there's a lot of things that are happening even today that we don't know uh that are very relevant to every single person you buy with FTX and I mean it's very possible that uh some uh screwed up on South that he could recoup the losses uh from his Alameda experience and decided like this year to move some of the customer friends to Alameda to just uh keep the thing alive and just make things go up again uh that it didn't work out uh which would be uh potentially a crier but what's important is to know what happened uh we can decide if it's a crime or not we can go through all of things uh but right now what three missing is a full picture of everything uh the Bahamas government is free to do something we don't know who is uh rooting for whom we've seen some uh I don't know exactly why it's trying to go uh where I mean he posted his long uh what happened on Twitter and then try to not say what happened but what he was trying to do on uh there's many things there that we don't know at all and before we can get back uh people their money which is Indian what everyone wants to have I believe people need to access have access to the truth and the whole truth of everything that are happening around FTX because uh maybe you're not going to get money uh back out of your investment maybe you're going to get only 10 cents on the dollar or maybe you're going to get virtual of your money we don't know yet uh but I need a lot of people to like get some kind of closure on this uh what's important is to know why things uh went like this and I mean your if you're involved in this you need to know what went wrong so you know how to avoid it in the future it's part of the learning process uh we go through as humans and we go so as a industry with crypto and it's really I think the most uh important thing people getting money back on that will depend of course on what really remains so it's not going to change much uh on what we do but we can try to find a way to get things done with more transparency uh I mean it's already part of what the bankruptcy is about because you've got the codes filing that everyone has access to and so on which brings a lot of transparency on the process uh but I do feel that the piece of information missing out there I mean we know that uh there's I talk a few times about it like this cash account for eight billion dollars that uh frankly is quite suspicious you have this copyright structure which is very complex and we don't know if there's anything hidden behind it we don't know all of the companies that had investment into FTX actually if you look into the findings that happened yesterday you have a list of creditors you don't have the names but you have the amounts and you can see the top 50 Critters in FTX like 200 million dollars 150 hundred million dollars and very large amount of money is uh that FTX owes to people which means that some companies out there have holes of this kind of amounts and we don't know which companies uh have been affected all this kind of information there's a lot of things that needs to be more transparent than the industry uh we created crypto uh I mean Satoshi created bitcoin initially as a way to create a system that has a fully transparent history of every single transaction where you can choose to be pseudonymous so you can hide your name but you cannot hide your trans screening story um I think it's uh kind of a philosophy that actually brings uh different results than the typical way we do things uh in the business world so yeah if I had already anything I wanted to see right now from FTX uh some and all the people involved this uh transparency no lies yeah that's a scary point about somebody out there or hopefully has like the logs of what the balance is on FTX were and therefore what other exchanges hedge funds projects have holes in their own balance sheets now and aren't coming forward so there's this uh there's this Delta between what someone knows if they have access to that information plus the projects themselves versus what's public in the public eye and therefore there's probably a good bit of contagion and Fallout left yeah um I think nobody wants contagion to happen so uh if a project for example out there has 150 million dollars whole due to FTX I mean it's not really that fault and it might be worth coming forward uh to the community and find a way to work out things uh on the long term and making sure less company fall from this so I'm just trying to hide it and uh or maybe I mean if they can if it's not an important like they got uh enough cash to cover for it might be okay but if anyone is in trouble because of that I'm pretty sure as a community we can find a way uh to help this kind of companies uh move forward this and stay alive when I when you mentioned the what happened tweaks I was thinking like what sort of Mind stay is a person or what kind of person tweets what happened letter by letter over the course of like three days but then recently I found out that um that block five gave a loan to someone who Alameda Sam's private company with which people might rub in Hood equity and then pledge that as collateral block fight to get alone so all right pretty reasonable yeah that's the kind of person um all right I got a couple of uh questions before we wrap up

um one did you ever interact with Satoshi and uh or uh or yeah who would you bet Beyond who she is uh so yeah actually I did have some interactions back in the day on the big conference because uh back then the Bitcoin client was using something called wxjtk which is a very weird and uh not fairly I mean a lot of people use it but I liked uh QT better as a graphic framework I mean sorry it's a lot of tech talk but basically I wanted to make my own Bitcoin client uh on Satoshi was against it because it could risk derailing the blockchain uh I had a little discussion about this with him or her I don't know uh and as to who Satoshi is I don't think we should be looking into it uh because as part of the Bitcoin community and I mean crypto enthusiasts and so on Saturday made very clear when leaving the Bitcoin world that nobody I mean don't want to be uh revealed um as someone who has been involved in the Bitcoin community and I guess every anyone who use anything based even remotely on blockchains should respect uh this opinion I mean this decision from Satoshi all right so you know but you're not telling us got it um question number two was Willy bot real uh you could say it was really it is not exactly as people live uh deduced exactly why for the most part it was similar uh there have been a long history on this and it starts actually from before I took over Mongols uh and it was probably one of the main thing I regretted after taking over one boxes when we had this 80 000 Bitcoins uh whole how to deal with it I did get some advice from Jed which he suggested either to get the need to start to bring this kind of amount uh on the table and make everything back to normal or just wait for the cells to cover this hole or just I mean if the person because starts going up and as the whole becomes bigger maybe uh cover some of this whole by creating a U. S on a hole that might be more stable over time um part of what really was doing is to basically avoid the hope this hate it doesn't Bitcoins are all from uh increasing value by replacing it with the US dollar hole yeah so playing back the Bitcoins and then you have missing USD instead of missing Bitcoin makes exactly the way I should have done this back in the time and I would they've done knowing what I know today is uh just to be open with it and explain to customers okay we are decept we have this whole uh we're going to issue a token that matches the whole and so on to people you think that's an X did it right I think I mean in retrospect I'm looking how it went through uh it was the right solution yes everything and every single exchange out there is the one that got the better uh resolution is it weird thinking about like one Bitcoin as a whole lot of money when you were slinging thousands of Bitcoin around you know like servers that were just barely hanging on at the time uh sorry is it weird thinking about one Bitcoin as a lot of money when you were dealing with an exchange or thousands of Bitcoin or just things that you dealt with every day yeah um I mean when I was selling servers with my company hosting company back in the day uh you could get one server from about 2 000 Bitcoins a month so that would be insane today uh yeah actually I think I made like uh 70 000 Bitcoins out of all the web hosting activity uh it wasn't helped uh to Mong works um I mean because of my position with Mongols I just decided to not let me uh the company uh claim anything out of this wow yeah um uh did you ever plan to put Litecoin on Mount gox or was it all of ruse I it was planned to I was very busy dealing with U. S government saving friends from France which was quite a pain uh plus we had the coin lab lawsuit I mean everything all there was a lot of things to deal with and I did uh I mean mongooks did have things prepared for like implementation uh but there were a lot of changes still required in terms of the UI and how to make this work uh more Cox also had an automatic intercurrency settlement system where for example if you were buying Bitcoins in Euro uh and there was something cheaper even with exchange rate from the US dollar market you would get your trade settled against the US dollar trade of someone else so we had a fairly complex system even back in the time on hiding Litecoin would uh actually multiply this complexity uh not just by two but uh a lot more so I had to think of dealing with this while at the same time the among box trading engine trouble going through all the traditional times we had the engine lag Everyone likes to make fun of uh but that was also something I was working on with the team back in the day where we had a new trading settlement engine where actually we split the actual trade execution on the actual movement offense so you can we can trade very quickly and for example you could buy Bitcoins very quickly but your balance could be updated a few seconds later uh is this was this Midas yes exactly yeah what was the Midas engine where we uh basically you want to buy Bitcoin so you get your funds logged into a trade and the trend is executed but your coins are not moved instantly uh and this allowed us to offer very quick uh execution and I mean we reached like a few hundred thousand production per second from that so yeah that would have been nice I mean we had a lot of good stuff on the work if uh manga questions there Kobe would you trade on an exchange called Mount gox today like if it after the bankruptcy and all that stuff get got finished well I did I fell for that with mint pal too because mint power was pretty good and then they got um I think they got hacked and then someone came in to like buy mint pal and make the uh make them whole but actually they just stole all the money and then um went to jail for as a for raping people um not even related to the financial fraud just a rapist um so I fell for that one once before so I don't know I don't know about it I think with stuff like that it's like in some ways they're like real deep crypto native people like it's like oh Redemption is the Phoenix you know and then but for everyone else it's like wait didn't that like die 10 years ago like that doesn't sound safe to me so um I don't know but do you um do you miss it do you wish that like Mount gox was still operate as a as an exchange today and you were you know um competing with CZ and SBF and launching exchange tokens and leveraging customer deposits against those exchange tokens and or who would you be yeah I don't know actually because it's a lot of stress uh running in nature engine uh when you have like 100 Bitcoins on a system that uh you don't know tomorrow you could get hacked and lose everything uh every single day is like could be the last day of your life basically um yeah the one thing after the Mongoose democracy is and maybe some people will grow uh I mean we feel like they already had someone say that but you do sleep better uh when everything is not at stake every single day yeah on that note Ledger two hours in thank you so much Mike for joining us um I have one like very quickly we're not done he's still a good question uh Mark he's reading it from somewhere tell us once and for all what were you thinking In This Moment uh actually on this picture I believe it was during the press conference uh of when another bankruptcy and uh I was actually very stressed because I was in front of this I mean this very small room we you had me or lawyers on one side and more than 100 uh journalists cameraman and different kind of people in front of me and in that time they were still playing nice but that was probably the most uh stressful time in declaring bankruptcy because I don't know I didn't know at the time what I was going to go through um actually when I did uh bo and going through like explaining yes we had an issue with the system and we lost everything and I'm very sorry uh for everyone involved I actually uh why do I bring your boy I was trying to remember the actual world and I said in very weekly in Japanese like uh what was the thing already on it turned out that when I was doing that some of the journeys turned the volume so high that you could actually hear me like what was I try to saying that was kind of uh not what I wanted only people to hear but uh so this face of euphoria is actually a face of extreme stress and work anxiety I think this picture was taken while I was blinking or something like that because uh I was not uh caring at you for Reagan uh I feel like we can rewrite this picture though now in this moment I am shipping myself basically all right well I had to know uh thank you for reliving it for me uh I've really appreciated your input today and I hope that it's helpful for other people um is there anything any final words that you want to leave us or Sam or um the bankruptcy trustees or whoever uh yeah I mean one thing would be I guess as a community and even it might be professional for me to say this but uh I do think that a lot of people inside the crypto committee are really happy to help other people uh when they have issues or going through trouble and so on and it's really a matter of being open and asking for help uh but on one side being more open is a good thing on the other side uh for FTX uh for some at least other ways things look like right now it looks like it did uh something that would be uh typically considered criminal so it might be actually good idea to not talk about it too much without loyals uh but yeah um come on the podcast have a chat with us mate you can confess all you want yeah mark thank you so much appreciate you being on here with us y'all can follow Mario magical tux on the Internet thanks for everybody for being here we've got another show for you peaceful this Thursday we'll catch you later bye-bye