Kyle Lawrence [00:00:00]:
Jonathan Mann and Brian Frye stopped by for a chat. Bitcoin goes mainstream, and Ethereum turns nine. All that and more coming up on block and order. Welcome to block and order, the show that explores the legal issues facing the world of web three and beyond. I'm Kyle Lawrence, and with me as always, even though he was scheduled to be there after me, he beat me to Nashville last week. Moish Peltz.

Moish Peltz [00:00:29]:
That's right. Quickest man to Nashville.

Kyle Lawrence [00:00:32]:
You sure were. How you doing, mosh? You look really well.

Moish Peltz [00:00:36]:
I'm doing great. I got. I picked up my Satoshi t shirt, which was kind of my goal for, you know, really for this conference, but for any conference, you know. And I'm pretty happy because, you know, I nailed it.

Kyle Lawrence [00:00:47]:
They are pretty nice. Well, since you bought one, I had to buy a different one because it's like when you go out to dinner, I can't get the same thing as you. That defeats the purpose.

Moish Peltz [00:00:55]:
Well, I think if you're getting the filet, everyone can get the filet. It's okay. No one's gonna be mad that you also got the steak, Kyle. Although I guess in this bad example, right?

Kyle Lawrence [00:01:03]:
Yeah, I don't think I'd be getting it. Although if you give me enough whiskey, I'll eat just about anything. Well, thank you for joining us on block and order. For those of you new to the show, this is a point counterpoint style program where we discuss the legal issues facing all things blockchain, crypto, web three, general emerging technologies and innovation. We try to educate and inform, but in an entertaining way. We try to do it, each segment being only a few minutes long. Sometimes we go over, sometimes we don't. Then we have a lightning round at the end.

Kyle Lawrence [00:01:35]:
So thank you for watching. Blocking order is available on all podcast platforms as well as on YouTube. So kicking us off today, bitcoin 2024. It happened, didn't it, Moish? Well, let's. Let's just jump right in. What do you think about it?

Moish Peltz [00:01:51]:
Yeah, man, it happened. What do I think about it is, you know, I like. Look, there was a lot of speakers that showed up at this conference. A lot of people, you know, very prominent in the political spectrum and crypto industry spectrum. There were some speakers that were reported to want to go that didn't make it. But I think no matter how you look at it, I think we're going to look back on. On this particular conference is potentially a turning point in the industry where I think you can sense a real shift, you know, in the way that the industry perceives itself and the way it's interacting with government and, and also just the industry as a whole, maturing. It was a really fascinating conference for, for a number of reasons.

Kyle Lawrence [00:02:40]:
It's true. No, you hit the nail on the head with that. You know, we go to a lot of these conferences, and I'm sure people who watch this show also go to a lot of them. The general feeling at these events is always, it's very positive. Everybody is always very energetic and excited about the space. We certainly are. But this one definitely marked a bit of a sea change, I felt. You alluded to the speakers that were there, and we'll come right out.

Kyle Lawrence [00:03:03]:
And I could just list just some of the high profile ones. You had Edward Snowden, Senator Cynthia Lummis, Bill Haggerty and Tim Scott. Ronna from Congress is there. Alex Gladstein spoke twice, and he's a personal hero of mine. I have his book back there. Michael Saylor was my personal favorite. And of course, presidential candidates RFK junior and republican nominee, former President Donald Trump was there. And just, you know, look, you can, you can say, you can feel how you want about Trump, but him being there, just his presence alone shines a national spotlight on bitcoin and this industry as a whole.

Kyle Lawrence [00:03:37]:
And that can only mean good things. I mean, the names I just rattled off from both sides of the political aisle. And I'm glad, you know, you've always maintained, moish, that crypto should be nonpartisan. And I think putting aside some of the comments that were made, just the level of speakers that were here, I think illustrates that very well.

Moish Peltz [00:03:54]:
Yeah, I mean, I don't know, nonpartisan or bipartisan. Probably bipartisan because I think ultimately a lot of these issues do overlap with what we need government to do. I know there's probably some on the libertarian side, which those views were definitely expressed at the conference of get my government away from my crypto. And I totally get that. Maybe that's the answer for a lot of crypto. But I just think even talking about litigation and our guests that are going to be on later today, some of these, we actually want regulation or we want to define what is regulated and what is not. And that necessarily requires engagement with both parties. And so it was really fascinating seeing the level of engagement between prominent people in the industry and the organized conference and other just like very loud people on social media that are about who was coming to this conference and who was nothing and kind of expectations going into that.

Moish Peltz [00:05:04]:
So I think, you know, one part of the conference was definitely just people speculating about what one person had just said or was going to be saying. And I think also, you know, just, it was, it was really interesting to hear what different people were taking away from all these different speeches. It was really impossible to see everything at the same time. You know, Michael Saylor, for example, I couldn't watch his keynote, but I did get a chance to watch it on my flight home. So it, but, you know, and the other thing is, you mentioned a lot about, like, kind of the, I think we've been dancing around the idea. Like, there's like a vibes check to a lot of these conferences. And a lot of the vibes around conferences often have to do with, like, where the asset prices.

Kyle Lawrence [00:05:49]:
Right.

Moish Peltz [00:05:49]:
So, for example, at the last NFT NYC, when, like, all the NFTs were dead, the conference kind of felt a little sad, like just like part of it. But I don't think the vibes here at, at bitcoin 2024, which I think the vibes were good and perhaps, like, just on, like, political vibes, that's kind of weird. But I think, I think they were overall really good. But I don't think they had, they were good because of, like, bitcoin being high in, like, dollar amount. I think they were good because the industry is, is growing up and recognizing that it, it has political influence if it, if it, if it wields it properly.

Kyle Lawrence [00:06:28]:
Sure. I mean, we can get into some of the specifics about the party platform action items that Trump laid out in RFK junior mentioned and specifically Cynthia Lummis. But Michael Saylor, one point where, I think, I'll disagree a little bit where, yes, the vibes were pretty good. But I saw Michael Saylor, I was there in person on Friday, and he basically convinced every single person there, including myself, to liquidate everything we own and just put it right in bitcoin. Because today it's worth whatever, 68,000, whatever it's at right now. And he said, 20 years from now, if you put $10,000 into bitcoin today, 20 years from now, you will be set for life. And I was like, oh, my God, he's right. And everyone for the next 24 hours is saying, oh, my God, Michael Saylor, I want to sell everything I have.

Moish Peltz [00:07:12]:
Yeah, look, I watched the same speech as you and I felt exactly the same way. So who am I to say? We'll link the speech in the, we will link a bunch of the speeches in the show notes. The Bitcoin 2024 conference has YouTube videos of all the speeches, definitely the sailor speech is worth watching. If you're not bullish on bitcoin, be careful before you watch it.

Kyle Lawrence [00:07:39]:
Right. It's true. But you were. So we both saw RFK and we both saw Trump. What are your takeaways from the Trump platform action items? Such as they were electricity.

Moish Peltz [00:07:51]:
Yeah. So from the Trump action items. You know, I think it's really interesting. You know, I know that the GOP, and we talked about it on our last episode, has included, as part of their party platform, you know, basically no CBDCs, the right to self custody. And then I, you know, I think Donald Trump recognized on stage that when he, you know, said, oh, and I'm going to fire Gary Gensler, like, the whole entire crowd basically got up on their feet, which, which he did not expect. You can watch the clip. It's, it's pretty funny to see him, like, recognize, oh, I hit on Gary Gensler. That's interesting.

Moish Peltz [00:08:33]:
And, and so, and I think the other thing which you mentioned, RFK Junior, and RFK Junior had kind of previewed this idea that the US treasury should actually build a strategic reserve, or federally, the US government should build a strategic reserve of bitcoin, which Trump initially said, I think a little bit, it wasn't quite that far. He said, well, we should just keep the bitcoin. We have the US being essentially the largest non Satoshi holder of bitcoin. And then Senator Lummis came on after him and said, actually, we want to go further. And I think actually, as of today, introduced a proposed bill, bitcoin act, to have the US actually go and buy a significant portion of bitcoin.

Kyle Lawrence [00:09:21]:
Right. She's promoting that we hold 1 million tokens for 20 years and then ultimately use it to pay down the United States debt because as it appreciates in value, just only good things can come from that. And during the speech, so she spoke on Friday and then spoke again immediately after Trump had wrapped up his remarks. And she referred to it as our Louisiana purchase moment. So it'll be interesting to see how that plays out. RFK junior was much more bullish. He proposed 4 million to be held back in the reserve, which, you know, listen, we'll see what comes of it. Trump also suggested appointing a crypto advisory council, and he did mention designing transparent regulatory guidance, lowering the cost of energy, which he didn't get into specifics about.

Kyle Lawrence [00:10:05]:
But that was a big part of it. I think he said, you'll be tired of all the electricity or something like that. And also a very prominent talking point at the conference, they were giving these shirts out, free, raw, free rost. And he did mention the commuting, the sentence of Ross Ulbricht, the founder of Silk Road, who many, you know, is sort of a folk hero in the community.

Moish Peltz [00:10:26]:
Yeah, there was actually, I believe Ross's family was, like, right in the, in the front row.

Kyle Lawrence [00:10:31]:
Oh, is that right?

Moish Peltz [00:10:33]:
Yeah. So they were very happy to hear him, you know, commit to freeing Ross on day one of his terminal or potential term. Yeah, but look, I think this is another thing I heard from a lot of speakers, including Edward Snowden, but also there was a bitcoin core developer there that spoke, basically saying, be really careful. These politicians are coming here and they're telling you all the things you want to hear, but they may not necessarily have the best intentions when it comes to crypto. I mean, really, I think it's pretty transparent. I don't think any of the audience thought otherwise. These people are here to earn our vote.

Kyle Lawrence [00:11:13]:
Correct.

Moish Peltz [00:11:13]:
And they're promising these things to earn that vote. But is that in the best interest, long term, of crypto? And I think that's for really every citizen to make an informed decision and read these speeches and vote. Right.

Kyle Lawrence [00:11:27]:
Well, I mean, that's obviously the case. And nothing that's never highlighted more than when Trump speaks. And I think he would probably even admit that to you. I mean, he basically gets out there and says, look at all these great voters. He basically stopped short of saying that. But. He basically said that, but that. But to getting back to Anthony Scaramucci's point, just him being there, his presence, you know, now you have a democratic presumptive nominee, you seeing all the headlines, and we know for a fact that she's reached out and is trying to develop a pro crypto platform of her own.

Kyle Lawrence [00:11:57]:
Just that alone, even if it's all just some speeches and they're trying to garner votes, and be that as it may, that's fine. Just their presence alone, positive news for crypto. You're seeing it in the, more in the mainstream. That can only mean good things. We'll see what happens at the election. Fair point.

Moish Peltz [00:12:14]:
Well, we're gonna have a few more blocking order episodes before then, because otherwise, I think we, we could go for another hour on, on recap.

Kyle Lawrence [00:12:22]:
We'll do a Patreon episode or something like that for.

Moish Peltz [00:12:27]:
Comment below, if you want a private session with Kyle and I giving our unfiltered thoughts on Nashville.

Kyle Lawrence [00:12:34]:
Cost is one bitcoin.

Moish Peltz [00:12:38]:
All right, next topic. Celsius, the bankrupt crypto platform. Is suing. I think there's over 2000 lawsuits now in individuals and entities that allegedly received preferential transfers of more than $100,000 and now looking to recover those transfers in an adversary proceeding. And then they just filed, like, literally in the past couple of weeks, thousands of lawsuits. So, prior to those litigations, Celsius had already recovered about $100 million through settlements. They basically offered a flat, I think it was 13.5% recovery, where account holders could basically just come in, pay a flat fee, and settle their case. Some people either didn't do that or just weren't in a position to do that or in a different class and are now being sued.

Moish Peltz [00:13:29]:
So, Kyle, what do you think about the trustee of this bankruptcy now suing, essentially, customers to claw back money in adversary proceedings?

Kyle Lawrence [00:13:42]:
You know, this isn't the first time we've seen this. We've talked about it previously on the show. We've talked about Voyager. We've had clients of ours who have received these kinds of notices, and they all ask me the same question, how is this remotely fair? And, you know, I give them an answer they don't like.

Moish Peltz [00:14:00]:
It's.

Kyle Lawrence [00:14:00]:
Look, I'm a lawyer. My job is not to dispense fairness. It's just. That's what the. That's what the laws are. You know, I give you bad news. You know, my personal feelings are, as I get it, you know, they need to. They need to get that money from somewhere, and, you know, but I certainly understand the arguments of the people receiving these notices and on the receiving end of this, because they didn't do anything wrong.

Kyle Lawrence [00:14:22]:
It's not like they defrauded anybody.

Moish Peltz [00:14:24]:
They.

Kyle Lawrence [00:14:24]:
They're not acting on inside information. They see which way the wind blows, and they act on it, you know, so it's. It's hard to argue with that, even though if the law doesn't agree with that position. I don't know if you agree with that or if you're a little more bearish on it.

Moish Peltz [00:14:39]:
Well, look, I think bankruptcy. The idea of bankruptcy is to try and equalize the scales. And there's a lot of money. Everyone's lost money. That's why we're here. But how do we balance those scales and make sure people may have taken out more money than others, get their fair share here? It's this really difficult because, you know, it. There's. There's reasons that people took out money before the bankruptcy filing.

Moish Peltz [00:15:10]:
Besides, oh, crap, this thing's going down. This is the Titanic. I better take my money out. You know, people are doing all sorts of things.

Kyle Lawrence [00:15:19]:
Yeah.

Moish Peltz [00:15:19]:
And so I get in an ordinary, course, bankruptcy that you have basically, you know, all these kind of partners of a business. You have. You have, like, service providers and law firms and accounting firms and manufacturings and distributors, and they're all kind of, like, at risk of this happening. And when that happens, you got to, like, equalize the scales here. I think the idea that there's different categories of people being sued, but a large chunk of them are just ordinary customers that either just happened to withdraw some money because they were just withdrawing money, usually, or kind of got an inkling that the thing was going to go down and took it out. And it just feels like this is not an avenue where they're going to recover a ton of money from ordinary consumers. And it also feels, you know, as you said, it's, like, incredibly unfair for some of them.

Kyle Lawrence [00:16:12]:
Yeah. I mean, I get. I get both sides of the position, and it sucks. And I think we. The example I gave previously was, should Martha Stewart be held accountable? Because somebody called her up and said, hey, you're going to lose all your money. You got to get your money out of here. And she was like, oh, my God, I don't want to do that. And now she went to jail for insider house arrest or whatever it was for insider, Kyle.

Moish Peltz [00:16:30]:
But that's. That's exactly it. If Martha Stewart was a defendant in this case, no one would feel bad for her.

Brian Frye [00:16:36]:
It's.

Moish Peltz [00:16:37]:
It's the, you know, like, the mid level. Like, you know, just imagine a lawyer that. That has $200,000 to his name, and he. And he withdrew it before the thing went bankrupt. It's like, well, now we want, you know, that was $200,000 in bitcoin back in.

Kyle Lawrence [00:16:51]:
Yeah.

Moish Peltz [00:16:52]:
In 2022. So that's now worth, you know, a million dollars. You want a million dollars from you. And, like, the guy's like, what the hell are you talking about? So, you know, I think there's. There's a lot of those. There's probably more of. Just on a numbers basis, there's probably more of those than there are Martha Stewart's.

Kyle Lawrence [00:17:09]:
Yeah.

Moish Peltz [00:17:09]:
And I think that's exactly the point is, like, maybe there should be more of a rank ordering of, like, you, sir, are an ordinary citizen, and you can kind of keep your money user or celebrity or liquidity provider or some other insider. And, like, maybe there's a different analysis.

Kyle Lawrence [00:17:26]:
That we take, probably get into some really thorny constitutional issues, because wherever that line is drawn, could be it's a lawsuit waiting to happen.

Moish Peltz [00:17:33]:
Yeah, and like, maybe the bankruptcy code is just isn't set up to address, like, these mass consumer.

Kyle Lawrence [00:17:38]:
Right.

Moish Peltz [00:17:38]:
Crypto bankruptcies.

Kyle Lawrence [00:17:40]:
Yeah, we'll see.

Moish Peltz [00:17:42]:
We'll see.

Kyle Lawrence [00:17:44]:
All right, moving right along, Binance has announced the launch of a proof of KYC token, the first of its kind, the Binance account bound token, or as I'm going to call it, BABT. The BABT is issued to users who pass Binance's, KYC process, or BABT. BABT has better mouthfeel BABT is like, it hurts this. It probably hurts to hear, actually, my, in my earthen. So the BABT would be issued to users who pass Binance's KYC, know your customer process, and are a type of soul bound token, which are tokens that represent users identity and achievements in the web three ecosystem. The BABTs have three key properties thus far. They are non transferable between individuals. Obviously, you can't transfer a know your customer authorization to somebody else.

Kyle Lawrence [00:18:35]:
That would be ridiculous. It's obvious it can't be transferred between one person's addresses for similar reasons. And they can be revoked by the issuer, but minted again within 72 hours. And just for everybody knows, know your customer is the banking protocol whereby you verify your identity to a bank, institutional lender, or other platform, basically, where you, where you are putting your money. Moish. Skepticism does abound, but where do you land on this? What do you think about the BABT?

Moish Peltz [00:19:03]:
It's not the right word for it, whatever it is. Look, I think the idea, and we've seen several examples of this, of having an issuer issue a KYC token that's sold down to the issuing address, and then that address can go and, you know, it can prove, like, I am a us citizen, I'm an accredited investor. I can buy, sell, and trade securities on a whim. I think that's awesome. I think that's way better. And creating a real marketplace of people buying and selling, you know, what I would consider, like, real crypto asset securities and not like JPEGs, requires a technology like that. Right? The problem is, I think, is there's an issuer here which is binance. And I think that's going to be great for the Binance system.

Moish Peltz [00:19:57]:
But I'm kind of skeptical that beyond, like, the immediate binance ecosystem, anyone else is going to be using this token. And maybe that's fine. Maybe it's like, look, binance is solving a Binance problem. That's what they're doing here. They're not trying to bite off more than they can chew. But I think ultimately it would be cool to have a token that would work across multiple ecosystems and maybe that would include Binance, or maybe that would include a consortium of people like Binance and other.

Kyle Lawrence [00:20:30]:
I think you're right.

Moish Peltz [00:20:30]:
Exchanges. But it'll be interesting to see how these tokens work across different ecosystems, across different jurisdictions, things like that. So that's kind of where I want to see where this is trending.

Kyle Lawrence [00:20:43]:
Yeah, I don't disagree with that. I see this as like a beta test of the kind of the use case of a token like this, because the reality is that if I go to TD Bank, I have to KYC over there, and then I go to chase, I have to KYC over there. If anybody's done that process for regular old me, it's like a very prolonged rectal exam. That is not fun. And if you can simplify that process and say, all right, well, I already did it over here, I can do it over there. I mean, we don't have that, like here in the US. Like you have this kind of token that can achieve that. I don't know.

Kyle Lawrence [00:21:15]:
I agree with you. I don't think this is going to change the way we bank, but I think it's a step in the right direction and we'll see what happens with the implementation of this going forward. Worth noting that launch.

Moish Peltz [00:21:25]:
I agree. But I do think the evolution of the KYC token and tokenizing technology will ultimately revolutionize the way we think. We're just. We're just not there yet.

Kyle Lawrence [00:21:38]:
We're not there yet. One day, maybe, not today.

Moish Peltz [00:21:40]:
We'll see.

Kyle Lawrence [00:21:41]:
We'll see.

Moish Peltz [00:21:42]:
All right, our next topic, the IRS', is Operation hidden treasure, which was aimed to catch cryptocurrency holders trying to evade us taxes, has reportedly only achieved minimal success, according to the IR's agent, the agency's inspector general. So as you might remember, back in 2021, the IRS launched a program called Operation Hidden Treasure, focused on acquiring data analytics tools with software licenses and training employees to help enforce tax compliance in the blockchain space. So as a result, the IRS basically obtained over 600 licenses, primarily with chainalysis, Trmdezenhe, some of these other large analytics providers spending over $40 million. But as a result of that, it doesn't seem like they've actually recovered a lot of unpaid taxes yet. So, Kyle, what do you think? Is that surprising?

Kyle Lawrence [00:22:44]:
It's not surprising. You see this a lot with a lot of these government investigations. The most famous one that I remember from a couple years ago was where I. I forget which state it was or which agency it was, but they were trying to find out people who were abusing welfare because they were on drugs, and they spent tens of millions of dollars trying to uncover the abuse, and they ended up finding, I don't know, $500,000 or something like that, and they celebrated it. Look at all this abuse we found. But the money that they spent had dwarfed it. And just as an amusing aside, when you said Operation hidden treasure, just the first thing that popped into my head was operation one eyed Willie. I don't know why that.

Kyle Lawrence [00:23:20]:
I don't know why. It just popped in there.

Moish Peltz [00:23:22]:
Sounds like a weird operation. I was thinking of Tom Petty's hidden treasures. Like, that's amazing. Siriusxm radio show.

Kyle Lawrence [00:23:40]:
That's pretty good, but I can't believe you did. Oh, dude, you get a zero for the day. You didn't recognize the Goonies reference? Matt Foreman would be so upset with you. I'm gonna tell him.

Moish Peltz [00:23:48]:
Oh, it's a Goonies thing.

Kyle Lawrence [00:23:49]:
Yeah.

Moish Peltz [00:23:50]:
Okay.

Kyle Lawrence [00:23:50]:
Well, I mean, since 2020, the IRS has spent over $47 million on this with blockchain analytics, companies that specialize in these transactions, namely chain analysis. And the limitations that are believed to be abound here is that most crypto changes hands off chain through the exchanges. So it's hard to even track it if you want to be able to find it. So I'm curious. I feel like this was kind of doomed from the start. I don't think they were doing it the right way, and they had reached a point of forward momentum that they couldn't really undo it. That's what it looks like to me.

Moish Peltz [00:24:22]:
I'm surprised by this. I got to say, I'm completely surprised, because the thesis was, and I think the reason the IRS went down this road is crypto, is this, like. Like, thicket of non tax compliant people, and they're abound, and if only we could just, like, throw a dart, we would hit someone that has a billion dollars of, like, unpaid crypto taxes. And here they've been going for three years, and they haven't. That hasn't realized. I'm frankly a little surprised about that, I think. And the thesis was there that we should be able to find tons of non compliant taxpayers, and it just doesn't seem like that's the case. So, like, I don't think it's the training.

Moish Peltz [00:25:04]:
I don't think it's the software. I don't think it's the lack of effort in trying. I just think they just haven't found it. I mean, I'm kind of puzzled.

Kyle Lawrence [00:25:14]:
I think that they launched it in 2021 and they didn't evolve as the landscape evolved with it. I think they got kind of stuck in whatever protocols they had at the time. That that's.

Moish Peltz [00:25:23]:
I don't. I don't agree. Because if you look at the. The golden age of crypto tracing, it's backwards looking. It's saying, okay, here we are in 2020. Let's look. Let's look over the past five years and just find all the bitcoiners and have them pay taxes. And I would.

Moish Peltz [00:25:39]:
I would have expected they would have come up with some names.

Kyle Lawrence [00:25:42]:
Yeah.

Moish Peltz [00:25:42]:
Otherwise, why are they spending $50 million?

Kyle Lawrence [00:25:45]:
Um, yeah. Yeah, I'm surprised.

Moish Peltz [00:25:48]:
I want to know more. Like, I need to talk to the inspector general and get to the bottom of this.

Kyle Lawrence [00:25:54]:
All right. We will definitely have an update as the situation unfolds.

Moish Peltz [00:25:58]:
If you are the IRS inspector general, please come and block an order and explain your findings.

Kyle Lawrence [00:26:04]:
Well, I've said it before, and I'll say it again. Elon Musk is the second best person on the planet at keeping his name in the news. And recently, he announced that humanoid robots will enter low production for internal use in the Tesla factory starting next year, with hopes of high production for other companies by 2026. Tesla would use the robot for internal uses first, and they would be doing what he described as difficult chores, dangerous chores that you don't necessarily want a person to be involved in. With the goal of reducing labor shortages was how he put it. The prototype was launched in 2022, named Optimus. And Optimus, when it was launched, took a few steps, waved to a crowd, and performed basic dance moves, which I vaguely remember seeing.

Moish Peltz [00:26:53]:
Everyone loves a dancing robot.

Kyle Lawrence [00:26:55]:
We all saw Terminator, we all saw irobot. We've all seen Robocop. Moish, what do you think? Is this Elon Musk just kind of touting himself? Do you think this is practical, or are we already here? You go to a McDonald's. There's no humans there anymore. Just punch numbers on the screen. I mean, like, we're getting there. Yeah.

Moish Peltz [00:27:13]:
I mean, why shouldn't there be optimus humanoid robots building our Tesla cybertrucks? This is the future we've asked for, Kyle.

Kyle Lawrence [00:27:21]:
It's true.

Moish Peltz [00:27:23]:
I mean, I don't know. Like, why would. I don't know. I think it's hard to doubt Elon Musk because he's done so many incredible, ridiculous things. And I think I. He's found a way to keep his name in the news. Yeah, because the showboating. But look, I mean, there.

Moish Peltz [00:27:42]:
There weren't really electric cars, and then there were, and he 100% annoyed people, but he got the job done. And the same thing with SpaceX. There was not a private space industry, and. And now there is. So, um, who am I to doubt him? You know, if he wants to make humanoid robots, like, why does he have any less likely chance to. To break into the mainstream than anyone else? Actually, calling back to Nashville, I heard he was over. Over flight, really, during the Sunday speeches, but. But did not land.

Moish Peltz [00:28:15]:
So I don't. I don't know what happened there.

Kyle Lawrence [00:28:17]:
But, yeah, I think he also tried.

Moish Peltz [00:28:18]:
To make some crypto news, but, yeah, you didn't show up.

Kyle Lawrence [00:28:20]:
Yeah. That's a shame. Yeah, I agree with you. And that's another thing I've always said before. Listen, love, love him or hate him, he has brought a. The electric vehicle market to where it is today. And it's not perfect, but it was nowhere when he burst onto the scene. And I think he deserves a lot of credit for it because people thought he was crazy.

Kyle Lawrence [00:28:38]:
He is very heavily invested in it. And, you know, look, if we can do things, this is not always the most popular opinion, but if we can do things cheaper and more efficiently, and if that means using robots instead of human beings, I think that it's something worth exploring. You know, you don't want to remove human element of it. You want people to keep their jobs. But at the end of the day, robots, they're not going to need cigarette breaks. They're not going to fall asleep on the job. They're not going to. You know, there's not.

Kyle Lawrence [00:29:05]:
You're not going to have those kinds. They have other issues, but you're not going to have those kinds of issues. I think it's worth exploring, and I think it's really interesting.

Moish Peltz [00:29:11]:
Well, if you look at, I think some of the reasons that Elon Musk was. Was disliked, you know, by the current political administration, it has to do with the idea that they're. They don't have union employees. And I think that's a big break between the other large american car manufacturers. And so I guess the answer is, well, let's lean into this. We don't have union. Why even have humans at all? So I guess we'll see.

Kyle Lawrence [00:29:42]:
Do you remember, I'm going to put you on the spot again with the movies. So, Robocop, do you remember what the three prime directives were without looking it up? I know it's from memory.

Moish Peltz [00:29:51]:
No, I did not.

Kyle Lawrence [00:29:54]:
It was protect the innocent, serve the public, trust, and uphold the law. Bam. It may not have been, but that.

Moish Peltz [00:30:02]:
Could be, like, blocking orders, like.

Kyle Lawrence [00:30:04]:
Exactly.

Moish Peltz [00:30:05]:
That's a. It's probably one of the better. I just watched the Beverly Hills cop on Netflix. The new one.

Kyle Lawrence [00:30:13]:
Nice.

Moish Peltz [00:30:14]:
And those two are, like, the best Detroit movies.

Kyle Lawrence [00:30:18]:
It's true. The first robocop is one of the best Sci-Fi movies ever made. I will.

Moish Peltz [00:30:21]:
Oh, yeah.

Kyle Lawrence [00:30:22]:
I'd buy that for a dollar.

Moish Peltz [00:30:26]:
I'd buy that for a dollar.

Kyle Lawrence [00:30:28]:
That's the.

Moish Peltz [00:30:30]:
That's right.

Kyle Lawrence [00:30:31]:
Paul.

Moish Peltz [00:30:31]:
Paul Verhoeven, right?

Kyle Lawrence [00:30:33]:
Yeah.

Moish Peltz [00:30:35]:
I mean, Starship troopers is, like, also excellent. Excellent.

Kyle Lawrence [00:30:39]:
Yeah. We could talk about Paul Verhoeven all day, but we'll. We'll stop it at showgirls and move on to Crowdstrike. Hey, everybody remember that the worldwide tech outage from a couple weeks ago after a defective update from cybersecurity company Crowdstrike has raised questions about automating software upgrades and whether a handful of dominant suppliers, especially in the cloud, concentrates risk to a dangerous extent. It leaders, basically, in the wake of this, really just need to ensure that their vendors, integrated with their systems, maintain high standards in development, testing, and release of software updates. Because the ramifications of this, I think we got off kind of easy, and I say we globally. Not me, because I'll get into what happened to me afterwards, although I'm sitting here, so I can't really complain. But I think there are a lot of implications of when we rely on this technology for our air traffic and our general infrastructure and our medical billing and our hospitals are relying on the software.

Kyle Lawrence [00:31:39]:
Our law firm uses software like this. Like, what happens when this stuff really crashes? Like, what do you like, moish? What are we. What are we walking into here?

Moish Peltz [00:31:49]:
Well, look, I mean, we keep saying, like, the world is going to digitize, whether we like it or not.

Kyle Lawrence [00:31:54]:
Everything.

Moish Peltz [00:31:55]:
Everything that was analog is becoming digital, and. And the result is when you have an outage, you're seeing the effects can be, you know, nearly catastrophic. I think you're right. We probably dodged. I mean, it's kind of insane that, like, every windows computer just, like, didn't work for, you know, a few hours, and it's like, oh, okay, let's move on. But that's really what happened. And thankfully, we have redundancies, and we were able to kind of reset the system. But it does kind of portend a more dangerous future where everything's relying upon systems that, you know, it's kind of the XKCD cartoon where there's, like, a whole, like, modern financial system and it's all.

Moish Peltz [00:32:38]:
There's like one little block kind of holding it up. Right? And so, yeah, I mean, here we saw, like, someone kind of flicked the box and the whole thing fell down, put the pieces back.

Kyle Lawrence [00:32:49]:
Yeah. Not ideal. And it was really not ideal when en route to Nashville. I. You know, we can. We can flash the picture. It was so quaint when my flight was supposed to take off at 230 in the afternoon, and it was around 315, and I'm standing by the gate and, you know, my loving wife took a picture of me with a big smile on my face because we were about to board the plane and we did. And then we sat there for, like, half a day.

Kyle Lawrence [00:33:12]:
And here's what's. All right, I'm gonna. I'm gonna rant about Delta for a minute. Here's the thing. I'm a lawyer. Shit happens. I understand that. And I get paid to deliver bad news, that's fine.

Kyle Lawrence [00:33:24]:
But what I don't do is I don't give different people different answers when they ask me a question just because I don't want them to harass me. And Delta Airlines, damn it all, if I ask you a question, I expect the same answer from the different people along the assembly line of underpaid workers that you set before me to solve my problems.

Moish Peltz [00:33:43]:
Oh, man.

Kyle Lawrence [00:33:44]:
Yeah, well.

Moish Peltz [00:33:44]:
What, a humanoid robot solve that? Well, at least they give you a consistent answer.

Kyle Lawrence [00:33:49]:
Well, they wouldn't lie to me. They wouldn't be able to.

Moish Peltz [00:33:54]:
Unless that's not in their prime directive. Unless that's the fourth.

Kyle Lawrence [00:33:57]:
The fourth prime directive. Lie to Kyle Lawrence when he asks you what's going on with the plane. Right.

Moish Peltz [00:34:02]:
Well, I have to say, I took Delta the next morning, and I happened to arrive perfectly on time. Actually, a little bit early. But while we were boarding the flight, like, they had done nothing wrong. Flight was on time. Everything was great. The flight attendant, like, preemptively apologize for, like, all of Delta. I'm so sorry. Everything's gonna be okay.

Moish Peltz [00:34:22]:
It was like, well, I'm doing fine.

Kyle Lawrence [00:34:24]:
Yeah. I will say, and to credit to everybody on the plane, the flight crew, they were fantastic. I mean, listen, they were the least responsible people for the situation, and they were very nice and friendly, and they did everything they could to make us comfortable. And everybody on the flight, a lot of whom. Who were going to the conference, everyone remained in good spirits and nobody lost their minds. Like, you see all these things on Instagram about people just going nuts over seat changing and all that. I'm very happy that good. You know, we remained in well repute, but Delta Airlines, come on, clean it up.

Kyle Lawrence [00:34:58]:
Clean it up.

Moish Peltz [00:35:02]:
All right. Well, up next, we have a special treat. With us are going to be Jonathan Mann and Brian Frye. As you may have seen in the news, Jonathan Mann wrote, directed and released the song and music video. I'm suing the SEC. And, you know, yeah, clap claps for Jonathan and Brian, who are co plaintiffs against the securities Exchange Commission. And not only did they release a song, they released an excellent music video which Jonathan put together over the last six months. And as if a song and a music video were not enough, an artful complaint put together and filed by them.

Moish Peltz [00:35:51]:
And its really something to behold. If you havent read it, I would suggest reading it. It really comes to some excellent points that we've been talking about on block and order, just about the confluence of intellectual property law and art and securities law and the way the government has been failing at providing real guidance for artists and creators in this industry. So they really hit the nail on the head. It's going to be a fascinating case to follow and see how it goes. And we're really lucky to have Jonathan and Brian on the show with us. So with that said, over to our interview.

Kyle Lawrence [00:36:27]:
All right, well, welcoming to the show, Jonathan Mann, the song of day man, and Brian Frye. Welcome, gentlemen. Really appreciate having you on. How are you doing?

Jonathan Mann [00:36:37]:
Doing great. Thank you for having us.

Brian Frye [00:36:39]:
Yeah, same, same. Delighted to be on the show.

Kyle Lawrence [00:36:43]:
We are indeed delighted to have you. So why don't you just give us a quick rundown of what, why did we invite you on the show? What makes you guys so special?

Jonathan Mann [00:36:54]:
Yeah. So for context, Brian and I are both in our, in our semi professional lives, NFT artists. I have been writing a song a day for the last 16, almost 17 years. Wow. And I've been selling them as NFTs on the blockchain for the last two, almost three years every day. I got interested in NFTs very early, way back in 2017. They weren't really a thing for a long time and then they became a thing and now they're not really a thing anymore again. But I still sell them every day and they've basically become my livelihood, more or less, which is what I had hoped would happen when I first discovered them.

Jonathan Mann [00:37:47]:
And this all really started, this saga that we've embarked upon where we are suing the securities and Exchange Commission. That saga began when the SEC went after Stoner Cats, which was an NFT project that was launched in 2021, was extremely successful at the height of all the hype, raised $8 million. Had a gas war situation happen on Ethereum main net. I mentioned to Brian the other day that my friend super fizz literally lost eight, about $32,000 in trying to mint a stoner cat.

Kyle Lawrence [00:38:35]:
Just in the gas wars. Wow.

Jonathan Mann [00:38:37]:
In the gas wars.

Moish Peltz [00:38:37]:
Just for gas.

Jonathan Mann [00:38:38]:
Just for gas wars. So this was like a big deal. Like most NFT projects, you know, the price kind of fizzled over time. However, they did deliver what they set out to do, which was they made eight episodes of a hand animated show about stoned cats called Stoner Cats. And fast forward. They launched in 2021. In September of 2023, the world learned that they had been hit with an SEC action that said that they had been selling unregistered securities, that the SEC was basically claiming that, that every single cat JPEG that stoner cats had sold was an offering of an unregistered security. And so they, they levied them.

Jonathan Mann [00:39:32]:
They levied against them a million dollar fine and a bunch of other onerous things that were very distressing.

Kyle Lawrence [00:39:39]:
Right.

Jonathan Mann [00:39:41]:
The thing that really got me was I read through this complaint that the. That the SEc did, and, you know, I'm not a lawyer. I don't know that much about this kind of stuff. But, like, I kept waiting for the bit of. In the. In reading the thing for the part where they explained what made it a security, because it seemed to me, we all know the Howie test. We all have to know the Howie test, being here in crypto.

Kyle Lawrence [00:40:13]:
We do, indeed. Yep.

Jonathan Mann [00:40:14]:
I. It seemed to me, reading through this thing, that I couldn't understand where the security part was.

Kyle Lawrence [00:40:23]:
Right. Yeah.

Jonathan Mann [00:40:25]:
Then, furthermore, everything that they were accusing stoner cats of were things that all of us were doing, the things that they were saying were, a, not securities, and b, just common practice among every single NFT creator.

Kyle Lawrence [00:40:47]:
That's exactly right.

Moish Peltz [00:40:49]:
I think that's right. I think. I think you can read, a, that order, as every NFT project that ever sold nfts is a security which, which.

Jonathan Mann [00:40:58]:
Which just, it just. Brian and I have talked about this a lot. Like, it made me so angry, like, it made me physically. I felt physically angry. And I channeled that anger into a song called this song as a security, where I sort of poke fun at the SEC and said, you know, this song that I'm writing, clearly, based on what you just said, is a security. You know, what should I do, Gary, with this song? And. And, you know, and that was. That was the moment of the sort of, you know, wheel starting to turn about.

Jonathan Mann [00:41:35]:
Well, what could we actually do? Is there an actual path here to, you know, to halt, to. To try to hold the SEC somewhat accountable in some modest way or something? And then Brian can read the story.

Brian Frye [00:41:52]:
Yeah, I mean, so that's where I kind of got involved. So Jonathan got in touch with Jason Gottlieb and Morrison Cohen, and they were planning to bring an action, but wanted to have at least one additional plaintiff to accompany Jonathan. And when Jason asked him, you know, can you think of anyone who would be a good person to approach? Lo and behold, my name was on the tip of his tongue for reasons you may already be aware of. But I'll kind of share a kind of a potted version of it for your listeners. So, you know, for me, this is actually kind of the culmination of what I would characterize is almost a 20 year long kind of intellectual project that began back when I was a junior associate securities lawyer at Sylvan and Cromwell in New York City.

Kyle Lawrence [00:42:44]:
Right.

Brian Frye [00:42:45]:
So I was doing a lot of securities related work and thinking about sort of what is a security and what isn't these kind of difficult on logical questions in relation to some of the issues we were litigating at the law firm. And, you know, like many securities lawyers before going to law school, I went to art school, and I also had.

Kyle Lawrence [00:43:07]:
A kind of artistic practice, a natural.

Brian Frye [00:43:09]:
Path, obviously, like many. Like many, many lawyers. And so the more I looked at the way the SEC and the courts talked about securities from a kind of ontological perspective, like, you know, these kind of deep philosophical questions about what is or isn't within the basket of things that we call security. The more it sounded like they were talking about artwork and the art market to me. And specifically, the more it sounded like they were talking about conceptual art. Right. Because, of course, when it comes to conceptual art, the art is the concept, not any object. Right.

Brian Frye [00:43:47]:
And the way that the art market transacts in conceptual art is through certificates that are issued by the artist and represent ownership of the single edition of the artwork. I mean, you know, you don't have to squint very hard to see a certificate for conceptual art as being a kind of physical NFT, as it were. Right. So it really bothered me at the time, and I was like, well, how can that be? Like, conceptual art is a security that kind of makes sense. And I would talk to securities lawyers who I knew about it. They were like, it doesn't make any sense. Why would any buy, anyone buy something like that? My artists were just. My artist friends were like, I don't get, I don't know, idea what you're talking about.

Brian Frye [00:44:24]:
Security, this is foreign language for me. And so I thought about this for a long time, you know, as I was practicing, as I started teaching, and I was really struggling with how to take this idea and explain it in a way that would feel real and salient to people. And what eventually struck me was that the problem was I was thinking about it too much like an academic and enough like an artist, and that I needed to really kind of activate the idea to make it feel real and tangible. So what I did was I wrote a larvae article that I styled as a prospectus for the sale of a work of conceptual art titled sec no action letter request. And the work of conceptual art consisted of sending a no action letter request to the SEC proposing to sell a work of conceptual art that had all the features of what the SEC called a security letter request. They said, you know, this is what I'm doing. This is why I believe what I'm doing satisfies all of your stated criteria for being a security that requires registration. Therefore, in my opinion, in order to do what I'm proposing to do, I think I need to register this.

Brian Frye [00:45:33]:
Tell me why I don't have to register this.

Kyle Lawrence [00:45:35]:
Right?

Brian Frye [00:45:35]:
In other words, basically, I sent a no action letter request saying, you know, a friend of mine characterized it as the first ever SEC action letter request. Right, right, exactly. Please come regulate me, bro. Right.

Jonathan Mann [00:45:50]:
Come.

Brian Frye [00:45:53]:
And they just ignored, I mean, as you can imagine, they just ignore me. This was 2019, right? And. And so, you know, I kind of let the project made the rounds a little bit, got mentioned by Matt Levine among some other people. And then I kind of let it sit for a while because I wasn't sure where to go next with it. And then, low and behold, 2021, the NFT market explodes. And I was like, oh, my God, this is amazing. It's like I fell asleep, dreamed of a beautiful imaginary market, and nothing. And then I woke up, and there it was, right? And I was like, well, this is amazing, you know, because when I first did the project, everyone said, well, you know, that's not really a security, because no one would actually buy it.

Brian Frye [00:46:37]:
I was like, well, point me to where in the, how we test it says anything about people actually buying it, because I don't see that as being the requirement. Right?

Moish Peltz [00:46:45]:
But also like robust market of purchasers.

Brian Frye [00:46:49]:
Right, exactly right. But then I was also like, but that's not true. People been buying conceptual art, you know, since Duchamp. Right. Conceptual art is as old as the securities market, or at least the kind of modern, regulated securities markets are. Right. So I was like, well, that just doesn't work. But then an NFT market came along and I was like, well, here we go.

Brian Frye [00:47:06]:
Right. So I just reissued the project as an NFT, sent another no action letter request to the SEC saying, well, you know, I'm doing the new project, I'm doing the same project. I'm just doing it with NFTs instead of with paper certificates. Now, I still think it's unregistered security. But you didn't, you didn't respond to my last request, so I'm just going to take that as tacit acceptance on your part that what I'm doing.

Kyle Lawrence [00:47:30]:
You're in the clear.

Brian Frye [00:47:31]:
Yeah, totally copacetic. No problem whatsoever. Went ahead and sold it.

Kyle Lawrence [00:47:35]:
Not legal advice, everybody, don't do that. No. Have to do it.

Brian Frye [00:47:41]:
Right. But, um, so, you know, I then went ahead and sold the entire collection in, you know, half an hour or something. This is our very day of any NFT that were, and then started, you know, just writing in this area, you know, quite a few academic papers since then, a bunch of other NFT projects since then. So I've kind of been this storm in the SEC side, and I kind of feel like, you know, I was telling people for years, like, if you listen to the SEC and you take them out their word, right, they have regulatory authority over all of this, and that's crazy.

Kyle Lawrence [00:48:23]:
Right. And one of the things we've always, and thank you very much both, you know, for the explanation. It's fascinating stuff. Moish and I just, we, this is what we want. We love this kind of, and I.

Moish Peltz [00:48:32]:
Think share this, we do our best art at the intersection of.

Kyle Lawrence [00:48:37]:
Right.

Moish Peltz [00:48:38]:
You know, art and securities law. And I think both of you, I mean, Jonathan, I think your two biggest bangers, you know, I'm a security and I'm suing the SEC from the legal perspective, I guess. But I think the legal and the securities law and the intellectual property law and the art and NFTs, like, that's, that's what we live for, so.

Kyle Lawrence [00:49:01]:
Right. So, you know, and Brian, you raise a really great point. And it's something that we've been talking about on the show. It's something I talk about as part of my securities practice. It's the SEC has taken this position that, hey, if you just come in and register, we're your friends, we'll help you. And that's insanity. If you walk into the SEC, they will hand you a subpoena and show you the door, and you're just, you're really in a bad way. So you're absolutely right.

Moish Peltz [00:49:28]:
Or, I mean, look, I. Brian, we've talked about this conferences before, and, you know, we've, clients have come up to us like, hey, can we do this? Like, well, there is an option. You can submit a no action letter, but then there's like, well, they might just ignore you.

Kyle Lawrence [00:49:42]:
Right.

Moish Peltz [00:49:42]:
And so you're gonna do all this work.

Kyle Lawrence [00:49:44]:
Exactly.

Moish Peltz [00:49:45]:
And you're gonna pay in a council to do like, well, then. And then they probably think it's a security anyways because there's NFTs involved.

Brian Frye [00:49:53]:
Yeah. Although we do think. We do think that, you know, one of the reasons that I made an appealing person to add to the lawsuit was the fact that I had sentence these two no action letters in the past, that I had proposed and created projects that were, you know, took this form in the past, and that I, you know, was ready to create a new project that was, you know, to put it bluntly, designed to be exactly identical to stoner cats, except more so, with the, with the explicit intention of saying to the SEC, tell me why this conceptual artwork? Why? Explain to me the basis for your belief that you think that you can register this as a security. Because it's very obviously a work of conceptual art.

Jonathan Mann [00:50:48]:
And that's how the complaint starts. I love how the complaint starts with the line, this case is about art. And that is really the point. Right. Which is the SEC. And Brian talks about this, that, you know, all the time, the SEC has a very specific mandate and it does not include art. And if it does, then something seriously messed up. Because it shouldn't.

Kyle Lawrence [00:51:15]:
Right?

Brian Frye [00:51:16]:
Yeah. And one thing, one thing I really like to point out as well, it's like, look, we have to look at this from a practical perspective, right? Everyone talks about that. Howey. The Howey test. I actually think that's a huge mistake, right. For two reasons. The first one is the Howey test is totally empty. It's meaningless.

Brian Frye [00:51:31]:
Right. Literally, any economic transaction can fit under the Howey test if you wanted to. All you have to do is characterize it in the right way. And there it is. And that's why I've always referred to the fifth, like, secret factor of the Howey test is the only one that matters. Right. It's whatever the SEC wants to regulate it, just tells you, well, it falls under Howey, therefore allowed to regulate it. So it's purely discretionary on the part of the SEC.

Brian Frye [00:51:56]:
I think the real substance of the Howey test comes out of Howey, comes elsewhere in opinion, right. It's where the Supreme Court says, we don't look to how the issuer characterizes what they're doing. We look to the economic reality, the transaction that they're proposing, right. And that was literally the whole point of how. Right. That, you know, what was the defendant and Howey doing, right. They were setting up a transaction such that it appeared to be the sale of orange grows when it was actually the sale of a securitized investment in an orange growing operation. And this effectively with the court said, you can't make it not a security by saying magic words and characterizing the right way we look at what we're actually selling.

Brian Frye [00:52:37]:
Well, let's think about the art market that way, right? The art market existed when the SEC was created. The art market existed when the 33 and the 34 acts were written into law, right? And yet they didn't, say, regulate the art market, right? The SEC didn't try to regulate the art market. Literally not a single person ever, ever thought, ever. Even if people who thought the art market needed regulation didn't think the SEC was the agency that created to, intended to, or frankly, capable of regulating the art market. And it's definitely true. We have almost 100 years of history of the SEC not regulating the art market, right? And now they want to say, oh, yeah, that's always been within our authority to do. Because there's literally no, there's no difference between selling art as a physical object or as a certificate and selling art as an NFT. So if they can regulate the NFT market, they can regulate the art market too.

Kyle Lawrence [00:53:41]:
And we've seen that argument made a few times now when people have requested, comment or countersued the SEC, and they say, listen, if you're telling us that what we're doing is security, then when I go and buy a bottle of whiskey at the store, you're telling me that's a security. You have to draw a line somewhere. And I think you guys are really onto something. And when you talk about, you know, the, the ethereal fifth element of the Howey test and how they've completely misapplied it as a securities attorney, I perk up. But I'd be curious to hear your take on what you think striking down chevron means for the SEC, specifically when they start doing things like that it's gonna be really interesting.

Brian Frye [00:54:19]:
It means nothing, actually. It means nothing whatsoever. And I can actually, I can explain to you why I, I think actually Todd Phillips and Bo, Bo Bowman have done a better job. Right. So when we think about the major questions doctrine as it intersects with Chevron and Loeba Price. Right. What they're really about is the agency itself interpreting the scope of regulatory authority given to it by Congress. That's not what's happening here.

Brian Frye [00:54:46]:
Right. Because the SEC isn't interpreting the power it to it by Congress. The SEC is actually interpreting the power recognized by the Supreme Court already. Right. So it's doing something, it's effectively doing the opposite of what's at stake in the major questions doctrine and in the sort of now defunct Chevron doctrine. Although I. Chevron, Skidmore, I honestly don't think it makes that much difference which one you pick. Take your deference.

Brian Frye [00:55:14]:
Deference is deference. But actually, this is a really, and the reason the litigation is, I think, important, and an important way to go is that it's the courts who have already defined what the scope of the authority of the SEC is, but they haven't returned to that question in a really, really long time, and they haven't thought about it in a kind of programmatic way, thinking about what the role of the agency actually is. So I think that that's why this is really important and something that needs to happen, and also a reason maybe the SEC doesn't want it to happen, because it's kind of a nice place for an agency to operate. Right. Under a 90 year old Supreme Court opinion that basically just said, do whatever the hell you want.

Moish Peltz [00:56:00]:
Well, so, I mean, I can imagine because we've heard the argument so many times, and now the star map of securities, crypto regulations, decisions, the SEC coming in and saying, well, nfts are amorphous, and they could cover all sorts of things, from art to legitimate securities offerings representing tokenized equity. In fact, there are companies that do that. Where do we draw the line? How couldn't you imagine an art company looking more like tokenized Reg d offering if you structured in a certain way? So I guess the question is, what outcome are you looking to achieve here? I know we all want guidance, but what kind of guidance are you hoping to elicit or you hope will come as a result?

Brian Frye [00:56:52]:
Yeah, I think this is a great question, because in a way, I would characterize it as almost like the slippery slope question. Right? It's like, well, if we say, you can't do this, where do we draw the line? How do we know what they can and can't do? You know, it's crazy. You know, it's crazy observation, right? We have 90 years of the SEC knowing the difference between art and securities. So I don't know. I draw the inference from that that it's not that hard to do.

Jonathan Mann [00:57:21]:
I have a question that I always think about when that question comes up. Were Bowie bonds explicitly securities? Yeah, Bowie bonds.

Brian Frye [00:57:31]:
Yes, they were. They were. They were.

Jonathan Mann [00:57:33]:
They were, like, legitimate. Yeah. Well, there you go. I think that that answers, you know, if an artist does the Bowie bond, that's a security.

Brian Frye [00:57:40]:
Yeah, well, and the Bowie bonds are very different, too, right? Because when Bowie issued the Bowie bonds, they were very explicitly tied to the revenue streams from his catalog. Of his catalog. Right. So the Bowie bonds entitled you to a securitized interest in that revenue stream, which is totally different from what happens when you buy an artwork. You're not, you know, you're not buying an interest in the securities.

Jonathan Mann [00:58:06]:
You're not expecting any, like, dividends or anything from the artists work.

Kyle Lawrence [00:58:11]:
Yeah, well, definitely there are.

Moish Peltz [00:58:13]:
I mean, to be fair, there are NFT projects that do make those promises, and maybe they're. They're dumb and they are violating securities laws. But I guess, you know, if I were an artist and, you know, wouldn't. Wouldn't that be an enticing thing to offer? And maybe then I should go and talk to securities attorney. But I guess the question is, like, what? You know, I don't think there's ever going to be, like, a binary. Well, now it's a bowie bond, right? And so I, you know, I can tell maybe the answer is for ordinary course.

Jonathan Mann [00:58:42]:
Yeah.

Moish Peltz [00:58:43]:
Hard sales. NFts are the vehicle. Why? It's definitely not a security.

Jonathan Mann [00:58:47]:
I can tell you for sure that stoner cats didn't do anything like that. And there was nothing. There was nothing in their thing where it was like.

Kyle Lawrence [00:58:56]:
Right.

Jonathan Mann [00:58:56]:
Promising anything like that. That's why when I was reading, I was like, what am I reading? What am I even looking at?

Kyle Lawrence [00:59:02]:
Well, they were just a bunch of artists that got together and created these characters. And from what I recall of the case, you know, when it came out in 23, it was, well, you have Ashton Kutcher, you have Mila Kunis. Obviously, you're doing that to juice interest. And that's why people expect. It's like, well, I mean, they were just, like, friends with us. Like, it's.

Jonathan Mann [00:59:17]:
I don't know, the point of making art. You think you don't want people to see your art. Like they, you know, they make a big deal in that complaint about them, you know, how much they promoted. It's like, well, yes, that's what. That's our job as artists, partly, is to promote what we do.

Brian Frye [00:59:33]:
Yeah. So I would say if you want to characterize an investment in the art market as an investment and kind of identify what you're investing in, I would say that the subject matter of the investment is raw commercial goodwill.

Kyle Lawrence [00:59:51]:
Interesting.

Brian Frye [00:59:52]:
And that's it. Right. And I don't think we would characterize investment in raw commercial goodwill in any other context as being a securitized interest. Right. Because it doesn't have a dollar value attached to it.

Kyle Lawrence [01:00:05]:
Yeah, that's a good point. Yeah. It's really interesting to see, because a lot of times these projects get dinged, even if they do, even if they follow the guidance that you're talking about right here, Brian. And, you know, we're not saying you're going to make any money. We're not doing all these things. It's almost like the founders of the project, they can't help themselves. Eventually they get interviewed or they go on Twitter and they make some slip up, even inadvertently, and they say something along the lines of, you're going to make a lot of money if you do this, and bam.

Moish Peltz [01:00:31]:
Or the social media manager puts a rocket emoji.

Jonathan Mann [01:00:34]:
A rocket emoji.

Kyle Lawrence [01:00:35]:
Absolutely right. Something that innocuous.

Brian Frye [01:00:37]:
But I mean, realistically, how is that any different from an artist saying, I'm a great artist, I'm gonna be super famous, and if you buy my artwork now, when I'm super famous, my artwork is gonna be worth more money.

Moish Peltz [01:00:50]:
Right, right. And.

Jonathan Mann [01:00:53]:
Yeah, and the SEC would never go after a non NFT artist. And that's, you know, and the fact that they've gone after Stoner cats and impact theory, you know, it just, it. It makes so little sense. And that's why we're bringing the case. We're arguing that we feel, and I can say genuinely, I do, maybe not today, maybe not tomorrow, but someday, it's just as likely that they would come after Brian or me.

Kyle Lawrence [01:01:24]:
Sure.

Jonathan Mann [01:01:24]:
You know, for things that we do in good faith.

Kyle Lawrence [01:01:29]:
Ready? Yeah.

Jonathan Mann [01:01:30]:
For things that Brian's asking for it.

Moish Peltz [01:01:33]:
Yeah.

Jonathan Mann [01:01:34]:
I mean, Brian literally tried, you know, so. So, yeah, that's. That's really the crux of it, why we're doing.

Moish Peltz [01:01:42]:
All right, well, Jonathan, I want to know, how are you going to continue doing song a day when you're doing wall to wall press for. For this do you have a stash of songs stashed up for, for this or is, you know, what's, what's the plan?

Jonathan Mann [01:01:57]:
Well, I mean, as I'm sure you know, you know, I feel like the, a lot of the, a lot of the, the hard work is done now. Like, now it's just a lot of waiting. Now it's just like, we just got to wait and wait. Wait. I mean, I can't tell you how excited I am to write a song about whatever response we get. I mean, that's going to be a great day. You know, like, that's going to be really exciting for me. So that's part of, that's for me, that's part of my art, that's part of my whole thing.

Jonathan Mann [01:02:27]:
I write about what happens in my life and when I'm suing the sec and I get a response from them, that's gonna be a song, you know, of some, of some kind.

Moish Peltz [01:02:38]:
The brain drudgery of, you know, discovery and, you know, I just, I can, I can just imagine the discovery deficiency letter jingle that's gonna, that's going to spring from this.

Brian Frye [01:02:50]:
Yeah, I can't wait. I'm really excited to hear. I personally can't wait for the deposition.

Jonathan Mann [01:02:55]:
Oh, my God. Oh, my God. Brian Bright, you'll be so good in the deposition. I can't even. Yeah.

Kyle Lawrence [01:03:03]:
I wonder how many extensions they're going to ask for in their answer, though. They are the government. They're going to take their sweet time and getting back to you, that's probably for sure.

Jonathan Mann [01:03:10]:
Seems likely. Yeah. Yeah, yeah. So, I mean, that's what it feels like to me now is now it's just I get to sit around and wait, you know, and wait and wait.

Kyle Lawrence [01:03:20]:
Just like working for the government. So you said you had 17,000 songs. You know, really quickly, just kind of as we run low on time of all those songs, is there one that stands out as being a particular favorite of yours? Do you have one that's your baby?

Jonathan Mann [01:03:37]:
I don't. To be clear, it's 17 years of sogs, which is only 5000.

Kyle Lawrence [01:03:45]:
5600.

Jonathan Mann [01:03:46]:
600.

Kyle Lawrence [01:03:48]:
Wow.

Jonathan Mann [01:03:49]:
Actually, almost. Almost 5700. I'm like eight days away from 5700.

Kyle Lawrence [01:03:53]:
Wow. Mazel Tov.

Jonathan Mann [01:03:56]:
No, no, I don't. I don't have a favorite song. You know, that's a lot of songs and I forget, you know, most of them. So a lot of times what happens? I go back and I'll listen. I post them all on Spotify. So I listen, I'll be like, oh, that's a good song writing that way.

Brian Frye [01:04:17]:
I mean, I'm suing. The SEC is a banger, man. My wife is pretty good. It's pretty good. It's driving her crazy. She, like, walks around the apartment singing it.

Jonathan Mann [01:04:25]:
So I. You know, like that one, for instance. Like, I mean, I spent a good. I spent a good amount of time writing that song. Like, working on it. So, you know, that happens occasionally.

Moish Peltz [01:04:38]:
How did the video come together? Because it's so. It's so well produced. Is that something that you worked on yourself? Is there a team involved?

Jonathan Mann [01:04:46]:
No, no, it's all me. Similarly, just like, many months of work, you know, I fell. I finished the song, and then I had the idea. You know, I sort of. I sort of. In my mind, I'm like, a little bit like. This entire thing is like a little bit like a tv show. A little bit like a.

Jonathan Mann [01:05:04]:
Feels a little bit like a. I don't know. Yeah, like a tv show of some kind. And so. So I was thinking about. Yeah, like, tv openings and the song, too, kind of felt like a tv opening to me, almost. So then I. And then I thought about too many cooks, if you remember.

Jonathan Mann [01:05:20]:
Too many cooks.

Kyle Lawrence [01:05:21]:
Yes. You know, we will not show the whole thing on the cookie.

Jonathan Mann [01:05:27]:
Such a wonderful piece. And so I was like, can I make. You know, can I make my version of too many cooks? And then actually, over the. You know, over the. I'd say six months of working on this song, this video, the AI tools over that time developed so rapidly that many ideas that were not possible from at the beginning. So I'd be like, oh, wow, I can put Gary and me into these scenes very easily now. And I'm like, okay, well, then I just have to, like, pick the right. You know, I was like Laverne and Shirley, and I was like.

Jonathan Mann [01:06:04]:
I mean, I keep joking that it's like a lot of, you know, I'm, like, 42, so it's a lot of, like, elder millennial reference points, like old Star Trek, you know, and, like, old happy days that, you know, used to come on or whatever. Those are my reference points for this kind of tv. Yeah, so, so this. So, you know, and I kept. I kept changing it. Like, I had one. I had one thing where one of our. One of the lawyers involved, I sent it.

Jonathan Mann [01:06:37]:
I had a version where there was, like, a naked ver. Like a naked me in one of the pieces like that. But it was, like, me when I was, like, 25 naked. So it was like, young, naked Jonathan was one of the characters. Young, naked Jonathan. And he was like, I love it. It's great. Maybe take out the naked Jonathan.

Jonathan Mann [01:06:59]:
Okay. All right. I'll remove that. That's fine.

Kyle Lawrence [01:07:02]:
Yeah.

Moish Peltz [01:07:03]:
So last question, and then I think we can let you guys go for our attorney audience. I heard that you guys have the legal spend covered, but from a, getting the word out from an advocacy perspective, you know, what, what can other attorneys in the industry do to move the cause forward?

Brian Frye [01:07:25]:
I mean, I'd love to hear people just talk about the lawsuit and its implications more. I'd love for people to, you know, tell any journalist they know that, you know, this is a story they should be covering and they should be taken seriously. I think it's one that maybe some people don't fully understand why it matters and why it's important. And so kind of getting that word out there would be great. You know, if any attorneys or lawyers are looking for, you know, someone to talk about it, you know, I'm always available, so.

Moish Peltz [01:08:02]:
Well, great. We're going to have to have you back on once the case starts moving. After the government gets their three.

Kyle Lawrence [01:08:09]:
Definitely after the answer, for sure.

Brian Frye [01:08:14]:
Yeah. Yeah.

Kyle Lawrence [01:08:15]:
All right. Well, gentlemen, we greatly appreciate your time. We know your time is very valuable. You know, you've been making the round, so we, we just really appreciate you stopping by. Block and order. Should artists have to register their artwork before selling it to the general public? And stay tuned for future episodes to find out.

Jonathan Mann [01:08:31]:
And we'll find out.

Kyle Lawrence [01:08:32]:
Best luck to you guys. Yeah.

Brian Frye [01:08:33]:
Amazing. Thanks a lot.

Jonathan Mann [01:08:35]:
Thanks, guys.

Kyle Lawrence [01:08:36]:
Thank you, gentlemen.

Jonathan Mann [01:08:37]:
Appreciate it.

Kyle Lawrence [01:08:38]:
Well, Jonathan Mann and Brian Fry, that was really scintillating stuff. It really was. Just love seeing guys just the cojones of what they're doing and just their. So erudite. That was phenomenal. Moish, what you think of that?

Moish Peltz [01:08:50]:
Yeah, it's such a fun vibe. And hearing them speak about it, you can tell they just, like, exude excitement about the lawsuit and everything. And I'm just really excited to see how it plays out and also really to see the content that continues to spring forth from Jonathan every day, including, as we've heard, just more music related to the lawsuit. So I think that's gonna be great to follow.

Kyle Lawrence [01:09:13]:
Yeah. Please stay tuned for more episodes of Block in order to just find out what happens with this. We'll definitely be covering it now onto the lightning round. Known origin announced on July 17 that it will be shutting down its chain marketplace and minter. While the terms of the deal have not been disclosed, this decision is quite surprising because it comes just two years after the platform was acquired by eBay. Despite the closure, known origin emphasized that its existing nfts remain fully functional and tradable. Number go up. Number go down.

Kyle Lawrence [01:09:41]:
Great. Yeah.

Moish Peltz [01:09:43]:
All right, so next up, DraftKings. The sports gambling company is shutting down its NFT business, effective immediately. The company sent an email to its customers, basically. Recently, a judge in the US District Court for the District of Massachusetts allowed a class action lawsuit against DraftKings to proceed, finding that the plaintiffs had plausibly pled that the NFTs were unregistered securities.

Kyle Lawrence [01:10:07]:
Yeah, well, easy come, easy go. I remember we covered that when they launched it.

Moish Peltz [01:10:12]:
Short lived, I guess.

Kyle Lawrence [01:10:13]:
Exactly. Happy birthday Ethereum Tuesday, July 30 Vitalik Buterin, the founder of Ethereum and producer of its white paper, wished it a happy birthday back in 2015 when the network was launched and the first block was mined. Apparently. However, some are arguing that it was in 2013 when Vitalik first conceived of a general purpose blockchain built for decentralized applications. And they. So there's dissension as to when the actual birthday is. I think the father knows when the birthday is. Just like, you know, when people question you, when you tell them what their birthday is.

Kyle Lawrence [01:10:44]:
I never understood why people do that. Yes, I know when my birthday is.

Moish Peltz [01:10:46]:
Well, I think, I think Vitalik was the one that said, well, the white paper might be the right date. But I think, I agree it's confusing. I think the way, I think it's a good argument that the white paper, it's like, well, this is the concept, the date, bitcoin white paper, that's also the date. So there's already, there's no wrong answer to it. All right, so digital banking startup Mercury has announced that cessation of its services for startups in several countries, prominently including Ukraine and Nigeria, citing regulatory challenges and operational complexities in those issues. That's definitely come with some controversy, and startups relying on mercury for financial services may need to seek alternatives. I did hear that 90% of their compliance obligations were basically for like 1% of their accounts, and so it just wasn't sustainable.

Kyle Lawrence [01:11:37]:
De minimis next up, our daily dose of schadenfreude. New Jersey senator Bob Menendez was found guilty on July 16 of accepting bribes as a foreign agent, including gold bars and a luxury car, in exchange for his political clout. The irony of the conviction is that Menendez often cited bitcoin as the, quote, ideal currency for criminals. Menendez's sentencing is scheduled for October 29. My wife's birthday should have invested in bitcoin bro, I don't know what you were thinking. That was a mistake.

Moish Peltz [01:12:08]:
That's right. If you want to take bribes, why are you taking gold bars, luxury cars? Take bitcoin. He knew about it. He just. He just dismissed it. Should have taken his own advice. No. Just kidding.

Moish Peltz [01:12:20]:
Don't do bribery. Politicians. Come on. Let's be better. All right. Grayscale. Grayscale. The ETF company has launched a new fund for decentralized AI.

Moish Peltz [01:12:33]:
The fund will finance three key areas, AI services, addressing problems related to centralized AI, and developing AI related infrastructure.

Kyle Lawrence [01:12:42]:
That is a banner day for block and order because that is the first time we completed the lightning round on time. Well done, mister Moish. Well, that wraps it up for this edition of block and order. A very special thank you to Jonathan Mann and Brian Fry for the really exciting discussion. And we're really looking forward to seeing what comes up or what comes next for that litigation. So stay tuned to future episodes, and please feel free to follow them on twitter and follow their pursuit of justice in the face of injustice. Remember to like and subscribe and follow us on all our socials. The links are down below in the show notes, of course, drop a comment below if there's a particular topic you'd like us to cover.

Kyle Lawrence [01:13:18]:
Nothing that we discuss here on the show is meant to be construed as legal and financial advice, especially about taking bribes. Please consult your own attorney if you're going to take the plunge. Neither discussion nor the fact that we own assets or products that we discuss in this show is meant to be serve as an endorsement of said assets. Very special thank you to producer Abby, the OG producer. Without her, the show would not be possible. So on behalf of Moish Peltz, I'm Kyle Lawrence. Thanks for tuning in, everybody.

Moish Peltz [01:13:44]:
I'm Moish Peltz. Take care, everyone.