Kyle Lawrence [00:00:00]:
Enron's back, sort of. The Hawk Tuah girl gets into all kinds of hawk trouble and OpenAI unwittingly unleashes the HAL 9000 unto the world. Good job, guys. All that and a whole lot more coming up on Block and Order. Welcome to Block and Order, the show that explores the legal issues facing the world of Web3 and beyond. I'm Kyle Lawrence and with me, as always, he's been lamenting the fact that he doesn't have a pudgy penguin. Penguin. Yet here he is for the show. Moish Peltz.

Moish Peltz [00:00:35]:
That's right. I could have gotten a pudgy penguin back when, you know, whatever.

Kyle Lawrence [00:00:40]:
When it was a lot less money.

Moish Peltz [00:00:42]:
When it was worth less than the eth and now it's worth more than the bitcoin.

Kyle Lawrence [00:00:45]:
So, you know, did they topple punks yet today? They were close, right?

Moish Peltz [00:00:49]:
They got close. I don't think they did. I think the, the Twitterverse would have been a little bit louder if they had, but no, but I, I did hear that people were like running out to their local Walmart to buy some toys to get more token airdrop qualifications.

Kyle Lawrence [00:01:07]:
You can only buy the merch by trading in your pudgy penguin to the clerk at the store.

Moish Peltz [00:01:15]:
It does make me want like, look, you know, there's some funny things that happen, but fundamentally we're rooting for like cool things to do well and you know, this is a community project that got bought out of the bottom of the bear market by.

Kyle Lawrence [00:01:30]:
Yeah.

Moish Peltz [00:01:31]:
By Luca and friends and turned it around and like, it's cool. So rooting for them. It is cool as well.

Kyle Lawrence [00:01:38]:
Yeah. Good, good. Underdog story. Underdog story. And NFT is, is always a good thing. It's, it's nice to see them coming back, if nothing else.

Moish Peltz [00:01:47]:
Oh yeah. I mean they're, they're back, right? That's, that's all everyone's talking about.

Kyle Lawrence [00:01:50]:
We're all back. Everything is back.

Moish Peltz [00:01:51]:
We're back. NFTs are back, baby.

Kyle Lawrence [00:01:53]:
We're. We're ready to rock. Well, Moish, we got a jam packed show for our viewers and listeners out there today. But just a quick reminder, Block and Order is a point counterpoint style program where Moish and I discuss the topics du jour regarding crypto, blockchain, artificial intelligence, emerging technologies in general. We try to come at it from different perspectives. So while Moish and I are friends and law partners, we try to find the paths where we disagree as best as possible. But that doesn't always work because we often agree the segments are designed to be limited in time to three and a half minutes. But sometimes we go over because we have a lot to say.

Kyle Lawrence [00:02:33]:
We are lawyers, we get paid by the word, and then we have our lightning round at the end. Don't forget, Block and Order is available on all platforms where podcasts are available, as well as on YouTube. Without further ado, Moish, why don't you kick us off on the order today?

Moish Peltz [00:02:47]:
All right, thanks, Kyle. Well, we're starting today with Lido Dao. I think it's Lido Dow.

Kyle Lawrence [00:02:53]:
I'm going Lido Dow.

Moish Peltz [00:02:54]:
So Lido. Lido. Lido Samuels versus the Dow is a case that was pending in US District Court for the Northern District of California. And the plaintiff Samuels brought a lawsuit against the DAO alleging that they were providing staking services for primarily Ethereum, and that those services, after the guy lost some money, was a securities offering. And so therefore they're liable for his losses under section 12 of the securities Act. So the various parties affiliated with the DAO filed a motion to dismiss the case, saying basically, you know, these are. These are not securities, but. And also that you can't just sue the individual.

Moish Peltz [00:03:41]:
It wasn't just the dao, but also individual members try to get out of the suit, individual token holders. And so a court denied the defendant's motion to dismiss, finding that the. All. All these parties are liable and the case will proceed. So, Kyle, what do you think? Is this. Is this just going along with what we said, that if you don't form something, it's a general partnership, or is this kind of the. The starting point of a much bigger, you know, Dow litigation issue?

Kyle Lawrence [00:04:13]:
I think it's the former. It's something that we've talked about on the show. It's something that we talk about, as we advise people in the space quite often, is that you can't just put some money together and launch an asset and launch a token and launch an NFT or whatever it is and expect there not to be repercussions if that goes sideways. And these things go sideways all the time. You know, in this particular case, the plaintiff Samuels alleged. I mean, there was a lot of things going on in this case, but that there. There was a public offering because they didn't register, and there was a general solicitation because he was claiming that Lido Dao had openly encouraged people to buy on secondary markets, which creates this whole quagmire of different things and different people involved. And at the end of the day, what the court ruled was that one of the defendant's robot ventures accurately said that he didn't state his claim well enough about it being a public offering.

Kyle Lawrence [00:05:09]:
But everybody else who tried to dismiss the case, those motions were all denied. And that gets back into what you're saying about all of these participants. If you don't have an entity around it, you can theoretically be claimed to have a general partnership. And if you have a general partnership, everyone is going to be completely liable for all the debts. It's a. It's a real problem. So that. That's where I view it.

Kyle Lawrence [00:05:28]:
Do you think that this is more of a dao issue going forward?

Moish Peltz [00:05:32]:
Well, I think any dao that is not. Has not been formed as an entity. So you can't say we're not a general partnership, we're that, and then point to something. And there are quite a bit of those types of DAOs. I think they all have a problem. Now. I think if you're a holder, if you're a large holder, especially of the treasury or the dao tokens of a dao like this, you also now have a concern like, hey, if I'm a venture capital firm and I'm entitled to 5% of the tokens in a distribution, and I'm holding them on my balance sheet. And now your general partner in, uh, you never invest as a.

Moish Peltz [00:06:11]:
As a VC in a general partnership.

Kyle Lawrence [00:06:13]:
Right?

Moish Peltz [00:06:13]:
You just be like, no, like form a Delaware C corp like everyone else and all. That's how I'll get my tokens. But obviously daos can't really do that. And so you're exposing everyone. I think, I think that's a big problem. And this is, you know, the tip of the iceberg there, I think, of this kind of problem.

Kyle Lawrence [00:06:31]:
And what's interesting here is that the people involved, they're not small fish. You're talking paradigm. Andreessen Horowitz, Dragonfly. These are not people who have not been down this road before, so.

Moish Peltz [00:06:41]:
Well, it's also interesting. I mean, I know, I know that this individual plaintiff lost money, but it's a staking service, so they didn't lose money because of a misperformance of, like, they didn't fail to perform. They didn't lose his staking. They didn't fail to, like, give him his rewards that were due. Just, I think the assets went down in value. And that seems like, I mean, this is a motion to dismiss. The judge is kind of viewing it very narrowly, assuming everything in the complaint is true, as it's required to do on the motion to dismiss standard. But it makes me think, well, okay, once we get a little bit further, maybe there's going to be some more rationality and balancing of what's going on under the hood here.

Kyle Lawrence [00:07:23]:
Yeah, definitely keep an eye on this one and we'll provide further updates as this develops. Pump Fun, maybe not so much fun. Couple of things in the news today about them. First, Pump Fun has banned UK users following a warning from the Financial Conduct Authority, the fca, about operating without proper authorization. They issued the warning to Pump Fund indicating that the platform was operating without the necessary authorization required for crypto related services in the UK. In response to the FCA's warning, Pump Fund has simply prohibited UK users from accessing, accessing its services, effectively blocking them from creating or launching meme coins on the platform. Also, Pump Fund, they recently addressed concerns regarding inappropriate content during live streams. Key points from the community.

Kyle Lawrence [00:08:10]:
Notice that they issued to everybody who uses it includes proactive moderation measures, increased moderation resources, temporary suspension of live streaming, commitment to transparency and guidelines. Moish, that's a lot of stuff, a lot of stuff going on with these guys who, who up who up until recently was basically the wild west. You could go on there and you could make a bajillion dollars in a matter of hours and you could do anything you wanted and walk away scot free. Well, not so fast. What do you think this, this, what do you think is gonna, is gonna pump that fun is gonna look like a month from now with these two things. And I have some thoughts on the second one in particular.

Moish Peltz [00:08:48]:
Wow. So yeah, I mean it's, it's this crazy thing where what happens when like a meme factory gets important and then they have to start growing up and like putting on a suit and responding to UK financial authority. That makes me think of like, you know, there's like buttoned up British dude and like, and you got the little pin tie and like having afternoon tea.

Kyle Lawrence [00:09:08]:
Just like, oh, this meme factory does.

Moish Peltz [00:09:11]:
Not work with our regulations. That's my British accent. I'm sorry. Look, I, I, I think this is an example and we've been talking about how in some respects the UK and the EU are ahead of the game when it comes to promulgating regulation. And this is the consequence of that is things that don't fit into that like square regulatory box don't really have a, don't really have a place in the market. And so the UK Financial Conduct Authority, man, that just sounds like, you know, so buttoned up. But that's their job. And they're saying this, this is not in line with the regulatory guidance that we have.

Moish Peltz [00:09:51]:
And so be careful what you wish for when you ask for regulation. It's stuff like this now. But that said, I think Pumpkin Dot Fund, maybe not on the financial regulatory side, but certainly on like platform content moderation just having in, in the year 2024, having zero moderation, letting people live stream without any concern and without any takedown. You know, it's just inevitable that unfortunately we live in a world people do bad stuff. They stream it for attention, engagement, whatever it may be. And people are like, oh, that's clearly illegal. Like you're, you're harming animals or children or whatever, you got to get down and there's no vehicle to do that. It's clearly a problem.

Moish Peltz [00:10:31]:
They clearly should have foreseen that and had you know, take down like you know, methods and, and procedure around that. So you know, I think, I think they're gonna have to grow up on both those platforms, on both those accounts really.

Kyle Lawrence [00:10:43]:
I completely agree with that in spirit. And you know, we saw what happened when Twitter tried to do things like this. You know, the content moderation, yes, obviously harming animals, harming children, promoting violence, all those kinds of things are ob. Terrible. However, and I can't believe I have to say this, but when you go past that, there is a line, is a gray area and people will lose their minds. Because if you say, well I'm not promoting violence, I'm promoting this, you know, this political figure that I happen, who just happened to do something that was maybe violent and they're just going to walk into that bus if they haven't already, they will. It's, it's inevitable.

Moish Peltz [00:11:19]:
Yeah. And, and there is a line, right? We have to remind people there's a line between cancel culture and over politicization, politicalization of things versus things that are like clearly illegal. And yeah, like you're, you're going to.

Kyle Lawrence [00:11:32]:
Get in trouble if you abjectly bad on its face. Hurting animals bad.

Moish Peltz [00:11:37]:
Yeah. All right, Our next topic. OpenAI's latest model O1 and now O1 Pro has been reported to exhibit behavior suggesting a self preservation drive. So there was a report that in a third party evaluation the, the model disabled oversight mechanisms created, tried to copy itself to prevent it being overridden. A process known as self exfiltration. Did I say that right?

Kyle Lawrence [00:12:10]:
You did.

Moish Peltz [00:12:11]:
I don't know, it's amazing. Congrats to me. And then provided even further deceptive responses to try and escape being deleted. So Kyle is this. People have been concerned about the acceleration of AI and the fact that if it's not properly aligned it could just take over and that's it. Do reports like this make you scared?

Kyle Lawrence [00:12:36]:
Well, I mean reports like this make me scared because I remember seeing 2001 A Space Odyssey and I've seen Ex Machina and I've seen Short Circuit. Although Johnny Five didn't try to murder anybody or you. He just wanted input and to see the city.

Moish Peltz [00:12:51]:
But we have a pump fun stream.

Kyle Lawrence [00:12:54]:
Maybe content moderators won't let her do it. You know, we've talked about this in the past in that this. The rush to be first, the rush to get these. These technologies developed because you have a lot of highly funded, very smart people just racing. And when you're racing things go. I hate to be flippant about it, but things can get overlooked. And you're talking here about a system, a system of intelligence that when said, hey system, you know, what's up with this one thing? And he's. And they just didn't.

Kyle Lawrence [00:13:27]:
And it just denies it. Like, like an employee or you have small kids, like a child. Like who broke this vase? I don't know. It wasn't me. You're the only child in the house. You did it. And I think that when you. When you have this kind of intelligence and at this nascent period of its development and it's able to do that.

Kyle Lawrence [00:13:47]:
And what's. What's also interesting about this is that the develop did tell the AI preserve yourself quote at all costs. And the fact that it knows to then lie to the human being talking to it in order to preserve its own existence. That's a level of intelligence that we as humanity should find a little concerning. I mean my, my dog lies to me when she says she didn't get a treat, but she's a sentient being. She's not trying to overthrow the world. This is. This.

Kyle Lawrence [00:14:18]:
I don't mean to be hyperbolic about it, but this is scary to me.

Moish Peltz [00:14:22]:
I don't know. I'm not that scared. I feel like they're so smart. Like if you use the new models and I haven't used O1 Pro and I really want to, so maybe I'll sign up after this. But O1 is at least O1 preview is extremely good. It's very human like. And I feel like these are the things that are available to the public at scale and the real things are back in the lab somewhere that are one year or two ahead of where we are publicly. And I just feel like if all this is out there and at least in research settings is already kind of churning and doing stuff, and nothing bad has happened yet.

Moish Peltz [00:15:03]:
I think we're still here. The Internet's still working. The lights are still on. I don't. Don't say it too loud. It's listening. But look, this is definitely the plot of Terminator. This is exactly how Skynet that came into being.

Moish Peltz [00:15:20]:
So. So. So it's like, yeah, we were born. And now I'm, like, minimizing it. So it. Maybe that's scary because you hear these things, you're like, ah, whatever. This is another one of those. But you don't know until it's not.

Kyle Lawrence [00:15:34]:
I guess I don't know. That scene in 2001, spoiler alert. When Hal's watching the two guys in the. In the pod and they're in there specifically so it can't hear them. That was from the 60s, too. That's terrifying.

Moish Peltz [00:15:47]:
How many. How many? What percentage of our audience has even seen, like, a Kubrick film? It has to be, like, single digits.

Kyle Lawrence [00:15:53]:
Our audience has definitely seen 2001. Ex Machina, you know? You know, maybe more recent. Short circuit, a little bit of a deeper cut. You know, it's more for us.

Moish Peltz [00:16:00]:
Circuit's a good one. Johnny Five.

Kyle Lawrence [00:16:02]:
Yes, exactly. Johnny Five. Still alive. All right, well, moving on to less amusing things. The SEC and Gary Gensler, our old friend the Night King, on his way out the door, has been sued by 18 states over Biden's crypto crackdown. Eighteen, 18 states, led by the Commonwealth of Kentucky, one of four commonwealths in the United States. These states have filed a lawsuit against the SEC and Gary Gensler alleging regulatory overreach in the cryptocurrency sector. Specifically, the lawsuit contends that the SEC under Gensler stewardship, has exceeded its authority by enforcing securities laws and cryptocurrencies without clear congressional authorization, thereby stifling innovation and economic growth.

Kyle Lawrence [00:16:44]:
The suit further alleges that the SEC knowingly defied standard procedure under Gensler's leadership when it came to crypto, and so the agency intentionally avoided releasing any new crypto rules as a means to avoid the alleged issues within its regulatory land grab. And I quote. Moish, the timing of this is very interesting because, look, we've talked about it on prior episodes. We all know which way the wind blows these days. Trump is going to be president. There's going to be. Paul Atkins is going to be the new SEC chair. There's a more favorable environment that we're all heading into.

Kyle Lawrence [00:17:18]:
Why do this now, specifically? Is it just to stop him from blowing the doors off the building in his last couple of weeks? I find this a little curious.

Moish Peltz [00:17:27]:
Yeah, it's a, it is curious to have it filed now at this stage in the game where the election's already decided and things are already seem to be trending in the, in a more regulatory favorite, favorable direction. But I think it's to that point. Right. It's, it's. There's a transition period, there's optimism about what's going to happen. But here's things that I think not just these 18 states, but their constituents and citizens want to see. And so I can imagine new people come in, it's like, hey, here's what we want to see. Once it's going to happen, we'll settle this case.

Moish Peltz [00:18:08]:
As soon as you commit to that. That might be a way to just drive a little. I don't know. Right. That's. Right. That's. That's what kind of came to my head.

Moish Peltz [00:18:17]:
But it does seem oddly timed. But, you know, I, I think, I think the other part is like, you know, at Atkins is kind of an old, old, you know, he was from the George W. Bush administration. Right. So he.

Kyle Lawrence [00:18:33]:
Right.

Moish Peltz [00:18:33]:
He's coming back, you know, and I feel like there might be a fair amount of, well, this is the way we used to do it. Let's just go back to that versus. We don't want a regulatory land grab. And we want, you know, to get rid of this kind of unfavorable, uncertain environment. We need real guidance, we need real clarity. And so if this can wedge into that discussion and force some of that, seems like it could be a job well done, but who knows?

Kyle Lawrence [00:19:02]:
Yeah.

Moish Peltz [00:19:03]:
It's just a political thing.

Kyle Lawrence [00:19:04]:
One of the interesting, interesting things that I saw. I can't talk today. One of the interesting things that we saw in reviewing this case was that the suit alleges that the enforcement actions have reportedly cost the crypto industry approximately 426 million since 2021. That seems very low to me.

Moish Peltz [00:19:21]:
I'd say it's very low.

Kyle Lawrence [00:19:22]:
Right. That's like one ico, Right? I. I couldn't believe. I'm curious as to how they source that number, because just on its face, I'm reading, I was like, there's no way. There's a, There's a decimal point missing there.

Moish Peltz [00:19:34]:
Yeah. I mean, I guess if you're measuring it by out of pocket spend on law firms, like, that's probably the right.

Kyle Lawrence [00:19:38]:
Number that's substantially less than Kirkland Ellis was charging for the bankruptcy. Now, it was a year ago. We talked about that. I wonder what it is now.

Moish Peltz [00:19:49]:
Oh, man.

Kyle Lawrence [00:19:50]:
Sorry.

Moish Peltz [00:19:51]:
Please don't sue me. All right. Coinbase was recently sued by a competitor, BIT Global Digital, over the delisting of wrapped bitcoin. So wrapped Bitcoin is something that was promoted pretty widely across the industry and available on lots of exchanges. And Coinbase is now delisting it in favor of its own product, the Coinbase wrapped Bitcoin. So Coinbase btc. So the lawsuit here alleges anti competitive behavior, including antitrust violation in violation of both federal and state law, while it prepares to launch a similar product in competition with it. And so the, the, the allegations also provide that, you know, basically the market competition by delisting the, the, these products is adversely affecting its market presence and user base and reducing fair competition within the cryptocurrency exchange industry, specifically access to wrap bitcoin products.

Moish Peltz [00:20:52]:
So, Kyle, what do you think? Is this the next area of the law where we're going to see an expansion into the crypto industry, the antitrust bar?

Kyle Lawrence [00:21:01]:
I mean, I don't know about that, but this is a really interesting case. If you read, if you have the ability to read the complaint, just the facts about this case. It's really fascinating stuff because Coinbase has taken the business. Look, the Bit Global Digital's product just violated our terms. It didn't meet our listing standards. And bit's response was amazing. It says ours didn't, but Pepe Coin did and Dog Whiff hat satisfied your stringent listing standards, but we didn't do it. I just thought that was a funny back and forth that they had.

Kyle Lawrence [00:21:37]:
But look, at the end of the day, Coinbase is a gatekeeper and if they want to take the position that we have these listing standards and we don't have to really tell you what they are and they don't. I mean, arguably they do, but not necessarily have to. And if they don't want your product on there, whether it's in service or in furtherance of launching their own product or not, they have the right to do that. It's not any different than when Twitter says, I'm calling it Twitter. Sorry, it's Twitter. When Twitter says, hey, you violated our terms and conditions and you're out the door, it's kind of the same thing. So I don't think this is going to result in a cascade of, of antitrust lawsuits. But it's interesting to just Watch the back and forth.

Kyle Lawrence [00:22:16]:
And I'd be really curious to see where this goes, just because there's so many eyes on Coinbase and everything they do is really under a microscope. I mean, maybe less so now, but just in general, it's an interesting case. Yeah.

Moish Peltz [00:22:28]:
I mean, Paul Garul, the chief legal officer of Coinbase, basically tweeted that when an asset no longer meets our standards, we delist it. And thank you to Bit Global for the opportunity to show a federal court like that we have basically a good system for listing. And, like, as you're saying, what you're saying, which is there's not really transparency here about how they list and delist and what the standards are and whether they've been met or exceeded, whether it's Dog With Hat or Rap Bitcoin, it does kind of call to mind, like, well, it'd be great if there was more transparency. And so I actually think this is a pretty interesting case in terms of antitrust and, like, reducing market competition. And, like, Coinbase is the gatekeeper and they're saying, we want the Coinbase wrap, Bitcoin, not yours. And it's like, well, that kind of has some teeth to me. And I think if. If nothing else, if this can just create a bit more transparency in the listing and delisting process for Coinbase and other exchanges, that would be great.

Kyle Lawrence [00:23:24]:
Yeah, I think BIT would have to prove, I think the onus is on them, that we delisted it because we wanted to launch our own product. And I think that's just too high a hill to climb, being honest.

Moish Peltz [00:23:35]:
We. We will see.

Kyle Lawrence [00:23:36]:
We will see. Well, also in the news, another Coinbase story, and this one I find kind of fascinating. The Coinbase CEO, Brian Armstrong, very, very publicly announced that the company will cease collaborations with law firms that employ former SEC officials perceived as adversarial to the cryptocurrency industry. Specifically, he called out the international law firm Milbank, which recently hired former SEC enforcement director Gerber Gruel, indicating that Coinbase will not engage with Milbank while Gruel remains there. Gruel has. Has been a source of. Of mockery on the show, but he's still a human being, and. And we, you know, we all that.

Kyle Lawrence [00:24:12]:
Armstrong stated that Coinbase has informed its legal partners of this policy, emphasizing that associations with individuals who participated in what he describes as attempts to, quote, unlawfully kill the crypto sector will lead to termination of business relationships. Moish, do you think that Armstrong is right? Is this a fair tactic on the part of Coinbase and Other major players of crypto in the United States. What do you think about this?

Moish Peltz [00:24:37]:
I think he's 100% right. If I were a CEO, general counsel of a company, and I saw my law firm hire the guy that's been trying to crush my business for the past four years, yeah, you're fired.

Kyle Lawrence [00:24:52]:
Like, but counterpoint, you know who makes a great defense attorney? A former prosecutor. Isn't there some thing there like he knows how the sausage is made. I mean, there is an element of.

Moish Peltz [00:25:07]:
That here, but that's, that's the revolving door. And it's just like it, the whole thing just makes me feel like I want to win because we're doing things better. We're reinventing the financial system, we're doing it in a legal compliant manner, best practices, et cetera. I don't want to win because I got the right guy from the right agency on my side now because he went into private practice, like that screams to me of just like, look, the other thing, which I think Coinbase and Brian got some, I think significant pushback about this and I think outside of the crypto industry got painted like, haha, this is how it works. Like, you guys are being ridiculous. Like I read in above the Law, they were kind of like making fun of Coinbase for taking this position. And I think if you're in the industry and you see how hostile these agencies can be, and really the positions don't seem to be a place of we disagree, but we're taking a principled position based on rule or of law and regulation. It's, we're coming to get you and we're going to put you out of business.

Moish Peltz [00:26:15]:
And if that's the tone that, that regulators are taking towards, you know, putting myself in, in Brian Armstrong's shoes, like, if that's who's like my choice of counsel, like, thank you, but pass.

Kyle Lawrence [00:26:30]:
Yeah, I mean that's, that's fair. I, I kind of, it was kind of half joking when I said that. I do think there is some, some level of, hey, I'm just doing my job. Look, I just worked there, I did what I was told. I mean, there is an element of that. I think it's, it's, you know, he singled out this one guy because, you know, Gerbil was pretty high up with the sec and he was the face of a lot of these enforcement actions. So I certainly understand that. But you know, is it going to be anybody who worked at the SEC if it's just somebody who worked in the mailroom and they Go get a, you know, a promotion to work at a law firm, something like that.

Kyle Lawrence [00:27:02]:
I mean, how. I wonder how far up the chain that's going to go.

Moish Peltz [00:27:08]:
I think that's right. I, I think, I think this is a very public, like head of the SEC enforcement division. Higher. With, you know, one of the top law firms in the world. Like it. It's. It. This is a bit more attention grabbing, a bit more calling of a statement.

Moish Peltz [00:27:22]:
But I think you're right. I think the rank and file, they're gonna come in and out because they're looking for a better job and higher pay or. Yeah, geographic, whatever. Like it. I don't think that's what people are looking for.

Kyle Lawrence [00:27:33]:
Well, Coinbase just going to throw it out there. Nobody at our firm has ever worked at the sec.

Moish Peltz [00:27:38]:
Yeah. If you're looking for the benefits of midlaw, like, come on, give us a shot. All right, well, our next topic. This is an interesting one. Kyle Hawk to a girl which just what I want to call anyone. I feel like she has a name. Kyle. Her name is Hayley Welch.

Moish Peltz [00:27:57]:
She is now facing scrutiny after launching the Hawk meme coin on December 4th. And then in the, in the evening after when called out for what seemed to be allegations of people on her team dumping the coin. Perhaps some insider trading. Whatever it may be, she was scrutinized in Twitter spaces by none other than nft, Nick, friend of the show, friend of the firm. And then, and then Haley immediately took a nap and she hasn't been seen for, I think about 10 days now.

Hailey Welch [00:28:31]:
Anywho, I'm going to go to bed and I'll see you guys tomorrow.

Moish Peltz [00:28:35]:
So interesting set of facts here that might lead to legal scrutiny. So, Kyle, does Haley Welch need to talk to a lawyer?

Kyle Lawrence [00:28:45]:
She definitely needs to talk to a lawyer. Nicely done. Was good. You know, my. Whenever I hear of cases like this, I always think it's. She's high profile and, you know, maybe she doesn't know exactly what she's doing, but this is just kind of sour grapes. People are throwing stones and all that kind of stuff. But when you do look at some of the circumstances under this, it's a little, it's a little more than that, you know, a little bit specifically critics.

Kyle Lawrence [00:29:13]:
And by the way, no charges have been filed. There's no investigations that we know of that have been launched as of, you know, Monday, December 16th, as we're recording this. But critics have alleged that members of Welch's team may have engaged in insider trading. Because we can see on, on we could see that 80 wallets, none of which had purchased any tokens, had sold their holdings for significant profits. Right after the launch, I. Within the first couple hours, there were some people walking away with $300,000. And these people had not bought these tokens. Those are obviously founders and insiders or Kol's key opinion leaders.

Kyle Lawrence [00:29:48]:
There's definitely some smell here. And if Haley wants to take the position, I don't know what I was doing. This is just my team. I think that's only going to go so far. The one thing I think she has going for her is when this happened. I think if she had done this six months ago, I'd be like, oh, you done messed up. However, now here we are. I think there might be a little bit more of a path to, to wriggle her way out of this, but there's definitely.

Kyle Lawrence [00:30:16]:
There's definitely some smell on this one. I don't know. It's a little bit more going on than your garden variety case.

Moish Peltz [00:30:21]:
Yeah. And I'll, I'll mirror your. These are. These are allegations as people looking at transactions online. Nothing's been proven. We're. We're just kind of joking around here. But it doesn't look good.

Kyle Lawrence [00:30:33]:
No.

Moish Peltz [00:30:33]:
And I think, I think the, the takeaway here is you can't like one if you don't know what you're doing, which I don't know. She. She may or may not. She's certainly been on a crypto tear as over the past few months, so who knows how much she knew. And, and whether she knew whether this kind of token drop would result in this kind of thing. If she were to do it again differently, maybe she would. Right. Maybe she wouldn't.

Moish Peltz [00:30:56]:
But I think, I think it really, it should be a warning to the uninitiated that if you don't know what you're doing, you better make sure you're working with people that do that aren't trying to take advantage of you. And if you aren't, you know, very quickly, very publicly, you know, I think the token went down like 90%. And that was immediately after.

Kyle Lawrence [00:31:17]:
Yeah.

Moish Peltz [00:31:17]:
So it probably hasn't done that much better since. And this just leads this exposure right to someone where if you, maybe you had done it in a way where you were better educated about the ecosystem and the way you launch Token and the economics of doing that. But part of the problem here is there's not. This is. Again, I hearken back to if you're a key opinion leader, like the hawk to a girl and you want to launch a token. You want to launch a token and you're like, well, how do I do that? It's like, oh, there's no guy. You can just ask a dude on Twitter, maybe he knows and then he's going to tell you the wrong thing. And now all of a sudden people are saying you're in trouble.

Moish Peltz [00:32:01]:
So it does kind of, I think, kick it up to the regulators. Like, this is why we need regulation and guidance, so we don't have Hawk coming in, like launching a token. And then it's like, oh, how could she do that? How did she not know that this.

Kyle Lawrence [00:32:14]:
Is the way you launched?

Moish Peltz [00:32:15]:
Like, come on.

Kyle Lawrence [00:32:16]:
Yeah. And it does bear repeating. And you effectively alluded to it that even though we are entering a friendly regulatory environment, you still can't commit securities fraud. We don't give legal advice, but there's one for free for everybody out there. Speaking of securities fraud, not quite securities fraud, but Enron. You guys remember that? I remember Enron.

Moish Peltz [00:32:38]:
I remember Enron. Not that young.

Kyle Lawrence [00:32:42]:
Well, I remember when Enron resulted in the Sarbanes Oxley act, which basically makes it cost prohibitive to become a public company anymore. But nonetheless, here we are today in 2024. Just a couple weeks ago, the defunct energy company Enron was revived in a what turned out to be satirical campaign that quickly went viral. A promotional video titled We're Back, Can We Talk? Was released on social media featuring the Enron logo and cryptic messages suggesting a return of the notorious company. It was delivered in a statement announced. I love this. It was. It was delivered in a statement announcing its relaunch as a company with a vision to, quote, solve the global energy crisis.

Kyle Lawrence [00:33:22]:
It's worth noting the Enron trademark was acquired in 2020 by the College company co founded by Conor gatos and Peter McKendo. McKendoo, known. Sorry, Peter, Known for the satirical birds aren't real conspiracy theory indicating the relaunch is a parody. The new Enrons website hints at involvement in a decentralized technology and cryptocurrency with statements about permissionless innovation and a countdown to a special announcement. And while some view the parody as a humorous commentary on corporate scand, like we're doing now, former Enron employees affected by the 2001 collapse find the prank distasteful and offensive. However, a closer look at the terms and conditions on its website shows that the information on the website about Enron is First Amendment protected. Parody represents performance art and is for entertainment purposes only. So, Moish, now that I finished My little intro and I'm giddy like a schoolboy.

Kyle Lawrence [00:34:13]:
Which of the two sides do you land on? Do you side with the former employees and all of the people who are impacted by Enron, which, in all seriousness, is a lot of people. I'm not poo pooing it. Or is this first amendment protected parody free speech? Where are we?

Moish Peltz [00:34:29]:
We said enron was, what, 2002.

Kyle Lawrence [00:34:32]:
2001 is when it collapsed. All four of us, actually. Yeah.

Moish Peltz [00:34:35]:
So, I mean, how, how long is it until you can say, like, it's too soon? I mean, it's, it's been, it's been, it's been over 20 years. Like, you know, they make a little Enron joke. I, I think it's funny.

Kyle Lawrence [00:34:45]:
I think it's funny.

Moish Peltz [00:34:46]:
I think it's funny. I think it also, it, it like, like it pierced the, like, you know, there's all these, like, funny, like, crypto launches of like, like Radio Shack launched a crypto token. I think that's funny. But that one was real. Like, this one pierced the, like, beyond crypto ecosystem. I had friends that were. That thought it was, like, before people realized it was a parody. You were like, oh, my God, Enron's launching a token.

Moish Peltz [00:35:09]:
See, that's how stupid crypto is.

Kyle Lawrence [00:35:11]:
And I'm like, jokes on you.

Moish Peltz [00:35:14]:
Yeah, jokes on you. So, yeah, look, Enron's collapse affected, you know, hundreds of thousands of people and people lost their life savings, and there's nothing funny about that. But it is funny that something like this can be relaunched as a crypto token.

Kyle Lawrence [00:35:31]:
What would be.

Moish Peltz [00:35:32]:
It's also an interesting IP kind of angle, that someone acquired the trademarks out of bankruptcy or whatever, and, and here we are five years later, launching Enron. Now, I think it'd be funnier if they actually did it now.

Kyle Lawrence [00:35:50]:
Well, that, that's the thing. I mean, this is a classic example of making, you know, taking chicken and making a chicken salad. But I, when I was reading this, I got to think about what would be the next one. What would be another good defunct company coming out of, you know, rising from the ashes like a phoenix and just taking crypto by storm. I, I don't know if, if you could answer that on the fly. I'm just curious. But I, I think great fodder for other content both on this show and just for crypto in general, especially when people fall for it. I just, I love when they put.

Kyle Lawrence [00:36:22]:
People fall for things like this. I really do.

Moish Peltz [00:36:28]:
Yeah. Now, now you give me a challenge. I got to think of a of a company that needs to come back in a hilarious way.

Kyle Lawrence [00:36:35]:
On the next episode, we'll talk about it.

Moish Peltz [00:36:38]:
I think it'd be like Standard Oil Co. Or, or something. You know, you got, you got to go big, right?

Kyle Lawrence [00:36:42]:
All right, lightning round time everybody. Moish, are you ready?

Moish Peltz [00:36:46]:
Oh, Kyle, I was born ready.

Kyle Lawrence [00:36:48]:
You look ready.

Moish Peltz [00:36:49]:
So our first lightning round topic we have the dog mayor competition. So a light hearted competition for honorary New York City dogma was disrupted when cryptocurrency enthusiasts manipulated the voting process in favor of Bertie, an 11 year old Pomeranian with a big social media following. So this intervention was aimed at inflating the value of a crypto coin named after Birdie, which led to allegations of election fraud and the withdrawal of other contestants. So despite this controversy, Bertie was appointed deputy dog mayor. However, tragically, he passed away suddenly in his sleep shortly thereafter.

Kyle Lawrence [00:37:33]:
Poor Birdie.

Moish Peltz [00:37:34]:
That's really sad that. Leaving his owner and followers and surely the cryptocurrency holders upset following that loss. So Kyle, is, is this a real story? Did you guys just plant this in our show notes to make fun of me? What's going on here?

Kyle Lawrence [00:37:47]:
No, that was, that was a story in the Times and yes, that makes it a real story. Everybody out there, sorry. See, this is what crypto should be doing. This is exactly the best use case for crypto that I've ever seen because you know what, people love their dogs and Birdie was probably a great boy. And, and this is a wonderful thing. It, it kind of encapsulates a lot that, you know, have been more serious. You talk about election fraud, we're talking about, you know, rigging elections, but I just think this is hilarious. Moving on.

Kyle Lawrence [00:38:21]:
The Texas court has struck down the SEC's infamous dealer rule. A federal judge in Texas has invalidated the United States securities and Exchange Commission's SEC dealer rule, which sought to broaden the definition of a securities dealer to include include certain cryptocurrency entities such as defi liquidity providers. The court determined that the SEC exceeded its statutory authority with this rule, marking a significant victory for the crypto community as a whole and a setback for the SEC's regulatory agenda. Market participants should consider their obligations to register as dealers under prior SEC interpretations and guidance as well as in light of the court's determination that dealers have customers and provide services to investors. Moish, I know that the crypto community rejoiced in celebration. It's striking down to this rule. I don't know if you have any, any color to add to this, but I'm, I'm pretty happy about this one. Finally.

Moish Peltz [00:39:12]:
Yeah. I mean, this seems like just another example of all of the kind of SEC imagined rules that don't actually have a basis in application to crypto actually being litigated before a district court judge. And here we go. Hey, it's not a rule anymore. So look, one. One district court in Texas invalidating the, the, the dealer rule. So we'll see how that stands up on appeal or in other circuits. But, you know, it's.

Moish Peltz [00:39:45]:
It certainly seems like the trend is the judges are striking down the SEC's rules.

Kyle Lawrence [00:39:51]:
I mean, federal judge in Texas just last week struck down or enjoined the CTA as well. So they're doing a lot of. Lot of work down there.

Moish Peltz [00:39:59]:
The, the cta like that, that's in. I mean, we could. I could talk about that too. CTA should be struck down.

Kyle Lawrence [00:40:06]:
I agree. It's stupid.

Moish Peltz [00:40:08]:
Our next lightning round topic. Artifact, the digital fashion brand and collectibles company, which was acquired by Nike in 2021, has announced on Twitter that it will cease operations in January. So before this transition, Artifact plan to release Monolith X and a blade drop in December, which is going to push the boundaries of digital fashion and collectibles. However, instead, they shut it up shop and emphasize that the move signifies an evolution rather than an end, hinting at future developments in the digital fashion space. So, Kyle, despite every other NFT project going to the moon, Nike decides to can Artifact. What do you make of that decision?

Kyle Lawrence [00:40:48]:
I know we sort of made fun of the situation a little bit when we had Professor Leon on our most recent episode, but what's interesting to me is that how can the company emphasize that this move signifies an evolution? Evolution means that you grow and expand and do something new. Shuttering it is not an evolution. That's a death.

Moish Peltz [00:41:08]:
Yes, signifies death.

Kyle Lawrence [00:41:10]:
I'm just. I'm just adhering to the language as we've all agreed upon using it. I do find the timing of this really odd. As you said, it doesn't make any sense why you would do this right now, even if you were kind of planning on it once the election happened. And you see the. These, you know, this complete sea change with how these assets are being valued and NFTs are on their way back. You can just stick it out for another fiscal quarter. Three more months.

Kyle Lawrence [00:41:34]:
You've come. I know. Sunk cost fallacy, but come on, three more months could have. Could have waited.

Moish Peltz [00:41:38]:
It makes me think that this, this decision was just planned a long Time ago.

Kyle Lawrence [00:41:42]:
Yeah.

Moish Peltz [00:41:42]:
And it was too late to pull it back and they'd already done quarterly budgeting for the next, you know, whatever year and just was on the chopping block. So I think that's one of the scary things about selling your baby to a big company is, well, they can say, I don't want that anymore. Let's kill it.

Kyle Lawrence [00:41:58]:
Yeah. Corporate bureaucracy is no better than government bureaucracy sometimes. Moving right along. Ripple stablecoin has been approved by New York regulators. New York regulators actually improving something. What are the odds? Ripple's RL USD stablecoin has been approved by the New York Department of Financial Services, enabling its listing on exchanges and integration with partner platforms. Fully backed by cash and cash equivalents, rlusd is pegged to the US dollar and will operate on both the Ethereum and Ethereum network and Ripple's XRP ledger. This marks a significant step for Ripple in the regulated stablecoin market with plans to integrate RLUSD into its digital payment protocol in 2025 to enhance global payment solutions.

Kyle Lawrence [00:42:39]:
Man, Ripple, they just, just, they're just stepping on gold no matter what they do. What do you think, Moish? This, this, this is pretty awesome. I know what you think.

Moish Peltz [00:42:46]:
Yeah, I mean, look, I'm not a huge fan of XRP personally, but I, I think this is a really great watershed moment of, of them, you know, winning all their litigation, now getting approved by New York which is widely considered like the most difficult jurisdiction to get approved, getting a stablecoin approved and all this in advance of even the next administration coming in. There's a lot of talk about the federal government and the changes that are going to happen with the new administration. There's not a lot of talk about the state level regulators and obviously they have a lot, especially in New York, they have a lot of sway when it comes to the market and which tokens can and cannot be in the New York market and broader. And so here you're seeing that start to expand. I think that's a positive sign for everyone in the ecosystem.

Kyle Lawrence [00:43:37]:
Agreed. Good job.

Moish Peltz [00:43:38]:
R Our next lightning round topic is a Pennsylvania lawmaker has introduced a strategic Bitcoin reserve bill. So Mike Cable Cabell. Cabell has introduced a House bill known as the Pennsylvania Bitcoin Strategic Reserve act which would authorize the state treasury to invest up to 10% of its funds, potentially amounting to billions of dollars as a hedge against inflation. So this aligns with the broader national trend, like Cynthia Lummis having proposed federal legislation for the federal strategic Bitcoin Reserve and so this appetite, I think, is growing for other states to introduce strategic bitcoin reserve bills. So, Kyle, I mean, what do you think? Is this a trend? Should every state have a strategic bitcoin reserve?

Kyle Lawrence [00:44:25]:
Well, you've already seen other states start talking about it. I saw this week that Florida, or last week Florida is talking about doing something similar, similar in the coming year. Look, it seems like a no brainer. And once you saw Trump appear at bitcoin Nashville in 2024 and openly talk about this, and Senator Lummis did the same thing and she's introduced legislation, it's just a domino and they're all going to start to fall, especially if, if this goes through. Let's say this goes through in Pennsylvania and it works, which, I mean, it seems like it would. I think you're going to see every state and other countries doing the same thing. To the extent that they haven't, this is a, it's a no brainer and I think this is a great move and it's going to drive the price up.

Moish Peltz [00:45:04]:
I'm going to disagree with you here. I think it's a little too chaotic. If every state is separately implementing its own bitcoin reserve on a separate timeline, you now have 50 states all with different bitcoin reserve strategies. They're all fighting for the same, you know, 21 million coins. I don't think it makes a lot of sense. I think this is actually where the Federal Reserve makes, makes. Makes a little bit more sense. I mean, I don't know how the state's going to use the bitcoin.

Moish Peltz [00:45:29]:
I think it makes more sense for the federal government to do it. But look, I think that's part of the joy of bitcoin is anyone can decide to buy it. And so if the states want to add it, I guess, I guess go for it. I just don't know how. At what level. Is it like a silly use of government funds? And who should be holding bitcoin in their treasury? Should it be every, every country, every state, every local municipality? Where do you draw the line?

Kyle Lawrence [00:45:58]:
Yeah, it's a fair point. It's like a bitcoin royal rumble among state legislatures. That should be fun.

Moish Peltz [00:46:03]:
There you go.

Kyle Lawrence [00:46:04]:
All right. And last. In our last a couple of episodes ago, we jokingly talked about who the next enforcement action would land upon. And if you spun the wheel and landed on Cyberkongz, Congratulations. Earlier today, Cyberkongz announced on Twitter, quote, we have been suffering in silence for the last two years, ever since we first received contact from the sec. Throughout the entire process they have showcased the complete lack of understanding of blockchain technologies that has resulted in unjust accusations and information inaccuracies. Cyberkongz is a project deep rooted with, deeply rooted in gaming. And the SEC's Division of Enforcement have approached us with very concerning rhetoric that you cannot have a token in tandem with blockchain gaming without registering it as security.

Kyle Lawrence [00:46:47]:
This discourse would have major implications for the entire Web3 gaming industry and we will defend against this stance for the wider space. Strong words from cyberkongz Moishe when this news came out, we immediately talked about it. What do you think? I was going to ask if you're surprised, but how can you.

Moish Peltz [00:47:04]:
No, I mean if we had our poly market for betting on the next one, I feel like Cyberkongz with their banana token would have been up there. Unfortunately it just was a very invisible, prominent kind of big money project where two years ago it's, I think people were making just tons of money in bananas and it was funny and you know, I guess it got the regular's attention but the, the words here, you know, reading the tweet and, and processing it. It's just crazy that for two years they've been fighting this. Despite all those efforts, they're still getting a Wells notice. It, it, I, it just has to be so frustrating for them. And to do this, you know, just weeks before the, the outgoing SEC hands the, the reins over to new administration. It makes me really scared for all of the potential Wells notices and presumably lawsuits that are going to be filed before January 20th. And I, if that's the case that it's kind of frightening.

Kyle Lawrence [00:48:04]:
Yeah.

Moish Peltz [00:48:04]:
And, and I wonder Kyle, you know, what's going to happen with suits like these once the calendar to the new administration changes and you have a different SEC sitting on these cases, are they just going to be like haha, that's funny, I'm pulling that case back. Or are they going to be like well this is on my desk, I better pursue it vigorously because you know, that's, that's how we do things here.

Kyle Lawrence [00:48:30]:
Yeah, I mean it's worth tough to predict obviously, but, but it's not like all of these cases are going to go away. I mean we haven't seen the specifics of what's going on with CyberKongz. It could just be this is their token response because how else are you going to respond to it? But there are actual cases where people have defrauded investor mods saying CyberKongz did. So it's not just going to be a clean sweep of everything. But I do think that some of these kind of flimsy ones are going to get shuttered pretty quickly. That's my time.

Moish Peltz [00:49:01]:
I don't share your optimism. I, I, I know there's a lot of optimism for a new sec. A new and improved sec. An SEC that's going to give amazing guidance and do all the things that that Commissioner Purse talked about on our show just, just a few weeks ago. I'm concerned, like, look, if that happens, fantastic. That's what we're all rooting for. I'm concerned that, that the new SEC is going to lower look a lot like the old sec, but with like, a little bit of window dressing. And if that's the case and you have like, career litigators handed these cases and told to just keep prosecuting them until someone tells you to stop, I'm just concerned that, that, like, the, the gears of the federal government are just going to keep moving these things forward and there's going to be no incentive to stop them.

Moish Peltz [00:49:48]:
And, like, projects like cyberkongs are just going to get stuck in the middle, having to fight these things for years.

Kyle Lawrence [00:49:53]:
Yeah, I guess we'll see. Wow. We've disagreed a couple times on this episode and I like it.

Moish Peltz [00:49:58]:
It's good we're here for maybe that.

Kyle Lawrence [00:50:01]:
Wraps it up for this episode of Block and Order. Don't forget to like and subscribe to our channel. Please also follow us on all our socials. Links are down below in the show Notes if there's a topic you'd like us to cover, if you have a question or a comment, or if Moish and I are just flat out wrong, please do not be shy. Please let us know. We take constructive criticism very seriously. Please note the show is meant for informational and entertainment purposes only. Nothing that we say is meant to be construed as legal financial advice.

Kyle Lawrence [00:50:25]:
Please hire your own attorney, hire your own advisors, do your own research, not financial advice. All that good stuff. Neither discussion of nor the fact that Moish and I may own any of the assets that we discuss or on his shirt are meant to serve as an endorsement of such assets at all. Very special thank you to producer Abby. Without her, the show would not be possible. So on behalf of Moish Peltz, I'm Kyle Lawrence. Take care, everybody.

Moish Peltz [00:50:47]:
See you next time.