Monday, November 14, 2022

Congress to Tackle Crypto

 As the hull of FTX burns in the Bahama breeze:

"Congress needs to take heed and ensure it doesn't let a failing, scam-based industry lobby its way to a legislative bailout."--Public Citizen President Robert Weissman

Carlyle Group co-founder David Rubenstein showed his love for crypto in multiple interviews.  His family office has a stake in crypto infrastructure firm Paxos.  The following occurred on Saturday, November 12th.

"Paxos received direction from US Federal Law enforcement to freeze Paxos-issued assets associated with four ethereum addresses.  In compliance with the request, Paxos froze 11,184.38 PAXG tokens valued at roughly $19 million. These tokens were previously on the platform and had moved to unknown wallet addresses over the prior 24 hours." 

In July 2022 FTX invested in Paxos alongside Bank of America, Coinbase Ventures and Peter Thiel's Founders Fund.  

The dual investments of FTX and Founders Fund show how money can transcend politics in crypto: Thiel is a staunch conservative who spoke at former President Trump's inauguration, while Bankman-Fried was one of President Biden's biggest donors.

Red Team donor Peter Thiel supports "the idea that companies should basically be able to do whatever they want, that democracy isn’t the most important value."

Paxos already has the consummate D.C. insider as a major investor.  If anyone can engineer funds from Uncle Sam's wallet, it is David Rubenstein.  Carlyle located in Washington for that very reason.

David Rubenstein (patriotic philanthropy), Sam Bankman-Fried (effective altruism) and libertarian Peter Thiel all want government regulation to be light, taxes to be low and for any oversight to bolster their investment positions.  Bailouts are fine, even when behavior has been bad.  

“These blowups have not been crypto blowups, they have been banking blow-ups. Lending to the wrong entity, misvaluations of collateral, arrogant arbs, followed by depositor runs. See Long Term Capital, Savings & Loan and Sub-Prime blowups. All different versions of the same story.”--Mark Cuban

They've been mostly non-bank blowups, caused by blatant conflicts of interest and a cascade of financial frauds.  

Carlyle made huge returns on BankUnited after the 2008 financial crisis, courtesy of billions in FDIC subsidy.  Rubenstein is a deep pocketed Congressional influencer.  The non-lobbyist successfully retained private equity's preferred carried interest taxation multiple times over the last twelve years.  

Congress, don't look at the titillating Paxos Gold.  It may take your regulatory will away.

Update 11-15-22:  After the Wolf of Wall Street targeted crypto, crypto has a new Wolf  in SBF:

"I think this [crypto] crash accelerates regulatory intervention," Saylor said on Yahoo Finance Live . "I mean, in fact, in a sense, SBF is like the Jordan Belfort of the crypto era. Instead of 'The Wolf of Wall Street,' they'll make a movie called 'The King of Crypto.'"

Update 11-16-22:  News reports indicate SBF approached PEUs Apollo and TPG for a cash infusion.  There is no evidence FTX reached out to Carlyle's Rubenstein.  Both are investors in Paxos.