Carol Van Cleef on FTX, SBF, and the Regulatory Struggles Ahead

The collapse of FTX, SBF, impending regulations, Ripple and its impact on 2017 ICOs, and NFTs - a financial law expert and early crypto voice weighs in on it all.

The views and opinions expressed in the following podcast are those of myself and my guest. None of this is investment advice or a solicitation for you to buy any financial instrument. I am not a licensed investment advisor. This content is for informational purposes only. This episode was recorded on November 15, 2022.

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Carol Van Cleef is Counsel and Chair of the Blockchain and Digital Assets practice at Bradley. She has been an influential voice in the crypto community for several years and is an expert in financial law. In this conversation, we talked about the collapse of FTX, SBF, regulations that may be coming, Ripple, Statute of Limitations on 2017 ICOs, NFTs, and quite a bit more.

Killer Quote

If there's a pool of money that people can go after, they usually find a way to go after that pool of money and often cross lines that they shouldn't. 

Viewing/Listening options

The video version is available through YouTube. You can watch that below:

You can also listen to the audio version of the BCR podcast through Spotify:

Episode Rundown

These time codes are approximate:

01:30: brief background in blockchain and time as a banking regulation lawyer. Moved to alternative payment systems in the late 1990's. Represented a gold-backed digital currency system during the GFC era. First crypto event in 2013.

04:30: immediate reaction to the FTX collapse. Blockchain analytics team she works with started picking up signs of problems two months ago. SBF not passing Elon's "bs detector."

08:30: being open-minded about Sam Bankman-Fried. Seems to be on the side of SBF being more in over his head than choosing criminality by choice. Talked about Sam getting proper licenses early unlike most players in the space. Parents with law backgrounds: "getting oversight at home."

13:30: What kind of regulations of crypto could realistically have stopped the fraud at FTX? Turns out, probably none.

I'm not sure that there's any one thing that would have stopped it

16:30: Sam's links to politics and the why attacking regulators for those relationships will probably backfire. 

17:30: Where the regulatory focus may go from the administration.

19:30: LBRY losing against the SEC. Not unexpected. Takes the view the SEC hasn't been regulating by enforcement to the degree that crypto proponents might suggest. 

22:00: The SEC's stance on Ethereum as a security. Does it matter that ETH is now PoS to the SEC given more centralization of validators? She seems to believe ETH validators are more akin to payment processors. 

25:45: Are Rocket Pool and Lido Finance managing securities by pooling assets for staking? 

28:00: What makes Ripple a security in the eyes of the SEC? Answer: pre-mine and centralized control of the pre-mine.

29:00: Believes the SEC is sitting on Statute of Limitation waivers from the 2017 ICOs. Ripple case outcome could impact a lot of the 2017 ICO coins fairly soon. 

32:00: Talking to people about how the SEC views securities in crypto back in 2014. 

33:30: Where she thinks the SEC comes down on NFTs. She personally believes NFTs will play a significant part of our future. Possible real-world applications. Possible instances where NFTs would be considered securities.

Final Thoughts

There is a lot to unpack from this conversation. I can't say that I agree with everything Carol said but I lean that I agree with most of it. Regardless of my views, she is the expert in financial law and has been in crypto longer than most people who are currently in the space, myself included. I think it's incredibly important that we really take her thoughts on the space into consideration as crypto advocates and blockchain asset investors. I'm actually very encouraged that she seems as bullish on NFTs as she sounded in this podcast appearance. 

Carol and I spoke for close to 20 more minutes and went a little deeper on NFTs and DAOs. If you’d like access to the entire interview, subscribe to the BlockChain Reaction service through Seeking Alpha. You can start a 2 week free trial before committing a penny. Short of that, you can certainly subscribe to the free, cut down version of the podcast through Spotify or YouTube.