[music] What you are basically. [music] Deep, deep down, far, far in. [music] Is simply. [music] The fabric and structure of existence itself. [music] Peace for all men and women. Peace for all men and women. [music] Not merely peace in our time. [music] It's an all time. The fabric and structure of existence itself. [music] Peace for all men and women. [music] Not merely peace in our time. [music] It's an all time. [music] The fabric and structure of existence itself. Hi everybody, welcome to the parallel mic podcast. Our host, Mike, and thank you so much for joining us for our latest episode. Tonight, we've got a first time guest. His name is Jake Donahue. I should say I don't know what his name is because Jake Donahue is an alias. And the reason for that is because Jake was an insider in the cryptocurrency industry and is written a book about it called Crypto Confidential. And I wanted to get Jake on the show because I know a lot of my audience are interested in the evolution of digital currencies. We're all certainly concerned about the trajectory of the financial surveillance infrastructure and digital assets, NFTs, tokenization. Remember Larry Fink who told us that the whole world is going to get tokenized, including every physical asset and every living thing. Truly terrifying. We've also done episodes in the past like the one with Courtney Turner where we discussed the tokenization and commodification of nature itself. So the goal with this episode is purely to give you that insider's take from somebody who was within the industry. So you've got a clearer look as to what these assets are. Whether you want to risk investing in them or whether you want to leave them just for speculation. And also just to have that discussion with somebody who knows the industry about the trajectory of digital assets in general. And in part two, that's precisely where we take it. So members, please head over to paralomite.com to listen to the full episode. If you're not a member yet, please consider joining us. This one's going to be an interesting one. So I hope to see you over there on the website in closing. Hope you are well healthy and reasonably happy. And like always, I'll see you in the next one. Hi everybody. Welcome to the paralomite podcast. Today, we are joined by Jake Donahue, which is a pseudonym. Jake has adopted to conceal his identity for reasons we'll get into in today's interview. Jake is somebody who worked for a number of years in the crypto space. And that's our topic today. We're going to talk about the evolution of crypto, the corruption of the financial system, specifically looking at it from the perspective of crypto currencies and cards on the table. Listeners will know I'm not a huge fan of cryptos. I'm not somebody who owns them. I've been skeptical of the space for a long time, particularly who is directing the space, which have done lots of episodes on the parallel systems broadcast on. But don't let that put you off. If you are a fan of cryptos, the goal today isn't to bash on cryptos. It's to learn more about what happens behind the scenes and hopefully give you all some insights into what risks really exist there. And by speaking to an insider, we can also learn how we might protect ourselves from those risks. So even if you are speculating or investing in cryptos, this one will be really useful. And for those that don't, and like me, as skeptical of the trajectory, we're going to talk about the digital financial surveillance state and all of that stuff as well. But before we get started, Jake, welcome to the show. Perhaps you can begin by telling listeners a little bit more about who you are and what your background is. Mike, thanks so much. Thanks a lot for having me on the show. I've been really looking forward to this. See how, like I said, I am Jake Donohue. That is a hey pseudonym. Like I said, we can get into the reasons why I had to write the book. I'm under a pseudonym shortly. But yeah, I used to be a crypto founder. So back in 2021, 2022, the crypto boom, myself and some colleagues set up a what was a kind of decentralized prediction market. So it was kind of a win only casino, whereby you'd speculate on the future price of Bitcoin. And if you get it correct, you want to pay out. And if you get it wrong, then you don't lose your initial stake. So we set that up back in early 2021. Back then, you know, there's kind of all coins will going all going insane. So we saw a very, very strong price appreciation on day one. So our token listed at a three million dollar market cap. And within about an hour, well, under an hour, it was trading at over 300 million dollar market cap, which was quite in line with a lot of what the other tokens at the time we're doing when they were launching. Now, out of that, we spun a marketing agency, so kind of communications consultancy. And that's really when I kind of saw a lot of, you know, the severity and the extent to which fraud is pervasive within within the space we started working with some of the biggest projects, some of the biggest companies in the industry, you know, some of the real industry leaders, not a traditional firms as well, who are all trying to get into crypto. And yeah, really saw how, you know, how bad things were. So I left in 2022, just at the end of 2022 after the collapse of FTX, and then, yeah, turned whistleblower wrote a book called Crypto Confidential, which got published a couple of weeks ago actually were released a couple of weeks ago, basically just, you know, shining a light on some of the, some of the most egregious cases of fraud, some of the, you know, malpractice in the space, and really showing how those scams are orchestrated so that people who read the book can, you know, be aware of them and be on guard and hopefully not lose, not lose all their money. Yeah, that's a great introduction, Jake. I think it's a very important and pertinent topic because so many people I know have lost a lot of money in crypto. I also know people who have made fortunes in Bitcoin and particularly the early investors. I've got a friend who made an awful lot of money. In Bitcoin, he bought a farm with it and a big property out there in South America, so it's not everyone's lost money, but there are a lot of people who lose money. There's a lot of victims as well, I think, because crypto is a place where there's so many people who just are not skilled in terms of the understanding of technologies and how these things work, which is one of the reasons I'm not huge on the space is technology for me. Just move so fast these days that it's so hard to be anything close to an expert and there are experts out there who will scam you and will trick you, but we'll get into all that, Jake. But before we start to talk about your time in crypto, maybe you could tell us what you did before that. What happened kind of in your teens? How did you become a guy that ended up in finance? Did you have any background before the crypto space in finance? Yeah, absolutely. Absolutely, Mike. So, yeah, I had quite a neglected career before going into crypto, so I worked a lot of positions. I first started off in finance, exactly, for an exchange. So for an exchange in derivatives, I worked in the prime brokerage of a large investment bank, US investment bank with offices in London, where I'm based. So, yeah, I started off there, then went into politics for a while, so I worked in UK Parliament for a while, and then went into media, you know, cons and PR and that kind of thing. And that's really why I spent the bulk of my career, and then that's really the kind of skill set that I brought to crypto. So I was working for a kind of traditional PR agency. Very high end, so I had offices in London and New York, working with kind of traditional financial institutions so hedge funds, asset managers, private equity firms, real estate funds, that kind of stuff that was that was the bread and butter of what we were doing. And yeah, it took the kind of comments and PR experience I had as well as the, you know, the kind of background in finance that I had and brought that into crypto. And yeah, I led the cons, the media and the marketing on the projects that we set up. And yeah, it was the kind of chief communications officer or chief marketing officer of the agency as well that we set up. And was it you that went to crypto Jake, I did crypto come to you like, did you have an interest in that space? Was it something that you'd speculated in or had any background knowledge on, or was it completely new to you and you just haphazardly ended up there. Yeah, it's a good question. I was always kind of aware of crypto and I had some kind of a very early exposure to it, very early on in my career when I was working at that prime brokerage that I mentioned. I was on the team that actually launched the first, their first derivatives on crypto. So, you know, hedge funds, that kind of thing will come into us for trading execution. And the respect to manual effects and, you know, kind of indices, derivatives and kind of commodity derivatives, that kind of thing. And then I was on the team which launched the first crypto derivatives. And that was CFDs, clinical contracts for difference on some of the majors so Bitcoin, Ethereum, Litecoin, they weren't too many cryptos around back then. So XRP, those kind of things. So that was really my first kind of professional exposure to it. I had exposure to prior to that university as well. So one of the people I set up the companies with was actually a friend of mine from university and he was, I described in the book as an early Bitcoin evangelist. So, yeah, when Bitcoin was, you know, trading in triple figures and hundreds of dollars, you know, he was holding a lot of it with his, with his cousin. So, you know, he was trying to get me into a university. I, you know, didn't really, didn't really want to, you know, seem like a bit of a scam. Back then, you know, it seems, you know, it's kind of weird, you know, internet's money kind of thing, which, and he was quite a nerdy guy as well. And it typically attracted those kind of people. So yeah, I wasn't too interested back then, you know, had other things to be focusing on. But then, yeah, got professional exposure to it. And then, yeah, kind of had a, had a kind of chance encounter with him one evening, just when he was, you know, looking to set up this gambling platform. And it seemed like a good option to eat. So I got into it from there. And what was the crypto projects that you worked on? And Jake, where did it come from? What was the aims? Maybe you can tell listeners kind of that evolution of the, you know, from the first meeting with this guy where you actually discuss it to how it actually ended up becoming a fully fledged project. Yeah, so the premise of it was that it was, yeah, like I said, a kind of win only casino. So it allowed you to kind of speculate on the future price of Bitcoin. And it was really, it was a DeFi play. So we got into it at the time. It was a time called DeFi Summer. So the kind of summer of 2020 was when the first currently centralized money markets started popping up, where, you know, you're in finance and RV and those kind of things. So borrowing and lending on the blockchain, typically on the Ethereum network, that was really the only kind of network, which enabled smart contracts, which had any kind of real liquidity back then. So people were building on that and launching these platforms, and they were just taking off. It was a real renaissance period for the industry. You know, crypto had been in a bit of a black hole before that, you know, before that it was the ICO era back in 2017. That came to an abrupt end because of enforcement actions and that kind of thing. You know, against a lot of these projects who were raising huge amounts of back in the ICO era projects, for example, raising billions and billions through these ICOs and and ton as well. So the telegram, the telegram token, which should just come back into the spotlight, but that's a separate point. So these projects were raising a lot of money back then. And then that got, you know, that stopped. They were, you know, even before that, there were kind of big enclosures, you know, Mount Gox and, you know, these kind of very famous hacks, which saw a lot of, you know, investor confidence shaken and, you know, really shut a lot of people out the industry. But then it all started coming back together in DeFi summer, and it started taking off. There's this narrative from decentralization. And then so we wanted to get in on that. So we thought we saw a niche in the kind of decentralized prediction market space. So that's how it came about Vitalik but during the creative Ethereum back then as well was talking about, you know, how prediction markets were real, you know, a lot of untapped potential in them and how he saw them as, you know, real kind of burgeoning and promising emergent aspect of the crypto space. So, yeah, we jumped on to that. And yeah, look to set things up from there. So we, you know, created a white paper and various iterations of that while we're working out the economics behind the token. And yeah, just started fundraising. And yeah, had a lot of interest from VCs oversubscribed. Most of the most of the fundraising rounds had to expand the rounds to fit in all this, you know, bench capital, which was being thrown at us. A lot of these people were offering us money about even reading the white paper. They heard that we were a DeFi play, you know, they had our backgrounds in, you know, kind of well established traditional industries and they wanted to get involved in that. So, yeah, we raised from them, we raised strategic rounds from influencers or KOLs, key opinion leaders. And, you know, that's really when the kind of nefarious underhand things, you know, started, started coming to light. So, you know, these influencers were buying token allocations from us and we were giving it to them, you know, at discounted, you know, pre launch prices so that they could then go on and and show the token and promote the token to their followers. So, you know, we did that. And then, and then we launched it. Yeah, we launched, you know, we had, we had always couldn't IDEO, so an initial DEX offering, initial decentralized exchange offering. And then, yeah, it took off, like I said, because of these influencers who had bought the token and who had promoted it to their followers, because of various other, you know, quite underhand marketing tactics that were going on, which are very prevalent at the time. You know, could bribing journalists or paying journalists to write favorable articles about us passing that off as organic coverage. You know, we had all of these things going and that created a lot of hype around the token. And yeah, that's what, you know, kind of drove the huge kind of price appreciation that we saw on day one. But then we quickly realized that that wasn't actually that, you know, it was difficult to realize those games. So, we had this huge market cap, this very, very inflated market cap, but, you know, we didn't have a platform live yet. We didn't have any revenue. We didn't have any, you know, revenue streams, anything like that. And so short of liquidating our own token holdings, there was no way to actually, you know, like I said, realize those gains that we had achieved. And if we did start liquidating it, then that would just tank investor sentiment. They would see that the inside team was dumping. So that's why we spun out a marketing agency from that. So one was a kind of growth project, you know, reliance on speculation and investor confidence and the other was, yeah, kind of cash flow. Because we had clients who were, you know, paying us, you know, monthly, monthly fees or, you know, project fees or whatever to help them with their marketing. So, yeah, that's how that's how that's how it all got set up. Yeah. So maybe you can set the scene a little bit for listeners, Jake, in terms of the team that he was on, because in the crypto space, as everyone listening will know there's kind of different tribes, isn't that you've got the people who are like your friend at university, who were the early adopters and they were super interested in the privacy function, or at least this idea that they could second navigate the dollar system and maybe escape the status system of central banking and these. Basically, the hidden tax of inflation. And then there's the people who got in later on who were more speculators and gamblers who were looking to scam people or at least just make a quick book and then you've got the retail crowd. So looking at it, looking at it from that perspective in terms of the different ideological attachments, was your team in any one camp was there a focus for the token for it being some kind of utility token. Or was it more like no way here to set something up to make some money, and hopefully I'll get rich and then get out kind of attitude. Well, yeah, exactly. So it really varies. So most of the founders, the crypto founders that I worked with, either people who I set up my projects with, or the people that we went on to collaborate with in terms of the marketing agency. Most of them kind of claim to be, like you said, kind of proponents of decentralization. So, you know, kind of restoring sovereignty to, you know, to the, to the masses or whatever, you know, kind of restoring. You know, giving people a kind of control over their own finances and, you know, removing intermediaries, that kind of stuff. That was in almost all cases, kind of front, you know, it was quite, quite mandacious. And that was a kind of narrative that was, you know, put out there to explain why people were doing what they were doing, why they were setting up these projects and, you know, what the rationale behind them was. Most people I knew and I worked with, and I'd say this is true for, you know, pretty much the whole of the industry, were motivated by greed, I think, and you know, it cryptid typically attracted a specific type of person. So, there are these, you know, can defy evangelists, these, these kind of maximalists who, who really do believe that stuff, but I would say they're very much in the minority and most people setting up their own projects are doing it because, you know, because the money involved, and because of the ease with which, you know, malpractice can be committed, you know, back then, and it was, it was pretty much completely unregulated. Now there is regulation coming in and there's, you know, enforcement actions taking place, but back then there was really none of that. So, in fact, a certain type of person, you know, a little snake oil salesman, a lot of grifters, that kind of thing. But none of them really cared about these kind of principles that we were pushing out there to potential investors. I mean, for example, take, and you know, you mentioned you tell this tokens, I mean, take decentralization. We were positioning our platform as decentralized, but it wasn't, it had a back end, you know, we could, we could control the, you know, we had control over the smart contracts, we had control over the tokens. Our token had a tax function, for example, which imposed tax on people when they, when they sell it or when they transfer it or when they interact with smart contracts, you know, we set that centrally. We could, we could raise that, we could lower that, we could do whatever, and same with the platform as well, you know, it wasn't autonomous. We had control of how the platform was operated when it eventually launched, and even though we were positioning it as autonomous. Now, a lot of the ways that these tokens are sold, exactly like you said, they're either, you know, positioned as utility tokens or governance tokens or both utility being, you know, gives you some kind of access to a platform. Right, and governance being gives you voting rights over how that platform is operated. Now, governance is very kind of duplicitous narrative in the space. Very often, these tokens don't convert any kind of voting rights, but really is a side of that. I mean, there was an NFT project, for example, called Particle. Back in the day, now what they were doing is they were fractionalizing paintings, so they would buy, they raise a huge amount of money, they had a lot of funds in their treasury, they would buy a bank scene. For example, and then fractionalize that into 10,000 NFTs, and each NFT holder could vote on things like where that painting would be displayed, you know, which galleries are good for exhibitions. And, you know, supposedly this painting, you know, each token gave you 110,000 of a voting right. So what's that like point, 0.01% of a voting rights on, you know, kind of ownership over that painting. Now, in the fine print of the terms and conditions of these NFTs when they were sold, actually, that's not true and actually all 10,000 of these NFTs together equated to 0.01% ownership of the picture. So each NFT individually actually only represented 0.001 or whatever ownership of the painting. The remaining 99.99% ownership was retained by the central team. It was retained by the Particle Foundation or whatever the company was called. And, you know, so that was in the fine print. That wasn't what was pitched to investors, you know, ostensibly in the marketing for these NFTs, whatever. And, you know, that's really indicative of how governance works. You're made to feel like you, you know, you're an owner and people often talk about, you know, we want to foster an owner's mentality. That's actually not true. And, you know, what they're doing there is they're just trying to imbue these tokens with some semblance of utility. They're trying to make people feel that, you know, these aren't just, you know, useless bits of code that sit in the wallet, but actually you can do something with them and they give you ownership over a given project. And when it comes to your projects, Jake, what was the kind of narrative that went along with that? So you started out with this project and you got yourself involved and I'm writing saying you was in the marketing department for that project. So you was focused on trying to drawing investors or retail crowd. Yeah, that's right. Yeah, exactly. So, you know, we went down those those kind of two well drawn paths. So, you know, the utility that, you know, this token will allow you to access this platform, which, you know, you could then potentially earn quite substantial rewards on further than line when it launched. And then also governance as well that, you know, you would have a say and how the platform was run, you could decide, you know, for example, what assets or what markets were available to speculate on. You could decide, you know, what the tax function is, even what the reward payouts would be through on chain governance through on chain voting. So those were really the kind of two main angles we were taking to, you know, kind of get investor demand for the token and, you know, neither of them will particularly show me the token did give access to the platform. So, you know, it did have that, but, you know, why you need a token for that in the first place, it doesn't really make much sense. I mean, you can, you could have just used kind of us DC or whatever or even you didn't even need to really use crypto at all. You could just use us dollars or whatever. So, yeah, that's, that, that's really how we were positioning it. Who are these people that we're investing in Jake because it sounds like you've got two crowds here you've got the venture capital guys and people who have more substantial amounts of capital who are going to put money in. And those people don't care about anything but increasing their, their profit, like they want profit that's what they're there for the, they're to increase the capital and then probably get out at a later point and then you've got this other crowd, which is the retail crowd and it's those guys that, I guess these projects are trying to convince to get in for more ideological reasons or because you're promising me promising them it's going to be useful in some way. And, and you need those guys to believe in the project long term, whereas the other guys, the venture capital it's like, yeah, we don't care about any of that. Tell us how much money will potentially going to win or maybe they've got their own agenda to where they're actually going to try and exploit you guys because if they believe that they can pump it on day one and then get out with a few hundred percent profit then they'll do that because it's venture capital it's predatory. So you've got these two separate groups and maybe you could talk listeners through that like how do you deal with both sets of groups I'm guessing it's vastly different. So it's not exactly like that's exactly it so they're kind of broadly split into people who buy the token before it launches and people who buy the token after it launches. So before the launch you're right it's primarily VCs but it's more than that as well so there are the, for example, the seed investors or the pre seed investors now they might be, you know, friends and family they might be kind of contacts that you know who interested in this kind of stuff is working to contact that kind of thing. And then the then the VCs will come in and there are multiple rounds for VCs the best VCs, you know what are sometimes referred to as the kind of signals are given the earliest rounds and each round has tiered pricing as well so the early you get in the cheaper these tokens are available to you. And then there'll be a strategic round now these are typically reserved for people who are going to contribute to the marketing and promotion of the token in some way so normally that social media influences. But it can also be generalist can be media people it can be, you know, public figures in any, in any, you know, any kind of capacity. So that's broadly how those kind of presale rounds are structured and then you have the public sale round and that's when it's made available to, you know, the ordinary investor. The guy who's going to be buying it on a decentralized exchange or on a launch pad. Well actually launch pads are kind of their set their own separate things so launch pad as a platform on which tokens are what our launches name would suggest. And these platforms have, you know, vast lists and vast kind of communities of investors, who they've, you know, they've acquired through their marketing efforts. And you'll give a launch pad a certain number of tokens, and then they'll split that out into allocations amongst their investors. And the way they, you know, divvy those allocations up varies sometimes it's, you know, random lottery sometimes these launch pads will have their own tokens and, you know, if allocations are reserved for the kind of biggest token holders or whatever. And the purpose of the launch pad is that they allow ordinary investors to kind of get allocation to these kind of presale funding rounds of tokens, you know, back then these presale rounds were very highly in demand. So you're getting a guaranteed number of tokens at a guaranteed price. So, you know, if you're confident the tokens can appreciate in price on launch, which a lot of them were, which most of them were back then, and then it means that, you know, you're, you're basically guaranteed to make some money off of that. So, yeah, you will then give some allocation to a launch pad, and then you'll make it available to the public on a on a on a public sale. You know, there were a lot of problems with these with these launches back then so basically as soon as the token listed on a decentralized exchange, which is the kind of equivalent of a stock floating on a stock market. As soon as that happened, bots would come in. So these are kind of pre programmed trading bots, so you know, trading algorithms or whatever, which buy up tokens a lot faster than a human being can. And it means that they get when these tokens are listed at a certain price, these bots will get that that price they'll get, they'll get a lot cheaper than humans and that sends the price skyrocketing. So if you're an ordinary investor, you have to buy at a much higher price. And then so when all the ordinary investors start piling in, then the bots will then dump their tokens back onto the, onto the people who have just bought in. So that nets the bottom a lot of, you know, a lot of profit. And at the same time, the VCs and the influencers and whoever who bought it guaranteed prices in the presale, you know, their tokens will all unlock on launch as well. So once that token price starts pumping up, you know, due to retail demand, these influencers, these VCs will be dumping it as fast as they can as well. So really the whole command of token launch industry, the whole kind of token launch process is engineered to bag as much profit for insiders as possible. Wow, that's crazy. But yeah, it's totally what I've seen myself. It seems to me, I mean, what it looks like to me Jake is, if you go back to something like the 2000.com boom you've got a new technology and back then it was the internet today it's crypto currencies. And like you said, it's deregulated to begin with, or the zero regulation to start with. And therefore it becomes a Wild West and you've got all of these different projects starting up back in the.com menu. It was websites, there was all these different websites being given IPOs and being listed and the people who were buying the IPO, they had no idea what they were buying really like you said there was the smart money who were expecting it to go rapidly when it was launched. And then you had the dumb money, which was the retail crowd who were going to buy it at the launch. And it was this kind of divergence that you just said, you're trying, if you're running the project on this case, if you was the business, you was trying to drawing the big money. But then simultaneously you're trying to advertise to the retail crowd. And a lot of those companies going into the crash where profitless companies, some of them didn't even have a function in business. They were essentially just trying to pull in the money so they could make money for these early investors. And then when it launched, the share price would go up five, six, seven hundred percent on the first day. But I guess my point is the main thing those guys were doing was advertising. They were spending a fortune on advertising and all that investor money was to advertise to get the dumb money to buy in. So it would warrant the advertising budget that pumps the price of it, if that makes sense. So these companies were really just like shell companies that were an advertising and PR campaign. And it seems to me like that is exactly what the crypto space is like now. There's a lot of these coins have been this infinite amount of them. And really all that counts is getting good PR, getting those early investors and then dumping it on the retail crowd. Is that fair to say that it's more of a PR and marketing thing than it is as the people who invest think it is, which is about these coins that are going to give them some kind of utility. I mean, I know some of them do, but I'm talking about in general the projects that you saw and that you was working on. Yeah, I think you're exactly right. I think that's what's on. And I think it's a very apt comparison between crypto and the dot com boom. And in that these crypto companies, which are launching tokens, what's happening there is they're essentially taking startups public. Now, there's a lot of problems with that. You know, like you said, these these crypto products, they don't have any revenue. Like I just said, our project, we didn't have a platform like revenue streams, often because they are very early stage as well. They don't even have, you know, robust systems or processes in place. So they're often not very good, not very good companies to begin with, but they're being taken public via, you know, kind of equivalent to an IPO, you know, to buy an idea of a token launch. And the problem is that, yeah, you're right, because there's no, there's no revenues, there's no cash flow. There's no way to value these things. And there's no kind of justification for the those valuations before this price increases beyond pure speculation beyond pure height and through, you know, these narratives they've engineered for advertising through marketing, that kind of thing. I would say the difference between the crypto and what happened back in the 2000s with the, you know, the dot com boom was that some of those companies back then there's dot com companies actually went on to succeed. And actually they did have some substance behind them and they did, you know, provide value. I mean, for example, Amazon was one of those was one of those companies and that took them a while to really, you know, kind of monetize and grow and scale. But they did actually, you know, have product market fit. They did actually provide a solution to something. I don't think that's the case in crypto at all. I actually don't believe any of these crypto companies have any kind of, you know, fundamental, you know, value proposition or anything. You know, I've often said that crypto is a problem to us is a solution to a problem which does not exist. You know, in that, and people are realizing that now, you know, DeFi has just completely gone out the window decentralized finance. And other people who were very big into that, you know, jump, you know, jump trading, which is, you know, kind of market maker liquidity provider and hedge fund in the crypto space as part of jump capital, which is a, you know, traditional, you know, market maker. They've just unwound all of their deFi positions. They were one of the biggest players in that space. Because, you know, putting these things on the blockchain doesn't actually solve anything. You know, blockchain tech is really not very innovative. It's existed for a long time. It's basically just a public ledger. And actually, you know, rather than driving efficiency is actually often makes things, you know, much less efficient, efficient, combined with the fact that these technologies are, you know, very unproven. They're quite, you know, they're quite, they're quite shaky. There's a lot of problems with them. They're very susceptible to hacks. You know, as we've seen, you know, every day, there's a multi million dollar hack taking place in crypto. So I really don't think there is any kind of place for crypto in the, you know, the financial sector. And, you know, that's being reflected in the fact that they're on the deFi projects launching anymore. And that narrative has completely gone out the window. And really the only kind of token launches you're seeing now are meme coins, which is really the kind of purest manifestation of crypto. You know, these are things which are, which are a joke, which are, you know, deliberately, deliberately position themselves as having no fundamental or intrinsic value, and which are, you know, fueled completely by speculation and by hype. So, yeah, I don't think, you know, any of these crypto companies will emerge as being, you know, kind of Amazon or anything like that, because I don't think they provide any kind of real world, real world value. I don't think they do anything which, you know, traditional institutions or traditional methods of, of, you know, transacting, or, you know, borrowing lending that kind of thing, you know, they don't do anything different to that or anything better than that. So, I think that's, yeah, the industry's headed headed one way, I think. Yeah, I think I best maybe you could compare it to pets.com, but I think even that would be a bad comparison because pets.com was still actually a functioning business. It was a bad business. It wasn't making any profit, but still, there was something there, whereas this infinite galaxy of all these different clients. Yeah, it's all really, it's just there for a casino, isn't it? It's there for people to try and make money off other people and investing, you call it speculation, which I don't call it investing because it's not, but we could say it's the greater full series. You know, I'm going to have something and somebody who's a greater full has to come along and hopefully they're going to give me more money than I paid for it. But there's going to be a lot of people in the audience who are saying, yeah, but that's the crypto shit coin space. What about Bitcoin, Ethereum, Monero, Pirate Chain, some of these other coins that actually do have a utility in their eyes, they're not a part of this just modern day. You see no craze to try and enrich themselves. There's actually, you know, a whole infrastructure and network there. So, do you, let's, I guess I'll ask you like this, Jake, do you see Bitcoin as something that's very different to what these coins were? Yeah, so again, I think that's right. You know, I think that crypto will always exist in some form in that in the same way that penny stocks back then back in the, whenever the 80s, the kind of Wall Street days, you know, they were really the kind of hot new thing back then. And then that died down. However, people do still trade penny stocks. I think that a will still exist. I think it'd be a lot of much smaller industry. However, I think that people are always going to speculate on these things and it's always going to have, you know, have, have gamblers, you know, taking part in it. But, you know, beyond that, I think that it's never going to see any kind of like mass adoption is never going to see any integration into traditional financial institutions. I think, you know, Bitcoin, I mean, you mentioned, you know, Bitcoin having some kind of utility. I really don't think it does. Again, I think it's primary utility is speculation. People say that, oh, well, it solves the problems of, you know, cross border remittances or that kind of thing. But, but it really doesn't. I mean, you know, you have Western Union for that you have PayPal for that. Often these things charged zero or very, very low fees, you know, far lower than actually interacting on the Bitcoin network. And also, you know, it doesn't provide banking for the unbanked as other people say it does, because, you know, to be able to use the Bitcoin wallet, you have to get a move off to get a smartphone or a laptop, you have to sign up for a, you know, trading account. You know, exchange after on ramp. You know, you have to on ramp. So you have to turn your fiat money into crypto and then enact, you know, transact and interact with these, you know, these exchanges with these platforms with these crypto wallets. So it actually a lot more complicated and complex, especially for people who may not be so technically technologically literate, then, you know, traditional financial systems or, you know, Western Union or things like that. I think the only real use case for it is crime. I mean, you know, you mentioned Monero, you know, the privacy coin there, which, you know, can't be tracked and, you know, look at now, again, one of the only real narratives left in the spaces, zero knowledge proofs. So being able to, you know, send, you know, make transactions, send money around about people seeing the origin of those funds. You know, I think that's a very handy tool for, you know, for criminals, for people, you know, using the dark web to, I don't know, you know, buy drugs or whatever. And also for, you know, sanctions of Asians and for money laundering. So I think crypto will always exist in those two formats in speculation and, you know, it's kind of tool for a tool for criminals in terms of actual, you know, value, I mean, they're contributing value to the real economy. I don't see, I don't see it having any place there. Just to push back a little bit on that one, Jake, I'm sure there'll be a lot of people listing, and I myself would say this as well, that when it comes to things like, let's say, Monero or Pirate Chain, I don't actually own any of them myself, but I know a lot of people who do. And the reason that they own it is not because the criminals, these, I know many entrepreneurs who bought it, because they're worried, they're worried about the surveillance, financial surveillance system that's being created around them and they're thinking, right, maybe in five years time. Or let's just use that example from recently, like with the truckers in Canada, where people donated to them, they had the bank accounts turned off. So they're seeing it as this kind of safe that's hidden. And if the West comes to the West in the future, they've got this little pot of money that they can use outside the system. If that system becomes weaponized against them. So would you agree, Jake, that there is uses there as well in terms of we can see that there's this financial surveillance infrastructure being built around us. And I would say that crypto currencies and Bitcoin itself have actually helped spare that they've helped create it over the past, you know, 12, 15 years, this rapid development in the space. And you can see now that the powers that be are looking at that and saying, well, how could we use that, you know, how could we use that for our benefit, which isn't necessarily going to be to our benefit as in me and you. It will be to their benefit as in the big banks and maybe surveillance state governments. So do you see that other function as well, like that could be useful for people if things get more tyrannical in the future. Not really, to be honest, I think, yeah, again, that's that's a reason that is often touted and, you know, really, like you said, the only kind of crypto where that could potentially apply to is something like a Monero. It doesn't apply to Bitcoin, I don't think, because it is very trackable. It's very traceable. It certainly doesn't apply to, you know, any kind of stable coin, which is capable of being completely frozen on the blockchain by the central issuer. And these are the, you know, the most widely used and widely held coins. So, I mean, even if you are, you know, in a very, very small minority who is actually using crypto as a hedge against government, you know, governments tyranny, I suppose, or the financial surveillance state. I mean, why not why not just use cash, or why not just use like precious metals like gold and that kind of stuff which, you know, people have been using using for years, as opposed to kind of unproven technologies which are very susceptible to hacks very susceptible to losses, you know, which are really quite unsafe to unsafe to use and actually, you know, afford you a lesser degree of privacy than, you know, kind of transacting in, you know, intangible goods. So, you know, I really don't think that that's much of a case personally. Yeah, I think it might make, I mean, if somebody has, say, a million dollar portfolio and they want to put 10 grand into something like that as a potential last resort, then yeah sure, it makes completely sense. I guess if you're thinking about putting a significant proportion of your net worth into it, well, that's different because they're still extremely volatile and they're going to be very hard. to transact with because so few people use them so I can certainly see a case for it but I think yeah it needs to be thought through, but let's let's shift gears a little bit. One of the things that I wanted to ask you about then Jake is what deception tools tricks are these projects these crypto projects using to try and manufacture excitement and to get people interested so is it the crypto projects themselves or is the collusion from within side the traditional financial system and maybe you could just talk listeners through that a little bit about how they create that artificial excitement and what deceptions they should be aware of if they're going to invest in this space. Yeah, absolutely. So this is really something which, you know, kind of permeates kind of every facet of the space. It's all kind of geared towards engineering engineering hype and that starts even before a token gets listed. So when the token launches, you know, it's a bit like I said earlier, a company floating on a stock exchange right so you have an IPO and you know the company is listed as a specific price. Now that price in IPO is very meticulously set and they're very stringent processes in place to make sure that that is a fair valuation. So that evaluation will be arrived that by an investment bank who you know audits the company audits the financials there'll be lawyers involved there'll be accountants kind of checking it. And it's all very, you know, very scrutinized by regulatory bodies as well. Now in crypto that there's an absolutely none of that so the price of which a token lists is just set by the team launching the token, which is, you know, which is quite quite crazy there's no oversight whatsoever. And they really just pull a figure out of, out of thinner. And yeah, what they'll do is they'll often set that deliberately low. Now obviously you could argue that it should be in the first place because there's no revenue cash flow kind of backing up any kind of valuation. But either way, you know, they set it very low and then they position it as, you know, kind of like low cap gem or whatever in the hope that it will appreciate and price on launch. And, you know, they'll have influencers and everything like that, you know, that they'll all be going, they'll be telegram groups, you know, I've been in telegram groups of 40, 50, you know, even 100 influencers. You know, all coordinating marketing efforts for a project project will send out kind of bullish piece of news like an announcement or exchange listing or something. And then post time to telegram group for all the influencers to share it, you know, all together so it's a very coordinated effort. Now what actually happens there is, you know, it gets very, it gets very kind of nefarious at this point. They'll also have market makers in those telegram groups and these market makers will have a pool of tokens, so project tokens, treasury tokens or team tokens, insider tokens or whatever. Now, once this shilling starts on this bullish piece of news, what the market makers will then start liquidating tokens into the palm. So you're selling tokens into green candles and really kind of extracting value from retail that way. What else happens and this is, this is really bad. I mean, so these tokens, when they sell to VCs and influencers and that kind of thing in the pre rounds like we're talking about before, they will have what's called a besting schedule. So the VCs won't get all their tokens on day one. Sometimes they'll, you know, get it in monthly installments over a year, two years or whatever. Now, sometimes these besting schedules. So when these tokens unlock, you know, sometimes that's not public. So what products, what some projects will do is they'll know that when a token unlock is happening, there's going to be a huge dump, right, because everyone's going to rush to sell and realize, you know, profit on their early investment. What projects will do is they will, if the project, if the tokens chasing on an exchange, which allowed a short selling, the day before, even the morning of whatever these unlocks, the teams will put short positions on their own token. So that the team will be profiting off of these dumps as well. And, you know, this will be done without investors knowing, you know, sort of, you know, about the VCs or the, you know, retail investors knowing. I don't think they'd be too happy with that. What if they found out that the team that just sold them a token is shotting the token and it's, which for listers, I'm sure listers do know, but if there's anyone that isn't aware, that's basically betting that it's going to go down, isn't it? So if you found, it's like if you was buying shares in a mining company, you found out the CEO was betting against his own stock, he was betting the company to lose its share price, you'd be out of there as quick as you can. So of course, that has to be kept hidden. Yeah, exactly. I mean, it's just so bad for so many reasons. You know, all of these things, if they happen in traditional industries, you know, people would be behind bars for decades, you know, because it's a conflict of interest. It's, you know, the, you know, the C suite or whoever the directors, you know, actively acting against the interests of their own company. And it's also inside of trading, isn't it? So trading on information, which isn't public. So it's just wrong for 70 reasons, but it gets even worse. I mean, a lot of the hacks which happen in crypto. So a lot of the times when you hear, oh, you know, our projects been hacked, we've had our liquidity drained, you know, our smart contracts have been compromised or whatever. That will be the team doing that in a lot of cases. So the, the CTO, the chief technical officer of a project will hack it, will hack their own project. The team will say, okay, we've got, you know, we want to get out of this. We don't want to just completely rub, pull the rug, especially if they're, you know, public facing if they're, if they're what's called docs to people know who they are. But they'll want an exit route. They'll know that, you know, projects not going anywhere, or they'll just get bored a bit and want to move on to something else. So they need a convenient exit strategy. So they'll orchestrate a hack and they'll say, oh, you know, our smart contracts got compromised, or, you know, we've been hacked or, or, you know, whatever, but really it'll just be themselves doing that one to extract all the remaining liquidity in the project and also as a convenient exit routes as well. So there's a lot of things that projects do, which are just completely unethical. I mean, even kind of seemingly innocuous things, right, like giveaways. You know, people run a promotional giveaway, say, you know, like, you know, in the most basic sense, it's, you know, like and retweet this and follow our social media accounts, and you'll be in for a shot of winning, I don't know, $1,000 prize. Again, that'll look that stuff will all be rigged, especially if these giveaways, it doesn't happen so much anymore, because there's been a lot of regulatory clamp down on this. But if those giveaways are promising pre sale allocations, you know, the winners of these will be friends of the team. So, so that's kind of violating advertising standards rules, you know, it's just, again, orchestrating hype. And just, yeah, in just to completely underhand way, same with whitelist, you know, when NFTs were dropping, when NFTs are really the whole thing back in 2021 2022. The way you get access to them is you have to, you know, sign up for a whitelist. Now what they'll do is to say there's 1000 people on this whitelist being on the whitelist guarantees that you'll be able to mint one of these NFTs. What they'll do is, first of all, they'll get 10,000 people on there, right, because to factor in dropout, so they want to sell out a drop purely by the whitelist and people are much more likely to try and mint an NFT if they think they can get a guaranteed allocation in one. So they'll have 10 times the number of people on these whitelist, then are actually, you know, spots available. And also the whitelist will be stacked full of themselves, their contacts, you know, their friends, their families, whoever, so that they get guaranteed access to the NFTs. So, yeah, it's a lot of lying. It's a lot of force advertising. And it's all to ensure that, you know, they can, they can, you know, bag themselves as much money as possible. Yeah, it really does seem like a retail vest investor has no chance in that space. You know, it really is odd stacked against you because you've got all of these corrupt figures that are trying to exploit the retail investor. And then even beyond that, you've also got the sophisticated investors who are using algorithms and they're getting inside knowledge. So for the everyday man and woman on the street who's thinking, Oh, I'm seeing these coins going up and I want to get involved and speculate a little bit. The odds are so heavily stacked against them. I mean, would you say, Jake, it's, I mean, what's the likelihood of success? Just a rough figure, do you think, for the everyday man and woman who are trying to go into this space with all of this weighing down on them? Like close to zero, as close to zero as possible. You know, by the time you've heard of a token, it's already too late. You know, the bag holders are all insiders, you know, now they've got the influencers going, which is why you've heard of it. I mean, take like, you know, meme coins, which are, again, the only kind of apart from prediction markets now which has made a comeback in light of the election. The meme coins are really the only kind of thing that's that's that's popping off at the moment and even then it's dying down, because 99.999% of them are rugs, you know, are complete scams. As soon as, you know, these meme coins have, you know, even a tiny bit of liquidity, you know, 50, 60 K liquidity, the devs will just instantly dump on that. Now, there are obviously people who are attracted to this stuff because you hear the success stories, but you hear about the guy who had a thousand dollars of Shiba Inu and, you know, that's now worth 10 million or whatever. But, you know, those are, it's, you have a better chance winning the lottery, to be honest. You know, as opposed to trying to, trying to make it in, make it in crypto, the only people who make it are the insiders or, you know, people who kind of run trading bots or math bots or MEB, so maximum extractable value. You know, people who run these kind of things or hackers or scammers who are exploiting projects, you know, they make a lot of money as well. As for, you know, the average kind of retail person trying to invest in a new token. Yeah, I mean, it's akin to winning the lottery. Yeah, it's kind of like day trading. I'll becoming a trader. A lot of people try that when they best dip the toe in investing. They think, Oh, I'll be a day trader and it's like 94% of people lose money day trading. It's really hard to do and crypto is just the same. It's not, I mean, most people earn their money through investment by buying something when it's cheap and signing something when it becomes overvalued. Well, there's a big problem with the crypto space in that most of these things have no value. So therefore it becomes the greater full theory. But beyond that, the people who got really rich on Bitcoin, it really is almost exclusively people who bought it a long time ago and then held it through many of the cycles and now have got, you know, tens of millions of dollars. But for the people that are buying it in 2001 and 2002, what you might see it go up 50%, you might see it go up 100%, even if you bought it out 50 and it goes to 100 or 50% gain isn't a lot. It's not the same as a 10,000% gain or a 20,000% gain. That's what makes people rich. But it always comes, whether it's in Bitcoin or crypto or in traditional stocks, it always comes from buying something really, really early before it gets to the mainstream. So, yeah, it's this illusion of great returns, but the great returns are not going to be there if you're finding out about it when I'm finding out about it. So it's, yeah, it is an illusion, Jake. I mean, there are always, there are always exceptions to the rule, but like you said, it's more of a lottery win kind of odds to be that exception. Yeah, exactly. That's completely spot on. I mean, everyone I know who's rich from crypto, you know, they participated in the Ethereum ICO. They were buying it for, you know, for sense, where they put this part of space in the Cardano, you know, ICO or, you know, whatever, or they were buying Bitcoin when it was, you know, a double digits. And, you know, now, but there's still this narrative of generational wealth is being touted. And, you know, one of the worst things, one of the worst kind of catchphrases that's thrown around the spaces, we're all still early. Now, that's not true in other people who are saying that they were early, and they need new people to keep piling in, one to kind of keep on, you know, getting games, because even though they bought something, you know, and it's gone up 10,000 percent or, you know, 100,000 percent in price. That that still isn't enough in the greed sets in. So they want new people to keep piling in. And also to prolong, you know, to keep the party going kind of things. So they want new attraction, and they do that by promising generational wealth and by saying that everyone's really early, but, but they're not. You know, that, like, they're just not. And, you know, like you said, you know, because cryptocurrencies are so volatile, you might see, you know, 10, 20% increases or even 50% increases or whatever. But then again, you also might see 99% drops. So, yeah, I think that's, you know, this narrative generational wealth or, you know, getting rich quick or, you know, being early is really, you know, really damaging because that is still something which draws people into the space and actually exactly like you said. All the people you have made generational wealth with crypto bought it, you know, five, six, 10 years ago. Yeah, it's definitely diminishing odds. The Fed you get into something and we'll way, way deep into this now. I mean, everyone and anyone was buying crypto back in 2021, 2022. It was huge. Everyone was asking me about it. And now nobody cares because of course it's crashed, but if it does have another cycle, then I think we'll see the same thing, but it will unfortunately be the same results. It'll be people that maybe do see drawing the midpoint of the cycle when they jump in because they won't be early. They'll see something go up, but then they'll see it go back down because it's so hard to know when to get out of those things because you are already late. You know, if you're buying it because everyone else is talking about it, it's already too late in my opinion. But just shifting gears before we end part one, Jake, I just wanted to hand this question to you to kind of get your take on how you felt about your own participation because I feel like this has just flown by part one. We didn't get to all the questions I wanted to. And in part two, I want to kind of move on to talking about some of the big exchanges because you're giving us the insider's view from, I would say, the small end. You know, this is from small projects that are starting up. But there's also the big exchanges. We're talking FTX, one of the biggest exchanges in the world, MT Gox, which was the biggest in the world at the time. And there's a lot of corruption going on there too, so I think that's really important to talk about because that affects everyone, whether you're into crypto or into Bitcoin. I know a lot of people who are. But in terms of your own participation, how did you feel about the ethics of what you was doing? Did you regret it? Did you have Gil afterwards? Because I'm sure there was probably retail invested in your project. Did any of them get banned? Or do you feel like yours was not quite so bad? I just wanted to get your take on that before we end part one. Yeah, it's a really great question, and it's a difficult question. It's something that really the whole kind of book is about that point. And I probably won't be able to do justice to all of it just now, but it is really thoroughly explained in the book. It was a real mix for me. So I knew from the start that what we're doing wasn't right, especially in terms of these kind of brown envelope journalism and this influence and stuff. I come from traditional PR where you had to read the financial promotion rules, you had to be very, very circumspect about how you talk about investments and that kind of thing. And how are you kind of engaged with the media? So I knew from the start that some of these practices were illicit. Now, to all extent of it wasn't revealed all at once. And it was kind of gradual process of gradual realization. As I got further and further down the rabbit hole and it started working with more and more projects. That's when the severity and the magnitude of it all really did start to dawn. However, yeah, I did have apprehensions from the start. Now, I won't lie, there was an aspect of greed and it was more money than I had ever seen. There was also an aspect of, especially initially, part of me thought that I really was working on the new frontier of finance, really working on something revolutionary. And it wasn't until so many projects stopped delivering on their roadmap. So many projects started drug pulling and I started seeing all this first hand. And also, you know, started seeing how these founders really treat their investors and really think about them beyond, you know, the public statements, public messages, you know, just the sheer contempt, you know, the ridicule and that kind of thing. You know, all of this just started compounding. But in the beginning, it wasn't like that. And I really did, you know, it was from naivety or whatever, but I really did think that, you know, there was something worth doing. And also, there was an aspect of, you know, we were young when we set these projects up and a lot of people in crypto, a lot of people in tech are very young, you know, we were mid to mid to late 20s. And, you know, at the height, we, you know, we had nearly 100 people working for us. You know, people were very long careers, people, you know, in their 40s and 50s. And, you know, we were, you know, we were telling them what to do. We were there, you know, we were there boss or their bosses boss. And so there was an aspect of it, you know, which was quite, I don't know, it was quite, it was quite cool having that amount of responsibility early on. Eventually, though, all of those things became untenable and really, you know, to fully know how the industry works and to see all that fraud and all those scams and, you know, all that contempt and all the vitriol in the space to see all that and still be in crypto. You know, you really do have to be a very specific type of person. And, you know, it was morally untenable. I left the industry and, you know, I could have just walked away. But I really didn't feel right in doing that. And I really did want to, you know, I really did feel like I had to, you know, come to terms with and, you know, to make amends for my role in it. Even though, you know, I tried to act, you know, a lot of these things I was seeing, but I wasn't involved in. So, for example, I never really participated in inside the trading. I never even really used crypto or kind of bought much crypto when I was working in the space. So I might, you know, use some platforms to test things out. I, you know, try doing a thing called leverage yield farming for a while, but I'm just losing a lot of money on that. So, you know, I was, I was adjacent to these things, but not, you know, directly involved, most of the time. So, yeah, but even then I, you know, wouldn't have felt right or comfortable walking away without, you know, doing what I could, you know, get the message out about what the industry is really like and to prevent, you know, or hopefully try to prevent, you know, future. Future, future people being harmed by it. So, so that's why I wrote the book. That's why, you know, it's Expo is a to just, yeah, to get the message out. And, you know, hopefully go some way towards, you know, swaging, you know, my role, you know, my own kind of complicity within, you know, within what I think is a fundamentally bad industry. Okay, Jake, I think that's a great place to leave part one. Thanks so much for your time. I'm sure you've given listeners a lot to think about whether they are investing or speculating in cryptos, or they're just an observer, like I have been for most of the time. And where can listeners find you, Jake? Where's the best place to find you online? Yes, I'm very active on Twitter. So, at J. Donahue author, that's Donahue D-O-N-O-G-H-U-E. And yeah, that's the best place. I'm always, you know, very open to interacting with people, engaging with people. My DMs are always open. So, yeah, looking forward to chatting with any listeners. Awesome. Well, in part two, Jake, I'd really love to start by discussing FTX because I think this was a key part of your story as well from having read the book. And it's certainly an expose as to how the corruption within crypto is not just from within. It's also from without. It's the political side. It's the regulators. Everyone has had a role to play in what FTX went through. So, I'd love to discuss that one with you. But thanks for more time, Jake, for joining us, and I look forward to part two. Mike, thanks very much. It's been a pleasure. Okay, that's it for part number one. Everyone in part number two, we discussed the collapse of FTX and Jake gives us his insider's view as to how that happened, why it happened, and also where the corruption sits at the upper echelons of crypto. We're talking at the exchanges. Also, we're going to discuss the dodgy dealings involving politicians and the dodgy payments that they were receiving from companies like FTX. So, we're going to discuss the overall trajectory of the space. We're certainly going to get into Bitcoin as well. We're going to talk about whether it can still be used as a tool for freedom or whether that is now off the table, given BlackRock and all the other usual suspects are now getting involved. So, a lot to get into, please head over to paralomite.com to listen to the next part. If you're not a member yet, please consider joining us. It would be great to have you there. In closing, take care of yourselves, and I'll see you next week. 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