Tornado Cash Indictment 'Very Disappointing' for Crypto Industry: Legal Exec

The state of crypto is presented by Tron connecting the world to the power of Cryptocurrency. Good morning and welcome back to first mover earlier this week, tornado cash developers, Roman Storm and Roman Semenov were charged with money laundering and sanctions violations. Joining us now to discuss is Deputy General Counsel for crypto trading firm Falcon Py Manar. Welcome to the show. Thank you for having me. Thanks for being here. Now we got to talk about this a big case for this industry. The DOJ is alleging more than a billion dollars in transactions moved through the mixing service and storm and Semenov quote knew that they were helping hackers and fraudsters conceal the fruits of their crime and quote. What's your reaction to this? It is certainly um a uh scary set of allegations uh to see against the company. I I think most importantly, the the tough part about this for the industry is is that, you know, mature companies in the industry like ours. We we look to build products and services that are taking the benefits of the technology and using them in a positive way, right? Partnering it with traditional financial market structure including new and innovative products and structures. And it's very disappointing to see allegations that the benefits of the technology are being used in a negative way to, to violate US law. All right, now, I want to talk about these sanctions to cash was sanctioned uh last year by the US Treasury Department Office of Foreign Asset Control. And some advocates mature firms in the industry have disagreed with the sanctions. Um What, what are your thoughts here? Do you disagree or do you agree? Well, as a matter generally, we don't comment on third party actions and things that we're not a part of. So I'm, I'm gonna refrain from commenting on the sanctions specifically and, and reiterate my point that I think the the the toughest part about this for the industry is, is that the allegations do center around the negative use of the technology which I think mature companies are really looking to, to make clear is not the intent of the asset class of the industry and not what we're looking to build for the future. And you've heard earlier right from Austin, from the Solana Foundation. Um You've heard the paypal announcements, it's clear that the industry and mature companies like ours are moving towards things that benefit the broader market participants um and, and build products and services for the future. And really, I think over the last year, if nothing else, what you see in the industry is that ma maturation right. We've been through a lot of trials and tribulations on the legal side, for sure. Uh We're seeing positive developments around new regulations, we're seeing litigation that's playing out important issues that the industry has required clarity on. And so yes, while there might have been some historic activity that is less than ideal for our industry, uh we are certainly looking forward to, to what the future brings. What do you think this case means for developers? You know, there are a lot of people watching this saying this could be detrimental for developers who are simply writing code for D five products. Um What, what are your thoughts there? You know, one of the things that we've, uh very much advocated for is looking at the technology from the purpose of what it does and not what it takes to get there basically. Right? So regulate it in a way that is consistent with what the outcome is and not the, the steps or the technology that gets it there, don't regulate the technology, regulate what the, uh, what, what the future is and what it's actually bringing forward. And I think that's the case here as well. All right, I want to move on over to FTX now back in December, Falcon X disclosed that 18% of its quote unencumbered cash equivalents were locked on FTX. Yesterday, we learned that FTX wants to start selling staking and hedging its crypto holdings in an effort to return funds to creditors. What are your thoughts on how um FTX has been handled as, as the bankruptcy moves forward? Yeah, we're, we're, we're seeing actually quite positive traction in terms of the recovery efforts in that bankruptcy. We are seeing um no legal issues being addressed and, and being um taken forward in order to, to get recovery for the claimants that have been impacted. We're seeing this moving quite, quite quickly and honestly, from for the industry itself, it is a, a good way for some of the legal issues that have existed in the industry to be resolved and to be considered in a way that helps structure products and services for the future. So we're optimistic. It, it does look like it's moving quite quickly. Now. We have the FTX case and the tornado cash case, everyone is watching both. Which one do you think is going to have a bigger impact on how the industry moves forward? Certainly the FTX case, I think that that brings forward um important legal issues that are necessary for future growth around how security interests are formed in these assets. Um How, you know, recovery should look like what the right market structure is for participants in this asset class. And so I do think that has the more pressing legal issues that are novel. All right. And what do you think of a potential FTX reboot? Hard to say? Um You know, we certainly, um do think that. Uh there, there are some ideas there uh really hard to say, but you know, we'll be excited to see what the future brings there. All right, I, I wanna uh talk about the Financial Innovation and Technology Act, tell us what that is before we, before I get into my question. Sure. So it's a market structure bill that uh was put forward by the House Financial Services and the House AG Committee. Uh It's, it's a really transformative bill. It addresses a lot of the open regulatory questions that exist in crypto today in the US, namely, you know, the process by which an asset or a token can be considered a secure or considered a commodity. What the right market structure is for um interacting with those asset classes. So uh appropriate registration categories for providers in this space. And it also looks to the future and uh what I can bring for for the asset class as well. Uh The, the bill passed the committees um a few weeks ago. So it's out of the house Financial Services and the House ad Committee. It's with the main house now and we are seeing, you know, bipartisan support there. So we're very optimistic. Talk to me a little bit more about why this is the right direction for the crypto industry. There are few bills that, that are being debated on right now. Why is this the one that you're focused on following? Yeah, I mean, this is the bill that's made it the furthest in the US. And I think that is largely because it is comprehensive with respect to the issues that it addresses. It's also really leaning into the existing market infrastructure that exists with respect to the CFTC and the SEC and certain registration categories that exist. And it calls on the agencies to work together which is going to be important for our industry to move forward uh in the US. Uh I think one of the other biggest uh advantages of the bill is that it is prescriptive, it is prescriptive from the perspective of it has timelines in place for some of these actions to, to be taken. Um which is, which is nice because it gives companies a road map on which to build in. What is the likelihood do you think of the agencies actually working together though? We've seen the agencies kind of butt heads on who, who has, what, who has say over what, what do you think the likelihood is, is that the agencies can actually work together to get clear regulation in the US for this industry? Well, with the congressional mandate to do so, I certainly I'm optimistic that that will happen. I do think there, you know, at the the agencies, there's interest in making this work, right? So I am optimistic about that outcome. All right. Thank you very much for joining the show this morning and I hope you have a great weekend. Thank you. You too. Thank you for having me. That was Falcon's Deputy General Counsel per Man.