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In Episode 283 of Hidden Forces, Demetri Kofinas speaks with Vance Spencer and Michael Anderson about the downfall of FTX, the political back-story behind Sam Bankman-Fried\\u2019s legislative push to build a regulatory moat around his business empire, and the path forward for the crypto industry.

As the crisis at FTX was unfolding, Vance received a call from none other than Sam Bankman-Fried. The two had never spoken before, but Vance had become recently critical of Sam\\u2019s efforts to lobby Washington for regulation that many felt would benefit him and his companies at the expense of everyone else in the industry. The legislation that SBF was pushing for would be particularly detrimental to the ecosystem of crypto known as decentralized finance or \\u201cDeFi\\u201d for short.

Cashing in on the tens of millions of dollars that he spent to curry favor with lawmakers, Fried spent his time behind the scenes persuading them to pass a bill known as the \\u2018Digital Commodities Consumer Protection Act.\\u2019 Sponsored by Senators Debbie Stabenow and John Boozman, the DCCPA would, according to some of its critics, make it impossible for open source developers to function within the U.S., limit access to decentralized financial products and applications for U.S. consumers, and create a regulatory monopoly for FTX in the United States.

On their call Sam stated multiple times that if the DCCPA didn\\u2019t go through the S.E.C. was going to come after everyone. It was going to come after the DeFi projects and it was going to come after some of Framework\\u2019s own investments. Sam Bankman-Fried was explicit, telling Vance Spencer that Framework would be \\u201cmaterially harmed if they did not get on side.\\u201d

This was apparently part of a larger narrative being pushed by Sam Bankman-Fried in the months leading up to his phone call with Spencer. It\\u2019s what Ryan Selkis, founder of crypto market intelligence firm Messari, described in a recent tweet as a \\u201ccommitted contingent of crypto policy people that want you to know that the Big Bad Wolf of Gary Gensler is coming to get you if the DCCPA doesn\\u2019t pass.\\u201d

At the same time there were rumors circulating that regulators may have\\xa0somehow\\xa0been working on behalf of SBF. Specifically, US representative Tom Emmer of Minnesota tweeted out a few days ago that there were reports coming into to his office suggesting that the chairman of the SEC was \\u201chelping SBF and FTX work on legal loopholes to obtain a regulatory monopoly.\\u201d\\xa0

To our knowledge, Tom Emmer has not put forward any evidence to support his claims and no one on this call\\u2014not Demetri, Michael, or Vance\\u2014is making that assertion. While the facts of this story are still coming together, what we have learned thus far gives credence to every bias and suspicion that most Americans have about their government and the corrupting influence of money in Washington. It\\u2019s at the heart of everything that\\u2019s gone wrong with our political system and it\\u2019s a big part of why extremists on both the left and right of the political spectrum have gained the support of an increasingly radicalized electorate.

Demetri\\u2019s hope with this conversation, besides telling a newsworthy story, is to prevent the narrative from being hijacked and recast as the case of some rogue, evil genius that we can easily blame for a problem that is systemic in nature. Yes, Sam Bankman-Fried a bad dude, but our system rewards bad dudes. And too often it punishes good ones. We need to change that.

If we want to see a positive change in our country\\u2014whether in crypto, finance, the media, or in the nation\\u2019s capital\\u2014we have to work together to fix the problem. And we have to hold people accountable, including ourselves, because in a democracy there is no one else.

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Producer & Host: Demetri Kofinas

Editor & Engineer: Stylianos Nicolaou

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Episode Recorded on 11/11/2022