Many of the topics that, of course, are making frontline headlines um. I think you guys got a like this. One were going to break this down a little bit deeper for you. My name is paul. Barron welcome back into techpath lets get into it today i wanted to bring in john deaton john deaton. You of course know him through xrp and ripple fame and the class action case for all the xrp holders. So john welcome back into the show thanks paul appreciate it yeah john. I want to get into the scenario around these crypto exchanges, along with many companies that have ran into some dire situations here of late. Well, look to voyager first and one of the key things you being a seasoned class action attorney filing in the crypto sector. When you look at class action cases and the scenario that, as we know, voyager filing for bankruptcy this morning, we got the news: where does that put people who are out there with voyager today? Is there a potential here for class action? Do you see what i guess legal course do you see playing out in the markets here in the coming months, maybe over the next year? Well, this is going to be litigation for years thats. The first thing now its very understand, too, the bankruptcy filing changes, the landscape. You know there are class actions right now, pending against coinbase and nexo and and finance. You know for various types of claims, but when a company files bankruptcy, there is a provision of the bankruptcy law that protects that company basically stays any lawsuits right.

So if there was any pending litigation against voyager, its automatically stayed by the federal bank bankruptcy statute, uh and the court would consider those claims, along with all the other creditor claims right and obviously, if youre a tort, litigant, meaning tort, meaning that you filed a case. Civil case youre gon na go to the back of the line in the bankruptcy court. So now a lot you know, class actions also with these other um companies that have not filed bankruptcy, thats a different animal because theyre not protected by the bankruptcy laws that would stay the litigation and so the biggest issue right now with these cases is, you know, Celsius and others and im sure voyager as well, have you know basically waivers of class action lawsuits. They have whats called binding individual arbitration clauses where, when you sign up, you check a box that basically says that if theres a dispute between you and that company, you waive your right to file a class action. You waive your right to file any individual lawsuit and you agree to an individual arbitration against that company yeah. This is the notice right here from voyager um. Just so you guys kind of understand. We reported a little bit on this yesterday, but back to johns point right. There uh very specific under arbitration clause and class action waiver which raise your waves, your right to sue in court or seek a jury trial for disputes relating to the use of her services.

Now my question is this: when you have these well stay with voyager for now um, when you have the scenario of this claim of fdic insurance and though there was um verbiage within deep within their um, their statements, a lot of the eulas that talk about this And there is a lot of gray area and ive had a couple of attorneys. Look at this and trying to understand really where it is. But the fact that we actually had metro metropolitan bank, which is the company the bank that essentially supports voyager. They actually had to come out and do a statement, and this was the day uh we published a video. It was like the day after we published a video about this very issue, theyre, actually clarifying the position that metropolitan bank is saying: hey, wait a minute if youre a voyager customer doesnt mean you have fdic insurance with us. So with that kind of scenario, this could be construed as clear miscommunication at the very least to where it could confuse consumers and investors, obviously that are in the border. What happens when it is getting into those waters, because now youre outside of just the point of a failure scenario, youre actually looking at confusing advertising confusing terms all those kind of things i wont say the word. But what happens when those kind of things come up in this type of case great great point paul? In order for a contract to be valid and the terms of that contract to be valid, both sides have to have be on the same page right.

There has to be whats called a meeting of the minds, so if one side lets take voyager, if they are misrepresenting things, then that person relied on that misrepresentation right. They didnt get true accurate information to make a voluntary decision. So a waiver of a class action really comes down to was the customer voluntarily and intelligently and knowingly waiving their right to a lawsuit and a class action. And if they, if they were then its a valid provision. But if there is any allegation of fraud, misrepresentation or omission of material information, then you can basically argue that that provision of the contract is invalid because of those misrepresentations and then, if youre successful, there would be a motion to dismiss the case, for example, based on That provision uh that you go to arbitration and you cant sue and then the person, the customer, your lawyer would challenge it and then show the judge, the misrepresentation and then there would be a decision. And if the judge agreed with you, then you could proceed with the class action or the litigation. If the judge disagreed with you and enforce the provision, you wouldnt be able to sue so thats. Your point is excellent because uh, i wouldnt say its confusing and and thats the standard. So what you articulated is correct: confusing advertising youre confusing the customer its up in the air, but if you can prove misrepresentation, then thats thats, the home, run to overcome that provision, because then youre basically saying look, you cant force this contract judge because they were fraudulent.

They misrepresented, i would have never entered into this contract and gave up those rights if i knew that um this information wasnt accurate. So so, okay. So your scenario here this was from a tweet that just came up um and they were tweeting at us and it was really kind of the issue of your. Your usd is fdic insured. This is something that comes up in the voyager app. Its often stated on the website all those kind of things for a lot of people who had us dollars in the voyager app itself or within the voyager uh platform, and i guess this would be. The real question is: how does that apply to a bankruptcy hearing? I and i kind of think of this as a bank, if you look at it from a banks position, you know the federal deposit insurance corporation comes in, they repair all the depositors uh in the in the case of a potential failure banks. Maybe in some cases i guess could go either insolvent or bankrupt or file bankruptcy, but does that change the landscape at all? For those who had u.s dollars in there that were alluding to fdic insurance yeah, they still fall under the bankruptcy proceedings. Well, i i think paul now that you showed me that i actually i was a little curious. You know celsius hasnt, filed bankruptcy right and right. In my eyes, voyager was pretty quick to filing for bankruptcy protection and i think they may have been advised by their lawyers.

You know i dont know how solvent or insolvent they are, but the lawyers may have looked at that and said: listen. You need to be protected from these class actions from this litigation because they could overcome those anti waver provisions because of this fraud or this misrepresentation. This confusion, and so it may have been a decision, but the reality is its very. You know unfortunate, but the law is clear: theyre protected any litigation. If i were to file a class action lawsuit right now against voyager immediately, i would receive a notice that it cannot move forward and im in violation of the law because theyre protected by bankruptcy protection. So the question then becomes: can you pierce like the corporate entity? Can you pierce it and show fraud behind individuals right who are promoting it and so thats going to be another form of attack, uh yeah and i dont know the way. Is your story? I dont know who the uh, who the owners were or the promoters or you know the corporate structure but thats why i said right now its protected, but this litigation is going to play out for several years. So, within a federal case, if it does, i mean im not were not giving legal advice here in any way. What were trying to do is discuss kind of the options and scenarios that most likely, if you guys, are out there and youve invested in one of these companies, maybe youre at risk.

Obviously, you should seek your own attorney, get with them understand where the markets are and your own situation, but i look at it this way and ive been in uh cases where our business was a creditor and a creditor to companies who failed in many cases throughout My years you know, ive lost many scenarios where we we never got made whole because they either file bankruptcy. But there was one case where we did run into a scenario where we were a creditor and the person who we were accredited to creditor to. There was fraud in in that case and we we, along with other uh people within the case, were able to pierce the corporate veil uh and be able to get to uh civil uh file. Lawsuits within that kind of scenario does fraud? Is it one of the bigger scenarios that plays out in something like this, that kind of pierces the potential for a federal bankruptcy protection? Absolutely and and im really, you know if there was that kind of misrepresentation by voyager, where theyre really basically soliciting business by giving them a false sense of protection. You know i mean uh as in fdic insurance. You know, by definition that meets a prima facie case of fraud and so um thats. Why? I also think that they may have been rushed, which is listen if we dont file and get protection from the court that would stay. All litigation were gon na get hit with a slew of these uh class action, lawsuits or individual lawsuits, and so uh yeah.

So i i think, but youre right as in your personal experience, it was the fraud that was allowed. You and the others in the group to pierce the civil without the corporate veil, and then you can attack the the person whos behind it. If theres, you know assets to give people an example, if you, if you had a brian armstrong, if he committed fraud right and coinbase filed for bankruptcy, but you could prove fraud, you could then go after him individually and im, not suggesting that hes done anything. I understand yeah just give an example for sure all right, so crypto exchanges in general, right now heavily under fire, were seeing a lot of changes within these terms of service, which they have the full right to do were seeing a lot of changes that are kind Of happening on the fly, especially around withdrawal limits, and one thing that has happened with many companies – is theyve, either slowed withdrawals so that we dont end up on these bank run kind of scenarios where liquidation, uh and also liquidity becomes a big issue. The protection of a lot of these depositors, much like with a bank theres, really nothing there thats going to control um. You know a current or a an exchange of being able to go in and change their terms of service which they can do at any time. But down the road, do you think were going to see more regulation on these exchanges to get more transparent? I guess with how customers, money and assets are being controlled in the future, because, obviously we know that happened with celsius of how they were leveraging up in d5.

What are your thoughts on where regulation is going to go around this overall? Well, a lot of people think that im anti regulation because im fighting the sec, you know so hard im, not im in smart regulation and the industry paul to move forward. Theyve got to become more transparent, and so there has to be sensible regulation that and disclosures where there has to be. You know, in my opinion, at a minimum, even if its a private company theyre, not public, where they have to disclose um. You know at least every quarterly, preferably it would be every month where you would see their assets liabilities where the money is uh, whether or not theyre engaging in these high leverage strategies. You know because lets face it in the bull market and everythings going up yeah. These everything you can fail sure right, yeah, nobodys, worried about it at that time. Yeah, but id also say that you know listen. Lets lets all be honest for a minute as well. If someone says im going to pay, you 20, you know uh return on your bitcoin or your xrp or whatever token it is. You know if it sounds too good to be true, you know it might not be true or it might be so leveraged that its at risk and yeah and you have to disclose the risk. You know speculations, okay and speculation is, is what the markets built on, but there has to be.

The consumer has to appreciate. You know that risk. Am i risking my underlying capital to get that 20 and if the market becomes illiquid, is that truly at risk? If i voluntarily know all that – and i still engage fine but whats happening, thats not happening so i agree. Uh, unfortunately, too, is that the celsius, the voyager, all of the things that you and i are talking about there, its giving gary ginsler a lot of ammunition to say, look weve got to have regulation except he wants to over, regulate us right. He wants to come in and say everything other than bitcoins to security and needs to be registered and so uh. We have to be careful, but if the industrys going to move forward, they have to become more transparent and we have to get some kind of sensible. Smart regulation that that requires these disclosures, you know, are exchanges, you know what are they doing uh? Are they making trades that are you know against the consumer like just be open and honest about it? Yeah well, theres a lot. You know, obviously, with these that would start to put a lot more pressure into your exact uh point, and that is where whether its sec or just regulators in general, where we do see a stiff arm or a heavy arm, much like what we saw with mika In the eu i mean that particular proposal and whats happened now with the eu is theres a lot more pressure on stable coins, theres a lot more regulatory guidance on exchanges and including around this whole scenario around securities in these exchanges.

So i see all of this getting into a very interesting time right now in crypto, when you think back around to 2017, there just wasnt this many many companies that were really excelling like what we saw in this last run in 2020, 21, but now were seeing Kind of the fallout, so everybodys learning from all these mistakes were seeing all sorts of restructuring most likely. The landscape of what our exchanges will look like in three or four years has probably been quite different than what we see uh today. All because of what essentially has been happening over the past six months, so a lot of crazy stuff out there in the marketplace right now, john. I know that uh, you guys are all over this id love to kind of pick. Your brain as things continue to um develop because i think theres a lot more coming down the pipe for sure, but i want to thank you so much for stopping in today. We appreciate it. Thank you, paul enjoy it as always. Talk to us all right! Take care all right, so you guys are tuned in over on the podcast side of things, make sure and jump over here to the youtube channel. This is the place where youre going to catch all these exclusive interviews and really where we dive in deep on a lot of insights around the crypto blockchain technology kind of the evolution. But the one thing i can say right now guys is um, not your keys, not your coin! Get on to self custody with all of the turmoil were seeing.

You need to get into a self custody strategy for what youre doing out there in crypto.