Patrick O'Kain, Special Agent for the DEA: How Criminals are Using Cryptocurrency

Patrick O'Kain is a special agent for the DEA. In this conversation, Patrick and Anthony Pompliano discuss Patrick's time conducting intelligence work in Iraq, how he was trained to work in the DEA, what it's like chasing Mexican drug cartels, how criminals are currently using cryptocurrency, and where Patrick sees Bitcoin and crypto going in the future. All views and opinions expressed by Patrick are his alone and do not represent the DEA or the U. S. government. ----- Monarch is building the future for those interested in one wallet that consolidates the best services and functionality into one simple and easy to use app, Monarch will empower users to control all aspects of their Financial Kingdom from the palm of their hand. You may have heard the phrase “Not Your Keys, Not Your Crypto”. With Monarch, you own your keys and seed, meaning You own your crypto. With Monarch, you can Store, Receive, Send, Swap, Buy, Sell and earn interest on Crypto, track your portfolio, the news, the market cap and more today! We're constantly adding new services and updates too! Learn more today by visiting MonarchWallet.com/pomp or download the wallet for FREE today from Apple or Google. Visit https://monarchwallet.com/pomp/ to get your free tokens! ----- Curious about Cryptocurrency but don’t know where to begin? Storm Play is a free and fun way to start earning in exchange for you time. Simply download, register and discover microtasks that meet your interests and be rewarded with Storm Bolts. These Bolts can then be converted and withdrawn into your favorite cryptocurrency, including Storm Token, Ethereum (ETH) and Bitcoin (BTC.). Earn cryptocurrency rewards by playing new games and trying out cool products! Download the app to start earning crypto here! https://smart.link/5cb0e0b33a7ef (Available for iOS and Android). ----- If you enjoyed this conversation, share it with your colleagues & friends, rate, review, and subscribe. This podcast is presented by BlockWorks Group. For exclusive content and events that provide insights into the crypto and blockchain space, visit them at: https://www.blockworksgroup.io

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:01Anthony Pompliano?

  What's up everyone, this is Anthony Pompliano. Most of you know me as Pomp. You're listening to Off the Chain, simply the best podcast in crypto. Let's kick this thing off. This recording is with Patrick O'Kane, who currently serves as a financial investigator with the Drug Enforcement Agency, better known as the DEA. In this conversation, we discuss Patrick's time conducting intelligence work in Iraq, how he was trained to work in the DEA, what it is like chasing Mexican drug cartels, how criminals are currently using cryptocurrency, and where Patrick sees Bitcoin and crypto going in the future. Because Patrick is an acting member of the DEA, he could only share so much.

• 0:43Anthony Pompliano?

  I'm thankful for his time and openness to recording this. All views shared by Patrick are his and his alone, and they do not represent the DEA or the US government. I really found this conversation fascinating and educational at the same time. I hope you enjoy it nearly as much as I did. Monarch is building the future for those interested in one wallet that consolidates the best services and functionality into a simple and easy to use application. The Monarch app and wallet will empower users to control all aspects of their financial kingdom from the palm of their hand. You may have heard the phrase "not your keys, not your crypto." With Monarch, you own your keys and your seed phrase, meaning you own your own crypto.

• 1:24Anthony Pompliano?

  With Monarch, you can store, receive, send, swap, buy, sell, and earn interest on your crypto. You can track your portfolio in the news, and you can check the market cap daily. They're constantly adding new services and updates, and you can learn more today by visiting monarchwallet.com/pomp. Again, that's monarchwallet.com/pomp, or you can download the wallet for free today from Apple or Google. Are you curious about cryptocurrency and you don't know where to begin? I've got a great way for you to try. You can use Stormplay, a free and fun way to start earning in exchange for your time. That's right, you don't necessarily have to make a financial investment to begin. You can simply download, register, and then discover these micro tasks that they present you that meet your interest, and then you're rewarded with these Stormbolts.

• 2:09Anthony Pompliano?

  The Bolts are then converted and can be withdrawn into your favorite cryptocurrency, including the Storm token, Ethereum, or my favorite, Bitcoin. If you go and download the Stormplay app today, you can earn cryptocurrency rewards by playing new games and trying out cool new products. It's worth a try, and it's a great way to get started. Remember, go check out Stormplay in the App Store today.

• 2:29Speaker 01

  Anthony Pompliano is a partner at Morgan Creek Digital. All opinions expressed by Pomp or his guests on this podcast are solely their opinions and do not reflect the opinions of Morgan Creek Digital or Morgan Creek Capital Management. You should not treat any opinion expressed by Pomp as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. This podcast is for informational purposes only.

• 2:56Anthony Pompliano?

  All right, guys, I'm here with Patrick. I really, really appreciate you doing this. I think people are going to be fascinated by everything you've got to share. So, thanks.

• 3:06Speaker 02

  Yeah, thank you for having me. I know it took a while for us to make this meeting happen, but I'm glad to be here.

• 3:12Anthony Pompliano?

  For sure. I think you've got some disclaimers that you've got to read, right?

• 3:15Speaker 02

  Yeah, so I'm an active DEA agent, so I'm not here representing the agency. So, everything I say here are my views and not necessarily representative of DEA, DOJ, or the US government.

• 3:30Anthony Pompliano?

  Perfect. Me either. I'm here on my own as well. All right, so before we get into the DEA and kind of how the things that you do with crypto, let's talk about your background because you've got a fascinating background. We actually were in Iraq at the same time doing two very different things. So, maybe let's start with college and the program you went through and where that led you to.

• 3:55Speaker 02

  Yeah, so I went to undergrad at a place called Mercyhurst University, and they had an intelligence studies program. And it was, I entered in 2002, so it wasn't too far after 9/11. So, I knew I wanted to do something in the counterterrorism realm. So, I was looking for something to do after high school, and I saw Mercyhurst College, and I thought, that's it. So, what I wanted to do was go to the CIA and be a spy and work on counterterrorism issues. So, I did that, and when I was a junior...

• 4:34Speaker 02

  I got a conditional offer from the CIA to be an analyst for them. So the CIA is broken up between, you know, part of their, what they do is analysis and the other part is operations. So I was going through the interview process for an analytic role, but what I really want to do was the operations side, the case officer stuff, so.

• 4:57Anthony Pompliano?

  The Jason Bourne stuff.

• 4:59Speaker 02

  Exactly, the Jason Bourne stuff. So I went to my recruiter and I was like, hey, listen, I think this is great that we're going down this path, but I think the operational side would be better suited to me. So is there any way you could slide my, my package into the, the operations side of the house? And he did. And then I had one phone call with the operations side and they're like, man, you need more experience, you're a junior in college. So, so at that same time, I did put out some feelers for different companies that worked in the intelligence community, in the counterterrorism side of the house. One of them was Northrop Grumman and I got an offer from Northrop Grumman and I took that because I knew that that would lead me to Iraq and that's what I really wanted to do because it was right when the global war on terrorism started.

• 5:44Anthony Pompliano?

  And this is a private corporation that essentially provides support both analytical and operationally to intelligence agencies, the military, et cetera?

• 5:55Speaker 02

  Exactly, yeah. So there's a handful of companies that supplement the government workforce. And really at that time, there was so much work to be done. Governments couldn't accomplish the mission on their own, so they brought in private companies to supplement the workforce and they cleared everyone just as they would, you know, government employees to work on these sensitive issues.

• 6:17Anthony Pompliano?

  So, junior, you finished up school.

• 6:20Speaker 02

  Yeah.

• 6:20Anthony Pompliano?

  What do they do to prepare you to go to Iraq?

• 6:24Speaker 02

  Um, they, uh, nothing.

• 6:28Speaker 02

  Nothing really, it was a whole lot of on the job training. So you integrate with the team and you talk to, you know you're going there when you, when you sign up.

• 6:41Speaker 02

  But you don't really know what to expect, but when you meet the team and you talk to people who've done it before. You know, it really takes a lot of the mystique and fear out of it. So you know, you work US-based for a while, figure out the job and then, then you get shipped overseas.

• 6:58Anthony Pompliano?

  And are you doing, I'll call it combat training, right? Kind of different aspects to that, but learning to shoot, move, communicate? Are you going to gun ranges? Like, is there some of that training or is it literally just go figure it out?

• 7:12Speaker 02

  No, yeah, there's training. So you do, they give you government-sponsored personnel security training. You know, what to do if you're in a bad situation overseas, just general good practices to adhere to overseas. And there was a little bit of firearms training. Because if you, when you were moving around outside of the bases, you did have a sidearm or a rifle. So you got, we got a little bit of training on that.

• 7:42Anthony Pompliano?

  Got it. And so you go to Iraq. How old are you when you go?

• 7:46Speaker 02

  Let's see, it was, first time over there was 2007, so man, I think I was 25 at the time.

• 7:53Anthony Pompliano?

  Yeah, pretty young.

• 7:54Speaker 02

  Yeah, pretty young, yeah.

• 7:56Anthony Pompliano?

  And so you were there in 2007 for a number of years, kind of on and off?

• 8:00Speaker 02

  Yeah, so I went, I was there on and off between 2007 and 2010. So we would do essentially like a two to three month deployment, then come back for a handful of months, then go back and just repeat that cycle until you threw the towel and said that was enough.

• 8:17Anthony Pompliano?

  Yeah, I was there in 2008, 2009. And so have, have some context as to the experience, but you were doing much different things, right? So maybe describe some of the things that you were actually doing on a day-to-day basis while there?

• 8:30Speaker 02

  Yeah, so I was officially, my title was an all-source analyst. So I worked with a lot of the government agencies to...

• 8:43Speaker 02

  Go after the Al Qaeda in Iraq, high value targets at that time. So, one of the guys that I was looking at was Al Boummar al-Baghdadi. And he was kind of my main account. And I would just work with all of the information that we had. I'd, you know, take information from all the government agencies, militaries, kind of bring them together and try to determine this guy's network, where he's located, and try to figure out ways on how to capture him.

• 9:14Anthony Pompliano?

  Yeah, and so to kind of translate this for people who aren't familiar with the government agencies, the military, etc., is if you've ever seen the movie, what is it, Zero Dark Thirty? Right, I think is where they go and they chase down Osama bin Laden. The woman in the movie that works for the CIA is basically a case officer on that case to find bin Laden.

• 9:33Speaker 02

  Right.

• 9:34Anthony Pompliano?

  You, you know, that's overgeneralization, but you were doing a similar thing to go find a different high value individual, but very similar in terms of the work that's done to try to locate these folks.

• 9:43Speaker 02

  Yeah, yeah, and it's very much a team effort. And oversees all of these agencies work together to really push forward the mission. So, that's right, I mean, I would work with, I wasn't a case officer, but I would work with case officers and get their info and, you know, talk to their sources if I could to get additional information, just to kind of push forward our mission.

• 10:07Anthony Pompliano?

  And then, so as you're doing this and you're gathering information, you are using the information that others have gathered and kind of working in that team. What are you doing on a day-to-day basis? Are you staying in one place? Are you kind of going back and forth, you know, to different bases?

• 10:22Speaker 02

  Yeah, most of my time was in the green zone, but I did travel around quite a bit. And there was just meeting with other military units that were very specialized in sensitive site exploitation. So, you know, and that means these guys that go in and do a raid on a certain location, they knew exactly what to look for, what items had evidentiary value. So, cell phones, SIM cards, where are SIM cards typically hidden? Is there like a code network, you know, are they writing certain codes in notebooks to look for, things like that. So I'd go around and interview people that, you know, really knew what they were talking about to try to bring that back to my unit.

• 11:05Anthony Pompliano?

  Got it. And part of this too is, there's almost stages to these raids, right? Sometimes, whether it's the military, the government, a private agency, you're going in and a lot of times you're raiding because you're trying to capture somebody who has done bad things or is a bad person. Then there is, once you've either been successful or not, then you're looking around for quote unquote evidence, right, which you're describing of, you actually don't even know what's on the cell phone. You don't know what's on the hard drive. You just know that that is the highest probability place where the sensitive information is. And then you've got to gather that and extract it back to a base where whether you or somebody else on the team looks through it. And so, there's

• 11:47Anthony Pompliano?

  a lot of data involved there. Right? And kind of like, you know, the way people have described that type of work to me is, it's quite boring because you're looking for a needle in a haystack to some degree. But then when you find it, it can be the difference in a case or, you know, the work.

• 12:01Speaker 02

  Yeah, you know, parts of it were boring and you do experience information overload and data overload. And that was one of the things that I did. So I would, I would receive all of the, the media that were, were taking on raids. So cell phones, laptops, thumb drives, anything that the operators found out on these raids, they'd bring it back and I'd rip it, put the information into our systems and analyze it to see if I could make sense of it and we, you know, get it to lead us into the right direction.

• 12:34Anthony Pompliano?

  How much of the information that you're consuming and analyzing is in English versus, you know, Arabic or some other language?

• 12:43Speaker 02

  Yeah, it was all in Arabic.

• 12:44Anthony Pompliano?

  All in Arabic. And you're a fluent Arabic speaker?

• 12:47Speaker 02

  No, no, we had, we had a lot, we had a lot of linguistic support. So, anything that I got, I'd have to make an appointment with the linguist team. And, and that was one of the hardest parts was, one, they were spread way too thin. So it was tough to get a meeting with them. And two, You know, when you're, when you have all of this data in Arabic, having somebody else read it to you, they don't necessarily know what's important. So if you would have to, if you got, if you seized a notebook and needed it translated, it would take days for them to translate everything in the notebook and they don't necessarily know what's important.

• 13:29Speaker 02

  So you don't want to have them not translate too much, but you don't wanna have them, you know, just bogged down on something that's not too important. So there was always that balance to try to make sure we were really maximizing our efforts and being as efficient as possible.

• 13:44Anthony Pompliano?

  Yeah, it, it, the complexity of this job cannot be overstated, in my opinion. And just that it's not only the collection, which involves physical danger and all that, but just the organization, the structure of the data when you get it, and the translation, right? And then on top of all of that, that just gets it in a position where, okay, now we have smart people who are looking at it and can try to figure out what's important and what's not, right? Okay, so you're doing this for a while, you're going on and off, back and forth in Iraq. What is your, at the time, what's kind of your interaction with other agencies or with like special forces and, you know, different government or military units?

• 14:26Speaker 02

  Yeah, so it was really like we were working hand in hand. So I would work, we, we had special forces operators that were integrated into our units because they were the guys that we would work with, they were the action arm. So when we would find an actionable lead, we would brief the, the special forces guys up on it and they would plan their raid on, you know, based on the information that we're given them. So it was really hand in hand and we worked with all the three letter agencies over there. And another part of what I did was just briefing what we're finding up the chain of command. So briefing the, the highest levels of government over there.

• 15:09Anthony Pompliano?

  And as you're doing this, are you convinced you're gonna be in Iraq forever? And you wanna do this or did you, you were gonna kind of leave that and go do other work?

• 15:19Speaker 02

  I loved it, I loved it. I thought. I thought the mission was really exciting. And, you know, like I said, it was coming off of nine eleven and I had a strong sense of patriotism and I wanted to to serve and I thought that this was a really, you know, good way to to serve my country. So I was loving it. So one thing that I didn't like at the time was, as an analyst, you don't have a whole lot of control over what you're working on. So I was really craving more control and I was kind of weighing my options, whether I was gonna try to throw my hat in the ring for the CIA again and try to become a case officer or even go the military route. So I was meeting with all the special forces operators to see if that was a good path for me.

• 16:02Speaker 02

  And there were a few retired FBI and DEA agents over there that were doing contract work for the government agencies. And I talked to them about their careers and that seemed really interesting. So what I wanted was to be able to see something through from start to finish and really make a project my own. And it really seemed like these federal agents were able to do that. They could start an investigation, run all aspects of it, and then complete it and then move on to the next one. That sounded really interesting. So I I threw my hat in the ring with the FBI and DEA and ultimately decided to to get on board with the DEA.

• 16:40Anthony Pompliano?

  So maybe talk a little bit about what does the DEA do? I think people know drugs, but there's other things, right? And then why you chose the DEA over some of the other opportunities you had?

• 16:51Speaker 02

  Yeah, so let's start with what DEA does. DEA is the Drug Enforcement Administration and they investigate violations of the Title 21 law. So the Controlled Substances Act, that's Title 21. And that's that's essentially it. Their main purpose is to investigate and bring to justice individuals and entities that sell drugs, that

• 17:22Speaker 02

  Somehow impact the United States. And anything that touches the drug world, we can also investigate. So money laundering, there's always money involved with drug trafficking. So a lot of what DEA does ties into investigating big international money laundering schemes. Drugs touch counterterrorism, narco-terrorism. So really, anything that touches the drug trade as it affects the United States is kind of run by the DEA.

• 17:54Anthony Pompliano?

  Got it. And your role when you first started was a little bit different than what you're doing today. Maybe talk a little bit about, you know, what you initially started and how you transitioned over to some of the crypto stuff.

• 18:07Speaker 02

  Yeah, so I started out in 2012, I went to the academy and.

• 18:15Anthony Pompliano?

  What's that like?

• 18:15Speaker 02

  Oh, man.

• 18:17Anthony Pompliano?

  Is it fun?

• 18:18Speaker 02

  Yes and no. Some people love it, some people hate it. I think most people have a love-hate relationship, you know, with it. I think looking back, you recognize that it was a good experience and you made some solid friendships and you learned a lot. And but at the time, it sucks.

• 18:39Anthony Pompliano?

  Wait, all right. So what do you do in the academy? Is it like a lot of, I'm assuming it's kind of like basic training at the military? Like lots of physical training and then learning of, hey, here's the different aspects of the job?

• 18:49Speaker 02

  Yeah. So it's a lot of, so a large part of it is firearms training because, you know, we all carry firearms. And it's imperative to be really proficient with them and responsible with them. So we do a lot of firearms training. In fact, I think, you know, our firearms training is as robust as the Secret Service's. So it's really intense on that aspect. Physical fitness, that's a huge part of it. But really, the bread and butter is the classroom stuff, understanding the drug laws, understanding how to run an investigation, understanding how to work with the prosecutorial offices, US Attorney's Office.

• 19:32Speaker 02

  How we partner with other agencies and the nuts and bolts of running a drug investigation. That's kind of what we focus on. It's changing now because the the drug world is changing, but um yeah, a lot of what we learned was how to do proper surveillance operations and follow people around and how to properly write these reports and affidavits so it makes sense to juries and prosecutors and the defense.

• 19:59Anthony Pompliano?

  Well, and what's always fascinated me about law enforcement in general, but but specifically some of the specialized agencies like the DEA is your job is not only to catch the bad guys, right? The bad like that's the table stake stuff. You've got to not only be able to catch them, you've got to be able to prove they've done something wrong, and then you've got to be able to prove that to a court, a judge, a jury, whoever it is, in a way that they understand, right? They don't have all the context you have. They haven't spent, you know, six months investigating something. And so there's a lot of steps in there that could trip you up if you don't do it the right way.

• 20:31Speaker 02

  Yeah, documentation is super important, and and you also have to balance um everything we do, everything we write is eventually public. It's gets unsealed. So typically I'll write an affidavit and it's initially sealed to not um, you know, hinder the investigation. But once um we're wrapping up the investigation, everything is unsealed and it's uh it's out in the public. So um so the bad guys can see exactly how we went about getting this information. So you really have to walk a tight rope on being disclosing everything you need to, but not disclosing too much that will expose our sensitive techniques and tactics. Um but you really, you know, we're a public agency and we serve the people. So you don't,

• 21:13Speaker 02

  you can't, you know, hide things either. So you have to like balance what you share to keep it accurate and not ruin future investigations.

• 21:22Anthony Pompliano?

  Got it. That makes sense. Um and then let's just talk before we get into specific things that are going on today.

• 21:30Anthony Pompliano?

  A lot of people have have been excited when I've talked with other guests about drugs and all this kind of stuff on a more general basis. You probably have more experience than anybody else in terms of what's going on in that world. How serious is the drug problem in America? And like, you know, how serious I think is some of the, you know, the Mexican cartel threats or, you know, other types of drugs coming from Asia? Like, just give us an overlay. I'm like, what is the drugs in America problem look like today?

• 21:57Speaker 02

  Yeah, you know, it's a, there's always debate debate on whether, you know, legalization would solve the problem. But it is a huge problem. And if you look at the less fortunate areas across the country, opioid abuse is rampant. You read about it in the news and that's not, you know, that's real. It's like, it's happening. And it's really sad because no one that's addicted to heroin or fentanyl wants to be addicted to heroin and fentanyl. So it's, it's pretty sad. So the, the problem is real and, and I think enforcement does play an important role. But ultimately, what's going to change that is bringing everyone's quality of life up

• 22:38Speaker 02

  around the country, education, so people don't turn to drugs and, you know, treatment and, and better education around it. But I think it's, you know, it's the enforcement, it's education, it's everything, it's the total package that will actually make a difference.

• 22:52Anthony Pompliano?

  Yeah, and we obviously don't have enough time to go through everything. But in previous conversations with you, I think that thing that has struck me is how reasonable, right? A lot of people inside the agency are around, you know, look, there's really, really bad stuff that's super severe and you're probably hard pressed to find anyone in America that thinks that, you know, certain drugs should be legal. And then there's acknowledgement that there's plenty of people who think certain drugs should be legal, right? And there's a debate and, you know, that'll play out in the courts and government, et cetera. But the DEA has a job to go do and, and there's a very real impact around, you know, if somebody's addicted to heroin, that is bad for them and usually the people around them, right? And so preventing that stuff, the prevention is not only from an enforcement standpoint, right?

• 23:37Anthony Pompliano?

  Can you prevent the drugs from getting into the US? But as you described, also educating people on, hey, you probably should never start because you may not ever stop.

• 23:43Speaker 02

  Right, yeah.

• 23:46Anthony Pompliano?

  Okay, so when you first get started DEA, what do you do? And then we can get into what you're doing today.

• 23:51Speaker 02

  So I first started DEA, and I joined DEA. I don't think I answered this question, but why DEA over FBI or some of the other law enforcement agencies? It was right around the time, I don't know if you remember, you know, 2010, 2012, how everything in the news was the Mexican cartels.

• 24:07Anthony Pompliano?

  Yeah.

• 24:08Speaker 02

  And you couldn't get away from it. And I just thought that that was such a good mission to work. Because those, the cartels were so heinous and, you know, the devastation that they were wreaking in Mexico and then bringing the drugs up to the US. I just thought that was a really valid mission to go after. So when I started, you don't really get to pick what you work on right out of the, right out of the bat. So typically, when you're in the academy, if there's 50 other agents in there with you, the DEA will give you 50 vacancies. And they say, essentially say, hey, pick where you want to go, work it amongst yourselves, and then hopefully you'll get it. So.

• 24:50Anthony Pompliano?

  And there's cooperation that goes on, right?

• 24:52Speaker 02

  Yeah, you game the system a little bit, you know? And you try to work with people. So, you know, if you want to get to a certain part of the country, and you know, if you want to go to like California, you know LA, everyone wants to get to LA. Maybe you think, okay, well, that's, you know, there's a lot of interest there. Maybe I'll go to a smaller office outside of LA that'll still give me there, less competition. So there's a little bit of that. And also, you work with each other. If somebody has a family in Nebraska and there's one Nebraska spot, you know, a young single guy might not, he might want to go back there, but you know, he's gonna let the guy with the family, yeah, so.

• 25:29Anthony Pompliano?

  Yeah, and look, I think this is true in most government agencies, most military units, etc., is people understand that there's life around the work, right? And how do we help you get where you're trying to go?

• 25:40Speaker 02

  Exactly, yeah.

• 25:40Anthony Pompliano?

  You know, but still serve the mission.

• 25:41Speaker 02

  Yeah. Yeah, and I found that DEA has been really good with that. I mean, technically, I'm based out of the San Francisco office.

• 25:48Anthony Pompliano?

  Okay.

• 25:49Speaker 02

  On loan to New York.

• 25:50Anthony Pompliano?

  Oh, interesting.

• 25:51Speaker 02

  Yeah, yeah, so I've been in New York for about two years now. So they're flexible, for the most part, when it comes to, you know, helping you out with your family life and personal life.

• 25:59Anthony Pompliano?

  For sure.

• 26:00Speaker 02

  Yeah.

• 26:00Anthony Pompliano?

  All right, so you started out in California?

• 26:02Speaker 02

  Yeah, I started out in California. And I was in a satellite office of San Francisco, up in Santa Rosa. And the first cases I worked were more traditional, straight-up drug trafficking cases.

• 26:16Speaker 02

  And the first big case I worked was a heroin investigation, heroin and meth. This this family that had ties to giant violent cartels down in Mexico essentially had the lion's share of the drug trade throughout Northern California. And they've been operating there for years, like decades. And, you know, certain law enforcement agencies took a swing at them and it was like whack-a-mole. You know, if you would get one guy, they would just come come back with with more people. So my office and a few other federal agencies around the area, essentially around all of California, we had this giant operation to completely wipe out that entire drug trafficking

• 26:59Speaker 02

  organization out of Northern California. So it was a two-year, no, it was about a three-year-long investigation where

• 27:06Anthony Pompliano?

  Wow.

• 27:07Speaker 02

  we were going up on wiretaps and, you know, we were tracking cars and all sorts of things to identify who all the co-conspirators involved, what they're up to, you know, the extent of their operation, their sources of supply, and gather enough evidence on everyone to ultimately bring everyone to justice. And all of those things that we did in tracking and wiretaps, you know, all of that's done in concert with the US Attorney's Office and the courts to to make sure that, you know, it's a airtight case and and we can really take these guys out of operation.

• 27:44Anthony Pompliano?

  And part of this is, from what I understand, you kind of, you want to get to the top, right?

• 27:50Speaker 02

  Yeah.

• 27:50Anthony Pompliano?

  Kind of of the pyramid, if you will, where, you know, that's the person making the decisions, that's the El Chacos of the world, whatever.

• 27:55Speaker 02

  Yeah, yeah.

• 27:56Anthony Pompliano?

  But you start at the bottom.

• 27:57Speaker 02

  Yeah.

• 27:58Anthony Pompliano?

  Right? It's like, it's literally like the street drug dealers where you start and you kind of trace it from there and it's hard work.

• 28:03Speaker 02

  Yeah, it is. And that's essentially how that investigation started. There was just a low-level, he was actually

• 28:13Speaker 02

  A drug user that was arrested by the local police department and he said, hey, here's who sold it to me. And the PD came to our DEA office and said, hey, can you help us out with this case? We think it's tied to this bigger picture. Let's work these guys. And that's how it started. So we started at the very bottom and worked our way up to the

• 28:36Anthony Pompliano?

  It's crazy.

• 28:36Speaker 02

  upper echelons, down into Mexico and, and, you know, tried to take everyone out that we could, you know, that we can identify.

• 28:45Anthony Pompliano?

  And how many of these types of organizations, right? Not the ones specifically that you're talking about, but just in general, what I'll call drug facilitated criminal organizations are also doing other bad shit, right? Like, is it, hey, you know, we're a heroin family and that's what we do is we distribute heroin and we make a lot of money from it? Or is it, you know, heroin is one product within our criminal organization or enterprise and we do a bunch of bad shit?

• 29:09Speaker 02

  Yeah. I think, I think there's both. I think drugs are so lucrative, though, that the, the big drug trafficking organizations, you know, the big cartels and, you know, what you see in, you know, the show Narcos, you know, their, their main cash generating activity is drug trafficking and they will supplement that with, with other opportunities. But typically, from what I see, it's, you know, drug trafficking organizations are drug trafficking organizations. But there is crossover, you know, the, the mafia, I'm sure, is involved in racketeering and other things and on the side they'll, they'll sell drugs.

• 29:51Speaker 02

  So, you know, it's, it's really where, where, you know, every organization has strengths and weaknesses. It's like, you know, business. So if you have, if you have a, a unit that is involved in other things, you know, credit card scams or something like that that generates money, they wouldn't shy away from it, I'm sure.

• 30:09Anthony Pompliano?

  Yeah, i- i- it's fascinating to me how many of them through documentaries, conversations with folks like you, they look at it as a business and they run it pretty strictly like a business, right? There are employees, there are, there's accounting, there's, you know, distribution, supply chain, all this stuff. It just happens to be that they're doing it illegally with illegal products.

• 30:30Speaker 02

  Yeah.

• 30:31Anthony Pompliano?

  And those people, they kind of stayed on the right side of the law, actually would be good business people if it wasn't illegal drugs, right?

• 30:37Speaker 02

  Yeah, I mean, they use a lot of the same techniques, you know, it's like the biggest technique referenced is branding, you know? That's the biggest like correlation drawn between legit business and drug trafficking. And they do that, they'll brand, like certain cartels will brand their cocaine with their specific stamp and it's a, it's a brand. So they, they do things like that and, and they have clear command and control operations and distribution networks and they're negotiating prices. And they have large networks to get money back to where it needs to be. So it's definitely run in some instances like a weirdly violent business.

• 31:16Anthony Pompliano?

  Yeah, absolutely. All right. So you're doing this and really start out what I'll call kind of hardcore DEA mission of let's go get drug dealers and drug distribution networks. You're in San Francisco though, around 2014 timeframe.

• 31:30Speaker 02

  Yeah, so yeah, they're between 2012 and 2015, 16.

• 31:35Anthony Pompliano?

  Okay. And in San Francisco, obviously all the Silk Road stuff's going on.

• 31:39Speaker 02

  Yeah.

• 31:39Anthony Pompliano?

  So I don't know how much you can talk about, you know, the way that the agency was looking at that type of stuff or if you had any interaction.

• 31:46Speaker 02

  Yeah, you know, I heard about that when I was in the academy.

• 31:51Anthony Pompliano?

  Oh, really?

• 31:51Speaker 02

  Yeah, and that's, we did a tour, part of our academy was to understand, you know, the, all the assets that the DEA had to run investigations. And there's just like this subset where DEA was doing some really unique things with cryptocurrencies as they applied to drug trafficking. And I was hooked. I was like, I'm definitely going to be working.

• 32:16Speaker 02

  Yeah, I wish I could get into it more, but you know, I think they were really forward leaning in seeing the trend and they wanted to get behind the eight ball on that one. So

• 32:27Anthony Pompliano?

  This is 2012, 13, right?

• 32:28Speaker 02

  Yeah, this was 2012, yeah. So that's kind of like at the peak of Silk Road's operations when all of that nonsense was going down.

• 32:37Anthony Pompliano?

  And then I guess really the way that the DEA kind of intersects with the Silk Road or cryptocurrencies is folks are using it to buy and sell drugs, move money around the world, kind of a whole bunch of different use cases that are needed by criminals.

• 32:53Speaker 02

  Yeah, that's it. And that's kind of like the way I see a DEA's first entrance into the cyber realm as we know it now was you Silk Road essentially the first dark net marketplace when it became so easy to just buy and sell drugs and tons of other illicit things online. And there was, you know, people recognized that we have to get behind this. So that's how DEA's became involved in dark nets and cyber and cryptocurrency, cryptocurrency specifically on how it is used to purchase drugs

• 33:30Speaker 02

  online. And you know, drug trafficking started, well, it became really prevalent and well-known with the dark net marketplaces, but you can find it in clear net as well. People selling drugs from different countries. And it's really something that all federal governments and law enforcement agencies are keeping an eye on now.

• 33:53Anthony Pompliano?

  Yeah. And so maybe let's talk, before we get into what people are doing with crypto and some of the things you see today, let's talk about how you transition from hardcore, I'm only going after or mainly going after drug distribution networks and the cartels to more crypto-related stuff. Like, how does that transition work?

• 34:12Speaker 02

  DEA is kind of like a time bait, do your time sort of thing and then kind of ask for for something you want to get into.

• 34:18Anthony Pompliano?

  Transfer something.

• 34:19Speaker 02

  Yeah, yeah, so I um, so I worked in the Santa Rosa office for for a few years and then um, when I, after I made a few cases, I did a, did an undercover case where we were, we were posing as a biker gang. And I'm not a, you know, kind of a clean cut sort of guy, so we were driving around Harleys.

• 34:40Anthony Pompliano?

  You were on Harleys with like the jackets and everything?

• 34:43Speaker 02

  Yeah, leather jackets, Harleys, I grew my hair out long, I had what I could grow with a beard and uh, yeah, we were, there was this, this drug trafficking network that we, we couldn't get into, we had no sources, we had nothing and we're like, hey, let's just pretend like we're bad dudes and see if they start selling us stuff, so, so we did that, we dressed up like, like bikers and um, I was with a few other guys that actually looked the part, they were, you know, older school officers and agents and they-

• 35:10Anthony Pompliano?

  They rode the Harleys on the weekends for fun.

• 35:11Speaker 02

  Yeah, exactly, yeah, they, they used their, their personal Harleys for that, I, I had to use one of the DEA's, but that was a pretty interesting case and we'd buy heroin and drugs and get enough evidence on these guys, so-

• 35:22Anthony Pompliano?

  When you're undercover and like, you're like, I got long hair, I got my jacket on, right, whether you're armed or not, you're on your Harley and you're like going to meet up to buy drugs, are you ever like, I live a fucking wild life?

• 35:33Speaker 02

  Yeah, yeah, sort of, but I'm also like, what am I doing, I don't, I don't fit this part at all, they're gonna-

• 35:39Anthony Pompliano?

  You're like worried, right, you're like, oh, they're never gonna-

• 35:42Speaker 02

  Yeah, and I, you know, I, I don't feel like I'm very good at undercover work because you have to have, you have to be able to talk and the, the guys that are really good at it, they, they know how to talk the talk, it's an art form, and the guys that I'm working with, they, they could talk to these guys and, you know, they didn't skip a beat, they knew exactly what to say and I'm just kind of sitting there watching, I'm like, how's he doing this, this is so impressive, but, yeah, not, yeah, I mean, it, it's like, it's weird though, when I tell my friends about this, some of the stuff that I'm working on, they're always like, man, your, your job is so crazy, but I feel like it, it's like-

• 36:16Anthony Pompliano?

  It's dangerous, dude.

• 36:17Speaker 02

  Uh, you know, it could be, but I, I don't, you don't feel it when you're doing it.

• 36:21Anthony Pompliano?

  Yeah.

• 36:21Speaker 02

  I'm like, oh, this, this is a job, it's like, you know, just the same way somebody else works at a desk job, you know, some of the stuff you do becomes a job. My, you know, what I do is like, I fully recognize that it, that it's a little, you know, different than what, what a lot of people are working on, but um, ultimately it does sometimes just feel like a job.

• 36:40Anthony Pompliano?

  Yeah.

• 36:41Speaker 02

  It's unique when, when people ask me that question.

• 36:43Anthony Pompliano?

  Did, uh, did you take a picture of, uh, you guys all, right? Like you gotta kind of, uh, timestamp that one?

• 36:50Speaker 02

  Yeah, I documented that one for, for some files, yeah.

• 36:53Anthony Pompliano?

  People get dressed up for Halloween, you just put on your undercover outfit and roll?

• 36:57Speaker 02

  Yeah, it's so funny. No one believes me. They're like, no one would sell you drugs because you clearly are a cop.

• 37:02Anthony Pompliano?

  Yeah. Look, it, it's, uh, it is funny. Um, you know, I'll be walking around the streets of New York with, uh, my girlfriend and, uh, I'll walk by somebody and I'll literally like nod my head at them or something. She's like, what, what the hell was that? I was like, you know, he was in the military.

• 37:16Speaker 02

  Yeah.

• 37:16Anthony Pompliano?

  But I, I just, I can tell you a million reasons why I think that, but like a high degree of confidence. And you do recognize whether it's the way they carry themselves, the haircut, whatever. Uh, you just see it, right?

• 37:27Speaker 02

  No, it's totally true. It's like that, uh, was that Gladwell who wrote the book Blink?

• 37:31Anthony Pompliano?

  Yep.

• 37:32Speaker 02

  It's totally that thing. And I'm the same way with, uh, you know, I spent plenty of time around military and, and law enforcement. So if there's somebody completely in plain clothes, you know, even if they're all tatted up and bearded, I'm like, I know he's a cop.

• 37:43Anthony Pompliano?

  Yeah, it's, it's so funny because the criminals don't know. A lot of times they don't know.

• 37:48Speaker 02

  A lot of times they don't, yeah.

• 37:49Anthony Pompliano?

  Uh, i- if they wanted to learn how to find the cops, they should just hang out with more cops, right? And then they would eventually pick it up. Uh, all right. So you go from riding Harleys with long hair, you know, the whole outfit to then you are getting into crypto. How does that transition work?

• 38:03Speaker 02

  Yeah, so I, um, I requested a transfer to, uh, San Francisco's Financial Investigative Team. And that's when I started to dive into the, to the crypto world.

• 38:13Anthony Pompliano?

  And, and that team is still part of the DEA, but describe a little bit how that team interacts with or why that setup given an organization that's tasked with drugs.

• 38:22Speaker 02

  Yeah, so, um, there, there are financial investigative teams all around the country. And the way, the way DEA works and the way a lot of federal law enforcement works, uh, we have, uh, division offices around the country and around the world. So, um, Each office handles kind of their area. So San Francisco handles Northern California. And essentially, while federal agents have jurisdiction to go all around the US, we kind of focus on what's impacting our local area. And ultimately, that's usually where cases start, and then they will spider web out from there. So each office essentially has a financial investigative team to handle the money laundering

• 39:06Speaker 02

  side of investigations, which there always is, typically always is, a money laundering side. And it's just a little different of investigation. You have to go through bank records. You have to know where to get some of the documents, and you have to really have a lot of patience to go through hundreds of thousands of documents to find, to really piece together these larger money laundering schemes and, you know, just follow the money essentially. So it's a little different skillset.

• 39:37Anthony Pompliano?

  So this time when you're doing kind of intelligence type work, right? At least now it's in English. It's not Arabic, right? So it's got easier as your career's gone on. But let's talk, I think a lot of people hear money laundering, and they actually don't even know what that means. So maybe just describe what money laundering is, and then we can talk about how criminals use it and why they do it.

• 39:56Speaker 02

  Yeah, well, at its most basic level, I guess, money laundering is essentially using financial instruments to either hide a specified unlawful activity or facilitate a specified unlawful activity. So that's the caveat there, the specified unlawful activity. Anytime you acquire money or use money to do something illegal and put that money into a credible financial institution, that becomes money laundering.

• 40:32Speaker 02

  For DEA, the specified unlawful activity is always drugs, but it could be anything. You know, FBI investigates thefts, you know, stolen art that, you know, proceeds from that could be the specified unlawful.

• 40:43Anthony Pompliano?

  Yeah, because I think most people, when they think of money laundering, they're thinking, hey, the act of money laundering is actually.

• 40:50Speaker 02

  Buying a car wash.

• 40:51Anthony Pompliano?

  Yeah, you give, you give me money, right, through some drug deal, and money laundering isn't me just putting it in the bank, it's me putting it through my business so that then it looks like legitimate revenue for the business.

• 41:01Speaker 02

  Yeah, that's a form.

• 41:02Anthony Pompliano?

  That's a form, yeah. But, but actually just putting it in the bank and using it could also be money laundering.

• 41:07Speaker 02

  Yeah, I'm not an attorney, but I think as, as long as you're using the financial instruments, at least in the US, and, and the proceeds are from something illicit or to facilitate something illicit, that then becomes money laundering.

• 41:20Anthony Pompliano?

  Yeah, and so, obviously, there's multiple currencies in the world, right? So you kind of go over to the Financial Investigations Unit and, you know, the, I think the public narrative around crypto, Bitcoin, et cetera, is that's for drug dealers, right? That's the drug dealer's money. Maybe let's start with when you first move over to that unit, what was the understanding of cryptocurrency versus, let's say, US dollars? And how was the, the agency thinking about it? And then we can kind of talk about how that's evolved.

• 41:51Speaker 02

  Yeah, well, I, I don't know, I mean, I don't know how the agency, big, you know, agency is thinking about it, but at that time, it, it was still very much geared towards illicit stuff online, because I think at that time, like 30% of Bitcoin transactions were somehow involved with something illegal.

• 42:16Anthony Pompliano?

  Illegal, yeah.

• 42:17Speaker 02

  Now, the number has dropped substantially. So at that time, I think everyone was interested in it, but it was still viewed as a.

• 42:27Speaker 02

  As something to facilitate illegal activity.

• 42:31Anthony Pompliano?

  And when you say it's dropped substantially, any kind of ballpark number of what you guys think it is today?

• 42:37Speaker 02

  Well, I think it's the latest figures are below 1% of all the economic value of Bitcoin right now is below 1%. And what's interesting about that is I think it's that's a smaller number than like regular money laundering, like fiat money laundering, I think.

• 42:57Anthony Pompliano?

  So I definitely want to talk about the comparison between fiat and crypto and like what you see there, what you actually would prefer somebody to use, etc.

• 43:06Speaker 02

  Yeah, so, well, for fiat, I think the estimates, and I don't know if this is still accurate, but it's like 2% of global GDP is illicit, perhaps. I think that's the figure.

• 43:19Anthony Pompliano?

  I think Bloomberg had an article in end of 2018 that said $2 trillion is laundered through fiat every year, which I think probably is close to.

• 43:27Speaker 02

  Something around 2%. Yeah, so if you, it's kind of comparing apples to oranges, but if you take those two figures, having Bitcoin, illicit Bitcoin activity being below 1%, I mean, that's kind of at least on par with what we're seeing in, you know, fiat, traditional money laundering.

• 43:46Anthony Pompliano?

  And in the fiat world versus crypto, let's talk a little bit about, I don't want to say the benefits to criminals, but maybe the benefits to law enforcement catching somebody doing illicit activity. I'm guessing and I'm hoping that you say crypto is easier to catch bad people doing bad things than US dollar cash, but the banking system itself, kind of electronic money, it may actually be easier to catch them using that than crypto? Or kind of how would you rank those in terms of ease?

• 44:15Speaker 02

  So cash is tough, right? Cash, there's no, there's no record unless somebody's keeping great record books. And, you know, oftentimes we'll look for that, you know, accounting books, but. Cash is completely anonymous, so that can be very difficult to to track. What's what's nice about for for investigators with traditional fiat money laundering is it often does have to hit a financial institution and there are laws where these financial institutions have to give us information on that and we have places where we can submit a legal process to get that information and that's that's been that process has been submitted over years. So so, you know,

• 44:58Anthony Pompliano?

  Well documented.

• 44:58Speaker 02

  Yeah, everyone understands it.

• 45:01Anthony Pompliano?

  And so really what you're talking here is there's a separation between the banking system and physical paper money.

• 45:08Speaker 02

  Yeah.

• 45:08Anthony Pompliano?

  Right? The physical paper money is actually very difficult to track.

• 45:11Speaker 02

  Yeah, yeah, super difficult. So.

• 45:12Anthony Pompliano?

  The banking system is much easier because.

• 45:14Speaker 02

  Yeah, but still, I mean, you you still have to know where to look. You know, the banks do are compelled to give certain information that that is suspicious and transactions above a certain amount. They have to give that information to the government. But um, I mean, there's hundreds of trillions of dollars going through the bank accounts every day. So it's tough to you still have to know where to look. So a lot of the money laundering schemes that we uncover, we we already know that they're.

• 45:43Anthony Pompliano?

  Where to look.

• 45:44Speaker 02

  Where to look. And then at that point, it's just kind of identifying the scope, all of the accounts used, all of the individuals involved, where the money is coming from, and making that investigation more robust. So you still have to know where to look.

• 45:58Anthony Pompliano?

  Got it. And then how does that compare with Bitcoin and cryptocurrency?

• 46:01Speaker 02

  It's very much the same, except Bitcoin specifically is just really easy to track. So that's an added benefit for for law enforcement and regulators. You know exactly where the money has been and where it's going. What you don't necessarily know. Is uh who's holding it, but um but.

• 46:22Anthony Pompliano?

  So following the money is actually very simple because it's all on chain.

• 46:25Speaker 02

  Yeah.

• 46:25Anthony Pompliano?

  The difficulty comes in, I know wallet A has the money, send it to wallet B.

• 46:31Speaker 02

  Yeah.

• 46:31Anthony Pompliano?

  You don't know who owns wallet A or wallet B.

• 46:33Speaker 02

  Right, not necessarily. So if there are standalone wallets, it's very tough to identify who's holding that money. In fact, there's, I I don't know these actual uh exact figures, but there's uh you know, tons of Bitcoins just sitting in these wallets and and um and they're active and people, somebody has it and it's somehow tied to, you know, the original Silk Road, but uh people don't necessarily know.

• 46:56Anthony Pompliano?

  Know who has it.

• 46:56Speaker 02

  Who has it. So that that's a challenge, but um but it is, but it is uh because of the mutable ledger, it is super easy to to track the flow and um.

• 47:08Anthony Pompliano?

  Would it be a fair categorization to say law enforcement in general, not just drug-focused agencies, but just in general, would rather a criminal use Bitcoin or cryptocurrencies than US dollar physical cash because of the trackability? Or is it more nuanced than that?

• 47:26Speaker 02

  Um, well, let me speak personally. Uh, I would much rather have uh criminals do everything through uh the dark web and and cryptocurrencies because uh it it is easy to track and there are a ton of smart people that are uh working on ways to make it even more transparent and and keep illicit funds out of this new ecosystem that's, you know, pretty much going mainstream.

• 47:56Anthony Pompliano?

  Yeah, there there's a um, there's an agent edited, a uh, a government agency that uh one time said um, in general, not just financial crimes, but in general, when a criminal is committing a crime, we'd rather have their hands on a keyboard, right? It was kind of the sentiment of like, the digital footprint is much easier to track than the physical world across all things, right? Not just drugs or money laundering. Um, I thought that was really fascinating because uh that's a little counter narrative to the way the public thinks about the internet, right? It's like, oh, I can't see it, I can't touch it, so it must be easy to do that. It's actually not if you know what you're looking for.

• 48:33Speaker 02

  Right, yeah, and it there are, it is tough. I mean, there are techniques to to hide um who you are, where you are, and there are some people that are very good at that. Not everyone is, but ultimately, you know, there's, there's really smart people in the government that are working on this issue. And if there's only, people are going to make mistakes at some point. And it's kind of like a traditional non-cyber investigation. Somebody will make a mistake that, that

• 49:01Anthony Pompliano?

  A bad, a bad guy will make a mistake.

• 49:03Speaker 02

  A bad guy will make a mistake and, and law enforcement will be able to capitalize on that mistake. And, you know, find out who that individual is. It's the same, same thing with cyber. But I think there's more signatures now when, when you're doing everything online.

• 49:15Anthony Pompliano?

  Yeah, it, it's, um, you know, I, I've got a lot of friends in law enforcement, just having been in the military. And, uh, and they all talk a lot about this idea that, uh, you know, you don't think you break laws. But if a cop rode behind you for 30 minutes, you're going to break some law, right? It could be everything from your seatbelt's not on to your lights, to you didn't use your blinker, to you jaywalked, to you dropped a, you know, stick of gum on the floor. Right? I mean, there's all kinds of things and, and the thing that I have found with most law enforcement is, uh, again, very reasonable. The application of the law, right? I mean, go out here on the streets of New York, there's people jaywalking all over the place. Cops aren't arresting people, right? They're not even writing them tickets. They're basically saying, hey, get the hell out of the road so you don't get by a car.

• 50:01Speaker 02

  Yeah, yeah.

• 50:01Anthony Pompliano?

  Um, and, and so I think that there's, uh, the severity of crimes and kind of the intention becomes really important as well as, you know, what does the book actually say?

• 50:10Speaker 02

  Yeah, yeah, I think so. I think that's accurate. And, um, really it's like, uh, I think, um, law enforcement in general tries to really address the needs of a specific area and make it safer for people. I think there's really an honest effort for that law enforcement across the board at all levels.

• 50:27Anthony Pompliano?

  For sure. Um, all right. So we talked a little bit about Bitcoin and what I'll call it the public blockchains. What about, um, the privacy coins? Like, how, how do you see that fit into, uh, the overall ecosystem? And maybe even how some criminals are using that versus Bitcoin, et cetera?

• 50:41Speaker 02

  Yeah, so we see, um, privacy coins are much harder to track, uh, you know, almost impossible. Uh, there are some techniques that, that we can use, um, but it is, it is harder to identify.

• 50:58Speaker 02

  People, smart people, smart companies are working on that issue constantly. You know, the, you know, companies that do blockchain forensics are hiring cryptographers to figure out ways to, to crack certain codes and, and get insight into the way money is moved through Monero or Zcash. But that's really nascent right now. So I think it's tough. We don't have the data to understand how prevalent it is right now. We do have a lot of data for Bitcoin. We're starting to get more data for Ethereum. So it's hard to, it's hard to really estimate how prevalent it is with illicit transfer funds.

• 51:42Speaker 02

  That being said, I think one of the biggest problems, not only in crypto, but for law enforcement in general, is the idea of going dark. With all of these encrypted communication tools, it's, it's becoming more challenging to get access into content of conversations. You know, typically, you know, traditional phone call that government wanted to intercept, they would establish enough probable cause to intercept that and then go to a judge and the judge read the affidavit and say, yeah, I agree that you, you need to listen to their phone calls and we'd get a phone tap and you could hear the content. Now, it's not so simple. You know, we have, there's Signal and Telegram and you can't necessarily, you know, FaceTime and you can't necessarily listen to that.

• 52:25Speaker 02

  So that's a, the, going dark is, is a big problem. But ultimately, the way I look at it is throughout the years, whether it's intel or law enforcement, the, the kind of low-tech thing that you revert to is human intelligence. And I think that's what's going to happen until, you know, governmental technology catches up to the privacy coins, you're going to identify people that can give you information. So if you, you know, if somebody's using Monero, you're going to find his associate, his legitimate friend that is also doing something illegal and he doesn't want to go to jail, so he's going to spill the beans on, on the guy moving money through Monero. So I think that...

• 53:12Speaker 02

  At some point you revert to, you know, the, the non-tech approach to investigations.

• 53:18Anthony Pompliano?

  It's the whole idea, uh, bad people do bad things.

• 53:20Speaker 02

  Yeah.

• 53:20Anthony Pompliano?

  Bad people usually hang out with other bad people.

• 53:22Speaker 02

  Yeah.

• 53:22Anthony Pompliano?

  Right?

• 53:23Speaker 02

  Yeah.

• 53:23Anthony Pompliano?

  And people are at the very core self-interested and when they're facing jail time, fines.

• 53:29Speaker 02

  Yeah.

• 53:29Anthony Pompliano?

  Et cetera, all of a sudden they have a much better memory.

• 53:32Speaker 02

  Yeah.

• 53:32Anthony Pompliano?

  It is, you know, and look, you can watch every crime documentary in the world, every movie, right? Talk to anyone who's ever been in law enforcement and I think that's been true for, you know, a hundred plus years, right?

• 53:43Speaker 02

  Yeah, exactly.

• 53:44Anthony Pompliano?

  How, how big or interested is government in general, right? So, so not even necessarily DEA, but, uh, and I'm asking the guy who focuses on this. So, so we'll, we'll, uh, we'll call out the bias immediately, but how big of a problem do you think that the government agencies think cryptocurrency is used for illicit means is and how big of a focus is it versus, look, we're dealing with everything from, you know, Mexican cartels to, you know, other terrorist activities to whatever and crypto is, you know, very, very small or low on the totem pole.

• 54:18Speaker 02

  Yeah, so I think, um, I think you, the way I look at that is you don't frame it as how big people think of this as being a problem, but how, how prevalent will it be in the future?

• 54:34Anthony Pompliano?

  Okay.

• 54:34Speaker 02

  And that's the way I look at it. I think, um, right now, uh, it's in its infancy. Uh, Bitcoin and crypto, other cryptocurrencies were still, you know, uh, at the beginning of that. And, um, while it's not a, you know, one, less than one percent of Bitcoin is illicit, you know, if the figures are correct, uh, you know, that doesn't sound like a huge problem. But as that one percent is a little misleading because there's more activity on it, there's more money, uh, being transactioned, uh, transacted, but the percentage of illegal transactions is going down. So that just means there's more legit purposes to using it. And that's a trend that I think we're going to see, uh, you know, from now and, and I think I'm very bullish on, on Bitcoin.

• 55:19Speaker 02

  So I think that that's going to be the future, uh, and, and a few privacy coins may be the future. So I think, um, I think me and, uh, a lot of other government, uh, people will, uh,

• 55:33Speaker 02

  They recognize that, you know, that's the future. And while it might not be a huge problem now, it will be something that we have to understand in the future because all transactions will be cryptographic.

• 55:44Anthony Pompliano?

  Yep.

• 55:44Speaker 02

  Everything will be digital. There will be no more fiat. I mean, that's the, that's the way I see it.

• 55:49Anthony Pompliano?

  Yeah, and it's interesting too, because, you know, I would tell the naysayers of digital currencies, right? The people who should be the least bullish or the most bearish on this stuff is law enforcement, people where it makes their jobs harder, right? I've actually found, you know, with you and many others, it's the exact opposite, right? Because they spend so much time seeing how the technology works, what the benefits and the downsides are, there becomes more conviction and of course the world's moving this way, like the trend becomes more inevitable, which I find very fascinating.

• 56:25Speaker 02

  Yeah, no, I definitely see that. And there's, there's not a huge number of investigators that are looking at crimes through cryptocurrency or on the dark net, but those that are, are really passionate about and excited about that, that realm and fully recognize that that's the way things are going. And, and there's definitely not, it's, there's no sentiment like, you know, hey, we gotta get rid of these cryptocurrencies, we gotta stop this. It's more like, we just gotta understand this because this is how things are gonna be.

• 56:56Anthony Pompliano?

  Yeah. It, I think it's a really important point.

• 56:59Speaker 02

  Yeah.

• 56:59Anthony Pompliano?

  Right? Is like, there are certain governments around the world who are saying, hey, we can stop this, right? We actually can stop it and like, we're gonna ban it, we're gonna do all this stuff. I haven't found, literally to this day, I've not found one single person in the US government, whether they are law enforcement, they are a regulator, they are a representative, everyone we've talked to, I've never heard that sentiment. I've always heard, this is going to happen. We think that there's a high probability of this happening. How do we create rules that protect people? How do we encourage innovation? Like, it's very kind of forward thinking without wanting to ban or stop the progress.

• 57:34Speaker 02

  Absolutely. I definitely see that. And if you listen to, you know, The heads of the SEC and CFTC and FinCEN and all of the people that are dealing with the civil side and, you know, upper echelons dealing with the law enforcement side. Everyone addresses encouraging innovation. But you also have to keep the market safe. And if you want more money to come in and, you know, if you want institutional investors and, you know, your retail investors to feel comfortable in this realm, it has to be safe. And that's, uh, that's the balancing act, encouraging innovation and, uh, at the same time, keeping the market safe.

• 58:11Anthony Pompliano?

  Absolutely. We talked a little bit about privacy coins and I think, um, you know, that is a challenge for everyone, you know, especially law enforcement. Are there other challenges that you guys face that maybe others don't know about or you spend your time thinking about?

• 58:27Speaker 02

  Yeah, I think, um, no, this is, this challenge is very specific, I think, to, um, what I experienced, but, and, and it's probably across the board in law enforcement business. Our, our systems, our internal systems are built to handle a traditional, uh, real world investigation. So, um, molding a crypto investigation into the existing rails that we have to work on is sometimes challenging. So it causes, uh, some, um, roadblocks to, to forward momentum, but, uh, there's really smart people at headquarters level that are trying to sort that out. Uh, so that's a very specific problem to, to my realm.

• 59:10Speaker 02

  In terms of other challenges, I think it's just, money laundering is complicated in general. I mean, whether it's fiat or crypto, uh, good money laundering just, it goes unnoticed.

• 59:21Anthony Pompliano?

  That's the purpose, right?

• 59:22Speaker 02

  The whole purpose of it. So, so, uh, keeping up with the technology and understanding what can be done, uh, not only getting insight into how criminals are using privacy coins or other coins, uh, but what's even out there to be used is very challenging because there's so much information. Uh, and I try to, you know, stay up to date on, on what's happening on the overall crypto landscape, but, um, it's daunting. And, um, you know, especially with, with Ethereum tokens, ERC20 tokens.

• 59:59Speaker 02

  You can essentially hop back and forth between different tokens and being able to track that and you can write smart contracts to automatically facilitate all of this movement of these funds and it becomes completely obscured if you don't have the right software to really flesh that out. So just staying up to date on what is possible to use is a task. It's like a full-time job in itself.

• 1:00:25Anthony Pompliano?

  I've never thought about this, but it's hard enough for fund managers, entrepreneurs, people in the crypto industry in terms of like every single day that's their job. The people who, their job necessarily didn't start out in crypto, but it's led them there like yours, staying on top of the latest fork or the latest technology, plus also conducting investigations, probably not the simplest thing in the world.

• 1:00:50Speaker 02

  Yeah, it's tough. And I don't come from a super heavy tech background. I did some work in the intel community on a tech project, but a lot of what I'm doing now is just on-the-job training and learning how to make sense of this and talking to the right people, the smart people in this ecosystem. And that's one thing I love about the crypto space. I'll go to meetups and events and just talk to people and everyone's just so willing to share their knowledge and meet up for coffee and kind of understand what I'm working on and how they can help. And so the community is just a really friendly community.

• 1:01:30Anthony Pompliano?

  Yeah, well, part of it is the education leads hopefully to awareness and adoption, right? And so it's fascinating to have this conversation with you. Before we wrap up, I'll ask you some kind of rapid-fire questions. I'll avoid some of the crypto ones. I don't want to put you on the spot in terms of what the most important company in crypto is or anything like that. But what's the most important book you've ever read?

• 1:01:55Speaker 02

  Let's see, I think two.

• 1:01:57Anthony Pompliano?

  Two, what is that? I've never heard of that.

• 1:01:58Speaker 02

  No, no, so.

• 1:01:59Anthony Pompliano?

  Oh, two books, okay, alright, I was gonna say, you got a book I never heard of before.

• 1:02:03Speaker 02

  So, one is The Four Pillars of Investing by, I think, the author is Bernstein, William Bernstein. And I think, coming from a non-finance background, that book was really important to understand how to make a well-balanced portfolio and diversify my funds, and it was easily digestible. And the second book is really obscure, and you probably haven't heard of it, but it's called Conversations for Action.

• 1:02:30Anthony Pompliano?

  Oh, I've not heard of this.

• 1:02:31Speaker 02

  Yeah, it's a, it's a collection of essays, and I think the author is Fernando Flores, I think he's Chilean.

• 1:02:37Anthony Pompliano?

  Okay.

• 1:02:38Speaker 02

  But he, he just, him and his cohorts thought a lot about how to move projects along. It's geared towards business, but he, he came to the conclusion that conversations, and this isn't like earth-shattering, but conversations are everything when you're working to move, to facilitate something and make change. And he just outlines ways to properly communicate to, to achieve a goal. So that's been really important to how I interact with people in my job, personal relationships.

• 1:03:18Anthony Pompliano?

  Conversations for Action?

• 1:03:20Speaker 02

  Yeah, Conversations for Action, a collection of essays. I think the author is Flores.

• 1:03:24Anthony Pompliano?

  Yeah, did you use that on the bikers?

• 1:03:28Speaker 02

  Yeah, I pulled that out.

• 1:03:30Anthony Pompliano?

  You said, let me, here, I got some new tactics. That's awesome. Alright, before I let you ask me one question to end it, aliens, real, not real?

• 1:03:41Speaker 02

  100% real.

• 1:03:43Anthony Pompliano?

  Okay, not, not the DEA's perspective, this is his personal perspective.

• 1:03:47Speaker 02

  Yeah, and that's a, that's a different topic.

• 1:03:50Anthony Pompliano?

  So 100% real?

• 1:03:51Speaker 02

  Yeah, I, I think so, I mean, the, just the probability that we're the only

• 1:03:57Speaker 02

  intelligent species in the universe, I think it doesn't make sense. So, yeah, I think, I think extraterrestrials are there, and I probably think that either in our life or the next lifetime, there will be contact, there will be like irrefutable information that there's something else out there.

• 1:04:17Anthony Pompliano?

  Got it, and would you rather go to space or the depths of the ocean?

• 1:04:24Speaker 02

  I think I'd rather, space scares me more. I just get the sense, like this impression of like just isolation. There was like that movie, I think it was Julia Roberts, she was like sucked out to

• 1:04:35Anthony Pompliano?

  Yeah.

• 1:04:37Speaker 02

  I think that that would be, uh, this is more scary, but also more interesting at the same time.

• 1:04:43Anthony Pompliano?

  All right.

• 1:04:43Speaker 02

  Yeah.

• 1:04:44Anthony Pompliano?

  That's not a bad answer, the fact that it's scary makes it more interesting.

• 1:04:47Speaker 02

  Yeah.

• 1:04:47Anthony Pompliano?

  That's fair. Uh, what one question you have for me?

• 1:04:50Speaker 02

  Oh, you know, so we, we met, uh, once before and

• 1:04:54Anthony Pompliano?

  We, just so everyone knows, we had to meet first so that we could make sure that he was allowed to do this. So I'm incredibly thankful to him and his team for letting him do this.

• 1:05:02Speaker 02

  Yeah.

• 1:05:04Speaker 02

  But I had so many questions after that conversation. I think, um, one thing that I'm curious about is how you go about making, uh, complicated decisions, whether it's personal life or business decisions. If you have a, a certain model for that, whether it's a gut feeling.

• 1:05:20Anthony Pompliano?

  Yeah.

• 1:05:21Speaker 02

  Uh, if you have a framework that you kind of fall back on.

• 1:05:23Anthony Pompliano?

  This, um, so I think I always did something similar to this, but, uh, when I worked at Facebook, uh, there was a, uh, they have all these posters that hang on the wall and some of them are, you know, frankly, kind of fluffy, you know, motto type stuff and some of them are actually pretty good. And, and, uh, one that I really, uh, resonated with me was, uh, done is better than perfect. Right?

• 1:05:43Speaker 02

  Yeah.

• 1:05:44Anthony Pompliano?

  And it was this idea that, uh, when it comes to decision making, within a decision, there may be actually four or five smaller decisions. Right? So, you know, should we make this investment or not? Right? Is, is a complex decision. It seems binary, but actually there's a bunch of other little things that go into it. Right? Do I trust this founder or not? Do I think this market is real or not? Right? Kind of all of that stuff. And the way that done is better than perfect is more about the probability of being right and also focusing on the one or two micro decisions that actually make up 80, 90% of the big decision. Right? So in investing, The complex decision of should I invest or not?

• 1:06:26Anthony Pompliano?

  Whether I'm right or wrong on this, what I have concluded is eighty or ninety percent of that decision comes down to do I want to back this founder? Right? And if I want to back this founder, the rest of the things are actually much less important than backing the founder. If I back the founder, then I'm gonna do the deal. Right? And so that's an example of the decision of should I invest or not actually gets boiled down to something that's a little bit more easily you can wrap your head around. And, you know, there's an argument that a lot of that's gut feeling, right? Intuition, all that, all that kind of stuff, which isn't a great way to make decisions repeatedly and have a high probability of success. But the way that my partners and I think about that is you're talking about a highly

• 1:07:08Anthony Pompliano?

  complex environment somebody's going into, and so everything they're pitching you, it's gonna change. Right? Good, negative, neutral, it's just, it's not gonna be the same. The product they build, their competitors, the market dynamics. If you bet on the right person to figure it out, that feels like the most important thing. Right? And so I think that that done is better than perfect. Is a way to move quickly, not necessarily break things, but just continue to, you know, can I be right in eighty percent of the decisions I make? And right is not defined as I hit a home run with every decision, but I'm more right than wrong with each decision. Or that type of stuff.

• 1:07:45Speaker 02

  No, that's good. When, when, when you're backing a founder, do you ever experience that you really think the founder's going to go far, but don't really agree with his vision for the, for the product or the company? Or do you feel like there's a strong correlation with a strong founder and also a strong?

• 1:08:03Anthony Pompliano?

  Yeah, it's a great question. I don't know if we've ever backed a founder where love the founder, hate the idea, right? Like, like, kind of very visceral, opposite feelings. Definitely have backed founders that we were like, wow, this is a great founder. I don't get it. Right? So not that I disagree, but you're way more expert than me at this space. I kind of understand why this is important. I hear you what, what you're doing. I don't know if it's gonna work or not. Right? So kind of this like in-between positive and negative sentiment. Definitely have backed a number of founders. And actually, some of them have proven to be our best founders, which, which is an interesting data point in that.

• 1:08:49Anthony Pompliano?

  It's almost like they had information that so few other people had and they understood a problem that so few other people did that there was less competition there, right? And again, deciding to back the right founder, if we like the idea and we like the founder, that's great. If we like the founder and the idea is kind of in the maybe category, I've learned to trust the pattern recognition of that might be, that actually might be even better, right? So still kind of figuring that out mentally. But again, I don't think we've ever backed a founder, love the founder, hate the idea, right? I've backed companies that I love the founder, idea's pretty good, hate the name, right? Or something like that, but never hate the idea and love the founder. So, listen, man, this is fantastic. I think that a lot of people are really going to

• 1:09:32Anthony Pompliano?

  enjoy hearing kind of more from your perspective. I have found you to be incredibly reasonable and intelligent on crypto and kind of everything that's going on. So, thank you so much for kind of spending time to come do this and navigate everything internally. Hopefully, they're happy with kind of everything that we covered and we'll have to bring you on again after, you know, a couple of months and see if anything's changed.

• 1:10:02Speaker 02

  Yeah, I'd love to come back on. This has been a lot of fun.

• 1:10:04Anthony Pompliano?

  We'll just bring you on and you can do the daily headline reads of crypto hacks and crimes, right? All right, thanks so much.

• 1:10:13Speaker 02

  All right, thanks.

• 1:10:14Anthony Pompliano?

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• 1:11:43Anthony Pompliano?

  If you liked this episode of Off the Chain and want to help us take crypto to the top of the Apple, Spotify, and other podcast charts, please do us a favor and rate, review, and subscribe. To review, simply go to the Off the Chain homepage, scroll down until you see the five blank stars. Taking 15 seconds to fill those stars in and leave a quick review goes a long way in helping us take the entire crypto ecosystem to the top of the charts. I appreciate you listening and see you next time on Off the Chain.