A few commentators convinced me I could offer a few general reax to this ongoing crypto crisis without getting into the specifics of the FTX/SBF case (where, as previously noted, I’m going to withhold editorializing). So I figured I’d give it a shot FWIW. 1/
This is at least the 4th significant burst “asset bubble” of my adult life. (a) algo-trading bubble of 1987; (b) the Dot.com bubble of 2001; (c) the securitization bubble of 2008; and now (d) the crypto-bubble of 2022. (And no I wasn’t around for crash of ’29!) 2/
(This list omits a lot of crises that either were one-offs or simply got exposed amidst a market correction, such as Drexel, Long-Term Capital Mgmt, Madoff, Theranos, etc. To count as a bubble IMO, the crisis must pertain to an entire asset class.) 3/
While each of these bubble was unique in its own way, they shared similarities too: 4/
First: In each an emergent “cool-kids’ view” challenged traditional thinking abt how markets work. Whether it trading platforms, non-brick-and-mortar marketing, copula-based securitizations or DeFi, vocal skeptics were seen as “get-off-my-lawn” dinosaurs who just didn’t get it 5/
Second: Proponents of each new narrative were themselves genuine believers who drank the Kool-Aid; bona fide proselytizers speaking the truth (or *their* version of it) in touting the narrative. Many were also smart and dynamic, and they easily attracted uncritical groupies 6/
Third: As the “new narrative” bubble persisted over months/years, even skeptics began questioning whether they were too hasty to criticize; maybe(?) a radically new paradigm *was* emerging. Many dampened their criticisms. The resulting equilibrium was uneasy/wary acceptance… 7/
Fourth: This wary acceptance also fed regulatory paralysis: Each new thing was unfamiliar; it didn’t fit w/ the existing regulatory extrusion machine. And, if the wary acceptance foretold a new paradigm emerging, regulation wld be dumb. So regulators sat on their hands too 8/
Fifth: All the while, sub-rosa doubts lingered; many sideline observers (and even participants) remained vigilant for early cracks in the new toy’s armor. When those cracks manifested, they were usually small, but still large enough to undercut confidence in the new narrative. 9/
Sixth: The confidence shock compounded quickly, as proponents were so taken by the new thing they had used it as building blocks to erect complex structures. E.g., synthetic CDOs composed of other CDOs. Sock puppets all the way down. Now *all* the building blocks were suspect 10/
Seventh: The burst bubble gave way to cataclysmic pain & loss--often to folks who could ill afford it. And with it came pressing questions: Who was to blame? Who was the mastermind that orchestrated the collective social delusion feeding the bubble? [We are here now, IMO] 11/
Eighth: A phalanx of regulatory entrepreneurs soon enters, touting hastily-cobbled/recycled initiatives for antsy government actors. Some initiatives are train-wrecks, some decent improvements; most are unclear until they play out. None may actually prevent the next bubble. 12/
Ninth: After things calm down a bit, we awkwardly find ourselves still using some of the same instruments blamed for the previous bubble; algo trading, internet marketing, securitization, or (…perhaps…) blockchain verification protocols often tied to payment systems. 13/
Along with pain and chaos, each arguably left behind a contribution – just not as revolutionary as its proponents dreamed/espoused. /14
Tenth: Wash rinse repeat; like a cicada, a next “new thing” will pop up w/in a decade. I've no clue as to its form, other than predicting it’ll be flashy; it won’t fit in our reg structures; it’ll have smart/articulate proponents; & it'll seduce a willing public into playing 15/
Perhaps this exasperating process is just part of the human condition (whether we like it, or -- as I find myself today -- not). /end

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More from @ProfEricTalley

Nov 11
A few thoughts on the Twitter byout debt, as original underwriting banks attempt to syndicate out debt (reportedly) at 60% of par. 1/ bloomberg.com/news/articles/…
Warning of possible bankruptcy may be a savvy move by Musk if he is contemplating purchasing the debt himself (or a good chunk of it), directly or through Twitter. IMO he’s not misstating things to say that bankruptcy is a possibility under the status quo ante. 2/
Indeed, if the current debt stays on the books and is placed with third parties, the company will very likely have have a cash-flow / distress problems over the next 12 months that will be hard to solve. 3/ news.bloomberglaw.com/esg/musk-risks…
Read 6 tweets
Oct 28
Now that it’s over(?), here are my 10 takeaways from the TWTR-Musk saga: 1/11
1.The merger dispute was never that hard of a case. No novel legal interpretations came out of it, and it settled in a manner befitting its merits. Oliver Wendell Holmes once famously quipped, “Hard cases make bad law”. This easy case made (more or less) no law.
2.That said, even relatively simple cases can be made to look hard(er) than they are if people are motivated & equipped to throw lots of $ and spin at them. Especially when third parties get in on the $-spin game, too. This one proved to be irresistible catnip to many.
Read 11 tweets
Sep 19
@ProfRobAnderson offers up a pithily written paper arguing SP is not ineluctable even if Musk found in breach. I agree w/ that general point (even if Rob & I possibly disagree about what relative point estimates to put on SP, $1b, $2b & YOLO Expectation damages.) A Good Read!👇
A key point concerns the "prevention" doctrine, which CM used in Decopac to disregard a financing failure engineered by the buyer in order to trigger an escape hatch on SP. Rob argues that prevention applies only to "conditions", not "remedies" (under his reading of the Rtmt 2d). Image
I'm still mulling what I think of this point. On the one hand, we *are* in DE, not in Restatement-land, and Decopac is the most immediately applicable DE precedent. On the other hand, CM did cite to the Restatement in Decopac, so maybe she was trying to be faithful to it?
Read 5 tweets
Sep 9
@chancery_daily has badgered me into offering up an argument why $TWTR might be able to get (uncapped) expectation damages – rather than capped $1b damages – if SP is not granted & musk found in breach. I’ll oblige, but with understanding that this is a long shot argument
The key damages provision that needs to be interpreted here is 8.3(c)(ii), which reads (in relevant part):
This language seems to say TWTR is entitled to the Termination Fee, a remedy distinct from expectation damages. But it does NOT say that this option is TWTR's exclusive $ remedy, at least after a knowing breach. Rather it says only that this is "a thing" TWTR is entitled to.
Read 14 tweets
Sep 8
Second Circuit just reversed the Citibank/Revlon mistaken payment opinion from SDNY! Image
Opinion by Judge Leval (not surprising, since he's the contracts guru of the 2nd circuit
Holding is that Bank Worms precedent does not apply to these facts Image
Read 21 tweets
Jul 13
Twitter, Elon, Revlon duties and settlement: Following up on my earlier 🧵 on settlement: suppose TWTR negotiates a settlement with Musk that involves a repriced deal (say at $40 / share) and the deal closes....
Twitter SHs would probably sue, alleging a Revlon violation and claiming that the Board did not undertake reasonable efforts to protect the $54.20 price already negotiated. How should the board respond? One (boring) way is to fight it, of course….
But another might be for the board to file a brief brief that says “💩“, and await the default judgment against them (e.g., the diff b/t $54.20 and $40). Once that judgment is entered, the board sues TWTR for indemnification under Article VII of the TWTR charter, which reads…
Read 9 tweets

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