Darren Kleine

Following the drama of the SEC’s regulatory crackdown on multiple crypto exchanges, the Band-Aid has finally been ripped off, says Haseeb Qureshi.&nbsp;



“Everybody knew that this was coming.”



The managing partner at crypto investment firm Dragonfly spoke to Blockworks on the Empire podcast (<a href="https://open.spotify.com/episode/1kbgQmzOKGg7VhNIq2Q4Ld?si=3b123d9b991041d1">Spotify</a> / <a href="https://podcasts.apple.com/us/podcast/empire/id1554930038?i=1000616863596">Apple</a>) about events leading up to the legal clash between the <a href="https://blockworks.co/tag/sec">SEC</a> and crypto exchanges <a href="https://blockworks.co/news/sec-sues-coinbase">Coinbase</a> and <a href="https://blockworks.co/news/binance-changpeng-zhao-face-sec-charges">Binance</a>.



After the <a href="https://blockworks.co/news/bittrex-us-shutdown">Bittrex</a> and <a href="https://blockworks.co/news/sec-charges-beaxy-exchange">Beaxy</a> cases earlier this year, Qureshi says, the SEC developed a very clear legal theory.&nbsp;



All exchanges are essentially doing the same thing that Bittrex and Beaxy were accused of doing, he explains, “which is, operating without a BD license, operating without an exchange license and operating without a clearing agency license.”



“So that&#8217;s gonna be true of everybody, right? If it&#8217;s true of Bittrex, it&#8217;s true of Coinbase, it&#8217;s true of Binance, it&#8217;s true of everyone.”



<h2 class="wp-block-heading">Enforcing non-compliance</h2>



SEC Chair <a href="https://blockworks.co/news/gary-gensler-national-disgrace">Gary Gensler</a> has publicly stated that he thought that everything in crypto, besides bitcoin, is a security, Qureshi says. 



“Five of the top 10 items on Coinmarketcap are alleged to be securities.” The exceptions, he notes, include <a href="https://blockworks.co/tag/bitcoin">bitcoin</a>, <a href="https://blockworks.co/tag/ether">ether</a>, <a href="https://blockworks.co/tag/usdc">USDC</a>, <a href="https://blockworks.co/tag/usdt">USDT</a> and <a href="https://blockworks.co/tag/dogecoin">dogecoin</a>.&nbsp;



It all started with naming <a href="https://blockworks.co/news/sec-ripple-gary-gensler">Ripple as the first major security</a>, Qureshi says. People “deferred to the SEC,” thinking at the time that the agency must have known something that they didn’t, he says, so <a href="https://blockworks.co/price/xrp">XRP</a> was broadly delisted.



“Then they started going after more stuff,” he says. “It was <a href="https://blockworks.co/tag/algorand">algorand</a> and then it was <a href="https://blockworks.co/news/ripple-xrp-filecoin-sec-illogical">filecoin</a> and people were like, ‘Oh, really?’”



“Are you sure this is a security?”



Soon, “everything is a security,” he says. But why?



“Because there&#8217;s a team. And the team has tokens. And they talked in public.”



The industry has grown “fatigued” with the process, Qureshi says. “They&#8217;re not complying anymore.”



“You&#8217;ve basically enforced non-compliance,” he says. “It&#8217;s like, ‘Hey, the entire town, please report to jail tomorrow. You&#8217;re all arrested. Everything you&#8217;re doing here is illegal.’”



“And at a certain point, you force the industry into a corner of just saying, ‘Okay, well, we&#8217;ll see how it plays out in court.’”



<h2 class="wp-block-heading">Old systems are atrophying</h2>



Avichal Garg, co-founder of blockchain-centered venture capital firm Electric Capital, says the issue is one of credibility.



He notes that the SEC’s <a href="https://blockworks.co/news/binance-pushes-back-sec-lawsuit">accusations of fraud and commingling of user assets</a> against Binance <a href="https://blockworks.co/news/coinbase-binance-suits-different">substantively differ</a> from the allegations leveled against Coinbase.



“We don&#8217;t want another <a href="https://blockworks.co/tag/ftx">FTX</a> situation. People should not be touching user funds.”



Unlike the Binance lawsuit, the Coinbase case is “exclusively focused on what is or is not a security,” <a href="https://twitter.com/brian_armstrong/status/1666129111025324035?s=20">according</a> to Coinbase CEO Brian Armstrong. 



When “everything is a security,” Garg says, “but I&#8217;m not willing to go in front of Congress and tell you whether or not a particular thing is a security or why a thing might be a security, you start to erode credibility.”



“Over the last 50 or so years, a lot of these organizations and institutions that were created, into which we imbued all of this trust,” he says, “have started to erode.”



The frameworks through which these agencies operate are no longer relevant, Garg says.&nbsp;



“Should we really be determining the rules of the road in 2025 with digital assets and a global market and [artificial intelligence] that can control billions of dollars with precedent set in 1930 about orange groves?”



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Garg argues that rules need updating “because there&#8217;s no way people a hundred years ago could have imagined all of the ways that this stuff is gonna work today.”



“But if you don&#8217;t acknowledge that and if you don&#8217;t take the position of wanting to try to actually work on your mandate and you say, ‘I&#8217;m not gonna try to be helpful, I&#8217;m not gonna be collaborative, I&#8217;m not gonna make statements on the record,’” Garg says, “what you&#8217;re really doing is eroding trust.”



“The more crypto succeeds,” he says, “the more it&#8217;s an indication that all the old systems are atrophying.”



“And we don&#8217;t really have concrete plans to fix them.”



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The SEC is ‘eroding trust,’ Electric Capital co-founder says

Casey Wagner

<div id="highlights-block_62fa73dadf2ca" class="highlights">
 <ul>
 <li>Dragonfly purchases early Ethereum investor in undisclosed deal</li>
 <li>Dragonfly managing partner Haseeb Qureshi formerly worked as a partner at the hedge fund firm</li>
 </ul>
 
</div>



Cryptocurrency-focused venture capitalist Dragonfly has purchased its first digital assets hedge fund firm backed by Sequoia and a16z.&nbsp;



The acquisition, MetaStable, founded in 2014, is one of the oldest and highest-performing crypto hedge funds. MetaStable was an early investor in Ethereum, Filecoin and Algorand — at one point raking in a return in excess of <a href="https://fortune.com/2017/07/26/bitcoin-cryptocurrency-hedge-fund-sequoia-andreessen-horowitz-metastable/" target="_blank" rel="noreferrer noopener">500%</a>. 



More recently, the fund has invested in trading platform Floating Point Group and layer-1 protocol Iron Fish.&nbsp;



<a href="https://cms.blockworks.co/tag/dragonfly-capital/" target="_blank" rel="noreferrer noopener">Dragonfly</a> managing partner Haseeb Qureshi, who formerly worked as a partner at MetaStable, in a <a href="https://medium.com/dragonfly-research/re-introducing-dragonfly-f6a2deb7078a" target="_blank" rel="noreferrer noopener">blog</a> post Monday said the firm is now “more expansive than it’s ever been.” 



The news comes months after Dragonfly, based in San Francisco, CA, <a href="https://www.prnewswire.com/news-releases/dragonfly-capital-closes-oversubscribed-650-million-crypto-venture-fund-iii-301543290.html" target="_blank" rel="noreferrer noopener">closed</a> its third crypto venture fund at an oversubscribed $650 million. Its second fund, closed in 2021, cleared $250 million. The company remains interested in native protocols, Web3 initiatives and tokens that aim to create new digital economies, General Partner Tom Schmidt said in <a href="https://www.prnewswire.com/news-releases/dragonfly-capital-closes-oversubscribed-650-million-crypto-venture-fund-iii-301543290.html" target="_blank" rel="noreferrer noopener">May</a>. 



Dragonfly will also soon be the new owner of 10 million LDO tokens — equal to 1% of the total supply — after the Lido DAO <a href="https://thedefiant.io/lido-dragonfly-deal-approved" target="_blank" rel="noreferrer noopener">approved the sale</a> earlier this month. Lido is a liquidity platform where traders can earn yields on staked assets. LDO token holders came to an agreement after floating <a href="https://cms.blockworks.co/after-failed-first-attempt-lido-relaunches-proposal-for-diversified-treasury/" target="_blank" rel="noreferrer noopener">different versions</a> of the proposal. 



Dragonfly committed to buying the LDO tokens at $1.45 apiece, or at the two-week average price as of the vote plus a 5% premium, whichever is higher. There is a one-year lockup period.



As part of a brand overhaul, also announced Monday, the firm has dropped “Capital” from its name.&nbsp;



The acquisitions and rebranding effort fit into Dragonfly’s broader goal to reintegrate itself as a crypto-native brand. Its new look is affectionately inspired by the “hacker” and “weirdo” culture often displayed throughout the space, according to Qureshi.&nbsp;



“It’s time for a refresh,” Qureshi said.



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Crypto Venture Firm Dragonfly Acquires Hedge Fund Backed By A16z, Sequoia

Garrett Harper

In this episode of Empire, Jason is joined by Haseeb Qureshi and Tom Schmidt of Dragonfly Capital. Haseeb and Tom are top venture capitalists with unique insights into crypto&#8217;s current trends, new innovations and market sentiment. If you want expert advice on the market, these are two people you ask.



Haseeb Qureshi and Tom Schmidt discuss:



<ul><li>the venture capital landscape</li><li>power is shifting to investors</li><li>being long crypto while fighting the Fed</li><li>supercharged crowdfunding</li><li>convertible bonds &amp; debt financing</li><li>the changing meta</li><li>how projects choose where to build</li><li>the end of airdrops</li><li>market outlook</li></ul>



Check out what they had to say in the video below.👇



<figure class="wp-block-embed is-type-video is-provider-youtube wp-block-embed-youtube wp-embed-aspect-16-9 wp-has-aspect-ratio"><div class="wp-block-embed__wrapper">
<iframe loading="lazy" title="Can Crypto Find a New Narrative? | Haseeb Qureshi &amp; Tom Schmidt" width="1024" height="576" src="https://www.youtube.com/embed/ZAOhG9KdPu0?feature=oembed" frameborder="0" allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture" allowfullscreen></iframe>
</div></figure>



<h3 class="wp-block-heading">About the show</h3>



&#8220;Empire&#8221; is a twice-a-week show where we share the real crypto stories that aren’t heard elsewhere. On Mondays, Jason and Santiago Santos interview crypto industry movers and shakers to talk about their struggles, bold moves and tough decisions. Finish off the week with Friday&#8217;s weekly roundup episode that covers the top news and narratives of the week.



For any NPR or Guy Raz fans out there, you can think of &#8220;Empire&#8221; as a &#8220;How I Built This&#8221; for Web3.



Subscribe to &#8220;Empire&#8221; today on&nbsp;<a href="https://podcasts.apple.com/us/podcast/empire/id1554930038" target="_blank" rel="noreferrer noopener">Apple</a>&nbsp;or&nbsp;<a href="https://open.spotify.com/show/4UTePv1CR3APdKOiosR3Iq" target="_blank" rel="noreferrer noopener">Spotify</a>. Watch episodes on&nbsp;<a href="https://www.youtube.com/channel/UCEOv-8wHvYC6mzsY2Gm5WcQ" target="_blank" rel="noreferrer noopener">YouTube</a>.



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Podcast: Can Crypto Find a New Narrative? | Haseeb Qureshi & Tom Schmidt

Ben Strack

<div id="highlights-block_62697aca73bac" class="highlights">
 <ul>
 <li>Founded in 2018, Dragonfly has invested more than $700 million overall</li>
 <li>Most US venture capital firms don’t focus enough on crypto projects in Asia, according to a Dragonfly Capital executive</li>
 </ul>
 
</div>



Dragonfly Capital has launched its third crypto venture fund with $650 million in commitments, earmarking the capital infusion to back later-stage startups as the crypto industry matures.



Those backing the new fund include Tiger Global, KKR, Sequoia China, Invesco, Top Tier Capital Partners and Ivy League endowments. The fund was originally aiming for $500 million in commitments, <a href="https://www.sec.gov/Archives/edgar/data/1900344/000190034422000001/xslFormDX01/primary_doc.xml" target="_blank" rel="noreferrer noopener">a regulatory filing</a> shows.



Dragonfly intends to “double down” on its backing of the next breakthroughs in crypto infrastructure, DeFi and smart contract scaling, as well as consumer products, such as NFTs, crypto games and DAOs.



“Our strategy is still early-stage investing, but we&#8217;ll now be able to lead more Series A and Series B rounds as well,” Dragonfly Managing Partner Haseeb Qureshi told Blockworks. “Our goal is to support entrepreneurs in every round from seed to exit.”



The new fund has not yet made any investments.



<a href="https://cms.blockworks.co/dragonfly-launches-second-vc-fund-with-225-million/" target="_blank" rel="noreferrer noopener">The firm last year launched</a> its second venture capital fund, focused on international decentralized technologies, with $225 million.



Founded in 2018, Dragonfly has invested more than $700 million, including stakes in Avalanche, NEAR Protocol, Compound, MakerDAO, 1inch, Matter Labs, Anchorage and Dune Analytics.



Despite venture dollars flowing into crypto in recent years, Qureshi said the biggest gap in the market right now is investing in Asia.



“Dragonfly has been global from day one, so we have deep roots in Asia,” he said, adding that the firm was an early backer of Amber Group, Babel Finance, Matrixport and Bybit. “We believe that it&#8217;s a hugely important part of the market that&#8217;s neglected by most of the US [venture capital firms].”



Amber Group reached a $3 billion valuation with <a href="https://cms.blockworks.co/crypto-trading-platform-amber-group-eclipses-3b-valuation-with-latest-raise/" target="_blank" rel="noreferrer noopener">its fundraise in February</a>, while Matrixport <a href="https://cms.blockworks.co/matrixport-raises-100m-and-hits-unicorn-status-with-1b-valuation/" target="_blank" rel="noreferrer noopener">hit a $1 billion valuation</a> last year.



Bybit, which recently moved its headquarters from Singapore to Dubai, unveiled crypto options trading this week. CEO Ben Zhou said the firm is confident that the new offering will help normalize crypto options trading, “just like what Robinhood did for stock options.”



Qureshi declined to comment about potential future fund plans.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



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Dragonfly Capital’s Latest Crypto Fund Aims to Invest From ‘Seed to Exit’

In the latest episode of &#8220;<a href="https://youtu.be/akAFJBudGzU" target="_blank" rel="noreferrer noopener">Empire</a>,&#8221; Blockworks&#8217; co-founder Jason Yanowitz is joined by Haseeb Qureshi of Dragonfly Capital and Avichal Garg of Electric Capital.



Both are strong voices when it comes to tokenization, the metaverse and multichain futures. In this episode, Haseeb and Avichal debate the merits of the &#8220;blockchain as cities&#8221; philosophy, the future of crypto and what a multichain world will look like.



Plus, hear their thoughts on:



<ul><li>Network effects in crypto</li><li>Narratives in crypto</li><li>and so much more!</li></ul>



Check out what they had to say in the video below.👇



<figure class="wp-block-embed is-type-video is-provider-youtube wp-block-embed-youtube wp-embed-aspect-16-9 wp-has-aspect-ratio"><div class="wp-block-embed__wrapper">
<iframe loading="lazy" title="Multichain Future Debate | Haseeb Qureshi &amp; Avichal Garg" width="1024" height="576" src="https://www.youtube.com/embed/akAFJBudGzU?feature=oembed" frameborder="0" allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture" allowfullscreen></iframe>
</div></figure>



<h3 class="wp-block-heading">About the show</h3>



&#8220;Empire&#8221; is a twice-a-week show. On Thursdays, Jason interviews crypto industry movers and shakers to talk about their struggles, bold moves and tough decisions. Friday&#8217;s weekly roundup episodes feature <meta charset="utf-8">co-host Santiago Roel Santos and cover the top news from the past week.



For any NPR or Guy Raz fans out there, you can think of &#8220;Empire&#8221; as a &#8220;How I Built This&#8221; for the bitcoin and crypto industry.



Subscribe to &#8220;Empire&#8221; today on&nbsp;<a href="https://podcasts.apple.com/us/podcast/empire/id1554930038" target="_blank" rel="noreferrer noopener">Apple</a>&nbsp;or&nbsp;<a href="https://open.spotify.com/show/4UTePv1CR3APdKOiosR3Iq" target="_blank" rel="noreferrer noopener">Spotify</a>. Watch episodes on&nbsp;<a href="https://www.youtube.com/playlist?list=PLvER9nHSRN3wPkrDGTT5_8VC4Hjcq0f9U" target="_blank" rel="noreferrer noopener">YouTube</a>.



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