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Subscribe here: Apple Podcasts | Spotify | YouTube<\/em><\/p>\n On this week\u2019s episode of The David Frum Show<\/em>, The Atlantic<\/em>\u2019s David Frum opens with his thoughts on the shooting at Bondi Beach and the rise of anti-Semitic violence globally. He discusses what willing governments can do to crack down on radicals and prevent future acts of violence.<\/p>\n Then David is joined by Will Thomas, a professor at the Michigan Ross School of Business, to discuss Thomas\u2019s paper \u201cCrypto Kleptocracy.\u201d David and Thomas discuss how the second Trump term has embraced the crypto industry, how cryptocurrencies have enriched the Trump family, and the new channels for corruption that crypto opens.<\/p>\n Finally, David discusses Joseph Conrad\u2019s Lord Jim <\/em>and what the novel can teach us about courage, a discussion relevant after an eyewitness reported that he thought police were slow to act during the terrorist attack on Bondi Beach.<\/p>\n The following is a transcript of the episode:<\/em><\/p>\n David Frum:<\/strong> Hello and welcome to The David Frum Show<\/em>. I\u2019m David Frum, a staff writer at The Atlantic<\/em>. My guest this week will be Will Thomas, professor at the Michigan [Ross] School of Business, and we\u2019ll be discussing the intersection of cryptocurrency and American kleptocracy, and how we can have a more honest approach to the management of both. My book of this week will be Lord Jim<\/em>, by Joseph Conrad: a study of courage\u2014what it means to have it, what it means to lack it.<\/p>\n But before the dialogue and before the book discussion, some opening thoughts on the terrible news this week from Australia, a massacre on Bondi Beach. Apparently, two gunmen, armed with hunting rifles, who killed, as I speak, a tally of 15 people, injured many more, who had gathered on the beach to celebrate the Jewish holiday of Hanukkah, the first night of Hanukkah. Much has been written about this terrible crime; I\u2019ve written something myself on The Atlantic<\/em>, and you can see my immediate thoughts there. I want, in this opening, to discuss something a little more practical, which is: What can be done about outrages like this? Are governments truly helpless in the face of this kind of anti-Semitic\u2014and it didn\u2019t have to be anti-Semitic; it could be some other kind of extremist hate\u2014or is there more that could have been done that wasn\u2019t done?<\/p>\n I draw attention to this fact: The two alleged, apparent gunmen are reportedly a father-and-son team, and the son, in particular, was known to the police. In fact, Australian police\u2014the Australian security organization, which goes by the acronym ASIO\u2014ASIO had put him under close scrutiny in 2019 because of his suspected ties to ISIS. They kept him under watch for about six months and then decided that he wasn\u2019t an active threat to anybody and ceased to pay attention to him. And I\u2019m not second-guessing that decision, because maybe they had good reasons. People deactivate and activate. The resources of a democratic country are large, but they\u2019re not infinite; you cannot watch everybody anywhere. So I\u2019m not second-guessing that decision. Maybe it was right; maybe it was wrong.<\/p>\n But the point is he was a known quantity. And when you get these kinds of radical actions, it very often happens that the people involved are known quantities. We are no longer in the al-Qaeda days, where a foreign terrorist group infiltrates sleeper agents into a country, tells them to avoid all contact with the police\u2014Drive the speed limit; keep out of the public eye; don\u2019t get in trouble; don\u2019t get arrested<\/em>\u2014until the day to strike. The extremist actions that are happening in the 2020s are much more local. They import the technology, the know-how, the ideology, but the persons themselves are from the place where the crime is committed, usually, or they\u2019ve been there for a while, at least. And they\u2019ve had a chance to break other kinds of laws, as they often have done. So they\u2019re known to the authorities.<\/p>\n Now, again, the authorities do not have infinite resources; they can\u2019t watch everybody. And in a free society, anyway, there are limits on what \u201cwatching\u201d means. You can\u2019t just send an agent to follow somebody around because you think he might, at some point in the future, do some heinous act. But what they can do is put pressure, put various kinds of legal pressure, on the world from which these outrages come.<\/p>\n In Australia, in my native Canada, in the United States too, the movement that has expressed itself in anti-Semitic murders\u2014like this one in Sydney; like the murder of two and the wounding of three in Manchester, England, on Yom Kippur this year; like the assassination of two people here in Washington earlier in the year 2025\u2014those people usually have associations with some kind of radicalized group, and that group is something the government can monitor. And what it can do is be aware that, in these kinds of groups, that there are kind of circles: There\u2019s a hardest core of people who might be on their way to committing an act of violence. There\u2019s a slightly outer core of people who, without committing the act of violence themselves, will support and enable the act of violence and have a pretty good idea that the act of violence is coming. And then beyond them, a group of activists who maybe don\u2019t know that an act of violence is coming but press the law and create permissions that enable the people who are more active, more militant to go forward. And then outside them is a larger group of well-wishers and fellow travelers who may share ideas and principles but probably aren\u2019t in the movement for the long haul.<\/p>\n One of the things that\u2019s very important to do is to separate the soft groups from the hard groups and to make sure that the hard groups understand they\u2019re not gonna have as much permission and protection as they think they do. And this begins by enforcing laws pretty strictly and pretty impartially, a let me give you an example of what I mean. In September of 2025, a supporter of the anti-Israel cause rode along Bondi Beach\u2014didn\u2019t just ride, galloped on horseback on Bondi Beach\u2014holding a Palestinian flag. Now he didn\u2019t commit\u2014no one was hurt. But this was a reckless action. People could have been hurt. The beach is crowded. We have no idea how good a rider he is, and anyways, it\u2019s illegal to ride a horse on the beach. He was let go with a warning. Now, if you walk your cocker spaniel on Bondi Beach, you will face a fine of up to 330 Australian dollars. If a restaurant, a sidewalk caf\u00e9, doesn\u2019t place its chairs properly, there\u2019s a fine for them. But someone, because he came from a favored political group, was able to break the law and do it with impunity, or with a warning, and that sends a message about the attitude of the public authorities. Now, that doesn\u2019t affect the hard-core person who\u2019s determined to commit violence, but it does affect those who are making a decision: How far along the way do I go with this hard-core person who\u2019s willing to commit violence?<\/em><\/p>\n A lot of anti-Israel violence since October 7 takes the form of a kind of playacting: dressing up in terrorist outfits; occupying public spaces in illegal ways, like putting up tents that are normally prohibited but putting them up on university campuses and defying the authorities to do anything about it; the riding the horse on Bondi Beach\u2014that kind of thing. There\u2019s a kind of playacting. But the playacting is not just a form of expression; it\u2019s also a form of testing the attitude of the authorities. And if the authorities are more resilient and robust, the people who don\u2019t wanna get in trouble, which is most of us, will back away from the playacting and will retreat to more lawful forms of protest.<\/p>\n No one is saying you don\u2019t have a right to express your views on any contentious issue, and you wanna picket, picket. But for every picketer, there are rules that govern what is legal time, place, and manner\u2014methods of picketing. And the anti-Israel movement systematically breaks those rules, at first in quite modest ways, but then in more and more threatening ways. Maybe it\u2019s not the biggest deal in the world that somebody puts up a tent and breaks the campus rules on camping on the quad overnight. It\u2019s a bigger deal when they are forming mobs in front of day-care centers or synagogues or old-age homes or hospitals, all of which have happened in many cities, and blowing whistles in the middle of the night. And, again, testing: Is anyone watching? Will anyone do anything about us?<\/em><\/p>\n And, again, if you enforce the rules, you are not going to necessarily deter the most violent person, but you can successfully separate the most violent people from the support structures that they need. And it becomes especially dangerous when the reason that that separation does not happen is, if there is a government, as was the case with the Australian federal government at present, as has been the case with some Canadian governments, both federal and provincial, where the government, in some ways, looks to the soft part of the movement for some kind of political support. So it\u2019s worried, The reason we\u2019re not going to enforce the law on riding horses on Bondi Beach, the reason we\u2019re not gonna enforce the rules about blowing whistles under the windows of hospitals\u2019 emergency units, the reason we\u2019re not gonna stop you from mobbing in front of synagogues or day-care centers in ways that are clearly meant to be intimidating is because <\/em>some of the people in this mob may vote for us\u2014or, anyway, are connected in ways to people who vote for us<\/em>, because that tells the mob that the government is afraid of them. And that is a very different dangerous feeling for a government to communicate.<\/p>\n Managing the problem of how do we protect lawful protests, lawful dissent\u2014whatever one thinks of the particular dissent\u2014and separating it from taking the steps along the pathway to violence begins by understanding that people who are really good liberals in their heart think that free speech becomes most important and precious when it\u2019s at the very outermost edge, that when the speech is at its most extreme and when it is tempting us most to do something to suppress it, that\u2019s when it most needs to be protected. And so, when somebody is chanting some hideous slogan or protesting under the windows of an old-age home, that\u2019s exactly where the free-speech instincts need to be most robust; that\u2019s the way many strongly principled liberals think. But not everyone in that crowd is a strongly principled liberal. They\u2019re thinking in a different way. They\u2019re thinking, I am testing and probing as to what is possible, and if this is possible, then the next thing will be possible. And I\u2019m not walking up to a bright boundary; I\u2019m changing the nature of the boundary, and I\u2019m pushing and pushing and pushing to test and expose the weakness of the authorities and building a network, a community, that includes people who will take up a gun and mow people down on a beach in Australia<\/em>.<\/p>\n And now my dialogue with Will Thomas.<\/p>\n [Music<\/em>]<\/strong><\/p>\n Frum:<\/strong> Will Thomas is assistant professor of business law at the Michigan Ross School of Business. He is the co-author, with Jeffery Zhang, of an article called \u201cCrypto Kleptocracy,\u201d which was published in the November 2025 online edition of the Michigan Law Review<\/em>. And it\u2019s that article that sparked the conversation. I\u2019ve written a little bit about crypto for The Atlantic<\/em>; I focused especially on the problem with stablecoins. But Will Thomas and his co-author Jeffery Zhang point us to another direction, which is the power of cryptocurrency to enable government corruption.<\/p>\n Their article begins by pointing us to two converging lines of threat to American political integrity. The first is the change in the law of public integrity that has been advanced by the Supreme Court over the past dozen years and especially in a 2016 case, which involved the corruption trial of a former governor of Virginia, Bob McDonnell. In the case McDonnell v. the United States<\/em>, the Supreme Court dealt with these facts: The governor of Virginia and his wife had taken $175,000 in cash and gifts from someone with an interest before state government. The governor had enabled meetings for this donor, set \u2019em up with people on their state bodies that oversaw the interests that the donor had an interest in. And the governor facilitated those meetings and gave a kind of indication of the answer that he would like to see, but there wasn\u2019t an explicit, Here\u2019s the bag of swag. Here\u2019s the favor in return<\/em>. And the Supreme Court said, You can\u2019t convict a governor of a state of bribery on those charges. Merely setting up meetings does not count as an \u201cofficial act\u201d under public-corruption statutes<\/em>.<\/p>\n Now, this makes it extremely difficult to convict anybody of anything because corruption, as the Supreme Court wants it, you have to enter into the mind of the person. You have to say, The official receives <\/em>this benefit from the donor, and in return, they do <\/em>that favor<\/em>. That can be hard to prove. The things that are easy to prove is that the meeting happened and the favorable result ensued, but we don\u2019t know exactly what was inside everybody\u2019s brain. The Supreme Court has made it very difficult to prove. Meanwhile, the cryptocurrency industry has created this extraordinary method of flowing cash, or the equivalent of cash, to all kinds of people, including public officials, in ways that are very hard to trace, and it is the convergence of these two things that inspired the article \u201cCrypto Kleptocracy.\u201d<\/p>\n This is especially relevant because of what is happening at the federal level with President [Donald] Trump. President Trump has made, since being elected to the presidency last November and since becoming president in January, an enormous fortune\u2014hundreds of millions, maybe even in excess of $1 billion\u2014from cryptocurrency. One of the cryptocurrency schemes that the president floated was the launching of a meme coin called $TRUMP. That came on the market at the beginning of 2025. It was sold for $75 per coin\u2014more than $75. I looked it up this morning\u2014I\u2019m speaking to you on the 15th of December\u2014and the coin is trading for about five and a half dollars. So it\u2019s lost 90 percent of its value. And one of the questions we\u2019re invited to ask is: Did the people who lost all that money buying crypto coins, are they dupes? Or did they not care? Did they think, This is a great way of advancing money to the president<\/em>?<\/p>\n So I thought, in that context, very important to reach out to Will Thomas to talk about \u201cCrypto Kleptocracy.\u201d Will, thank you so much for joining me today.<\/p>\n Will Thomas:<\/strong> Hey, David. Thank you for having me on today.<\/p>\n Frum:<\/strong> So let\u2019s start with this question. You\u2019re a law professor; you think about upholding the law. I wanna invite you to think like a lawbreaker. So, you and I, we are no-goodniks. We are out there in no-goodnik-land, and we are planning to get a favor from a public official\u2014let\u2019s say a state governor to make it less inflammatory. And you\u2019re the expert, and I turn to you and say, I wanna deliver this governor a big pile of cash in ways that make it difficult for me to be punished, and I have some favors to ask<\/em>. What\u2019s my way? How should I do that? How should I structure this deal to get my favor from my governor with minimal legal risk?<\/p>\n Thomas:<\/strong> So, unfortunately, what I would tell you is it\u2019s gotten a lot easier, and it\u2019s gotten a lot easier both for decisions like McDonnell<\/em> that you mentioned but also just a variety of Supreme Court decisions that have really narrowed what we think of as sort of legally enforceable corruption.<\/p>\n What the courts are really looking for these days is a pretty explicit sort of quid-pro-quo relationship. And the things that have been ruled out are the more casual gift with no explicit request for something of value, even though that\u2019s well understood in sort of social practice. They have ruled out, recently, gratuities, so my giving something of value to an elected official after<\/em> they took the actions that I wanted them to take. And they\u2019ve ruled out giving money in exchange for maybe even explicit promises to somebody who is temporarily out of office. So we saw, most recently, Trump\u2019s border czar, Tom Homan, was caught in an FBI sting receiving a bag of $50,000 in cash with explicit promises to steer government contracts once he came into office. The current administration dropped that case, and there\u2019s many reasons for that. But one of them is, I think they could point to Supreme Court cases saying that is not illegal behavior. So the advice I\u2019d be giving a client is, Look, there\u2019s about two or three things that you can\u2019t do to influence a politician, but short of that, be as transactional as you wanna be, and chances are, the law is gonna protect you, and even if the law doesn\u2019t protect you, the enforcement rates are so low that you don\u2019t have to worry about it<\/em>.<\/p>\n Frum:<\/strong> So I hear three opportunities, three fantastic opportunities to advance my case with my governor. The first is, if I get him the money or the benefit before<\/em> he wins the election. The second is, if I get him the benefit or the money after<\/em> he does the favor. And the third is, if I can just blur the connection between the money and the favor, and say, Nowhere is it going to be written down that \u2018here\u2019s the bag of swag in return for the favor.\u2019 It\u2019s just: I\u2019m giving you gifts, and you\u2019re doing me favors, and it\u2019s kind of blurry, especially if the favors are not exactly, like, an order written in your handwriting, but you\u2019ve set up a meeting, you\u2019ve told the zoning board, you\u2019ve told the state educational foundation that this is the result that would be good for the state, it happens to align with my interests, and you get the present<\/em>. On all of these cases, I\u2019m probably safe?<\/p>\n Thomas:<\/strong> I think that\u2019s right. I think you got three pretty solid pathways these days to avoid getting in trouble.<\/p>\n Frum:<\/strong> Okay. Well, that\u2019s great news for me as the corrupt donor. But I\u2019m worried about my reputation. It\u2019s not just enough for me to escape the law. Even though I can probably get away with it if indicted, I\u2019d rather not be indicted, and I\u2019d rather just not have people know about it. Is there a way to make this more anonymous?<\/p>\n Thomas:<\/strong> Right. Absolutely. And this is, I think, where crypto really enters the scene. Obviously, if there are ways to do these things without being detected, that\u2019s gonna do two things\u2014<\/p>\n Frum:<\/strong> Yeah. That\u2019s great. That\u2019s what I\u2019m looking for.<\/p>\n Thomas:<\/strong> Right. So crypto is this cheap, sort of anonymous piece of financial technology. It\u2019s embedded in this industry that is increasingly falling between regulatory cracks, so there\u2019s not a lot of oversight. And it\u2019s hitting the scene right as we\u2019re having this sort of steady retreat away from fraud and anti-corruption law. So you sort of put these things together: Crypto creates space\u2014whether it is through something like meme coins, whether it\u2019s through something like stablecoins\u2014to funnel, frankly, huge amounts of cash or cash equivalents to a willing politician without a lot of ability to even track what\u2019s going on. So as long as your corrupt governor is putting themself up for business by, say, creating their own stablecoin or issuing their own meme coins, you\u2019re gonna be able to funnel them quite a bit of money, and it will be virtually impossible for anybody else to track.<\/p>\n Frum:<\/strong> Okay, now we\u2019re putting on something\u2014so my corrupt governor has issued a meme coin. It\u2019s going start worth $75; it\u2019s going to rapidly fall to nothing, but I don\u2019t care. What I want\u2014I want him to know that the money came from me, but I don\u2019t want anyone else to know. Can I structure things that way?<\/p>\n Thomas:<\/strong> Right. So the sort of deep irony of crypto is it\u2019s built atop this system that\u2019s supposed to be giving us radical transparency, right? We know all the money that moves across wallets; we conceal all of that information. And yet the sector\u2019s notorious for being sort of secretive and providing anonymity. So you need to find some way to connect to the governor themselves by, say, informing them directly. But nobody\u2014well, it\u2019ll be extraordinarily difficult for anyone to be able to take payments made by one wallet into the meme coin and identify that with you and specifically identify you in relation to some kind of agreement or quid pro quo. You basically have these entirely disconnected events, with very little correspondence between the real world and the sort of crypto ledger.<\/p>\n Frum:<\/strong> Let\u2019s go slower there because we spend a lot of time thinking about this\u2014many honest people don\u2019t, and they shouldn\u2019t. So what is cryptocurrency? What\u2019s a coin? What\u2019s a meme coin? Explain these terms a little bit.<\/p>\n Thomas:<\/strong> So we\u2019re gonna focus on just meme coins and stablecoins because cryptocurrency is a broad sector, so it\u2019s a little bit of misnomer; it covers lots of things.<\/p>\n So what a meme coin is\u2014a meme coin is essentially a loyalty token. Somebody is going to issue a variety of tokens around a theme, around an idea, a name, whatever. And they\u2019re going to try to convince people to purchase them, in essence to purchase them to express their loyalty to the underlying idea, to express their interest. It\u2019s almost like a trading card, right? It\u2019s not necessarily purchased for its value; it\u2019s purchased \u2019cause you\u2019re interested in it.<\/p>\n I say that\u2014if you actually look at the practice of meme coins, they look a lot like penny stocks, right? Lots of people who buy these meme coins aren\u2019t necessarily buying them because they want to say, I own a meme coin with Donald Trump\u2019s name on it<\/em>. They\u2019re buying them as a get-rich-quick scheme. The thought is, This thing will be valuable for a short period of time. If I can buy a lot now and sell it before it drops from $75 to $5, I can make a quick buck<\/em>.<\/p>\n Frankly, if you talk to people in the meme-coin world, there\u2019s the marketing description, which is they\u2019re these kind of like trading-card-style loyalty tokens, and then there\u2019s the actual day-to-day practice, in which it just looks like a boiler-room kind of pump-and-dump scheme.<\/p>\n Frum:<\/strong> Okay, but I think we still haven\u2019t explained to people what\u2014so cryptocurrency is a bunch of computer code that has a unique location and that you persuade people that this computer code has some value. And the most famous of them is bitcoin; there are others. And there\u2019s a value that is attached to this piece of code. There\u2019s a promise that there will only be so many units of this piece of code. And although it doesn\u2019t have any actual commercial uses, nonetheless, it has value, and simply because it\u2019s traded back and forth, the value tends to increase. But it\u2019s essentially computer code that exists on computer systems and is traded back and forth.<\/p>\n Thomas: <\/strong>That\u2019s correct.<\/p>\n Frum: <\/strong>Have I said that correctly?<\/p>\n Thomas:<\/strong> That\u2019s exactly right. So it is sort of fiat currency in the truest sense, right? We just have a purely digital or sort of computer representation of this thing.<\/p>\n Frum:<\/strong> Don\u2019t call it\u2014but it\u2019s not a currency. You can\u2019t buy anything with it.<\/p>\n Thomas:<\/strong> In practice, it is not like the U.S. dollar or the euro, right. It\u2019s still a highly specialized set of folks trading it amongst themselves.<\/p>\n Frum:<\/strong> It\u2019s super inconvenient, and I looked this up: According to the Federal Reserve, of the people who own cryptocurrency, only 2 percent of those people ever use it to buy anything, and 3 percent\u2014and they may overlap with the 2 percent\u2014ever use it even to transfer money back and forth. It\u2019s a speculative asset that\u2019s for holding and for trading, not for buying and for selling.<\/p>\n Thomas: <\/strong>And I think, actually, that description is important because, while lots of people who talk about crypto, and particularly advocates of crypto, talk about it in the future\u2014It will be a currency; it will replace the dollar; it will be a seamless method of transaction<\/em>\u2014the actual practice today, what you\u2019re looking at is exactly right. The actual practice today is people seem to be treating this as a risky or speculative investment, right? I\u2019ve got my normal stocks and bonds, and I\u2019m gonna put a little money in this wild thing that might, sort of arbitrarily, make me a huge amount of money<\/em>.<\/p>\n I actually have a colleague who studies crypto investors: What do they like? What do they know? One of the things that surprises me is even people who choose to buy any kind of crypto asset, whether it\u2019s bitcoin, whether it\u2019s a meme coin, know almost nothing about what crypto is. In fact, if you ask them, What is the blockchain?,<\/em> they say, I\u2019ve never heard of that<\/em>, even though blockchain is the sort of underlying technology, it is the heart of all crypto assets. It is that sort of digital ledger that you were describing a moment ago. So people, clearly, are doing this as some kind of investment scheme, even if the crypto industry would like to characterize it as something bigger and grander.<\/p>\n Frum:<\/strong> Look, if you wanna buy milk, you want U.S. dollars, euros, yen\u2014whatever they\u2019re taking in the country in which you live. If you wanna hold wealth safe from the ravages of inflation, you wanna buy gold or real estate or, if you have good taste, art. There are all kinds of hard assets that retain value in times of monetary inflation.<\/p>\n But what it\u2019s really great for is if you\u2019re an international terrorist group and you wanna move money back and forth, or if you are a drug dealer and you wanna convert your piles of cash into something that you can put in a bank, it\u2019s really useful. And that\u2019s how the people at Binance got into trouble, because their platform was used that way, and the allegation against Binance was they knew it and organized their platform to help terrorists and drug dealers. And for that, the head of Binance was convicted and sent to prison because a jury accepted that he knowingly helped terrorists and drug smugglers.<\/p>\n Thomas:<\/strong> That\u2019s exactly right. In addition to being this sort of purely digital representation of a thing of value, the crypto industry is very good at bouncing transactions through what people usually describe as shell companies, right? It\u2019s very good at masking transactions. And, yeah, you don\u2019t even have to say allegations\u2014the Binance founder and Binance were convicted of federal crimes, including money laundering, and that money laundering was related to helping terrorist organizations cover up their activities so that they would avoid U.S. regulatory scrutiny. This is deeply harmful to national-security interests. This is a profoundly<\/em> worrisome use of the technology.<\/p>\n Frum:<\/strong> So if I\u2019m involved in the business of terrorist money laundering and I think, I could use a little political muscle behind me of the regular state<\/em>\u2014so here\u2019s where this all [comes] tremendously back to our scheme about bribing the corrupt governor. So we can take some of this crypto money and funnel it to him. Now, my governor has got a problem, which is he\u2019s actually quite a shrewd person, and he understands that cryptocurrency moves around a lot in value and what is $1 million today might be half a million tomorrow\u2014it might be $2 million tomorrow, but it might be half a million tomorrow. He likes U.S. dollars, so he wants to know that he can count on this for his old age. He wants $200,000\u2014not ether or dogcoin or catcoin\u2014$200,000. How can I get him $200,000?<\/p>\n Thomas:<\/strong> So I think this is actually where stablecoins become the much bigger sort of public-corruption concern and threat.<\/p>\n The basic idea of a stablecoin is, if I described a meme coin as sort of a pump-and-dump scheme\u2014something whose value fluctuates a lot\u2014stablecoins are invented, their design proposed, to try to solve that volatility problem. And the way we\u2019re gonna solve it is I\u2019m gonna issue coins, and I\u2019m gonna say, For each coin I issue you give me $1. I\u2019m gonna take that $1, I\u2019m gonna put it in the safest investment I know\u2014I\u2019m gonna put \u2019em in short-term U.S. Treasuries\u2014and I\u2019m gonna keep it there. And that way, if you ever want to cash your coin back in, you will get it for exactly $1, and you know that asset is protected<\/em>.<\/p>\n That\u2019s great. If I hold to my word, that solves that stability problem, which means you\u2019ve got a straightforward way to cash out these investments. That\u2019s the sort of first move we might make to make your governor feel a little bit more comfortable.<\/p>\n Frum:<\/strong> So if the governor wants to be a more active<\/em> person in the corruption scheme, he issues a meme coin. It\u2019s CorruptGovernor.com, or whatever the coin\u2014$CORRUPTGOVERNOR\u2014and he says, Look, buy my meme coin. Pay me $75 per coin. The Supreme Court has said, <\/em>That\u2019s fine. No problem. And no one understands it, so there\u2019s no reputational risk. And it\u2019ll fall to $5, but you don\u2019t care about the money; what you care about is knowing that I got $75 from you, or $75 times however many units you wish to buy<\/em>. But if the governor is more passive, the stablecoins are the way to go, and that, he says, I don\u2019t have to be a participant here; I just receive the stablecoins, and I know I\u2019ve got $200,000 in swag, and I will look favorably upon whatever it is you want me to do<\/em>.<\/p>\n Thomas:<\/strong> Correct. Receiving the stablecoins are going to\u2014they\u2019ll hold their value over time, so that\u2019s sort of an easy passive receipt. And, frankly, if the governor wants to go in the sort of more active direction, I think stablecoins are also, actually, both less risky, less sort of\u2014<\/p>\n Frum:<\/strong> The governor could issue his own stablecoin. But then, you\u2019re just making the money on the float because the meme coin you can make out of nothing, whereas, at least theoretically, with the stablecoins, you have to buy some U.S. Treasury bills.<\/p>\n Thomas:<\/strong> That\u2019s correct. You\u2019re making money just on the float. On the other hand, you are making money on third-party transactions that don\u2019t necessarily involve you. This adds another level of removal, anonymity for your governor, right? So if you have a stablecoin that is out there that you\u2019ve helped generate, two parties can engage in a transaction that never explicitly involves you at all, right\u2014it\u2019s just two private parties in the market. As long as they make that transaction using your stablecoin, you will then be getting a float off that. And, of course, those parties can engage in open-market transactions; they never have to say your name or involve you in any capacity. But you know what they\u2019re doing, and that is that informal sort of not-quite-quid-pro-quo relationship.<\/p>\n Frum:<\/strong> In fact, we have not just a governor, but a president of the United States and his family engaging in these operations. Do you have any doubt that what President Trump has been doing this year is legal?<\/p>\n Thomas:<\/strong> I would say\u2014I can imagine facts coming out that would change my mind, but at least based on what we know so far, I think that virtually all of the activity President Trump has engaged in around the crypto industry is legal. And I would go further and say some of those things are legal because of changes in the second Trump administration.<\/p>\n Frum:<\/strong> Oh, okay. So he\u2019s made a billion dollars. Part of that money has been selling for $75 things that are, today, worth $5, and that\u2019s legal. And part of that money has been made from issuing these stablecoins, which purport to be worth a constant value, although, as readers of my Atlantic<\/em> article on the subject will know, they are guaranteed to fail sooner or later\u2014almost certainly guaranteed to fail\u2014but they fail more slowly than the meme coins, which go from $75 to $5 in a few months. And he\u2019s been doing both of these things, and he\u2019s made, apparently, a billion dollars\u2014as president, because of the presidency\u2014and it\u2019s legal.<\/p>\n Thomas:<\/strong> Yes. I believe that all of this is legal, unless we were able to find out the exact, narrow, exacting kind of quid-pro-quo facts\u2014<\/p>\n Frum:<\/strong> Unless he got some bad lawyering and made some really unnecessary\u2014because he could make the billion dollars in ways that most people would regard as pretty unconscionable, so you\u2019d have to have some pretty bad advice or be very, very greedy and stupid\u2014<\/p>\n Thomas:<\/strong> Exactly.<\/p>\n Frum:<\/strong> \u2014to break a law when you don\u2019t need to. You can make the same dubious billion dollars without breaking any laws.<\/p>\n Thomas: Correct.<\/strong><\/p>\n Frum: <\/strong>Why don\u2019t all the presidents do this? Crypto was invented all the way back in 2012, \u201913. Why didn\u2019t President [Barack] Obama make a billion dollars this way?<\/p>\n Thomas:<\/strong> So I think that there\u2019s a couple things going on here. One is gonna be personality-driven, right? We\u2019ve seen Donald Trump the president, in his first term, has a very different sort of attitude about these sorts of presidential self-enrichment practices. He had a hotel that was right next to the White House. He sold the hotel. He\u2019s now bought a publicly traded company in Truth Social that, again, presented all these conflict-of-interest concerns. So, psychologically, he\u2019s disposed to these kinds of behaviors.<\/p>\n I would say that the crypto industry has evolved in some ways, has become a more stable, reliable platform. The development of stablecoins, in particular, opens up a, frankly, a much safer way for politicians to exploit these things for value.<\/p>\n And the last really important thing is that, in addition to changes in corruption law, the federal government has struggled to figure out how it wants to regulate crypto coins. It has not yet had a sort of consistent answer; it bounces from scandal to scandal. The second Trump administration has pulled back from virtually all crypto enforcement and regulation. So there are some things going on right now that\u2014<\/p>\n Frum:<\/strong> Let me stop you. I wouldn\u2019t describe that as the government can\u2019t figure it out. The Biden administration figured out: These things are poison. They have no legitimate use. Let\u2019s try to discourage people from buying them<\/em>. And the second Trump administration figured out: I personally can make a billion dollars if I say,<\/em> Let \u2019em rip, so let \u2019em rip<\/em>. That\u2019s not, like, a \u201cthey\u2019re baffled by the problem.\u201d Both Biden and Trump were incredibly unbaffled. Biden said they, They\u2019re poison. They have no legitimate use. Try to stop them<\/em>. Trump said, They can make me rich. Let\u2019s go for it<\/em>. Neither president had any kind of intellectual uncertainty about crypto and what it is; they\u2019ve had a big disagreement.<\/p>\n Thomas:<\/strong> That\u2019s fair, yeah. So there are some crypto assets, like bitcoin and ethereum, where there seems to be some bipartisan consensus of, like, We see a use for it. Maybe we\u2019ll allow it to go<\/em>. But you\u2019re absolutely right. With respect to the meme coins themselves, in particular, the Biden administration took a pretty aggressive view against these. They also took an aggressive stance towards a lot of the sort of exchanges that were letting things float in, were maybe sort of the source of a lot of the problems. And those actions have been unwound by the Trump administration; those investigations have stopped. And Trump has been using his pardon power, again, pretty aggressively to pardon folks convicted of fraud, but especially crypto-related fraud.<\/p>\n Frum:<\/strong> I think if I said to a lot of people, Look, there\u2019s this industry<\/em>\u2014maybe it\u2019s crypto, maybe it\u2019s cigarettes, maybe it\u2019s baseball trading cards, maybe it\u2019s asbestos\u2014and it\u2019s got a product that a lot of people think is harmful. Not everybody\u2014some people think it\u2019s good. But a lot of people think it\u2019s harmful. And one president tried to control it, and another president has said, <\/em>Let it go. And the president who said, <\/em>Let it go, has made a billion dollars outta the industry in nine months<\/em>, I think most people would say, I have a pretty clear picture of what happened here. And even if I am inclined to think that the cigarettes or the asbestos is not as harmful as other people do, I don\u2019t think the president who said, <\/em>Let it rip, should make a billion dollars in nine months out of what some people regard as asbestos or cigarettes<\/em>.<\/p>\n Thomas:<\/strong> I think you\u2019re putting your finger on why we wrote this piece, right? To us, at least\u2014and I think most people would agree\u2014there is a big<\/em> disconnect between what the law allows right now and what it prohibits and what I think anybody on the street would think of as sort of clearly corrupt behavior.<\/p>\n Now, look, that\u2019s always true. Criminal law does never perfectly map onto our moral intuitions, but here, there seems [to be] a really glaring gap. And if anything, the gap has been, sort of both steadily and then acutely, growing a lot bigger. And our worry is not just this administration\u2014although this is a profound worry\u2014our worry is, is Trump playing the role of entrepreneur, where he is showing future politicians exactly the playbook to run if they wanna sort of follow in his footsteps?<\/p>\n Frum:<\/strong> \u201cYes\u201d would be the answer.<\/p>\n Thomas:<\/strong> I think absolutely, yeah.<\/p>\n Frum:<\/strong> (Laughs<\/em>.) Yes. The next president may not literally do it because of publicity, but why shouldn\u2019t a governor, why shouldn\u2019t a president of Brazil or a prime minister of Japan, some other world leader, why\u2014now, maybe other countries have stricter public-corruption laws. Maybe in Japan, if you take the money after doing the favor, they still say, Sorry, we\u2019re not such idiots that taking the money after the favor means that we don\u2019t see what happened here. That\u2019s only in America, is that going to be a defense<\/em>.<\/p>\n Thomas:<\/strong> Right. Everybody\u2019s gonna have their own ways of working out these details. Although Europe is a great example of a jurisdiction that is very concerned about the crypto industry, that has been doing more than the United States to try to figure out how to regulate it, bring it under control, and there, too, there\u2019s very<\/em> little attention to this specific problem of how crypto enables public corruption. So even an area that is really focused on dealing with crypto has just not started to pay attention to the ways that there\u2019s this huge problem.<\/p>\n Frum:<\/strong> Well, look, there\u2019s so many ways that crypto is dangerous, and I referred to an article I wrote in The<\/em> Atlantic<\/em> about stablecoins. If you saw It\u2019s a Wonderful Life<\/em>, and who hasn\u2019t, you know the problem of: You think the money\u2019s in the bank, but it\u2019s not really in the bank; it\u2019s in all the different houses sponsored by the savings and loan. If everybody shows up at the same time to get their money out, even Mr. Bailey, as wonderful as he is, as honest as he is, can\u2019t pay the money back, and now, imagine if Mr. Bailey was kind of a crook.<\/p>\n So the solution that was found after the events depicted in that movie was to say, Okay, first, we\u2019re gonna have quite strict regulation about how the money is paid. We\u2019re gonna have quite strict attention to the books of the Bailey savings and loan. And oh, by the way, we\u2019re gonna have a federal stopgap so that if everyone\u2014even if it\u2019s Bailey, and he\u2019s honest, and the money really is in people\u2019s houses, and of course, he can\u2019t turn all the money into cash all in an hour, we\u2019ve got a federal guarantee [backing] him, that the federal government will provide the cash and Mr. Bailey will pay us back out of the insurance premiums he\u2019s been paying for years of honest behavior<\/em>.<\/p>\n So stablecoins are like Bailey\u2019s savings and loan without the federal deposit insurance and without the proper system of auditing. It\u2019s a promise: The money\u2019s there. You all show up at the same time, we have no way to make sure that you all get your money at once, and maybe it\u2019s not as honest as Bailey savings and loan<\/em>.<\/p>\n Thomas:<\/strong> Well, I love that you bring up this example, in part because my co-author, Jeff Zhang, and I, we started this project in part because we were polishing off another essay that we\u2019d written all about the return of bank runs\u2014Silicon Valley [Bank], all these sorts of companies\u2014which themselves are being driven largely by sort of speculative crypto assets that cause these problems. And as we were talking, Jeff, who\u2019s more of a crypto expert than I am, was describing\u2014we were talking about the Trump meme coin, and then he mentioned USD1 to me\u2014this is the Trump family\u2019s stablecoin\u2014and in reading about it, I had exactly the same reaction you had a few moments ago, which is, This seems plainly corrupt. How is this allowed to happen?<\/em> And that sort of kicked off this project.<\/p>\n Absolutely, there\u2019s a deep tie between a traditional finance system that has seen the problems over time, has learned to address them and mostly ameliorate them, and then this new thing called crypto that takes itself to be a technological innovation and so sort of not subject to history, even though we know what happens when you create these kinds of investments, whether you call them cash or crypto: It leads to predictable problems. And right now, the predictable solutions to the predictable problems are not in place.<\/p>\n Frum:<\/strong> Okay. So let\u2019s say we want the next president of the United States not to make a billion dollars in nine months from an industry that is maybe dangerous and that he\u2019s regulating. How would we stop this?<\/p>\n Thomas:<\/strong> So there\u2019s a variety of different things you might think about doing in this space. Some are gonna apply more specifically to a president versus, say, other politicians. So the first easy thing is just we need to reverse what the SEC has done under the second Trump administration. Go back to the Biden approach, and you can tweak it however you\u2019d like, but start with the general instinct that these are securities; they\u2019re being traded and treated like securities. We have a whole enforcement tool kit. We need to take advantage of that.<\/p>\n Frum:<\/strong> Let me put a pause here\u2014<\/p>\n Thomas: <\/strong>Please.<\/p>\n Frum:<\/strong> \u2014just to explain something. So all over D.C., there are people who have BMWs and Lexuses that they\u2019ve acquired by lobbying for the question, \u201cIs cryptocurrency\u2014is it a security or not?\u201d Because the rules on securities\u2014since the Great Depression, the United States government has put in place some very strict rules\u2014you can really go to prison for lying about a security. But if it\u2019s not a security, then the penalties for lying are a lot more lax.<\/p>\n And so one of the reasons cryptocurrency is called \u201ccryptocurrency,\u201d even though it\u2019s useless as currency, is because, mostly: crypto, not a security so I don\u2019t go to prison if I lie about it\u2014whatever; fill in word here\u2014so I need to call it something other than a security, even though it really is a security. I<\/em>t\u2019s a derivative. It is a security, but if, again, if you lie about a security, the Securities and Exchange Commission will put you in jail, whereas if you lie about a currency, the rules are much slacker.<\/p>\n Thomas:<\/strong> That\u2019s exactly right. So securities are\u2014we have lots of law, lots of clear understanding of how to enforce them. The Securities and Exchange Commission is sort of the first among equals of financial regulators. They\u2019re very professional. They know how to bring a lot of resources to these kinds of challenges.<\/p>\n And, frankly, we\u2019ve had a definition of what counts as a security going back to the \u201950s, and when I teach business students, when I teach undergraduates, I give them the test, and then I ask them to apply them to what they know about crypto assets, and they almost to a person agree, Oh, well, if that\u2019s the test, these are securities<\/em>.<\/p>\n So I think we have a straightforward story about why we need to undo what the second Trump administration has done there.<\/p>\n Frum:<\/strong> One step we can take is pass a law that says, Cryptocurrency shall henceworth be known as \u201ccrypto securities.\u201d They are securities, they\u2019re regulated by the Securities and Exchange Commission, and if you lie about them, you do go to prison<\/em>.<\/p>\n Thomas:<\/strong> Great. Easy first step. I think that\u2019s where we should start. The second step would be with Congress.<\/p>\n It is true, right, that this technology looks a little different than other kinds of frauds we\u2019ve seen in the past. But, look, the federal government has lots of fraud statutes: We have a securities-fraud statute. We have mail fraud, wire fraud, bank fraud. There is no reason why we shouldn\u2019t have a crypto-fraud statute that directly grapples with how this technology is different, how it moves, how it enables fraud.<\/p>\n The Supreme Court has been pulling back on corruption laws, but in the Supreme Court\u2019s defense, the reason that they have been pulling back is because the statutes that exist are often written in fairly broad language; they are subject to wide interpretation. And so Congress should take the lesson, right? If the Supreme Court is concerned about these generic, vague criminal statutes, we need a crypto-fraud statute that is pointed and sharp and actually addresses the problem.<\/p>\n Frum:<\/strong> What are the things that we most would want to fix in public corruption? I\u2019m actually a little bit more sympathetic to the Tom Homan case, where you say, Look, you gave somebody money, thinking maybe someday they\u2019ll be important<\/em>. And that looks pretty bad in the case of Tom Homan, where he became important some months later. But what if you give somebody money, and they become important 20 years later? These things do get a little hard. But the idea that giving them the money after the official act, or broadening the definition of \u201cpolitical acts\u201d so all the wink-and-nod ways that political corruption is typically done, those get a bye, those seem like things we need to fix faster.<\/p>\n Thomas:<\/strong> I think that\u2019s right. And, look, I agree with you that we have strong intuitions of what counts as corruption, and it is easy to point to obvious cases of bad behavior. And it\u2019s also easy to point to cases where you say, like, My congressman did a favor for my child to let them get a pass to go to visit the White House, and next month, I sent them a card, or when I sent in my contribution to the candidate, I wrote, <\/em>Thanks for all the help. Is that really corruption? I think, no, that\u2019s probably not. And so finding laws that parse those lines carefully is genuinely hard; I don\u2019t wanna be dismissive of that. But I do think that there\u2019s low-hanging\u2014<\/p>\n Frum:<\/strong> If you included a gold watch with the thank-you note, however \u2026<\/p>\n Thomas: <\/strong>Right. I think that\u2019s exactly right. I think there\u2019s a difference between\u2014<\/p>\n Frum:<\/strong> (Laughs<\/em>.) I don\u2019t know\u2014<\/p>\n Thomas:<\/strong> No, no, no. Right\u2014<\/p>\n Frum: <\/strong>(Laughs<\/em>.)<\/p>\n Thomas: <\/strong>(Laughs<\/em>.) No, no, you\u2019re totally right. Like, just \u2019cause there\u2019s dusk and dawn doesn\u2019t mean there\u2019s not night and day, right? We can knock out some low-hanging fruit here by looking at things like dollar amounts, by looking at connections, behavior. Instead of trying to make it this deeply formal, logical connection, we can just be context-sensitive human beings. You can look at some situations and say, That seems problematic to me<\/em>, right? The new playing field\u2019s problematic<\/em>\u2014<\/p>\n Frum:<\/strong> [What] you can just generally do [as] a kind of rule of thumb is: Do we have a big problem in the United States of people who look like they\u2019re mildly careless politicians ending up in prison for mildly careless actions? Do we have a lot of those? I can\u2019t think of many examples of that. And do we have a lot of examples of things that look really shocking that turn out to be, not only do they get away with it, but it turns out there\u2019s nothing to get away with because, actually, it was legal the whole time, and Obama was just a fool not to do it?<\/p>\n Thomas:<\/strong> Right. The problem is always \u201cWhat is legal?,\u201d not \u201cWhat is illegal?\u201d here. The outlier cases are interesting, but they seem like slam dunks. It\u2019s the first [Bob] Menendez prosecution that gets dismissed. It\u2019s the [McDonnell] case. These are the situations where I think any layperson would have looked at it and said, Oh, yeah, that\u2019s obviously a corrupt politician who\u2019s probably going to prison<\/em>, and it turns out, Oh, you\u2019re so mistaken. That is absolutely legal behavior<\/em>.<\/p>\n Frum:<\/strong> Yeah. There aren\u2019t a lot of good explanations for a politician having an apartment full of gold bars.<\/p>\n Thomas:<\/strong> That\u2019s correct. Or a freezer full of money, I think, was William Jefferson\u2019s strategy back in my day.<\/p>\n Frum:<\/strong> So those are some of the things we wanna do on the public-integrity side. Let\u2019s talk a little bit more about the crypto regulation\u2014so, say, regulated as a security, put the Securities and Exchange Commission in charge. And what should we do about meme coins? If they\u2019re a security, would they be considered just so obviously fraudulent that the SEC would crush them?<\/p>\n Thomas:<\/strong> When we first saw these definitions of securities coming around in the \u201950s, what we were concerned about were penny stocks, right? And the problem with penny stocks\u2014these were these thinly traded, highly volatile, very cheap quote-unquote stocks\u2014and the question was: Are some of them legitimate<\/em> investments, and are some of them just scams? And I think that broadly describes where we are with meme coins.<\/p>\n I\u2019m open to the possibility that some of these are, in fact, legitimate investments. I also think that, just overwhelmingly, most of them are your sort of pump-and-dump scheme, where you\u2019re engaged in behavior that, if securities law applied, you and I would say, Oh, that\u2019s insider trading. That\u2019s illegal<\/em>. But because securities law doesn\u2019t apply, that sort of deceptive-promotion, flag-the-thing-and-run practice is legal. So I think if securities law applied, if the SEC stepped in, what we would see is the category of meme coin would largely disappear, or at least the quantity of meme coins would be dropped as just not worth the risk.<\/p>\n Frum:<\/strong> And for the stablecoins, my solution for them\u2014and tell me if you disagree with any of this\u2014is I think we need to see: A stablecoin is a deposit-taking institution. If I give you $100 and you say,