Crypto: ‘We need SEC regulation,’ Ross Gerber says

Gerber Kawasaki Wealth & Investment Management CEO Ross Gerber joins Yahoo Finance Live to discuss security measures for digital assets, the FTX collapse, transparency in the crypto industry, financial protections, and his investment in Twitter.

Video Transcript

AKIKO FUJITA: Well, as regulators delve into the FTX fallout, the shock is turning into anger with investors wondering what the consequences will be for the one-time icon, Sam Bankman-Fried. The latest today, a bankruptcy filing suggesting the company could have more than a million creditors.

Gerber Kawasaki Wealth investment Management CEO Ross Gerber tweeted that SBF could serve time, and he joins me now to make the case here. Ross, always good to have you on the show. Your firm has been offering clients exposure to crypto. You've been a longtime Bitcoin bull. I mean, give me a sense of how significant the pain or the fallout has been for you and your clients over the last several weeks.

ROSS GERBER: Well, fortunately for us, our partner is Gemini. And we put in place a lot of protections when we got into Bitcoin because of my experience with Bitcoin and things like Mount Gox and the long history of exchange collapses and theft in Bitcoin. One involved with crypto must have substantial security measures, as well as we bought specific insurance for our clients.

Now, in our case, we've had no assets moved or issues. The price of Bitcoin has gone down, and that does affect our clients. But our assets are safe as of now, and we have a great partner. And they've been very, how would I say, visible and transparent about the way they manage their business at Gemini. And they also have a relationship with the New York banking authorities so that their business is audited by US authorities. So the protocols we put in place have worked. And so we're very happy about that. And I think we run the safest Bitcoin program in the world.

AKIKO FUJITA: Ross, I want to bring up a tweet that you put out back in July, specifically on Sam Bankman-Fried, where you said, I can't tell you how much this man scares me for the future of crypto. He seems to be running something very questionable. I learned this lesson taking apart AIG when it went down. What did you see at the time that led you to say this?

ROSS GERBER: Well, you know, I grew up in LA in Hollywood, you know? And one of the things that you learn is when people start telling you lots of stuff and you've never heard of them before, you've never seen them before, and then all of a sudden, they have all this money, and you start trying to figure out where the money came from, and you can't figure it out, if it smells like a duck, and it looks like a duck, it's a duck.

And so I think a lot of people want to believe in the investment world, and they look for reasons to believe. But when you grow up in West Hollywood-- in Hollywood, and you spend your school days in West Philadelphia, you learn not to believe. And you start asking lots of tough questions. And that's why I'm in this business. A lot of CEOs don't want to talk to me. They don't want to deal with me because I ask tough questions.

And the businesses we invest in are the ones where the CEOs open up the doors and say, here's the books. Here's how our business runs. Meet everybody. I want to show you. I'm meeting with the president of Polestar today. He can't be more open to showing me how their business runs and what they're doing. So transparency is crucial when making investment decisions.

AKIKO FUJITA: So the question is, does the collapse of FTX change your case for crypto overall? We were watching the Senate Banking Committee hearing today. Pat Toomey making the case that, look, this isn't about Bitcoin. It's about a CEO who misled or reportedly misled and used customer assets to prop up another company he owned. Now those are all allegations right now, but is that how you see it? Should people see this in tandem with what to do with crypto, what to do with Bitcoin, what to do with Ether, or is this an FTX specific case?

ROSS GERBER: Yeah, this is a very interesting part of this whole thing because most people-- even in my firm, we had this whole debate yesterday. I said, remember how we started? We started GK because the financial crisis. We were involved with AIG when it went down, and it was a disaster. And it was the worst period of time in my entire career. And I almost lost all my money.

And I can tell you, from that experience, that if you think the traditional financial system is any better or filled with any better actors than crypto, that's incorrect. What we have is 150 years of regulation. We have multiple regulatory bodies. I personally right now am going through an SEC audit, the second one. It's a five-month process where they go through everything. They do a phenomenal job, to be honest.

And this is what needs to happen to crypto. We need the SEC. It's amazing these politicians, with their bills and their bullcrap-- listen, they're securities, and we need SEC regulation of crypto exchanges, just like broker dealers and exchanges in traditional finance. And that's what we've done at our firm, is really just try to bring crypto into the traditional financial regulatory world. We've come up with all kinds of policies and procedures in our firm that basically just mirror the current ones for traditional finance.

AKIKO FUJITA: Finally, Ross, I do have to ask you about Twitter because you are invested in the privately held company now. Since Elon Musk has taken over, you've got advertisers who are saying, we don't feel comfortable on that platform. You've got sort of what happened around the blue checkmark with fraudulent accounts going up. I mean, what do you make of the job Elon Musk has done so far? I mean, is this all part of the business plan?

ROSS GERBER: [LAUGHS] That's the way Elon does his business plan. You know, I'm working real hard to try to help Elon here. We have a fundamental disagreement on some of the issues with Twitter. I've come from a media background, and I'm an entertainment background kind of guy. And he comes from an engineering background. And so he really sees the solutions for Twitter as being engineering-based, and that's what he's working really hard on as the product.

But the issues with the advertisers and handling the very delicate process of dealing with Hollywood and celebrities and advertisers and such is not something he's naturally good at. And it's certainly affecting Twitter. Now, there are lots of solutions that he can employ to solve these problems, like finding somebody to do this who's good at it. And that's what I think will eventually happen.

But I think what Elon is doing is extremely disruptive. We all talk about disruption until it happens, and then nobody likes it. But what I think is that we're going to get a phenomenal Twitter product in about a year or two, and that's why I invested in it. And I think the current management at Twitter sucked. And so this is a great opportunity to make an amazing product.

AKIKO FUJITA: Yeah, we know you've always been a big supporter of Elon Musk. And it's good to have you on the show today. Ross Gerber, Gerber Kawasaki CEO, good to have you on.