Transcript
Speaker: People keep saying that we need to be a more mature organization and that we're no longer startup. And that hurt his soul.
Speaker: He is like, we are a startup. We will act like a startup.
Speaker: Hi everyone, welcome to Spot Draft's Beacon Voices podcast. I am your host, Akshay Verma. I am the Chief Operating Officer at the company. And with me today is my former colleague from Coinbase and now the General Counsel and Chief Compliance Officer at Cloaked, who has just recently raised a Series B. Excited for him and for the company and for that means for the crypto ecosystem, Sumit Chagani. Sumit, great to see you here, man.
Speaker: Yeah, man. Good to see you again, actually. How you doing? yeah Good. I'm doing real good. We're going to talk about a few things today. i definitely want to talk a little bit about your journey into law school and kind of what that was like and whether ah you found all the things that you were expecting to find. want to talk a little bit about your in-house career, especially now being the top lawyer at the company and what that's been like. But but before we get to all that, and of course, you can't have a conversation in 2026 without talking about AI. So i'm I'm sure we'll get into some of that, too.
Speaker: But let's let's start with a little bit about you. I mean, tell us about you know that that origin story about why Samit wanted to go to law school and what that was like and how you made that decision.
Speaker: Yeah, no, appreciate that. And yeah, kudos to you and what you guys have built over at Spot Draft. It's really cool to see you just ah switch up everything you're doing from the financial services world that we had to coin to to build it out. What is now, frankly, the hottest thing I'm seeing, which is legal ops and AI. It's pretty nuts.
Speaker: Wild how quite crazy the flight has been. Yeah. Listen, when I was starting... college, um my initial thought was what was really cool is the FBI world that was happening at the time. I think that when we were, of course, 9-11 hit during a very important time during, at least for myself, high school,
Speaker: And then I started to think about that side of the world because it was actually getting pushed all over the place. um One of those things in college that I just started to to study was political science, which, frankly, hopefully nobody's offended, but is a somewhat of a useless career unless you start to take these other paths in your existence.
Speaker: um After a certain amount of time, I very quickly after that time determined that going to law school was the only way I would have that type of career path, but also one that would blossom me in a couple of different places.
Speaker: I then turned to the storyline of how my family got here, which made me then start to gear myself towards immigration. Immigration law.
Speaker: Yeah. I wrote, which I really consider to be one of the better pieces of writing I ever had, my essay to get into law school, which now I feel a bit like a fraudster in the seat that I'm sitting in But it was all about unlocking the door for people that were very similar to my family by going into immigration law.
Speaker: um UNC Chapel Hill is where I ended up getting into, which was, it's a very public interest school. So i probably struck some chords and some hearts. I went in there, but after my first year in school, everything went to shambles.
Speaker: Bear Stearns went down, a bunch of other spots went down. Everyone's still picking up those same pieces. Financial crisis is happening. So everybody that was starting to go towards whatever trajectory you're on MNA, some form of financial services, frankly, immigration, whatever it was very quickly became a litigator.
Speaker: After law school. So despite me going initially, my 1L year was down in Miami. I was doing a lot of cross border transactions with the law firm called Diaz-Royce.
Speaker: And then I went to K&L Gates in Pittsburgh. My second, my 2L year, they ended up giving like four people out of 30, and it's kind of wild that they even had a class of 30 summer interns, a job.
Speaker: So I went back down to Miami and I became a litigator. And very quickly after my time at Diaz-Royce, I shouldn't say very quickly, it was about three years, Ackerman called me, who was still cleaning up South Florida during the financial crisis, and said, we need a class action defense litigator, ah trial liter litigator that's going to take these motions to the house, whether it was federal court or state court, and then do some of the dirty work of taking back some of the larger estates that were part of a foreclosure.
Speaker: So everything from class action defense down to the nitty gritty of foreclosure was my forte for about three plus years down in South Florida. Wow.
Speaker: What kind of litigation?
Speaker: Initially, a bit of everything. I represented, um frankly, the country of Venezuela quite a bit in South Florida, Fogade, which was their equivalent of the FDIC, all the way to disputes with the Four Seasons of the world at the time that were selling through the moon a bunch of apartments that were like dual use.
Speaker: So just all kinds of types of litigation at the first shop I was at. But my second shop was very heavily focused on on financial services and we've represented banks and servicers, um the Bank of America, the cities, all of those in the world to bring, defend the class action world, but also bring what they needed to recoup after the financial crisis.
Speaker: Yeah. Well, look, it's interesting. I think when you have close ties either to family who immigrated, even if you didn't yourself, and i was an immigrant. um I think particularly in the South Asian culture. So I also had intentions of doing immigration law.
Speaker: i went to I went to law school here out in the Bay Area, but had had really considered that because of my own experience. And like, you know, I came in when the INS was still a thing, if you remember that. And I remember standing in line like outside two blocks away from the entrance at 6 a.m. with my dad to get like paperwork done and stuff. And so it was really like there was a noble intent there. And I'll tell you what what what I have come to believe, which is that you and I are in prominent roles now and there's probably nothing better we could have done than to show people from our background that this is possible, man. So kudos to you for being where you are and kind of leading by example, even if you may not necessarily have gone into direct representation on immigration. I think it's ah it's a really cool thing for for you to be at the top of your at a company like this, because I think it speaks volumes to our community about what's possible.
Speaker: Appreciate that. Feelings mutual, man. So you're litigating ah for countries, which is insane. I can't even imagine what that's like. um And so you start getting into the financial services world a little bit. What what was that like?
Speaker: It was wild. um I think that what ends up being, as you are a litigator, you're doing very similar work across the board. If you're a really good litigator, you can litigate everything from tort liability yeah all the way to taking doing God's work and and dealing with a Venezuelan individual that you need to get off the OFAC list, for example. So you're kind of doing breadth.
Speaker: um The difference, though, was one, how aggressive I was able to be in court, which my first three years, very aggressive because we were midsize firm. And sometimes you were playing plaintiff through that journey to playing defense side.
Speaker: in assisting, like I said, the the larger banks of of the US at the time that i had already seen a bunch of bubbling occur to them, that the decisions that were coming out not only had to be extremely tactful, but you need to ensure that you're not putting some type of precedent out there that could actually act as a domino effect for the rest of the country.
Speaker: And what do I mean by that? Part of my gig over at Ackerman was part of this deposition escalation team where there were certain individuals that were part of the mortgage foreclosure crisis that were everywhere.
Speaker: There was a stamp, for example, that had a certain person's name on it. One person was signing a bunch of the transfer agreements with mortgages. Somebody of may have signed the packages of these mortgages and everybody was trying to depose them.
Speaker: So one of those depositions that we are ill prepared for or fail to quash the subpoena, whatever it may be, could have a domino effect for the rest of the country because everyone's looking for that transcript to then use in their case.
Speaker: Yeah. And us being one of the like the escalation council in the mortgage foreclosure space just ended up being that people would say it's in better hands if you give it to the Ackerman team.
Speaker: And we had to act like that. So I think it's more. how aggressive could we be and how fast and loose could we be with strategy versus how could we still win staying in a bucket playing by rules that the other side of the house was not playing by which is always tough right as a litigator you want to throw very similar sized stones on the other side but you have to in this case understand we're actually right with the backbone that we have on certain cases and we have to act like that and then also act like we are the people in that, like the the mature individuals in the room, which I'm not one of those at all.
Speaker: Well, and and also, you've essentially at that time in the global economy, you got the world's eyes, so to speak, on some of this work because so many millions of people were affected. I mean, entire economies went down. And and so so I'm sure there's a lot of pressure just around that and how to navigate all of that from a PR perspective. um What was law firm like life like for you? I mean, we we we I've had my own experience, obviously, in big law, and I think there's plenty of shade that gets thrown around what law firm life is like and all of those kinds of things. but But what about you? Like, what was it like for you? Was it what you expected it to be? Is this something you kind of tolerate for a while or was it something else?
Speaker: So I'll answer this in in a way that I'm sure a lot of younger attorneys come to you for advice or people coming straight out of law school. and there's been an addition like there's been an uptick in the amount of people saying, should I just hang my own shingle?
Speaker: Because one, they've heard horror stories about the law firm environment. Two, they feel like they could kill and eat a lot more by themselves. But the number one thing that I got from a law firm was fine tuning your craft.
Speaker: Yeah. And really being able to have someone just hammer you on your writing and get you to a better place where over time, which I really believe in repetition and reps, everything from sports to to even writing.
Speaker: You get to a much better place that you feel confident. And not only am I, I'm getting to the point, not being flowery, flowery, and then ultimately putting out what wins in just motion practice or appellate law.
Speaker: But that would be the number one thing. How do you fine tune without somebody over your shoulder, at least for a little bit, saying this is just straight garbage?
Speaker: This is how you do it. And you need a few of those in your back pocket, not only to humble you, but to get you to a much better place. So when you get to the next phase or you do hang your own shingle, you have all of these past lives that you've lived that got you to the point of feeling very confident.
Speaker: on what you're putting out. And now, I don't know the last time I wrote a massive brief or a motion, but I can certainly see when I get ones in yeah um who went through some of this training and who's giving me something that is very easy, succinct, easy to read, strong points. And that's just how I write to today.
Speaker: Yeah. I mean, like, and now you get to do a little bit of hammering cause you're also paying for the work product and not just supervising it as a partner. Do you give direct feedback is like random, little bit of random sidebar question. like Do you give direct feedback to the associate or partner who's written that brief on like how to clean it up? Or is it more like, Hey, here's the message we need to get across in this brief. And like, I don't feel like this came across well, like, do you get into the nuts and bolts of language and sentence structure? And this is a borderline run on sentence and it should be like seven words.
Speaker: I do to a certain extent. I think it's more going to be the high level, the second point you made that even if this is going to win this brief, this is not the message we want to send out.
Speaker: or even if we're gonna end up telling the business this thing, I need a little bit more that thinks about a year from now, the impact on this type of thing being the decision point for the business.
Speaker: So yes, I think that there's always gonna be a bit of feedback and you know knock on wood, I think that at Coin, ah we faced a lot of litigation. we're not We're getting to that point a little bit with Cloat, yeah but we're,
Speaker: But now it's more about how do I make decisions that are gonna endure over time versus just winning this specific battle? yeah And that's everything from how is this gonna be looked at from a PR standpoint, but also how is this impacting our lobbying efforts? How's this gonna impact the banks that we're working with for cloaked pay?
Speaker: How does this impact you know things that we may be doing on on the hill? So all of that comes into ah decision point. And I think that is, We won't get into AI, but I think that is the differentiator now that you've got to have.
Speaker: Otherwise, anybody can regurgitate a little bit of the law back. Very true. Well, I i was going kind of get into an AI conversation later, but this one point, I'll pull this question up a little bit because I think it's very relevant right now.
Speaker: One of the, um I don't know if i want to call it a narrative, but certainly ah a point that's been raised with all the AI craze in the last couple of years and coming very much to a frenzy and continuing on the uptick even this year is that entry-level positions in several sectors, including the law firm sector, um are very much at risk because of AI. And one of the the implications, if that is to be a reality, let's take lets let's take for for this sake of this part of the conversation, let's assume that that does become a reality. What are your thoughts on where some of these fresh law grads get their training? Because whatever you know downsides there may be to working at big law, I fully agree with you.
Speaker: the level of training provided you have the right partners who are willing to take you under their wing and saying, yes, this is how you do it. Not just this is wrong. There's plenty of that too. But like, this is how you do it. And this is what good looks like. And this is what great looks like.
Speaker: Where does that come from for for some of these fresh grads? It's going to be tough. I think that there's going to be a very quick pull up of the type of work product that a a fresh grad is going to need to be ready to do Listen, we when we first got in, you may do diligence or something like that for quite some time. You might do a bit of research on like what is the base of a specific piece of regulation. There may be some things that right now
Speaker: AI is going to be able to spit out very quickly, right? I think that you're probably going to very quickly be pushed to, I need to get a brief out and even that now, like how far are we going to go with the AI doing the brief writing?
Speaker: But then also you may just end up going to court more often now, because that is something that at least at this stage, AI is not able to do. But that doesn't take that doesn't do anything for people that are going directly into M&A tax. Some of these other areas that may never see the lot of day in court.
Speaker: So I'm I'm questioning now, frankly, what is going to be the new age attorney? And is it going to be somebody that. automatically gets into a law firm and has to find the differentiators for their client base that are have nothing to do with like pieces of the law.
Speaker: Or is there some entrenchment at the client now that's just going to you're going to have to take the cost basis out of it and say, we're going to certain things for free so we can learn you better and then be almost in house for you.
Speaker: Or is there going to be so many failures that occur with AI, which I don't think is going to be the case, it's going to get better over time, that there's a trust factor from the judge level that says, I don't want to read any of this slop.
Speaker: I'm going mandate that there's no AI in my briefing, which if I was a judge, I would, even if it's old school, I would consider it because the ability for your counsel to explain the things that they have written, digested, spit out a one-liner that makes sense, respond very quickly back.
Speaker: I'm not in court now, but I don't know if that's starting to get lost as we allow AI to just draft for us, or there's more unique arguments that are being made that have made even the law overall much better.
Speaker: That's a question I don't have an answer to because I'm not sitting in court. Great articulation. i mean, I think we all woke up to the news of the Sullivan Cromwell apology letter. If you haven't seen that, highly recommend it.
Speaker: partner at Sullivan and Cromwell had to write an apology to the judge basically saying, Hey, we submitted something to you that seems to be rife with AI hallucination. Our apologies. Here are all our checks and balances. Here's what the training that our associates go through before they even get access to our AI tools, which I'm guessing are Harvey. I'm guessing it's Harvey. Maybe it's something with LexisNexis. I don't know.
Speaker: But It's Sullivan and Cromwell, man. know. It's one of the top firms on the planet. And like that stuff's going to continue to happen. And then there's a there's a there's an individualistic responsibility here, which we cannot ignore. It's not systemic. But we are so much in the early days of like, well, maybe this is this is where I come out.
Speaker: Rather than just training on learning how to write and having effective briefs in in the along the lines of the early part of our conversation is, how do you orchestrate orchestrate this thing?
Speaker: You are now in part an associate who orchestrates the AI that we need to leverage because obviously the economics and the and the client demands are are very much front and center for what we need to get done. So i think I think the training remains. I do think it changes. I'm not sure what it changes to just yet.
Speaker: um Because without that, I mean, it's not like law school taught us anything practical. We didn't really learn how to practice law in law school. We started getting that in in our law firms or wherever else it is that we ended up going. so So they were always going to be the ones to teach us. And historically, law firms have been the training ground for most lawyers.
Speaker: In-house lawyers like you, like me, like we went after we had spent some time at law firms. So again, I don't think that changes very, very quickly, but I think the nature of what happens during that training is going to change pretty significantly.
Speaker: So um'm I'm curious. I agree with you. And and not I mean, not to be cliche, but you're only as good as your prompt. So there's going to have to be even the education backing.
Speaker: how do you ask this right question um as a law student or or yeah as a ah brand new associate i do i am bringing in a couple of interns this summer and i'd love to see it's kind of an experiment for me i'd love to see how they deal with things now uh versus like the back in the day us looking things up and I guess old school. It used to be books. Right. But now and then it turned to Westlaw and some of those things. But yeah, what did they just dive directly into Claude and get the answer, which
Speaker: which I hope that they then take into dot connection. And I have had scenarios where of new like brand new AI coming out a couple, like a year ago, intern would use that and spit out something to me.
Speaker: And I'm like, but this doesn't, this not really answering the question. The actual answer requires an application to be filled out, this thing to be filled out. What's the grant look like for this, whatever it is.
Speaker: And there's still some dirty work to be had. And i think it's people that actually do some of that dirty work that will get the differentiator. Yeah, hopefully it it it it, and again, as you said, it'll it'll get better over time. The technology will get better over time, but it's a starting point. It gives you some ideas. gives you kind of where to look.
Speaker: i always I love telling this story. i was a first year associate at Pillsbury and I was drafting a regulatory analysis on AB 32 here in California, which was Governor Schwarzenegger's landmark climate change legislation. It was brand new in 2006. Nobody knew how to work with it. I got in on the ground floor with everybody else and it was great. So I did this memo for the partner who was submitting it to one of our clients and I went to Google.
Speaker: I went to Google to pull up the regs just for the language of the regs so that I could kind of analyze them. And then I was doing my Westlaw kind of annotation as part of the as part of the analysis. So and this is still a time when you printed memos out and you took them to the partner. So I printed out the memo. I paper clipped the printouts of the regs from Google and I took them to him with my analysis. And he's looking through my analysis. Then he gets to the appendix and he sees the Google printouts. He's like, what is this?
Speaker: And I was like, those are the regs. He's like, no, they're not. I was like, oh, like yeah, those are the regs. He's like, where did you get these? I said, Google. He's like, take it back. go to the library, go get the Westlaw books, photocopy them, and then bring them to me because I can't trust this.
Speaker: Okay? That was 20 years ago. In October, our culture I probably see that in like November, October, it'll be 20 years since that. We've come a long way. We've come a long way. Just the same thing exists. It's like, can I trust what Claude just told me?
Speaker: Can I trust what ChatGP just told me? I got to verify it somehow. Lawyers had that funny higher that we have a higher obligation to verify. So again, I don't think that changes very, very quickly.
Speaker: Yeah, no, I agree with you. And I think in that in that same vein, there's going to be a bunch of attorneys, especially judges out there that are just going to say, I just don't want it. And what's funny is that that's the discretion of potential, whether it's discrimination or twisting words or whatever it is, is actually a very human trait.
Speaker: And it's seeping into AI and it's ultimately robots are going to be more trustworthy, right? They don't have all the other biases and stuff that come in, yeah but it's still a very hard thing to digest.
Speaker: So true. It's like they used to come out with AI models for credit. Everyone was like, well, what's in the black box? Well, the black box is better than John. That's looking at you saying, I'm not going give you a loan because of some race.
Speaker: Right. Or insurance coverage, right? That's been used in insurance coverage as well and insurance claims and think that's such a good point. All right. Let's shift gears. the way So you spent some time at law firms.
Speaker: ah Why the shift to in-house? Like what was it that was calling you to move the shift to in-house? Yeah. So when I was down in Miami, I didn't think that Miami, i had i had my first daughter down in Miami.
Speaker: I didn't think Miami was going to be what endured for us over time. um I started to look at a yearning to go in-house just to try it out. I'm a big like itch, let's scratch it kind of guy. um I wasn't able to very quickly find something in-house, but I got an opportunity at PwC.
Speaker: And I was a regulatory consultant that moved me up to New York. And I was on a team of a bunch of ex regulators. um I was the attorney that dealt with like the class action repercussions, not from a legal standpoint, but like a consultant standpoint of how do you clean this up based on things I've seen in the previous class.
Speaker: And then we would go into banks that got hit with an enforcement action. Again, most of the seepage coming from the financial crisis. and we would revise their audit structure.
Speaker: We would clean up like their compliant risk assessment compliance risk assessment. We would speak with their business about first line, second line monitoring, all of this stuff that was very like for risk and regulation world of PwC.
Speaker: yeah um One of those banks that I cleaned up was Citizens Bank. And this was just a an odd enforcement action that they they were in called deposit reconciliation.
Speaker: When you used to write in on the slips, and i'm sure ah many people still do if you walk into a bank, how much money you're bringing in, there was, when you couldn't read it, a rounding error that was occurring. you know Office space happens over and over and over, ends up being a few million bucks, looks like this was wrong for customers.
Speaker: let's clean it up enforcement action so i went in there cleaned that up helped them do a little bit of not only the audit world of that but the training world of that and they said why don't you come and join us at citizens which happens quite a bit at consulting shops um that that was my actual first time flipping from defense which i feel like i played for my first eight years to offense where i started to be much more business centric and i built out over at citizens all of their buy now pay later before it was the coolest thing on the block
Speaker: The iPhone upgrade program, if you ever go into and an Apple store and you buy an iPhone, you pay monthly, it's actually a citizens one loan. Xbox, which we did a very similar type of a program where you can actually rent games and you pay on a monthly basis. Vivint Smart Home, a couple of other ones.
Speaker: And then I also took over credit card, did a little bit of mortgage there. So I just ended up learning a lot of the different pieces of the bank while over there. all consumer bank yeah and and was that i mean were you like hey i think i want to try an in-house career the law firm thing was cool but this is going to be more interesting i have a mind for business like what was the mentality that was shaping there or was it like me which was like i kind of want to try this out i have no idea where it's going to lead and that's how i went to axiom but it ended up turning out great but like what was it like for you was that intentional
Speaker: it's It's probably more the latter, dude. i I think it was just what else is out there that I should be tasting. And this was the first time that I was like, oh, I'm actually sitting at the bank, which used to be my client.
Speaker: Let's try it out. Now, the one thing that probably hits you like it did me was, oh, damn, but look at the paycheck. Very different, right? I was like, what the hell am I doing? And I remember being at Citizens, talking to my good friends at Ackerman and their are bonuses, and I'm like, bro, this was the wrong decision. What am I doing? But, you know, you keep trucking, you figure out the next thing. and And it was still a lot of fun trying to build actual products and dealing with the other side of the world, right? Engineering, product, the product teams, customer service. You're just kind of learning all these different pieces of life.
Speaker: I will, say I took a, I i took a 50% pay cut to leave the law firm life. My wife was pregnant with our first son at the time. She had just left her job, um, maybe six months before that. And she was like, we had a mortgage and ah she was like, what, what are you doing? I was like, you have to trust me. This will be good. I was like, you have to trust me. Like, please just trust me.
Speaker: This will be a really good idea in the longer term. We'll be okay financially. And ended up turning out great, but it nerve wracking to leave this path that was fairly clear to you, whether you liked it or not, it was fairly clear to go into this world. And and you know what? like i learned i ended up learning how much more I enjoyed the business side of things then I did the law. And i you know, I was somebody who wanted to go to law school for a huge portion of my life and be an environmental lawyer. And I went and did that. I just, it wasn't there. It's like the thing that I was looking for wasn't really there.
Speaker: And, you know, like I wanted to save the planet. Like that stuff really spoke to me. and like, I'm not doing anything close to that now. I sell software. I sell software. That's what we do. no now you're still saving the great I've had great stints along the way. And I love this new gig. Well, I'm not new anymore, but. But I think that's it's it's we work in such a risk averse profession.
Speaker: Generally speaking, you and I come from a risk averse culture from a career standpoint. Right. Stability and longevity are like paramount when we think or that's what I was a taught about our careers. And yet you step out there on the ledge and you're like, there's got to be something better out there. And I got to go see what that is. And I think that's a really cool thing because that's what makes us so human. That's what makes us so American, by the way. I think it's a truly American thing to do that. I also think, not to get too preachy, it also leads to a lot of happiness because you find out what else is out there. You find out what else you're really, really good at.
Speaker: And now I'm i'm on year 14. You know, you're you're not far behind in terms of how long you've been outside of the law firm world. I'm ahead of you, man. 15 now. 16. I think going out there, and and for me, this message really, especially for law students,
Speaker: And especially in the world that we're in today, when they're coming out of law school, there are so many more opportunities than you and I had. And I think that's fantastic for them and for the economy in general and for law schools because it keeps them interesting. But I think I think it's a really cool story about how and why and like, you know, the mechanics of making that shift at the top of that list for me was like the courage to be able to do it because it's not easy to always think about changing your career in that fashion. All right. So you spent some time PwC. What came next? Like why the shift? What's pulling you in other directions?
Speaker: So PwC, and then I went to Citizens, right? Because I cleaned them up with an enforcement action. Then I just started to play offense. Then this bank that I've never heard of, but was all around me called Apple Bank, a very New York bank, gave me a ring.
Speaker: And there in the in the US, they would be considered a big bank. They're right around like the $18 billion dollars mark. But in the world of New York, where you have every massive bank, trillion dollar bank around you, they were the mom and pop-like shop.
Speaker: They were a community bank, but not designated by regulation community, but they were the community bank on every block in New York City. So sure, let me let me hear what you got to say. Let's talk about it.
Speaker: But there is an individual by name of Jeff Herbert that just took over as GC there. he was He was an awesome individual, but he gave me a ring. He said, I would like to build out the consumer product side of Apple Bank.
Speaker: We are heavy commercial aviation, heavy commercial real estate. That's where it was born from, frankly, a real estate empire here in New York. But we need to balance the balance sheet.
Speaker: And I need you to come in and help the business not only understand risk associated with starting lending, starting a credit card, thinking about small business lending, thinking about online account opening,
Speaker: So these are all things they didn't have, but they saw what I had previously done at Citizens and they said, this feels like someone that would know the regs, understand the risk barometer, but also handhold a business, handle compliance through what would be more risky territory for us. Yeah.
Speaker: Yeah. Yeah, and then so you're you're kind of in this true product counsel role for the first time. and And this is the cool thing. Product counseling is one of the newer disciplines within the in-house world, like maybe 20 years. And I'm sure Apple and Google can fight it out over who created it. That's fine. But I think one of the cool things about being product counseling, and and this is something I had considered, I just didn't have enough of the tech and like other financial background to like make me make myself marketable on the product counseling side,
Speaker: is that you really, and and I just want to talk about like, you really have to be a partner to the business. And I'm not saying other in-house counsel in other in other roles and functions within the department don't, but you really, as a product counsel, you really have to be a partner to the business. How did you go about learning that? Were there inherent traits that you already had that made you sound for that? And I want to talk about what that dynamic was like at at Coinbase once you got there, but would love to hear like how you develop those chops.
Speaker: Yeah, um I think that was all Citizens, to tell you the truth. The team that I was on over at Citizens, Citizens 1, was like a ah startup within the larger bank. That when we're doing these deals with Apple or we're doing these deals with Microsoft, it was really just a group of us five that were taking away what's the product build standpoint. I'm working with them on the numbers. I'm crunching what it looks like from unit metrics. And then we're going out the door with me, doing everything from everything from the agreement to blessing what the front end looks like.
Speaker: And that also you have to get maniacal if you're working with with Apple on, OK, we have all these regulations that require a checkbox or all these regulations that mandate that you read the hell out of a disclosure and The world of Tim Cook, which I know is now changing passing the baton. yeah he would We would get a call on Saturday when we're about to go out with something like the new iPhone is about to drop on Monday. And he would say, I need these five words off the screen.
Speaker: And I have to get on the phone with the Apple team to say, this is why we need it. And this I became very good friends and to this day, very good friends with WinBoot that was at Apple at the time.
Speaker: And we would hash out what is the least amount of things that needs to be on page for the best customer experience, get out the door, right? And that type of approach is what I brought to Apple very disclosure heavy bank, very deposit heavy bank.
Speaker: But how do you get somebody to jump on and get something done very quickly, like a loan two to three clicks, right? New for the bank. So,
Speaker: When I jumped in, yes, it was learning the business, understanding where like the you know where the drip has always happened with Apple, where they're trying to succeed at, and also making them twist their brains on maybe this approach, for example, referral marketing for our loans is not the best way and not even not the best way for your balance sheet.
Speaker: But from a risk standpoint, like you don't have any understanding of what these loans are going to look like. It was from LendingGlobe at the time. Is it going to be usury rates? Are they going to F your customer? Is this now actually going to kill the relationship with Apple?
Speaker: So let's Apple Bank. Let's think about these things slightly differently. Also, I've done this before. Let's bring in Upstart. Let's bring in the small business fintech. Let's bring in who's going to assist with our online account opening.
Speaker: Let's. Let's leverage folks out there that are doing this dialed into banks, but also gives us defenses on the back end, because at the time, Upstart had a CFPB no action letter.
Speaker: OK, now, if somebody's bringing in a black black box for lending, at least it was blessed. Right. So when you're thinking about decisioning, especially for a bank that you're trying to on the fly alter the risk appetite for.
Speaker: You got to understand where are they tremoring at some of the risk and how can you even from a legal standpoint say that this is going to solve not only the risk but it's actually going to put more money in your pocket.
Speaker: and we're going to have defenses to our regulator. So all of these things come into a decision that you are trying to lead through what is like the mud of a a bank that has 15 risk committees and a board that has to approve it and all these things. So you learn those things very, it takes time and you may get like, you may have arguments, but we were very real about what change needs to happen to get us to even getting table stakes for a consumer bank.
Speaker: Because if you're not going to get that, you're not going to be able to fund those massive commercial aviation deals because you haven't. Everyone's leaving even with their deposits if you're not serving the rest of what they need.
Speaker: Yeah. I mean, look, uh, and this is bit part of the narrative around product counseling as well as I think litigators who have gone deep into the regs that are relevant for any kind of product role, they tend to be successful, assuming that they can really understand how to transition over to the being business forward and along, along with kind of identifying the risks. But do you think your litigation experience was particularly useful as you started to transition into those product roles?
Speaker: Yeah. um A thousand percent. And I think the number one reason for that is not everything is a fire. When you're a litigator. Yes, you have super deadlines. Everything's going nuts.
Speaker: But if someone's calling you out of nowhere or saying, oh, i need you right now. Is somebody going to jail or is somebody dying? yeah right like that's your litigator thought process of course you get what you need to done but very similarly when you're looking at regs today it's not okay black and white this thing needs to happen let's take e-sign for example 1980 reg
Speaker: Yes, you can check off the box. But if somebody was like, well, we need to do 15 other things for eSign that's operationally gonna have X amount of money tied to it, I would make a risk-based decision to say,
Speaker: We may not do that because when somebody wrote this in 1980, they didn't expect for a transaction to occur on an iPad and an Apple store.
Speaker: So there's just, and that, I mean, frankly, is the world we lived in at Coinbase, but you also start to get the barometer of you're not gonna take all the risk out of the products and things that you're creating.
Speaker: Otherwise it's gonna be the worst customer experience ever. And you're gonna spend millions to get to that point. But you take these decisions and say, um'm I'm not going to just make everything on fire. I'm going to make certain things occur. We're going to launch product. We may test it a bit.
Speaker: And then we're going to dial up what needs to happen as we scale. Yeah. Speaking of Coinbase, tell us about the move there. And and then by that time, you're you're essentially in your fourth in-house kind of role, whether it's, you know, and I'll include PwC in there because i think it's important.
Speaker: But would love to to hear maybe the top two learning lessons across those that got you ready for the next gig as as the general counsel at Cloaked. Like, what was it? Anything specific about Coinbase or something consistent across those four roles that really happened? But first, let's start about kind of the transition to Coinbase.
Speaker: Yeah. um So when I was at Apple, Apple Bank, um I was always considering and thinking about what's what is going to be the future of finance. It can't be an age old T plus two transaction all the time, every day.
Speaker: There was also just a peak of interest I had in Bitcoin crypto as an investment vehicle. That actually led to me considering what should we be doing as Apple Bank to start to trickle into this new world of crypto.
Speaker: We had, when I first got to Apple bank, we were crawling out of a consent order, AML consent order. Frankly, most banks, even coin got hit with one of those just because you were growing over time. For Apple, it was, they bought another bank, all of a sudden we're 10 billion more spotlight.
Speaker: but we But I proposed a couple of different approaches to the team, including one would one closed loop type of crypto transaction that allowed us to store it within their online banking environment, but never send it to a non-custodial wallet. Still have to get it out through our normal bank channels, fiat coming back out through their online platform, right? Like the online online banking platform.
Speaker: We went pretty far with that as a team, including with the GC, but ultimately the board said they weren't ready to take that risk. I was really excited to try to make something like that happen. In the meanwhile, I started to write a couple of articles because frankly, my first boss used to always say, if you're really interested in it, you can't just say you're interested, like do something about it.
Speaker: And I say that all the time to my even law students now. um im If they're like, oh, I'm really excited about this thing at fintech, I'll write it with you. Get it started, but get out there so that when you go to that interview, you got something to say, not just I really like this thing.
Speaker: and So I started write. One of them was a good friend of mine, Trevor Levine, which ultimately went to FTX right when I went to Coinbase. Still an amazing friend. He actually taught me a lot of things I learned in crypto.
Speaker: And After I wrote that, I started to consider applying to a couple of places and very quickly I found that they were looking for people just like me.
Speaker: People that have been in the financial services reg space, trying to build out what they've already started to build out in like the veins of of crypto that have to have some kind of regulatory component or at least your ability to pulse check the regulatory components.
Speaker: so gemini a few other places i was pretty far in the interview process coinbase was frankly top of my chart but also the one that hit first so i went over there i was supposed to be part of actually you may recall coinbase lend yep i remember that they ended up getting a letter from a wells notice from the sec saying if you launch this product It's fire and hell.
Speaker: So they hired me for that. I ended up pivoting to be the head of retail trading from a legal standpoint. So I was in charge of all the retail trading. I worked with the team on the non-custodial wallets for a bid. And then I ended up building out like the MPC wallet with the team, all product council,
Speaker: product counseling that I kind of flew a few different ways. Some of it based on need, some of it, you may recall a couple of risks that occurred that just required the rest of the product council team to kind of carry the bag.
Speaker: And one of those was actually the international exchange that we ended up launching right before I left for Cloak. Okay. Okay. got So across these roles, want to shift gears a little bit.
Speaker: Obviously technology has played a role in how we lawyer. It's changing massively now. Operations has played a role in how we are lawyering in-house. ah Talk a little bit about your experience with, and we don't have to call it legal operations, but just operational effectiveness, like how important that became across your roles. And then, and then the kind of technology that we have seen proliferate on the in-house side, like what are your views on those two things?
Speaker: Yeah, so of course I saw a ton of that at Coin because you you of course were there and helped us build out how you can actually operate this thing like a, frankly, like a product.
Speaker: um When I first jumped into Cloat, none of it existed. yeah So I think i recall having the conversation with my my CEO at the time, even thinking about something like a CLM or something like that. And he was like, dude, like,
Speaker: We have so much other low hanging fruit right now. Let's stick it into Google. Right. Which now we're probably at a stage that we're starting to get much more organized from the legal ops perspective.
Speaker: But I've seen it in action. I've seen it work at a larger ah org. But the one thing that is deeply embedded in my soul right now and coin taught me this is that.
Speaker: points of friction if they're not put in place appropriately and fit to your company just end up being processed that we're doing because other people did it.
Speaker: Yeah. So it's really funny because we had I had this conversation actually Sunday morning with my CEO because he put out this note to just his reports of People keep saying that we need to be a more mature organization and that we're no longer a startup.
Speaker: And that hurt his soul. He is like, we are a startup. yeah We will act like a startup. We may be putting things in place, but our ability to ship, which this probably sounds just like Brian Armstrong, right? The need for us to quickly ship, test, get things out the door,
Speaker: iterate on those can't be stopped by 15 layers of process just because we saw Walmart or man maybe Amazon now, not in those trenches, but these larger companies that that we've started to bring people in from start to say, but I used to do this.
Speaker: Yeah. Right. yeah So now it's like, how do we make sure that as we build, you keep the speed, but you're not just bringing things in things in for no reason. It is very suitable for cloaked.
Speaker: Yeah. And he said something which i and I love the thought process. And I feel like we we think about this the same way. If you say that Google brought it in. then one, how does it apply to us? But our mindset shouldn't be that we're building ourselves to be Google.
Speaker: Our mindset should be we're building ourselves to buy Google. That's how we need to play. I lovewa bro love that mentality from your CEO. I also think, and like we're also a Series B company, that is a very similar conversation to the one I have with my CEO.
Speaker: um he went He's a co-founder CEO, so he's been there from the very, very beginning. And it is a struggle because the law of people, literally that's it. The more people you have, the more points of interaction you have on a daily basis, the more layers you create between those people, the slower you're going to be. It's not difficult math to figure that out.
Speaker: The harder part is how do you avoid that? How do you avoid that? And you know like there's one point of view that's like flatter organizations and quicker speed to decision-making has one impact. There are others that have like documentation. i have I have had the privilege of now having worked at several organizations and companies and worked with dozens, if not maybe close to 100 more during my consulting days. And I can say with a significant level of confidence, Coinbase was one of the best run companies that I've ever experienced. It really was. And part of it was that mentality that you just alluded to to Brian was like, I will not take this for granted.
Speaker: I will not take for granted that just because we're big and just because we're public and just because we have thousands of employees that things have to slow down. And we i mean Spot Draft is struggling with that right now. And we're not a huge company. i mean we're We're about 320 people. And we're really trying to make sure that that happens. now The punchline here is, does AI become the ultimate mitigator to that? I think to a great extent, the answer is yes. Because where you used to have to bring in people to do those process-oriented things, you can now have one or two people orchestrate it with technology.
Speaker: That is the law of technology. That's that's why human beings have technology. It's why we created the wheel. Instead of having four people carry a boulder 100 yards, you get one person with a really strong wheelbarrow to to push it 100 yards. right like that's That's technology in a nutshell. yeah I really like that mentality. I think if you can keep that kind of velocity, then your chances of success and staying ahead are that. That's what business is about. You've got to make sure that you're that you're on that kind of stuff.
Speaker: So I know we talked a little bit about AI and kind of how it changes the in-house world. What are you most looking forward to as a lawyer, as as the top lawyer at Cloaked with respect to artificial artificial intelligence? And I won't say over the next two years because in six months, the answer will probably be very, very different because that's how fast things are moving. But what is that personally feel like for you as as the GC at Cloaked?
Speaker: So as ai has started to bubble up, what we've started to see is just like there's 5 trillion good use cases of AI.
Speaker: You see some nefarious activity that's starting to bubble up. ah That has also prompted the discussion of privacy and security. So it has actually increased the need for the cloaks of the world to help not only the consumer start to grapple with where's all my data, how is it getting aggregated, how do I remove that ability to get that aggregated, then people scam me or spam me. but also enterprise as well as government starting to understand that most of the attacks that are occurring in this world now are actually based on the employee level doing something crazy versus an endpoint that's not protected by cloud flare or something like that which was the age-old way that hackers used to exploit or bad actors used to bad yeah so
Speaker: When you ask me from a cloak standpoint, I think not only are we starting to integrate AI into the methods in which we protect people from whether it's AI or bad actors using AI, but now The blossoming of how the heck as you as a CISO start to understand various like fine shreds of employee potential threats is something that we're just building very crazy for. And it's it's something that's just starting to to prompt most CISOs to think about the risk very differently.
Speaker: I do think that the rest of the world, I think everybody in this world will be cloaked and I'm happy to get you on, Akshay. But you'll you'll start to see that there's at least limited levels of protection that you can get for your family, your your grandmother, your mother of where there's about to be even this next level of spam and scamming that's going to be so personalized that doesn't even make sense.
Speaker: yeah Now, from a legal standpoint, I would say there's I have to find a way to be even better at my use of AI. We have AI agents that are within the closed universe of of cloaked.
Speaker: We have an AI origin, AI Sumit that you're able to use with the back end of claw to help you get things done. I gotta be better at that. Even my CEO says like you gotta use it more.
Speaker: sure But I've found myself that first of all, if I get AI slop, there's such a turnoff in my brain. Like you didn't read this 40 page policy. And you're giving it to me to review and read it? Okay, fine, I'll do it.
Speaker: But that's where I go back to something I said at the very beginning. I find myself staring at a wall and attempting to connect dots even more now, because that is the only differentiator from AI.
Speaker: How can I think about how this thing is impacting potentially my insurance business? Is there something I should be thinking about here for tax? And yes, you take that dotck connection and then you feed it and gain more information in ai But it at least removes yourself from the glaze that we all have, whether it's like just being on your phone and using AI all day or just the the the madness of the world that's happening to say, how can I help my business in a different way?
Speaker: Or is there a product that we're not thinking about or other the products that we're actually building now, even for internal use, things that are about to get spread in this new AI vortex for just security and privacy. yeah So I don't know if that's answering your question, but I think it is.
Speaker: The answer is probably as haphazard as my brain is. and and And that is generally speaking. Generally speaking, that's how most AI is being leveraged. Very little of it is like super intentional and like targeted because we're still trying to figure out what what we can do with it. Our engineering team built also within our ecosystem an agent called Neo.
Speaker: So no surprise there, you know exactly where that's from. And we we can we can attach Neo to our various Slack channels. And for me, it is an incredible knowledge management tool.
Speaker: And so I can query Neo. Neo can go find the information and give me a summary. And it is very powerful just to have those answers in a relative split second rather than what channel was that in? Or I remember where I saw this and like, maybe it's there, but he's plugged in. and know So I just called him me Neo is plugged in. to our systems and is able to retrieve that for us. And I have very rudimentary, but very powerful outcome just to have those answers in ah in a really quick fashion and then be able to leverage them to connect the dots. I really like the way you articulate that.
Speaker: right, I've got three questions I ask every single guest and we'll wrap up with those. All right, so this is a little bit reflective a reflective exercise, but also a little bit of a look forward exercise.
Speaker: So as you think about your law school self, okay, when you're in law school, what's one piece of advice that you would give that law school sumit with the benefit of hindsight that you now have in your career?
Speaker: Oh, interesting. Don't be so worried. Have as much fun as you can right now. Can I tell you that it happens to be one of the most consistent answers that I get? Yeah, would back to law school right now. would love it. works out. And also, shit works out. Take a risk. Shit works out.
Speaker: That's so important. If you work hard, it works out. Yeah, I agree. All right. Now let's look. I don't know if 10 years is too long anymore. I don't i don't even know. Timeframes are like so like wonky now in my head. But when I wrote like these questions, I'm like, okay, 10 years. let's just, we'll stick with 10 years. If you want to use five, that's fine with me.
Speaker: Looking 10 years ahead, maybe five years ahead. What's the kind of path that you hope you've taken? Not just in title, but like the work that you're doing and what you're most proud of. um I would love to have done something that does ultimately change the world. I'd love that like a Nobel Peace Prize or something like that, but that's shooting to the moon.
Speaker: But I will also be real that I would love to be in a financial position that my girls don't have to worry about anything. And yeah, give me a yacht. I'm good with that. Give me all those things.
Speaker: Yeah. You a big sailor? Is that a yacht or that's just figurative for like, I got to have that kind Figurative. All right. All right. Last question. As you look back at some of your early career decisions, are there any signals or instincts that turned out to be worth trusting and others that were maybe just noise?
Speaker: Cliche would be trust your gut. It as ultimately does win. But I would take one step in the building of a team piece in that, that there's going to be a ton of people that look extremely good on paper. And in the hiring process of who you're about to bring on the court with you as you're starting five,
Speaker: there's very much a gut instinct and a vibe that comes along with that. And I think that, um, That is something that now, like I make a very bit very different decision on the way that I try to build the people around me.
Speaker: And I think that that to me is something I'll continue to take away that sometimes your your vibe hires are the the ultimate hires for you and not just people that you're you're trying to get to be on your team and in the room because they're ah their pedigree or something else tells you that they should be.
Speaker: I love that answer. Yes, always always trust your gut and you learn to fine tune it just like we fine tune AI with more data. Sometimes it'll be right, sometimes it won't. And the next time yeah it has to be used, it'll be right again. so And hopefully your ah your your team doesn't hallucinate, dude. All right. My guest today has been Sumit Chugani, who is the general counsel and chief compliance officer at Cloaked. Thanks for joining me today, man. I know you're very busy. I appreciate you taking the time.
Speaker: No, appreciate that. See you again soon, Oche. I'm making my way to SF soon. Maybe we'll play some golf. Absolutely.
