👁️ Arthur Knight Has Fallen
It would be funny if it weren't so grim. Also Prometheum, Bolt, and Justin Sun.
Welcome to the weekly Dark Markets fraud, graft, and crypto news roundup. Be sure you didn’t miss the weekend’s installment of the SBF book drafting process, “Techno-Rationalism and the Denial of Death.”
This week’s news:
Babylon Launches Bitcoin Restaking; New FTX Campaign Finance Charges; Prometheum is still Goofin’ Around; Justin Sun Destroys Everything He Touches; Bolt’s Funding Round is Blackmail; Elon Musk is A Walking Financial Crisis; Palantir has links to Russian Oligarchs; Nicholas Rossi admits he’s not Arthur Knight; DOJ Sues an AI Price Fixer; A City of Crime in the Golden Triangle; Movie Spotlight: Dead Birds
Babylon Launches Bitcoin Restaking
I don’t often cover positive cryptocurrency news here much anymore, but this one is extremely cool, interesting, and ripe with potential: a startup called Babylon is in the process of launching a liquid Bitcoin restaking product. That sounds like crazy jargon but amounts to letting other blockchains rely on Bitcoin’s top-tier security, while paying Bitcoin holders yield for the service.
I haven’t done a deep dive yet, so I can’t speak to the nuances of their tech and custody stack. But it’s a potentially huge unlock with long-term benefits both for Bitcon holders and the crypto ecosystem.
Michelle Bond (But not Barbara Fried!) Charged With FTX-Linked Campaign Finance Fraud
This is truly infuriating. The U.S. Department of Justice has filed criminal charges against Michelle Bond, then-partner of FTX co-conspirator Ryan Salame, with campaign finance fraud. In substance, the charge is that Bond collected $400,000 for a “sham” consulting gig at FTX, then used that to fund her campaign for the House, and lying to the FEC about it.
I’m sure she’s guilty as fuck, but this is nonetheless infuriating, because Bond’s alleged crimes are clearly less severe than those of Barbara Fried, who on evidence directed the concealment of tens of millions of dollars worth of donations to a variety of Democratic candidates. This makes the prosecution of Bond look politically motivated and selective - so we can thank Babs for now undermining faith in the justice system, along with raising a sociopathic monster.
Prometheum is At it Again!
So part of my interest in scammers is of course that they undermine justice and fairness in the world, and they should all rot in hell/jail. But they are also incredibly entertaining, because grifting is the last refuge of the wildly incompetent.
It’s hard to think of a better illustration of that than Prometheum, an unbelievably weird crypto-adjecent operation that has spent several years positioning itself as a “legally compliant” crypto trading platform, but hasn’t managed until recently to actually offer any services at all. There’s general suspicion that they’re what Rep. Richie Torres called a Potemkin company, and possibly in collusion with Gary Gensler’s SEC. Matt Walsh at Castle Island Ventures is the world’s premier David Attenborough-style Prometheum Observer, and if you’re not already familiar with their bizarre story, his thread here is the best place to start.
But they ain’t done yet! Again courtesy of Matt (and the consistently excellent On the Brink podcast), we have news that Prometheum is trying to raise $20 million, on essentially no revenue, no viable business model, and a reputation that is an absolute dumpster fire.
How do you overcome those tiny details? Well, as Matt lays out, you hire an incredibly shady investment banker, in this case Aegis Capital, who have 38 “regulatory events” for disclosure and other problems. Something something you need a criminal banker, amirite? And of course, the services of such a venerable institution don’t come cheap - Aegis is charging Prometheum a staggering 13% rake on the raise, which I’m sure is going to go great.
So yeah, the good news here is Prometheum is running out of money and this raise is going to go over like a lead balloon (unless they can get more of that sweet Chinese Communist Party cash), so we won’t have to deal with their boneheaded obfuscation and disinformation for much longer.
Justin Sun, WBTC, and the Long Shadow of Reputation
I’ve been writing about Justin Sun’s shenanigans since at least 2019, when he bought BitTorrent and pretended it was going to run on his Ethereum clone, Tron. He’s a performative P.T. Barnum figure more than an outright criminal (though who knows). Now we have a nice illustration of the long-term cost of being full of shit, as his slightest affiliation with a $9 billion custodial crypto product, Bitgo’s WBTC, has triggered a lot of angst in the industry, leading a sudden and sharp exit from the product. And rightly so, anyone near this charlatan deserves to get rekt.
The Utter Madness of Bolt’s Funding Round Blackmail Scheme
This one is almost too crazy to summarize, but I’ll try: A fintech startup that has previously been embroiled in fraud allegations this week told its current investors that they needed to give them more money, or their existing stakes would be slashed. In my now more than a decade as a tech and finance writer (yikes) I have never heard of such a provision. Though apparently “pay to play” rounds and “forced conversions” aren’t unheard of, Bolt’s structure is unusual and will likely trigger a massive legal battle if it goes forward.
And the blackmail barely scratches the surface! The raise is at a purported $14 billion valuation, and Bolt’s annualized 2024 rev is $28 million, with $7 million profit! Founder Ryan Breslow is, presumably, on the Elon Musk Ketamine Regime.
Bolt also apparently lied about which funds had committed to the round, and there’s a UAE fund involved but their representative refuses to disclose its name, $250 million of the “fundraise” is in the form of “marketing credits” for social media influencers and …
look man, I’m just going to walk into the ocean
Elon Musk is Creating His Own Financial Crisis
The banks who loaned Elon Musk the money to buy Twitter are taking a gigantic bath on what the WSJ calls “the worst merger-finance deal for banks since the 2008-2009 financial crisis.” They haven’t yet written down the roughly $13 billion, but trust me, they will.
And if I may say: lol. lmao.
U.S. Defense Contractor Palantir has Links to Russian Oligarchs
Forbes reports that the children of two sanctioned Russian oligarchs are working for Joe Lonsdale, cofounder of Silicon Valley tech-defense contractor Palantir, at his venture capital firm 8VC. They are Denis Aven, son of billionaire Russian Banker Petr Aven, and Jack Moshkovich, son of oligarch Vadim Moshkovich.
In a response post on X, Lonsdale takes the incredible stance that it’s fine he hired Denis because he’s “a friend he grew up with,” both moving in the elite circles around places like Harvard and Yale - which are certainly not hotbeds of transnational elite corruption, not at all!
Nicholas Rossi Admits He’s Not Named “Arthur Knight”
This case of fraud doesn’t have much to do with finance, but it’s too bizarre and darkly funny not to highlight. It’s hard to fully enjoy, because Nicholas Rossi is accused of two separate counts of rape, but his attempt to get out from under have been staggeringly … bold and creative? I guess that’s one way to put it.
With essentially no supporting evidence or strategy, Rossi has for years been claiming that he is in fact not Nicholas Rossi, but a U.K. citizen named “Arthur Knight” - a pseudonym that is nothing short of brilliant. Here he is in costume, with a woman who has been (for reasons I’m sure are incredibly sad) posing as “Arthur Knight’s” wife.
Sadly (for those who love grim comedy) it would seem the jig is up. Rossi was successfully extradited to Utah, and in a recent court hearing his public defender confirmed his identity.
DOJ Files Collusion suit Against AI Real Estate Price Aggregator
So there’s a company called Realpages that invites landlords to submit information about how much they’re charging renters to a central database, where it processes this information and sends it back to other landlords to help them set their own rent rates. Does that sound like a barely-mediated price-fixing scheme to you? Because the Department of Justice agrees! A classic case of “artificial intelligence” being a great way for entrepreneurial brainlets to trip over their own dicks.
Horror and Corruption in Laos’s Golden Triangle Economic Zone
A self-governing enclave at the intersection of Laos, Myanmar and Thailand, released from the strictures of oversight and regulation in an effort to unleash growth, has instead become a hub for slavery, scamming, drug trafficking, money laundering, and – wouldn’t you know it – an illegal tiger and bear breeding and butchering operation. The animal’s bones are reportedly turned into aphrodisiac wine.
While Bloomberg is more circumspect, a group of researchers, Crisis Group, refer to the area’s primary developer, Zhao Wei, explicitly as a “Chinese crime boss”. Apparently developers initially promised manufacturing and agribusiness, but got casinos instead - and even those aren’t the truly significant source of revenue. Instead, the Zone is a haven for romance swindling and “pig butchering” operations, run by trafficking victims who are kept locked behind barred windows.
Watch: Dead Birds
I’m going to be featuring more culture here, most of it probably weird horror and sci-fi. Dead Birds is a nearly forgotten Civil War horror film from 2004 that combines some of my favorite things, most notably the brutal murder of Confederates. It’s got an absolutely stacked cast including Michael Shannon, Isaiah Washington, Mark Boone Junior, and Henry Thomas. The story ends on a righteously bleak and doomed note.
If you’re wondering why you’ve never heard of it, it might be because the film’s one real weak point is the one most likely to hold off a general audience: the micro-budget effects, including Scorpion-King caliber CGI and a particularly rough moment of blood-splatter stickers. Some of the practical effects are more than fine, though (see above). It kind of rocks!
"This makes the prosecution of Bond look politically motivated and selective".
Per my comment on the Tornado Cash developer trial, and the question of why go after that developer instead of the financial institutions that are often connected with money laundering (HSBC, Credit Suisse, etc.)--it's not only about how heinous the crime, but also about how easy it is to win the prosecution.
Which is easier to prosecute? Someone who clearly given the role--a wife who normally would not get a paid consulting job from her husband? Or someone who was born into the role--a mom who might understandably receive a donation from her son? Someone who used the funds directly--to run her own campaign? Or someone who then donated to others--to run their campaigns and would require proving a quid pro quo that it would then help her?
Actually this could be an interesting case of "effective value" or whatever they call it. High risk, but high reward in the case of SBF's mom. Ah, but that reward doesn't go into the pocket of the one taking it, which might dissuade, say, an appointee or employee of the DOJ. Of course, SBF was taking high risk, high reward "altruistically." Only keeping that reward in his pocket temporarily. Though he would in no way be bound to then passing it on. That is definitely what would happen. Right?
Anyway, this is not to say I am sure SBF's mom's case is harder to prosecute than Salame's wife's case. Wait, Salame's? Is his name really a deli meat? Had to double check. Guess so.
But instead, it's like my last comment, which, yes, did have elements of pedantry. But not pedantry for pedantry's sake. Pedantry is basically empty calories for self esteem. The counterargument/question presents itself in both cases, and in both cases would like to hear it explored, i.e. by DZM. Regarding my last comment, I'd like to hear: How well do these expected value calculations hold up in general, how much are they used as excuses for generally considered amoral behavior, and how much of the supposedly delayed moral payoff actually occurs and is measurable? And for this comment, I am curious: How hard would it be to win against SBF's mom vs Salame's wife in a similar case?