👁️ Biden/Gensler Crypto Policy is Crumbling
Greunberg out at FDIC, a SAB 121 defeat, OpenAI is fucked, and other good news.
It has been a week of truly epic proportions for two of the three narratives I follow most closely here: cryptocurrency and (the slow death of) “artificial intelligence.” Don’t worry though, there’s some global financial crime in there too!
Scroll towards the bottom of this edition for a full section of developments in the Biden administration’s “Chokepoint 2.0” campaign to throttle crypto. It’s not going great.
But first, if you haven’t yet, be sure to check out my new podcast episode with 0x_kitsune. Kits is pseudonymous but works in “real world asset tokenization.” We talked about the threats to the dollar worldwide (there aren’t many), and the benefits of dollar stablecoins. We talked at some length about David Graeber, and why leftists need to understand how the monetary and financial system works.
But most importantly, we talked about West Ham, our guild/group chat/angel list, and why the NFT industry’s goal of “monetizing community” is a complete sham that will get you blinded by lasers. (Also, please subscribe to Dark Markets on YouTube, lots of good clips over there!)
Premium supporters should also be sure to read my lengthy exploration of sociopathic behaviors displayed by Sam Bankman-Fried, based on the work of Dr. Martha Stout in The Sociopath Next Door.
You can also follow David on Farcaster, if you’re already in the mood for that sort of thing! And don’t forget Bitcoin is Magic: Internet Money, Memetic Warfare, and the End of Mere Reality, my book about Bitcoin is social and historical context.
Now, the news.
Fringe Finance News for May 21, 2024
FTXer Sam Trabucco Reappears: One of the biggest outstanding mysteries of the broader FTX situation has been what happened to Sam Trabucco, who quit as co-CEO of Alameda Research just a few months before the FTX scam imploded. At the time, Trabucco said he just wanted to get on his boat and “go fast over the water,” but he has been suspiciously and totally absent from the criminal and civil proceedings since.
Now he has reappeared, though only briefly, to offer a heartfelt letter attesting to the character of Ryan Salame, who confessed to his role in SBF’s campaign finance fraud. Based on circumstantial evidence, the appearance of the letter has triggered a round of speculation that Trabucco had a substantial role as a cooperating informant for the FBI and DOJ.
OneCoin is At Home in Dubai: Many former participants in the massive OneCoin fraud - now started nearly a decade ago! - took their winnings to Dubai, according to an update from Jamie Bartlett at The Missing CryptoQueen. Using open-source intelligence, his team found 27 properties in the Emirate that had been purchased by former OneCoin players, presumably using stolen money.
Dubai: for when you need somewhere even sketchier than London to hang out.
Traditional Money Laundering Tops $3.1 Trillion: According to Nasdaq, $3.1 trillion in illicit funds flowed through the traditional financial system in 2023. Cryptocurrency, meanwhile, was used to move $24.2 billion in illegal money, a literal rounding error by comparison.
This drives home an underlying theme of this newsletter: That drug and human trafficking money substantially fuels global banking, and that targetting crypto is largely a misdirection, aided by useful idiots like Sen. Warren.
OpenAI is Utterly Doomed: So it turns out Sam Altman is a complete, blithering idiot. OpenAI, the company he now more or less officially heads (I guess?) is going to evaporate into dust within a couple of years. Not because he copied Scarlett Johanson’s voice after she refused him permission, and is about to face an entire wave of lawsuits so nuclear the Toxic Avenger wouldn’t touch them with a mop - no, not for that reason.
But because Altman was enough of a moron to do THAT, and nobody around him told him just how dumb it was - that, that is the reason OpenAI is doomed.
Pump Dot Gone: I honestly don’t have a good summary on this one. There was a big exploit of a Solana system called Pump.Fun. Someone stole a lot of money? But maybe it was all a LARP? Either way it was very entertaining which is what really matters, including the hacker himself showing up in a Twitter Spaces, which occasionally sounded like an op meant to shill other projects, before his apparent/reported arrest the next day.
Regardless, Pump.Fun was explicitly a shitcoin factory, and when you lie down with dogs, you come up with fleas - then the fleas steal your money. I don’t know if I feel bad for any “victims” that might exist.
Roundup: Biden’s Failing Anti-Crypto Campaign
Ether ETF Moves at SEC: Late yesterday the SEC asked for paperwork updates from applicants to open Ethereum (ETH) spot ETFs, which would sell ETH positions on traditional securities markets. The news accompanied some other chatter about changing attitudes regarding the ETF - attitudes that may well have been shifted by the show of force in the SAB 121 vote last week. The entire crypto market rallied steeply on the news, with ETH up more than 20% on the day.
Senate Rebuffs SEC, and Biden, on SAB 121: Senators voted a striking 60-38 to overturn the SEC’s not-really-a-rule SAB 121. The initial SEC measure, which bypassed normal public review through its misleading designation as mere “guidance,” had the radical policy implication of effectively banning U.S. banks from custodying cryptocurrency for customers. Democrats including Chuck Schumer crossed the aisle to vote to repeal SAB 121 - which is even more of a rebuke of the Biden administration than it might be, since Biden has already declared he will veto the effort to rein in the coked-up gangsters at the SEC.
Elizabeth Warren’s Team Coached Chokepoint Mastermind: Semafor reports that Elizabeth Warren’s “protege” Rohit Chopra and her former chief of staff, Dan Geldon, both spent time coaching FDIC head Martin Greunberg ahead of a House hearing last week. Greunberg headed up both the Obama administration’s “Chokepoint” banking censorship program and the Biden administration’s extralegal systematic attack on cryptocurrency.
FDIC Head Steps Down: Shot aaaaand chaser. The Warren team’s coaching seems to have been for absolute shit, as Greunberg will now step down from the FDIC after the hearing, over an alleged culture of bullying and abuse at the agency. Abuse of power actually seems perfectly on brand for Greunberg – you get what you pay for.
I personally do not agree with the vitriol Warren often gets. In a previous article about the DOJ 's actions against Samourai, DZM brought up HSBC and how they do pretty bad things. Well Warren's no apparently no fan of HSBC either.
From the Wikipedia article on Warren:
"At a March Banking Committee hearing, Warren asked Treasury Department officials why criminal charges were not brought against HSBC for its money laundering practices. Warren compared money laundering to drug possession, saying: 'If you're caught with an ounce of cocaine, the chances are good you're going to go to jail ... But evidently, if you launder nearly a billion dollars for drug cartels and violate our international sanctions, your company pays a fine and you go home and sleep in your own bed at night.'"
I mean that's almost the same kind of sentiment I can imagine DZM making.
So unless one thinks that is just theatrics, I think it is clear she is no friend of TradFi BS. I get the feeling that she was/is as pissed off about the 2008 Financial Crisis as I was/am. And that we have largely the same goals. And, in fact, they are the same when it comes to TradFi. Regulate those mofos. To paraphrase another Warren: Regulate any stealin' of our property and money.
We just differ in one tiny quadrant: crypto. And per this DZM piece it is a tiny quadrant: "According to Nasdaq, $3.1 trillion in illicit funds flowed through the traditional financial system in 2023. Cryptocurrency, meanwhile, was used to move $24.2 billion in illegal money, a literal rounding error by comparison."
Thus, I can disagree with her recent actions and comments--and hope it's more her team's fault than hers--and still support her Progressive views and efforts.
Regarding her team, remember it was a former staffer of hers that went after Pooltogether. And in this piece "Elizabeth Warren’s 'protege' Rohit Chopra and her former chief of staff, Dan Geldon" are prominently involved. To some, this could be seen as her minions are doing her bidding. But it could also be that it's her team that is encouraging her to go after crypto instead of banks. Perhaps her team is convincing her that crypto has no other value than money laundering and fraud. It can be hard to convince someone of otherwise when those do seem to be two very big use cases for it (just not bank-sized big use cases). Crypto is still early, so it's almost a matter of interpretation and prognostication, and maybe she's got some fintechy Svengali(s) "educating" her on the matter. I mean "shadowy super coders" does not scream a thurough and deep understanding of crypto. But that's okay. No one can be an expert on everything. And maybe her position will evolve over time.
I don't know. I kind of feel like it's being a fan of John Lennon. In general, and in the big picture, the guy really did care about peace, just kinda stinks that he also beat his wife (possibly wives). If wife beating is more important to you, or if crypto is more important, well, I can understand it. Wife beating is pretty f'ing bad.
Lastly, I think also maybe it is about different ways to get to a goal. 2008, in my mind, was institutions doing "shadowy super" finance chicanery. Which can possibly be solved by making it transparent to the few, but powerful and theoretically popularly elected (e.g. government regulation). Or by making it transparent to the many (e.g. a blockchain or distributed ledger). Yes, crypto isn't always transparent (see my comment on Samourai and my ethical conflicts with mixers). But regulations don't always keep proper tabs either (see the detoothing of Dodd-Frank that many think allowed Silicon Valley Bank to do what then caused them to fail - https://www.newyorker.com/news/q-and-a/the-regulatory-breakdown-behind-the-collapse-of-silicon-valley-bank - a detoothing ofa lot of the protections that I believe Warren helped put in place) .
There is probably more to be said about the political polarization of just about everything nowadays, even what could just be considered a technology, but maybe in another comment.