👁️ How the Yen Crashed Everything
Blame Japan! Also, BitClout Fraudster Nader Al-Naji Eats Shit; David Marcus joins Losers for Trump; David Sacks' alleged ties to Chinatown gangsters.
Hello to all my fine readers, and to a HUGE edition of the weekly Dark Markets news roundup - the bad boys and girls have really been busy.
You might also have noticed that Everything Crashed this past weekend. If you’re wondering why, click here.
Also in this edition: BitClout founder was a fraud; David Sacks, Adderall, and Chinatown Gangsters; Pandemic Fraud Investigations Shut Down; AI Co. spent everything on its website; 900 pages of Patriot Front FBI Documents; Song A Day Man Sues the SEC; Libra’s David Marcus Joins Losers for Trump.
Programming Update: More generally, things are getting rolling again here as we pass through the extremely traditional New York City Summer Break (this is my religion, please respect it). Later this month, Dark Markets will launch a new “Season” of the podcast, along with a reading group and related events that will focus on one topic.
For now, the topic I have in mind is “The Future and Prediction in Finance” - a huge conceptual pillar of the Sam Bankman-Fried saga and a rich topic in its own right, that I’ve been nibbling at for years. Time to eat the whole meal - and if you want in, be sure you’re a Premium Subscriber to get full access to a forthcoming Discord and other features, along with work so far on my SBF book.
BitClout’s Nader Al-Naji was a Shameless Fraud (And Princeton Grad!)
The Securities and Exchange Commission occasionally gets something right, if years after the fact, and their new criminal fraud charges against BitClout founder Nader Al-Naji, a.k.a. “Diamondhands,” is one such case. It was very obvious that BitClout was a scam from the start, mostly because its financial design heavily incentivized early capital investment to claim namespace on the new network.
And indeed, according to the SEC, Al-Naji handed over millions of dollars of investor funds to family (just like Sam Bankman-Fried) while lying about BitClout’s technology stack. Al-Naji also faces charges from the DOJ, which frankly is how you know this is serious.
And in an apparent bid to diversify the credentials of elite slimeballs defrauding average folks, Al-Naji is a graduate of Princeton, not fraud factory Stanford, which gave us Do Kwon, Elizabeth Holmes, and, of course, the Bankman-Fried Crime Family.
Most staggering, Al-Naji raised a reported $257 million with a barely-functional product. If you gave him a dime, do your family a favor and never invest in crypto (or anything else) again.
Did David Sacks sling Adderall with Chinatown Gangsters?
In June, criminal charges came down against the executives of Done Global, a “telehealth” pharmacy that allegedly became a huge pipeline for grey-market adderall, which among other things led to patient deaths. David Sacks was an investor in Done, and investment analyst Lauren Balik alleges the connections run much deeper than that. Broadly, Balik has argued that Sacks and other Silicon Valley investors are in effect running a money laundering ring for the Chinese Communist Party.
I can’t personally endorse the theory or Balik’s framing, but elements of it ring true.
Pandemic Fraud Investigations Shut Down
Courts reporter Seamus Hughes highlights the shutdown of the office of the Special Inspector General for Pandemic Recovery, an agency tasked with digging into pandemic relief fraud. The shutdown is the result of a five-year sunset clause written into the original CARES act legislation.
The agency has already recovered more than its budget in fraudulent claims, but at only $60 million recovered so far, it’s surely a drop in the bucket, and the sunset comes exactly when hundreds of millions of dollars worth of pandemic loans are coming due. Agency director Brian Miller rightly says this “makes no sense,” and calls for Congress to renew the office.
Friend AI’s Domain Cost Most of Its Money
An “AI companion” company whose product was broadly roasted as pathetic and laughable turns out to have spent $1.8 million of its total of $2.5 million in investment capital on the Friend.com domain name. While the domain is good and maybe “worth it” in some broad sense, it’s hard to imagine a clearer example of AI being totally driven by hype, with actual functionality a distant consideration.
Patriot Front Far-Right Group Gets 900 Page FBI Release
Researcher Robert Skvarla highlights the FOIA release of 900 pages of FBI documents on Patriot Front, one of however many hilariously failing far-right splinter groups. These groups largely consist of off-duty law enforcement officers, peppered with on-duty undercover agents spying on them, so it makes sense there’s a lot of material. Part 1 is here and Part 2 is here.
Song a Day Man Sues the SEC
Jonathan Mann, aka Song a Day Man, is suing the Securities and Exchange Commission. As he describes his motives in this incredible rant, Mann has been selling NFTs of his songs for years now, and believes that the SEC’s legally baseless prosecution of NFT projects like Stoner Cats left him afraid of falling afoul of securities laws, just for selling collectibles.
“Because the SEC has been exquisitely random about which projects they go after,” Mann writes, “It feels like anyone could be next. Are they going to come after me?”
David Marcus Joins “Losers For Trump” Movement
Former Facebook/Meta exec David Marcus is by far best known for completely faceplanting as the leader of Facebook’s 2019 attempt to create a crypto-like currency called Libra. So it’s little surprise that he decided to join other perpetual losers, frauds, and weirdos like Peter Thiel, David Sacks, and Chamath Pahalipatiya in declaring support for Donald Trump.
But of course, Marcus is a beta even by these squishy, rent-seeking manlets’ standards (He was President of PayPal, not a founder), so he chose to declare his support for Trump after everyone else in Silicon Valley already had. Even more on brand, he did so immediately after the announcement of Kamala Harris as the presumptive Democratic nominee shifted the discourse sharply against Trump, showing the gift for shitty messaging that helped make sure Libra was a complete catastrophe.
Most notably, Marcus ate shit in a 2019 House Financial Services Committee Hearing so badly that it effectively killled Libra then and there. He lacked good answers to basic questions about either the data or finance aspects of Libra, leaving even committee members themselves visibly bemused by his lack of preparation.
Like most newborn right-wingers, Marcus is explicitly motivated by resentment over his own failure to get the government to do what he wanted. In his announcement, he spells out that in the course of lobbying for Libra, he found that “Democracts … cared more about government power and control.” That’s a staggeringly self-absorbed assessment of the situation, given that Libra was a poorly-designed, wildly illegal international money market fund that stole superficial buzzwords from crypto while threatening the stability of global currencies, and operating on a clearly fake decentralized “nonprofit” model that congresspeople immediately saw through as the ham-fisted ruse that it was.
Being embarrassed by your own incompetence and sublimating it into antisocial authoritarianism is, it seems, a near-universal component the rightward turn. Being unable to think your way out of a wet paper sack is another – and David Marcus fits both bills.
How the Yen Crashed Everything
Cryptocurrencies and equities (and effectively everything else) swooned late Sunday. Even blue-chip cryptos were down on the order of 15% in a few hours, while major stock markets dumped around 3%. Those numbers are squarely in “normal correction” territory for both crypto and stocks, so it’s not much to shout about, but the reasons for the pullback are very significant.
Most analysts have converged on the Bank of Japan’s rate hike as the proximate cause for overall market fears, and we’ll get to that, but there is one crypto-specific factor that I find very funny. A lot of numbskulls with the same sterling instincts as David Marcus decided last month that Donald Trump loved crypto, based on his well-known capacity for strong and well thought-out ideological commitments. Then he gave a speech at a Bitcoin conference that was widely viewed as disappointing and rambling, just days after Joe Biden withdrew as the Democratic nominee and dramatically shifted Trump’s election prospects.
While I understand crypto folks feeling so bullied by the Biden admin that they cling to Trump, it’s the height of stupidity to think this guy cares about much of anything other than his own skin. In this case, the stupidity almost immediately came back to bite Trump-crypto boosters, as Bitcoin crashed a little right after the Trump speech, then started bleeding heavily two days later, on July 29.
So crypto was already battered when U.S. unemployment spiked to a worrying 4.3%, news that sent crypto down by around 5% last Friday. DJIA, notably, didn’t bleed on the jobs report, presumably because the report points to a possible Fed rate cut this year.
All of this was merely prelude, though. On July 31, the Bank of Japan decided to hike rates by less than 25 basis points, from .01% to 0.25%. By early Monday, it became clear that this was enough to seriously disrupt the yen “carry trade,” under which investors borrow cheap yen, then convert those funds into investments in higher-yielding currencies or other instruments. The sharp shock on Monday was essentially a leverage unwind as cheap yen got sucked out of the system and a lot of investors working with borrowed funds got loans called in.
Perhaps the major take-home here is that we’re near the end of the idea of an independent monetary policy, even for a very strong economy like Japan’s. Everything in global finance is deeply connected: you can borrow anywhere to do anything anywhere else, as long as you have the right broker and know-how.
An argument could be made that this fait accompli should maybe be reflected in more transparent and uniform global financial infrastructure. But hey, that’s just me.
"Broadly, Balik has argued that Sacks and other Silicon Valley investors are in effect running a money laundering ring for the Chinese Communist Party."
Balik's post was an interesting read.
A quick note. I have decided that "articles" are in newspapers, magazines, trade publications (broadly what we can consider CoinDesk), news sites (Vox, The Verge, Arstechnica). But more importantly than the forum, articles have an organization that operates the forum and has more than one author. Anything else--blogs, Medium, Substack--are "posts." I don't like the fact that the word "article" still has more gravitas. But I suspect that will change.
Not because articles have always been and stayed venerable (The Daily Mail technically has "articles" but it's really just a steady job innit?), but because posts have really gone up in comparable quality. Ed Zitron's newsletter/substack is being mentioned quite a bit in social media and aggregator. Ironically, an organization should suggest less susceptibility to influence, as you seemingly need to pay off more than one person to get your agenda. But that's not what happens in practice because of capitalism. When the whole enchilada has a price tag, you do actually only need to pay one person: the seller. Sure, CoinDesk isn't technically owned by Peter Thiel. And CNN is technically beholden to John Malone; it technically has a supposedly-somewhat-liberal CEO that just happens to be a long time acolyte of John Malone. This indirect influence might be the new flavor versus outright-buying moves. Like when Murdoch bought the Wall Street Journal. And, yes, when Musk bought Twitter. X doesn't create articles but Musk does seem to want to make lemonade, if not Lemon-ade, out of his sour purchase with in your face deep-fake propaganda. Well, maybe not "deep" fake, but it was definitely blatant and offensive propaganda, and the first dang thing I saw when I logged in after months. Which I only did because crypto /still/ often requires that atrocious technology.
Okay, not a quick note.
Balik's post was interesting because it brought back memories of very openly anti-gay Republicans being found out as being very much closeted gays. It made me think if it is so much that pop psych explanation of projection and self-repulsion after all. Maybe not, methinks.
Another quick note. It annoys me that while that quotation from Hamlet is generally applicable when it is used, most people probably don't realize how it is only losely correct most times, and some people do realize this, and these latter people probably wonder if the former people realize this, and that makes me not want to use the quotation. "Protests" is just making a strong opinion in the original meaning, but a strong opinion against something (common current usage of protest) is still, yes, a strong opinion. It's not like Hamlet is saying the quotation to his mom after she goes on and on about how much she dislikes that she has had to marry his father's brother. It's his mom saying the woman in the play within the play is being too performative in her promises (protests) to never remarry after her husband dies. The basic point of the quote is someone is being too performative contrary to likely true feelings, so it always closely fits, but rarely perfectly in modern usage.
No more quick notes.
Anyway, with the female lesser subject and male primary subject of the post, these dedicated investors in defense technology (i.e they sell really big guns) that protest they hate the CCP... The lady and the dude protest too much, methinks.
With gay-bashing gay-being Republicans, I think a lot of it is presented as causal, i.e. they are gay-bashing because they are secretly gay. And I guess in this case this is presented as causal. They are CCP-bashing because they are secretly CCP. But in both cases, there is the audience to consider.
If these politicians were looking to get elected as mayors of San Francisco as opposed to, say, congressmen of Bible-belt red states, regardless of how open they were of their personal sexuality, it is highly doubtful that they would be going on social media espousing views that could offend potential LGBTQ+ voters. But they are instead trying to get votes from adherents to a religion that where they live is fairly hostile to non-cis-het relationships, to the point where their religious services officiants will pontificate against those relationships more than, you know, "it is easier for a camel to go through the eye of a needle than for someone who is rich to enter the kingdom of God." Similarly, the lady and dude are seemingly trying to sell guns to a country that is a direct rival of another country, and seemingly really likes to have guns in case of aggression from said country, or to be fair, towards said country. Though, I doubt the vast majority of the population of either country wants any aggression at all. In fact, that's the crux of it, the gun sellers are not selling to the vast majority of people. They are selling specifically to people who push and receive such rhetoric that we need guns, and we need guns because of "them." Thus the sellers are willing to espouse rhetoric against "them" in social media.
Such pandering does not necessarily mean a closeted gay or closeted Chinese spy. But if your lover releases an erotic video of you... Or your "liquidity provider" puts your investment company on its "partners" page... Well, like I said, it just may not be causal is all. And is the video authentic? Well, seeing as sexual relations between consenting adults of any gender are not a crime--thankfully and so far--I guess it's okay we have no way of knowing (beyond statistical probability based on how many of these stories have come out). But seeing as money laundering is a crime, well, it sure would be nice if there was some sufficiently decentralized/censor-proof distributed ledger technology used to make/record all the transactions. But no, I don't think we have a transparent (block)chain of transactions from the sister of the leader of China to this dude and lady. Alas.
But, to touch point on why maybe orange people touting orange tokens might matter (not that there is anything wrong in aesthetic choices of makeup or iconography): It could be the death knell to many that yet another facet of life that needs not be upon a political divide is nonetheless now upon a political divide. To put it blithely (but I hope respectfully as I am personally proudly pro-LGBTQ+ rights): guns are for red / gays are for blue / but now it seems / not crypto too. Alas.