👁️ JD Vance's Portco Was a SPAC Con

AppHarvest, backed by Vance's fund and shilled to public markets at a huge valuation, went belly-up almost instantly.

Also In News Today:

Worker Survey Finds AI Really Isn’t Helpful; Trump’s Absurd Bitcoin Pitch; Vitalik Buterin Rejects Single-Issue Crypto Voting; Yes Razzlekhan is Probably a Fed.

But First:

JD Vance Down on the Farm; Martha Stewart touring an AppHarvest site with CEO and Founder Johnathan Webb.

The tagline for this newsletter prominently includes “tech fraud,” by which we more specifically mean “investment fraud, legal or illegal, premised on tech hype.”

I try to avoid being too loose with a term that has a specific legal meaning, but I sometimes still use “fraud” to describe the wave of deceptive-but-seemingly-legal tech investment messaging that really began with Elon Musk’s self-driving bullshit circa 2016 (remember that?). At the core of it is overpromising, raising big money from public markets, then wildly underdelivering. The investors take a bath (sooner or later) but you get to keep the money, because you can just keep saying things like “we’re not quite there yet.”

It’s in that context that I think it’s fair to describe the public stock market listing of AppHarvest, an indoor farming startup from which JD Vance’s venture fund Narya appears to have made a big return, as a fraud. (It’s also fair because an actual fraud suit was filed, along with an extensive report on the company’s labor abuses and general ineptitude by the publication Grist.)

Vance’s fund, Narya Capital, participated in a Series C round for AppHarvest. While the exact numbers aren’t available (Narya wasn’t a leading investor), AppHarvest raised a total of $100m before going public via SPAC (Special Purchase Acquisition Company) in 2021 at a valuation of more than $1 billion. That’s the “liquidity moment” for VCs, so you might guestimate Narya made a 3 or 4x return on their stake.

You might already know where this is going: AppHarvest declared bankruptcy in mid-2023, a mere two years after being valued at $1 billion by public markets.

That incredibly rapid and total collapse was possible because SPACs are (or were) flawlessly designed engines for legal, public-market fraud. In 2020, above all, they required far fewer financial disclosures than a traditional IPO, leaving them far more able to skate by on hype and puffery.

JD Vance knew exactly the right people to learn the ropes of the game: Chamath Palihapatiya, who recently helped convince Trump that Vance was an ideal veep pick, was making millions around the same time by setting up deceptive SPACs for absolute fucking dogshit like Clover Health. Chamath is a cynical thief, made clear by his oft-memed comments that human rights abuses are “below my line,” and his insistence that costing his investors tens of millions of dollars (while keeping his own fees, thanks) means that he’s “in the arena, trying stuff.”

With a 2021 SPAC, you had carte blanche to not just “try stuff,” but effectively to tell the public that the “stuff” was absolutely sure to work, regardless of the extremely limited financials that had to be disclosed. The problems with this became clear very quickly, and in March of 2024, the SEC finally adopted rules closing these loopholes, making it obvious that there were clear shortcomings that Chamath and his ilk simply chose a good moment to take advantage of.

There are few clearer pieces of evidence that you did something technically legal, but fundamentally immoral, than when they change the rules specifically so you can’t do that thing again.

To be clear, this is not to say that AppHarvest itself was a fraudulent company. It does seem like it was a really shitty one! But Johnathan Webb, who founded the company in 2018, seems to have had a genuine plan to explore a new kind of agriculture. Admittedly, as described in this extremely good in-depth writeup at Grist, the “controlled environment agriculture” pitch seems fundamentally flawed - as one scientist put it, the basic dynamic of CEA is “turning fossil fuel energy into food.”

But CEA is a real idea that actually works elsewhere and may have applications. It seems worthy of some startup funding - maybe even a decent amount! Grist details a ton of operational problems, though, including the apparent use of illicit migrant labor, and more general worker abuse and deception, including forced overtime. This was, Grist argues, driven substantially by the attempt to turn a profit in an industry where labor is a major fixed cost. AppHarvest couldn’t pull it off, even after subjecting workers to conditions one described as “hell on earth.”

But what is now really obvious is that AppHarvest was never anywhere close to deserving to go public.

The deception here was overwhelmingly on the money side, benefitting JD Vance and driven by strategies shared by Vance ally Chamath Palihapitiya. A securities fraud suit was filed in 2022.

Of course, having benefitted from this alleged fraud makes Vance kind of a perfect GOP Vice Presidential candidate, because whatever “national conservative” lipstick you put on it, and however funny it is that this cherubic treat boy is being sold as an avatar for some imagined hypermasculinist right wing, the pig that is the Republican Party is basically about legalizing fraud against average people by elites.

Trump made it obvious, but it was ever thus.

Trump’s Bitcoin Bullshit Has The Hogs Sweaty

Donald Trump appeared at a big Bitcoin conference in Nashville, where a fresh crop of jug-hooting hillbillies got to greet him as God-Emperor and cry uncontrollably when he promised the U.S. Government would create a “strategic Bitcoin reserve.”

This is stupid enough to be infuriating - unlike El Salvador, it makes zero inherent sense for the U.S., which already runs the world’s reserve currency, to keep a stash of Bitcoin. It’s pandering, pure and simple, and amounts to a promise to pump the price of Bitcoin. I can’t even be bothered, luckily there’s a deeper critical analysis here at The Rage.

Worker Survey Finds AI Really Isn’t Helpful

A new survey by Upwork found, among other things, that 77% of surveyed workers felt that AI tools had made them less productive. To be as generous as possible, this could be attributed to the “trying things out” stage of the technology, as companies frantically try to chase rhetoric and marketing trends that insist AI is going to be a huge efficiency gainer.

Maybe the other 23% of employees really like AI tools, and maybe if you do the same survey in a year you’ll get much different results. Maybe the other 77% of workers have smart managers that will stop trying to force them to use AI to replace themselves. Right? That’s how that’s supposed to work?

Or maybe there’s all this dissatisfaction because managers don’t actually understand the nature of the work they supervise and manage via buzzwords. I guess we’ll find out!

That said, however generous one might feel, a 77% failure rate for new adopters is not great for a technology that needs to scale with immense efficiency and near-total penetration to reach the lofty goals that its deluded grifter messiahs have set for it (that goal being, of course: building a replacement for God.) As Ed Zitron recently pointed out in another barn burner, OpenAI doesn’t actually have a lot of runway left! They’re kind of fucked!

Vitalik Buterin Rejects Single-Issue Crypto Voting

Ethereum cofounder and figurehead Vitalik Buterin has published a lengthy new blog post arguing, quite sensibly, that the values behind crypto should shape your voting … but not just because one guy said something nice. Above all, Good Guy Vitalik reminds the room that “freedom” was once upon a time supposed to be the goal here, and that if you find yourself making a “pro-crypto” vote for someone who fantasizes about violent social repression, maybe that’s not actually the right guy.

The Crocodile of Wall Street is Probably an Informant

In a piece of absolutely incredible luck, longtime bitcoiner Jameson Lopp spotted Razzlekhan, a.k.a. Heather Morgan, at the Nashville Bitcoin conference. This is notable because Razzlekhan has been found guilty of trying to launder more than $4 billion worth of Bitcoin stolen in the 2016 Bitfinex hack, and that conviction more or less came with the acknowledgment that she and partner Ilya Lichtenstein were also likely the guilty parties in the original hack itself.

Despite these staggering findings, Morgan was granted bail in 2022 and seemingly has been walking free since then. The last reports about the case indicate a plea deal was reached in August of 2023, but the exact contents of the deal still don’t seem to have been publicly disclosed.

That’s all extremely suspicious, and along with other information in my possession, I think there is a lot of reason to believe that Razzlekhan, and possibly Ilya Lichtenstein, are cooperating with law enforcement. Hard to say exactly what their contributions might be, but as Lopp emphasized to his fellow Bitcoiners, Razzlekhan is not someone you want to be anywhere near, even for a cheeky photo.