"The Untold Story of a Crypto Crimefighter’s Descent Into Nigerian Prison"
A wild read, long but worth it.
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An overview of the Sam Bankman-Fried trial
I find it hard to think that Bankman-Fried was just a guy who got in over his head. He has the education and background to understand what was going on.
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"Get out of Crypto now" - former SEC Lawyer
A massive Tweet from an ex-SEC Lawyer:
Get out of crypto platforms now, I can't say it any plainer. Having worked as an attorney in the SEC Enforcement Division for almost 20 years (including 11 years as Chief of the SEC Office of Internet Enforcement), I believe that we now know for certain that crypto trading platforms are under a U.S. regulatory/law enforcement siege which has only just begun.
And before you chop my head off with vitriol, ad hominems and OK Boomerisms, please allow me to explain the situation with only facts and research.
And before you label me a bureaucratic, washed-up SEC shill, please bear in mind that while I may indeed be washed up (!), I am typically an outspoken and dedicated SEC critic (see, e.g., https://twitter.com/JohnReedStark/status/1656774452388962305?s=20). I also have no stake of any kind in the cryptoverse. I am 100% objective, independent and neutral. Just seeking truth, always.
My take is that the SEC is spot-on with their crypto-related enforcement efforts. No matter what the carnival barkers promise, it is axiomatic that crypto trading platforms are high-risk, perilous and inherently unsafe. Please read on to understand my reasoning.
Why A Lack of SEC Registration Matters
U.S. SEC registration of financial firms: (1) mandates that investor funds and securities be handled appropriately without conflicts of interest; (2) ensures that investors understand the risks involved in purchasing the often illiquid and speculative securities that are traded on a cryptocurrency platform; (3) makes buyers aware of the last prices on securities traded over a cryptocurrency platform; and (4) provides adequate disclosures regarding their trading policies, practices and procedures.
Overall, entities providing financial services must carefully handle access to, and control of, investor funds, and provide all users with adequate protection and fortification.
With traditional SEC-registered financial firms, the SEC has unlimited and instantaneous visibility into every aspect of operations. With crypto trading platforms, the SEC lacks any sort of oversight and access — and has scant ability to detect, investigate and deter fraudulent conduct. As a result, the crypto marketplace operates without much supervision, lacking:
--The hallmarks of the traditional transparent surveillance program of a financial firm like an SEC-registered broker-dealer or investment adviser, so the SEC cannot analyze or verify market trading and clearing activity, customer identities and other critical data for risk and fraud;
--SEC and/or Financial Industry Regulatory Authority licensure of individuals involved in crypto trading, operation, promotion, etc., so the SEC cannot detect individual misconduct and enforce violations; -Traditional accountability structures and fiduciaries of financial firms, so the SEC cannot ensure that every customer's interest is protected and held sacrosanct; and
--The compliance systems, personnel and infrastructure, so the SEC cannot know where crypto came from or who holds most of it; and -The verification and investigatory routine and for cause SEC or FINRA examinations, inspections and audits, so the SEC and FINRA cannot patrol, supervise or verify critical customer protections and compliance mechanisms.
What the Crypto Regulatory Vacuum Means
For customers of digital asset platforms like most so-called crypto exchanges, there is not just a gap in customer protections, but a chasm. For example unlike SEC-registered financial firms, crypto trading platforms have:
-No record-keeping and archiving requirements with respect to operations, communications, trading or any other aspect of business;
-No requirements regarding the pricing or order flow of transactions or the use internal platforms and payment systems by employees;
-No reason to abide by U.S. statutes and rules prohibiting manipulation, insider trading, trading ahead of customers and other fraudulent behavior by customers or employees;
-No mandated cybersecurity requirements or standards to combat online attackers and protect customer privacy;
-No requirement to establish mandated training or code of conduct requirements;
-No obligation to have in place internal compliance, customer service and whistleblower teams to address and archive customer complaints;
-No requirement to reverse charges if any dispute or problem arises;
-No mandated robust and documented processes for the redress and management of customer complaints (N.B. that and even if there was a formal complaint filing structure in a digital asset trading platform, the pseudo-anonymous nature of virtual currencies, ease of cross-border and interstate transport, and the lack of a formal banking edifice creates enormous challenges for law enforcement to investigate and apprehend any individuals who use cryptocurrencies for illegal activities);
-No obligation to follow publicly disseminated national best bid and offer and other related best execution requirements;
-No minimum financial standards for operation, liquidity, and net capital; -No U.S. governmental team of objective auditors and examiners to inspect and scrutinize the fairness, execution and transparency of transactions;
-No requirement to ensure consistency of trading operations i.e. that the trading protocols used, which determine how orders interact and execute, and access to a platform's trading services, are the same for all users; and
-No obligation to design ethics and compliance codes for Wall Street entities (regardless of registration status) which would ban their employees from investing in cryptocurrency or NFT investments based on the same arguments as the ban of initial public offerings and options – i.e. that they are too risky and may tempt an employee to steal if not prohibitive.
It's all straight-forward and commonsensical. SEC registration establishes critical requirements that protect investors from individual risk and protect capital markets from global systemic risk. The requirements also make U.S. markets among the safest, most robust, most vibrant and most desirable marketplaces in the world.
Thanks for reading. With my blessing (and nothing but love for you), please feel free to launch the hate. Full Stop.
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"‘I didn’t steal funds’ says former crypto titan Bankman-Fried"
Sam Bankman-Fried seems like the kind of guy who, whenever someone disagrees or is upset with him, rather than dropping things he doubles down believing if he just explains things better they will come around. Dude is out of prison on a quarter billion bail and is blogging and continuing to plead his innocence in the public eye. His legal team must be screaming at him to shut up and just wait for the trial and court process to happen.
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Excellent analysis of Sam Bankman-Fried's legal situation
Honestly, I don't watch a lot of LegalEagle's videos. Not for any reason of his, but just that I tend to not care about the legal depth of content he covers, I am usually fine with the upper level of awareness and insight I gain from my online reading. But, I was curious for more about the FTX and SBF's situation, so I found this video to be very informative about it all. He does a fantastic job breaking down the charges against him and the other leaders charged.
One thing I feel isn't being suitably touted in the media is how you don't see ANY Democratic leaders in government running to SBF's defense, the way you would if it were a Republican-supporting donor facing similar issues.
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"The amateur sleuths who helped to bring down Sam Bankman-Fried"
Overall an interesting insight into two people who were trying to highlight some of the things coming to light as cryptocurrency goes through this bust period.
But when he started to point out that, in crypto markets, the familiar pattern of the Ponzi scheme – a kind of fraudulent investment that only pays out as long as new investors are joining – could be seen again and again, no one seemed to want to know. Block’s posts on Twitter were studiously ignored by a world caught up in the great speculative investment boom of 2020 and 2021, when the stimulus programmes governments deployed during the pandemic created a huge bubble in asset prices. Novice investors piled into anything that offered enough risk – bankrupt companies, blank-cheque vehicles, crypto, NFTs (digital ownership tokens) – and in doing so sent their prices, as the saying goes, to the moon.
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FTX's ex-CEO possibly fleeing to Argentina
It is not a great look for the ex-CEO of a company which very dramatically suddenly filed for Chapter 11 to be flying to Argentina days later. I'm sure it's nothing though. He might not be on the plane, but I'd bet a bit of crypto coin he is.
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A thought I had after my brief detour into transhumanism this morning:
One aspect of the Crypto boom and the power consumption spike it caused is likely, a precursor to a similar boom if AI ever really takes off. Consider what will happen if the world ever sees capable AI able to handle tasks humans have traditionally done. How many businesses would flock to AWS or to snag GPUs to run their own machines if they could replace paying humans.
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Jorge Stolfi: ‘Technologically, bitcoin and blockchain technology is garbage’
A tweet by the Brazilian computer science professor inspired 1,500 experts to write a letter to US Congress warning about the risks of blindly trusting cryptocurrencies
P. Is it possible that as a society we invest millions in something we don't understand?
A. This is exactly what is happening in the crypto industry. Very few people seem to know that there is money coming in from investors and money going out to the creators of various schemes and miners. These pyramid schemes collapse when there are no more fools to fool.
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Axie Infinity was taken down by a fake job offer
Ronin, the Ethereum-linked sidechain that underpins play-to-earn game Axie Infinity, lost $540 million in crypto to an exploit in March. While the US government later tied the incident to North Korean hacking group Lazarus, full details of how the exploit was carried out have not been disclosed.
The Block can now reveal that a fake job ad was Ronin’s undoing.
According to two people with direct knowledge of the matter, who were granted anonymity due to the sensitive nature of the incident, a senior engineer at Axie Infinity was duped into applying for a job at a company that, in reality, did not exist.
[...]
The fake “offer” was delivered in the form of a PDF document, which the engineer downloaded — allowing spyware to infiltrate Ronin’s systems. From there, hackers were able to attack and take over four out of nine validators on the Ronin network — leaving them just one validator short of total control.
In a post-mortem blog post on the hack, published April 27, Sky Mavis said: “Employees are under constant advanced spear-phishing attacks on various social channels and one employee was compromised. This employee no longer works at Sky Mavis. The attacker managed to leverage that access to penetrate Sky Mavis IT infrastructure and gain access to the validator nodes.”
The hackers are reportedly out of North Korea. The article highlights this article which notes that they have used similar tactics with aerospace and defense contractors. It's hard to blame anyone for falling for these. This isn't a Nigerian prince emailing, this is a company that looks legit and puts you through many rounds of interviews, just to get you to download a PDF.
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Ethereum finally moving away from mining
It's been in talks for years now, glad we're finally reaching this point. Of any crypto, Ethereum is the one I believe is most likely to prove long term viability. I'm not convinced of it, but if I had to pick one to win it all - that's the one.
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Bill Gates is not an NFT Bro
“Obviously, expensive digital images of monkeys are going to improve the world immensely,” he offered when asked about the subject, referring to the totally legit Bored Apes Yacht Club. Understandably, Gates appears far more interested in investments that generate tangible, real returns for societies and economies, adding, “Anyway, I’m used to asset classes like a farm where they have output, or a company where they make products.”
I look back at the rise of Bitcoin. I thought it was a legit thing at the start and an opportunity for making money, but I wasn't in a position to do so. Now, over a decade later, I look at Crypto and these NFTs and shake my head.
I think Bill's criticism is right but also falls short of hitting on its inherent problems. Even aside from the energy consumption for these (granted, that is getting better in some cases), the promise of "DeFi" falls short in many ways.
Tech folks are fighting to make this a real solid part of the tech world, but it hasn't caught on. And, as lewd as it may be, one of the biggest signs to me that Crypto has a long road ahead is that the canary of adult entertainment has not yet moved into it. Adult entertainment has a history of trailblazing new technology and while there are some Crypto attempts with it - nothing that has taken off.
Edit: CNN also has a story about Bill Gates' dislike for NFTs.
"I do think people get bought into these manias, who may not have as much money to spare," Gates said. "So I'm not bullish on bitcoin."
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The Non-Fungible Token Bible: Everything you need to know about NFTs
I haven't read it yet, but I bookmarked it as a resource as I try to understand this new crypto-NFT craze.
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Janet Yellen Offers US Senate a More Nuanced Take on Crypto
First off, I had no idea there were articles on NASDAQ's website. Second, I agree with Yellen. Cryptocurrencies aren't going away, it is in the interest of the government to figure them out and figure out how to extend their reach into them.
"I think we need to look closely at how to encourage their use for legitimate activities while curtailing their use for malign and illegal activities," she wrote. "If confirmed, I intend to work closely with the Federal Reserve Board and the other federal banking and securities regulators on how to implement an effective regulatory framework for these and other fintech innovations."
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