Molly White's Citation Needed - Issue 45 – I'm the director now

Episode Date: December 5, 2023

Rising bitcoin prices bring echoes of the crypto mania from years past, and an ambitious hacker decides to manifest a new job for themselves. Originally published on December 5, 2023.

I'm Molly White, and you're listening to the audio feed of the citation needed newsletter. You can see the text version of the newsletter online at newsletter.mollywhite.net. Issue 45. I'm the director now. This issue was originally published on December 5, 2023. Rising Bitcoin prices bring echoes of the Cryptomania from years past, and an ambitious hacker decides to manifest a new job for themselves. Exciting news. For those of you who enjoy listening to the audio versions of these newsletters and would like to be able to do so from your podcasting app of choice, I've put together a podcast feed. It'll have exactly the same recordings that I attach to each newsletter post, so those of you who like listening from Substack won't miss anything if you don't use the feed. I'm also working on some exciting video stuff, so if that's something that interests you, make sure to subscribe to my channel over on YouTube so you don't miss it. It's at Molly Zero XFF over there as well.

I'll also put links in the newsletters, of course, to any videos I publish. As a part of my experimentation in the video world, I am also on TikTok now. If you don't like TikTok, fear not, I'll try to cross-post videos to YouTube where reasonable. And if you don't like video in general, that's fine too. This is all in addition to my writing, not in place of it. One last quick plug. After a bunch of requests, Web3 is going just. is now cross-posting to Instagram and Threads in addition to its usual Twitter,

Mastodon, and Blue Sky. The username on Instagram and Threads is Web3 is going great. In the age of a million social networks, I just try to meet people where they are. Crypto has enjoyed some more gains in recent days, with Bitcoin recently breaking the $40,000 mark. Hold on to your butts because mainstream financial news outlets are already uncritically republishing claims by crypto executives celebrating a so-called bull run. In fact, CNBC seemed so eager to talk up the price movement that they even published a headline falsely suggesting that those

same executives had predicted a $100,000 price in 2024. In reality, those predictions were coming from two different groups that also had reasons to try to pump crypto prices, a crypto firm, and a bank that owns a crypto firm. Naib Buckele, the Bitcoin-loving, temporarily not president of El Salvador, has been taking a Twitter victory lap as he claims his massive expenditure of the country's money on Bitcoin is now finally profitable. He also promised that he would hodel instead of, oh, I don't know, using some of those profits for the good of the country and its people.

The claimed profitability is, of course, impossible to, to verify, as he has not published any wallet addresses he's used or any accounting of the purchases beyond occasional tweets. However, it seems that the graph he included, along with his announcement tweet, which is from a website that estimates El Salvador's holdings based on Buckele's various public statements, actually had a bug that caused it to erroneously show that the country was in the black, when in fact the investments are still somewhat negative overall. Now I have to to wonder how much Buckele even knows about his own country's crypto holdings if he's relying on the same rough estimates used by outsiders with no transparency into the country's spending.

In the courts. Doquan of Terraluna fame will be extradited after he completes his four-month prison sentence in Montenegro for document forgery. The courts there still need to figure out which country has priority in extradition, the United States or South Korea. Kwan, apparently told the court that he was willing to be extradited to South Korea, suggesting he might prefer that over the U.S. Charging Richard Hart, the founder of the Hex crypto scheme, was one thing. Finding him has been another. The SEC has apparently been on the hunt for Hart since their July lawsuit, and they've yet to be able to serve him. Hart has always been cagey about his whereabouts, but is believed to be somewhere in Finland. Meanwhile, Hart's

been gloating in the third person on Twitter about charges against other crypto founders. He tweeted, the list of people in jail or bankrupt that didn't like Richard Hart or the things he founded is really long. The guys who pulled off the first of three hacks this year against Platypus Finance have escaped criminal charges by arguing that they are white hat hackers who were only trying to safeguard funds that were endangered by a bug they discovered, and that they planned to return. and that they planned to return the $9 million they took, hopefully for a 10% bounty. A Parisian court has acquitted them, although the court did note that platypus could go after the hackers civilly.

More sports teams are regretting doing deals with crypto companies. Ad litiggo Madrid is apparently gearing up to sue the Whale-Fin crypto exchange for not forking over the 40 million euros or $44 million that they owe in sponsor. sponsorship payments. Whalefin had previously canceled a sponsorship deal with the Chelsea Football Club in December of 2022, reportedly because of financial difficulties. Also in the sports crypto overlap, headlines in major news outlets announced a $1 billion class action lawsuit against football star Cristiano Ronaldo for promoting Binance, with the plaintiffs saying it's his fault they lost money in crypto after signing up to trade on the exchange. It seems unlikely to me

that they'd succeed on that point, which is sort of like suing someone advertising a casino because you decided to gamble there and then lost all your money. Other class action lawsuits have also been filed against two promoters of FTX, Mercedes Formula One Racing Team, and Major League Baseball. These are from the same group of plaintiffs suing people like Shaquille O'Neal and Tom Brady for their advertisements of the exchange. I normally don't talk much about class action lawsuits until they actually go somewhere, since many of them aren't particularly fruitful, but these have gotten some press coverage. In bankrupties, there's been a hiccup in the plan to restart Celsius as Nuco.

Newco is initially going to mine Bitcoin, stake ether, and distribute shares of the new company to Celsius creditors. but the SEC has so far been unwilling to sign off on it. Celsius tried to pivot to a new plan, which would involve only Bitcoin mining, but the judge has expressed concern that this is substantially different from the deal creditors approved back in November. There will be a hearing on it in December, and it's possible that it will go back to creditors for another vote. If this falls through, Celsius will just be liquidated. Genesis and Gemini are still at each other's throats,

and Genesis has now sued Gemini to try to claw back $689 million in so-called preferential transfers in the form of loans called back by Gemini in the three months leading up to Genesis's bankruptcy. A judge has okayed a $1.65 billion settlement payment by Voyager to the Federal Trade Commission, or FTC, which it owes as a result of an October 2023 lawsuit from the FTC over repeated claims that Voyager accounts were FDIC insured. In Governments and Regulators. A federal judge in Utah has demanded the SEC try to convince him not to sanction them in an ongoing case by the regulator against a crypto company called Debt Box.

According to the judge, the agency made several representations while arguing for a temporary restraining order that were false or misleading, such as that the company had closed tens of bank accounts in recent days as a part of an attempt to move assets out of reach of U.S. authorities. However, Debtbox was able to demonstrate that this statement was false and that some accounts had been closed long ago, or by the banks rather than by Debtbox. Other crypto firms battling the SEC have already leapt on this order. Terraform Labs and Doquan have argued that it ought to be considered alongside their arguments that the SEC has been misleading, which are a part of a motion for summary judgment currently being considered in that case.

You'd think they might wait for actual sanctions to come down, but I guess they're on a deadline. Coinbase has warned customers that they were subpoenaed by the Commodity Futures Trading Commission, or CFTC, which is apparently investigating the Dubai-based By-bit cryptocurrency exchange. The warnings weren't sent to all Coinbase customers and may have been targeted specifically to Coinbase users who also used Bybit. Bybit claims not to serve U.S.-based customers, but its half-hearted geoblocks seem to be fairly trivially circumvented. The Financial Stability Board, or FSB, an international group that watches over the global financial system and monitors threats to its stability, has released a report on cryptocurrency firms or groups of firms that perform a variety of different functions. thank the FTX group and its many legal entities, which included the FTX cryptocurrency exchange

and the Alameda Research Trading Farm. The report mostly concluded that more research was needed, but included a rather scathing line. Quote, available evidence suggests that the threat to global financial stability and to the real economy from the failure of an MCI is limited at present. The U.S. Treasury has sanctioned Sinbad for tumbling hundreds of millions of dollars in cryptocurrency for the North Korean Lazarus Group. Sinbad was really just a reincarnation of the blender cryptocurrency mixer sanctioned by the Treasury in May 2022 for the same reason. Although the Fed seized the Sinbad domain, there is already a mirror online. Let the mole-wacking continue. The Treasury

has also been issuing thinly veiled warnings to tether via remarks by Deputy Treasury Secretary Wally Adiemo at a blockchain conference. He said, I am increasingly concerned about things like dollar-based stablecoins that aren't based here in the United States, but give people the privilege and the ability to use the dollar outside of our jurisdiction. We cannot allow dollar-backed stablecoin providers outside the United States to have the privilege of using our currency without the responsibility of putting in place procedures to prevent terrorists from abusing their platform. This seems rather pointed.

Tether, the largest issuer of dollar-backed stable coins, is owned by the Hong Kong-based Iphinex, and Tether Holdings Limited is registered in the British Virgin Islands. Tether has also been widely named in recent reports about cryptocurrency being used to finance terrorist groups, including Hamas and its ally Palestinian Islamic Jihad. In Binance. The now former CEO of Binance, CZ, is stuck in the United States until a judge reviews whether he ought to be allowed to return to his home in Dubai before his February 23rd sentencing hearing. The requirement that he stay in the U.S. was not originally a part of his bond conditions,

but the Justice Department appealed that decision, arguing that CZ is a flight risk with few ties to the U.S. C.Z. has argued back that if he was a flight risk, he wouldn't have voluntarily appeared in the U.S. to enter a guilty plea in the first place. Bloomberg has reported that attendees of a fancy dinner hosted by Binance at a conference in Singapore in September got advanced notice of the more than $4 billion settlement between the company and U.S. criminal and regulatory authorities. The Philippine Securities and Exchange Commission has warned citizens that it may shut Binance down in the country, where it has been operating without a license. Furthermore, its promotion of crypto trading on social media could come with

criminal consequences under Philippines law, and the regulator has ordered Google and META to stop showing Binance ads within the Philippines. Binance seems to be following its usual ask forgiveness, not permission strategy, and has promised to come into compliance in the jurisdiction. Elsewhere in crypto. A new Ethereum Layer 2 network called Blast has recently emerged on the scene, but many people in crypto have questioned if it might just be a pyramid scheme. Its pseudonymous founder is known for creating the successful Blur-NFT marketplace, and

it's backed by the well-known crypto investment fund paradigm. But the way it's onboarding new users without allowing them to withdraw funds, and its promises of unsustainable exponential yield have many eyebrows quite reason. raised. Even paradigm seems to be hedging, with a statement from a general partner disavowing blasts recent announcement and launch strategy. Quote, we don't endorse these kinds of tactics, wrote Dan Robinson on Twitter. OpenC, the once monopolistic NFT platform, is doing so poorly that Tiger Global marked down their stake in the company by 94%. Another VC firm, KOTU, marked their OpenC investment down by a comparable 90%. OpenC's $23 million Series A and $100 million

Series B funding rounds were both led by Andresen Horowitz. Tiger Global has also marked down their investment in BordApe Yacht Club by 69%. Nice. As it happens, Andrieson Horowitz also led the $450 million seed round for Yuga Labs, the company behind Ward Apes. The Bloomberg piece, about Tiger Global's woes also mentioned that they had marked down by 45% an investment in a non-crypto firm, the AI-flavored Superhuman email app. Any guesses who led Superhumans $33 million series B in 2019? The Web 3 is going just great recap. There were 10 entries between November 22 and December 3rd, averaging 0.8 entries per day. 193.45 million dollars was added to

the grift counter. Woes at Huobi, Huobi, now actually known as HATX, and its related Hiko chain protocol, were hacked for a combined $115 million. This was confirmed by Justin Sun, who claims to be only an advisor to HTX, but who is widely recognized to be its owner. This is yet another blow to Sun, whose Poloniacs exchange was hacked for $120 million, not even a month ago. The large losses by Sun and his affiliated companies have some speculating that Sun is making off with the money before he, I don't know, disappears or fakes his death or something.

He's recently taken to publishing weird, uncanny Valley videos of himself talking about artificial intelligence, in which he resembles and sounds more like an animatronic doll than a human being, which doesn't exactly help that particular rumor. question and answers so simple, in reality there are still many cognitive and emotional thresholds. We might witness Chad GPT today. A considerable number of scores in LSAT exams, even in the United States SAT exams, already considered as an excellent student, but I personally think it still has a big difference from humans. Because I think the biggest feature of human beings, unpredictability, we can see the fate of some people, maybe it's because of some small changes, there have been some different.

significant changes. The Khyber Swap hack. The Khyber Swap Decentralized Exchange was hacked for crypto assets worth around $54.7 million, although Kiber was later able to recover around $4.7 million from front-running bot operators. Since the theft, they've been communicating with the hacker, offering a 10% bounty if they return the funds. The attacker, apparently trolling, responded with a lengthy list of demands from Khyber, which included, quote, complete executive control over Khyberswap and the, quote, surrender of all assets.

In exchange, they promised that the company's executives, quote, will be bought out of the company at a fair valuation, and, quote, wished well in your future endeavors. Never a dull moment in crypto. This amusing story was also the subject of my first ever TikTok video, if that's up your alley. Everything else. Users of the safe wallet have lost a cumulative $2 million to address poisoning. Florence Finance also lost $1.45 million to address poisoning. Draft Kings was secretly paid to run a Polygon network validator.

The crypto media outlet forecast has gone bust. BitStable decided to burn most of the tokens after a public sale went wrong. The SoFi Neobank ditched crypto. The HUNAC's crypto scam stole 90s. million dollars, and a Bitcoiner spent $3 million on a transaction fee. In the news, I joined Alex Cantruits and fellow guests Ryan Broderick and Deepa Sutheraman to talk about the effective altruist and effective accelerationist groups and their approaches to the development of artificial intelligence, which I wrote about recently, if you missed it.

It was a really great conversation with really knowledgeable and thoughtful folks. You can find it on podcast apps or on YouTube, and it's titled. Silicon Valley's Effective Altruist versus Accelerationist Religious War. Worth a read. If you really want to do a deep dive into the ideologies that have congealed around the artificial intelligence space recently, Emily Gershensky's recent blog post titled Making God, is an excellent read that ties in a lot of historical context and discusses the strong religious component. Continuing in the theme of Emily's writing about AI, linguistics

professor and AI ethics powerhouse, Emily M. Bender, did a great thread on Macedon about media coverage of AI and how poor reporting contributes to the hype and marketing coming out of these companies. The markup published a piece titled Meet the Vietnamese Grandmother Fighting Misinformation One YouTube Video at a Time. After noticing a lot of pro-Trump content by Vietnamese YouTubers YouTubers who were translating right-wing news outlets, this awesome woman started translating English language media stories for Vietnamese speakers in the United States to help ensure there was access to a broader range of viewpoints. I love stories like this about individuals chipping away at big problems

by volunteering their time to help make information available to others. That's all for now, folks. Until next time, this has been Molly White. Thanks for listening to this issue of the citation-needed newsletter. To learn how to support my work, visit Molly White. If you would like to read the text versions of these episodes, sign up to receive the newsletter in your email, or support my work on a recurring basis, go to newsletter.mollywhite.net.