Molly White's Citation Needed - Issue 72 – A seat at the table

Episode Date: December 24, 2024

The SEC is still busy even though it may soon be undermined, crypto industry capture of government continues to worsen, and several media outlets botch their crypto reporting at a time it’s needed most. Originally published on December 23, 2024.

I'm Molly White, and you're listening to the audio feed for the citation needed newsletter. You can see the text version of the newsletter online at citation needed. News. Issue 72. A seat at the table. The SEC is still busy, even though it may soon be undermined. Crypto industry capture of government continues to worsen, and several media outlets botched their crypto reporting at a time it's needed most. This issue was originally published on a decision. December 23, 24.

Happy holidays, everyone. I feel this way year-round, but because it's gift-giving time of year, I wanted to say, your support has been the best gift I could dream of. Years ago, I would have laughed you out of the room if you'd told me what I'd be doing these days, partly because I didn't expect to become a writer, but also because it would have seemed impossible that writing a pay-what-you-want newsletter like this one could be sustainable. It only is because of you, and whether you're reading this issue for free, sharing my work with others you think might be interested, or signing up for a paid subscription,

you're making this possible. By this, I do mean writing this newsletter, but also all the other work I would never have time for if I was still juggling a separate full-time job alongside it. Keeping Web3 is going just great up to date so that people can see the ongoing drumbeat of frauds and scams that permeate the crypto industry, building and then closely tracking crypto industry election spending at Follow the Crypto, which enabled not only much of my own reporting on crypto influenced this election, but quite a lot of other journalists reporting in CNN, Wired, The Guardian, and others. Filing a complaint with the FEC about Coinbase's apparent violation of campaign finance laws, speaking with policymakers and regulators to help them understand

cryptocurrency in the surrounding industry, and to advise on proposed legislative and regulatory changes, speaking with journalists and doing media appearances, sharing my expertise directly, or helping journalists cover the tech industry accurately and critically, publishing articles in the New York Times, Haisa, and Bloomberg Business Week, twice, to reach a much broader audience than I can with this newsletter, and quite a bit more. Thank you. While you are perhaps wrapping up last-minute gifts and hopefully enjoying some end-of-year rest, I wanted to get you up to speed on what's been happening in the crypto world. In the courts, BitGlobal versus Coinbase.

Last issue, I mentioned that Trump's new business advisor, Justin Sun, is so shady that even the broader crypto world wants nothing to do with him. As I mentioned then, when Sun and his company BitGlobal recently began helping to manage wrapped Bitcoin or WBT, Coinbase and Cracken rushed to create their own wrapped versions of the token and ditch the now sun-tainted version. This so infuriated son that he has now filed a lawsuit against Coinbase. The lawsuit begins with a rather justified screed against Coinbase. Quote, the cryptocurrency revolution began with a warning about the dangers of centralization,

the danger that the more power an institution acquires and the more of the market it concentrates on its own closed, centralized platform, the more it will use that power to crush its competitors and seize the fruits of their innovation for itself. Like all the centralized tech giants before it, Coinbase gives lip service to the innovation of a decentralized world. BitGlobal also knocks Coinbase for citing supposed listing standards as a reason for removing the WBT token, fairly pointing out that Coinbase seems to have little in the way of standards at all. BitGlobal points out several tokens as examples, including Mog, a token which features a so-called legal disclaimer on its website that reads, quote, Mog is a crypto coin with no intrinsic value or expectation of financial return.

Just because some people are getting ridiculously rich buying crypto doesn't mean you definitely will. Mog is to be used strictly for getting laid and for entertainment purposes only. However, that's about where the reasonable portion of the lawsuit ends. The rest of it devolves very quickly, at one point accusing Coinbase of, quote, dunking on WBTC and, quote, creating FUD. Bit Global accuses Coinbase of violating various federal and state laws prohibiting unfair monopolies and claims that Coinbase engaged in trade libel by suggesting they were relying on undisclosed information when they asserted that WBT was too risky to list.

Notably, the lawsuit does not mention Justin Sun or his involvement with Bit Global at all, despite Coinbase's explicit statement that they were delisting the asset because of his involvement. BitGlobal tried to convince a judge to issue a temporary restraining order to force Coinbase to continue listing WBTC, but they were unsuccessful in convincing the judge of imminent, irreparable harm. The lawsuit will still continue, but for now, Coinbase can delist the asset. BitGlobal's lawyers did make one reasonable point during the hearing, though, referring to Coinbase's comments about SEC and FBI scrutiny of Justin Sun. Quote, on one hand, Coinbase is publicly stating,

their top people are publicly stating, the SEC and FBI aren't to be trusted. But when it comes to Justin's son, all of a sudden they are to be trusted. Could it be that Coinbase's beef with U.S. regulators is self-serving rather than principled? No, that can't possibly be right. Trump's World Liberty Financial Project has already taken Justin's side in a way, swapping a bit over $10 million worth of Coinbase's wrapped Bitcoin product for Sun-managed WBT. Although Coinbase CEO Brian Armstrong had a crypto-focused phone meeting with Trump shortly after the election,

and Coinbase spokespeople have commented that, quote, were gratified by the degree that the new incoming administration team has had an open door with Coinbase in the crypto community, whatever goodwill earned Armstrong this access apparently couldn't win out over Sun's cold, hard cash. Everything else. Prosecutors have finally responded to Sam Bankman Fried's appeal from September. Their 106-page response rebuts his arguments that the judge improperly allowed some of the prosecution's evidence while improperly excluding the defenses, that the jury was improperly instructed as to the legal meanings of intent, good faith, and willfulness, that the defense was not allowed to introduce arguments pertaining to Bankman Free its reliance on legal counsel,

that the defense was not allowed to order discovery from the FTX bankruptcy team and its lawyers, that the forfeiture money judgment was unlawful, and that the judge was biased and that the case needs to be remanded to a different judge. This is going to be a lengthy and verbose appeal process. The judge has already granted the defense team an extension until January 31st to file a reply brief, which he's also allowed to be 2,500 words longer than the usual 7,000 word limit. Dylan Meisner, former VP of finance at the Delphide Digital Blockchain Research firm, was sentenced to four years in prison for wire fraud after he borrowed 50th in January 2022, priced at around $170,000 both at the time and now,

telling them he needed the money to shore up his personal investments against significant losses he was facing. However, unbeknownst to his employer, he kept helping himself to more of the company's money as crypto markets continued to decline. He ultimately stole nearly $4.5 million in total. In addition to his present sentence, he will need to pay back the loan and the money he stole. Hex founder Richard Hart was already wanted by Finnish police for tax evasion and assault, but now he can add Interpol and Europol to the list of police organizations looking for him. According to EU authorities, Hart is wanted for alleged tax evasion

amounting to hundreds of millions of euros in unpaid taxes, as well as an alleged brutal physical assault on a 16-year-old. The night the notice was issued, Hart tweeted, quote, it feels great to be wanted, and wrote of his excitement for the future, including for Trump's impending inauguration. Craig Wright, the man who lied so hard about being Bitcoin creator Satoshi Nakamoto that courts had to set the record straight, has rather predictably kept lying. And so now he has a hammer hanging over his head. In July, a London court found that Wright's claims to be Satoshi were false and prohibited him from bringing more lawsuits based on that premise. He of course turned around and did precisely that only a few months later, and so now he's been found in contempt of court

in the original proceedings. He's been given a one-year prison sentence, which is suspended for two years. This means that if Wright does it again within the next two years, he will have to serve the sentence, plus any additional sentence for the new offense. Court order wasn't enough to stop him from filing his lawsuit, so we'll see if this works. In Governments and Regulators, U.S. SEC. The SEC has levied a $123 million fine against Jump Crypto-subsidiary Ty Mo Shan, which was involved in a secret deal with Terraform Labs to help prop up the floundering Terra Stablecoin in May 2021. Jump spent $20 million to help the supposedly self-healing stable coin regain its dollar peg, earning about $1.28 billion in the process.

And Terraform Labs CEO Doquan would later claim that the restoration to a dollar price was thanks to an automatic feature of the Terra Project and not some backroom deal. This lie by Terraform Labs and Jump Crypto helped build confidence in the sustainability of the Terra token, which collapsed horrendously a year later. The SEC has also reached a settlement with Cantor Fitzgerald, which will pay a $6.75 million fine over allegations that two special purpose acquisition companies, or SPACs, had misled investors when they claimed that they had not been in contact

with the eventual targets of their acquisitions. While the companies were not crypto-related, one is a now-bankrupt smart glass manufacturer called Vue, the other an Earth Observation satellite company called SOTOM. SETA logic, SEC action against a company helmed by Trump's transition team co-chair, and soon-to-be Commerce Secretary Howard Lutnik, is noteworthy. Cantor Fitzgerald is also closely linked to the tether stablecoin. Crypto.com has abruptly dropped the lawsuit it had only just filed against the SEC in October,

a lawsuit which seemed to be a direct response to a Wells notice issued by the agency against the company in August. This unusual move just so happened to co-encers. side with a meeting between Donald Trump and Crypto.com CEO Chris Marselect, who posted a photograph with the president-elect on Twitter, with a caption, honored to have a seat at the table. A spokesperson explained, we withdrew our action against the SEC given our intent to work with the incoming administration on a regulatory framework for the industry. Trump and Mars Select reportedly discussed crypto-related political appointments and the prospect of a Bitcoin strategic national stockpile.

Do you think Marcelek asked to take the picture in front of the framed King Jong-un photo, or was that just a coincidence? The Unicorn Crypto Investment companies say they've received a Wells notice from the SEC, warning them of impending legal action involving not only unregistered securities offerings, but also fraud and deceptive business practices. Unicorn CEO Alex Kannonikin said the company received subpoenas earlier this year focused on the company's eponymous token, which they say is backed by, by real-world assets, including real estate.

This is not the first SEC investigation into Unicorn, although previous ones did not result in any legal action. Unlike most crypto projects, the Unicorn self-identifies its token as a security. While Unicoin had previously agreed with the SEC that they would not try to go public or undertake initial coin offerings, Canaanans said they had decided to breach the agreement after Trump won the presidency. As a side note, a headline in fortune crypto has rather amusingly attributed the Wells notice to SEC Chairman Gary Gensler's anti-crypto campaign.

Whether the headline writer meant to suggest that going after fraudsters is itself anti-crypto, or if this was an accidental peek behind the curtain of the SEC anti-crypto campaign narrative coming from the crypto industry, is not quite clear to me. The SEC has also reportedly delivered a Wells notice to the Cyber Kong's NFTA. T Gaming Project. Cyber Kongs claimed in a statement on Twitter that the SEC communicated to them that they, quote, cannot have a token, ERC20, in tandem with a blockchain game without registering it as a security. However, this characterization of the SEC's communications comes from the company and hasn't been reviewed by outside journalists or anyone else. The SEC doesn't comment on Wells notices,

so the statement should be taken with a grain of salt until a lawsuit is filed. It is interesting to observe the SEC sending Wells notices this late into the Biden administration when it's unlikely a lawsuit will be filed before Trump takes office. While the SEC may continue to pursue fraud cases, like the one they seem to be looking to file against Unicorn, lawsuits based on lack of registration seem like they're about to become a lot less popular. If Cyber Kongs is accurately characterizing the SEC communications, it seems somewhat strange to me that the SEC would take this action at this stage. Everything else. Bitcoin and other crypto assets have long earned a reputation as a tool for tax evaders, but it seems that the U.S. authorities have started to pay a bit more attention of late.

After proposing a bespoke reporting form for digital assets earlier this year, the IRS has now helped to prosecute its first criminal tax evasion case focused on crypto. A Texas man was sentenced to two years in prison and ordered to pay over a million dollars in restitution for filing false tax returns that repeatedly dramatically understated how much he had made in gains on his Bitcoin sales. In addition to lying to his accountant and claiming he had bought the Bitcoins for a much higher price, he also tried to hide the Bitcoin transactions using crypto mixers. Australia's securities regulator, ASIC, has fined Cracken $5.1 million US dollars for offering margin trading to Australian customers without first requiring them to undergo the process that would

determine if that degree of risk was suitable for them. The more than 1,100 customers lost more than $5 million. U.S. dollars. While some of them were likely sophisticated investors, Cracken made no effort to limit the product to such a group, and around 81% of the customers who used the margin product lost money. In a similar case, ASIC has also filed suit against Binance's Australian derivatives trading platform for allegedly misclassifying more than 500 retail investors as wholesale investors,

which are similar to an accredited investor in the United States. By designating them as more sophisticated investors, the customers were not given the legal rights and consumer protections granted to retail customers in Australia. These investors comprise 83% of Binance's clients on the Australian platform. Nigerian law enforcement have arrested almost 800 people, allegedly involved in a cryptocurrency romance scam, which is also known as a pig-butchering operation. The operation was based out of a building where more than 500 SIM cards were recovered, being used by scammers to impersonate Italian and German women, and then romance their

victims until they could convince them to put money into the investment scam. Victims were primarily based in North America and Europe and were targeted via WhatsApp, Instagram, and Telegram. The scam was apparently two levels deep, a group of foreign nationals. had engaged the Nigeria-based workers in the scam, but the foreign group was also scamming the scammers in Nigeria, cutting them out of the fraud once the victim had deposited funds. Polish police have arrested Dmitri Vasiliov, a man wanted by the United States on fraud and money laundering charges in connection to the Russian BTCE, later W-EX, cryptocurrency exchange.

BTCE was the largest exchange in Russia when it collapsed in 2018 and nearly $500 million was lost. Vasiliev faces up to 20 years in prison and is only the latest person charged in connection to this platform. El Salvador has tentatively agreed to limit its Bitcoin-related activities in exchange for a $1.4 billion loan from the International Monetary Fund, which has long been skeptical of President Buceli's choice to foist his Bitcoin enthusiasm upon Salvadorans. The deal is contingent on the Salvadoran government ending the requirement that Salvador and businesses accept Bitcoin as payment, quote, confining the country's exorbitant Bitcoin-related purchases, limiting tax payments to being made in U.S. dollars, which is El Salvador's other legal currency aside from Bitcoin,

and divesting from operations of the troubled government-provided Chivo Bitcoin wallet. Once El Salvador implements the agreed-upon crypto-related changes, as well as some other changes involving broader fiscal policy, transparency, and reserves, the IMF says they expect to approve the program. Taiwanese investigators are looking into the death of a well-known cryptocurrency expert and crypto-fraud investigator, Miffi Chen. She had helped bust several major crypto-crime cases and had apparently been warned about her safety by authorities when criminal organizations began trying to track her down. Some have expressed concern that the circumstances of her death seem suspicious. although Taiwanese authorities have stated that she was killed in a traffic accident when she was rear-ended by an inattentive driver.

In Politics. Nominees A part of the crypto lobby's dark money arm, the Cedar Innovation Foundation, was hard at work earlier this month alongside the rest of the cryptocurrency industry on a no-holds-barred campaign to block the renomination of SEC Commissioner Caroline Crenshaw, who is broadly perceived by the industry to be as or potentially. even more anti-crypto than Chairman Gensler. The campaign succeeded when the Senate Banking Committee canceled the renomination vote, meaning that she will almost certainly be replaced with another industry ally. Even Fox acknowledged the crypto industry's gamesmanship, writing, the effort to oust Crenshaw was yet another test of the crypto industry's political clout. This time, through social media posts, letters to senators, and even a mobile advertising campaign, the industry's message to politicians was clear. A vote for Crenshaw would come with political repercussions. The threat was taken seriously

and resulted in last week's vote being rescheduled. SEC statutes require that a maximum of three of the five people on the commission can be members of the same party, and traditionally the opposing party is permitted to select the two commissioners in the minority seats. However, it seems that tradition has gone out the window, and both minority seats will now be held by Trump appointees. The week before, outgoing Senate Banking Committee Chair Sherrod Brown, a Democrat from Ohio, had issued a statement during the committee's final hearing under his chairmanship, emphasizing the importance of protecting the Consumer Financial Protection Bureau and calling out corporate power. Quote, from what we've seen from Trump's nominees thus far, corporate special interests won't

just have a seat at the table this time around. They'll be given free rein to rip off workers and customers. He's opening up our government to the highest corporate bidder. rising housing costs, private equity infiltrating more and more of our economy, insurance costs going up, risks building up in the private credit market, new technology that's increasingly being used in our financial system, from algorithmic prices to AI to crypto, all these risks have one thing in common. They all have the potential to take even more money away from working Americans and funnel it to the same corporate elite that always seem to come out ahead.

A vowed cryptocritic and CFPB originator Senator Elizabeth Warren, a Democrat from Massachusetts, will become the ranking Democrat on the committee, but the chair position will go to Senator Tim Scott, a Republican of South Carolina, who has described crypto as, quote, the next wonder of the world, as he promised to pass industry-supported legislation. Over in the House, Scott's fellow outspoken crypto enthusiast French Hill, a Republican from Arkansas, will take charge of the powerful financial services committee. A crypto advocate in this seat was assured, regardless of the outcome, with all four candidates under consideration having an A or strongly supportive of crypto rating

from Coinbase's stand with crypto advocacy group. Trump apparently has more favors to repay than he has political positions to fill, so he's just creating new ones. In addition to his newly invented crypto and AI czar position, allocated to reactionary PayPal Mafioso and venture capitalist David Sacks, Trump has now decided he needs a whole crypto council. Among its first appointees is Bo Hines, whose qualifications to become the council's executive director are one, playing football in college.

Two, losing the 2022 midterm general election for a North Carolina house seat. And three, losing even worse in 2024, when he not only failed to see. secure the Republican primary nomination, but came in fourth place. The crypto world has, like me, mostly reacted with bafflement, given that Heinz's crypto qualifications are as absent as all his others. He did receive around $425,000 in backing in 2022 from American Dream federal action, a cryptocurrency-focused super PAC run by then FTX executive and now federal inmate Ryan Salem. So he was evidently able to convince Salem of his usefulness to the cause. Meanwhile, Trump has picked Andrew Sinhorowitz General Partner and Musk Powell, Sri Ram Krishna, for an advisory role on AI.

Bitcoin Strategic Reserve. Federal Reserve Chair Jerome Powell unequivocally stated in a press conference that the Fed is not permitted by the Federal Reserve Act to hold Bitcoin and that he's not looking for a change to the law. Whether he wants one or not is not likely to stop some of the most crypto-enthusiastic Congress people for pushing for such a change. And longtime crypto fan, Senator Cynthia Lummis, a Republican from Wyoming, has already been drafting a bill that would force the Treasury to purchase one million Bitcoin over the next five years, worth around $100 billion at today's prices. It's not clear how Trump himself feels about her proposal, as his promise for a stockpile

involved no new Bitcoin acquisition, but rather just holding on to around 210,000 Bitcoin, already seized by law enforcement. While many bitcoins love the idea of a strategic reserve, mostly because such large purchases would likely pump their bags, even some in the Bitcoin world think it's a profoundly stupid idea. Many of them think it's stupid for somewhat different reasons than I do, though, with several prominent bitcoinsers expressing concern that it would mostly signal a lack of faith in the strength of the dollar.

Personally, I remain skeptical about the chances that such a thing will pass in Congress. However, I do worry that several states seem keen on the idea, with various legislators in Florida, Pennsylvania, Ohio, and Texas proposing the establishment of state-level equivalents. Banking Trump's nominees have been screening potential bank regulators, and according to the Wall Street Journal, they are very keen on the idea of slashing, if not eliminating, bank regulators under the guise of streamlining. Some have apparently asked potential nominees about eliminating or reassigning the duties of the Federal Deposit Insurance Corporation,

a Depression-era organization that provides depository insurance against bank collapse, and which has been responsible for ensuring that you will not lose up to $250,000 in your bank account if your bank goes under. This insurance was used heavily throughout the great financial crisis when more than 300 banks failed between 2007 and 2010. It's not been used nearly as much in the past decade, but it's not been used nearly as much in the past decade, it is notable to reflect on where it's been used when it has. In 2023, five banks failed, and three of them were closely tied to the crypto industry. In March, a brief banking panic

saw the collapse of Silicon Valley Bank and Signature Bank, both of which provided banking services to the then-foundering cryptocurrency industry. SvB was the bank of choice for much of Silicon Valley and provided some banking to cryptocurrency firms, like Circle, which was its largest single depositor, and whose USDC stablecoin lost its dollar peg after the news broke that over $3.3 billion in the stablecoin's backing reserves were held at SVB. However, SVB's exposure to crypto was not nearly as significant as signatures, or more than 90% of total deposits came from crypto clients. A third crypto bank, Silvergate, also wound down during this time,

but because the FDIC did not have to intervene to protect depositors, it isn't included in the count. The Silicon Valley types now advising Trump were a lot fonder of the FDIC back then, when they were faced with the possibility of losing the millions of dollars that they were keeping beyond the FDIC insurance limits. David Sachs wrote on Twitter,

Where is Powell? Where is Yellen? Stop this crisis now. Announce that all depositors will be safe. Place SVB with a top four bank. Do this before Monday open or there will be contagion and the crisis will spread. Anybody who thinks that preventing bank runs and panics isn't a federal responsibility missed a couple hundred years of financial history. It's called systemic risk and only federal banking authorities can stop it.

A full half of venture capital firm Andresen Horowitz's portfolio companies were among the beneficiaries of the special bailout that was ultimately authorized to protect all depositors, including those above the FDIC maximums. Now, Andresen Horowitz co-founder Mark Andreessen is reportedly acting as an advisor to the Musk and Ramoswamy-led government efficiency group trying to kill the FDIC. Later in 2023, Hartland Tri-State Bank failed, thanks to a very different cryptocurrency-related issue. Its CEO had embezzled more than $47 million and sent it to a cryptocurrency scam. In journalism, the owners of the Cryptomedia outlet CoinDes have cravenly back. to pressure from Justin Sun to remove an article about his banana stunt because he didn't like its tone, and the site deleted the article without a retraction notice. The article by Callan Quinn noted Sun's open lawsuit from the SEC and his habit of threatening

media outlets with legal action when they note that his Tron blockchain has been heavily used by terrorist groups. While it might be asking too much to expect much in the way of journalistic integrity from a lot of crypto media outlets, for all its flaws, journalists at CoinDesk have done some really good reporting in the past, such as when they broke the story about the Alameda Research Balance sheet that betrayed FTX's insolvency. That story was a part of their downfall, though, because the FTX collapse contributed to financial problems at CoinDesk's then-parent company Digital Currency Group, which ultimately had to sell the media outlet to a cryptocurrency

exchange called Bullish. Despite the cowardice by bullish executives, some employees have the outlet stood up against the deletion and submitted a letter to the executives challenging the move. The letter leaked and an excerpt was published by the block. It read, in the original press release announcing Bullish's acquisition of CoinDesk, you expressed your quote, unwavering support for CoinDesk's commitment to journalistic independence. Unbeknownst to much of the public, we no longer function as an independent subsidiary of our parent company. Instead, we have been fully absorbed into Bullish, a crypto exchange that directly competes with many of the companies we cover. Evidently, this was all for show.

Bullish executives now heavily influence editorial and content decisions. The decision to retract the Justin Sun article was outrageous, crossing every ethical line that were taught to observe as journalists. It showed blatant disregard for CoinDesks' editorial independence and for our profession. If this got out to other media, it would rightfully become its own news story, risking the reputation of CoinDesk, Bullish, Block 1, and are journalists. The letter also accuses Bullish management of, quote, placing limits on our ability to publish opinion articles, to avoid offending industry leaders.

Bullish responded to the letter from their journalists by firing, editor-in-chief Kevin Reynolds, and deputy editors-in-chief Nick Baker and Mark Hawstein. CoinDesk's editorial committee head, Matt Murray, also resigned. The Wall Street Journal has published a profound, a profound. soundly irresponsible article titled Young Men are Making Risky Bets on Crypto in Politics and Raking It in Right Now. I still remember back in late 2021 when there was a spate of articles in mainstream press about how much money some people were making in crypto. An article in the New York Times was titled Crypto is Cool, Now Get on the Yacht. An article in Fortune was titled how a risky bet on the

Shiba Inu coin made this warehouse manager a millionaire. These types of articles were very close. closely timed with peak Bitcoin mania and peak Bitcoin prices, and people who bought in after reading them were immediately plunged into the two years of crypto winter that followed. It seems that newspapers have learned nothing from this and are now publishing puff pieces about how much money people are supposedly making, not only from crypto, but from sports betting and meme stocks. The article healthfully includes a chart crime to add to the FOMO, showing that if young investors could just time travel back to January 2024 with the advanced knowledge that these four specific assets would outperform an unusually conservative portfolio for

young investors, they'd be swimming in it right now. Practically simultaneously and without an ounce of self-reflection, the Wall Street Journal also published an article about how gamblers anonymous meetings are being frequented by traders who've been ruined by meme stocks, options, and crypto trading. While the journal suggests this is new, this is a trend of I remarked on three years ago, and it certainly predates that as well. Elsewhere in crypto. Microstrategie, which is nominally a software company, but is really more of a weird Bitcoin simulacrum due to its massive Bitcoin holdings, has entered the NASDAQ 100 index. This means that, whether they realize it or not, more than a million people may have some form of exposure to

Bitcoin via their investments in QQ, an ETF tracking the NASDAQ 100. By now, Micro Strategy holds a whopping 400,000 Bitcoin, or around 2% of the entire Bitcoin supply. Although the business doesn't do much, and in fact has been losing money on the software end of things, the stock is trading it around a two-time premium to their Bitcoin holdings. What could go wrong? Meanwhile, Micro Strategy is still taking out every loan they can get to buy even more Bitcoin. Chairman and co-founder Michael Saylor, the driver of Micro Strategy's Bitcoin Plan, has been been busy trying to convince companies like Microsoft to dump some of its liquid assets into Bitcoin

2, saying they could, quote, add hundreds of dollars to their stock price. However, his proposal was roundly rejected by Microsoft shareholders, with only around half a percent of votes going his way. Despite the Bitcoin price rally, it's still hard out there for Bitcoin mining companies. An activist investor that has established a significant position in the Riot Platform's Bitcoin mining company is trying to decontes. commission some of its Bitcoin mining operations and instead convert them into data centers for companies looking to rent computing power for AI. This has been a popular pivot in the Bitcoin mining

world, as Bitcoin mining operations and AI computing are similarly power hungry, and Bitcoin mines often already have the power infrastructure in place. Stablecoin giant Tether has dumped $775 million into the Rumble video sharing platform, which is known for its popularity among conservative and far-right users, and which has been described by Columbia Journalism Review as, quote, a hub for misinformation and conspiracy theories. The NFT project Pudgy Penguins launched its own crypto token, Pengu. Pudgy Penguins also sells plush toys online and at physical retailers, including Walmart and Target, and each stuffed animal comes with a QR code to join Pudgy World.

Those who've scanned their QR codes will potentially, at some undefined point in the future, be eligible for a pengu air drop. As Charlie Munger once said, quote, show me the incentive and I'll show you the outcome. At least one person decided it would be a good idea to bulk purchase a thousand pudgy penguin stuffed toys from Amazon to get the QR code, use the codes to redeem the air drop, and then just return the toys. Estimating for some reason that each air drop would be worth $50, the user believes they've just stumbled into an easy $50,000. Time will certainly tell if that pans out, likely the airdrop will be worth considerably less. And I, for one, am very curious to see if Amazon accepts a thousand returned, opened boxes. When pressed on the ethics of this scheme

by a Twitter user who wrote, quote, you don't see an issue in this, you are screwing over the next buyer, they replied, quote, sir, you're in crypto. Every time you make a dollar, it means another person loses a dollar. Elsewhere on Twitter, someone shared photos of pudgy penguins' boxes and a New York Walmart, all damaged after someone opened the boxes to scan the codes. Some have joked that crypto is akin to digital Beanie babies, and in this case, they're not wrong. As for the Pengu token, which is already being distributed to holders of the much more expensive pudgy penguin NFTs, the token price spiked and then quickly dropped. This coincided with a massive sell-off of the NFTs as well, suggesting people were waiting for

theirdrop and then dumping the NFTs. Radiant Capital is the latest to disclose they were exploited by North Korean hackers impersonating software contractors, a tactic that has become common in recent months and has been the subject of warnings from the FBI. Though the protocol's $50 million hack was disclosed shortly after it happened in mid-October, the company has just attributed the attack to a North Korean threat actor. They say the attackers compromised multiple Apple devices used by radiant employees, with a quote sophisticated piece of malware called Inlet Drift, which was transmitted within a PDF of a supposed analysis of a September exploit of a different platform.

The Web 3 is going just great recap. There were eight entries between December 6 and December 22nd, averaging 0.5 entries per day. $34.11 million were added to the Grift counter. An 85-year-old painter lost his life savings to an NFT art dealer scam. I had somehow missed that the quote surge in cryptocurrency-related crimes had forced the Brooklyn District Attorney's Office to create a virtual currency unit in September of 2023. That unit has just uncovered a group of Nigerian scammers that were operating a ring of around 40 websites that impersonated various real NFT marketplaces, which they were then using to scam artists. Pretending to be art dealers, the scammers contacted artists and asked them to agree to sell their artwork as NFT. on various marketplaces.

Then, claiming that the artists had earned large sums of money, the scammers convinced them to send the money to pay supposed fees in order to access their windfalls. In one case, an 85-year-old painter was scammed out of his life savings after he was convinced to liquidate his retirement, make credit card payments, and take out loans to pay $135,000 to the scammers who told him he'd made $300,000 on OpenC. He was left, quote, emotionally and financially devastated after realizing he'd been scammed.

Unfortunately, the police were unable to recover any of his money, although they did seize the 40-odd fake NFT marketplaces, which they redirected to a warning site about crypto scams. Everything else. The SEC fined jump crypto's subsidiary $123 million. Two NFT fraudsters were charged for rugpoles amounting to over $22 million. $3.5.1 million by the Australian securities regulator. A crypto holder lost assets priced at $2.5 million. A former pastor was charged with a crypto scheme in which he stole $5.9 million from his former congregants. Clober got clobber. The Alpaca Finance Project proposed $50,000 in

restitution for $2.8 million in losses. Worth a read. Neither of today's recommendation, are short, but they're both excellent. Maxwell Neely Cohen, a fellow at the Harvard Library Innovation Lab, published an amazing long-form article on digital archival techniques and the challenges that present themselves when trying to use digital media for long-term storage. It's fascinating to the right type of person, and I am the right type of person. Maybe you are, too. It's titled Century Scale Storage, and it can be found on the Library Innovation Lab's website. Patrick McKenzie, sometimes better known as Paddyo 11 wrote an extremely long analysis of the recent cryptocurrency industry and venture capitalist claims that crypto firms are being subjected to a systematic

campaign of debanking. It's very informative, and it's titled debanking and debunking in his bits about money newsletter. In the News, I had the great honor of being the first guest on the news system crash podcast, a collaboration between the excellent Paris Marx of Tech Won't Save Us and the excellent Brian Merchant, the author of The Must Read Blood in the Machine. We had a great time talking about crypto influence on the elections and what it's likely to mean in the coming years. That episode was titled The Great Crypto Conquest of 2024. I also spoke to Charlie Warzel about what the cryptocurrency world has become and its shift away from its original stated anti-government anti-establishment ideology. That article is in the Atlantic

and it's titled Crypto's Legacy is Finally Clear. There's a gift link, the newsletter. Finally, I tried to help shed some light on what's going on with crypto prices right now, as well as some of the changes that are likely to come at the Securities and Exchange Commission under the Trump administration. That's in Vox and it's titled Why Bitcoin is booming. 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 mollywhite.net slash support. If you'd 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 citation needed.news.