The Breakdown - PleaserDAO Sues Martin Shkreli Over Wu-Tang Album

Episode Date: June 13, 2024

Yes, the title of this episode is real. NLW provides an update on former President Trump's meeting with Bitcoin miners, and then tells the wild story of a DAO, a formerly jailed pharma CEO, and a secret rap album worth millions. Enjoying this content? SUBSCRIBE to the Podcast: https://pod.link/1438693620 Watch on YouTube: https://www.youtube.com/nathanielwhittemorecrypto Subscribe to the newsletter: https://breakdown.beehiiv.com/ Join the discussion: https://discord.gg/VrKRrfKCz8 Follow on Twitter: NLW: https://twitter.com/nlw Breakdown: https://twitter.com/BreakdownNLW

Welcome back to The Breakdown with me, NLW. It's a daily podcast on macro, Bitcoin, and the big picture power shifts remaking our world. What's going on, guys? It is Wednesday, June 12th, and today we are talking about Pleaser Dow's lawsuit against Martin Schrelli. It's a fascinating one, trust me. Before we get into that, however, if you are enjoying the breakdown, please go subscribe to it, give it a rating, give it a review, or if you want to dive deeper into the conversation, come join us on the Breakers Discord. You can find a lot. link in the show notes are going to bit.ly slash breakdown pod.

All right, friends, today we are doing a fascinating story that involves elements of culture and Dow's and some really interesting stuff. But before we do, I wanted to give a quick update on the continued development and politics around Bitcoin. Presidential candidate Donald Trump met with Bitcoin mining executives in Mar-a-Lago yesterday to discuss the industry's strategic importance. Representatives from riot platforms, Clean Spark, and Terawolf were among the attendees. Matthew Schultz, executive chairman at CleanSpark said that Trump had told the attendees that he loves and understands cryptocurrency, claiming that he would be an advocate for miners in the White House. Jason Les, the CEO of

Riot, posted his photo op alongside Trump, flanked by American flags, captioning the photo, very good meeting with President Trump on Bitcoin and U.S. energy dominance. Following the meeting, Trump posted his big takeaways on truth social, stating, vote for Trump. Bitcoin mining may be our last line of defense against the CBDC. Biden's hatred of Bitcoin only helps China, Russia, and the radical communist left. We want all the remaining Bitcoin to be made in the U.S. It will help us be energy dominant. Now again, it is perfectly reasonable. In fact, it would be unreasonable for Bitcoiners to not question someone's intentions here, but it is also undeniable that industry figures in the mining industry are just grateful for a different type of tone.

Remember, the last thing we heard about Biden from Bitcoin mining was a promise to tax the industry 30% on electricity usage. Terrell Wolf board member Amanda Fabiano reflected on the discussion, tweeting, Our industry has faced an enormous amount of political struggle, fueled by misinformation and misguided narratives. Our industry needs politicians that are interested in learning about the benefits of Bitcoin and Bitcoin mining. We must encourage growth of the Bitcoin mining industry in America. Bitcoin mining offers substantial advantages, including strengthening the electrical grid and fostering job creation, particularly in small town USA. Today, a representation of Bitcoin miners had the chance to explain that to President Trump. I am hopeful that this educational session

will mark the beginning of a shift in perspective, allowing us to return our focus to building. So for those of you keeping track at home, Trump as the pro-Bitcoin and pro-crypto candidate just continues to double down. But with that, let's shift to our main topic. Pleaser Dow is suing Martin Schrelly for allegedly sharing copies of an unreleased Wutang Clan album after forfeiting the rights to do so. The lawsuit claims that Schrelly shared at least 50 copies of the album since the sale in 2021. Most recently, Schrelly played the album in a Twitter-X-spaces event last Sunday. The lawsuit itself is bizarre for a number of reasons, but the back. story of how it came about is even more strange. This album has become a modern artifact,

playing a role in multiple culture trends over the last decade. So if you have been looking for a little something different, if you're tired of all the political talk, join me on a deep dive into the history of the unreleased Wu-Tang Clan album, Once Upon a Time in Shaolin. Let's start first with where our industry came into contact with this album. Pleaserdao purchased the album in a significant moment in crypto culture that happened right as crypto was breaking into mainstream consciousness. The album was purchased out of a police seizure for $4 million in July of 2021, and at the time, the identity of the purchaser was not revealed. In October, Pleaser Dow announced that they were the secret purchasers. We did a breakdown episode on the purchase on October 24th,

2021, and looking back, one could argue that during that cycle, that was roughly the point where conversation shifted away from the Bitcoin focus to other things. Two weeks after that episode, Bitcoin peaked for the cycle, and NFTs transitioned from being some curiosity to a main extreme cultural phenomenon. There had been the Beeple auction back in March where a previously obscure digital artists sold an NFT for 69 million. Board Apes had run up by 2,000% since the summer and would triple in price over the next few months. New York had fully reopened for the first time post-COVID, and NFTs were becoming a hot art trend. During this period, Pleaser Dow became an extremely hot name in the space. Established in March, they billed themselves as a decentralized

art investment empire. The Dow gathered backing from a range of crypto funds and prominent individuals in the industry. Over that year, they got to work, accumulating digital art that they viewed as having cultural significance in the crypto space. They purchased NFTs created by whistleblower Edward Snowden and Russian punk band Pussy Riot. Their most high-profile purchase was an NFT of the Doge meme for 4 million. Pleaser Dow later fractionalized that NFT and sold it into the community. Keep in mind that at that time, the level of cynicism around NFTs was very different. We were still a few months out from Paris Hilton and Jimmy Fallon showing off their board apes on national TV, and the thesis that Web3 could be the future of art culture and business was being

meaningfully discussed in boardrooms around the country. The timeline was filled with GMs and we're all going to make it. It was a period of wild experimentation and Pleaser Dow were pushing the frontier using their seemingly limitless resources. So, this Wu-Tang purchase. The album purchase was universally lauded, with Pleaser Dow seen as championing the Web3 ethos. A fawning New York Times article promoted the Dow's state admission of, quote, prying artistic creations from an exploitative antiquated economic system and offering the promise of a fairer one. And indeed, that Web 3 narrative lined up perfectly with what the Wu-Tang clan had set out to achieve with Once Upon a Time in Shaolin. The album had been recorded in secret over six years.

A single copy was pressed in 2014 and then auctioned off the following year. The sale came along with strict terms. The album was not to be commercially exploited for 88 years, but could be released for free or played at listening parties. According to Wu-Tang producer and ringleader Rizza, the album was a reaction. to the proliferation of music streaming and its impact on the industry. He said at the time, the music industry is in crisis. The intrinsic value of music has been reduced to zero. Contemporary art is worth millions by virtue of its exclusivity. By adopting a 400-year-old Renaissance-style approach to music, offering it as a commission commodity and allowing it to take a similar

trajectory from creation to exhibition to sale, we hope to inspire and intensify urgent debates about the future of music. Once that initial auction concluded, the winning bit of two million came from notorious hedge funder and farmer bro Martin Schrelly. Schrelly was a reviled figure back in 2015, splashed across the headlines for hiking the price of antiparic drug Dariprim. Rizzo was publicly disgusted with Schrelly winning the auction. The group donated a significant portion of the proceeds to charity, and there was a sense at the time that the culturally significant album

would be hoarded away by a wealthy miscreant. After winning the auction, Schrelly discussed his plans to disseminate the album. He told Vice that he had considered destroying the album or, quote, installing it in some remote place so that people have to make a spiritual quest to listen. Nothing much came of these plans, but Schrelly did stream excerpts from the album in November 2016 to celebrate Trump's election win. However, the next year in 2017, Shrelly was convicted on two counts of securities fraud related to hedge fund operations. He was sentenced to seven

years in prison and fined $7.4 million. By 2019, Schrelly was out of appeals, and his assets were seized to pay the fine, including a Picasso and the Wu-Tang album. Now we come back to Pleaserdow. After winning the election after that album had been seized, Pleaserdow was featured prominently across the media. Jamie Johnson, who was referred to as the Dow's chief pleasing officer, gave a string of high-minded quotes. He said, This album at its inception was a kind of protest against rent-seeking middlemen, people who are taking away a cut from the artist. Crypto very much shares that same ethos. Johnson really played up the concept of taking the album back from the evil Schrelly for the greater good, stating, quote,

this beautiful piece of art, this ultimate protest against middlemen and rent-seekers of musicians and artists went south by going into the hands of Martin Schrelly, the ultimate internet villain. We want this to be us bringing this back to the people. We want fans to participate in this album at some level. Now, in the almost three years since then, fan participation has been a little sparse. There were rumors of small private listening parties held for Pleaser Dow members, but nothing more substantial materialized. In that same period, Schreli has also undergone something of a public image renaissance. He was released early from prison in May 2022 and has since been working in both crypto and AI. He's grown a large and highly receptive following that don't particularly care about past

allegations against him. So, that brings us up to speed to the past few weeks, when Pleaserdow began advertising the first listening parties open to the public. Events were held in New York over the weekend, and the album has also been loaned to the Museum of Old and New Art in Tasmania, Australia, for a series of listening sessions to be held next week. Over the past few months, however, Schrelly has been chirping at Pleaser Dow on Twitter, talking about broadcasting copies of the album that he had made. As a small selection, Schrelly once wrote, Lull, I have the MP3s, you moron. I literally play it in my Discord all the time. You're an idiot. Things came to a head on Sunday afternoon when Schrelly tweeted, well, Pleaser Dow blocked me from

their account, so I think I will play the album on Spaces now. The spaces went live with 5,000 people tuning in. Yesterday, Pleaser Dow unblocked Schrelly and served him with a lawsuit. The complaint claimed that Schrelly had violated the terms of the forfeiture order. That order prohibited Schrelly from taking any action that would diminish or damage the album and affect its availability, marketability, or value. Pleaser Dow also presented comments from Schrelly where he claimed to have, quote, sent it to like 50 different chicks. The lawsuit claims that Schrelly's was a breach of trade secret protections, and it caused the Dow monetary damage by devaluing the album. If the case goes anywhere, that's going to be the central issue. Forfeiture orders are intended

to stop someone from destroying an item they are supposed to hand over the authorities. Of course, it's somewhere between unusual and unheard of for that item to be the intangible value of secret music that can be diminished by making copies. Hello, friends. Before we get back to the rest of the show, I want you to join me at Permissionless. Permissionless is a conference for CryptoNatives's crypto natives. And the reason it's so important this year is that despite regulators' best attempts to push industry founders, devs, and executives out of the U.S., the U.S. remains the beating heart of crypto. Today, the tide is turning. Policymakers have pivoted from fighting crypto to embracing it, which will lead to the creation of new financial products, new

applications, and ultimately new adoption. Permissionless is a conference for those using and building on-chain products. It's home to the power users, the devs, and the builders. And what's more, I'm going to be there. The location is Salt Lake City. The dates are October 9th to the 11th, and right now tickets are just $199. Towards the end of the month, they're going up to $499, and if you want 10% off, use code breakdown 10 when you check out. If you go to the Blockworks website, blockworks.com, there will be lots of information about how to register, and again, use code Breakdown 10 to get 10% off. So before we get into the commentary, there's a few weird things contained in the lawsuit

that imply there may be a little bit more going on behind the scenes. The lawsuit discusses the 2021 purchase for $4 million, but also talks about the Dow spending $750,000 in January of this year to acquire, quote, copyrights in an exclusive right to exploit the recordings. In fact, the core claim in the lawsuit is that, quote, any dissemination of the album's music to the general public greatly diminishes and or destroys the album's value and significantly damages Pleaser Dow's reputation

and ability to commercially exploit the album. Pleaser Dow nodded to the idea that a deal had been struck tweeting, Our master plan is to release the music to the public in a way that honors the Wu-Tang clan and gets them paid while circumventing the streaming oligopoly. Every action we are taking is in service of that mission. So perhaps we are seeing the inevitable turning back of the original non-commercial idea, but something like that was probably inevitable. As for the prospects of the case, Pleaser Dow have already secured a temporary restraining order which prohibits Scarelli from retaining or distributing copies of the album. Unfortunately for Pleaser,

crypto lawyers are a little skeptical that the case has legs. Stephen Paley of Anderson kill called the lawsuit, quote, well-written, yet at the same time one of the stupider lawsuits I've read in a long time, and I've read some dozers. Gabriel Shapiro added, I'm rooting for Schrelly on this one. The case seems pretty weak as well. When asked to elaborate, he simply quipped proprietary IP is dumb. More seriously, Shapiro pointed out that Pleaser Dow had acquired the IP several years after the forfeiture order, adding, I don't think forfeiture orders are supposed to extend beyond the sale of assets. Law professor, artist, and anti-copyright activist Brian Frye had some more fleshed out commentary. He wrote,

even a famous jerk is right once in a while. If copyright law prevents people from consuming a work of authorship, then copyright law is an ass. Interestingly, this isn't actually a copyright case. Pleaser Dow appear to have gone out of their way to shoehorn it into a trade secrets violation. Still, Fry made an interesting policy point, adding, The art market is a market in Veblen goods premised on creating scarcity through authenticity, while encouraging consumption of the underlying work. The purpose of copyright is consumption. Prohibiting it is against public policy. So clearly beyond anything else, this is a very weird, unique case, so it's very difficult to get an idea of how it will play out.

The social commentary surrounding crypto culture was also running hot. Schreli set the tone as soon as he was served with the papers tweeting, These super nerds are suing me, the least cryptoethos, whitest least culturally relevant dorks. Good luck. Others piled in with Evan Ben Ness commenting. Nothing says Web 3 like running to the government because you're mad someone played some music on the internet.

Fubar added, why haven't music NFTs taken off? I don't know, maybe because their largest holders are too busy suing Martin Schreli for playing illegal notes. There was also a lot of discussion of the ideals of Dow organization. Pleaser Dow is actually a foundation incorporated in Grand Cayman. It has members and a token, but most people don't have any idea what the governance looks like. This got under the skin of Crypto Commentator Makesy, who tweeted, How does a Dow hire lawyers to file a proactive lawsuit in federal court on behalf of a bunch of Anans that didn't consult? Turns out that you are a Dow, you're a Grand Cayman's Foundation

company with Dow in the name. Stop co-opting the word to mean something it doesn't. Uniswop founder Hayden Adams, however, seemed to think this was perfectly fine, commenting, people complaining about Dao's suing don't realize Pleaser is basically a member or a museum. The Dow part is because many of its components and assets live on chain. It's not a public Dow anyone can buy into. Of course, they're protecting IP rights to the Wu Tang album they spent $5 million on. And that commentary brings to the surface one of the big criticisms around Dao's, that they are basically pointless decentralization theater in a lot of cases.

We saw this on full display in the Uki-Dao case last year, when the CFTC was successful in getting an order against Dow members personally. Now, one can argue it's a cheap shot to go after Pleaser Dow for having an incorporated foundation, but it demonstrates that the Dow structure might have some structural issues. The last few years have showed time and time again that code really isn't law, and when a Dow needs to enforce anything off-chain, it typically shows up to court in the form of an incorporated entity. Aside from being the crypto-twitter argument of the day, it sounds like the people who

listened to the album over the weekend really enjoyed the event. It was held in the oldest synagogue in New York, which was also the set for the 36 Chambers photo shoot. it does really seem that Pleaser Dow pulled out all the stops to create the right ambiance and delivered a unique experience. Attendee Kenton Presscott tweeted, being one of the few to listen to something probably only once is a surreal experience. Props to Pleaser Dow for putting on a majestic exhibit. So perhaps at the end of the day, we should all chill out for a minute and remember what ODB said, Wu Tang is for the children. And finally, if you are wondering if we're getting to the part of the cycle,

where we're devolving into battles just for fun, boy, go check out what happened with Andrew Tate last night. For now, though, that is going to do it for the breakdown. Until next time, be safe and take care of each other. Peace.