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👁️ Debanked In the Comatorium
It's the perfect time for fintech dipshits to lie. Also: The return of Enron, Craig Wright's Wrongs, Tornado Cash Unsanctioned.
And we’re back! As I mentioned, the newsletter flow was a little disrupted by my trip to DevCon, which supporters here helped fund, and which will continue to pay dividends. Excerpts from my SBF book will also resume, probably with a bit more frequency - I’m deep in the writing trenches now, working towards a deadline at the end of January.
But new things happen every day! This week, we review how David Marcus fucked up Facebook’s Libra payments system, and his pathetic attempt this week, along with losers like Kik’s Ted Livingston and Synapse’s Sankaet Pathak, to bundle their mortifying personal failures into the persian rug of Biden’s Chokepoint 2.0 debanking agenda and dump them in a landfill.
Scroll down for that, after some quick notes about: Enron is Back; Craig Wright Again; Censorship at OpenAI; Tornado Cash Sanctions Down; Crypto Was Always Punk.
‘Marcus claims his testimony was followed by “two years of nonstop work and changes to appease lawmakers and regulators,” but that might also be described as “two years cleaning up my own piss and shit,” at the end of which you’re still a guy who pissed and shit everywhere.’
Enron is Back, Baby
It’s unclear what’s going on! This might be parody! Or they might be launching a token! I guess we’ll find out! It’ll be fun!
Craig Wright’s Appeal Fails Because He Used AI to Write It
Now that CSW’s not an actual threat to crypto through his entirely laughable claims to be Satoshi Nakamoto, you might say that I Love This Guy. He’s funny! He apparently used AI to write a filing attempting to throw out the COPA decision that forced him to admit he is not Satoshi. And because Generative AI is a dangerous, hapless, fundamentally broken product basically design to fuck over people who aren’t as smart as they think they are, the AI hallucinated several nonexistent precedents for Wright’s filing, and it was summarily dismissed.
IT’S COMEDY GOLD, JERRY.
Chat GPT Refuses to Mention David Mayer (de Rothschild?)
Let’s just say right up front that the idea that the Rothschilds are a secret influential cabal is deeply anti-Semitic … but man, building new forms of censorship that breed conspiracy brainworms is NOT helping. Experimenters with ChatGPT have found that it refuses to say the name “David Mayer,” which people immediately assumed was to do with protecting the Rothschild heir of that name.
But 404Media found other human names entirely missing from this supposed step to building God, which is, honestly, hilarious. And as laid out in a (possibly AI-generated) report from USA Today, it might just be an effect of Europe’s Right to be Forgotten laws.
Tornado Cash Can’t be Sanctioned
In an indisputably epochal decision, the U.S. Fifth Circuit Court of Appeals has ruled that the Treasury department cannot sanction an autonomous smart contract - in this case, Tornado Cash, the Ethereum-based cryptocurrency mixing service. The real breakthrough here is simply the acknowledgment that a deployed and immutable smart contract isn’t a conventional legal entity, or the property of an individual.
The substance of the decision, per Reuters, was that OFAC only has the authority to sanction property, and that Congress must update the sanctions laws to encompass what the decision referred to as “uncontrollable technology.”
This will likely have implications for the ongoing trial of Roman Semenov and Roman Storm, cofounders of Tornado Cash currently on trial for allegedly aiding North Korea in launding close to $455 million. At the very least, the decision provides a strong precedent for the idea that Storm and Semenov, despite designing the software, were not actively involved in money laundering.
Also worth noting: Despite sanctions, Tornado Cash continues working just fine for criminals who don’t care about sanctions. This decision may most of all remove the fear many crypto users have of “dusting” - that is, having sanctioned tokens unwillingly sent to your wallet, leading to problems with Coinbase or other regulated offramps.
Crypto Has Always Been Punk
The Noise Protocol just dropped a fantastic and badly needed deep dive into the deep connections between resistance technology like Bitcoin, the cypherpunks, and regular old Punk Rock. It hits all the important points about ideology and practice, particularly the importance of digital “do it yourself” as a mode of opposition to platform monopolies like Facebook and Soundcloud. The piece also touches on the idea of subculture itself as a way to protect and grow dangerous ideas, which is certainly what crypto has been for the past decade.
It always shocks me that some people *don’t* grow up punk, and frankly if you’re one of those poor souls, you need to do some catching up. That’s *especially* true if you’re in crypto, because while it can be strategically useful to pose as if you’re against power and the state, many of those poses are increasingly superficial (see “Debanking” below).
Debanking Is The Cure For Your Ls
Marc Andreessen went on Joe Rogan and amazingly, what went wide were his comments about startup founders being “debanked,” that is, refused a bank account or having it forcibly closed. It’s a relatively obscure topic, and an important one. Unfortunately, Andreessen in typical VC fashion seems to have made it very much about his bags, and not about principle.
Despite having very different politics from basically all of these people, I agree with Nic Carter’s diagnosis that “Chokepoint 2.0” was an extralegal pressure campaign by the Biden administration to force banks to deny banking services to cryptocurrency companies specifically. Austin Campbell lays out the basics here. This is a clear violation of equal protection under the law, and its fundamental logic is the assumption that cryptocurrency as such is just one big fraud.
But as I lay out in this thread, the real core of the debanking issue, the reason we worry about financial censorship, are not rich, powerful VCs and investors, but marginalized groups like women and the global poor, whose actual lives are in many cases threatened by lack of access to banking services. This is the reason crypto, in the long term, really matters.
So it’s all the more cringey that a certain cadre of self-serving, feckless narcissist has chosen this moment to blame debanking for their own hilarious, self-inflicted failures. These victim cosplayers have muddied the waters about the entire issue with their bullshit: Some ran actual frauds, or were debanked for totally legitimate reasons. The gorilla dust is ironically very similar to how the racist David Sacks and his submental lottery-winning Igor Jason Calacanis caused a run on Silicon Valley Bank, then whined for a bailout because they were too stupid to do properm multi-account cash management.
The Free Ridooors
Sankaet Pathak Lost Everyone’s Money
The funniest debanking lament came from Sankaet Pathak, who as founder and CEO of Synapse, a bumbling fintech that debanked its own customers by failing to keep accurate track of their balances - a pretty key function in finance! He’s now rebranded as a critic of Evolve, the Actual Bank that froze his customers’ funds after they realized he was keeping track of balances with all the precision of Sam Bankman-Fried.
This is a heinously complex situation tied to a very contentious court case - and which as far as I can tell has absolutely zero connection to politicized debanking, and a lot to do with Pathak not knowing how to do math.
Kik’d in the Balls
Okay I take it back, this one is funnier.
Ted Livingston, founder of the failed messenger app Kik, complains that he had to sell his startup because it “was debanked,” but here’s what really happened: nobody was using Kik (except for, allegedly, child pornographers), and when it was on the verge of going under, Livingston conducted an “Initial Coin Offering” for a Kik token called Kin, raising $100m in 2017.
But the SEC was like “dawg that’s obviously a security, don’t do that” and Kik had to pay a $5 million fine. This was actually a big win for Kik, which got to keep like $95 million dollars (Where did that money go, anyway? Hmm). But get this - Kik had already shut down its money-losing core messaging app in 2019 because it wanted to focus on crypto. But sure Ted, blame the Biden administration.
David Marcus’ IQ is Too Low For Science to Measure
Easily the most risible set of complaints about “debanking” came from David Marcus, whose brain has apparently been slowly suffocating under that lustrous hair for decades. Marcus was the lead of Facebook’s Libra payments project, which was so poorly conceived and so badly sold by Marcus that the entire thing had to be scrapped, likely at a cost of hundreds of millions of dollars. In a series of Xeets yesterday, Marcus tried to tie the death of Libra to debanking, but it has absolutely no connection to Chokepoint 2.0, practically or conceptually. Mostly because Libra effectively died during the Trump administration, years before Biden and Gensler started cracking down on crypto.
The actual design of Libra was also *straight up cray cray*. It was a non-crypto cryptocurrency, centrally controlled, seemingly censorable, and with surveillance built into Facebook’s official wallet - at a moment when Facebook’s surveillance was a red-hot issue. It was also a non-stable stablecoin, backed by a “basket of global currencies” - a setup that presented innumerable complex and destructive arbitrage vulnerabilities for holders/issuers of any weaker currencies that wound up in that basket. Libra also did a hilariously stupid song-and-dance about forming a nonprofit “foundation” that would “decentralize” control of the network - but they only invited/pressured friendly companies to join the council, and experts instantly saw it for the kabuki it was.
The functional endpoint of the Libra journey came when Marcus appeared in a pair of hearings before the Senate and the House Financial Services Committee in 2019 to defend the plans for Libra, and fucked the dog so hard he got referred to the Metamask support email. In his recent thread Marcus claims his testimony was followed by “two years of nonstop work and changes to appease lawmakers and regulators,” but that might also be described as “two years cleaning up my own piss and shit,” at the end of which you’re still a guy who pissed and shit everywhere. Anyone who watched those hearings and knew their ass from a hole in the ground could see Libra died that day.
I appeared on the late lamented CoinTalk show in 2019 to do an autopsy on Marcus’ performance in the House hearing, which was bad enough that it basically unwound the whole thing in an hour. Marcus had no answers for basic questions like “can drug dealers use Libra? And if not, who decides who the drug dealers are?” Marcus’ performance at the hearings (and more generally) was so poor it was hard to fully accept as real, which I think is clear from my befuddlement throughout this episode. As “regulatory nerd” Matt Janiga put it on Twitter, “Libra died from a bad roll out and shitty government relations led by Marcus,” not “debanking.”
Marcus’ objective stupidity is further evidenced by what he did after he got shitcanned from Meta for his awful, lazy performance on a high-profile project. In May of 2022, backed by Paradigm and Andreessen, he co-founded Lightspark, a company based on the woefully misguided, behind-the-curve idea of using Bitcoin’s Lightning Network as international banking rails. I’m not going to autopsy this dead baby, except to say that Marcus somehow appears to have been unaware of the concept or existence of stablecoins like USDC, or of the fact that the Lightning Network barely works.
Here’s a roundup of all Marcus’ fuckups that I wrote in 2022, when the remaining assets from Libra were sold off. I believe that sale led to the creation of Sui and Aptos, two non-Facebook affiliated blockchains that noone should give one single shit about. Because David Marcus has spent the last eight years wasting his own time and everybody else’s money, and leaving behind a legacy of nothing at all.