Thoughts tagged "law"

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Coinbase Chief Legal Officer Paul Grewal again making oblique legal threats to chill criticism of Coinbase, suggesting to The Hill that it might be “defamatory” for me or Public Citizen to draw a line from their political spending to the current crypto regulatory environment.

Now, critics are putting the industry’s ramped-up campaign involvement last cycle under a microscope. Molly White, a cryptocurrency researcher and prominent crypto skeptic, argued the SEC’s changes in direction were the “goal of a lot of the election spending over the last couple of years.” “I think that the political contributions were quite directly related to both the changing regulatory environment in terms of, you know, broad policy direction, but also in terms of dropping the enforcement action,” White told The Hill. Public Citizen, a nonprofit consumer advocacy organization, slammed Coinbase and the SEC last week, arguing the industry’s campaign spending “paid off.” “The SEC decision is also an important marker in the Trump administration’s rush to abandon prosecution and enforcement actions against corporate criminals and wrongdoers,” Public Citizen co-President Robert Weissman wrote. “This is not just an abandonment of those already wronged by corporate wrongdoers, it is an invitation to a corporate crime spree and epidemic of corporate wrongdoing.”
Coinbase, along with other figures in the crypto world, fiercely rejected the criticism, pointing out opposition to Gensler’s probes was brewing for years. This included long before Trump publicly reversed his stance on crypto to back the industry in late 2023. “I find those comments misinformed at best, if I’m being generous, and defamatory at worst,” Paul Grewal, chief legal officer at Coinbase, told The Hill of the backlash. Some criticism, Grewal argued, fails to consider Trump was once a critic of crypto and at one point called it a “scam.” Grewal pointed out how Congress moved major legislation in 2023 on market structure, an issue that was met with bipartisan support. The Financial Innovation and Technology for the 21st Century Act in 2023 received support from 71 Democrats in the House. “The fact of the matter is that President Trump did evolve and transform in his view on crypto, really starting in December 2023,” Grewal said. “In January 2024, we first started to engage with him and his team, but it was against a much more nuanced, complicated and complete history that I think a lot of the critics just don’t want to engage in.”

Previously:

Tweet by paulgrewal.eth on October 30, 2024 @iampaulgrewal Once again, with feeling. Repeating misrepresentations of facts after previously being put on notice is …. unwise. Quoted tweet by Molly White @molly0xFFF As an active federal contractor, Coinbase is prohibited from making political contributions, including to super PACs. This makes $50 million that they have contributed in violation of pay-to-play laws for contractors.

“Some criticism, Grewal argued, fails to consider Trump was once a critic of crypto and at one point called it a ‘scam.’ ... ‘[It’s a] more nuanced, complicated and complete history that I think a lot of the critics just don’t want to engage in.’”

Huh.

Screenshot of Molly White’s Citation Needed newsletter: “Recently, there has been a push by the cryptocurrency industry to portray crypto as a major issue that will influence votes in the upcoming election season. This just so happens to coincide with Donald Trump's recent statements suggesting he's warmed to the industry. Although Trump personally has actually been far more vocally anti-crypto than Joe Biden — in 2021 saying bitcoin “just seems like a scam”1 and reportedly ordering Treasury Secretary Steve Mnuchin to “go after bitcoin” in 20182 — that hasn’t stopped many in the cryptocurrency world from embracing him as the supposedly pro-crypto candidate anyway. Screenshot of Trump tweets: I am not a fan of Bitcoin and other Cryptocurrencies, which are not money, and whose value is highly volatile and based on thin air. Unregulated Crypto Assets can facilitate unlawful behavior, including drug trade and other illegal activity.... ....Similarly, Facebook Libra’s “virtual currency” will have little standing or dependability. If Facebook and other companies want to become a bank, they must seek a new Banking Charter and become subject to all Banking Regulations, just like other Banks, both National... ...and International. We have only one real currency in the USA, and it is stronger than ever, both dependable and reliable. It is by far the most dominant currency anywhere in the World, and it will always stay that way. It is called the United States Dollar! It's not entirely clear why Trump has done a U-turn. Perhaps it's simply because supporting crypto has become the Republican thing to do. Perhaps it was because he himself discovered the grift potential this industry unlocks when released his own set of NFTs in 2022 [W3IGG]."
Screenshot of a Public Citizen article titled “Guaranteed Crypto Loss”: “Bitcoin, a cryptocurrency, is “based on thin air.” It is a “scam.” It can facilitate unlawful behavior, including drug trade and other illegal activity.” These are Public Citizen positions. But they are also direct comments from then President Donald J. Trump. Public Citizen continues to believe cryptocurrency is a Ponzi scheme and enables illicit activity. It also wastes enormous energy, contributing to climate change. We support the efforts of the Securities and Exchange Commission (SEC) to enforce securities law with respect to these public offerings, and of criminal law enforcers to arrest crypto actors who engage in fraud and other market manipulations. The FBI reported crypto-related fraud exceeded $5 billion in 2023. Trump, however, has pivoted into full-throated and potentially self-enriching endorsement of the sector. He now serves as the “chief crypto advocate” for World Liberty Financial, a nascent cryptocurrency firm. If elected president, Trump would have a glaring conflict of interest as Washington attempts to address policy for this fraud-ridden sector.”

taking psychic damage reading the lawsuit by Justin Sun’s Bit Global against Coinbase

COINBASE’S NONEXISTENT LISTING “STANDARDS” 62. While Coinbase claims to have made the decision to delist wBTC to adhere to the company’s “listing standards,” the truth is that Coinbase has virtually no standards for what can be listed at all. Around the same time that it was delisting wBTC, Coinbase has onboarded various “memecoins” which unlike wBTC have no inherent value other than demand created by their memetic potential as jokes. The decision to allow users to trade these memecoins makes clear that Coinbase did not delist wBTC because of any listing standard, but because Coinbase coveted wBTC’s market share and wanted it for itself. 63. On November 13, 2024, Coinbase announced that it was listing a memecoin called PEPE, named after a controversial picture of a cartoon frog which has been identified as a hate symbol and/or a “racist frog.” The coin is promoted to “Dank Meme Enjoyoors” with an official website that purports to perform an “Autism Test” on their computers to ensure that the user’s autism is over 9,000 before proceeding.17

i have to respect the argument that “memecoins... unlike wBTC have no inherent value other than demand created by their memetic potential as jokes”. your honor, wBTC’s lack of inherent value is for a different reason entirely

Celsius CEO Alex Mashinsky has entered a guilty plea in his criminal fraud trial, which was scheduled to begin in about two months. His Celsius cryptocurrency platform collapsed in July 2022 after it couldn't meet customer withdrawal demands. Its failure was particularly devastating because it had actively marketed itself to customers as safer than banks, regularly telling customers that "banks are not your friends". Many people believed that because Celsius was based in the US, it was carefully regulated and therefore safe.

Alex Mashinsky wearing a "banks are not your friends" t-shirt onstage at WebSummit 2021

Letters written to the judge in the bankruptcy case revealed the extent of the devastation to people around the world, some of whom had their entire life savings or retirement money on the platform. I published some excerpts back in July 2022.

These Celsius letters to the bankruptcy judge should be required reading for anyone who thinks that the only victims of crypto collapses are degens out there gambling on memecoins.

They thought they were insured from losses (and some believed Celsius had FDIC insurance like a bank would). Some of them only had money in stablecoins, which themselves make big promises about reliability. They believed US regulators wouldn't let this happen.

These letters are a big reason why I don't have a lot of patience for people who react to crypto scams with "they should have known better" or "they had it coming".

It's interesting to me that the Fifth Circuit only considered "control" at the smart contract level, and does not seem to consider the role of validators in their opinion. A substantial portion of ETH blocks are built with relays that censor transactions with OFAC-sanctioned contracts, and it seems to me there is now an open question as to whether validators that use non-censoring relays could be sanctioned directly.

The software codes here—the twenty Tornado Cash addresses for immutable smart contracts—are tools used in providing a service of pooling and mixing the deposited Ether prior to withdrawal. Indeed, the immutable smart contract provides a “service” only when an individual cryptocurrency owner makes the relevant input and withdrawal from the smart contract; at that point, and only at that point, the immutable smart contract mixes deposits, provides the depositor a withdrawal key, and, when provided with that key, sends the specified amount to the designated withdrawal account. In short, the immutable smart contract begins working only when prompted to do so by a deposit or entry of a key for withdrawal. More importantly, Tornado Cash, as defined by OFAC, does not own the services provided by the immutable smart contracts. A homeowner may own the right to trash-removal services and a client may own the right to legal services performed by a lawyer, but neither the homeowner nor the client owns the person performing the trash-removal services or the lawyer—for good reason. Similarly, Tornado Cash as an “entity” does not own the immutable smart contracts, separate and apart from any rights or benefits of the services performed by the immutable smart contracts.76 

(Not saying they should, just remarking on the fact that it seems to have gone completely unaddressed.)

Of course this was a concern already, but what with the Treasury focused on the Tornado Cash contracts, it was less central than I suspect it might be soon. This strategy would be somewhat in keeping with legal theories around other "malicious" code, where it's broadly speaking legal to write a devastating computer virus, but a whole lot less legal to run one.

The drumbeat of legal threats signals a potentially ominous trend for journalists during Trump’s second term in office. Litigation is costly and time-consuming. Most news organizations will look to settle rather than face months—more likely years—of discovery and depositions, plus significant legal fees.
“It is both conscious and unconscious. Journalists at smaller outlets know very well that the costs for their organization to defend themselves could mean bankruptcy. Even journalists at larger outlets don’t want to burden themselves or their employees with lawsuits. It puts another layer of influence into the journalistic process,” [Anne Champion] said.

Perhaps the CJR editors decided it went without saying, but it feels worth mentioning that — if Trump’s appointments go as planned — he will have the entire judicial branch to bring to bear on journalists, not just his wacky lawyer neighbor.

"Trump Threatens New York Times, Penguin Random House over Critical Coverage".
Lachlan Cartwright in Columbia Journalism Review.
Legal letter follows complaints aimed at CBS News, the Washington Post, and the Daily Beast. 

FTX's Ryan Salame has returned to Twitter for the first time since FTX collapsed — hours after he was sentenced to 7.5 years in prison for his role in the FTX fraud and for his illegal campaign contributions 💀

Ryan Salame @rsalame7926 · 18m Yah terrible tweet, like the worst. I get it, I've cringed reading it nearly every day since I found out half of ftx customers money was somehow missing. Quote Ryan Salame @rsalame7926 · Nov 6, 2022 It’s so powerful learning who your friends are! Very excited to grow with them in the long term. It’s not hard to genuinely figure out who cares about customers and who doesn’t if you look past the insanity Ryan Salame @rsalame7926 · 39m Who should I do the first public interview with? Top vote wins. Ryan Salame @rsalame7926 · 2h hot damn, this is going to get interesting quickly Ryan Salame @rsalame7926 · Nov 6, 2022 It’s so powerful learning who your friends are! Very excited to grow with them in the long term. It’s not hard to genuinely figure out who cares about customers and who doesn’t if you look past the insanity Ryan Salame reposted SBF @SBF_FTX · Nov 6, 2022 1) A huge thank you to everyone who has supported us--we're excited to keep climbing together. And especially to those who stay level headed during crazy times. We deeply appreciate it.