News: Québec pension fund invested in Celsius, Terra’s tax troubles, Anchor pass-through Ponzis, Wright v. McCormack trial

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104 degrees with a head full of steam

The Caisse de dépôt et placement du Québec (CDPQ) manages several public pension funds in Québec, Canada. In October 2021, CDPQ put US$150 million of its members’ pension funds into a US$400 million equity investment round in … the Celsius Network! [CDPQ press release]

The returns on stablecoin lending were just too good to pass up, you see: “Blockchain technology has disruptive potential for many sectors of the traditional economy,” said Caisse chief technology officer Alexandre Synnett. [CTV News]

The trivial details that Celsius had already been thrown out of Texas and New Jersey for issuing unregistered securities were of no concern to CDPQ — those American regulators clearly just didn’t understand blockchain technology.

“Celsius is the world’s leading cryptocurrency lender and has a strong management team that puts transparency and customer protection at the heart of its business,” said Synnett.

Unfortunately, Celsius had “transparency” mostly in that the rest of us could see right through them.

Blockchain technology really came through on its disruptive potential in May 2022, when Celsius’ funds allegedly under management had dropped from $27 billion to $12 billion — $6 billion of that being lost in just two weeks — as customers desperately try to get their money out while it’s still there.

Celsius’ CEL token has gone through the floor. The company has halted withdrawals for many customers. [New Money Review; Twitter]

Canadian media is now asking just what on earth CDPQ was thinking. [Radio Canada, in French]



Containers, and their drivers

Venture capital has a habit of funding Web3 shenanigans. We now have venture-funded pass-through Ponzis.

Paul Graham’s Y Combinator has funded, not one, but two shadow bank fintechs to do stablecoin lending.

Stablegains (YC 22) took customers’ USDC and actual dollars, and promised to pay 15% on a variety of investments. What Stablegains actually did was just put it all into Terra’s Anchor protocol, which paid out in the now-defunct UST stablecoin.

Anchor paid 20%, and Stablegains skimmed a bit off the top. The customers’ accounts were denominated in dollars, but only contained UST.

How did Stablegains deal with UST’s collapse? They changed the denominations in the app from USD to UST! And removed the old terms and conditions. [Twitter]

Stablegains lost about $42 million, from 4,878 customers. Stablegains blames the UST crash, and not their own judgement in going all-in on UST and Anchor. [Twitter]

Back in 2012, Pirateat40’s Bitcoin Ponzi scheme, Bitcoin Savings and Trust (BTCST), had a pile of pass-through Ponzis — which invested only in BTCST. (See Attack, chapter 4.) Back in the 1990s and 2000s, Bernard L. Madoff Investments also had a pile of feeder funds.

Crypto has now gone beyond replaying old scams from the history of finance, and is now just replaying old scams from the history of crypto. But now they’re VC-funded. Y Combinator’s Hacker News site is unimpressed. [Hacker News]

Another Anchor pass-through fund, Stader, also went down with the, ah, anchor. [Bloomberg]

Meanwhile, a TechCrunch headline says “Founder alleges that YC-backed fintech startup is ‘copy-and-pasting’ its business” — and the business is another stablecoin bank, Pebble (YC 22), paying implausible rates of interest. Y Combinator sure is picking ‘em. [TechCrunch; Twitter, archive; TechCrunch]



The man whose head diminished

After the collapse comes … the tax man. Do Kwon owns 92% of Terra’s Singapore entity and he’s a Korean resident, so South Korea’s National Tax Service views Terra as an indirect Korean entity.

The National Tax Service says that Terraform Labs needs to pay more than 100 billion KRW (about $35 million) in taxes. South Korea also wants 4.66 billion KRW from subsidiary Terra Virgin, Do Kwon, company chairman Shin and company CEO Han, and an additional corporate tax of 44,478 billion KRW on Terra Virgin.

There’s also a $790 million tax bill for the company’s transfer of “$3.5 billion” in bitcoins to Luna Foundation Guard — which is considered a gift for tax purposes. [Hankyung, in Korean]

Terraform Labs’ legal team all resigned after the collapse of UST. [The Block]

Seoul Southern District Prosecutors’ Office of the Financial and Securities Crime Joint Investigation Team is looking into the collapse of the Terra stablecoin. [Yonhap, in Korean]

It turns out that the large pile of bitcoins held in reserve by Luna Foundation Guard to support the price of UST was used to buy insiders’ bags of UST at $1.00 each — while the rest of the UST hodlers had a cryptocurrency experience. [New Money Review]

South Korean police want to freeze the remaining assets of Luna Foundation Guard. [The Block]

Luna 2 was launched! And the price promptly fell through the floor. It’s possible that Terrra has lost some investor confidence. [Web 3 Is Going Great]



My anaconda don’t want none unless you got coins, hon

Ex-IMF economist Natasha “Tascha” Che’s Twitter avatar is an NFT of her own face. Tascha’s previous moment of Twitter fame came in November 2021, when she (supposedly) burnt a diamond to sell it as an NFT. [Tascha Labs, archive]

Tascha’s latest eyebrow-raising Twitter thread tells the story of how, back in her disenchanted graduate student days, she went on a journey of spiritual enlightenment to Peru, drank ayahuasca, and saw a hallucination of an anaconda that told her the secrets of reality:

if I wanted, I could create ‘time’, ‘space’, & define everything in it right there, in whatever way I wanted. The consciousness I embodied could make that all happen.

What did Tascha use her newfound nigh-godlike powers for? To become a Web3 promoter, and tell you to sign up for her newsletter.

“The anaconda was right,” wrote Che. “I wasn’t ready for the truth.” [Twitter, archive, archive]



Odeon sky. Uncanny. Bushes are in disagreement with the heat

MiamiCoin, the flagship for CityCoins, is pretty much a dead minor altcoin now, and is hovering around $0.002 a coin. Its ticker is MIA. [CoinGecko]

The City of Miami’s PR people desperately tried to get Mayor Francis Suarez to shut up about MiamiCoin. The city worried that the coin might constitute a security, and the SEC would force CityCoins and the city of Miami to give investors their money back. [Quartz]

The city claimed it had done its due diligence on CityCoins before proceeding with MiamiCoin. Paul Butler sent a freedom-of-information request concerning this due diligence. He’s had no response as yet.  [City of Miami]




Craig Wright, who claims to have invented Bitcoin, is suing podcaster Peter McCormack for defamation. The case finally reached trial last week. The trial was just before a judge, Mr Justice Martin Chamberlain, with no jury.

McCormack has withdrawn his attempt to prove his claims about Wright were true, as this would have been too expensive. Instead, McCormack is attempting to show that Wright’s reputation was not seriously damaged by McCormack’s tweets, nor by an appearance by McCormack on another podcast. Wright also withdrew some of his claims of defamation a month before the trial.

There are several independent Twitter threads liveblogging days one and two of the trial, and so far I’ve only found a CoinGeek article on day three — though that’s the site owned by Wright’s employer, Calvin Ayre, and should be taken with a grain of salt.

Day one was cross-examination of Wright. Pat McCat thinks that “the main planks of Wright’s factual case on serious harm were dismantled convincingly: by the testimony of third parties who don’t have a dog in this fight. Wright’s responses were weak to me.”

The second day was cross-examination of McCormack, mostly about his Twitter analytics.

Day three was closing arguments. I’m not sure how long a verdict will take.

Trivia: McCormack “bought” Bedford FC, now Real Bedford, a 10th-league football club, in December 2021. Apparently McCormack acquired Bedford for nothing; he says the club has ten spectators at a typical match, and is funded by about £700,000 in sponsorship so far secured. [Twitter]

Now we await the verdict. The case number is QB-2019-001430. [Day one: Twitter, Twitter; day two (Pat McCat kept breaking his thread): Twitter, Twitter, Twitter, Twitter, Twitter, Twitter, Twitter, Twitter, Twitter, Twitter, Twitter, Twitter, Twitter, Twitter; day three: CoinGeek; index of legal documents]



New facts emerge

The Bank of Zambia, the country’s central bank, was infected with ransomware. The bank didn’t lose any data — so instead of sending the attackers crypto, they sent them penis pictures. “Suck this dick and stop locking bank networks thinking that you will monetize something, learn to monetize,” this august institution wrote to the hackers. [Bleeping Computer; Bank of Zambia, PDF]

Tech journalist Kara Swisher promotes cryptos for your retirement, compares crypto to the early internet, and fails to disclose her own crypto holdings at any step of the way. And apparently lost $300,000 in bitcoins in a box somewhere, and didn’t bother looking for it. But then, who even worries about change that small? Her podcast co-host, Professor Scott Galloway, has qualms about promoting crypto retirement funds on their pod — but not enough qualms to turn down the money. By Amy Castor, with assistance from me. [Amy Castor]

JPMorgan thinks the only thing keeping the crypto market afloat at present is massive infusions of cash from venture capitalists — which ultimately comes from hedge funds and the family offices of the super-rich, who are buying lottery tickets in the desperate hope for investments that offer any returns. [The Block]

Wall Street Journal: Crypto Might Have an Insider Trading Problem. MIGHT, you say? MIGHT? The Journal looks at blockchain data to reveal insiders buying up big on DeFi tokens just before they get listed on an exchange. [WSJ, paywalled]

The price of Bitcoin tends to go down specifically while the US stock markets are open — which suggests that those investors who are burnt by stock markets dumps make sure to dump their frivolous rubbish like Bitcoin first. [Bloomberg]

Bitcoin is green, actually: crypto miners in the US have been putting mining rigs into shipping containers, then taking these and a generator to a gas well head. They burn the gas, then they leave. The miners tell egregious lies about using only “waste” gas, but that’s not what’s happening here — these gas wells are being reopened to mine bitcoins. The gas would have stayed in the ground absent the mining. [Bulletin of the Atomic Scientists]

The problem with Bitcoin miners — an interesting article from Paul Butler about mining companies’ shonky accounting, and not about the more general problems with proof-of-work crypto mining. [blog post]

Remember those great gains you made in 2021? It’s 2022, and the IRS is calling. Yeah, you’re screwed. [Daily Beast]

If you must get into crypto, use an ad blocker. Third-party trackers on websites log anything you type before you submit it — and this would include private keys and seed phrases. [Bleeping Computer]



Guest informant

Jackson Palmer, the regretful co-creator of Dogecoin, is back, with his new podcast Griftonomics! “As snake oil increasingly becomes our new currency, regulators and lawmakers are asleep at the wheel while pay-to-play journalists pump out puff pieces from their slurp juice-induced hangovers.” It’s going a lot wider than crypto grifts too. First episode features Molly White of Web 3 Is Going Great. [Twitter; Anchor FM; YouTube]

Münecat did a video with More Perfect Union on the crypto crash, comparing it to the 2008 financial crisis. [Twitter]

Here’s a good new crypto-critical blog, from one of my esteemed readers: Web2 Boomer. He also did a podcast with Unchained (not the Laura Shin one). [Web2 Boomer; Spotify; transcript]



Living on video

I did Stilgherrian’s podcast The 9pm Edict last April. I went on again just today — well, recorded yesterday — and it was a delight, as always: “The 9pm Heartwarming Schadenfreude of Popping Bubbles with David Gerard.” It’s 51 minutes. DNS for Stilgherrian’s website hasn’t propagated yet after downtime (he forgot to renew the domain *cough*), but you can play or download it from Player FM. [The 9pm Edict; Player FM]

Interview with me: Magic Doesn’t Happen, Especially Not in Business, in Republik (Switzerland). There’s also a translation into German. [Republik; Republik, in German]

I’m interviewed in Wired about crypto. “In cryptocurrency, I’m quite serious about this, the backing reserve is gullibility.” There’s a podcast version of this coming as well. [Wired]

Asia Financial: Stablecoin Crash That Shook Crypto: All You Need to Know — with quotes from me. [Asia Financial]









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3 Comments on “News: Québec pension fund invested in Celsius, Terra’s tax troubles, Anchor pass-through Ponzis, Wright v. McCormack trial”

  1. It’s reassuring to know that an IMF economist hallucinates diamonds out of her ass and mints them as NFTs.

  2. Just want to say that the ayahuasca anaconda was warning her not to waste her life. That’s what “controlling time and space” means, at least to hallucinatory snakes.

    1. I expect our good friend the hallucinatory anaconda is more than a little disappointed with Ms Che’s life choices.

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