Join me today for Episode 962 of Bitcoin And . . . is LIVE!
Topics for today:
- Tornado Cash Motion To Dismiss Thrown Out
- Gensler to Define "Communication Protocols"
- DNS Attacks in Malaysia Already Happened
- Swan Bitcoin in Hell . . . Again
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https://www.therage.co/gensler-to-rule-on-licensing-requirements-for-communication-protocols-2/
https://axisofeasy.com/freespeech/malaysia-blocks-global-dns-resolvers-another-salvo-in-the-censorship-battle/
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[00:00:00]
David Bennett:
Good morning. This is David Bennett, and this is Bitcoin and, a podcast where I try to find the edge effect between the worlds of Bitcoin, gaming, permaculture, podcasting, and education to gain a better understanding of all. Edge effect is a concept from ecology describing a greater diversity of life where the edges of 2 systems overlap. While species from either system can be found at the edge, it is important to note there are species in the overlap that exist in neither system, and that is what I seek to uncover. So join me in discovering the variety of things being created as Bitcoin rubs up against other systems. It is 9:36 AM Pacific Daylight Time. It's the 27th day of September 2024 and this is episode 962 of Bitcoin. And we're gonna just jump right in with both feet, dude. The water is cold, but, you know, it's just the best way to get this shit done. Alright. So, tornado cash is the first bad news that we've got for this morning. And I I honestly think this is pretty much the only if not the only bad news, the worst bad news. Okay? So we're gonna get it we're gonna do this shit get it over with quick. So you can just go on about your day.
Tornado Cash has lost their motion to dismiss. Bitcoin Magazine Colin Crossman is gonna get us all squared away on this one. The judge in the Tornado Cash case delivered an oral ruling today rejecting both the defense's motion to compel discovery, as well as their motion to dismiss all charges. This represents a massive setback for the defense. And the judge's reasoning may not bode well for developers and projects going forward. So the motion to compel. Alright. This is what this is about. The defense's motion to compel discovery sought to access a broad range of government communications, including exchanges with foreign authorities under the Mutual Legal Assistance Treaty.
And with domestic agencies like the Office of Foreign Asset Control and the Financial Crimes Enforcement Network. Citing federal rule of criminal procedure number 16, the defense argued that these materials were essential to the understanding of the government's case and could potentially include exculpatory evidence. The judge, however, made it clear that rule 16 imposes a stringent requirement. The defense must show that the requested information is material to their case, not merely speculate on its potential usefulness.
The court dismissed the defense's arguments as speculative, noting that the reference to what the information might or could reveal do does not meet the necessary standard for materiality. Material materiality. Wow. That is one hell of a word. It's material and I t y. You pronounce it for yourself. For example, the defense argued that the MLAT communications with the Dutch government might shed light on the evidence against tornado cash or reveal the government's investigative theories. The judge found this reasoning unpersuasive. It emphasizing that materiality or whatever the hell it's called cannot be established through conjecture or vague assertions.
The court similarly rejected the defense's request for all communications between the government and OFAC as well as FinCEN. Although the defense claimed these documents were necessary to understand the government's theories and potential witnesses, the judge concluded that the defense failed to demonstrate how these communications were directly relevant to the charges at hand. The court reiterated that the burden is on the defense to show a specific link between the requested documents and their defense strategy, a burden they did not meet.
When the defense suggested an in camera review to determine their their materiality, God, what a word. The court refused. The judge argued that granting such a request based on speculative assertions would set a dangerous precedent, effectively forcing in camera reviews in all criminal cases when a defendant speculates about the relevance of certain documents. This, the judge stressed, would undermine the purpose of rule 16 and transform the pretrial discovery process into an unrestrained search for potentially helpful evidence. The the defense also raised concerns under Brady versus Maryland arguing that the government might be withholding exculpatory and impeachable evidence. While the court acknowledged the government's obligations under Brady, it found no indication that these duties had been neglected.
Without concrete evidence suggesting government was withholding information, the court saw no reason to compel additional disclosures. The judge cautioned that while the defense's arguments were theoretically possible, they lacked the factual support needed to warrant the court's intervention. Alright. So coming to the motion to dismiss all charges, well, that was presented or did present a much more significant set of issues. Central to the defense's argument was the definition of a money transmitter under the Bank Secrecy Act. The defense contends that Tornado Cash does not qualify as a money transmitter because it did not exercise control over any user funds. It merely facilitated the movement of cryptocurrencies.
The court, however, rejected this narrow interpretation. The judge clarified that the BSA, Bank Secrecy Act, the scope does not require the control of the funds. Tornado Cash's role in facilitating, anonymizing, and transferring cryptocurrency was sufficient to bring it within the statute's ambit. The judge likened Tornado Cash to custodial mixers, which have been deemed money transmitting businesses. Further complicating the defense's argument was their reliance on the 2019 FinCEN guidance, which uses a 4 factor test to determine whether a wallet provider is a money transmitter. The defense claimed this guidance, which includes a total independent control standard, should apply to Tornado Cash. But the court disagreed, stating that this standard is specific to wallet providers and does not extend to mixers like Tornado Cash. Consequently, Tornado Cash's lack of total independent control over funds was irrelevant to its classification as a money transmitter.
Another key point in the court's analysis was the distinction between expressive and functional code under the First Amendment. This is probably the most pivotal sentence in this entire article, so I'm going to read it again. Perk your ears up right now. Do it now. If you're if you're dazing off, come on man. Wake it on up. Another key point in the court's analysis was that there is a distinction between expressive code and functional code under the First Amendment. The defense argued that prosecuting Storm for his involvement with Tornado Cash was tantamount for punishing him for writing code, which they claimed was protected free speech.
The judge acknowledged that while code can be considered expressive, the specific use of code to facilitate illegal activities such as money laundering or sanctions evasion falls outside of the bounds of the First Amendment protections. The judge emphasized that the court must focus on the conduct enabled by the code, not merely the code itself. Even under immediate scrutiny, which applies to content neutral restrictions on speech, The judge found that the government's interest in preventing money laundering and regulating unlicensed money transmission justified the restrictions imposed by the relative statutes.
I'm pausing because later on we're gonna read a story about Gary Gensler and it's going to relate directly back to this entire paragraph I guarantee it continuing the court also addressed concerns about the immutability of Tornado Cash's smart contracts an issue raised by both parties the judge acknowledged the existence of a factual dispute but noted that it was not a decisive factor in the current motion However, the issue of immutability may play a role at trial in determining the extent of Storm's control over the service and its responsibility for its operations. In concluding remarks, the judge underscored that while the use of code to communicate ideas may be protected under the first amendment, using that code to facilitate illegal activities is not.
This distinction is critical in the context of emerging technologies like blockchain where the line between speech and conduct can be blurred. The court's ruling serves as a reminder that the legal system is prepared to hold participants in the digital economy accountable even as it grapples with the complexities of applying traditional legal principles to new and evolving technologies. Okay. Let's let's I wanna read this one again. In the concluding remarks, the judge underscored that while the use of code to communicate ideas may be protected under the First Amendment, using that code to facilitate illegal activities is not. And again, we're gonna be reading something about Gary Gensler and his thoughts and potential impact on communication protocols.
Do you see where this is going? If you don't see where this is going yet, then keep this story in mind as we when we're when we get to the Gary Gensler story. Okay? Because that's next. I I put that up next. But first, this is a terrifying prospect that code is free speech. We keep saying that. You know, the code behind Bitcoin is free speech. SHA256 and the algorithm for very many, you know, cryptographic functions is free speech. Right? It's no longer munitions. It's protected free speech. But yet, here we have a court that's trying to make a distinction. Saying, yeah, well, code is free speech, but what you use it for if the code is used for something that we deem unacceptable, no longer does the protection of the First Amendment apply.
Do you see the what ugly ass precedent this set sets? Right? Especially when we get to this next one. Keep all this in mind because Gary Gensler is going to rule on SEC licensing requirement for communications protocols. Gonna read it again. Gensler to rule on SEC licensing requirements for communication protocols. This is Lola Leitz from her, publication named The Rage. That's Lola Leitz from The Rage. In remarks before the 10th annual US Treasury Market Conference, SEC chair Gary Gensler has expressed intent to rule on amendments to rule 3 b dash 16 of the Exchange Act by November. The amendments expand the definition of the term exchange to include, quote, systems that bring together buyers and sellers of securities that offer the use of non firm trading interest and provide another type of non discretionary method, I. E. Communication protocols.
The proposed amendments would require that these systems register as National Securities Exchanges or as broker dealers and comply with regulation. End quote. Okay. I'm just pausing a little bit because the impact of this is kind of bowling me over a little bit, especially coming off of what we just read. Alright. Is it to be that when I zap somebody through the Nostra communication protocol that this the code the expressive code of the Noster protocol is protected free speech in the United States under the First Amendment. But the fact that I zapped somebody using that protocol now causes me to be using that code in an illegal manner.
See where this goes. You see how bad this is? Now, let's not take it as a zap. Let's say, ah, David, you're tinfoil hatting again. Please stop. Stop doing that. Okay. Okay. I'll stop. I promise. I'll stop. But what if we're using the Nostra communication protocol to set up, me opening a channel with your lightning node or vice versa? Are we getting closer to what Gary Gensler wants to rule on? Are we getting closer to the judge and the tornado cache and their interpretation of what is and is not protected free speech? See how these are working in tandem. The tornado cache and Gary Gensler ruling on what a communication protocol is and whether or not it should be required to be registered as a fucking exchange is starting to really concern me.
Which is one of the reasons why I will reiterate it again. If you are working on Freedom Tech, please, for the love of God, do not use your name. Use a pseudonym. Never tell anybody that you're working on it, not even your friends, if at all possible. I know that that sounds extreme, but I'm starting to wonder how extreme the other side of this equation is getting. I'm more I'm more worried about them being extreme than us being extreme. So let's continue. The proposed amendment has received 180 comments since 2022, many of which appear to be critical of the the overly broad language applied. As the advocacy and research center coin center submitted, quote, the proposed rule as drafted would not withstand constitutional scrutiny as the proposed definition directly describes the publication of speech as a necessary and sufficient condition for the registration requirement.
Merely making available a communications protocol can, by the SEC's own admission, trigger an obligation to register. A communications protocol is commonly understood as a set of rules. Making available a set of rules is an awkward linguistic construction that must, at the very least, include publishing and speaking, which are core First Amendment activities. By way of example, Corning Center argues, is Twitter's general communications protocol a negotiation protocol when users take advantage of the dollar sign to create a cash tag making stock names and ticker symbols accompanied by the price quote a trading interest?
End quote. Criticizing the SEC's consideration of rewording the category of communications protocols to negotiation protocols, Coin Center argues that a dictionary contains a protocol for appropriate use of the English language, a communications protocol. But a subset of terms in that dictionary can be used by buyers and sellers of securities to interact and negotiate the terms of a trade, a negotiations protocol. One might be able to publish a dictionary that includes only these terms and successfully queue narrowly to a definition of making available a negotiation protocol, Coin Center adds. But one would have great difficulty publishing a useful English dictionary that contained every term except the terms that buyers and sellers might use to negotiate said trade.
The SEC could easily use the proposed vague standard to target certain publishers of open source software who advocate for the use of that software for certain political ends. Arguably, the commission has already displayed a pattern of behavior of using its flexible regulatory power for viewpoint discrimination against developers of cryptocurrency or currencies and privacy protecting tools, CoinCenter concluded. Quote, as an investor, I understand the need to modernize regulations to address gaps in oversize in oversight of electronic trading systems, one anonymous commenter writes.
Quote, defining an exchange as any system with non firm trading interest is excessively broad and vague. This could unintentionally encompass a wide range of communication platform sorry, platforms and online forums that enable discussion about said transactions but do not themselves execute trades or constitute regulated exchanges. Regulatory uncertainty surrounding licensing requirements for software publishers have dominated questions on compliance among developers since of Tornado Cash developers Roman Storm and Roman Seminar in August of 2023. See how this winds back? Storm and Seminar, who developed a non custodial privacy protocol for the cryptocurrency Ethereum, are charged with conspiracy to operate an unlicensed money transmitting business, conspiracy to commit money laundering, and conspiracy to violate sanctions.
The pair are awaiting a jury trial in December. During the hearings on the case in July, appointed judge Filia or Fila, whatever, asked whether the charges were comparable to criminal criminally charging the creators of WhatsApp because criminals used it. If quote, if tornado cache has 1,000 customers and one is a bad actor, are they criminally liable? End quote. Much of the prosecutors' argumentation in the tornado cache case leans on control of the user interface as equivalent to control of Tornado Cash an argument which appears to stem directly from FATF, or the FATF, recommendations equating control over user interfaces as control over assets in apparent attempts to qualify UI developers as crypto asset service providers to impose licensing requirements.
Are you fucking kidding me? I can't design a user experience or a user interface that has something to do with bitcoin and not be considered providing control of the asset? And have to be licensed to do so? Interesting. Similar charges have been brought against developers of the non custodial Bitcoin privacy wallet, SamuraI Wallet These charges arise from the defendant's development, marketing, and operation of cryptocurrency mixer that executed over $2,000,000,000 in unlawful transactions and facilitated more than $100,000,000 in money laundering transactions from illegal dark web markets. The DOJ stated in a press release surrounding the arrest probably in my and I'm saying this for myself, probably without a shred of fucking evidence, but whatever.
Goddamn whole thing's Kafkaesque. If you've ever read the trial from, Franz Kafka or I think it's Franz Kafka Kafka. K a f k a. Okay. Kafka. Go read the trial. Just go read the trial and then relisten to this episode and then go listen to my episode on Ranch Wars. We're talking about the King Ranch and what they're undergoing. They were under they were under full investigation for over a year and they never even knew it. Go read the trial from Kafka. Just go do that. Now, let's finish this off. In an in the EU, Telegram founder Pavel Durov was recently been charged with laundering of the proceeds derived from organized groups offenses and crimes.
While not much is known about the charges, industry experts who wish to remain anonymous have told The Rage that the charges may be less related to Telegram's issuing of the cryptocurrency TON, t o n, and rather related to the fact that criminals may have utilized Telegram messenger to plan, coordinate, and possibly execute transactions violating AML and CTF and sanctions laws. Alex Pertsev, the 3rd developer of the Tornado Cash Protocol, was convicted of laundering 1 $200,000,000 by a Dutch court in May of 2024 and sentenced to over 5 years in prison. In written remarks, Gensler stated that a lot has changed in the capital market since the initial introduction of alternative trading systems regulations in 1998 quote the challenge in our times is to bring reforms to ensure that they are as efficient and resilient as they can be it's critical to taxpayers yes to the taxpayers oh somebody think of the taxpayers for fuck's sake. To the capital markets, to monetary policy, and the role of the dollar around the globe.
Given the evidentiary hostile environment for software developers and communication service pry providers today, it seems unlikely that the proposed amendments to the Exchange Act would not be abused to further crackdown on dissenting developers if the applied language remains as broad as drafted. Okay. That that that's it. That's the thing. Gensler getting to choose who and who is not a communications protocol which completely circumvents the Federal Communications Commission, the FCC. How is it that Gensler has anything at all to do with labeling electronic communications protocols as anything?
This this is scope creep that's what this is this is the SEC allowing scope creep to occur and now they're starting to envelop the Federal Communications Commission's mandate. This is FCC, 100%. Do you like, at one point or another, is Gary Gensler gonna be able to give me a license to as a as a radio network operator? Like, I get, hey man, it's Dave in the morning on 98.1 FM. But I gotta go get a license for that shit. Do I go to the FCC or do I go to fucking Gary Gensler? Who? Who do I go to? If I want to be a ham radio operator, who do I talk to now? Do I go to the FCC to get a ham radio operators license or do I go call Gary Gensler's office at the Securities Exchange Commission?
This, what's happening here, is the way you lose entire countries, republics, federations, states, populations. This is how it occurs. But one of the ways, it's not the only way, but it certainly is endemic of a failing empire that at this point is gasping for air, grasping for the last thread that they can hang on to before they go under the water. All we have to do is stand back and let them die. Just let them die. But the communication stuff doesn't really get we're not over the communication stuff, but we are gonna shift gears just a little bit. We're gonna talk a little bit about DNS.
Now I had a discussion with with a guy on, like, you know, we had a Zoom call together. I'm not gonna tell you who it is, but I'm pretty sure that that my fellow brother is listening. So I enjoyed our discussion the other day. We will have it again. You will get on the show. We are going to figure this out. But I want to raise the flag about domain name servers DNS. Right? Just just the whole just think of everything that is DNS. Now I think I'm safe in saying that what for those that don't know, I think I'm safe in saying or giving a a a describing what a DNS is for those that don't know. When you go to a website and you type in, I don't know, axis of easy.com, That that's not how you get to the domain.
That goes to a domain name server, and the domain name server kinda looks at it and says, I'm pretty sure I gotta I I it looks it looks through its own phone book. And then it looks up the name that you gave it axisofeasy.com and it says, oh there's the phone number, the IP address. It's like looking at a phone book. It's like you got the name of somebody but you don't know exactly how to get them on the communications protocol that we call the AT and T telephone network. So I go to my phone book. That's the DNS. And I look up the name of the guy that I wanna call. And his name is axis of easy. So I go to the a's, and then I go all the way down to the bottom of the a's where it's ax and then I look for axis of easy and I find it. I go to the right hand side and there's a telephone number in the format of an IP address.
That is what gets returned to your browser and that's how your browser connects with the actual website that's providing the information from axisofeasy.com. That's how this works. So keep that in mind as we read this one entitled Malaysia Blocks Global DNS Resolvers, another salvo in the censorship battle. The Malaysian government has recently ordered all internet service providers within the country to block access to global DNS resolvers and they have until Monday, September 30th to fully comply. That's this September. Let me make sure about the date.
This story was written September 8th this year by Mark e Jeftvich, September 8, 2024, this month. And they have until the end of the month, September 30th, to fully comply with blocking global DNS resolvers. All the ISPs in Malaysia have to do this. This act of digital gatekeeping, also known as censorship, is being justified under the guise of protecting the public from online harms. But like all overreaching government initiatives, it feels more like an exercise in censorship disguised to safety. So what's going on in Malaysia anyway? Well, briefly, the Malaysian Communications and Multimedia Commission has decreed that the solution to controlling quote harmful content online is to enforce strict control over how internet users resolve domain names.
Now, let's for anybody who's confused, because I gave you the the definition of DNS. When I look at a phone book and I look up Joe Smith's name to get his phone number, I'm resolving his name to the phone number. When I go to accessofeasy.com, my browser goes to DNS and says, I need you to resolve accessofeasy.com and return to me an IP address that I can that I know what to do with. That's what they mean by resolve continuing. They're essentially blocking people from using global DNS services like Google Public DNS, Quad9 Cloudflare and others by redirecting all DNS traffic to local services or servers that are under their control.
Why does this matter? Because controlling DNS is controlling access to the entirety of the internet at least for your people. You can't visit a website, send an email, watch a video, or have a chat session without translating the underlying host names like access.com into an IP address by resolving it with a DNS. When your government controls that process, it gives them the ability to decide what you can and cannot access. This is basically Orwellian, like, for reals. Here in Canada, we're watching this unfold closely. The looming C-sixty three quote online harms legislation is cooking up a similar brew, and it's something that the Internet Society of Canada has been flagging for a while now. I sit on their board. And this is exactly the kind of mission creep. We also know that as scope creep, and we just talked about it with Gensler and the FCC SEC.
We've been warning about or warning against, also former CEO of the Global Internet Society, Andrew Sullivan, who is Canadian, wrote this post about the Canadian bill earlier this year, and that is at internetsociety.org. What what was it? What governments can learn from Canada when regulating online harms is the name of that particular one. Okay. So make no mistake. Protecting from online harms is censorship. Pure and simple. The phrase, protecting the public from online harms, is thrown around as a catch all rationale for governments that want tighter control over what their citizens see and hear online.
Malaysia is saying they want to curb the spread of misinformation, extremism, and illegal content by clamping down on DNS services. And in their minds, if they control the DNS, they control the flow of information. DNS is a fundamental primary choke point for the Internet. Unfortunately, it's been designed in a comparatively decentralized manner, so controlling it isn't easy. Malaysia's MCMC has come out swinging in defense of their DNS redirection and website blocking. The government is focusing on platforms that allegedly spread disinformation and undesirable content. However, what seems undesirable is a gray area that expands to include political critique, oppositional voices, and even satire.
Fortunately, it's relatively simple to set up a DNS resolver. And it didn't take long for people to begin sharing the details on how to do it across social media. Threads have popped up all over Reddit such as this one where Malaysian netizens are discussing workarounds. If you're reasonably tech savvy, defined as knowing your way around a UNIX shell, then running your own DNS server isn't exactly rocket science. The main challenge is sidestepping the ISP's block on port number 53, which is the standard port for DNS traffic. But even that has solutions.
The trick is to use DNS over HTTPS or DNS over TLS, respectively known as DOH and DOT. Both of these protocols encrypt your DNS queries, making it harder for ISPs and governments to detect and block them. Even better, you can run these over alternative ports, making it practically impossible for sensors to lock down your DNS traffic. Setting up a DOH client to resolve queries via a cloud provider or a self hosted server can provide a quick escape from the government's filtering. You can also use a VPN service with integrated DNS support that can sidestep such blocks entirely. On a technical level, it's not trivial to do this, but with tools like AI and LLMs now, if you're capable of typing, reading, and copy pasting, you probably can. To give you an idea of just how far things are going, I whipped out these detailed instructions via chat gpt on how to set up a doh or d0tdns resolver on an alternate port and configure a macbook pro to use it for its dns queries and it took all of 15 seconds.
Even if Malaysia tightened its grips on these protocols open source tools like DNScrypt and local proxy resolvers still offer ways to thwart centralized control. I wasn't aware of the Malaysia DNS blocking until EasyDNS was mentioned in one of those Reddit threads as a potential alternative DNS provider. And to be clear, EasyDNS is not a DNS resolver. We provide authoritative DNS which means we help websites and domains stay online by ensuring their DNS records resolve correctly. We don't resolve queries for individual internet users. Malaysia is not the 1st country to attempt something like this. And they certainly will not be the last.
We're seeing a disturbing trend where governments feel entitled to dictate how their citizens can access the web. Whether it's DNS censorship, blocking VPNs, or passing sweeping laws that criminalize online speech, the overarching theme is the same. Clamp down on digital freedom under the guise of public safety. As with any battle for control, there will always be those who fight back. The fact that people in Malaysia are already figuring out how to circumvent these blocks shows that you can't fully suppress the human desire for free expression. Tools like encrypted DNS and VPNs are just the start. The harder governments try to tighten their grip, the more creative people will become in finding ways around it.
All right, so that's pretty much the article. That pretty much goes hand in hand with everything else. Alright? Gensler overstepping his boundaries to encroach on the FCC or the Federal Communications Commission territory is eye watering. And the fact that I could go out and I could probably strike up a conversation with some unknown gentleman at a bar over a beer and say, hey, did you know that this is occurring? And describe it to him in just a few sentences. I mean, not even getting on a soapbox. And he probably just his eyes would probably just glaze over and just doesn't give a shit. SEC, FCC, it rhymes.
They must be the same. I'm serious, man. It's probably it probably goes off like that in most people's heads nowadays because they're worried about whether or not they can afford food at McDonald's. That's what all this shit does. That's what the the outside of this FCC, SEC, the tornado cash thing, this DNS attack in Malaysia. Is it like, it'll glaze people's eyes over because they're being distracted by all this other shit. Iran, Hezbollah, Israel, Ukraine, Putin, Russia. The elections are coming up. They can't afford Safeway, so now they're going to Walmart. They can't afford Walmart. So now they're begging that the dollar menu from fucking McDonald's comes back. They're just on their knees begging for any relief whatsoever. And when you tell them that it's already happening in Malaysia, that the DNS is being blocked and that goes hand in hand with Gary Gensler's overstepping the FCC and the tornado cash stuff on they're not gonna care. They're just not gonna care and they have no idea what it means for their future.
It's up to us to figure out a way to get them to understand in a way that does not make their not only does not make their eyes glaze over, but where they actually understand it. So the gentleman that turned me on to this Malaysian DNS attack is saying that we should probably be raising flags to the developers of Nostr. I know they know. I know Fiat Joff knows about this. I know that j b that Will Kessarin or jb 55 from Thomas knows about it. I know hazard 183 knows about it. I know all the developers of all the nostril clients know this. And there's a lot of nostril people that are not nostril developers and they know about this shit too. But in case you're wondering, if your only communication protocol is to pick up the phone and dial, what is it, 8 numbers.
Like, 1 what was it? No. Well, they no. Seven numbers. Yeah. Seven numbers without the area code and country code. Just like 7 numbers in the United States and that's how you get to talk to somebody else on the other end of city, but you don't have a phone book and you don't have any other way to look up the friend's name you know to resolve it to the phone number of your friends so that you can call them on that protocol, what is that gonna do? What if you don't know let's let's take it one step further there's no phone book there's no 911 there's not all you have is a phone and you need to figure out the 7 digits to call the hospital because your loved one needs an ambulance and they need it right now just pretend there's no such thing as 911 alright you got to figure out how to get a hold of the hospital or the ambulance company to send an ambulance and there's no phone book. That's what this is.
Now extend that to the entirety of the Internet. Paying your bill, DNS. Gonna send an email, DNS is involved. Do you need to go to your friend's website and work on it because your friend is paying you $50 to make sure that it's up and running? Need DNS. If there's no phone book, the phone on the wall is worthless. If there's no DNS, the internet is worthless. We've allowed this to occur. Like this said, this article said, and my friend said, it's lucky that there is at least a slightly decentralized nature to DNS, but that that's not enough.
I posit that baby, like, I'd said look I know I'm being naive but let's say that we're just using Nostr and every time that we like, you know, like I just hook up like Nostr or rather I I like let's say I've got Albie, which I do. I've got Albie extension. It's got my private key my public key. Let's say that through Nostr WalletConnect, I'm able to somehow tell Albie and the Nostra Wallet Connect that, hey, use my Nsec and NPUB to read every single website that I go to send it as an event to a relay where that website is stored along with the returned, resolved IP address.
And make and, in what I didn't say is like, yes, if you go to bad websites and it's attached to your your insect this could be a problem. We have a technology that is able to de identify subjects and get them away from their data that they provide to, like, medical studies. Nobody knows that Alice Smith is 87 years old and has type 2 diabetes. After the study, all they know is that patient number 124 is 87 years old, is a female, and has type 2 diabetes. We can we're not stupid. We can figure out a way to de anonymize a SEND that I authorize with my insect to a relay, but somehow or another be able to pull my insect back so that the only thing that's left is the name of the person I'm looking up and their fucking telephone number. And if everybody's doing that, then we're continuously refreshing and rebuilding a completely ancillary DNS system.
That's as far as I can take it. I don't know how to do this shit. All that I know is that this is a very dangerous situation. And with Gensler overstepping FCC boundaries, with tornado cash guys and the the judge in that case starting to try to make distinctions between essential code and executable code and your intent of use of code, This is not going to end well unless we start fighting back. And no. The answer is not. Well, we should have a protest. Let's go put on our coats and go walk around in a circle in a blinding blizzard so that then they'll feel sorry for us. And then they'll do everything that we want them to do. No. It doesn't work that way. Anybody listening to my voice that hasn't heard the last couple of shows where I basically take a great big giant shit all over your fucking protest has not been listening to the show. Or if you have been listening to that, you're not getting the point. Protest is a waste of time.
It is a waste of your time it's a waste of my time to read about I don't care about your protest it's never going to work it never has worked nobody cares what do you do? Freedom tech. Be the mud that squishes out between the fingers of Moff Tarkin in Star Wars when all homegirl Princess Leia is going the more you tighten your grip, Tarkin, the more star systems will slip through your fingers. That's the water that Bruce Lee was talking about when he said be be like water. Be like water. Be like mud. Be that which cannot be contained. Be able to split yourself off in a 1000000 pieces and then regroup on the other side like the mud coming out between the fingers of somebody who thinks that they're gonna crush something. Fuck them. Fuck them to death. Let's run the numbers.
CNBC Futures and Commodities Oil, West Texas Intermediate is up today after getting just basted on the, roast on the spit roasting it got yesterday. 90 0.99 percent to the upside, 6834. Brittnortheast up 3 quarters of point to 7214. Natural gas doing what it always does, 5 and a half percent to the upside, $2.90 per 1,000 cubic feet. Gasoline rose slightly to a buck 96 a gallon. Shiny metal rocks are having a bad day. Gold is down almost a point, but it's still above 26100 to 2671. Silver is down 1 and a half, but it's at $31.80. Platinum is down. Scant copper is down over a point. Palladium is over 2 points.
Just damn near 3 points. Ag, biggest winner today is soybean. 2.5% to the upside. Biggest loser is sugar, 2.63 to the downside. Live cattle, everything's moving sideways. No. Not everything. Live cattle's moving sideways, but it is in the green. Lean hogs is down a third, but feeder cattle are up a third. The Dow is up a third, but the S and P is down 0.13%. NASDAQ down damn near a half, and the S and P Mini moving sideways but in the green. Oh, and Bitcoin. Oh, god. We passed back down through 65,000? Assholes. We had a clear shot of 66,300 earlier today, but now I've gotta give you 65,950.
That is a $1,300,000,000,000 market cap. We can buy 24.8 ounces of shiny metal rocks with our 1 Bitcoin, of which there are 19,000,000 759,458.62 of, and average fees per block have risen precipitously today. We're at almost a tenth of a BTC. 0.09 BTC in fees on average on a per block basis, of which there are 100 blocks carrying almost 200,000 unconfirmed transactions waiting to clear it double digits. Wow. 16 satoshis per vbyte for high priority, low priority, gonna get you in at 12 satoshis per vbyte. Hash rate, what's it doing? Oh, 554 exahashes per second. We are way down. We are 200 exahashes per second down off of our highs. Wow. I wonder what happened.
Oh, well, I don't really care. We're gonna be fine. Heckles for shekels, which was Bitcoin and episode 961. I got mister sat stacker with 5,000 sat says great great episode. Thank you. No. Thank you. Bitcoin Sandy with a 1,000 says love the chats. Fire emoji. Saints and sat666. Oh. Number of the beast boost for cashless Israel, he says. God's death 537. Thank you, sir. No. Thank you. Pies to pleb, 420. Thank you, sir. No. Thank you. And then ending it with Annabelle Handoek with a 100 sats says, thank you for the episode. No. I appreciate you listening to the episode. That's the weather report. Welcome to part 2 of the news you can use.
Swan Bitcoin claims that former employees and Tether conspired to steal its mining business. Liz Napoletano is writing this one for decrypt. Bitcoin company Swan. Swan Bitcoin alleged in a lawsuit filed on Wednesday that ex employees of the company, including former executives, usurp the firm's Bitcoin mining business. The company further alleges that the scheme was aided by Tether, the cryptocurrency giant responsible for issuing the industry's largest stablecoin by market capitalization USDT. Pausing to put the meme in your head of the 3 people from Harry Potter standing before the teacher, and she looks at them and says, why is it that when trouble occurs, it's always you 3? Swan Bitcoin, Tether, and I'm just waiting on the third one. Okay. The complaint filed in the district court for the central district of California, oh, at least it's not in New York, alleges that the former employee stole highly proprietary code from Swan's Bitcoin Mining Monitoring Software in addition to stealing its vendors and business partners.
The employees conspired to resign en masse and create a competing company called Proton Management, Swan Bitcoin alleges. Quote, the evidence of sorry. Excuse me. The defendants ah, my god. I'm having a having an attack here. An attack of stupid. The evidence of the defendant's brazen theft is overwhelming, Swan's lawyer said in the complaint. The former employees were stealing the crown jewels from Swan's Bitcoin mining business. Representatives for Tether and Proton, well, they didn't respond to decrypt's request for comments. I don't blame them. Swan's lawyers alleged that one of the Bitcoin firm's former executive, Swan vice president of institutional operations and research Brett Hilly downloaded more than 300 confidential documents from Swan's Google Drive, including mining inventory and performance data sheets, as well as a log of analyses of all the firm's mining sites and operations.
Proton's employees were also allegedly solicited, or said to be allegedly solicited Swan's mining personnel in addition to appropriating Swan's financing partner, Tether, for its own operations in an attempt to partner, Tether, for its own operations in an attempt to irreparably harm Swan's ability to compete in the market, the complaint states. The scheme, in part, hinged on Tether delivering Swan with a default notice that would provide the legal cover for the hostile takeover, Swan alleges. Proton CEO Rafael Zaghuri, which was then chief investment officer at Swan, made a concerted effort to sow dissent and chaos at Swan in an attempt to galvanize Swan employees to defect from the company according to the lawsuit.
From there, Zaguri and his alleged coconspirators attempted to force Swan CEO, Klipston, to resign and plotted to ensure that Swan would accept wind down capital from Tether, the Bitcoin firm's lawyer said. Oh, man. This is bad. Just 4 days after the employees resigned from Swan, including Zagury, who also served as their head of mining, quote, Tether, Swan's funding partner in its mining operation, notified Swan that the defendant, Proton, would be taking over day to day Bitcoin Mining Management in their joint venture. Oh, god.
This this is bad. This is really bad. SWAN is still investigating its former executives and employees' alleged collection of its proprietary data and trade secrets in addition to the circumstances of the resignations the complaint shows, and a representative for Swan declined Decrypt's request for comment. Yeah. Of course. It's ongoing. It's too new. The Bitcoin firm is seeking a permanent injunction against Proton that would prevent the company from further disrupting Swan's mining business and is asking the court to compel the former employees to return stolen equipment and confidential material.
Swan has asked the court for a jury trial and for damages to be determined at the trial. And you might be asking me what my gut feeling is. Swann's gonna win. That's gonna be that's my gut feeling. And why would I say that? Well, Swann has had a hell of a hell of a year. Actually, they've had a hell of a last 2 years for like like beginning I I can't even remember exactly when Texas told Swan to piss off, but they did. The state of Texas told Swan, uh-uh, uh-uh, you ain't servicing any customers because your 3rd party, whoever's holding the Bitcoin for you in your customer's name, we don't like them. We don't think they're above board. You're gonna stop doing business in the state of Texas. And then a few other states went along for the ride and it really hurts Swan Bitcoin's business.
And they roll on. They kept going. They kept going. They kept going. And then they finally got Texas they finally got another custodian. And it wasn't my favorite choice but they did make a choice that they switched custodians, it made Texas happy, made a whole bunch of other states happy. So then we could resume, like, you know, buying Bitcoin, like, once a week, every week, like I set up our family companies to do. And we've now resumed, buying bitcoin pretty much on the weekly. But right after that, Swan announced this major mining venture.
I was like, damn. They're really going whole hog. And they were, like, basically, like, bankrolling all the podcasters in the space, except for me, of course, because, you know, nobody wants to sponsor me. But that that that's me feeling sorry for myself. I'm just saying that they were basically bankrolling like all the podcasters. And a lot of them got hurt when Swan said, we can't advertise anymore on anybody's podcast. This was a major major advertiser for a lot of my favorite podcast, and I could tell that it hurt. It hurt these guys, you know, and it's like, god dang it.
Now now this. Now this. And I'm wondering, it's got to be connected. When when Swan said, hey, we're laying off a bunch of people. It's like, you know, this downturn is kinda hurting us and it's like, you know, we've had some you know, we've had a couple of bad years and all that kind of stuff and we all understood. But so, you know, I I still like Corey. But this is just it really got to them to the point that they gotta lay off a bunch of people and then all of a sudden they basically told all they pulled all their advertising from anywhere they were advertising to save money. And then all of a sudden we get this shit.
It's got to be related. Alright. So do I know that for a fact? No, I don't. Have I ever spoken to Corey Clipston himself? No, I haven't. I'm just letting you know I'm not anywhere close to this. You're getting what I'm getting. Okay? But this thing? What we're I mean the fact that Tether called Corey and said: Oh, by the way, that mining deal that we had that we made a big old fanfare about a few months ago, yeah, that's over. We're gonna let Proton do it. This is bad. But somehow, my gut feeling suggests that that Swan's gonna win. Is it wishful thinking? Maybe. Swan's been around a long time, the good bitcoiners.
Sure, they've they've they've fucked up a couple of times, but honestly in this space, it's surprising that not that everybody hasn't fucked up to the point of damn near disaster. So I'm just gonna let that one go. I'm just I'm I'm over it. I'm done. I'm not gonna hate on Corey and and Swan Bitcoin for any reason whatsoever. They've always been pretty good Joes. So my but my gut feeling really is is that somehow this is so terrible that what what has what has occurred here is so awful. It is probably so blatant and and it sounds to me like a bunch of mistakes were made by the people that started this proton thing that in court it's gonna be easy to prove that they were in in possession of stolen trade secrets.
They were probably in possession of stolen code that was proprietary. They're probably in possession of, like, business materials and intelligence that they should not have unless they are an employee of Swan. And when they left Swan and took the materials with them, they were no longer employees. And by all rights should have given all that information back. I get the feeling all this shit's gonna be found in discovery and it's gonna be an open and shut case. And who's on the hook? Tether is now exposed. USDT and the company behind it, Tether, that everybody makes fun of well, not they don't make fun of it because it's like too damn big but like, Bitfinex.
That that account kept saying that the whole reason that Bitcoin's price was was what it was, and he's been saying this for the last 5 years, and he's clearly wrong, but he kept saying that there's something wrong with Tether. And now we're, you know, we now understand that Tether is, like, one of the leading purchasers of United States debt in the form of Treasury. And then all of a sudden they're hanging around with a crew of people that clearly stole a bunch of shit from Swan? I don't know, man. Something don't something about this doesn't sit right with me at all, and I think it's gonna be bad. I'm just gonna say it now. It's gonna be bad, but I do think Swan's gonna come out on top. Okay.
Let's see. Do we wanna do this one? We're not gonna do that one. We're not gonna do that one, but we are gonna talk about b n y Mellon. BNY Mellon has been approved by your friends at the SEC for crypto custody beyond ETFs, Gensler said. The structure Bank of New York Mellon Corporation is using to offer custody services for digital assets could be used beyond the Bitcoin and ether exchange traded funds that the bank is considering according to SEC commission chair or SEC chair Gary Gensler. Earlier this week, the bank acknowledged that it had presented a plan to the SEC's office of chief accountant to custody those two assets in a way that would protect customer funds in the event of an insolvency.
The agency provided BNY with a non objection to the plan, a regulatory term that gives comfort to the bank that its structure will not fall afoul of the agency's requirement that banks reflect the value of the digital assets that they custody on their balance sheet. BNY previously told Bloomberg News that the SEC's non objection was specific to the ETF use case. Quote, though the actual consultation related to 2 crypto assets, the structure itself was not dependent on what the crypto was. Gensler told Bloomberg News on Thursday after he delivered a speech at the Federal Reserve Bank of New York's annual Treasury Market Conference.
Quote, it didn't matter what the cryptocurrency was, end quote. The Bitcoin and Ether investment products are the only crypto related ETFs approved so far by the U. S. Regulators. A BNY spokesperson did not immediately respond for a request for comment. BNY's proposed structure includes the use of individual crypto wallets, each of which would have a separate bank account and would be prohibited from being commingled with bank assets. It's up to the bank to decide whether to expand the pool of digital asset use cases it's comfortable custodying, Gensler said. Gensler credited BNY for doing all of the legwork on how to make sure customer assets would remain theirs and that they wouldn't be shunted to the back of the line in case of a bankruptcy.
1000 of crypto traders have found themselves in that position as a result of the blow up blow ups sorry. Sorry. Blow ups in recent years of the Celsius network, FTX, Voyager Digital, and BlockFi, and all the rest the assholes that are out there that need to be in prison for the rest of their lives and buried in the prison school yard. Whatever. I'm sorry. Ginsler noted that several banks and brokers have been in discussions about potential digital asset custody structures that would segregate customer assets from the banks and thus could also avoid the requirements of staff accounting bulletin 121 or that SAB 121 that I was talking about yesterday, the measure laying out the agency's balance sheet requirements for crypto. You know, the industry has vocally complained about SAB 121, one of its litany of complaints regarding the Gensler's administration aggressive posture towards the digital asset industry, president Joe Biden vetoed congress' efforts to overturn the SAB 121 earlier this year. Safeguarding digital assets for clients is a lucrative business, with many non bank providers charging 10 times more than the service compared to cost for more traditional assets. And by one estimate, the crypto custody market is now worth approximately $300,000,000 and growing by 30% annually.
300,000,000 now. It'll be 300,000,000 times 30%, added back to 300,000,000 next year, and then take that multiply it by 30%, and then add those together and that's next. See, that that's this thing is just is going off the rails. What what is this? BNY basically got a blank check to custody whatever digital funds their customers want to custody. Now it doesn't mean that they're going to do it immediately. It's just that Gensler is saying it's up to them. Do they do they want to, like, allow people to custody their ton? Do they want people to, you know, well, I I guess tons out of the question now because Telegram's all screwed up a doge.
Am I gonna get a Doge wallet with BNY Mellon? Well, BNY Mellon can say yes if they want to. It's got to be them that say yes. I can't force them to custody it, but they could. This is this doesn't help this doesn't help for Bitcoin against all the shit coins that are out there, but it's it it does add to the ablative armor aspect that is there to protect Bitcoin by having these multiple layers of shielding that is the shitcoin market. So now that BNY Mellon has this mandate to custody whatever the fuck they wanna custody for whoever the hell they wanna custody it for, well, that just adds to the strength of the blade of armor.
However, it kind of cuts both ways, doesn't it? It also means that shit coins are gonna be just all that much harder to get rid of. However, if you've listened to the show before, you know that my stance is the following. The shitcoiners will always be with you. And then Jesus walked on down the path. And if you don't understand the reference from the Bible, is that Jesus told us that the poor will always be with us. They were like his disciples were like, what are we gonna do about the poor? And he's like, dude the poor is always gonna be with you. You don't have to worry about the poor. They're always gonna be here. There's always going this work will always be here. We will always have to love these people because they're fucking broke. Well, the shitcoiners will also always be with you. They'll probably also always be poor, but by God Almighty they will always be with you.
Speaking of, you go out, you have a great weekend. That is the officially the end of the show. I will not be back until Monday, and I hope that you find it within yourself to go out and think about some of the shows that I talked about this week. Like today, we're talking about the overstepping of the bounds and scope creep of Gary Gensler as being able to tell us what is and what is not a communications protocol and whether or not should be it should be licensed. We've got a US federal judge that's trying to make a distinction between expressive code and other kinds of code. And one is protected free speech, but the other is not even though it's the same base code. It depends on what your intent is.
We got DNS attacks in Malaysia. That can be performed anywhere. Right? I talked about what is wealth earlier this week. Now, I really want you guys to think about that. I had a discussion with a cattle woman last night at a cattlemen's association meeting. We were talking about her 2 sons and her husband and the ranch that they that they own and they operate. And I was talking about secession issues. And she's like, yes. Because and when when when I brought up a show that I did about what is wealth, I told her I basically gave her the gist of that show as like a 32nd, you know, elevator pitch, and she understood immediately what I was talking about. She's like even, you know, my 2 boys, they have every opportunity to go out and get all the things that you talk about, but they want the ranch. They want to do ranching.
They don't need the money. And I'm like, that's because they understand what real wealth is. So if you didn't listen to that show, go listen to that show. There was a lot of stuff I covered this week, and I hope you got a lot out of it. And if you did, use podcasting 2.0 to throw me some sats, send me some boostograms, zap my ass on Noster, and I will see you on the other side. This has been Bitcoin and and I'm your host, David Bennett. I hope you enjoyed today's episode and hope to see you again real soon. Have a great day.
Good morning. This is David Bennett, and this is Bitcoin and, a podcast where I try to find the edge effect between the worlds of Bitcoin, gaming, permaculture, podcasting, and education to gain a better understanding of all. Edge effect is a concept from ecology describing a greater diversity of life where the edges of 2 systems overlap. While species from either system can be found at the edge, it is important to note there are species in the overlap that exist in neither system, and that is what I seek to uncover. So join me in discovering the variety of things being created as Bitcoin rubs up against other systems. It is 9:36 AM Pacific Daylight Time. It's the 27th day of September 2024 and this is episode 962 of Bitcoin. And we're gonna just jump right in with both feet, dude. The water is cold, but, you know, it's just the best way to get this shit done. Alright. So, tornado cash is the first bad news that we've got for this morning. And I I honestly think this is pretty much the only if not the only bad news, the worst bad news. Okay? So we're gonna get it we're gonna do this shit get it over with quick. So you can just go on about your day.
Tornado Cash has lost their motion to dismiss. Bitcoin Magazine Colin Crossman is gonna get us all squared away on this one. The judge in the Tornado Cash case delivered an oral ruling today rejecting both the defense's motion to compel discovery, as well as their motion to dismiss all charges. This represents a massive setback for the defense. And the judge's reasoning may not bode well for developers and projects going forward. So the motion to compel. Alright. This is what this is about. The defense's motion to compel discovery sought to access a broad range of government communications, including exchanges with foreign authorities under the Mutual Legal Assistance Treaty.
And with domestic agencies like the Office of Foreign Asset Control and the Financial Crimes Enforcement Network. Citing federal rule of criminal procedure number 16, the defense argued that these materials were essential to the understanding of the government's case and could potentially include exculpatory evidence. The judge, however, made it clear that rule 16 imposes a stringent requirement. The defense must show that the requested information is material to their case, not merely speculate on its potential usefulness.
The court dismissed the defense's arguments as speculative, noting that the reference to what the information might or could reveal do does not meet the necessary standard for materiality. Material materiality. Wow. That is one hell of a word. It's material and I t y. You pronounce it for yourself. For example, the defense argued that the MLAT communications with the Dutch government might shed light on the evidence against tornado cash or reveal the government's investigative theories. The judge found this reasoning unpersuasive. It emphasizing that materiality or whatever the hell it's called cannot be established through conjecture or vague assertions.
The court similarly rejected the defense's request for all communications between the government and OFAC as well as FinCEN. Although the defense claimed these documents were necessary to understand the government's theories and potential witnesses, the judge concluded that the defense failed to demonstrate how these communications were directly relevant to the charges at hand. The court reiterated that the burden is on the defense to show a specific link between the requested documents and their defense strategy, a burden they did not meet.
When the defense suggested an in camera review to determine their their materiality, God, what a word. The court refused. The judge argued that granting such a request based on speculative assertions would set a dangerous precedent, effectively forcing in camera reviews in all criminal cases when a defendant speculates about the relevance of certain documents. This, the judge stressed, would undermine the purpose of rule 16 and transform the pretrial discovery process into an unrestrained search for potentially helpful evidence. The the defense also raised concerns under Brady versus Maryland arguing that the government might be withholding exculpatory and impeachable evidence. While the court acknowledged the government's obligations under Brady, it found no indication that these duties had been neglected.
Without concrete evidence suggesting government was withholding information, the court saw no reason to compel additional disclosures. The judge cautioned that while the defense's arguments were theoretically possible, they lacked the factual support needed to warrant the court's intervention. Alright. So coming to the motion to dismiss all charges, well, that was presented or did present a much more significant set of issues. Central to the defense's argument was the definition of a money transmitter under the Bank Secrecy Act. The defense contends that Tornado Cash does not qualify as a money transmitter because it did not exercise control over any user funds. It merely facilitated the movement of cryptocurrencies.
The court, however, rejected this narrow interpretation. The judge clarified that the BSA, Bank Secrecy Act, the scope does not require the control of the funds. Tornado Cash's role in facilitating, anonymizing, and transferring cryptocurrency was sufficient to bring it within the statute's ambit. The judge likened Tornado Cash to custodial mixers, which have been deemed money transmitting businesses. Further complicating the defense's argument was their reliance on the 2019 FinCEN guidance, which uses a 4 factor test to determine whether a wallet provider is a money transmitter. The defense claimed this guidance, which includes a total independent control standard, should apply to Tornado Cash. But the court disagreed, stating that this standard is specific to wallet providers and does not extend to mixers like Tornado Cash. Consequently, Tornado Cash's lack of total independent control over funds was irrelevant to its classification as a money transmitter.
Another key point in the court's analysis was the distinction between expressive and functional code under the First Amendment. This is probably the most pivotal sentence in this entire article, so I'm going to read it again. Perk your ears up right now. Do it now. If you're if you're dazing off, come on man. Wake it on up. Another key point in the court's analysis was that there is a distinction between expressive code and functional code under the First Amendment. The defense argued that prosecuting Storm for his involvement with Tornado Cash was tantamount for punishing him for writing code, which they claimed was protected free speech.
The judge acknowledged that while code can be considered expressive, the specific use of code to facilitate illegal activities such as money laundering or sanctions evasion falls outside of the bounds of the First Amendment protections. The judge emphasized that the court must focus on the conduct enabled by the code, not merely the code itself. Even under immediate scrutiny, which applies to content neutral restrictions on speech, The judge found that the government's interest in preventing money laundering and regulating unlicensed money transmission justified the restrictions imposed by the relative statutes.
I'm pausing because later on we're gonna read a story about Gary Gensler and it's going to relate directly back to this entire paragraph I guarantee it continuing the court also addressed concerns about the immutability of Tornado Cash's smart contracts an issue raised by both parties the judge acknowledged the existence of a factual dispute but noted that it was not a decisive factor in the current motion However, the issue of immutability may play a role at trial in determining the extent of Storm's control over the service and its responsibility for its operations. In concluding remarks, the judge underscored that while the use of code to communicate ideas may be protected under the first amendment, using that code to facilitate illegal activities is not.
This distinction is critical in the context of emerging technologies like blockchain where the line between speech and conduct can be blurred. The court's ruling serves as a reminder that the legal system is prepared to hold participants in the digital economy accountable even as it grapples with the complexities of applying traditional legal principles to new and evolving technologies. Okay. Let's let's I wanna read this one again. In the concluding remarks, the judge underscored that while the use of code to communicate ideas may be protected under the First Amendment, using that code to facilitate illegal activities is not. And again, we're gonna be reading something about Gary Gensler and his thoughts and potential impact on communication protocols.
Do you see where this is going? If you don't see where this is going yet, then keep this story in mind as we when we're when we get to the Gary Gensler story. Okay? Because that's next. I I put that up next. But first, this is a terrifying prospect that code is free speech. We keep saying that. You know, the code behind Bitcoin is free speech. SHA256 and the algorithm for very many, you know, cryptographic functions is free speech. Right? It's no longer munitions. It's protected free speech. But yet, here we have a court that's trying to make a distinction. Saying, yeah, well, code is free speech, but what you use it for if the code is used for something that we deem unacceptable, no longer does the protection of the First Amendment apply.
Do you see the what ugly ass precedent this set sets? Right? Especially when we get to this next one. Keep all this in mind because Gary Gensler is going to rule on SEC licensing requirement for communications protocols. Gonna read it again. Gensler to rule on SEC licensing requirements for communication protocols. This is Lola Leitz from her, publication named The Rage. That's Lola Leitz from The Rage. In remarks before the 10th annual US Treasury Market Conference, SEC chair Gary Gensler has expressed intent to rule on amendments to rule 3 b dash 16 of the Exchange Act by November. The amendments expand the definition of the term exchange to include, quote, systems that bring together buyers and sellers of securities that offer the use of non firm trading interest and provide another type of non discretionary method, I. E. Communication protocols.
The proposed amendments would require that these systems register as National Securities Exchanges or as broker dealers and comply with regulation. End quote. Okay. I'm just pausing a little bit because the impact of this is kind of bowling me over a little bit, especially coming off of what we just read. Alright. Is it to be that when I zap somebody through the Nostra communication protocol that this the code the expressive code of the Noster protocol is protected free speech in the United States under the First Amendment. But the fact that I zapped somebody using that protocol now causes me to be using that code in an illegal manner.
See where this goes. You see how bad this is? Now, let's not take it as a zap. Let's say, ah, David, you're tinfoil hatting again. Please stop. Stop doing that. Okay. Okay. I'll stop. I promise. I'll stop. But what if we're using the Nostra communication protocol to set up, me opening a channel with your lightning node or vice versa? Are we getting closer to what Gary Gensler wants to rule on? Are we getting closer to the judge and the tornado cache and their interpretation of what is and is not protected free speech? See how these are working in tandem. The tornado cache and Gary Gensler ruling on what a communication protocol is and whether or not it should be required to be registered as a fucking exchange is starting to really concern me.
Which is one of the reasons why I will reiterate it again. If you are working on Freedom Tech, please, for the love of God, do not use your name. Use a pseudonym. Never tell anybody that you're working on it, not even your friends, if at all possible. I know that that sounds extreme, but I'm starting to wonder how extreme the other side of this equation is getting. I'm more I'm more worried about them being extreme than us being extreme. So let's continue. The proposed amendment has received 180 comments since 2022, many of which appear to be critical of the the overly broad language applied. As the advocacy and research center coin center submitted, quote, the proposed rule as drafted would not withstand constitutional scrutiny as the proposed definition directly describes the publication of speech as a necessary and sufficient condition for the registration requirement.
Merely making available a communications protocol can, by the SEC's own admission, trigger an obligation to register. A communications protocol is commonly understood as a set of rules. Making available a set of rules is an awkward linguistic construction that must, at the very least, include publishing and speaking, which are core First Amendment activities. By way of example, Corning Center argues, is Twitter's general communications protocol a negotiation protocol when users take advantage of the dollar sign to create a cash tag making stock names and ticker symbols accompanied by the price quote a trading interest?
End quote. Criticizing the SEC's consideration of rewording the category of communications protocols to negotiation protocols, Coin Center argues that a dictionary contains a protocol for appropriate use of the English language, a communications protocol. But a subset of terms in that dictionary can be used by buyers and sellers of securities to interact and negotiate the terms of a trade, a negotiations protocol. One might be able to publish a dictionary that includes only these terms and successfully queue narrowly to a definition of making available a negotiation protocol, Coin Center adds. But one would have great difficulty publishing a useful English dictionary that contained every term except the terms that buyers and sellers might use to negotiate said trade.
The SEC could easily use the proposed vague standard to target certain publishers of open source software who advocate for the use of that software for certain political ends. Arguably, the commission has already displayed a pattern of behavior of using its flexible regulatory power for viewpoint discrimination against developers of cryptocurrency or currencies and privacy protecting tools, CoinCenter concluded. Quote, as an investor, I understand the need to modernize regulations to address gaps in oversize in oversight of electronic trading systems, one anonymous commenter writes.
Quote, defining an exchange as any system with non firm trading interest is excessively broad and vague. This could unintentionally encompass a wide range of communication platform sorry, platforms and online forums that enable discussion about said transactions but do not themselves execute trades or constitute regulated exchanges. Regulatory uncertainty surrounding licensing requirements for software publishers have dominated questions on compliance among developers since of Tornado Cash developers Roman Storm and Roman Seminar in August of 2023. See how this winds back? Storm and Seminar, who developed a non custodial privacy protocol for the cryptocurrency Ethereum, are charged with conspiracy to operate an unlicensed money transmitting business, conspiracy to commit money laundering, and conspiracy to violate sanctions.
The pair are awaiting a jury trial in December. During the hearings on the case in July, appointed judge Filia or Fila, whatever, asked whether the charges were comparable to criminal criminally charging the creators of WhatsApp because criminals used it. If quote, if tornado cache has 1,000 customers and one is a bad actor, are they criminally liable? End quote. Much of the prosecutors' argumentation in the tornado cache case leans on control of the user interface as equivalent to control of Tornado Cash an argument which appears to stem directly from FATF, or the FATF, recommendations equating control over user interfaces as control over assets in apparent attempts to qualify UI developers as crypto asset service providers to impose licensing requirements.
Are you fucking kidding me? I can't design a user experience or a user interface that has something to do with bitcoin and not be considered providing control of the asset? And have to be licensed to do so? Interesting. Similar charges have been brought against developers of the non custodial Bitcoin privacy wallet, SamuraI Wallet These charges arise from the defendant's development, marketing, and operation of cryptocurrency mixer that executed over $2,000,000,000 in unlawful transactions and facilitated more than $100,000,000 in money laundering transactions from illegal dark web markets. The DOJ stated in a press release surrounding the arrest probably in my and I'm saying this for myself, probably without a shred of fucking evidence, but whatever.
Goddamn whole thing's Kafkaesque. If you've ever read the trial from, Franz Kafka or I think it's Franz Kafka Kafka. K a f k a. Okay. Kafka. Go read the trial. Just go read the trial and then relisten to this episode and then go listen to my episode on Ranch Wars. We're talking about the King Ranch and what they're undergoing. They were under they were under full investigation for over a year and they never even knew it. Go read the trial from Kafka. Just go do that. Now, let's finish this off. In an in the EU, Telegram founder Pavel Durov was recently been charged with laundering of the proceeds derived from organized groups offenses and crimes.
While not much is known about the charges, industry experts who wish to remain anonymous have told The Rage that the charges may be less related to Telegram's issuing of the cryptocurrency TON, t o n, and rather related to the fact that criminals may have utilized Telegram messenger to plan, coordinate, and possibly execute transactions violating AML and CTF and sanctions laws. Alex Pertsev, the 3rd developer of the Tornado Cash Protocol, was convicted of laundering 1 $200,000,000 by a Dutch court in May of 2024 and sentenced to over 5 years in prison. In written remarks, Gensler stated that a lot has changed in the capital market since the initial introduction of alternative trading systems regulations in 1998 quote the challenge in our times is to bring reforms to ensure that they are as efficient and resilient as they can be it's critical to taxpayers yes to the taxpayers oh somebody think of the taxpayers for fuck's sake. To the capital markets, to monetary policy, and the role of the dollar around the globe.
Given the evidentiary hostile environment for software developers and communication service pry providers today, it seems unlikely that the proposed amendments to the Exchange Act would not be abused to further crackdown on dissenting developers if the applied language remains as broad as drafted. Okay. That that that's it. That's the thing. Gensler getting to choose who and who is not a communications protocol which completely circumvents the Federal Communications Commission, the FCC. How is it that Gensler has anything at all to do with labeling electronic communications protocols as anything?
This this is scope creep that's what this is this is the SEC allowing scope creep to occur and now they're starting to envelop the Federal Communications Commission's mandate. This is FCC, 100%. Do you like, at one point or another, is Gary Gensler gonna be able to give me a license to as a as a radio network operator? Like, I get, hey man, it's Dave in the morning on 98.1 FM. But I gotta go get a license for that shit. Do I go to the FCC or do I go to fucking Gary Gensler? Who? Who do I go to? If I want to be a ham radio operator, who do I talk to now? Do I go to the FCC to get a ham radio operators license or do I go call Gary Gensler's office at the Securities Exchange Commission?
This, what's happening here, is the way you lose entire countries, republics, federations, states, populations. This is how it occurs. But one of the ways, it's not the only way, but it certainly is endemic of a failing empire that at this point is gasping for air, grasping for the last thread that they can hang on to before they go under the water. All we have to do is stand back and let them die. Just let them die. But the communication stuff doesn't really get we're not over the communication stuff, but we are gonna shift gears just a little bit. We're gonna talk a little bit about DNS.
Now I had a discussion with with a guy on, like, you know, we had a Zoom call together. I'm not gonna tell you who it is, but I'm pretty sure that that my fellow brother is listening. So I enjoyed our discussion the other day. We will have it again. You will get on the show. We are going to figure this out. But I want to raise the flag about domain name servers DNS. Right? Just just the whole just think of everything that is DNS. Now I think I'm safe in saying that what for those that don't know, I think I'm safe in saying or giving a a a describing what a DNS is for those that don't know. When you go to a website and you type in, I don't know, axis of easy.com, That that's not how you get to the domain.
That goes to a domain name server, and the domain name server kinda looks at it and says, I'm pretty sure I gotta I I it looks it looks through its own phone book. And then it looks up the name that you gave it axisofeasy.com and it says, oh there's the phone number, the IP address. It's like looking at a phone book. It's like you got the name of somebody but you don't know exactly how to get them on the communications protocol that we call the AT and T telephone network. So I go to my phone book. That's the DNS. And I look up the name of the guy that I wanna call. And his name is axis of easy. So I go to the a's, and then I go all the way down to the bottom of the a's where it's ax and then I look for axis of easy and I find it. I go to the right hand side and there's a telephone number in the format of an IP address.
That is what gets returned to your browser and that's how your browser connects with the actual website that's providing the information from axisofeasy.com. That's how this works. So keep that in mind as we read this one entitled Malaysia Blocks Global DNS Resolvers, another salvo in the censorship battle. The Malaysian government has recently ordered all internet service providers within the country to block access to global DNS resolvers and they have until Monday, September 30th to fully comply. That's this September. Let me make sure about the date.
This story was written September 8th this year by Mark e Jeftvich, September 8, 2024, this month. And they have until the end of the month, September 30th, to fully comply with blocking global DNS resolvers. All the ISPs in Malaysia have to do this. This act of digital gatekeeping, also known as censorship, is being justified under the guise of protecting the public from online harms. But like all overreaching government initiatives, it feels more like an exercise in censorship disguised to safety. So what's going on in Malaysia anyway? Well, briefly, the Malaysian Communications and Multimedia Commission has decreed that the solution to controlling quote harmful content online is to enforce strict control over how internet users resolve domain names.
Now, let's for anybody who's confused, because I gave you the the definition of DNS. When I look at a phone book and I look up Joe Smith's name to get his phone number, I'm resolving his name to the phone number. When I go to accessofeasy.com, my browser goes to DNS and says, I need you to resolve accessofeasy.com and return to me an IP address that I can that I know what to do with. That's what they mean by resolve continuing. They're essentially blocking people from using global DNS services like Google Public DNS, Quad9 Cloudflare and others by redirecting all DNS traffic to local services or servers that are under their control.
Why does this matter? Because controlling DNS is controlling access to the entirety of the internet at least for your people. You can't visit a website, send an email, watch a video, or have a chat session without translating the underlying host names like access.com into an IP address by resolving it with a DNS. When your government controls that process, it gives them the ability to decide what you can and cannot access. This is basically Orwellian, like, for reals. Here in Canada, we're watching this unfold closely. The looming C-sixty three quote online harms legislation is cooking up a similar brew, and it's something that the Internet Society of Canada has been flagging for a while now. I sit on their board. And this is exactly the kind of mission creep. We also know that as scope creep, and we just talked about it with Gensler and the FCC SEC.
We've been warning about or warning against, also former CEO of the Global Internet Society, Andrew Sullivan, who is Canadian, wrote this post about the Canadian bill earlier this year, and that is at internetsociety.org. What what was it? What governments can learn from Canada when regulating online harms is the name of that particular one. Okay. So make no mistake. Protecting from online harms is censorship. Pure and simple. The phrase, protecting the public from online harms, is thrown around as a catch all rationale for governments that want tighter control over what their citizens see and hear online.
Malaysia is saying they want to curb the spread of misinformation, extremism, and illegal content by clamping down on DNS services. And in their minds, if they control the DNS, they control the flow of information. DNS is a fundamental primary choke point for the Internet. Unfortunately, it's been designed in a comparatively decentralized manner, so controlling it isn't easy. Malaysia's MCMC has come out swinging in defense of their DNS redirection and website blocking. The government is focusing on platforms that allegedly spread disinformation and undesirable content. However, what seems undesirable is a gray area that expands to include political critique, oppositional voices, and even satire.
Fortunately, it's relatively simple to set up a DNS resolver. And it didn't take long for people to begin sharing the details on how to do it across social media. Threads have popped up all over Reddit such as this one where Malaysian netizens are discussing workarounds. If you're reasonably tech savvy, defined as knowing your way around a UNIX shell, then running your own DNS server isn't exactly rocket science. The main challenge is sidestepping the ISP's block on port number 53, which is the standard port for DNS traffic. But even that has solutions.
The trick is to use DNS over HTTPS or DNS over TLS, respectively known as DOH and DOT. Both of these protocols encrypt your DNS queries, making it harder for ISPs and governments to detect and block them. Even better, you can run these over alternative ports, making it practically impossible for sensors to lock down your DNS traffic. Setting up a DOH client to resolve queries via a cloud provider or a self hosted server can provide a quick escape from the government's filtering. You can also use a VPN service with integrated DNS support that can sidestep such blocks entirely. On a technical level, it's not trivial to do this, but with tools like AI and LLMs now, if you're capable of typing, reading, and copy pasting, you probably can. To give you an idea of just how far things are going, I whipped out these detailed instructions via chat gpt on how to set up a doh or d0tdns resolver on an alternate port and configure a macbook pro to use it for its dns queries and it took all of 15 seconds.
Even if Malaysia tightened its grips on these protocols open source tools like DNScrypt and local proxy resolvers still offer ways to thwart centralized control. I wasn't aware of the Malaysia DNS blocking until EasyDNS was mentioned in one of those Reddit threads as a potential alternative DNS provider. And to be clear, EasyDNS is not a DNS resolver. We provide authoritative DNS which means we help websites and domains stay online by ensuring their DNS records resolve correctly. We don't resolve queries for individual internet users. Malaysia is not the 1st country to attempt something like this. And they certainly will not be the last.
We're seeing a disturbing trend where governments feel entitled to dictate how their citizens can access the web. Whether it's DNS censorship, blocking VPNs, or passing sweeping laws that criminalize online speech, the overarching theme is the same. Clamp down on digital freedom under the guise of public safety. As with any battle for control, there will always be those who fight back. The fact that people in Malaysia are already figuring out how to circumvent these blocks shows that you can't fully suppress the human desire for free expression. Tools like encrypted DNS and VPNs are just the start. The harder governments try to tighten their grip, the more creative people will become in finding ways around it.
All right, so that's pretty much the article. That pretty much goes hand in hand with everything else. Alright? Gensler overstepping his boundaries to encroach on the FCC or the Federal Communications Commission territory is eye watering. And the fact that I could go out and I could probably strike up a conversation with some unknown gentleman at a bar over a beer and say, hey, did you know that this is occurring? And describe it to him in just a few sentences. I mean, not even getting on a soapbox. And he probably just his eyes would probably just glaze over and just doesn't give a shit. SEC, FCC, it rhymes.
They must be the same. I'm serious, man. It's probably it probably goes off like that in most people's heads nowadays because they're worried about whether or not they can afford food at McDonald's. That's what all this shit does. That's what the the outside of this FCC, SEC, the tornado cash thing, this DNS attack in Malaysia. Is it like, it'll glaze people's eyes over because they're being distracted by all this other shit. Iran, Hezbollah, Israel, Ukraine, Putin, Russia. The elections are coming up. They can't afford Safeway, so now they're going to Walmart. They can't afford Walmart. So now they're begging that the dollar menu from fucking McDonald's comes back. They're just on their knees begging for any relief whatsoever. And when you tell them that it's already happening in Malaysia, that the DNS is being blocked and that goes hand in hand with Gary Gensler's overstepping the FCC and the tornado cash stuff on they're not gonna care. They're just not gonna care and they have no idea what it means for their future.
It's up to us to figure out a way to get them to understand in a way that does not make their not only does not make their eyes glaze over, but where they actually understand it. So the gentleman that turned me on to this Malaysian DNS attack is saying that we should probably be raising flags to the developers of Nostr. I know they know. I know Fiat Joff knows about this. I know that j b that Will Kessarin or jb 55 from Thomas knows about it. I know hazard 183 knows about it. I know all the developers of all the nostril clients know this. And there's a lot of nostril people that are not nostril developers and they know about this shit too. But in case you're wondering, if your only communication protocol is to pick up the phone and dial, what is it, 8 numbers.
Like, 1 what was it? No. Well, they no. Seven numbers. Yeah. Seven numbers without the area code and country code. Just like 7 numbers in the United States and that's how you get to talk to somebody else on the other end of city, but you don't have a phone book and you don't have any other way to look up the friend's name you know to resolve it to the phone number of your friends so that you can call them on that protocol, what is that gonna do? What if you don't know let's let's take it one step further there's no phone book there's no 911 there's not all you have is a phone and you need to figure out the 7 digits to call the hospital because your loved one needs an ambulance and they need it right now just pretend there's no such thing as 911 alright you got to figure out how to get a hold of the hospital or the ambulance company to send an ambulance and there's no phone book. That's what this is.
Now extend that to the entirety of the Internet. Paying your bill, DNS. Gonna send an email, DNS is involved. Do you need to go to your friend's website and work on it because your friend is paying you $50 to make sure that it's up and running? Need DNS. If there's no phone book, the phone on the wall is worthless. If there's no DNS, the internet is worthless. We've allowed this to occur. Like this said, this article said, and my friend said, it's lucky that there is at least a slightly decentralized nature to DNS, but that that's not enough.
I posit that baby, like, I'd said look I know I'm being naive but let's say that we're just using Nostr and every time that we like, you know, like I just hook up like Nostr or rather I I like let's say I've got Albie, which I do. I've got Albie extension. It's got my private key my public key. Let's say that through Nostr WalletConnect, I'm able to somehow tell Albie and the Nostra Wallet Connect that, hey, use my Nsec and NPUB to read every single website that I go to send it as an event to a relay where that website is stored along with the returned, resolved IP address.
And make and, in what I didn't say is like, yes, if you go to bad websites and it's attached to your your insect this could be a problem. We have a technology that is able to de identify subjects and get them away from their data that they provide to, like, medical studies. Nobody knows that Alice Smith is 87 years old and has type 2 diabetes. After the study, all they know is that patient number 124 is 87 years old, is a female, and has type 2 diabetes. We can we're not stupid. We can figure out a way to de anonymize a SEND that I authorize with my insect to a relay, but somehow or another be able to pull my insect back so that the only thing that's left is the name of the person I'm looking up and their fucking telephone number. And if everybody's doing that, then we're continuously refreshing and rebuilding a completely ancillary DNS system.
That's as far as I can take it. I don't know how to do this shit. All that I know is that this is a very dangerous situation. And with Gensler overstepping FCC boundaries, with tornado cash guys and the the judge in that case starting to try to make distinctions between essential code and executable code and your intent of use of code, This is not going to end well unless we start fighting back. And no. The answer is not. Well, we should have a protest. Let's go put on our coats and go walk around in a circle in a blinding blizzard so that then they'll feel sorry for us. And then they'll do everything that we want them to do. No. It doesn't work that way. Anybody listening to my voice that hasn't heard the last couple of shows where I basically take a great big giant shit all over your fucking protest has not been listening to the show. Or if you have been listening to that, you're not getting the point. Protest is a waste of time.
It is a waste of your time it's a waste of my time to read about I don't care about your protest it's never going to work it never has worked nobody cares what do you do? Freedom tech. Be the mud that squishes out between the fingers of Moff Tarkin in Star Wars when all homegirl Princess Leia is going the more you tighten your grip, Tarkin, the more star systems will slip through your fingers. That's the water that Bruce Lee was talking about when he said be be like water. Be like water. Be like mud. Be that which cannot be contained. Be able to split yourself off in a 1000000 pieces and then regroup on the other side like the mud coming out between the fingers of somebody who thinks that they're gonna crush something. Fuck them. Fuck them to death. Let's run the numbers.
CNBC Futures and Commodities Oil, West Texas Intermediate is up today after getting just basted on the, roast on the spit roasting it got yesterday. 90 0.99 percent to the upside, 6834. Brittnortheast up 3 quarters of point to 7214. Natural gas doing what it always does, 5 and a half percent to the upside, $2.90 per 1,000 cubic feet. Gasoline rose slightly to a buck 96 a gallon. Shiny metal rocks are having a bad day. Gold is down almost a point, but it's still above 26100 to 2671. Silver is down 1 and a half, but it's at $31.80. Platinum is down. Scant copper is down over a point. Palladium is over 2 points.
Just damn near 3 points. Ag, biggest winner today is soybean. 2.5% to the upside. Biggest loser is sugar, 2.63 to the downside. Live cattle, everything's moving sideways. No. Not everything. Live cattle's moving sideways, but it is in the green. Lean hogs is down a third, but feeder cattle are up a third. The Dow is up a third, but the S and P is down 0.13%. NASDAQ down damn near a half, and the S and P Mini moving sideways but in the green. Oh, and Bitcoin. Oh, god. We passed back down through 65,000? Assholes. We had a clear shot of 66,300 earlier today, but now I've gotta give you 65,950.
That is a $1,300,000,000,000 market cap. We can buy 24.8 ounces of shiny metal rocks with our 1 Bitcoin, of which there are 19,000,000 759,458.62 of, and average fees per block have risen precipitously today. We're at almost a tenth of a BTC. 0.09 BTC in fees on average on a per block basis, of which there are 100 blocks carrying almost 200,000 unconfirmed transactions waiting to clear it double digits. Wow. 16 satoshis per vbyte for high priority, low priority, gonna get you in at 12 satoshis per vbyte. Hash rate, what's it doing? Oh, 554 exahashes per second. We are way down. We are 200 exahashes per second down off of our highs. Wow. I wonder what happened.
Oh, well, I don't really care. We're gonna be fine. Heckles for shekels, which was Bitcoin and episode 961. I got mister sat stacker with 5,000 sat says great great episode. Thank you. No. Thank you. Bitcoin Sandy with a 1,000 says love the chats. Fire emoji. Saints and sat666. Oh. Number of the beast boost for cashless Israel, he says. God's death 537. Thank you, sir. No. Thank you. Pies to pleb, 420. Thank you, sir. No. Thank you. And then ending it with Annabelle Handoek with a 100 sats says, thank you for the episode. No. I appreciate you listening to the episode. That's the weather report. Welcome to part 2 of the news you can use.
Swan Bitcoin claims that former employees and Tether conspired to steal its mining business. Liz Napoletano is writing this one for decrypt. Bitcoin company Swan. Swan Bitcoin alleged in a lawsuit filed on Wednesday that ex employees of the company, including former executives, usurp the firm's Bitcoin mining business. The company further alleges that the scheme was aided by Tether, the cryptocurrency giant responsible for issuing the industry's largest stablecoin by market capitalization USDT. Pausing to put the meme in your head of the 3 people from Harry Potter standing before the teacher, and she looks at them and says, why is it that when trouble occurs, it's always you 3? Swan Bitcoin, Tether, and I'm just waiting on the third one. Okay. The complaint filed in the district court for the central district of California, oh, at least it's not in New York, alleges that the former employee stole highly proprietary code from Swan's Bitcoin Mining Monitoring Software in addition to stealing its vendors and business partners.
The employees conspired to resign en masse and create a competing company called Proton Management, Swan Bitcoin alleges. Quote, the evidence of sorry. Excuse me. The defendants ah, my god. I'm having a having an attack here. An attack of stupid. The evidence of the defendant's brazen theft is overwhelming, Swan's lawyer said in the complaint. The former employees were stealing the crown jewels from Swan's Bitcoin mining business. Representatives for Tether and Proton, well, they didn't respond to decrypt's request for comments. I don't blame them. Swan's lawyers alleged that one of the Bitcoin firm's former executive, Swan vice president of institutional operations and research Brett Hilly downloaded more than 300 confidential documents from Swan's Google Drive, including mining inventory and performance data sheets, as well as a log of analyses of all the firm's mining sites and operations.
Proton's employees were also allegedly solicited, or said to be allegedly solicited Swan's mining personnel in addition to appropriating Swan's financing partner, Tether, for its own operations in an attempt to partner, Tether, for its own operations in an attempt to irreparably harm Swan's ability to compete in the market, the complaint states. The scheme, in part, hinged on Tether delivering Swan with a default notice that would provide the legal cover for the hostile takeover, Swan alleges. Proton CEO Rafael Zaghuri, which was then chief investment officer at Swan, made a concerted effort to sow dissent and chaos at Swan in an attempt to galvanize Swan employees to defect from the company according to the lawsuit.
From there, Zaguri and his alleged coconspirators attempted to force Swan CEO, Klipston, to resign and plotted to ensure that Swan would accept wind down capital from Tether, the Bitcoin firm's lawyer said. Oh, man. This is bad. Just 4 days after the employees resigned from Swan, including Zagury, who also served as their head of mining, quote, Tether, Swan's funding partner in its mining operation, notified Swan that the defendant, Proton, would be taking over day to day Bitcoin Mining Management in their joint venture. Oh, god.
This this is bad. This is really bad. SWAN is still investigating its former executives and employees' alleged collection of its proprietary data and trade secrets in addition to the circumstances of the resignations the complaint shows, and a representative for Swan declined Decrypt's request for comment. Yeah. Of course. It's ongoing. It's too new. The Bitcoin firm is seeking a permanent injunction against Proton that would prevent the company from further disrupting Swan's mining business and is asking the court to compel the former employees to return stolen equipment and confidential material.
Swan has asked the court for a jury trial and for damages to be determined at the trial. And you might be asking me what my gut feeling is. Swann's gonna win. That's gonna be that's my gut feeling. And why would I say that? Well, Swann has had a hell of a hell of a year. Actually, they've had a hell of a last 2 years for like like beginning I I can't even remember exactly when Texas told Swan to piss off, but they did. The state of Texas told Swan, uh-uh, uh-uh, you ain't servicing any customers because your 3rd party, whoever's holding the Bitcoin for you in your customer's name, we don't like them. We don't think they're above board. You're gonna stop doing business in the state of Texas. And then a few other states went along for the ride and it really hurts Swan Bitcoin's business.
And they roll on. They kept going. They kept going. They kept going. And then they finally got Texas they finally got another custodian. And it wasn't my favorite choice but they did make a choice that they switched custodians, it made Texas happy, made a whole bunch of other states happy. So then we could resume, like, you know, buying Bitcoin, like, once a week, every week, like I set up our family companies to do. And we've now resumed, buying bitcoin pretty much on the weekly. But right after that, Swan announced this major mining venture.
I was like, damn. They're really going whole hog. And they were, like, basically, like, bankrolling all the podcasters in the space, except for me, of course, because, you know, nobody wants to sponsor me. But that that that's me feeling sorry for myself. I'm just saying that they were basically bankrolling like all the podcasters. And a lot of them got hurt when Swan said, we can't advertise anymore on anybody's podcast. This was a major major advertiser for a lot of my favorite podcast, and I could tell that it hurt. It hurt these guys, you know, and it's like, god dang it.
Now now this. Now this. And I'm wondering, it's got to be connected. When when Swan said, hey, we're laying off a bunch of people. It's like, you know, this downturn is kinda hurting us and it's like, you know, we've had some you know, we've had a couple of bad years and all that kind of stuff and we all understood. But so, you know, I I still like Corey. But this is just it really got to them to the point that they gotta lay off a bunch of people and then all of a sudden they basically told all they pulled all their advertising from anywhere they were advertising to save money. And then all of a sudden we get this shit.
It's got to be related. Alright. So do I know that for a fact? No, I don't. Have I ever spoken to Corey Clipston himself? No, I haven't. I'm just letting you know I'm not anywhere close to this. You're getting what I'm getting. Okay? But this thing? What we're I mean the fact that Tether called Corey and said: Oh, by the way, that mining deal that we had that we made a big old fanfare about a few months ago, yeah, that's over. We're gonna let Proton do it. This is bad. But somehow, my gut feeling suggests that that Swan's gonna win. Is it wishful thinking? Maybe. Swan's been around a long time, the good bitcoiners.
Sure, they've they've they've fucked up a couple of times, but honestly in this space, it's surprising that not that everybody hasn't fucked up to the point of damn near disaster. So I'm just gonna let that one go. I'm just I'm I'm over it. I'm done. I'm not gonna hate on Corey and and Swan Bitcoin for any reason whatsoever. They've always been pretty good Joes. So my but my gut feeling really is is that somehow this is so terrible that what what has what has occurred here is so awful. It is probably so blatant and and it sounds to me like a bunch of mistakes were made by the people that started this proton thing that in court it's gonna be easy to prove that they were in in possession of stolen trade secrets.
They were probably in possession of stolen code that was proprietary. They're probably in possession of, like, business materials and intelligence that they should not have unless they are an employee of Swan. And when they left Swan and took the materials with them, they were no longer employees. And by all rights should have given all that information back. I get the feeling all this shit's gonna be found in discovery and it's gonna be an open and shut case. And who's on the hook? Tether is now exposed. USDT and the company behind it, Tether, that everybody makes fun of well, not they don't make fun of it because it's like too damn big but like, Bitfinex.
That that account kept saying that the whole reason that Bitcoin's price was was what it was, and he's been saying this for the last 5 years, and he's clearly wrong, but he kept saying that there's something wrong with Tether. And now we're, you know, we now understand that Tether is, like, one of the leading purchasers of United States debt in the form of Treasury. And then all of a sudden they're hanging around with a crew of people that clearly stole a bunch of shit from Swan? I don't know, man. Something don't something about this doesn't sit right with me at all, and I think it's gonna be bad. I'm just gonna say it now. It's gonna be bad, but I do think Swan's gonna come out on top. Okay.
Let's see. Do we wanna do this one? We're not gonna do that one. We're not gonna do that one, but we are gonna talk about b n y Mellon. BNY Mellon has been approved by your friends at the SEC for crypto custody beyond ETFs, Gensler said. The structure Bank of New York Mellon Corporation is using to offer custody services for digital assets could be used beyond the Bitcoin and ether exchange traded funds that the bank is considering according to SEC commission chair or SEC chair Gary Gensler. Earlier this week, the bank acknowledged that it had presented a plan to the SEC's office of chief accountant to custody those two assets in a way that would protect customer funds in the event of an insolvency.
The agency provided BNY with a non objection to the plan, a regulatory term that gives comfort to the bank that its structure will not fall afoul of the agency's requirement that banks reflect the value of the digital assets that they custody on their balance sheet. BNY previously told Bloomberg News that the SEC's non objection was specific to the ETF use case. Quote, though the actual consultation related to 2 crypto assets, the structure itself was not dependent on what the crypto was. Gensler told Bloomberg News on Thursday after he delivered a speech at the Federal Reserve Bank of New York's annual Treasury Market Conference.
Quote, it didn't matter what the cryptocurrency was, end quote. The Bitcoin and Ether investment products are the only crypto related ETFs approved so far by the U. S. Regulators. A BNY spokesperson did not immediately respond for a request for comment. BNY's proposed structure includes the use of individual crypto wallets, each of which would have a separate bank account and would be prohibited from being commingled with bank assets. It's up to the bank to decide whether to expand the pool of digital asset use cases it's comfortable custodying, Gensler said. Gensler credited BNY for doing all of the legwork on how to make sure customer assets would remain theirs and that they wouldn't be shunted to the back of the line in case of a bankruptcy.
1000 of crypto traders have found themselves in that position as a result of the blow up blow ups sorry. Sorry. Blow ups in recent years of the Celsius network, FTX, Voyager Digital, and BlockFi, and all the rest the assholes that are out there that need to be in prison for the rest of their lives and buried in the prison school yard. Whatever. I'm sorry. Ginsler noted that several banks and brokers have been in discussions about potential digital asset custody structures that would segregate customer assets from the banks and thus could also avoid the requirements of staff accounting bulletin 121 or that SAB 121 that I was talking about yesterday, the measure laying out the agency's balance sheet requirements for crypto. You know, the industry has vocally complained about SAB 121, one of its litany of complaints regarding the Gensler's administration aggressive posture towards the digital asset industry, president Joe Biden vetoed congress' efforts to overturn the SAB 121 earlier this year. Safeguarding digital assets for clients is a lucrative business, with many non bank providers charging 10 times more than the service compared to cost for more traditional assets. And by one estimate, the crypto custody market is now worth approximately $300,000,000 and growing by 30% annually.
300,000,000 now. It'll be 300,000,000 times 30%, added back to 300,000,000 next year, and then take that multiply it by 30%, and then add those together and that's next. See, that that's this thing is just is going off the rails. What what is this? BNY basically got a blank check to custody whatever digital funds their customers want to custody. Now it doesn't mean that they're going to do it immediately. It's just that Gensler is saying it's up to them. Do they do they want to, like, allow people to custody their ton? Do they want people to, you know, well, I I guess tons out of the question now because Telegram's all screwed up a doge.
Am I gonna get a Doge wallet with BNY Mellon? Well, BNY Mellon can say yes if they want to. It's got to be them that say yes. I can't force them to custody it, but they could. This is this doesn't help this doesn't help for Bitcoin against all the shit coins that are out there, but it's it it does add to the ablative armor aspect that is there to protect Bitcoin by having these multiple layers of shielding that is the shitcoin market. So now that BNY Mellon has this mandate to custody whatever the fuck they wanna custody for whoever the hell they wanna custody it for, well, that just adds to the strength of the blade of armor.
However, it kind of cuts both ways, doesn't it? It also means that shit coins are gonna be just all that much harder to get rid of. However, if you've listened to the show before, you know that my stance is the following. The shitcoiners will always be with you. And then Jesus walked on down the path. And if you don't understand the reference from the Bible, is that Jesus told us that the poor will always be with us. They were like his disciples were like, what are we gonna do about the poor? And he's like, dude the poor is always gonna be with you. You don't have to worry about the poor. They're always gonna be here. There's always going this work will always be here. We will always have to love these people because they're fucking broke. Well, the shitcoiners will also always be with you. They'll probably also always be poor, but by God Almighty they will always be with you.
Speaking of, you go out, you have a great weekend. That is the officially the end of the show. I will not be back until Monday, and I hope that you find it within yourself to go out and think about some of the shows that I talked about this week. Like today, we're talking about the overstepping of the bounds and scope creep of Gary Gensler as being able to tell us what is and what is not a communications protocol and whether or not should be it should be licensed. We've got a US federal judge that's trying to make a distinction between expressive code and other kinds of code. And one is protected free speech, but the other is not even though it's the same base code. It depends on what your intent is.
We got DNS attacks in Malaysia. That can be performed anywhere. Right? I talked about what is wealth earlier this week. Now, I really want you guys to think about that. I had a discussion with a cattle woman last night at a cattlemen's association meeting. We were talking about her 2 sons and her husband and the ranch that they that they own and they operate. And I was talking about secession issues. And she's like, yes. Because and when when when I brought up a show that I did about what is wealth, I told her I basically gave her the gist of that show as like a 32nd, you know, elevator pitch, and she understood immediately what I was talking about. She's like even, you know, my 2 boys, they have every opportunity to go out and get all the things that you talk about, but they want the ranch. They want to do ranching.
They don't need the money. And I'm like, that's because they understand what real wealth is. So if you didn't listen to that show, go listen to that show. There was a lot of stuff I covered this week, and I hope you got a lot out of it. And if you did, use podcasting 2.0 to throw me some sats, send me some boostograms, zap my ass on Noster, and I will see you on the other side. This has been Bitcoin and and I'm your host, David Bennett. I hope you enjoyed today's episode and hope to see you again real soon. Have a great day.
