Of Tech Bros And Trumpers

Over the past few months there has been a lot of rending of media garments over the fact that a group of billionaires from the usually-assumed-to-be-far-left San Francisco area suddenly decided to go all in for Trump. “Oh billionaires, oh billionaires, why hast thou forsaken us?” was the refrain across all manner of podcasts, think pieces, and posts on The Privatized Public Square. What seemed to go unmentioned, however, was the fact that these were not just regular tech bro billionaires. These were crypto bro billionaires. And not only were they publicly endorsing Trump, they had assembled what is currently the single largest pool of money being deployed to influence the upcoming American election.

Frustratingly (at least for me) no one outside a small group of skeptics and a handful of journalists seemed to have noticed either the important tech bro/crypto bro distinction or the enormous pile of money they had assembled. Or rather no one besides a small group of skeptics and Mark Cuban:

The reason these guys are spraying a reality distortion field hundreds of millions of dollars wide into the American political process is really quite easy to understand:

Most of the obscenely wealthy and obnoxiously loud tech bros you see turning up to Trump’s beat have enormous financial stakes in companies whose business activities include either participating in or indirectly enabling things that the laws of the United States currently forbid. Things like laundering money for fentanyl dealers, helping Vladimir Putin evade sanctions, running telehealth pill mills for controlled substances, and ensuring North Korea has continual access to sufficient capital for its nuclear weapons program, all set against a backdrop of alleged securities fraud and good old fashioned embezzlement on a scale the world hasn’t seen since 1928.

What is motivating all the sudden Bro On The Road To Mar-A-Lago conversions to Trumpism is simple: the Biden administration has, through its various enforcement arms, recently been on an absolute tear of charging most if not all of these companies with various forms of fraud. In the minds of the bros this has amounted to a level of unjust persecution not seen since the Romans fed Christians to lions just for the entertainment value. (The bros even have a sinister name for the conspiracy they see at work: “Operation Chokepoint 2.0”.)

The response of the executives of these recently indicted crypto companies has almost uniformly been to give the government the middle finger while doubling down on profiting off of idiots trading dog and frog themed memecoins. (Those that are executives of publicly traded companies have also been furiously selling off their stock in those companies for hundreds of millions of dollars while they still can.) Their behavior has on the whole been so far outside of the bounds of what used to be allowed in polite corporate society that a Trump shaped Hail Mary pass is pretty much all these guys have left. Because, you see, Trump has explicitly promised these bros that if elected he will immediately fire the government servants responsible for these obstreperous attempts to enforce the laws of the United States. Trump’s announcement of this plan at this year’s bitcoin conference received the kind of thunderous applause usually reserved for Taylor Swift encores. A plank to that effect can now be found in the “innovation” section of the official Republican party platform for 2024. Trump has even promised to stop “Operation Chokepoint 2.0” by name.

This is why these bros are backing Trump’s bid for the presidency. You can safely ignore most of the other reasons they give publicly.

There are a cornucopia of examples to choose from that are illustrative of the ways in which the laws of the international rules based order threaten the business models of the bro-ocracy. This post will focus on just one that is extremely topical right now, having occurred just a few weeks ago. Here’s the sequence of events:

1. $230 million “worth” of cryptocurrency was stolen from a cryptocurrency exchange in India named WazirX (announcement, archive).

2. The theft was linked to North Korea by reputable blockchain analysts (Elliptic, ZachXBT, The Register).

3. The way in which North Korean money launderers turn hundreds of millions of dollars “worth” of stolen dog coins into the kind of IRL money Kim Jong Un can use to acquire the various ingredients in the nearly century old recipe for atomic bombs is complicated but it mostly involves swapping the stolen dog tokens into other tokens many times over, eventually either cashing out to hard currency through an over the counter sale in China or Southeast Asia or converting the ill gotten dog coins into a pile of “major” tokens like bitcoin and ethereum and then parking those tokens somewhere “on chain” for future use.

4. A substantial portion of that money laundering activity happens in crypto markets called “decentralized exchanges”.

5. The most popular decentralized exchange by an overwhelming margin is the work product of a New York City company called Uniswap. North Korean money launderers in particular love Uniswap and made heavy use of its code to launder the dog coins they stole from WazirX.

6. Uniswap is backed by a16z (F.K.A .“Andreessen Horowitz”), the firm run by recent Trump converts Marc Andreessen and Ben Horowitz (blog, archive). It is by all accounts one of a16z’s more successful crypto investments.

It would thus perhaps not surprise you to learn that the American government has taken a dim view of Uniswap’s corporate activities. The U.S. Securities and Exchange Commission (“SEC”), the government agency in charge of regulating most of the American financial markets, recently charged Uniswap with running an unlicensed securities exchange (CNBC). As part of that investigation the SEC reportedly served subpoenas directly to a16z and the other venture capitalists who backed Uniswap just a few days ago (Axios).

Now if you were a particularly astute observer of international law you might be wondering what enabling North Korean cybercrime and sanctions violations has to do with the securities laws of the United States. Answering that question involves digging into a labyrinth of byzantine legal fictions concocted by the crypto bros’ obscenely well paid lawyers.

Buckle up.

WARNING: this section contains a detailed explanation of the legal shadow boxing that enables money laundering activity by North Korea to indirectly financially benefit crypto bros in the bay area. If that sounds like tough sledding to you you may want to just read Liz Lopato’s excellent recent piece in The Verge: “The Moral Bankruptcy of Marc Andreessen and Ben Horowitz”. Ms. Lopato sees the situation clearly even if she doesn’t discuss all the underlying mechanisms we’re about to dig into.

The legal and moral fictions offered by the bros in equal parts to the government and their own souls are myriad but they tend to revolve around the word “decentralization” with a frisson of disingenuous appeals to “free speech”. “No one owns the Uniswap code” they argue. “It’s open source, anyone can use it! More importantly Uniswap doesn’t directly profit from the money laundering trading activity that code facilitates”. This is, in point of fact, more or less true.

There are, however, some important caveats.

For one thing we really need to insert a “yet” in there, making the full sentence more akin to “Uniswap doesn’t directly profit (yet) from the money laundering trading activity its code facilitates”. Because while for the most part Uniswap’s market making code matches buyers and sellers completely free of human intervention once deployed “on chain” there are a still a few powers Uniswap’s developers have reserved for members of homo sapiens. The most important of these reserved powers is the ability to flip a switch that will instantly redirect a portion of the millions in dollars in fees generated by all the money laundering trading activity directly into that homo sapiens’ bank account.

The other caveat is that the word “directly” is doing an absolutely heroic job of holding up a legal fiction heavier than 10,000 suns. Consider that Uniswap currently makes money in two ways:

1. Fees it charges people to use a website it has created to serve as an easy to use interface to the open source code “on the blockchain”.

2. Selling its own “governance token” called UNI to the general public.

A “governance token” entitles its holder to a vote on the future direction of Uniswap. Technically it is holders of UNI tokens and not a company named “Uniswap” that holds the voting power to flip the aforementioned money switch that would redirect a share of the fees generated by all the money laundering trading activity into that voter’s bank account. (You would be forgiven for thinking that sounds an awful lot like a share of stock in a company that pays dividends.)

If, the legal theory goes, UNI tokens are controlled by a collection of international individuals that is “sufficiently decentralized” then no harm, no foul, and definitely no triggering of American laws against securities fraud. There are two issues with this argument. For one thing it’s obviously bullshit. For the other it doesn’t appear that the ownership of UNI tokens is all that decentralized. One party in particular seems to control an awful lot of the voting shares UNI tokens:

The legal fictions get more concrete (and sadly probably more correct in a court of law) when you consider that it is Uniswap not a16z who is issuing the voting shares UNI tokens. Thus, the argument goes, if anyone is committing securities fraud here it is Uniswap and not Uniswap’s financial backers. Investors like a16z can’t issue new voting shares UNI tokens; they can only sell those voting shares UNI tokens to an unsuspecting public. Which, legally speaking, might mean that a16z’s hands are clean even if they are absolutely morally bankrupt because historically it has been the creation and not the selling of unregistered securities to the public that has attracted lengthy sentences in correctional facilities.

Of course if you, an investor in the extremely profitable international money laundering industry crypto startups, want to actually sell your voting shares tokens to an unsuspecting public you need a marketplace to do so. And not a decentralized marketplace like Uniswap – realistically only money launderers, blockchain developers, and market manipulators know how to use those things. You need an easy to use marketplace where retail consumers with dollars in their fists and greed-glazed expressions in their eyes will look favorably on your magic beans voting shares tokens. Preferably a marketplace whose banking partners are routinely sanctioned for facilitating fraud on a massive scale and thus can be counted on to look the other way about any suspiciously large transactions. Maybe a marketplace whose CEO has some shall we say “questionable” ideas about profiting from pump and dump schemes and dog/frog coins.

In other words, you need Coinbase:

But then what if the government tried to take away the money bowl by shutting down your favorite source of retail fools to dump tokens on? Well then you’d probably be hopping mad. Maybe even mad enough to donate hundreds of millions of dollars to Trump while claiming you’re really concerned about Ukrainian sovereignty, free speech, and Hunter Biden’s laptop.

But enough about legal fictions and marketplaces. The more important question is the issue of why anyone would want to own $3.5 billion worth of UNI tokens in the first place, thus creating the demand that allows the Uniswaps of the world to sell those voting shares tokens to the public. Perhaps it might have something to do with the dollar value of the fees generated by Uniswap’s code. You might plausibly tell yourself something like: “the Uniswap team is smart. They control the ‘official’ Uniswap codebase. Surely some day they will find a legal way to redirect those fees to UNI holders – after all they already put a switch in the code to do just that! Maybe if buy their token now I will make a lot of money down the road,”. If enough people follow that line of thinking it could drive the price of Uniswap’s voting shares UNI tokens “to the moon” in the parlance of the bros.

And what do you think could reinforce that line of thinking more than a demonstrably enormous number of “on-chain” transactions generating a proportionally enormous amount of transaction fees? Fees that that some day UNI token holders could vote to claim as their own? You know what generates a lot of transactions, usually in an attempt to obscure the true source of the funds used in those transactions?

Money laundering.

A few final thoughts:

1. Nothing in this blog post should be taken to mean that either Uniswap or a16z is directly involved in international money laundering for drug cartels, North Korea, and Vladimir Putin. I am merely pointing out that the incentive structures created by crypto in general and decentralized finance in particular have created a situation where we now have a class of billionaires with an indirect but very real financial stake in looking the other way when drug cartels, North Korea, and Vladimir Putin want to launder hundreds of millions of dollars.

2. Truth be told I actually think Uniswap is kind of “cool” in a research project/proof of concept kind of way. As someone who has spent a lot of time looking at blockchain code I can say pretty conclusively that Uniswap is one of the cooler things crypto has created. In a world where retail customers are routinely fleeced by market makers like Citadel automated market makers even seem like kind of a good idea.

   The problem is that we don’t live in a libertarian utopia. If you build tools that are good at laundering money and make them publicly available and unstoppable by law enforcement then guess what: a bunch of extremely evil people with globe-destabilzing amounts of money earned from selling fentanyl, trafficking human beings, or outright theft are going to be your biggest customers. Seeking to profit on that sort of thing is grotesquely amoral so if you work at Uniswap or “invest” in UNI tokens then maybe go read a book about “good Germans” in the 1930s, because you are one.

We’ll be discussing the case of Ivy Leaguer and up and coming member of The Forbes 30 Under 30 To Prison Pipeline Nader Al-Naji whose financial backers just so happen to include the same pro-Trump venture capitalists who brought you revolutions in finance like Uniswap, FTX, and BlockFi.