In the Zone – Puerto Rico, Honduras, Golden Triangle, and New York City • Buttondown

September 13, 2024

As US territories go, Puerto Rico is the most populous and accessible to Americans. Despite this, and the many Puerto Rican communities around the country, the relationship between island and mainland has long been fraught. American companies exploited the island for cheap land and labor since we invaded in the 1800s, and successive governments haven’t been much more generous.

Thanks to a 2012 law allowing new Puerto Rican ‘residents’ (not indigenous locals) to evade capital gains tax, the island has become a hideout for crypto enthusiasts. One of the island’s biggest boosters is quasi-famous crypto bro Brock Pierce:

When he moved to Puerto Rico in 2017, Mr. Pierce, an investor in a range of experimental crypto ventures, made headline-grabbing promises to revive the local economy, with the help of a tech-bro brain trust. Best known for his role in the creation of Tether, one of the world’s most popular digital currencies, Mr. Pierce led a wave of industry migrants to Puerto Rico, many of whom started buying land and trumpeting a project they called Puertopia — the transformation of the U.S. territory into a hub for crypto investors and technology start-ups.

Brock started buying up real estate in Puerto Rico – hotels, museums, and other buildings he planned to develop – imagining that his crypto flock would follow him there and create a paradise of like-minded Bitcoin and NFT dudes.

It is impossible to know how much Pierce and others like him are really ‘worth’, since their assets are tied up in highly volatile digital currencies, but it didn’t take long for many of his ambitious ideas to falter financially:

Over and over, Mr. Pierce has found local Puerto Ricans to help him with development projects — only for many of those collaborators to later say that he exploited them, failing to pay bills or cutting them out of deals. At the same time, he has battled in court with another Act 60 arrival, Joseph Lipsey III, who seized control of the W last year, claiming that Mr. Pierce had defaulted on a loan.

Pierce’s story mirrors that of many ‘entrepreneurs’ trying to create their version of a utopia in a place that doesn’t especially want them. They show up, spend some money, make big promises, and run out on the bill. In their wake are shuttered buildings, half-finished projects, and unpaid debts.

There are an estimated 2,600 wealthy Americans taking advantage of Article 60 in Puerto Rico, including celebrities like Logan Paul. The island may not end up with crypto-utopian communities or become a hub of international digital currency trading, but it has its fair share of tax dodgers using it to keep more of their money without contributing any of it to the island’s economy – Puerto Rico still struggles with the effects of climate change on its infrastructure, underfunded health services, and poverty.

The issue of Puerto Rican statehood is complicated, and should ultimately be the choice of the island’s inhabitants, but at the very least the US should treat its citizens as the full Americans they are, with access to services, benefits, and freedom from exploitation by wealthy Americans.

What if I told you there was a more refined version of Pierce’s libertarian crypto paradise being built in Honduras, of all places? And, rather than existing in the mind’s eye of a drug-addled child actor, it was funded by some of Silicon Valley’s wealthiest assholes? And both Milton Friedman’s grandson and Ronald Reagan’s son were involved, for some fucking reason?

Friends, I give you Próspera, the brainchild of the world’s most unpleasant technocrats:

In promotional materials, Próspera markets itself to “21st-century pioneers” craving not just laissez-faire policies but also “good times and Caribbean vibes.” Direct flights from Miami and Houston can transport these digital nomads to Roatán in less than three hours. Then, from a chaise longue on the beach, they can register a business with the tap of a button. Although only one residential building has been built so far, a forthcoming eco-condo was during my visit courting buyers seeking “more personal freedom” and less “political drama.”

Yes, this ‘experimental town’ doesn’t have much in the way of places for anyone to live, but, more importantly, they can easily create tax-free businesses and pay with crypto and uhhhh undergo untested medical treatments:

Próspera has become particularly well known for the zone’s experimental medical facilities, which run clinical trials unburdened by F.D.A. standards. The week of my visit, Patri Friedman, grandson of the economist Milton Friedman and the founder of a start-up-cities fund that invested in Próspera, had a chip with his Tesla key implanted into his hand. On a previous trip he brushed his teeth with genetically modified bacteria purported to prevent cavities. Another time he was injected with a protein booster intended to make him “stronger and faster,” as he put it at a conference in Roatán that weekend.

Maybe the universe does have a sense of humor, and Milton Friedman’s unpleasant spawn will turn himself into the Toxic Avenger with a combination of exotic bacteria and implanted keyfobs. John Galt would be proud.

Where Puerto Rico is a place for the tax-averse and exploitation-curious, Próspera is a well-funded startup in a special economic zone granting it significantly more legal authority and powers. It came into existence because Honduras’s conservative president saw a TED talk by a reactionary economist about building charter cities in poor countries to bring prosperity and thought it was a great idea. Really. Then, despite resistance from Hondurans, he rammed through the necessary constitutional amendments in 2013:

(Paul) Romer and the oversight board he helped set up were sidelined, and the Honduran Supreme Court initially rejected the constitutional amendment. But Congress, led by Hernández, dismissed the four opposing judges in what some critics called a “technical coup.” (Hernández, who succeeded Lobo as president of Honduras, continued to have a career marred by corruption and was recently sentenced to 45 years in a United States federal prison for drug trafficking.) In 2013, Honduras amended its constitution to allow for the creation of autonomous zones, following China and the United Arab Emirates.

Nothing says ‘democracy’ like engineering judicial coups to pass laws so a bunch of rich foreigners can run economic experiments in your country without legal oversight.

It goes without saying there are a lot of really insidious philosophies at play here, as a former Coinbase exec explains:

“The Network State” was inspired, (Balaji Srinivasan) said, by the state of Israel. “That country was started by a book,” he tweeted in 2022, referring to Theodor Herzl’s 1896 manifesto, “The Jewish State.” “You can found a tribe,” Srinivasan said on a podcast. “What I’m really calling for is something like tech Zionism — when a community forms online and then gathers in physical space to form a ‘reverse diaspora.’”

It cannot be overstated how dangerous it is that people whose idea of an ideal country is a right-wing online forum Voltroning into a lawless enclave modeled after a violent apartheid state are also wealthy enough to make it happen, with a little help from corrupt dictators.

But! Sometimes when you’re trying to build a fancy resort city for yourself and your fascist investor friends, you might go to a local community meeting and put your foot in your mouth:

He stood on a second-story porch reading into a microphone the parts of the ZEDE law pertaining to land expropriation. “That’s when all hell broke loose,” Cárdenas said. People rushed up the steps, some shouting that he should leave, others to let him speak; shoves were exchanged, and (Erick) Brimen’s MacBook tumbled off the railing. He yelled at people to back up and stop violating his right to social distance.

Weirdly, a dude from Arizona trying to explain to native Hondurans that his new city had the right to eminent domain land it wanted did not go over well, and video of the encounter created a nationwide protest movement against the ZEDE (the Spanish acronym for exclusion zones like Próspera.) In 2021, the country’s new president was elected primarily on the platform of repealing ZEDE laws. A year later, the Honduran Congress passed constitution reforms to abolish ZEDEs. A rare victory for the little guy, right?

Maybe not. The original law had guaranteed the technocrats 50 years of ‘stability’, so questions remain around whether the new laws can override the original. And! Perhaps most critically, the company behind Próspera has filed a ten billion dollar lawsuit against Honduras in a World Bank tribunal court that allows companies to sue sovereign nations, but (of course) prohibits countries from suing corporations. Legal observers believe the company may win, which would not only financially ruin Honduras, but give other organizations trying to found these charter cities renewed confidence in the ability to bully and extort poor governments and corrupt politicians.

So, if you wondered what a lot of the worst rich people from Twitter were up to, a decent number of them are biohacking at a golf resort in the Honduran jungle, when they aren’t busy seizing land from local farmers and creating tax and wealth havens for themselves and their friends. Cool, right?

What if, instead of a bunch of annoying VCs, a special economic zone and charter city were instead run by a Chinese mafia kingpin? Friends, I give you the GTSEZ:

This is the Golden Triangle Special Economic Zone, a vast development project founded by a Chinese businessman named Zhao Wei. Outwardly it resembles a midsize Chinese city; it even has an airport, with a soaring terminal that Zhao hopes will eventually welcome international flights.

(…)

Behind the glassy facades, however, more is going on. The GTSEZ operates as a self-governed enclave, and for the better part of a decade investigators have warned that it’s a hub for criminal activity of every description—a legal no-man’s land.

In 2007, the Laotian government handed over a 99-year lease on 39 square miles of undeveloped land on the Mekong river, near where the countries of Thailand, Laos, and Myanmar meet. It gave Zhao Wei, a Chinese national with a background running shady casinos, his own Exclusion Zone, meaning the government would not interfere in the city’s affairs, no matter how illicit. Zhao built a casino, and hotels, and has spent years expanding the settlement to cater mostly to Chinese tourists, who can use GTSEZ casinos to launder and move money outside of China, which is otherwise against the law.

Since its inception, the GTSEZ operated as a hub for the area’s drug gangs to move their narcotics and cash. Rumor was, Zhao took a cut of all the business that went on in his zone, and he didn’t turn anyone away. Zhao made sure the local authorities got a cut as well – he gave the government of Laos 20% of the GTSEZ as part of the deal.

With a captive local government and neighbors too politically weak to do much, the only player in the region who could exert any influence was China. They turned a blind eye for awhile, but Zhao’s city has become a hub for another sort of crime that impacts China – crypto scams:

At a ferry terminal in Chiang Saen, the small Thai town directly opposite the GTSEZ, signs warn passengers of what might await them on the other side of the Mekong. “Don’t believe persuasive words that promise high compensation,” says one, illustrated with a cartoon police ­officer pointing his index finger at passersby. “You will become victims of forced labor and detention.”

These signs sit on the Thai border outside the GTSEZ because people from all over the world are enlisted by crypto scammers to come to Thailand for jobs, only to be tricked and kidnapped to work in ‘pig butchering’ scam operations, swindling people out of their savings with phony crypto investments.

The scale of the fraud is staggering:

In a report published in May, the US Institute of Peace (USIP), a Congress-funded research institution, estimated that the amount stolen by scam centers in the Mekong countries “likely exceeds $43.8 billion a year.” That total includes considerable losses in China, as well as the US and Europe.

This week, the FBI said Americans lost almost $6 billion dollars last year to crypto scams, which indicates how much of the fraud going on in the Mekong is targeting Chinese citizens. The good news is that China appears to be starting to crack down within the GTSEZ:

In recent months, Laotian authorities, presumably at the Chinese government’s urging, have arrested more than 1,000 Chinese citizens in raids of scam operations in the GTSEZ and deported them to their home country. The actions showed that it’s possible, at least when China applies the necessary leverage, for police to enter the GTSEZ and make arrests.

It remains to be seen how willing China is to rein in Zhao, since the government may view him as an ally in a region where it is trying to gain more political control. But the GTSEZ is a stark example of what can happen when you give one person or a group of people control of a place, outside international law.

What if, instead of getting permission to set up an extrajudicial state, you simply ran your mayor’s office like one? It might look a lot like Eric Adams’ administration right now. Two days ago, the brother of two Adams officials under federal investigation was also revealed to be under investigation:

Federal agents are investigating a possible bribery scheme involving New York City contracts and a consulting firm run by the brother of two top officials in the administration of Mayor Eric Adams, two people with knowledge of the matter said.

Prosecutors last week seized the phones of the two officials — the schools chancellor and the deputy mayor for public safety — and the consultant because they believed the devices might contain evidence of bribery and other crimes, the people said.

I can only imagine what it’s like to be an FBI investigator on one of the increasing number of Eric Adams cases – you confiscate some phones, go through the texts, then head back to the judge to get more warrants. They must be running out of corkboard space to put all the photos on.

The same day the Banks family was racking up potential indictments, this story dropped about the NYPD:

Several police executives were spotted Monday meeting in the fenced-off, secured lot instead of inside One Police Plaza, with law enforcement sources telling The Post that they’re afraid NYPD headquarters is bugged and their words are being recorded.

What could possibly have the notoriously untouchable NYPD’s top brass so worried they’re acting like extras on the Sopranos? Maybe this:

NYPD Commissioner Edward Caban announced his resignation in a letter to the department on Thursday, one week after federal authorities seized his phone in connection with a probe investigating his twin brother’s business as a nightlife consultant, Gothamist has learned.

So, to recap, two of the mayor’s top aides have a brother with a corrupt contracting business, and the NYPD commissioner (appointed by the mayor) has a twin bother who is a ‘nightlife consultant’ – definitely a real job – and they’ve all had their phones seized by the FBI in the last few weeks. While the NYPD is busy doing daily bug sweeps of its headquarters.

All of this would have been so easily avoided had Adams simply declared New York City an exclusionary zone before doing the corruption. I am just saying.

Inquirer – “Fannie Mae, a government-controlled mortgage financier, filed a federal lawsuit Monday in the Eastern District of Pennsylvania alleging that Pulley-affiliated companies defaulted on the mortgages for properties in Philadelphia and Delaware County.”

AP – “The IRS has collected $1.3 billion from high-wealth tax dodgers since last fall, the agency announced Friday, crediting spending that has ramped up collection enforcement through President Joe Biden’s signature climate, health care and tax package signed into law in 2022.”

WSJ – “In 2016, Steward Health Care System paid out a $790 million dividend—the lion’s share going to the hospital chain’s private-equity owner, Cerberus Capital Management.”

WaPo – “During a scorching, relentless wildfire season, Facebook has been flagging and removing dozens of posts containing links and screenshots from Watch Duty, a widely relied-upon wildfire alert app, as well as from federal and state agencies…”

NY Post – “A new TikTok trend has people posting their attempts to exploit a “glitch” in Chase Bank ATMs that offers “infinite free money” — but quickly learning that a bank and its money are not so easily parted. Experts say the “glitch” videos look an awful lot like check fraud — one of the oldest scams in the book.”

FT – “The profitmaking urge may have been in the room when the studio agreed to make another Alien film, but it doesn’t seem to have stuck around long enough to prompt any searching questions, like “you want to spend how much to do what?”.”

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