I’ve been traveling around the U.S., visiting friends on the East and West Coasts and in between, and this is my first newsletter since the end of February.
This week has been a busy one, full of interviews and talking to reporters about nonfungible tokens. Who knew NFTs would become the next tulip mania? I’ve gained nearly a thousand more Twitter followers and several more patrons, which is wonderful because I can certainly use the support.
As I write, Bitcoin is above $57,700, after reaching an all-time-high of $61,742 on March 13. Meanwhile, there are now 39.6 billion tethers in circulation—that’s 4.5 billion new tethers in the last three weeks, all helping to prop up the BTC price.
In my last newsletter, I said I didn’t think BTC would ever see $57,000 again. I was wrong, but I also didn’t expect Tether to keep blatantly printing billions more tethers—each one representing a dollar on an offshore exchange—after the NYAG settlement. It just shows this nonsense can go on a lot longer than any of us imagined.
Some quick updates—at the end of February, I did an all-day film interview for another QuadrigaCX documentary. I can’t tell you any more than this, unfortunately, but yes, more documentaries. (Still waiting for someone to do a Tether documentary and an NFT documentary, but we know those are coming.)
Also, fellow nocoiner David Gerard and I got a full viewing of the upcoming CBC Quadriga documentary. It was over a year ago that we met in Vancouver to film this. However, it feels like the Quadriga story is still unfinished, and will be until we know for certain that’s Gerald Cotten’s body buried in Halifax.
Here is the news.
Metakovan reveals himself
The art world was beside itself on March 11 when a person going by “Metakovan” bought an NFT by Beeple for $69.3 million in ETH—making it the third most expensive* ever sold by a living artist, behind Jeff Koons’s “Rabbit” and David Hockney’s “Portrait of an Artist (Pool with Two Figures)”—if you can get past the fact that it was paid for with magic beans.
In a blog post that went viral, I revealed that Metakovan was Vignesh Sundaresan, an Indian crypto entrepreneur who ran Coins-e, a shady, now-defunct Canadian crypto exchange. My post got 20,000 hits the first day.
Four days later, Sundaresan admitted he was Metakovan in a blog post on the Metapurse website. Metapurse is his crypto investment fund.
We already know who you are. The question is, why were you using a pseudonym in the first place?
He claims that it wasn’t a pseudonym, just an “exosuit.” He did it, he says, because he wanted to prove to the world that people of color can buy high-art, too. He then delved into a rags-to-riches story about how he made it big in crypto. (This is a common bitcoiner fairytale: buy crypto, and you, too, can become fabulously wealthy.)
In an online auction, I’m not sure a pseudonym proves anything. But it does look like maybe you were trying to hide or distract from something, like the questionable past projects you’ve been involved with?
Also, if Metakovan wanted to make a point about social justice, why did he buy an NFT representing a collage full of angry, racist, misogynistic images? That makes no sense.
Art critic Ben Davis spent an entire day digging through Beeple’s magnum opus—a collection of 5,000 images. His findings, written up in an article for Artnet News, aren’t pretty. In one example, Hilary Clinton with a set of gold teeth and the caption: “Senator Clinton’s last-ditch effort to reach black voters.”
That just tells me Metakovan could care less about the art. He only cares that he gets publicity and can make money off the NFT by packaging and reselling it—in the form of B20 tokens—to retail suckers.
If you are wondering where Metakovan got all that ETH to buy the Beeple NFT—he claims he was an early investor in the Ethereum ICO. Anyone who bought into that ICO and hodled, could easily be a millionaire today.
But remember, Metakovan and business partner Twobadour (aka Anand Venkateswaran) also raised 50,000 ETH in an early 2018 ICO for their Lendroid project. LST (stands for Lendroid Support Token) is a dead shitcoin that never got listed on any exchange.
NFTs are garbage
Since I wrote my Metakovan blog post, I’ve been getting pushback from artists who want to believe that NFTs bring value to the art world. They don’t want to hear that NFTs are a scam. It’s sad to see artists getting sucked into the crypto cesspool.
I wrote another post last week where I explain why NFTs are worthless—and how they have opened the door to fraud and money laundering. The only real value of NFTs is speculative—i.e., what the next sucker is willing to pay you for them.
Artists want to believe that NFTs are an avenue for them to get paid for their work, but in truth, NFTs are simply pointers, expensive URLs on the blockchain. And if the object they point to moves or disappears, those URLs will forever point to nothing.
Some NFTs contain a hash of the artwork they represent. But as computer scientist Jorge Stolfi explains: Copies of a physical work of art are clearly distinct from the original. They are not the same atoms that the artist himself put on the canvas. In contrast, copies of a digital file are exactly the same bits. There is no ‘original’ of a digital file.
In other words, any copy of a digital artwork will have exactly the same hash, so putting the hash on the blockchain is useless.
FATF takes aim at DeFi/NFTs
The Financial Action Task Force, a global anti-money laundering watchdog, released an update of its Draft Guidance on a Risk-Based Approach to Virtual Assets and Virtual Asset Service Providers.
Decentralized exchanges, the platforms behind decentralized finance (DeFi) apps, are now considered virtual asset service providers—or VASPs.
The DeFi app, or smart contract, is not a VASP, but the owners and operators of the DEX are, which means they are obligated to ensure these platforms meet the same anti-money laundering requirements as other financial institutions.
This is a clear aim at DeFi founders, investors and VC firms.
The FATF adds that NFTs that can be converted or exchanged for fiat currency or other virtual assets remain in scope.
In their analysis of the new guidance, blockchain analytics firm CipherTrace said that NFTs that can facilitate money laundering and terrorism financing are “virtual assets” as viewed by the FATF.
As I wrote in my NFT explainer piece, NFTs open the door to money laundering—big money coming from mysterious people to buy outrageously overpriced NFTs with cryptocurrency—so its no surprise that the FATF has NFTs on its radar.
Charlie Lee, the mystery Coinbase wash trader?
Coinbase settled with the CFTC for $6.5 million over claims that between January 2015 and September 2018 the exchange “recklessly delivered false, misleading, or inaccurate reports concerning transactions in digital assets.”
The CFTC also claims a former Coinbase employee was wash trading LTC/BTC pairs on Coinbase’s GDAX platform between August and September 2016. (GDAX, meant for professional traders, was later renamed Coinbase Pro.) Wash trades are illegal because they make it look like there’s a lot of trade volume when there’s not. (Verge, CFTC press release and order)
The order doesn’t mention who the employee is but we know that Charlie Lee, the founder of litecoin, was working as an engineer at Coinbase at the time—and it looks very much like he got caught with his hand in the cookie jar.
LTC wasn’t worth more than a few dollars even after it got listed on GDAX in August 2016. The price really took off when litecoin was listed on Coinbase’s retail exchange—called simply “Coinbase”—in May 2017.
Lee left a month later to focus on his litecoin project and then dumped his LTC at the top of the market in December 2017, when LTC saw highs of $360. That was during that last crypto bubble.
Lee got a lot of flak for that. Ironically, he later claimed that he sold because “holding LTC made it a situation where I may do something to pump the value short term. but is bad for the long term success of Litecoin.”
Bizarrely, LTC has never seen the highs in the 2021 bubble that it did in 2017. It’s only at $200 now.
Whistleblower Bitfinexed suspected Lee of wash trading all along. He wrote up his suspicions in a blog post in 2018, which is well worth the read now.
If Coinbase—the leading crypto exchange in the U.S.—allowed a former employee to wash trade up to 99% of the daily volume of a shitcoin, you can bet this is standard practice on all crypto exchanges.
Other newsworthy bits
Photographer/writer Andy Day says NFTs are a pyramid scheme. “To many, it’s a means of overthrowing the existing regime; when you look a little closer, you realize that it’s just an extreme manifestation of neoliberalism.” (Fstoppers)
If you still think NFTs are the greatest thing since sliced bread, Monty Python’s John Cleese has a bridge to sell you, specifically a drawing of the Brooklyn Bridge as an NFT. You can buy it on OpenSea. The highest bid so far is for $35,671. (Previously the top bid was $50,000.) (Decrypt)
Not a month goes by where we don’t hear of another DeFi rug pull. TurtleDex, a DeFi app running on the Binance Smart Chain, drained $2.5 million in crypto from liquidity pools on Ape Swap and Pancake Swap. (Who comes up with these names?) The owners immediately deleted TurtleDex’s telegram, the official website, and the Twitter page. (Decrypt)
USDC, the stablecoin issued by CENTRE, a project backed by Circle and Coinbase, has surpassed 10 billion. (The Block)
BofA published a report called “Bitcoin’s Dirty Little Secrets,” wherein analysts said there is no good reason to own bitcoin “unless you see prices going up.” David Gerard reviews the report in full on his blog.
First Trust Advisors and hedge fund SkyBridge Capital, led by former White House communications director Anthony Scaramucci, are pushing for a bitcoin ETF in the U.S. The prospectus for the “First Trust SkyBridge Bitcoin ETF Trust” was published on Friday. While a bitcoin ETF opened in February in Canada, U.S. regulators have repeatedly rejected attempts to introduce them, citing concerns about market manipulation. (The Block)
Want to flush all your money away? Toilet paper company Charmin has an NFT.
*Update on March 22 — Third most expensive, not first.