The Bitcoin Investment Trust is an open-ended grantor trust based in the U.S., sponsored by Grayscale Investments. Trading under the ticker GBTC, it is invested exclusively in bitcoin and derives its value solely from the price of bitcoin. According to its prospectus, the Trust's objective is for the NAV per share to track bitcoin's market price…
However, as the chart below shows, while NAV is not far off the price of Bitcoin (multiply the Trust's NAV by 10), the actual traded price of the trust has exploded… to a premium of over 100% in recent days – a record…
GBTC now has a market cap of almost $750 million and offers (for those who can find a borrow) perhaps the greatest bitcoin arbitrage of all time with GBTC trading at a stunning $2000 premium to the underlying Bitcoin it is supposed to track…
As Chris at Capital Exploits previously noted, in any other market on this planet, were we to have an asset priced at one level in one place and an entirely different price some other place, the price discrepancy wouldn’t last very long.
Traders would buy the asset where it is cheaper while simultaneously selling the asset where it is more expensive and pocketing the difference. Something also known as an arbitrage.
Arbitrage opportunities exist in public markets all the time but the discrepancies are typically extremely small and even more so with higher liquidity. It’s also pretty rare for them to last for any real length of time. Years ago I worked with traders whose sole focus was on arbitrage trading but today algorithmic trading trading has almost eliminated these opportunities and jobs.
Bitcoin’s market cap is now over $37 billion so it can no longer be considered “illiquid”.
We herefore humbly ask any of the Joe Sixpacks out there who’ve invested in this Bitcoin Trust to provide me a borrow as shorting it is not currently available.
Take another look at the above chart and tell me you, too, wouldn’t want to arbitrage this anomaly?
A bad credit score can be quite the hardship in America. But can you imagine a bad social credit score? China is implementing social credit scores that will influence the types of schooling, jobs, and housing available to citizens.
The population will also have the chance to review and affect their neighbors’ and acquaintances’ scores. They will be ranked in order to decide who gets what privileges, and who must remain on the outer periphery of society. What citizens of China say on the internet and in relation to the Chinese government will influence the scores, creating a stratified society with the “perfect citizen” on top, decided of course by the ruling Chinese Communist Party.
The score will be contained in information found on ID cards citizens must carry. Some citizens who renew their ID’s are finding that they must submit a sample of their DNA to the central database that China is building to keep further track of their citizens. Over 44 million samples have already been collected. The Chinese government claims it is for crime fighting purposes, however, the people forced to give samples have often committed no crime.
China also strictly limits its internet, creating a firewall that blocks whatever the government does not want people to see. Facebook, Instagram, and other social media websites have been blocked for years by the Chinese government, afraid the citizens will use the social media sites to organize protests and opposition to the communist party.
China maintains control through strict laws against freedom of the press and freedom of speech which helps them revise history in the minds of its citizens. China even went so far as to make it illegal to speak out against the “heroes and martyrs” of China and the communist party.
Already, events like the massacre at Tiananmen Square are viewed with confusion and misunderstanding by younger generations. But now you could end up legally liable for just challenging the historical narrative told by the government.
And Facebook wants in on the action.
Facebook Wants to Impress the Repressive Regime
Zuckerberg has been sucking up to the Chinese government ever since they blocked Facebook in 2009. He has learned Mandarin in order to give some of his amazingspeeches in China and even took a jog through a smog cloud last year for a photo op which included a Mao portrait in the background.
Zuckerberg has said, “You can’t have a mission to want to connect everyone in the world and leave out the biggest country.”
Zuckerberg also directly indicated his intentions by meeting with the Chinese Internet Czar and showing off his collection of Chinese propaganda and speeches by President Xi Jinping. Oh and he just happened to have JinPing’s book on his desk during the meeting, making him not just an insufferable kiss-ass but an obvious one too.
So should we really believe that Facebook made a mistake when they rejected a Hong Kong man’s controversial Facebook profile picture? (Facebook is not blocked in Hong Kong).
Facebook has apologised for “mistakenly” banning the use of a temporary profile picture frame commemorating the 1989 Tiananmen Square Massacre.
Facebook’s picture frame function allows users to change their profile photos in support of a cause. The frame in question carries messages calling for justice for Tiananmen protesters and an end to the “dictatorial regime” in China…
He said he received a notification within 24 hours saying that his design was rejected, on the basis that it fails to meet the company’s terms and policies. Facebook said the frame “belittles, threatens or attacks a particular person, legal entity, nationality or group.”
Fung then submitted on Saturday afternoon another frame showing a candle and the text “Don’t forget June 4,” hoping that Facebook would approve it. It was still under review at the time of publication.
Oops, Facebook later said, it was totally just a little mistake that they supported a murderous government over activists wishing to draw attention to horrible human rights abuses.
In fact, under strict censorship laws, the government does not allow any discussion of the 1989 Tiananmen Square Massacre in books and blocks online searches and discussions of the brutal crackdown that killed an estimated 1,000 students protesting the ruling Communist Party’s human rights abuses.
And now, the Chinese government is preparing for the 28th anniversary of the massacre on June 4th by placing many activists under house arrest and warning others not to speak out.
Facebook seems only too happy to help them in the effort of stamping out that dark mark on China’s history.
Facebook is a Dictator’s Wet Dream
People may not entirely know the extent of Facebook’s data gathering on users. It is much more than simply advertising to you based on recent Google searches, and figuring out your social circles to suggest friends. Facebook has algorithms which put together entire files on people that can be tailored to sell to an insurance company, an employer, or perhaps even the government.
It seems that China is weary of Facebook being used as a tool to organize dissent, and protest their strict Orwellian rules. But perhaps Xi Jinping is just playing hard to get. Zuckerberg will clearly have no problem altering Facebook in China to benefit the communist regime. With just a few tweaks, it will fit right into the Chinese government’s plan to turn China into an exact replica of the society depicted in 1984.
Zuckerberg is likely busy right now planning out exactly how he can help the regime implement their social credit policy–there’s no one better for the job! He can open up citizenship Facebook reviews for each profile, to streamline the process of ratting out your neighbors to the government.
He will be able to hand deliver the files on every citizen who uses Facebook to the Chinese government, revealing everything about them. It will be in Zuckerberg’s hands which Chinese citizens are oppressed and ostracized from Chinese society, and which ones are rewarded.
All the interest Zuckerberg has shown in Chinese propaganda, speeches, and leaders is simply him doing the proper research to understand how to best offer his products and services to dictatorships.
Virtually every class of US debt — sovereign, corporate, unsecured household/personal, auto loans and student debt — is at record highs. Americans now owe $1tn in credit card debt, and a roughly equivalent amount of student loans and autoloans which, like the subprime mortgage quality that set off the 2008 financial crisis, are of largely low credit quality (and therefore high risk).
US companies have added $7.8tn of debt since 2010 and their ability to cover interest payments is at its weakest since 2008, according to an April International Monetary Fund report. With total public and private debt obligations estimated at 350 per cent of gross domestic product, the US Congressional Budget Office has recently described the path of US debt (and deficits) as almost doubling over the next 30 years.
But this is not just a US phenomenon. Globally, the picture is similarly precarious, with debt stubbornly high in Europe, rising in Asia and surging across broader emerging markets. A decade on from the beginning of the financial crisis, the world has the makings of a fresh debt crisis.
In November last year, unsecured household debt in the UK passed prefinancial crisis highs in 2008. In the UK, debt excluding student loans crept up to £192bn, the highest figure since December 2008, and it continues to rise this year. Meanwhile, in the eurozone, debttoGDP ratios in Greece, Italy, Portugal and Belgium remain over 100 per cent. As of March there were more than $10tn negative yielding bonds in Europe and Japan.
There is also the perennial risk and market concern that debt levels in China will at some point bubble to the top of the country’s economic woes in a very damaging way. Among the most risky are nonperforming loans of stateowned enterprises, and mismarked and therefore not properly accounted for debt obligations in the overheated real estate market.
More broadly, emerging market borrowing is surging. Sales of EM corporate dollardenominated notes have climbed to about $160bn this year, more than double offerings at this point in 2016 and the fastest annual start on record, according to data compiled by Bloomberg going back to 1999. The total stock of foreign currency EM debt stands at more than $15tn.
The threat of a looming crisis is not solely down to the absolute volume of debts. At least three things make the situation especially precarious.
First, debt — particularly dollar denominated — is becoming more expensive as market expectations are pricing at least three rate hikes by the US Fed this year, and a relatively strong dollar is putting pressure on borrowers to service foreign currency obligations. The recent downgrades of South Africa to junk status follow a year in which credit rating agencies cut EM borrowers’ grades in record numbers. Moody’s downgraded 24 sovereigns (including Brazil, Nigeria and Saudi Arabia) in the first half of 2016, adding to concerns as to whether borrowers will be able to service their obligations.
Second, the ability to repay debt is under strain in countries whose revenues stem disproportionately from commodities, whose prices have suffered. Furthermore, nations exposed to significant Chinese trade and investment face fiscal stress as China itself has a relatively soft economic outlook.
Finally, the prevailing mixed global economic growth picture — underscored by the forecasts in the recent IMF World Economic Outlook — prompts questions as to how (and indeed whether) outstanding debts will be paid or brought under control.
It is possible that US corporate debt repayment could be boosted by president Donald Trump’s plans attract $2.6tn in corporate cash residing offshore back into the US. Barring any stipulations on its use, the prospect of a significantly low repatriation tax of just 10 per cent (compared with the 35 per cent current corporate tax rate) could help put a meaningful dent in outstanding corporate debt obligations.
Meanwhile, with crippling student debt now a political issue, there is scope for a resolution that could see significant writedowns and debt forgiveness with vast amounts potentially subsumed on to the government balance sheet.
But neither of these would help debt repayment outside the US. Of a shortlist of prescriptions to escape unsustainable debt — from outright default and austere fiscal policy to bailouts — only growth itself can lift countries out of high indebtedness in a nondisruptive way. Without it, we have the makings of a debt crisis that would reverberate around the world.
On May 29th, 2017, German news source Die Welt reported that German authorities raided the homes of five police officers amid a probe into evidence which suggests that law enforcement engaged in a cover up of Berlin terrorist Anis Amri’s history of criminal activity which would have warranted his arrest. Politico reported that police were seeking cell phones to verify whether the officials were communicating about the alleged cover-up.
Reports emerged earlier this month that Anis Amri, who carried out the deadly attack in Berlin last December, was a known drug dealer and police allegedly had enough evidence to jail him up to six months before the attack in which 12 people died. He had been under surveillance since March 2016 in Berlin, but security services said they dropped their watch in September, having only observed his activities as a drug dealer.
Berlin interior minister Andreas Geisel said police knew Amri was not just a small-time drug dealer as first claimed but had engaged in commercial-scale, organised drug trafficking, for which he said police could have obtained an arrest warrant. Geisel further alleged that at least one policeman involved had later forged a document in the cover-up of the omission.
On January 2017, Disobedient Media reported that German officials ignored multiple tips in September and October 2016 from Moroccan intelligence, warning them that Anis Amri was known to have sworn allegiance to the Islamic State and was meeting regularly with known ISIS operatives. This series of failures to properly investigate Amri and prevent the Berlin truck attack came on the heels of November 2016 reports that an intelligence officer working for Germany’s internal intelligence agency, the Bundesverfassungsschutz (BfV) was arrested for taking part in a plot to bomb the BfV’s headquarters in Cologne, Germany. This news was given little to no attention by U.S. media.
German news source Der Spiegel reported that the 51 year-old intelligence officer made a “partial confession” to his role in plotting the attack following his arrest.
These failures to properly respond to warnings about the Berlin truck attack and the infiltration of intelligence organizations by ISIS operatives seem to indicate either a troubling level of incompetence or complicity within German police bodies as well as intelligence and anti-terror bureaus.
Just minutes after an appearance on CNN explaining why he turned down House and Senate intelligence committees’ “invitation to provide information and testimony” as nothing but a “fishing expedition,” Trump personal lawyer Michael Cohen has been subpoenaed by the House committee.
As a reminder, Axios notes, Cohen last found himself at the center of a media firestorm earlier this year when he played a substantial part in the still-unverified Steele dossier on Trump’s Russia connections, which alleged that he took a trip to Prague to meet with Russian officials.
CNN notes that Cohen is the second person in Trump’s orbit to flatly deny a request from congressional investigators. Former national security adviser Michael Flynn refused to respond to a Senate subpoena and rebutted a House request last week through his lawyer.
“I declined the invitation to participate, as the request was poorly phrased, overly broad and not capable of being answered,” Cohen told CNN Tuesday, adding that he considered it a “total fishing expedition.”
“They have yet to produce one single piece of credible evidence that would corroborate the Russia narrative,” Cohen said.
He called the investigation a “rush to judgment.”
And so – unsurprisingly, AP reports that the House Intelligence Committee has subpoenaed Cohen.
A House Intelligence Cmte staffer says the panel recently issued a subpoena to President Trump’s personal attorney Michael Cohen, AP reports, citing an unidentified person.
The subpoena is part of the ongoing investigation into Russia’s election meddling.
When will the House subpoena Putin’s records and be done with this once and for all?
Of the many questionable provisions of the Affordable Care Act, the most controversial was unduobtedly the so-called contraception mandate. It has been the subject of two Supreme Court cases already, and if The New York Times is correct, it may spark a third in short order. While the earlier challenges were to the mandate itself, however, this time, the dispute will be over the Trump administration’s efforts to do away with it.
The Office of Management and Budget is currently reviewing E.O. 12866, an interim final rule that the Timesreports would “roll back” the regulation. This would almost certainly set off yet another legal battle:
Gretchen Borchelt, a vice president of the National Women’s Law Center…said her organization was preparing a lawsuit to challenge the expected rule, and she cited several possible legal arguments.
If the Trump administration does not adequately explain and justify the rule, she said, it could be challenged as “arbitrary and capricious,” in violation of federal law. In addition, she said, women could challenge it as violating a section of the Affordable Care Act that broadly prohibits discrimination in health programs that receive federal funds.
Ms. Borchelt also pointed to a little-known provision of the Affordable Care Act that says the health secretary shall not issue any rule that “impedes timely access to health care services” or “creates any unreasonable barriers to the ability of individuals to obtain appropriate medical care.”
The mandate was created by the Department of Health and Human Services under President Obama, and requires that virtually all employer-provided insurance plans (as well as all plans sold on the Obamacare exchanges) cover all forms of birth control—including those sometimes referred to as abortifacients. Exceptions were made for houses of worship, but not for private businesses or faith-affiliated nonprofits, even though a number of such groups object to participating on moral grounds. The former cohort (the “closely held corporations”) won relief with 2014’s Hobby Lobby ruling, while the latter brought its challenge before the high court last year in Zubik v. Burwell, better known as the Little Sisters of the Poor case for the order of Catholic nuns who have been party to it.
Earlier this year, Trump’s Justice Department shocked many supporters of the president when it declined to drop the case against the Little Sisters and six other religious nonprofits. The outcry was swift, and Trump responded by issuing an executive order that many saw as foreshadowing a rulemaking to reverse the regulation altogether. Now, it appears the president may finally be making good on his repeated campaign-trail promises to ensure that religious groups not be coerced into doing something they view as sinful.
It’s about time.
Ideally, the Department of Health and Human Services will eliminate the contraception mandate rather than just exempting a certain category of organizations from it. Better still would be for Congress and the administration to work together to liberate Americans from the long list of supposedly essential health benefits that the Affordable Care Act deemed us categorically too stupid to choose from among ourselves, thus forcing people to pay for coverage they may not want or even be physiologically capable of using.
Alas, that sort of freedom-maximizing outcome continues to seem unlikely.
It took Paul Singer’s Elliott Management less than 24 hours to raise $5 billion earlier this month, however it is safe to say he won’t be using any of that cash to buy stocks at current prices, or even BTFD. Instead, as he writes in his Q1 letter to investors, the legendary hedge fund manager thinks “that it is a good time to build a significant amount of dry powder,”
The reason for that is if, or rather when, Trump’s pro-growth agenda fails to be implemented, “all hell will break loose” and that a recession looms as the artificial crutches propping up risk assets are pulled out:
Given groupthink and the determination of policy makers to do ‘whatever it takes’ to prevent the next market ‘crash,’ we think that the low-volatility levitation magic act of stocks and bonds will exist until the disenchanting moment when it does not. And then all hell will break loose (don’t ask us what hell looks like…), a lamentable scenario that will nevertheless present opportunities that are likely to be both extraordinary and ephemeral. The only way to take advantage of those opportunities is to have ready access to capital.
Isolating the impact of the “Trump Put” as described recently by Deutsche Bank, Singer writes that “although the growth agenda of the Trump administration is slow to get off the ground, markets still anticipate that much of it will be enacted, sooner or later.” And yet, according to most metrics, the Trump trade has already been priced out of most markets with the notable exception of equities, which as Bank of America pointed out in a note last week, are now the “last one standing”.
Elliott’s warning of a negative reaction in equity markets if Trump’s economic policies are not delivered takes place as the US Congress debates how to fund proposed tax cuts for individuals and companies, and whether lawmakers are prepared to blow out the budget deficit as Trump’s plan would. So far, all of Trump’s various economic initiatives appear to have stalled permanently in Congress, with the market giving pricing in little possibility of their passage.
In this context, Singer warns that “there are actually forces in place that could point to a relatively near-term recession in the absence of solid new pro-growth policies.” And with rates already at ultralow levels, the Federal Reserve won’t be able to provide a sufficient QE cushion, as it did during the great financial crisis. Which is why absent a procyclical push, the US economy may have no choice but to contract. Which is ironic because Singer, a prominent Republican donor, originally staunchly opposed Mr Trump as its candidate, before meeting the President at the White House in February where Trump claimed “he’s given us his total support”.
The manager of $32.6 billion in AUM once again points out his favorite nemesis, the Federal Reserve, and says that “we live in a time when extraordinary worldwide monetary policies have created bubble after bubble.” Warning that QE has done nothing to address fundamental issues, Singer said that rising sovereign and private debt load will come back to haunt the markets and policy makers. Expounding on a popular theme from his previous letters, Singer said that not only has the mess from the great financial crisis not been cleaned up, but all the wrong measures have been used to address the problem.
“Since the GFC, we have believed that the extreme monetary policy (ZIRP, NIRP, and QE) prevalent throughout the developed world was unsustainable and risky.” He explains – as he has done every other quarter since 2008 – that the solution to a crisis resulting from financial engineering isn’t more financial engineering, but addressing the real issues that caused the problem to begin with. That has not beed one, and instead “the solution to overindebtedness should not have been the creation of more debt, and the problem of inadequate growth should not have been solved by money-printing and ZIRP/NIRP.”
Singer also blames failed policies for the current breakdown between heightened geopolitical risk and record low volatility:
“On the face of it, year after year of the unusual and risky policy mix has not caused the collapse of any major currencies or significant inflation (other than in asset prices),” resulting in a world that has been put to sleep by pervasive complacency. “This seeming lack of empirical proof of the lurking danger has lulled most investors into thinking that the elevated prices of stocks and bonds, and the historical fall in price volatility in financial asset markets, is somehow a permanent condition.“
To be sure, Singer has been one of the most outspoken market skeptics during the “central planning” phase of markets, issuing periodic warnings about China’s debt-fueled boom and price bubbles in financial markets inflated by central banks’ ZIRP/NIRP and bond buying policies of central banks. Maybe this time will be different. Even so, Singer’s stated skepticism hasn’t prevented him from outperforming not only the S&P in recent peers, but the vast majority of his peers.
So what is Singer’s advice for today’s investors? In a time of historic market complacency, Singer believes that “the trick in such periods is to keep out of trouble.” Eventually the markets wake up, and when they do, that’s when “all hell will break loose.” When that moments comes, Singer is confident that he will be ready.
There is a very REAL plot to overthrow Trump led by the political establishment and aided by the mainstream press.. This is not simply speculation – this is the real deal.
Of course the Washington Post and New York Times are in full swing to get rid of Trump. No matter what it might be, the twist is always against Trump right down to the story how Sean Spicer wanted to see the Pope because he is a devote Catholic and was denied.
CNN, of course, is also part of this conspiracy.
You will NEVER find any positive article about Trump in mainstream media. Here is CNN and we can see that 50% of the top stories are always against Trump.
We have Boehner coming out saying Trump is a disaster. This is the guy who threw people off committees if they did not vote for his agenda.
The Kushner story is desperately trying to make something out of nothing.
Here we have after Flynn’s removal, Kushner suggesting setting up a direct channel for diplomatic purposes regarding Syria with the Russians. That is entirely within reason and has been done during confrontations in the past. It was not done, it was merely a suggestion.
The press seems to want war with Russia and absolutely nothing else. Not such link was established. So why is this a major story? It’s again RUSSIA.
Behind the Curtain, Republican Elites are conspiring to overthrow Trump (including Boehner) to protect the establishment. I have never seen such an all out effort to reject the people’s demand for reform.
This is HIGHLY dangerous for we can very well move toward civil war. Our model also warns that that United States can break up as a result of this by 2032-2040.
In 2002 the U.S. Court of Appeals for the 9th Circuit said that the lawful use of deadly force by the police may be ruled unlawful if the police themselves “created the need to use force” by acting in an illegal manner. “Where an officer intentionally or recklessly provokes a violent confrontation, if the provocation is an independent Fourth Amendment violation,” the 9th Circuit held in Billington v. Smith, the officer “may be held liable for his otherwise defensive use of deadly force.” Otherwise known as the “provocation doctrine,” this legal standard has served as an important check on overreaching law enforcement tactics. Today, by a vote of 8-0, the U.S. Supreme Court rejected the 9th Circuit’s reasoning and wiped the provocation doctrine off the books.
At issue today in County of Los Angeles v. Mendez was a 2010 incident in which two deputies from the L.A. County Sheriff’s Department entered the residence of Angel Mendez and Jennifer Garcia without a search warrant, spotted Mendez holding a BB gun (which he kept on hand to fend off rats), and shot both Mendez and Garcia multiple times in ostensible self-defense. Mendez’s right leg was later amputated below the knee as a result of his injuries. Garcia was shot in the back.
Mendez and Garcia sued, charging the police with illegal search, illegal seizure, and illegal use of force under the Fourth Amendment. In March 2016, Mendez and Garcia prevailed at the 9th Circuit, which rejected the officers’ pleas for qualified immunity and instead held that the two detectives were “liable for the shooting as a foreseeable consequence of their unconstitutional entry even though the shooting itself was not unconstitutionally excessive force under the Fourth Amendment.” In other words, Mendez and Garcia prevailed under the provocation doctrine.
Writing today for a unanimous Supreme Court, Justice Samuel Alito overturned that 9th Circuit decision, dismantled the provocation doctrine, and ruled in favor of the officers. The provocation doctrine “is incompatible with our excessive force jurisprudence,” Justice Alito declared. “The rule’s fundamental flaw is that it uses another constitutional violation to manufacture an excessive force claim where one would not otherwise exist.” According to Alito, “there is no need to dress up every Fourth Amendment claim as an excessive force claim.”
Of course, if the police had not violated the Constitution to begin with in this case, the police would not have had the opportunity to use any sort of force at all. The indisputable fact is that Angel Mendez would still have the use of his right leg if the detectives had not disobeyed the Fourth Amendment, illegally entered his home, and shot him.
The Supreme Court’s opinion in County of Los Angeles v. Mendez is available here.
“[The] problem with the all-out libertarian argument of ‘anything goes’ is that we live in a world where everything you do affects someone else,” says Nick Bilton, former New York Times columnist, Vanity Fair special correspondent, and author of American Kingpin:The Epic Hunt for the Criminal Mastermind Behind the Silk Road.
Reason’s Brian Doherty called the book “a lurid cops-and-crooks story” in his recent review.
American Kingpin tells the gripping story of the manhunt for Ross Ulbricht and the “Dread Pirate Roberts,” a pseudonym used by the chief operator of the Silk Road, an online marketplace on the dark web that was used to buy drugs, weapons, and other illegal goods. The name was also a nod to the cult classic ThePrincess Bride, in which “Dread Pirate Roberts” is passed down from one character to another.
Ulbricht’s legal team claimed that this is exactly what happened with the Silk Road: Ulbricht started the site, but handed off the name—and control of the illegal marketplace—to another operator. The judge didn’t allow Ulbricht’s lawyer to present this theory in court, and Bilton doesn’t mention it in the book.
Ulbricht’s mother, Lynn, recently called American Kingpina “media lynching.”
“I just don’t have a shred of a doubt that it was Ross,” Bilton told Reason’s Zach Weissmueller. “When I first started writing this book, I thought there were multiple Dread Pirate Roberts…Then I saw the evidence… [and it was like] a bullet train that started to point in one direction.”
Bilton also discusses drug prohibition, his own mixed feelings about his enigmatic protagonist, and the murder-for-hire accusations that Ulbricht was never charged with but that came up in the trial.
This is a rush transcript—check all quotes against the audio for accuracy.
Nick Bilton: I came at it from a viewpoint of wanting to understand how Ross felt and why he wanted to do this. I didn’t know if it was monetary. I didn’t know if it was libertarian. I didn’t know what it was, and so I really wanted to understand, and that was probably the most important thing to me in the beginning of this reporting process. He had joined the libertarian club in college, and he had libertarian-leaning views prior to that, but at Penn State. I ended up talking to people who he was in the club with. I talked to people he met at conferences, libertarian conferences. I saw some of the transcripts from some of the debates he’d done, some of the quotes he’d given the local college newspaper, and spoke to people that he had debated with.
His arguments are incredibly relatable. He argues very succinctly, okay? Why is it that people are thrown in jail for buying weed or magic mushrooms? When it comes to that, I think I completely agree with Ross and his arguments and his ideas. Where I started to have a really hard time was with the idea of selling things like heroin and fentanyl which have led to more deaths in the last year alone than people who have been killed from firearms. I don’t see those as drugs. I see them as poisons.
One of the things I really tried to do in the book is I don’t offer a viewpoint at any point in time. What I do is I tell Ross’s side in the chapters about Ross from his point of view, from the things that I’ve read and reported and so on. Then I tell the law enforcement side from their point of view. Of course, there’s different versions of the law enforcement side. I want the reader to decide at the end. Do they believe that what Ross did was right? Do they believe it was wrong? Do they believe drugs should be legal? Do they not? I really hope that that’s how it comes across.
Zach Weissmueller: You get a little uncomfortable with things like heroin or fentanyl being sold on there, and certain people, certain characters in the book, also seem uncomfortable with that who are affiliated with the website. But the other side of that would be, well, still better here where there’s some sort of customer review process. There’s education happening on the forums to tell people how to take the drugs more safely, and also just the side effect of prohibition, all the violence that happens just because something that people want is prohibited. In the end, how do you think that all shook out?
Nick Bilton: I think that with all technology, whether it’s the Silk Road, Twitter, Facebook, driverless cars, you name it, with all technology, there is a good side and a bad. I think that one of the biggest problems in Silicon Valley, which is something I’ve covered for over a decade, is that people never ever think about the bad. They always think about the good, and the bad is something that happens. Then they have to kind of clean up the pieces afterwards.
For example, I was friends with the guys who built some of the early 3D printers, MakerBot and things like that. I remember saying, “What are you going to do with this? This is really cool. You can print objects out.” They said, “Oh, we’re going to make wall hooks and iPhone cases.” What was the first thing that people did was they built 3D-printed guns. Put aside the libertarian argument of that, whether guns should be legal or whatever. If there was something that they had thought about, they could have thought about ways to ensure that a five year old didn’t do that or whatever it is.
I think the same thing happened with the Silk Road. There are surveys and studies that came out in the past few years that have showed that buying drugs online makes people feel safer, makes them feel like they know what they’re buying because there are review systems, all the things that Ross set out to do. But then there are the negatives, and the negatives are that it has allowed fentanyl to come into the country more. There are other ways that it has come into the country, and people don’t understand.
This is a lab-based heroin that’s 50 to 100 times stronger, and people overdose on it. Where I have a problem with the all-out libertarian argument of anything goes is we live in a world where everything you do affects someone else, right? Every single, solitary thing you do has an effect on another human being. The way that I saw Ross arguing it was that, “Well, that’s not my problem.”
Zach Weissmueller: The libertarian viewpoint on the drug war is that it itself is so harmful that something has to be done to overturn it, and it’s not going to happen through normal, democratic processes. It’s been going on for over 40 years.
Nick Bilton: I completely agree.
Zach Weissmueller: A trillion dollars, countless deaths, incarceration.
Nick Bilton: Yeah. I completely 1000% agree that the war on drugs did not work, is not working, and I think that what’s fascinating is even the authorities that are chasing Ross in the book agree. The DEA agent ends up becoming a bad guy. He has a moment in the story where he’s like, “Wait a second, maybe, maybe this guy’s right. Maybe the war on drugs is broken.” But the argument that Ross was trying to prove was that let’s just make everything legal, and it will work itself out. I think that there are a lot of bad people in the world that try to take advantage of people by cutting up heroin with rat poison or whatever it is, and it kind of doesn’t think about the repercussions of those bad people.
Zach Weissmueller: I want to ask about the rather large group of federal agents who hunted down Ulbricht, because that’s a major part of this book. It’s about that manhunt. Could you just talk about the size and the scope of the investigation of Silk Road?
Nick Bilton: There’s a DEA team in New York. There’s an FBI team in New York. There’s an IRS agent in New York. There’s local police. There’s people in San Francisco that don’t even make it into the story. There are people overseas. Everyone is kind of hunting for this thing, because one, it was getting a tremendous amount of attention in the media because it was just fascinating that this thing existed and that no one had been caught and it hadn’t been shut down. Two, it’s because a lot of people wanted to be the hero that caught the guy.
But at the same time, you see the dysfunction of government. No one wants to share their information, because they’re afraid that if they do, someone will steal it, and go and catch this person and they won’t get credit. There are, of course, people that do bad things. Carl Force, the DEA agent, who starts stealing money and selling information to the Dread Pirate Roberts and all this insane stuff. There’s Sean Bridges, the Secret Service guy, who does the same thing, and is literally stealing money. It’s just mind-boggling just how dysfunctional this whole thing was.
Zach Weissmueller: Besides scrambling just out of pure ambition and media attention, there seemed to be, at least with some of these agents, a almost ideological motivation. We talked about Ross’s ideology, his libertarianism, but then there’s this Homeland Security agent who reads the writings of the Dread Pirate Roberts, which is the screen name of the administrator of the Silk Road. You describe him as being terrified at what he’s reading. Could you talk about the ideological motivations of some of the people involved in this?
Nick Bilton: For some of the agents, for one in particular, Gary Alford from the IRS, he seized the writings of the Dread Pirate Roberts, and they’re almost all incredibly anti-government. He is working on the task force where there are people who on 9/11 had run down to the buildings and spent weeks down there trying to pull bodies out of the rubble. He juxtaposes those two things, and is livid essentially that these people are now going to the hospital and some have died because of what their heroic efforts on 9/11, and then the Dread Pirate Roberts calling everyone in the federal government not very nice things.
Zach Weissmueller: I also sensed some of that in the sentencing statement of the judge in this case whose statements quite frankly infuriated a lot of Ulbricht’s supporters. She gave a full-throated defense of the drug prohibition. She said that his position was privileged and that what he did was terribly destructive to our social fabric, and then threw the book at him. What do you make of the judge’s comments and sentencing in this case?
Nick Bilton: Well, two things. The first thing I’ll say is that from my reporting, Ross was actually offered a plea deal in the beginning when he was arrested in New York. The plea deal was 10 to life. It would not have charged him with the kingpin charge. They said, “Okay, if you’re going to go to court, we’re throwing the kingpin charge at you,” which is everything, which is a really bad charge.
Zach Weissmueller: I will throw in that offering a plea deal of 10 to life is … I could see why someone might not jump on that.
Nick Bilton: I can see why someone might not jump on that, but when the amount of evidence that was on Ross’s computer, it also boggles my mind why he decided to take it to court and with the defense that he went with, he was caught with 2.1 million words of chat logs on his laptop, photos, videos, spreadsheets. All the same stuff was on thumb drives separately than his computer. It was a very difficult case to argue.
Putting that aside, one of the toughest questions that I’m ever asked around this book is if I agree with the sentencing. I can see it from both points of view. I can see people who look at it and say it’s ridiculous. It’s two life sentences plus 40 years for running this website, and I completely understand that argument. It makes complete sense. The other point of view is that there were at least six people who overdosed and died as a result of the site, that got bad drugs or had a bad reaction. You can say that the murders didn’t happen, but he thought that they were happening. The argument from that side is, “Well, of course that was a just sentence.”
As far as what the judge said, and this is one of the things that really upsets me the most about this whole story, this is a judge who not only hears cases like Ross Ulbricht’s but hears cases every single day from people in the Bronx and elsewhere that sell drugs because they don’t really have many options. What I took from her statement that it was a privileged argument is that Ross had a very lucky upbringing. He had a family that loved him. He had a lot of opportunities.
He went to school to be a physicist, and he chose to go down this path for the reasons he chose to go down. His argument that it was different because it was from behind a computer, I think, was what frustrated her the most. What frustrates me the most is you have everyone out there defending Ross, and I don’t see anyone out there defending all these poor people who are in jail for selling weed or magic mushrooms who are African American and Hispanic.
Zach Weissmueller: Someone like Ross who basically devoted his life to trying to stop the drug war from happening, and the people who support him who deeply believe that the drug war is immoral and wrong, think that this was a tool that could have disrupted that. Obviously they wanted to set an example of this guy who tried to do something to end this unjust drug war that throws all these poor people with these crazy sentences. To hear a federal judge who hands out those sentences sanctimoniously lecturing, I think probably rubbed people the wrong way.
Nick Bilton: I cannot speak for the judge. I am not the judge. If I was the judge, it probably would have been a different sentence. It definitely would have been a different sentence. But the everything goes mentality had repercussions. I don’t agree with the sentencing for these mild drugs. I do not believe that they should be illegal. I really think it’s just ridiculous, but when I see the results … I mean, go look. Go read the series in the Washington Post of people who have overdosed from fentanyl, and look at some of the stories and the videos of kids whose parents have died from it. It is harrowing. That shouldn’t be legal as far as I’m concerned, like in my personal opinion.
Zach Weissmueller: The argument for making something like heroin or even fentanyl legal would be that at least if it’s out in the open, we can treat the terrible consequences, the public health consequences, more effectively than when it’s totally underground, and again that something like the Silk Road would be a kind of crowbar to pry legalization open [crosstalk 00:14:39].
Nick Bilton: I mean, just I’m curious. Do you believe that they should be legal? Do you believe that heroin, that fentanyl, that all of these things should just be kind of open and …
Zach Weissmueller: I believe in harm reduction. I don’t think that harm elimination is realistic, but I think that making everything legal makes it a lot easier for information about these things to get out there and for treatment programs to flourish.
Nick Bilton: But I also believe that there are certain things that … Do you believe cyanide should be legal? I personally see fentanyl and heroin as the same thing. These are not drugs that we should be taking. I mean, tens of thousands of people now die a year from those drugs.
Zach Weissmueller: In a world where drugs were totally legal, who knows if fentanyl would even exist.
Nick Bilton: Yeah, I can see that. I think that, again, like for me it’s not all or nothing. It literally just boggles my mind that magic mushrooms are illegal and that even weed is illegal, MDMA and all these things. I don’t understand. It just makes no sense. But when it comes to these hard drugs that people overdose from on a daily basis if not an hourly basis, I just don’t understand why they exist, and I don’t think that we should be encouraging people to take them.
Zach Weissmueller: Obviously Ross is a sympathetic character to someone like me in a lot of ways, but there’s one area of this story that even makes his supporters uncomfortable, which is the supposed murder for hires that happened. There was one that was completely staged by a DEA agent, the one who was siphoning Bitcoins off the site. There were supposedly some five others that … where the Hells Angels were maybe contracted or maybe it was some sort of scam. In any case, no bodies ever came up, and it was not ever used in court against Ulbricht.
Nick Bilton: Well, it was used in court against Ulbricht. He was not charged with murder, but the kingpin charge, that was used both at the trial, chat logs around it, discussions around it, and it was used a lot in the sentencing.
Zach Weissmueller: Couldn’t you make the argument that that’s worse in a way, bringing it up in the trial but not actually feeling like you have enough evidence to charge him with it? You’re-
Nick Bilton: From what I can tell from the reporting I’ve done, the people I’ve spoken to, they didn’t not charge the murders because they didn’t have the evidence for the murders. They would never have charged him with murder. They would have charged him with some sort of commissioning to have someone killed or something like that, which is also a federal crime. But the reason is is because they wanted to prove a point about the website, and that was why they went after that kingpin charge, from what I can tell. The point was you run a website like this, that these are going to be the repercussions for those actions. That was the government point of view. I’m not saying I agree with it. I’m just saying that that’s what I heard during my reporting.
Zach Weissmueller: There’s been some criticism of the book from Ross Ulbricht’s mother, Lyn, who’s a very outspoken advocate. She’s called the book a media lynching, and says that you basically just presented the government’s side of the case.
Lyn Ulbricht: Nick Bilton has appointed himself judge, jury, and executioner.
Zach Weissmueller: Especially in relation to these commissioned murder charges where the defense side of the argument is that the Dread Pirate Roberts, who was the administrator who ran the site, might have been Ross at one point, but-
Nick Bilton: It was always Ross.
Zach Weissmueller: … he walked away.
Nick Bilton: It was always Ross. [crosstalk 00:18:20].
Zach Weissmueller: But you don’t buy that. Why don’t you buy that?
Nick Bilton: Well, first of all, you read the book. Do you think it’s a one-sided point of view from the government’s side?
Zach Weissmueller: I don’t think that, but you don’t raise this possibility that there might have been other people behind the DPR account.
Nick Bilton: Because there wasn’t. There is not a shred of a doubt in my mind that Ross ran that site from day one. The evidence, it is overwhelming, and I don’t need the government to tell me that. I went through everything. I went through 2.1 million words of chat logs. We went through social media posts, photos, videos, Ross in college arguing these things, saying the same exact things in college during debate class as the Dread Pirate Roberts said throughout the entire life cycle of the site. If you want to argue that the chat logs were hacked and changed, you would need a team of 1,000 people to pull that off. Imagine all you did for three years was talk online, and you didn’t really have many conversations in person. Now imagine that at the same time as talking online to your coworkers, you’re also posting on social media about things, right?
Let’s just say I have a few minutes while you’re in a library and I hack into your computer, and I’m going to place some documents there. How the heck am I going to get to the minute when you’re on a flight, telling your employees that I’m going to be on a flight, when you’re camping, saying I’m going to be away this weekend, when you meet a girl, telling people you just met a girl? To pull all those things off and to manipulate his social media, it would be impossible. If you read the book and you see how much of a mess the government was while trying to hunt this thing down, if you believe that the government could pull off manipulating all that stuff to throw this random kid in jail, it’s beyond delusional.
Zach Weissmueller: But does it necessarily prove that there were not other people with access to the login? Because one of the main alternative theories out there was that Mark Karpeles, who founded the Bitcoin exchange Mt. Gox, whose assets were seized in another investigation leading up to this, might have been the Dread Pirate Roberts.
Nick Bilton: So you’re trying to tell me that Mark Karpeles put together, manipulated those chat logs over almost three years, manipulated his social media feed, his emails, his text messages, the photos, right? Then not only that, took the entire Silk Road that was the exact version that’s on the laptop, snuck into Ross’s bedroom, and put the thumb drives next to his bedside the same day he’s arrested, and managed to get all those files on his computer in a library in a matter of about four or five minutes? It’s impossible, and so I just don’t believe for any moment that there was more than one Dread Pirate Roberts. I just don’t. There’s nothing that implies that other than the fact of that brilliant name, the Dread Pirate Roberts.
Zach Weissmueller: The defense is working on an appeal right now for Ross, and a couple of the things they’ve revealed are that they say they’ve discovered some deleted conversations between the Dread Pirate Roberts and someone who might have been another corrupted agent in the investigation. They also say that someone seems to have logged into the DPR account after-
Nick Bilton: Well, the DPR forum account, not the DPR account.
Zach Weissmueller: … Ross was arrested.
Nick Bilton: If someone logged into the DPR account, they would have taken off all the money and run away. Someone logged into the DPR forum account, and from what I understand, it was about seven weeks after. It was when the employees were taking the code from the site to build the Silk Road 2 and amid the code was a DPR forum login.
Zach Weissmueller: Given the complexities of this investigation and the nature of online identities and some of these anomalies, you still don’t think there’s any room for any uncertainty or doubt as to who was exactly behind the DPR account at all times.
Nick Bilton: I just don’t have a shred of a doubt that it was Ross. When you read the chat logs from the point in time when he supposedly handed it off to someone else, there’s no differentiation between them before and after, and the social media posts and so on. When I first started writing this book, I thought there were multiple Dread Pirate Roberts. When I first sat down and I started writing this book, I was like, “Okay, my job is to try to figure out who they are.” Then I saw the evidence, and I saw the diaries on his computer, and even before I saw the chat logs. It was the beginning of a bullet train that started to point in one direction.
Zach Weissmueller: Given the corruption that we know is involved with this case from people like Carl Force, you don’t have any doubts about anything being falsified in there?
Nick Bilton: I believe that there were things falsified from Carl Force’s DEA reports. I’m sure. He was not a very honest person. But I don’t believe that anyone got into Ross’s computer and managed to put in thousands and thousands of documents related to the Silk Road. There’s part of me that wishes, that really, really wishes, Ross would have said, “I did this. I believe that the war on drugs is stupid and wrong, and I did it because I believed this,” and become a martyr for the cause.
The other part of this that was so fascinating to me is the technological part. I meet people that will say on Twitter or Facebook, “You’re a piece of shit,” and, “Go to hell,” and this, that, and the other. I’ll meet them in person, and they’re the nicest, sweetest person in the world. We have a disassociation with what technology does and how it disconnects us from human beings. Even at Ross’s sentencing, he apologized for the things that had happened. After the parents of the people who had died stood up and spoke, he says that he didn’t intend for any of this to happen.
Zach Weissmueller: I want to finish talking about intentions versus reality, because you make it very clear in the book that he did start out with the idea of like, “I want my legacy to be the person who began the end of the war on drugs.” The Silk Road is gone. It’s been taken down, but as we know, dozens of imitators have popped up in its wake. What do you think his legacy will be, and what will people have learned from the Ross Ulbricht case?
Nick Bilton: His legacy will be both good and both bad. I think that there will be a group of people, mostly the people watching this, who will see that he has, if not started the conversation about how technology could be used to fight the war on drugs, will argue that and will see that from that point of view. You can’t deny that, but then there’s the other side of it, and that there are people who I’ve spoken to who say that these online drug marketplaces, whether it’s the Silk Road or others that are out there, have helped lead to the rise in fentanyl in America which have helped lead to the opioid epidemic, not exclusively, but have helped, and that there are repercussions for legalizing drugs on the dark web where there are still bad things that happen. I think that I see from my own personal point of view Ross’s legacy as being both a good one and a bad one.