Hypocrisy and The Consequences of Monkey Laundering

Ed Zitron 8 min read

In 2021, cybercriminals laundered billions through the blockchain:

Mining pools, high-risk exchanges, and mixers also saw substantial increases in value received from illicit addresses, the report said. Mixers typically combine potentially identifiable or tainted cryptocurrency funds with others, so as to conceal the trail to the fund's original source.

That’s because crypto is, by default, an incredible place to hide money, despite the public nature of the blockchain. As Martin Cheek said in Fortune:

Although transactions are recorded on a public ledger, purchasers can remain anonymous, a huge boon for anyone looking to discreetly wash assets. There’s no mechanism in place to prevent launderers from creating multiple accounts and transferring assets between them to further obfuscate the trail.

NFTs (non-fungible tokens) are an interesting inflection point for crypto-anonymity - while previously you’d want to keep your tokens relatively private to avoid potential bad actors, the very nature of an NFT is that you want to show it off. Depending on the NFT, they could be worth anywhere from a few thousand to a few hundred thousand dollars, and depending on the type of person you are, you may want people to know your real identity so that they know how cool you are for owning a monkey with a crown.

However, past a certain point of wealth, you actively want to avoid public knowledge of exactly how much you have, which is made problematic by a publicly-available ledger of literally every transaction you’ve made. Not simply because of the taxation on the NFT sales themselves, but the question as to when taxable events occur on the blockchain - is it literally every transaction? Or only sales? What counts as a “sale”? And if you’re getting a cut of each sale, and you’re selling something popular, does that tax liability connect with other people’s transactions that you benefit from?

This is why I believe the founders of the Bored Ape Yacht Club (henceforth BAYC) wanted to stay anonymous. The BAYC tokens have an astounding 3 billion dollar market cap, buoyed in part by celebrity NFT “purchases” funded by questionable crypto companies. They have cut licensing deals with everything from athletic brands to marijuana companies. Their owners receive a 2.5% cut of every sale in perpetuity, and as long as these monkeys keep selling, they keep profiting.

They also failed to keep the main promise of NFTs and didn’t pay the artist anything past a one-time fee that is dwarfed by the tens or hundreds of millions of dollars they’ll make off her work.

Monkey Business

Last week, enterprising and extremely online reporter Katie Notopoulos revealed the names of the BAYC founders in an in-depth piece of reporting. People with no object permanence claimed that this was “doxxing” - publishing private or identifying information about someone online with malicious intent - versus doing the necessary reporting on who and what is the power behind a multi-billion dollar entertainment-company-meets-scam.

This is an interesting philosophical discussion - do we have the right to know who the person is behind the product we’re selling? I would say yes, especially when it comes to an asset that’s part of an industry that’s regularly manipulated to benefit a few people. This isn’t some plucky artist sitting around sketching out things that is subject to some overwhelming risk by their identity being made public - this is a company that has intentionally obfuscated its executives for “safety reasons.”

Jeff Bercovici of the LA Times elegantly summarized why it’s necessary to know who these people are:

The answer to this question is that the NFT industry is full of nasty little hypocrites.

Tell me, what odds are more formidable than the value of your asset being dictated by a totally anonymous and untraceable person? As Bercovici said, wealth is power, and in this case, said power allows them to literally do anything they want - they can, as they have before, keep printing as many apes as they want to. They could flood the market with apes and cash out tomorrow, and there would be nothing to stop them - or at least, significantly less to stop them if they were anonymous - if they can create “mutant apes,” what’s to stop them from creating a new collection every week, potentially reducing the value of a bored ape in the process? Hell, they could literally release a new collection every week and burn the entire thing to the ground, destroying livelihoods in the process, with absolutely no legal recourse, even if it was obvious they were doing it to make a quick buck.

And on top of that, their anonymity allowed them to likely avoid massive tax liability, which I would argue is the number one reason that people want to stay anonymous when they have a lot of money. It’s much harder for them to hide the profits they’re making from the IRS if they are named and connected to the project - and much harder to pretend this is just a random project that happened to make money versus a multi-billion dollar company.

The whole point of crypto is that it puts the power “back in the hands of the people” and “democratizes financial access.” According to a VC that Buzzfeed spoke to, “it will meaningfully open up opportunities for people who otherwise have the odds against them.” Having anonymous billionaires does not readjust the odds - if anything, it aids in the oppression of more people because these shadowy oligarchs can (and have) wield massive amounts of money in total silence to profit off of the people they’re conning into joining the system.

Having more secret billionaires - or hundred-millionaires - does not protect anyone other than the wealthy. The idea that cryptocurrency somehow democratizes wealth is a terrible and cruel lie, one built to convince people that it is possible to get rich off of a system that is inherently built to enrich those who built it.

It’s utterly loathsome that thousands of mewling sycophants are complaining about the “privacy violations” of the BAYC founders. It’s not simply that these people live opulent, care-free lives - it’s that they want all the benefits of being a public figure (attention, money, status, privilege, and so on) without any of the costs (negative attention, taxation, regulation, and corporate responsibility). It is an act of hypocrisy, borne of the same greed as the corporate fat cats that crypto pioneers claim to hate - an intentional effort to obfuscate one’s wealth as a means of enriching oneself further.

These people want to be treated both as the financial leaders of the future and as cutesy “aw shucks, they’re just like you and me” artisans. They want to keep doing cool parties with confused celebrities and have their wealth and power totally unscrutinized.

To be completely clear, this is identical to how every massively wealthy person operates. The ultra-rich use varying means to obfuscate or entirely hide their wealth or use obtuse mechanisms within the tax code to escape liability. They create networks of shell corporations to hide money - something the average person does not have the means to do, of course - and then get mad when that source of money is revealed.

They are not looking to “keep things private” but to avoid scrutiny.

These are not political actors fighting oppressive regimes. These are extremely wealthy individuals that have done all they can to hide who they are. I can understand that they may also now have the scrutiny of people knowing what they look like and that they are, indeed, extremely wealthy - but that is very much a “buy the ticket take the ride” problem. Didn’t you want to be rich? Didn’t you want to be famous? Or did you want the good bits and not the bad bits? If you didn’t want to be rich and famous, why did you throw parties, get pictures taken, and do an interview with Rolling Stone?

There is a marked difference between posting a person’s home address and information about their family and revealing the names of extremely wealthy individuals. The same zealots that celebrate things like the genesis block of Bitcoin saying “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks” are now stepping up and screeching death threats at a reporter to protect the business interests of billionaires.

But isn’t that the general vibe of crypto? It’s a knowing kind of hypocrisy - the outward stance that you are fighting against the rich with the internal understanding that you’re fighting for the rich people you like, as you hope to become one of them.

Cryptocurrency does not “level the playing field.” It creates a new way for the ultra-wealthy to profit from and exploit the same desperation as sub-prime mortgages - that we finally have a chance to escape mediocrity and become “someone.” It is an endless carousel of people offering your chance to “make it,” one that for the most part just repeats the cycle of conning consumers into pumping money into rich people’s assets.

The only real differences are the lack of regulation and the fact that you can sometimes luck into wealth as a result, which creates an illusion of immediacy. There are hundreds of stories of “guys who got in early to crypto” who are now filthy rich, and the natural thought that someone may have is that they too could be rich, if they just buy into the system.

What’s actually happening is that millions of nasty little worms are rushing to defend people that do not care about anything other than monetizing them. Buying an NFT does not mean much. It does not help artists. For every story of someone making thousands or hundreds of thousands of dollars on NFTs, there are seemingly several rug pulls (when a developer takes the money and runs) a week. It really is that common. And because of the anonymity that the BAYC founders claim was so essential to their “safety,” these people are borderline untouchable - because despite handling over a million dollars of people’s money, they didn’t need to disclose their names.

Another reason the crypto industry - and many NFT pioneers - fear regulation is that what they’re doing clearly maps to numerous different kinds of fraud that the Commodity Futures Trading Commission specifically warns people about, things like “[someone] leading you to believe that other savvy investors have already invested."This is how Bob got his start. I know it's a lot of money, but I'm in—and so are my mom and half her club—and it's worth every dime,” or, even more specifically, “Creating a false sense of urgency by claiming limited supply. "there are only two units left, so I'd sign up today if I were you."

This is why, by the way, you haven’t seen this regularly happen in the real world - because this industry continually empowers and embraces the tools of fraud.

The BAYC founders are going to be fine. They are wealthier than any of us will be, and got there through means that were not particularly challenging nor unique. They will continue to print money, except now they may likely have to pay taxes on it. They are not mad because of their safety - they’re mad because the libertarian system they love didn’t protect them from the real world [emphasis Buzzfeed’s]:

BuzzFeed News searched public business records to reveal the identities of the two core founders, who go by the pseudonyms “Gordon Goner” and “Gargamel.” According to publicly available records, Yuga Labs, the company name behind BAYC, is incorporated in Delaware with an address associated with Greg Solano. Other records linked Solano to Wylie Aronow. Yuga Labs CEO Nicole Muniz confirmed the identities of both men to BuzzFeed News.

The irony of all of this is that these men were not doxxed - their own CEO confirmed their identity based on the records that the reporter found. These records, which were publicly available (much like the blockchain!), were filed willingly in, I assume, accordance with the law. Protecting these men is not an act of justice or democracy - it is quite literally empowering the rich so that they can continue living a markedly better life off of the backs of other people’s money.

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