- Spitfire List - http://spitfirelist.com -

FTR #760 Bit[coin]burg–The Rebels Without a Clue

[1]

Dave Emory’s entire life­time of work is avail­able on a flash drive that can be obtained here. [2] (The flash drive includes the anti-fascist books avail­able on this site.)

Listen: MP3

Side 1 [3]  Side 2 [4]

Introduction: Ronald Reagan observed that; “Government isn’t the solution to your problems. Government is the problem.” In the decades since that utterance, many young, idealistic individuals have embraced libertarian political philosophy. Well intended, those adherents are ultimately embracing a philosophy that will lead to a form of fascism.

Taking a slight detour from our discussion of “The Adventures of Eddie the Friendly Spook,” we examine a clandestine, online currency called bitcoin. Bitcoin has been hatched from the same libertarian, Ludwig von Mises milieu to which Eddie “get rid of social security, bring back the gold standard” Snowden adheres.

Used by the Silk Road network for clandestine and largely illegal activities, Silk Road allegedly was masterminded by Ross Ulbricht [5], an admirer of Ron Paul and devotee of the Ludwig von Mises [6] economic and social ideology.

Alone among sovereign nations, Germany recognizes bitcoin [7], in keeping with the monetary theories of Friedrich von Hayek, a disciple of Ludwig von Mises.

Although the currency has usually been attributed to one Satoshi Nakomoto. An article in Fastcompany.com [8] hypothesizes that the actual developers of bitcoin were Charles Bry, Neal J. King [9] (who officially denies any involvement) and Vladimir Oksman. All three work for a German firm called Lantiq.

Lantiq [10] is derived from Siemens, A.G. (a company inextricably linked with the Bormann capital network and the BND). Bitcoin may well be an Underground Reich/BND project.

Bitcoin’s defenders tout it as an alternative to fiat currencies and something that will prove a vehicle for economic salvation for the world. That claim has proved utterly vain, as bitcoin has proved to be, if anything, even more subject to crooked manipulation [11] as other currencies.

Program Highlights Include: The role of Golden Gate Capital in creating Lantiq; Golden Gate Capital [12] personnel’s background in Bain Capital (Mitt Romney’s firm); the hope by some that bitcoin could help replace the dollar as the reserve currency of choice in the world; Peter Thiel’s [13] embrace of bitcoin; Peter Thiel’ [14]s backing of Tea Party favorite Ted Cruz; review of Thiel’s capitalization of Ron Paul’s super PAC (located in Provo, Utah); the close political relationship [15] between Ron Paul and Mitt Romney.

1. Discussion begins with analysis of the Silk Road network’s alleged mastermind, Ross Ulbricht [16]. Ulbricht is a fan of Ron Paul and an adherent to the economic and social theories of the Ludwig von Mises Institute.

Exemplifying the apparently well meaning but misinformed young citizens attracted to Paul and the von Mises school, Ulbricht appears to exemplify the adage that “The [Silk?] road to Hell is paved with good intentions.”

Ron Paul is a hardcore fascist [17], joined at the hip with Nazi and white-supremacist elements. The Ludwig von Mises institute is explicitly anti-democratic and is joined at the hip with the neo-Confederate movement, which justifies African-American slavery and rationalizes a future secession by the Southern states.

Indicative of Ulbricht’s superficiality is his statement that; “Just as slavery has been abolished most everywhere, I believe violence, coercion and all forms of force by one person over another can come to an end. . . .” 

In addition to the von Mises Institute’s justification of African-American slavery prior to the Civil War, Walter Block [18] (and aide to Ron Paul and a Ludwig von Mises Institute scholar) has crafted what he calls “voluntary slavery.” [19]

We view “voluntary slavery” as the ultimate collateralized debt obligation.

“Who Is Ross Ulbricht? Piecing Together The Life Of The Alleged Libertarian Mastermind Behind Silk Road” by Ryan Mac; Forbes; 10/02/2013. [5]

. . . While at Penn State, Ulbricht was also politically active. A member of the school’s College Libertarians group, he took part in on-campus debates that were documented by the school’s newspaper, The Daily Collegian. In one article from March 2008, Ulbricht is identified as a supporter of Ron Paul who had attempted to become a delegate for the then-presidential candidate at the Republican National Convention.

“There’s a lot to learn from him and his message of what it means to be a U.S. citizen and what it means to be a free individual,” he told the school paper. “He doesn’t compromise his integrity as a politician and he fights quite diligently to restore the principles that our country was founded on.”

In Silk Road’s community forums, the Dread Pirate Roberts always made the libertarian underpinnings of his organization clear. In Oct. 2012, he noted in a post: “Silk Road was founded on libertarian principles and continues to be operated on them … The same principles that have allowed Silk Road to flourish can and do work anywhere human beings come together. The only difference is that the State is unable to get its thieving murderous mitts on it.” He called Paul “a mighty hero in my book” in a note from Nov. 2012. . . .

 This Is The Physics Student And Used Book Seller Who Allegedly Ran The ‘Silk Road’ Market For Drugs And Assassins” by Jim Edwards; Business Insider; 10/02/2013. [6]

. . . . But he lost his interest in physics and chemicals sometime after he graduated from Penn State in 2008, in favor of a new passion — libertarianism. He wrote on his LinkedIn profile:

Now, my goals have shifted. I want to use economic theory as a means to abolish the use of coercion and aggression amongst mankind. Just as slavery has been abolished most everywhere, I believe violence, coercion and all forms of force by one person over another can come to an end. The most widespread and systemic use of force is amongst institutions and governments, so this is my current point of effort. The best way to change a government is to change the minds of the governed, however. To that end, I am creating an economic simulation to give people a first-hand experience of what it would be like to live in a world without the systemic use of force.

He became a fan of the Austrian School of Economics, a conservative take on the free market. The indictment against him says he became a devotee of the Mises Institute, and that the writing of Ludwig von Mises and Murray Rothbard “provid[ed] the philosophical underpinnings for Silk Road.”

Silk Road was, in many ways, the apotheosis of free market economics. Because it was completely encrypted and completely anonymous, using Bitcoin — an uncrackable “cryptocurrency” — it stood outside any government regulation at all, including the criminal law.

Until today. . . .

2. Next, the program highlights a compelling working hypothesis [20] that bitcoin was developed by individuals associated with the Lantiq company.

In 1985, Ronald Reagan [21] incurred the wrath of many when he agreed to visit [22] the Bitburg cemetery in Germany, where Waffen SS soldiers are interred.

In this post, we examine the origins of the bitcoin virtual currency, which evolved into the online currency of choice for the customers of the Silk Road network [16].

Alone among sovereign nations, Germany has recognized bitcoin as legal tender, following on the theory of Friedrich von Hayek [23] of the Autrian school of economic theory, disseminated from (among other institutions) the Ludwig von Mises Institute [17].

Credit for creating this virtual currency is generally given to one Satoshi Nakomoto. An article at Fastcompany [8] hypothesizes that three individuals named Neal J. King, Charles Bry and Vladimir Oksman are the true originators of bitcoin. (Listeners are emphatically encouraged to read the entire linked article to flesh out their understanding of Adam Penenberg’s argument.)

Of more than passing interest under the circumstances is the fact that all three of the hypothetical creators of bitcoin work for a company called Lantiq [24].

Lantiq is a German-based firm that has evolved from Siemens. Siemens spun-off Infineon A.G.  [25](a semiconductor firm). Then Infineon and Golden Gate Capital  [12]created Lantiq [10].

Golden Gate Capitol was formed by alumni of Bain Capital [26], Mitt Romney’s firm.

In addition to links to the death squad-manifesting El Salvadoran junta of the 1980’s, Bain has links [27] to the milieu of the late billionaire, Howard Hughes, as well as the milieu of Bebe Rebozo’s banking operations. The latter appears to have had links to the Bormann capital network [28].

If we were going to express this in biblical phraseology, it would go something like this: “And so Siemens begat Infineon. And Bain Capital begat Golden Gate Capital. Infineon did lie with Golden Gate Capital. And thus did Infineon beget Lantiq.”

Among the points to be considered here are:

The Bitcoin Crypto-Currency Mystery Reopened” by Adam L. Penenberg; fastcompany.com; 10/11/2011. [8]

. . . I looked at the date on the patent application filing: 08/15/2008.

Now take a look at the domain bitcoin.org. It was registered three days later.

Domain Name:BITCOIN.ORG

Created On:18-Aug-2008
Now that is one hell of a coincidence. What are the odds that a phrase in Nakamoto’s Bitcoin paper would be replicated in a patent application filed the same year? Further, what are the odds the domain name for Bitcoin would have been registered 72 hours after the patent application was filed?

Based on the timing, I wondered if one of the people on the patent application–or perhaps all three–had based the Bitcoin concept on research that led them to this patent application. The three inventors listed on patent #20100042841 are Neal King, Vladimir Oksman, Charles Bry, and all three have filed numerous patent applications over the years.

Neal King (he also goes by Neal J. King from Munich, Germany) is listed on a number of patent applications, notably “UPDATING AND DISTRIBUTING ENCRYPTION KEYS” (#20100042841) and “CONTENTION ACCESS TO A COMMUNICATION MEDIUM IN A COMMUNICATIONS NETWORK” (#20090196306), both of which seem Bitcoin-y to me.

Charles Bry, who also resides in Munich, has filed several applications, many dealing with nodes and networks.

Vladamir Oksman, who lives in the U.S., has several patent applications, too, and they too seem related to networks, nodes.

I found another patent application that lists the three of them as inventors, filed June 2008–two months before the Bitcoin.org domain was registered.

KEY MANAGEMENT FOR COMMUNICATION NETWORKS

“Abstract One embodiment of the present invention relates to a method for key management in a communications network. In this method, a public key authentication scheme is carried out between a security controller and a plurality of nodes to establish a plurality of node-to-security-controller (NSC) keys. The NSC keys are respectively associated with the plurality of nodes and are used for secure communication between the security controller and the respective nodes.”
Could that also be related to Bitcoin?

Now, another coincidence: The Bitcoin.org domain was registered by a Finnish provider, based in Helsinki.

Charles Bry traveled to Finland in late 2007, six months before the domain was registered. In addition, Bry, who is a senior system engineer, lists German, English, French, and Italian as languages he speaks, and went to college in Paris. He works for a company called Lantiq.

Then there’s Neal J. King, and there are more oddities. A Neal J. King has a Facebook page that is sketchy with personal information, yet if you search for “Neal J. King” in Facebook’s search box, his profile doesn’t pop up. His wall is filled with posts about the recent Wall Street protests, banking, and criticism of the Patriot Act. Keep scrolling down and he “likes” blau.de, a German mobile phone sim card site. He also claims highbrow taste in literature and books, and it seems he’s an avid reader, having reviewed 46 books on Amazon–many deal with astronomy, biology, cryptography, linguistics, literature, mathematics, philosophy and physics. I read through his reviews, and his writing is excellent. Very clean. No typos. His sentences are elegant yet there are no extra words. The writing style reminds me of Satoshi Nakamoto’s posts in the Bitcoin Forum minus British spellings, which, as I noted above, I believe is a canard.

Finally, I looked up Vladamir Oksman’s LinkedIn profile (there are a couple of guys with this name, but he was easy to find). . . .

. . . [Correction, May 22, 2013: The Vladamir Oksman described above is the wrong one. The right one is listed on LinkedIn as having worked as a technical marketing director for semiconductor company Lantiq. . . . .

3.  “Neal J. King”; LinkedIn.com. [9]

. . . I represented Lantiq in Home Networking Standards. . . .

. . . .

Participant
IEEE P1901
2009 – 2011 (2 years)

I represented Infineon’s interests regarding the broadband Power Line Communication standards. I was active in clarifying the text.

Participant
IEEE P1901.2
2010 – 2010 (less than a year)

I represented Infineon’s interests in a technical standard for narrowband Power Line Communications.

Representative for Infineon
ITU-T
1997 – 2010 (13 years)

I represented the interests of Infineon in the creation and revision of technical standards on xDSL and PCM (V.92) modems. I was the editor of the V.44 standard on Data Compression.

Systems Engineer
Infineon Technologies
Public Company; 10,001+ employees; IFX; Halbleiter industry
March 1997 – December 2008 (11 years 10 months)

– Analysis and roadmap planning for security techniques & protocols for Wireless LAN systems; calculation of communications capacity gained by adding a low-frequency band; assessment of external technology proposals. One issued patent on emergency phone calls.

– Organized Infineon’s participation in technical standards for broadband modems (xDSL modems): threat assessment, resource assignments, coordination and editorial control. Committees: ITU-T Q.4/SG15, NIPP-NAI, DSL Forum; Secretary of NIPP-NAI for several years.

– Development of web-based information systems and tools to make technical-standards information available corporation-wide.
– Worked to achieve key agreements in the technical-standards process favorable to our position in the broadband modem market by either compromising with competitors and potential customers, or out-maneuvering them. . . .

4.  “Lantiq”; wikipedia.com. [24]

Lantiq is an international fabless semiconductor business of approximately 1,000 people.

Lantiq’s central functions and the executive management team are located at Lilienthalstr. 15 in Neubiberg near Munich in Germany.

Lantiq makes semiconductor solutions for Next Generation Networks and the Digital Home and, via its Infineon heritage, has an over 20-year record of technology development. . . .

 5. “Infineon Completes the Sale of Wireline Business; Lantiq Becomes a Stand Alone Business”; lantiq.com. [10]

. . . Neubiberg, Germany– November 6, 2009 – Infineon Technologies AG (FSE: IFX / OTCQX: IFNNY) and Lantiq today announced the closing of the sale of Infineon’s Wireline business to Lantiq, an affiliate of the U.S. based investor Golden Gate Capital. . . .

6.  “Golden Gate Capital”; wikipedia.com. [12]

. . . Golden Gate Capital Partners is an American private equity firm based in San Francisco, California. The firm makes investments primarily in mature technology companies, as well as other select industries, through leveraged buyout transactions as well as significant minority purchases and growth capital investments.

The firm was founded in 2000, by former investment professionals from private equity firm Bain Capital, as well as business consultants from its affiliate Bain & Company. . . .

7.  “Infineon Technologies”; wikipedia.com. [25]

Infineon Technologies AG is a German semiconductor manufacturer founded on 1 April 1999, when the semiconductor operations of the parent company Siemens AG were spun off to form a separate legal entity. As of 30 September 2010, Infineon has 25,149 employees worldwide. In fiscal year 2010, the company achieved sales of €3.295 billion. . . .

8.   “Bitcoin Recognized by Germany as ‘Private Money'” by Matt Clinch; CNBC.com; 8/19/2013. [7]

Virtual currency bitcoin has been recognized by the German Finance Ministry as a “unit of account”, meaning it is can be used for tax and trading purposes in the country.

Bitcoin is not classified as e-money or a foreign currency, the Finance Ministry said in a statement, but is rather a financial instrument under German banking rules. It is more akin to “private money” that can be used in “multilateral clearing circles”, the Ministry said.

“We should have competition in the production of money. I have long been a proponent of Friedrich August von Hayek scheme to denationalize money. Bitcoins are a first step in this direction,”said Frank Schaeffler, a member of the German parliament’s Finance Committee, who has pushed for legal classification of bitcoins. . . .

9. Not surprisingly, bitcoin is showing all of the corrupt, highly speculative [33] character of the very currencies that the very “techno-libertarians” who support the “alternative currency” criticize.

Following our posts on Silk Road [16] and Bitcoin [20], we explore the phenomenon of bicoin against the “shutdown” milieu of the GOP, itself inextricably linkd with the elements surrounding and promoting Edward Snowden. Reviewing previous points of information:

Alleged mastermind of the Silk Road online clandestine funding/merchandising network, Ross Ulbricht is a devotee of Ron Paul and the Ludwig von Mises school of social and economic theory.

Exemplifying the apparently well meaning but misinformed young citizens attracted to Paul and the von Mises school, Ulbricht appears to exemplify the adage that “The [Silk?] road to Hell is paved with good intentions.”

Ron Paul is a hardcore fascist [17], joined at the hip with Nazi and white-supremacist elements. The Ludwig von Mises institute is explicitly anti-democratic and is joined at the hip with the neo-Confederate movement, which justifies African-American slavery and rationalizes a future secession by the Southern states.

Indicative of Ulbricht’s superficiality is his statement that; “Just as slavery has been abolished most everywhere, I believe violence, coercion and all forms of force by one person over another can come to an end. . . .” 

In addition to the von Mises Institute’s justification of African-American slavery prior to the Civil War, Walter Block [18] (and aide to Ron Paul and a Ludwig von Mises Institute scholar) has crafted what he calls “voluntary slavery.” [19]

We view “voluntary slavery” as the ultimate collateralized debt obligation.

Alone among sovereign nations, Germany has recognized bitcoin as legal tender, following on the theory of Friedrich von Hayek [23] of the Autrian school of economic theory, disseminated from (among other institutions) the Ludwig von Mises Institute [17].

Credit for creating this virtual currency is generally given to one Satoshi Nakomoto. An article at Fastcompany [8] hypothesizes that three individuals named Neal J. King, Charles Bry and Vladimir Oksman are the true originators of bitcoin. (Listeners are emphatically encouraged to read the entire linked article to flesh out their understanding of Adam Penenberg’s argument.)

Of more than passing interest under the circumstances is the fact that all three of the hypothetical creators of bitcoin work for a company called Lantiq [24].

Lantiq is a German-based firm that has evolved from Siemens. Siemens spun-off Infineon A.G.  [25](a semiconductor firm). Then Infineon and Golden Gate Capital  [12]created Lantiq [10].

Golden Gate Capitol was formed by alumni of Bain Capital [26], Mitt Romney’s firm.

In addition to links to the death squad-manifesting El Salvadoran junta of the 1980’s, Bain has links [27] to the milieu of the late billionaire, Howard Hughes, as well as the milieu of Bebe Rebozo’s banking operations. The latter appears to have had links to the Bormann capital network [28].

If we were going to express this in biblical phraseology, it would go something like this: “And so Siemens begat Infineon. And Bain Capital begat Golden Gate Capital. Infineon did lie with Golden Gate Capital. And thus did Infineon beget Lantiq.”

Among the points to be considered here are:

“World to Washington: ‘Really?'” by Serge Schmemann; The New York Times; 10/20/2013. [35]

Some of the more alarmed and outraged voices rose from China, the country holding the largest share of American debt. One commentary from China that attracted attention in Europe was by Liu Chang of Xinhua, the official Chinese news agency, who called not only for the diversification of Beijing’s huge dollar holdings, but for a “de-Americanized world.” That, he wrote, would include “new international reserve currency that is to be created to replace the dominant U.S. dollar, so that the international community could permanently stay away from the spillover of the intensifying domestic political turmoil in the United States.”

From Athens — where an American default could have turned an unending economic crisis into catastrophe — Nikos Konstandaras wrote in the daily Kathimerini that Aristophanes, the master of ancient Greek comedy, “would have loved the idea of a group of lawmakers exploiting their position to abolish the state they are sworn to serve. For Greece’s ancient tragedians, the vain indifference, the ignorance of dangers caused by our character and actions, was familiar material.” The question, he added, was whether America is “the scene of comedy or tragedy.”

When the deal was reached in Washington last Wednesday, the world exhaled. But nobody believed it was over. “There is nothing more temporary than the defeats and victories in Washington,” wrote Le Figaro, the Paris daily. Even if civil servants are back at work for now, “America’s financial credibility is damaged and its democratic system has revealed to the world its gaping blockages.”

The questions abroad will continue; answers, however, are hard to find.

10. “The Federal Government’s Reaction to Bitcoin Is an Acknowledgement of the Dollar’s Vulnerability” by Peter Ferrara; Forbes; 8/25/2013. [38]

The Senate Homeland Security and Government Affairs Committee has private alternative currencies in its crosshairs.  The Chairman, Senator Tom Carper (D-DE) and Ranking Member, Senator Tom Coburn (R-OK), sent a joint letter to seven federal agencies last week asking for feedback and policy proposals for regulation of virtual currencies, like Bitcoin.

Bitcoin has surged in value and popularity recently as it has come to be embraced by more users across the planet.  In a world of government fiat currencies, Bitcoin is an admirable innovation.  But in a sense it extends the current currency framework, as opposed to revolutionizing it.  It was created out of less than thin air when cybergeeks who saw it as a natural progression of the modern web specified the creation and distribution of the new cybercurrency in a paper posted on the Internet in 2008.  The virtual currency was then launched into operation in 2009. . . .

. . . . The economy is already barely growing, if inflation is currently measured correctly.  If the Fed further destabilizes the economy, the dollar will probably further decline, as who will want to buy dollars to invest in a declining economy only continuously threatened with even higher tax and regulatory burdens?  But if the Fed redoubles on its current policies, the dollar will probably decline further under the threat of eventual inflation.  Who will want to hold dollars under this increasingly narrowing conundrum?  That is when the world may turn to something different.

It is not Bitcoin that will arise as the alternative global reserve currency, because as discussed above, it has no inherent value either, so it is subject to wide swings in market value too.  The real threat to the dollar is a different, private, alternative currency that can arise, that is based in real commodities with inherent value. . . .

11.  “The Antisocial Network” by Paul Krugman; The New York Times; 4/14/2013. [36]

Bitcoin’s wild ride may not have been the biggest business story of the past few weeks, but it was surely the most entertaining. Over the course of less than two weeks the price of the “digital currency” more than tripled. Then it fell more than 50 percent in a few hours. Suddenly, it felt as if we were back in the dot-com era.

The economic significance of this roller coaster was basically nil. But the furor over bitcoin was a useful lesson in the ways people misunderstand money — and in particular how they are misled by the desire to divorce the value of money from the society it serves.

What is bitcoin [39]? It’s sometimes described as a way to make transactions online — but that in itself would be nothing new in a world of online credit-card and PayPal transactions. In fact, the Commerce Department estimates that by 2010 about 16 percent of total sales [40] in America already took the form of e-commerce.

So how is bitcoin different? Unlike credit card transactions, which leave a digital trail, bitcoin transactions are designed to be anonymous and untraceable. When you transfer bitcoins to someone else, it’s as if you handed over a paper bag filled with $100 bills in a dark alley. And sure enough, as best as anyone can tell the main use of bitcoin so far, other than as a target for speculation, has been for online versions of those dark-alley exchanges, with bitcoins traded for narcotics and other illegal items [41].

But bitcoin evangelists insist that it’s about much more than greasing the path for illicit transactions. The biggest declared investors in bitcoins are the Winklevoss brothers [42], wealthy twins who successfully sued for a share of Facebook and were made famous by the movie “The Social Network” — and they make claims for the digital product similar to those made by goldbugs for their favorite metal. “We have elected,” declared Tyler Winklevoss recently, “to put our money and faith in a mathematical framework that is free of politics and human error.”

The similarity to goldbug rhetoric isn’t a coincidence, since goldbugs and bitcoin enthusiasts — bitbugs? — tend to share both libertarian politics and the belief that governments are vastly abusing their power to print money. At the same time, it’s very peculiar, since bitcoins are in a sense the ultimate fiat currency, with a value conjured out of thin air. Gold’s value comes in part because it has nonmonetary uses, such as filling teeth and making jewelry; paper currencies have value because they’re backed by the power of the state, which defines them as legal tender and accepts them as payment for taxes. Bitcoins, however, derive their value, if any, purely from self-fulfilling prophecy, the belief that other people will accept them as payment.

However, let’s leave that strangeness on one side, along with the peculiar “mining” process — actually a process of complex calculation — used to add to the bitcoin stock. Instead, let’s focus on the two huge misconceptions — one practical, one philosophical — that underlie both goldbugism and bitbugism.

The practical misconception here — and it’s a big one — is the notion that we live in an era of wildly irresponsible money printing, with runaway inflation just around the corner. It’s true that the Federal Reserve and other central banks have greatly expanded their balance sheets — but they’ve done that explicitly as a temporary measure in response to economic crisis. I know, government officials are not to be trusted and all that, but the truth is that Ben Bernanke’s promises that his actions wouldn’t be inflationary have been vindicated year after year, while goldbugs’ dire warnings of inflation keep not coming true.

The philosophical misconception, however, seems to me to be even bigger. Goldbugs and bitbugs alike seem to long for a pristine monetary standard, untouched by human frailty. But that’s an impossible dream. Money is, as Paul Samuelson once declared, a “social contrivance,” not something that stands outside society. Even when people relied on gold and silver coins, what made those coins useful wasn’t the precious metals they contained, it was the expectation that other people would accept them as payment.

Actually, you’d expect the Winklevosses, of all people, to get this, because in a way money is like a social network, which is useful only to the extent that other people use it. But I guess some people are just bothered by the notion that money is a human thing, and want the benefits of the monetary network without the social part. Sorry, it can’t be done.

So do we need a new form of money? I guess you could make that case if the money we actually have were misbehaving. But it isn’t. We have huge economic problems, but green pieces of paper are doing fine — and we should let them alone.

12. “Bitcoin’s Vast Overvaluation Appears Partially Caused by (Usually) Illegal Price-Fixing” by Rick Falkvinge; Falkvinge.net; 9/2013. [11]

. . . . In securities trading, the expression painting the tape [43] is used for any trading activity that is intended to manipulate the trading statistics (price, volume, other metrics) rather than to execute a trade. It is highly illegal, jail-time illegal, in all civilized parts of the world. The expression comes from the ancient price ticker tape, and how it could be “painted” with false data.

I’m going to illustrate how this Shark Squad has operated recently to fix the price in luring other traders of their money and hiking the price. (While luring other traders of their money is part of the game, there are legal and illegal ways to do so. Insider trading, for example, is one of the better-known illegal ones – our legal framework generally fights hard to create a level playing field for all traders.) The squad is a small team of collaborating traders.

In Step 1 of the cycle, the shark squad makes a large buyup, causing prices to skyrocket. Illustrated here, the buyup at 10:00 European time on Thursday September 12, 2013, from USD 135 to 145.9, an instant 8-percent increase. This causes a lot of downward-betting traders to flush out.

In step 2, the shark squad reverses this trend by causing a slow pullback, causing those who bought in greed to sell off in panic as the market has reversed and causing more stop losses to trigger and people to sell to the squad‘s bids. Note that I write causes a pullback – this is not a normal market pullback. Let’s look at the big picture first as displayed by the site bitcoinwisdom [44], which displays much more detail than most sites. You can see the pullback over Thursday lunch-to-afternoon (blue box, right half), and there is also a display of the current order book (yellow box) and the recent transactions (red box) which we will look at shortly. Note how the recent transactions in the indicated red box are all red, red, red, indicating a massive selloff – there’s nobody buying at all on cursory inspection, only selling, and a lot of selling.

However, let’s take a closer look at the minute details of the recent transactions in the bottom right corner, displaying time, price, and amount of the last bitcoin transactions:

Do you see a pattern here? All the transactions are for exactly one bitcoin, and the transactions are spaced exactly five seconds apart. This pattern can continue for hours, a claim verifiable by checking the MtGox transaction history. This is not market trading; this is one (1) automated process intended to give the illusion of many different players panic-selling. Furthermore, let’s take a closer look at the order book:

Do you see the numbers below and to the left of the current big red price? That’s the bid order book. That’s the current buy orders. Note how the currently executing buy orders are at 7-8 bitcoin each, placed just 0.0001 (!) bitcoin apart in price, evading detection on most sites. This is coordinated with the selling person. Those buy orders keep replenishing as the sales orders keep ticking one bitcoin per five seconds; they are coordinated. This is one person in the Shark Squad selling to another person in the Shark Squad, to give the illusion of market downward pressure and sell volume.

Both of these activities – splitting an order to give the illusion of many trades, and trading within a group to give the appearance of increased volume and a certain market direction – are considered painting the tape and highly illegal. (I’m going to stop writing “usually illegal” now, as it’s illegal in practically all countries where you can read this.)

So, how can I state with certainty that the seller and buyer are conspiring? Based on only this screenshot, the evidence could be improved, but having watched the market at this level for some two months and seen how these kind of buy and sell orders follow each other very closely, it’s obvious there is talking and coordinating within a team dedicated to fabricating a market impression. Normally, you would need to see how they moved in lockstep to identify this cooperation, but it’s particularly visible in this snapshot. (Besides, the visible order-splitting is enough to constitute tape-painting entirely on its own.)

Here’s the kicker, then: we have observed that the buy orders being executed – the ones with 7, 7, 7, 7, 7, 8, 8, etc. bitcoin at the moment at a price of 137.64xyz – belong to this shark squad. What happens when a trader sees the (false) image of a massive selloff going on, and sells in panic? Well, he’s selling his bitcoin into those buy orders to the shark squad, at the price they have set. Here, the price is 137.64. So the obvious question is, what happens next? Well, a fabricated price hike, of course, tricking other traders to buy those same bitcoin at higher prices from the coordinated shark squad. We’ll be returning to when and how that happens in step 4.

In Step 3, the shark squad puts up an enormous bidwall – so large it’s effectively a lid on the market – and lure other traders to sell into it, intending to sell the bought bitcoin at a higher price after the next fabricated hike. There is plenty of fake trading going on into these bidwalls as visible in step 2. We can also see that this lure is effective – look at the transaction history of bitcoin around these walls, and you can easily find trades of hundreds of coins amid the fake trading. Or perhaps it’s the shark squad selling to itself again with the transactions in the hundreds. Hard to know – most likely a mix of in-group trading and others being lured to sell. In any case, unsuspecting traders are selling into the shark squad‘s bidwalls. These lurewalls are easily identifiable in the close-up market history, as well as when they were removed:

In Step 4, finally, the price is hiked to new highs and the shark squad begins offloading its booty at higher prices, and the cycle repeats with them trading in-between themselves to give the appearance of market activity. That price hike happened at 15:25 Thursday, European time, up to 145 USD for this cycle, as also visible in the image above.

This cycle has repeated very visibly at least five times in the past weeks, and likely since much earlier in a variant version:

This – this illegal activity – is very troubling for the bitcoin ecosystem. . . .

13. “Dark Wallet: A Radical Way to Bitcoin” by Michael del Castillo; The New Yorker; 9/24/2013. [34]

. . . . Wilson believes Bitcoin should remain the backbone of a separate economy that undermines the government’s ability to collect taxes and to control the value of currency—not be subsumed into the mainstream economy.

“The state is basically allowed because we have all chosen to use these certain institutions to channel our activity and commerce,” he told me. “But when we are enabled, through alternative means and technologies, to channel our commerce as we will, channel our production as we will, the state simply disappears.”

Not everyone agrees, of course, that society would benefit from the disappearance of governments. Wilson used the Liberator to make the point that the government shouldn’t regulate the flow of information; he wants to use Bitcoin to help build an economy outside of the government’s reach.

But his ideology, taken to its logical conclusion, would also leave services like roads, libraries, fire fighting, and policing in the hands of the private sector—whose interests may not be aligned, Wilson’s critics argue, with those of the public at large.

Wilson knows that he could see blowback for his stance against the foundation: as a self-described “crypto-anarchist,” perhaps he shouldn’t be so concerned with who is or isn’t determining the currency’s future. And if the U.S. government attempts to regulate the currency, which seems likely, Wilson will also find himself once again in direct opposition to the government. . . .

14. “Former PayPal CEO Signs Off on Bitcon” by Sam Biddle; ValleyWag; 5/16/2013. [13]

Before he was one of the most powerful VCs in the world, Peter Thiel created PayPal, which deals in real dollars and boomed accordingly. If you think this might make him wary of unregulated internet funny money, you’re wrong: $2,000,000 wrong.
Thiel’s Founders Fund just wrapped a $2 million round for BitPay, which helps other companies accept Bitcoin payments—namely for things “like electronics, precious metals, and other low-margin products,” says TechCrunch.

The cash infusion comes only a week after Fred Wilson led a $5 million round in another company that does pretty much the exact same thing, and at a time when the most powerful Bitcoin exchange in the world is getting its ass kicked by the US government. [This is a reference to Silk Road [16]–D.E..] . .

15. Despite press coverage representing Ron Paul and Mitt Romney as opponents, the two are close political allies [45].

“For Paul and Romney, a Strategic Alliance between Establishment and Outsider” by Amy Gardner; Washington Post; 2/1/2012. [15]

. . . Despite deep differences on a range of issues, Romney and Paul became friends in 2008, the last time both ran for president. So did their wives, Ann Romney and Carol Paul. The former Massachusetts governor compliments the Texas congressman during debates, praising Paul’s religious faith during the last one, in Jacksonville, Fla. Immediately afterward, as is often the case, the Pauls and the Romneys gravitated toward one another to say hello.

The Romney-Paul alliance is more than a curious connection. It is a strategic partnership: for Paul, an opportunity to gain a seat at the table if his long-shot bid for the presidency fails; for Romney, a chance to gain support from one of the most vibrant subgroups within the Republican Party.

“It would be very foolish for anybody in the Republican Party to dismiss a very real constituency,” said one senior GOP aide in Washington who is familiar with both camps. “Ron Paul plays a very valuable part in the process and brings a lot of voters toward the Republican Party and ultimately into the voting booth, and that’s something that can’t be ignored.” . . .

16. The program concludes with more examination of Peter Thiel, the bankroller of Ron Paul’s Super PAC. Thiel is a big backer of bitcoin [13].

17. Thiel is also a financial angel [14] for Senator Ted Cruz.

In FTR #’s 758 [46]759 [47], we looked at the profound connections between the GOP fiscal terrorists of the “Paulistinian Libertarian Organization”  [47]and the milieu of Eddie Snowden. It should come as no surprise that Peter Thiel is a major backer of Ted Cruz.

Cruz, of course, is the GOP Senator from Texas who was at the forefront of the “shutdown milieu.”

Thiel is inextricably linked with Palantir [48]Ron Paul [45], the seasteading movement [49] and Facebook [50].

In our discussions of Thiel, NEVER forget that he explicitly rejects democracy [51], in no small measure because he doesn’t think women should be allowed to vote.

“Reminder: Peter Thiel Is Ted Cruz’s Gay Billionaire Ally” by Sam Biddle; Valley Wag; 9/2/2013. [52]

Where does a man like Ted Cruz get the confidence to IRL troll the United States Senate for 21 hours? Knowing that PayPal billionaire and Silicon Valley kingpin Peter Thiel has his back surely helps. . . .