Five Top Tech Takeaways: SBF Gets Locked Up, Coinbase's Canadian Foray, AI Startups vie with Giants, LK-99 Update, and a Mind-Reading Breakthrough

AI Startups In the Land of Giants

Judge Revokes Bankman-Fried's Bail; Over Witness Tampering Allegations

Sam Bankman-Fried, the founder of FTX, was taken into custody after a judge agreed with federal prosecutors to revoke his bail due to alleged witness tampering. The decision came after a court hearing in New York, and Bankman-Fried was sent to Brooklyn’s Metropolitan Detention Center. Judge Lewis Kaplan rejected Bankman-Fried's plea for delayed detention pending an appeal. The judge believed there was probable cause that Bankman-Fried attempted to tamper with witnesses. Since his arrest in December, he had been on a $250 million bail and was required to stay at his parents' home in Palo Alto, California. The Justice Department accuses him of a "pattern of witness tampering and evading his bail conditions" through his interactions with the media. The defense argued that Bankman-Fried was exercising his first amendment rights. The prosecution's case was strengthened when Bankman-Fried leaked private diary entries of his ex-girlfriend, Caroline Ellison, to the New York Times. Ellison, a former executive of Bankman-Fried’s crypto hedge fund, Alameda Research, had pleaded guilty to federal charges and is cooperating with the government. The prosecution views Bankman-Fried's actions as an attempt to intimidate witnesses indirectly through the media. (Source: CNBC)

Coinbase Embraces Canadian Regulations, Integrates Interac e-transfer

Coinbase is expanding its Canadian operations, integrating Interac e-transfer to simplify transactions in the region and strengthening its presence with over 200 engineers. While other platforms like Binance are retreating from Canada due to tightening regulations by the Canadian Securities Administrators (CSA), Coinbase has embraced these changes, signalling its commitment to the country. The company has complied with the CSA's new rules and has found a positive working relationship with Canadian regulators. Coinbase's CEO Brian Armstrong sees regulatory clarity as a foundation for further growth in the fintech field and remains optimistic about the future of cryptocurrencies globally, even as the firm faces legal challenges in the U.S. (Source: Globe and Mail)

Mind-Reading Breakthrough: UC Berkeley Researchers Vocalize Thoughts.

Researchers at the University of California, Berkeley have made significant progress in the development of devices that can vocalize human thoughts. This advancement could potentially aid patients who have lost their speech abilities due to strokes or brain injuries, allowing them to communicate in a more natural manner. In a notable experiment, the neuroscientists reconstructed Pink Floyd’s song "Another Brick in the Wall, Part 1" using brain activity recordings from 29 patients who listened to the song during brain surgery. While the reconstructed version was not as refined as the original, it was identifiable. The study, which was published in PLOS Biology, demonstrates the potential of using brain-activity patterns to develop therapeutic technologies. Dr. Edward Chang, a neurosurgeon not involved in the study, highlighted the significance of the findings. The research aims to utilize this technology to create neural prosthetics that can restore natural speech abilities to patients. The algorithms developed were even able to reproduce partial vocals from the song. The choice of the Pink Floyd song was due to its balance of familiarity. The breakthrough raises questions about mental privacy, as the ability to interpret thoughts could be the next frontier in privacy concerns. (Source: WSJ)

The Quest for a Room-Temperature Superconductor Continues

The LK-99, initially believed to be a room-temperature superconductor, appears to have different properties than initially thought. Recent studies suggest that in its pure form, LK-99 behaves more like an insulator. This discovery came after the Quantum Energy Research Centre in Seoul, South Korea, shared their initial findings with great enthusiasm. The team had observed certain characteristics in LK-99 that resembled those of superconductors, such as partial levitation above a magnet and a notable drop in electrical resistance. While the initial findings were shared on a preprint server, which allows for rapid dissemination of research without peer review, it's evident that the team was genuinely excited about their discovery, even if subsequent studies have provided a different perspective. (Source: TechCrunch)

Big Tech's Dominance in AI Policy Discussions: Where Do Startups Stand?

In the rapidly evolving realm of generative AI, major players like Microsoft and OpenAI often dominate the conversation, especially when it comes to regulatory discussions. These industry giants have been at the forefront, engaging with policymakers and even entering agreements with the White House to promote responsible AI. However, there's growing concern that smaller AI entities, both commercial and non-commercial, are being overshadowed in these crucial discussions. While these larger companies are instrumental in shaping potential AI policies, smaller businesses, which also play a significant role in the AI ecosystem, are anxious about their limited influence on the outcomes of these regulations. Experts emphasize the importance of including a diverse range of stakeholders in the regulatory dialogue to ensure a balanced and inclusive approach to AI governance. (Source: TheVerge)

Author: Malik Datardina, CPA, CA, CISA. Malik works at Auvenir as a GRC Strategist that is working to transform the engagement experience for accounting firms and their clients. The opinions expressed here do not necessarily represent UWCISA, UW, Auvenir (or its affiliates), CPA Canada or anyone else. This post was written with the assistance of an AI language model. The model provided suggestions and completions to help me write, but the final content and opinions are my own.

Figuring out FTX and SBF (Part 1): The Epic Rise in 5 videos

The recent weeks have seen the fall of crypto-king Sam Bankman-Fried (aka SBF). The epic rise and the spectacular fall of him and his FTX empire has us all asking one question: what happened?

We’ll initially explore this saga over several posts. 

 

In this post, we look at 5 videos that cover the rise of SBF and his FTX crypto-exchange. We’ll start by looking at how he initially got rich through arbitrage trading, look at the FTX “business model”, his connections to the US government, and then close with the celebrity endorsements that helped propel him to stardom.

 

Video #1: The Benevolent Billionaire?

Probably my first encounter with SBF, was in his interview with Nas Daily. We learn how SBF rose to fame in the crypto space by taking advantage of price differences in bitcoin in the US and in Japan. More importantly, the video captures the hope and the hype around the “earn to give” concept that SBF promoted. Turns out it was all hype and no hope. Vox published their twitter DMs with SBF, where he explains “I feel bad for those who get f***** by it…this dumb game we woke westerners play where we say all the right shiboleths [sic] and so everyone likes us” (link).

 

 

Video #2: Did SBF really say that Crypto is a Ponzi Scheme – 7 months ago?

On Bloomberg’s Odd Lot’s podcast aired back in April 2022, SBF seems to admit to Wall Street’s Wiseman Matt Levine that “magic internet money” is a Ponzi scheme. If you don’t have time to listen to the whole podcast, check out Coffeezilla’s quick takes. The technique that SBF discusses appears to  have been used in Celsius, which we discussed previously.  

 

 

Video #3: There are magic boxes, but magic business models?

On a separate but related note, FTX offered high rates of interests to depositors. As shown in Wall Street Millennial’s video, the rates were much higher than the fed rate that was close to zero at the time. This is not so much about the magic money box that SBF referred to in the previous video, but rather pure magic. How else can we explain the sustainability of such a high interest rate on bitcoin/Ethereum deposits? As CPAs know, when expenses exceed revenues – a business failure is inevitable.  (Click here to go to the timestamp where they discuss the issue of interest rate deposits)

 

Video #4: If you’re for regulations, you’re one of the good guys – right?

Stepping back, Cold Fusion’s video gives a good broad understanding of the key events that happened with the rise and sudden fall of FTX. (The previous video is also quite good as well). That being said, this video takes time to highlight SBF’s connection with the government and regulatory bodies.

 

Firstly, his mom is connected to the Democratic party. Secondly, he testified before congress, donated to both parties (not just the Democrats), and met with Gary Gensler from the SEC. If you look carefully at the screen shot where he speaks about the meeting with Gensler, you may recognize IEX’s Brad Katsuyama. (Reuters reported here on this meeting). He’s the protagonist of Michael Lewis’s Flash Boys. And that’s not the only connection to Lewis. Reports have emerged that Lewis had spent 6 months with SBF and is planning to publish a book about him. Lastly, there is an odd connection between FTX’s CEO, Caroline Ellison, and Gary Gensler. As Cold Fusion points out, Caroline’s father, Glenn Ellison, was Gensler’s boss at MIT.

 

Video #5: Is FTX a smart bet, with all these celeb endorsements?

Both Wall Street Millennial and Cold Fusion pointed out the role of influencers played in pumping the FTX/SBF brand name. But we don’t just need to take their word for it. We can see it for ourselves. Some of the promo videos are still live on FTX’s YouTube Channel. This video features Canada’s own Kevin O’Leary:

If you didn’t have a chance to go through the whole video, check out this part where he and the host emphasize the compliance-orientation of SBF and FTX. Now, that definitely didn’t age well. But perhaps what’s more surprising is O’Leary’s comments post-FTX meltdown. Apparently, he would back SBF in another crypto-venture (link).

 

Lastly, if you are interested in seeing the actual adverts aired on TV, check out this one featuring the actor Larry David.

 

In our next post, we’ll look at some more videos that take a closer look at the “Ten Days in November” that broke FTX and could have possibly ushered in the “Crypto Ice Age”.

Author: Malik Datardina, CPA, CA, CISA. Malik works at Auvenir as a GRC Strategist that is working to transform the engagement experience for accounting firms and their clients. The opinions expressed here do not necessarily represent UWCISA, UW, Auvenir (or its affiliates), CPA Canada or anyone else.