Five Top Tech Takeaways: UWCISA Launches Coffee Break PD, OpenAI Drama Continues, News from Google and DeFi gets Hacked!

Gulp and Grow: Introducing Coffee Break PD's Unique Professional Development Course

We are happy to introduce the launch of Coffee Break PD, where professional development (PD) takes on a caffeinated new form! Gone are the days of dedicating entire mornings or afternoons to lengthy PD courses. We're excited to introduce our innovative, "gulp-sized" approach to PD, designed to fit seamlessly into your busy schedule.

Efficient Learning in Gulp-Sized Chunks

Our course is uniquely structured into 15-minute segments, allowing you to engage in meaningful learning over a coffee break or a quick lunch. This format not only makes learning more manageable but also more enjoyable.  

The Crypto-Double Feature: Bitcoin and the FTX Saga

This introductory course offers a dual focus:

1. Bitcoin Basics and Beyond: Delve into the world of Bitcoin, exploring its mechanics, security issues, and transaction integrity. We take you through a detailed walkthrough of a Bitcoin transaction, from initiation to its addition to the blockchain.
2. The Rise and Fall of FTX: Featuring content from Cold Fusion, a popular YouTuber known for his engaging documentary style, this segment examines the dramatic story of Sam Bankman-Fried and FTX. It's a compelling narrative that offers invaluable governance insights.

Interactive and Immediate Assessment

Each 15-minute lesson is followed by a quick quiz, allowing you to immediately apply and assess your understanding of the material. This approach eliminates the stress of a final exam, making the learning process more effective and enjoyable.

Certification and Convenience

Upon completion, you'll receive a 2.5-hour CPD certificate from the UWCISA Center, affiliated with the University of Waterloo.  

Introductory Offer: Exceptional Value for Professionals

We're offering this comprehensive 2.5-hour course at an introductory price of just $49. This is part of our commitment to making high-quality PD accessible to as many business professionals as possible. We're eager for you to experience this novel approach to earning CPD credits and to hear your feedback on the documentary style of Cold Fusion versus traditional narrative formats.

Sign up now and transform the way you learn! 

For more, check out the course site here:

 

https://courses.coffeebreakpd.com/

 

Microsoft Gains Observer Seat on OpenAI's Board

The article from The Verge discusses significant changes at OpenAI, focusing on the reinstatement of Sam Altman as CEO, Microsoft's new role on the board, and the restructuring of the board itself. Here's a summary with key takeaways:

• Sam Altman Reinstated as CEO: Sam Altman has officially returned as the CEO of OpenAI. His comeback follows a turbulent period marked by his sudden firing, which was met with widespread surprise and concern within the AI community.
• Microsoft's Enhanced Role: Microsoft, a major investor in OpenAI, has been granted a non-voting observer seat on OpenAI's nonprofit board. This move increases Microsoft's visibility into OpenAI's operations, reflecting its significant stake and interest in the company's future.
• Board Restructuring: The OpenAI board has undergone a major restructuring. Two of the four members who initially decided to fire Altman are no longer on the board. This includes Tasha McCauley and Helen Toner, who were both part of the effective altruist movement. The movement fell into disrepute due to the actions of Sam Bankman-Fried at FTX. The new board comprises Bret Taylor (Chair), Larry Summers, and Adam D’Angelo, the latter being the only member from the previous board.

On a separate, but related note, the UK competition authority is now looking into OpenAI due to Microsoft's involvement on the board.

(Source: The Verge)

Gemini: Google's Vision for the Future of AI

Google has recently announced the launch of Gemini, a new multimodal AI model family designed to surpass the capabilities of OpenAI's GPT-4. Gemini, which is an advancement over Google's previous model, PaLM 2, has demonstrated superior performance in 30 out of 32 widely used academic benchmarks in large language model research. This AI model is capable of processing various types of input, including text, code, images, and audio, and aims to provide accurate problem-solving, advice, and answers across different fields. Google plans to integrate Gemini into its products, enhancing computing capabilities. Gemini will be available in three versions: Gemini Ultra for complex tasks, Gemini Pro for a wide range of tasks, and Gemini Nano for on-device tasks. Currently, only the mid-level Gemini Pro is accessible to the public through Google Bard, showing significant improvements over its predecessor.

Key Takeaways:

• Multimodal Capabilities: Gemini's ability to process multiple types of input, such as text, code, images, and audio, marks a significant advancement in AI technology.
• Three Versions for Different Needs: Gemini is tailored to various applications, with Gemini Ultra for complex tasks, Gemini Pro for general tasks, and Gemini Nano for local device applications.
• Integration into Google Products: Google's plan to incorporate Gemini into its product ecosystem signifies a major step towards more sophisticated and integrated AI solutions.

(Source: Ars Technica)

Google Strikes a $100 Million Deal with Canada on Online News Act

Google and the Canadian federal government have reached a significant agreement regarding the Online News Act. This deal will enable Google to continue sharing Canadian news online, in exchange for making annual payments to news companies, estimated to be around $100 million. This agreement, which addresses Google's concerns about the mandatory negotiation model and structural issues of the Act, allows Google to negotiate with a single group representing all media, reducing arbitration risks. The agreement is seen as a victory for Canadian media and may set a precedent for other countries. However, Meta (Facebook's parent company) has not resumed negotiations and has stopped distributing Canadian news on its platforms.

Key Takeaways:

• Annual Payments to News Companies: Google will make annual payments estimated at $100 million to Canadian news companies.
• Single Negotiation Group: The deal allows Google to negotiate with a single representative group for all media, simplifying the process and reducing risks.
• Precedent for Future Agreements: This agreement could serve as a model for other countries in their dealings with tech giants over news content distribution.

(Source: CBC)

The KyberSwap Saga: Hacker's Bold Power Play in Crypto Heist

The KyberSwap hack is a remarkable event in the cryptocurrency world, involving a sophisticated breach and a hacker with demands akin to a spy novel's plot. The heist, which occurred on November 22, 2023, resulted in the theft of approximately $48 million from KyberSwap's liquidity pools across multiple blockchains. The hacker, self-titled "Kyber Director," made outlandish demands, including complete executive control over KyberSwap, full authority over KyberDAO, and access to all company-related documents and assets. These demands, which were communicated on-chain, also promised a transformation of KyberSwap, including buyouts for executives, doubled salaries for employees, and rebates for liquidity providers, with a deadline set for December 10. The hacker's approach and the nature of the demands highlight the unique and sometimes surreal challenges faced in the realm of decentralized finance.

Key Takeaways:

• Massive Financial Impact: The hack led to a significant loss of $48 million, affecting multiple blockchains.
• Unprecedented Hacker Demands: The hacker's demands for complete control over KyberSwap and access to all company assets are unusually extreme and audacious.
• Potential Transformation of KyberSwap: The hacker's promises, if met, could lead to a complete overhaul of KyberSwap's operations and management.

(Source: Interchain Info)

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.

Five Top Tech Takeaways: SBF Gets Convicted, Elon Releases Grok, OpenAI's AppStore, Samsung's AI Plunge and Neuralink's Human Trials

SBF goes to Jail.

Sam Bankman-Fried Convicted: Jury Delivers Guilty Verdict in 5 Hours!

Sam Bankman-Fried (SBF), the founder of FTX, has been found guilty on all seven criminal fraud counts, potentially facing up to 115 years in prison. The jury arrived at the verdict within 7 hours. As predicted in a previous post, SBF's ill-advised media tour contributed to his downfall. The swift verdict also served as a stinging rebuke to Michael Lewis's portrayal of the SBF-FTX saga, which painted a sympathetic picture of the now-convicted fraudster. For Coffeezilla's take on Lewis's account, see below. For a video summary of the whole affair, check out ColdFusion's video. 

• Takeaway 1: Bankman-Fried was convicted of a range of fraud charges, including wire fraud and conspiracy against FTX customers and lenders, securities and commodities fraud against investors, and money laundering.
• Takeaway 2: The case underscores the importance of ethical conduct and transparency in business operations, especially in new and complex industries like cryptocurrency.
• Takeaway 3: The swift verdict, delivered after a month-long trial featuring testimony from former close associates, highlights the severity with which the justice system treats financial fraud.

(Source: CNBC)

Elon Musk's Grok: Pushing the Boundaries of AI Conversations

Elon Musk's new venture, xAI, has announced the creation of Grok, an AI language model that boasts a unique blend of humor and rebelliousness, designed to respond to queries that other AIs typically avoid. This development raises intriguing questions about the balance between AI freedom and ethical guardrails.

• Takeaway 1: Grok is positioned as an unconventional AI that can engage with "spicy" content, a departure from the cautious approach of mainstream AI models.
• Takeaway 2: The absence of standard content filters in Grok could lead to ethical and legal challenges, especially if it generates biased or harmful content.
• Takeaway 3: Despite its controversial nature, Grok's creation in just two months and its integration with real-time information from platforms like Twitter could represent a significant advancement in AI responsiveness and relevance.

(Source: WIRED)

ChatGPT Goes Custom: OpenAI's Latest Innovation

OpenAI is set to revolutionize the AI industry with the launch of its GPT Store, a platform akin to Apple's App Store, which will allow developers to create and share custom versions of ChatGPT. This initiative not only opens up new possibilities for personalized AI applications but also promises to share revenue with AI bot creators, fostering a new ecosystem of AI-driven services. OpenAI's GPT4 LLM now goes up to April 2023 (instead of September 2021). 

• Takeaway 1: The GPT Store will enable the creation and discovery of specialized ChatGPT bots, potentially leading to a surge in personalized AI services.
• Takeaway 2: OpenAI's move mirrors the App Store's strategy, aiming to become a central hub for AI tools and applications.
• Takeaway 3: The platform is designed to be collaborative, with revenue-sharing to incentivize developers, which could democratize AI development and usage.

(Source: The Verge)

Breaking Language Barriers: Samsung's Galaxy AI Initiative

Samsung is set to enhance its Galaxy S24 series with advanced AI capabilities, as confirmed by a recent blog post from the company. The new Galaxy AI feature will include AI Live Translate Call, allowing Galaxy phones to act as real-time personal translators during calls and texts, akin to live closed captions. This feature, part of the on-device and cloud-based AI experience, is expected to debut early next year, presumably with the Galaxy S24, which is rumored to be unveiled on January 18th.

• Takeaway 1: Samsung's Galaxy S24 series will introduce Galaxy AI, emphasizing real-time translation during calls and texts.
• Takeaway 2: The AI Live Translate Call feature signifies a leap in communication technology, potentially eliminating language barriers.
• Takeaway 3: The Galaxy S24 is rumored to feature a titanium frame and a 6.8-inch flat display, indicating significant hardware upgrades alongside the AI enhancements.

(Source: MobileSyrup)

Neuralink's Human Trials: A Step into the Future of Neurotechnology

Elon Musk's Neuralink has garnered significant interest for its upcoming human trials, with thousands of people reportedly eager to participate. The company, which received FDA approval earlier this year, aims to implant devices that could act as a "Fitbit in your skull," targeting individuals with paralysis from spinal cord injuries or amyotrophic lateral sclerosis (ALS). Neuralink's ambitions don't stop there; they envision a future where humans can communicate with machines and control digital interfaces using only their thoughts. However, the invasive nature of the procedure, which involves removing a portion of the skull to insert electrodes into the brain, necessitates a cautious approach, as emphasized by Neuralink's director, Shivon Zilis.

• Takeaway 1: Neuralink is moving towards human trials with a high level of public interest, aiming to assist those with severe neurological conditions.
• Takeaway 2: The technology involves a significant surgical procedure, replacing part of the skull with a device connected to the brain via ultra-thin threads.
• Takeaway 3: Despite the potential benefits, the invasive nature of the implantation process raises important ethical and safety considerations.

(Source: Business Insider)

Author: Malik Datardina, CPA, CA, CISA. Malik works at Auvenir as a GRC Strategist who 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.

Five Top Tech Takeaways: MBAs vs AI, Bitfinex Hacker Comes Clean, and Big Open AI and Google Bard Updates

Strategy.ai 

EY Unveils Fruits of $1.4 Billion Artificial Intelligence Investment: 

Consulting firm EY has invested $1.4 billion in artificial intelligence and developed its own large language model, EY.ai EYQ, marking the latest in a series of substantial AI investments by professional services companies. EY plans to train its 400,000 employees on AI and will continue to refine its AI model, focusing on ensuring privacy and data security. This investment follows similar commitments from peers like KPMG, Accenture, PricewaterhouseCoopers, and Deloitte, reflecting a broader trend in the industry. The firm aims to alleviate uncertainties surrounding AI implementation and offer comprehensive solutions, addressing the growing demand for AI strategies among corporate technology leaders. The EY.ai platform embeds AI in new and existing products, providing a structured path for effective AI deployment at scale.

Tech Entrepreneur Admits to Being Hacker in $4.5 Billion Bitcoin Heist: 

Ilya Lichtenstein, a tech entrepreneur from New York, has confessed to orchestrating one of the largest crypto heists in history, involving the theft of bitcoins now valued at billions of dollars from crypto exchange Bitfinex in 2016. Lichtenstein and his wife, Heather Morgan, pleaded guilty to conspiring to launder the stolen digital currency and defrauding the U.S. The stolen bitcoins, initially worth about $71 million, have surged in value to $4.5 billion. Federal prosecutors have recovered over $4 billion of the stolen funds, and Lichtenstein is cooperating with the government to recover the remaining amount. Despite their criminal activities, the couple maintained a high profile, with Morgan even writing a column for Forbes and pursuing a career as a rapper under the name Razzlekhan. (Do note that her music is terrible and cringe-worthy.)  Lichtenstein faces up to 20 years in prison, while Morgan faces up to five years for each of her two charges. (Source: WSJ)

Generative AI Outshines Wharton MBAs in Idea Generation

A study conducted at the Wharton School compared the innovative idea generation of MBA students to ChatGPT, a large language model. The study found that ChatGPT could generate ideas more quickly and, on average, of higher quality than the students. When market tested, the average purchase probability of a human-generated idea was 40%, while it was 47% for untrained ChatGPT and 49% for trained ChatGPT. When considering only the top 10% of ideas, 35 out of 40 were created by ChatGPT. This suggests that generative AI models like ChatGPT can be a valuable source of innovative ideas, shifting the bottleneck in the innovation process to evaluating rather than generating ideas. The study advocates for a collaborative approach where AI serves as a co-pilot to human innovators, ensuring a thorough exploration of possible solutions. (Source: WSJ)

AI Foundation Models: UK Government's Initial Report 

The UK government has published an initial report on AI foundation models (FMs).  FMs are pivotal in transforming industries, offering enhanced products, services, and breakthroughs in various domains. The document emphasizes the importance of competition, adherence to consumer and competition laws, and considerations for safety, data protection, and intellectual property rights.  It emphasizes the need for responsible AI practices to ensure ethical use and mitigate potential risks. The report provides a framework for policymakers, researchers, and industry stakeholders to navigate the complex landscape of AI. It also advocates for a collaborative approach involving leading FM developers, innovators, government, and regulators, with an update on principles and adoption due in early 2024 (Source: UK Government, Engadget).

OpenAI's ChatGPT Updates:

OpenAI has introduced several new capabilities to ChatGPT. Users can now interact with ChatGPT through both text and voice, allowing for more dynamic conversations. Additionally, ChatGPT has gained the ability to perceive visual information, enhancing its utility.

OpenAI has also introduced DALL-E 3, a significant improvement from DALL-E 2. This new version can generate higher quality images from the same prompts, providing better visual representations. This feature is available through the ChatGPT Plus subscription, which costs $20 a month. Subscribers will have exclusive access to this advanced feature.

DALL-E 3 can also generate letters, a significant accomplishment for AI image generators. It has overcome previous limitations, now being able to accurately generate images of fingers and hands, which had been problematic. Furthermore, it excels in text-based prompting, putting it ahead of the competition, including models like Mid Journey. (OpenAI, OpenAI)

Google's Bard Updates:

Google's Bard has received a massive update, enhancing its chatbot capabilities.  The updates include integration with Google’s suite of tools like YouTube, Google Drive, and Google Flights, allowing users to ask Bard to plan trips with real flight options or summarize documents from Google Drive. Bard can now communicate in multiple languages and has new fact-checking capabilities, allowing users to verify the accuracy of its responses with a “double check” button, highlighting areas where Google Search results confirm or differ from the chatbot’s statements. This feature aims to counter AI “hallucinations,” where the AI makes confident but incorrect statements. Users can also link Gmail, Docs, and Google Drive to Bard for personalized assistance, with the assurance that their personal information will not be used for training Bard or for targeted advertising. The updates reflect Google's ongoing efforts to advance consumer-facing AI technologies and enhance user interaction with generative AI across its services.

Canadians should note that Google Bard is currently not available in Canada, and there is no indication of when it will be released in the country. (Source: Google, CNN, BNN)

 

Author: Malik Datardina, CPA, CA, CISA. Malik works at Auvenir as a GRC Strategist who 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.

Five Top Tech Takeaways: Apple's Carbon Neutrality Questioned, Fairphone 5 Launches, Binance US's CEO Leaves and a Privacy Nightmare on Wheels

E-Waste: A Smoldering Problem (Pic Link) (Article Link)

"Carbon Neutral" Apple Watch: What Does It Really Mean?

Apple's recent launch of its "carbon neutral" 9th-generation Apple Watch has stirred both interest and skepticism in the tech community. While Apple has certainly made strides in cleaning up its supply chain and investing in renewable energy, experts like climate scientist David Ho question whether any product can genuinely be carbon neutral. The phrase "carbon neutral" is seen by some as misleading when companies use carbon credits to offset their emissions, a practice that has drawn scrutiny from regulators. Apple's "carbon neutral" watch relies heavily on these credits, which are tied to nature-based offset projects that are themselves subject to criticism. As noted in the article:

"Part of the problem is the slipperiness of attempting to tie a carbon credit—an abstract financial instrument—to any particular product in Apple’s armada of product offerings or the wider global economy. The Watch doesn’t have any role in creating those credits. They’re only brought together by an accountant’s sleight of hand."

The company's ambitious goal to have its entire product lineup carbon neutral by 2030 might sound good on paper, but given the complexity of global supply chains and the limitations of current carbon offset systems, it raises the question: how 'neutral' can a consumer product really be? (Source: Wired)

iPhone 15 Launch: Analyzing Apple’s Eco-Friendly Claims Amid New Product Launches

In case you missed it, we examined Apple's annual iPhone launch last week. Amid the spectacle of technology and innovation, Apple's environmental initiatives were in the spotlight. The tech giant unveiled four new iPhone models and two Apple Watches, all with improved features and performance. At the same time, Apple made significant claims about their Environmental, Social, and Governance (ESG) efforts, such as a 95% reduction in transportation emissions and a carbon-neutral Series 9 Apple Watch—a claim that has been questioned, as noted in a previous Wired article. Check out our post where we assess Apple's eco-claims in the context of their past green initiatives. (Source: UWCISA)

Fairphone 5: A More Sustainable and Repairable Smartphone?

The Fairphone 5, released by Dutch smartphone company Fairphone, aims to be a game-changer in the smartphone industry by offering up to 10 years of software support, a first in the industry. It also has built-in eco-sustainability, unlike the competition. The previous model, the Fairphone 4, got an industry-leading iFixit Score of 10 out 10 for its repairability. Designed with longevity, repairability, and eco-human-friendly-sourcing in mind, the phone retails at £619 (€699). It features a 6.46-inch QHD+ OLED screen, a Qualcomm QCM6490 processor, and an array of recycled and sustainable materials. While it may not lead in performance, it offers other unique benefits such as a removable battery, a five-year warranty, and modular spare parts for easy repairs. Fairphone is setting new standards for manufacturing and tech waste reduction, although compromises include a less impressive camera and mid-range performance. (Source: The Guardian, Fairphone)

Driving into the Privacy Abyss: The Dark Side of Modern Cars

Modern cars are becoming more like computers on wheels, boasting advanced tech features that unfortunately come with a price—your privacy. An exhaustive research study into 25 car brands revealed that every brand collects more personal data than necessary, and 84% admit to sharing or selling your data to third parties. Only two brands, available only in Europe, give drivers the right to have their personal data deleted. Surprisingly, car manufacturers perform worse in terms of security and privacy practices compared to other tech products like dating apps or mental health apps. The study also exposes how these companies manipulate "consent," forcing drivers and even passengers to give away their privacy. Given that every brand reviewed was flagged for privacy issues, the situation paints a grim picture for consumer choice and control over personal data. (Source: Mozilla)

Turmoil in Crypto Continues: Binance.US CEO's Departure and the SEC Crackdown

Brian Shroder, CEO of Binance's U.S. arm, has stepped down and will be temporarily succeeded by the firm's Chief Legal Officer, Norman Reed. Amid regulatory scrutiny, the company is also reducing its workforce by approximately one-third. This move follows allegations from the SEC that Binance.US has been operating an illegal trading platform. These organizational changes are part of a larger trend affecting the crypto industry, as U.S. regulatory bodies ramp up enforcement measures. (Source: WSJ)

Author: Malik Datardina, CPA, CA, CISA. Malik works at Auvenir as a GRC Strategist who 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.

Five Top Tech Takeaways: Nvidia's Billions, UN on AI & Jobs, Smucker's Approach to Hybrid, RoboTaxis Put on Pause and more

RoboTaxis Are Stopped

Nvidia Outpaces Rivals: How AI Fuels the Trillion-Dollar Company

Nvidia continues its meteoric rise in the tech world, fueled by unprecedented growth in its AI division. In its Q2 2024 earnings report, Nvidia disclosed a staggering $13.5 billion in revenue, with $10.32 billion coming from data center sales. The revenue in data centers more than doubled within just one quarter. Overall, the company made a profit of $6.188 billion, marking an 843% YoY increase. While the PC industry wanes, Nvidia's generative AI chips have found enormous demand. Moreover, the company is optimistic about the gaming sector, which rose 22% YoY to $2.48 billion in revenue. Nvidia is also forecasting a revenue of $16 billion in the next quarter, attributing much of the expected growth to its data center sector. Their next AI chip, GH200, is scheduled for a mid-2024 release, which aims to cater to growing demand. Meanwhile, rivals like Intel and AMD are yet to pose serious competition in the generative AI chip market. (Source: TheVerge)

Why AI Won't Spell Doom for Jobs: The UN's Take

A United Nations expert, Ekkehard Ernst, refutes the common notion that AI and robots will replace human labor in manufacturing sectors, especially in developed countries. Instead, jobs in the service sectors like construction, health care, and business are most likely to undergo transformation. Ernst suggests that AI will automate routine tasks, freeing humans to focus on emotional and interpersonal skills. In developing nations, sectors like agriculture are benefiting from AI. The impact of AI on labor markets can be shaped by local, national, and global policies, and isn't pre-ordained. Ernst argues that a broad skill set and flexible regulatory framework are crucial for optimizing the opportunities presented by AI. (Source: UN)

Tornado Cash Founders in Legal Turmoil: What It Means for Crypto

Tornado Cash co-founders Roman Storm and Roman Semenov are facing serious legal charges in the U.S., including conspiracy to commit money laundering, following the Department of Justice's unsealed indictment.  This comes after U.S. sanctions on Tornado Cash and the arrest of third co-founder Alexey Pertsev in the Netherlands. Roman Semenov has also been sanctioned for alleged support to North Korean hackers via the privacy tool. The case has wide-ranging implications, sparking debates about the legality of open-source development and unlicensed money transmission in the crypto space. Regulatory inconsistency also seems apparent, as the charges contradict FinCEN's 2019 guidance stating that "anonymizing software providers are not money transmitters. (Source: Forbes)

In terms of background on the company, Tornado Cash is a decentralized non-custodial privacy solution built on the Ethereum blockchain-based zero-knowledge proofs. It is an open-source, fully decentralized cryptocurrency tumbler that runs on Ethereum Virtual Machine-compatible networks². Tornado Cash offers a service that mixes potentially identifiable or "tainted" cryptocurrency funds with others, so as to obscure the trail back to the fund's original source. (For more see: Coingecko, Wikipedia)

J.M. Smucker’s Tailored Hybrid Strategy: A Case Study

J.M. Smucker has adopted a unique return-to-office strategy, setting it apart from other U.S. companies. The company, known for its diverse portfolio of brands from Jif peanut butter to Folgers coffee, has designed its headquarters to include a variety of specialized spaces, such as a coffee-tasting room and a mock grocery store. The hybrid strategy is tailored to accommodate the unique needs of different departments, allowing for a blend of remote and in-person work. The company expects its roughly 1,300 Orrville-based corporate workers to be on site as little as six days a month, amounting to about 25% of the time, depending on their roles. Employees are guided to meet this requirement by attending 22 'core' weeks a year. Remarkably, the strategy allows many employees to live anywhere in the U.S., as long as they cover their travel expenses to Orrville for these core weeks. This has led to a rising number of 'super-commuters' who live elsewhere but work in Orrville. The approach aims to leverage the company's historical strengths while adapting to the evolving work landscape. (Source: WSJ)

GM Agrees to Halve its Robotaxi Fleet Amid Ongoing Investigations

California's Department of Motor Vehicles has called for General Motors' self-driving subsidiary, Cruise, to halve its active fleet after two incidents involving the autonomous vehicles (AVs) occurred in San Francisco. The move comes shortly after Cruise was green-lit by California authorities to charge for robotaxi services around the city at all times of the day. One incident involved a collision with a fire truck, resulting in a passenger requiring hospital treatment for minor injuries. Another collision happened when a car ran a red light and struck a Cruise AV. A separate incident involved a Cruise AV driving into wet concrete. These developments pose significant challenges for the AV industry, emphasizing the complexity of creating fully autonomous, safe vehicles. (Source: CNN)

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.

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.

Five Top Tech Takeaways: Twitter $20 Billion Brand Bonfire, No Bard for Canada, Apple's GPT and AI Regulations

 

Bonfire of Billions

Musk's Twitter Rebrand: Lighting Up $20 Billion in Brand Value?

Elon Musk's recent decision to rebrand Twitter as "X" and eliminate the iconic bird logo has sparked controversy and is estimated to have wiped out between $4 billion and $20 billion in brand value. The move, which includes a shift in focus towards audio, video, messaging, payments, and banking, has been criticized by analysts and brand agencies who argue that Twitter's brand recognition and cultural influence are invaluable assets. The rebranding has also led to a significant drop in advertising revenue, with advertisers wary of Musk's controversial persona. Despite the backlash, some believe that Musk's personal brand may be powerful enough to carry the new "X" platform forward. (Source: BNN)

Google's Bard Expansion: Canada Left Out in the Cold

Google's AI-powered chatbot, Bard, has expanded globally but has notably excluded Canada, along with countries like China, Russia, Iran, North Korea, Afghanistan, Belarus, and Cuba. This move comes amidst Google's ongoing dispute with the Canadian government over the Online News Act, which mandates tech giants like Google and Meta to negotiate compensation deals with media outlets. The Act aims to balance online advertising revenues, a sector dominated by Google and Meta. In response to the Act, both companies have threatened to block news links from their platforms in Canada. Google's Bard, now available in over 40 languages and more than 230 countries, has not clarified if its exclusion of Canada is directly related to these regulatory disputes. (Source: CTV)

Sam Altman's Eyeball Scans: A New Frontier in Crypto or Privacy Breach?

Worldcoin, a project by OpenAI CEO Sam Altman, has launched a global initiative offering free cryptocurrency in exchange for an eyeball scan to create a digital ID. The project aims to establish a new "identity and financial network" and to verify users as human, not bots. Despite privacy concerns, people in countries like Britain, Japan, and India have participated, with Worldcoin claiming to have issued IDs to over two million people in 120 countries. Critics have raised concerns about potential privacy breaches, but Worldcoin insists that the project is "completely private" and that biometric data is either deleted or stored encrypted. The promise of free cryptocurrency has attracted many participants, despite the potential risks. (Source: CTV)

Apple's AI Ambitions: The Birth of 'Apple GPT'

Apple is reportedly developing its own AI-powered chatbot, internally referred to as "Apple GPT", using a large language model (LLM) framework named "Ajax". The project, which runs on Google Cloud and is built with Google JAX, is still in its early stages with no confirmed plans for public release. Multiple teams within Apple are working on the project, including addressing potential privacy issues. Despite Apple's relative silence in the generative AI space, the company has been integrating AI into its software for years, most notably with Siri. Apple's AI initiative is led by John Giannandrea and Craig Federighi, and a significant AI-related announcement is expected from the company next year. (Source: TheVerge)

AI Giants Commit to New Safety Measures Amid White House Initiative

In an effort to manage the risks associated with artificial intelligence (AI), the Biden administration has reached an agreement with seven major AI companies, including Amazon, Google, Meta Platforms, Microsoft, and OpenAI. The companies have voluntarily committed to implementing more safeguards around AI, such as developing a watermarking system to help users identify AI-generated content, testing their AI systems' security and capabilities before public release, investing in research on the technology's societal risks, and facilitating external audits of system vulnerabilities. While these commitments largely reflect existing safety practices, they lack enforcement mechanisms. The White House is also developing an executive order to govern the use of AI, emphasizing that these commitments are not a substitute for federal action or legislation. (Source: WSJ)

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.

Top Five Tech Takeaways: Llama2 joins the GenAI Fray, XRP Mixed Judgment, Co-pilot Pricing Announced, Tech Reacts to Bill C-18, and Code Interpreter Debuts

Robo Llama Joins the GenAI Battle

Llama2 Joins the GenAI Battle: Meta Offers it Free for Research and Commercial Use

Meta has recently announced the launch of Llama 2, the highly anticipated second generation of their open source large language model. Llama 2 has been released for both research and commercial purposes, free of charge, to promote innovation and development in the field. Microsoft, a longstanding partner of Meta, is deepening its involvement in this project and has become the preferred partner for Llama 2, making it available through Azure. The widespread endorsement from a variety of stakeholders across the technological landscape, academia, and policy, signifies the embracement of Meta's open innovation approach in AI. The model is free for both academic and commercial use - as long you have less than 700 million users. (Source: Meta, The AI Advantage)

Microsoft Unveils AI Copilot: A Pricier Path to Productivity?

Microsoft has unveiled its plans to integrate an AI engine, dubbed Microsoft 365 Copilot, across its productivity suite, with a proposed cost of $30 per user per month. Copilot, comparable to ChatGPT, can execute tasks across various Office applications, from editing Word documents and summarizing Excel data trends, to creating PowerPoint presentations and drafting emails in Outlook. Copilot is set to roll out for 365 E3, E5, Business Standard, and Business Premium customers, though an exact launch date has not been disclosed. Microsoft also plans to include a privacy-centric version of its Bing chatbot that will not store chat history, as an added measure to protect corporate data. (Source: Yahoo)

Bill C-18 Fallout: Tech Giants Google and Meta Block News in Canada

In a strong rebuke to Canada's Bill C-18, which mandates payments from tech giants for news links to support the Canadian news sector, Google and Meta have responded by blocking news links in Canada. Initially, Google had voiced concerns about the approach's uncapped liability and the risky business framework it presented, while Meta had regarded news contribution as highly substitutable. However, the companies' decisions to cut off news links could lead to dramatic consequences: a potential decline in news outlets due to reduced traffic and revenue, decreased reliability of Google's search services, increased reliance on foreign news sources, and a surge in misinformation. (Source: Michael Geist)

Ripple vs SEC: A Mixed Verdict over XRP Sales

In the lawsuit between Ripple and the U.S. Securities and Exchange Commission (SEC), the verdict delivered was a mixed bag. The court ruled that Ripple's sales of its cryptocurrency, XRP, on public exchanges did not constitute offers of securities, hence rejecting part of the SEC's claim. However, the SEC scored a partial victory as the court found Ripple's $728.9 million sales of XRP to institutional investors were unregistered securities sales. Additionally, it was determined that Ripple's executives couldn't argue a lack of "fair notice" that XRP was a security at the trial. (Source: Reuters)

OpenAI's Code Interpreter: Your New Companion for Data Analysis, Visualizations, and More

OpenAI has recently added a new plug-in to ChatGPT Plus called the Code Interpreter, turning the AI into a personal data analyst. This plug-in utilizes Python to generate responses and allows users to both upload and download files. Here is Business Insider's summary of the key capabilities:

1. Data Analysis: Users can provide large datasets to the chatbot and request detailed analyses to identify trends, making it capable of handling data in various formats including CSV, XSLT, and JSON.
2. Data Visualizations: Code Interpreter can generate graphs based on provided datasets, useful for data exploration and visualizations.
3. Data Cleanup: Instead of manually processing data, Code Interpreter can clean up datasets in seconds, making it a valuable tool for data hygiene.
4. Game Generation: Users can instruct Code Interpreter to create games from scratch, offering a unique application in recreational coding.
5. Video and GIF Creation: The plug-in can also generate animated clips and GIFs from images and vice versa, providing users with more creative content creation options.
6. File Conversion: Code Interpreter can efficiently handle file conversions, such as transforming a PNG file into a JPEG, or an MP4 file into a GIF.
7. Code Writing and Debugging: Despite its focus on non-coders, Code Interpreter can write and debug code, demonstrating its ability to produce and improve coding output.
8. Playlist Analysis: The plug-in can be used to analyze Spotify playlists, offering new ways to interpret personal music trends.
9. QR Code Generation: Code Interpreter can also generate QR codes, simplifying this process for users and providing quick access to web links. 

Here is Andrew Stapleton's take on the OpenAI's latest:

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.

Furious Five: Meta Launches Twitter Rival, AI at the Big 4, FTX relaunch & lawsuit, and Open-AI shuts off Browse-with-Bing

 

Meta vs Twitter: The Battle Begins

Meta's Threads Skyrockets to 100 Million Sign-Ups, Posing a Challenge to Twitter

Meta's social media platform, Threads, recorded 100 million sign-ups within five days of its launch, surpassing OpenAI's ChatGPT as the fastest-growing platform to reach this number. Seen as a potential rival to Twitter, Threads has attracted a broad user base including celebrities and politicians. Despite its rapid growth, it still lags behind Twitter's 240 million daily active users. Twitter has threatened to sue Meta, alleging Threads was built using its trade secrets. Threads supports posts up to 500 characters and media content but lacks a desktop version, direct messaging, and features like hashtags and keyword search. Meta has stated it will only consider monetization once Threads is on track to reach one billion users. (Source: CBC)

Balancing Act: Harnessing AI’s Potential in Tax and Accounting Amidst Regulatory Hurdles

Generative AI adoption is growing in tax and accounting firms, despite challenges like data privacy concerns and regulatory uncertainties. The technology, exemplified by OpenAI's ChatGPT, has potential for significant impacts but is also hindered by its limitations and the uncertainty of its economic effects. Major firms, including Ernst & Young, KPMG, Deloitte, and PwC, have invested in AI training and data analysis capabilities. However, AI's learning process raises data privacy issues, and regulators are lagging in addressing the fast-paced AI evolution. While AI has the potential to detect corporate fraud and revolutionize industries, firms need time for experimentation and learning to establish necessary standards and regulations. (Source: Bloomberg) 

Unveiling FTX 2.0: Relaunch Amidst Ongoing Crypto Crackdown

FTX is proceeding with its intentions to relaunch its primary global cryptocurrency exchange. WSJ, quoting Chief Executive John J. Ray III, reported that FTX  "has begun the process of soliciting interested parties to the reboot of the FTX.com exchange." The success of "FTX 2.0", however, is unclear. Despite its tattered reputation, the larger challenge may be overcoming the ongoing crackdown on crypto. (see here for our prior coverage of this) Source: WSJ)

Former FTX CCO Sued for Silencing Whistleblowers

FTX is also suing its former Chief Compliance Officer (CCO). Daniel Friedberg has been accused in a lawsuit filed by FTX and its debtors in the U.S. Bankruptcy Court for the District of Delaware of paying off whistleblowers to suppress information about the company's alleged fraudulent activities. The suit claims that Friedberg, who also served as the General Counsel for CEO Sam Bankman-Fried's crypto hedge fund, Alameda Research, disregarded internal control deficiencies and focused on keeping whistleblowers quiet while allowing the co-mingling of customer assets, which led to the downfall of both entities. (Source: Compliance Week)

ChatGPT Plus Users Lose Browsing: OpenAI Reacts to Paywall Concerns

OpenAI has temporarily disabled the 'Browse with Bing' feature in ChatGPT Plus due to concerns about bypassing paywalls and privacy settings. The decision follows user feedback that the feature was displaying full content from URLs, infringing on content owners' rights. Despite criticism from some users, OpenAI is working to fix the issue but has not specified when the feature will be back online. (Source: Yahoo Finance)

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.

The Furious Five for June 13: Tech and Business Stories You May Have Missed

The EV Charger to Rule them All

Apple Unveils is Vision Pro Headset: Are we Ready for Spatial Computing?

Apple has announced its much awaited VR headset. Last week, they unveiled the Vision Pro Headset, which is designed to seamlessly blend digital content with the physical world. This much awaited device allows users to interact with a three-dimensional user interface controlled by eye movements, hand gestures, and voice commands, and is powered by visionOS, the world's first spatial operating system. Careful to separate themselves from the competition, they classified the Vision Pro as their first spatial computer. The Vision Pro Headset is priced at $3,499 and is slated for release in early 2024. (Sources: Apple, Wired) 

For a great summary on Apple's latest, check out Cold Fusion's review:

Crypto Crackdown Continues: SEC Sues Binance and Coinbase

The Securities and Exchange Commission (SEC) has sued Binance and Changpeng Zhao (Binance’s Canadian founder and controlling shareholder) for operating an illegal trading platform in the U.S. and misusing customers’ funds. Binance is the world’s largest cryptocurrency exchange. The SEC said that Binance and Zhao misused customers’ funds and diverted them to a trading entity that Zhao controlled. That trading firm, Sigma Chain, engaged in manipulative trading (known as "wash trading") that made Binance’s volume appear larger than it actually was, the SEC said. Binance also concealed that it commingled billions of dollars in customer assets and sent them to a third-party, Merit Peak, which was owned by Zhao, the SEC alleged. The SEC filed the case in federal court in the District of Columbia and is asking a federal judge to freeze Binance’s assets and appoint a receiver. (Source: WSJ)

SEC then filed a lawsuit against Coinbase, for allegedly operating as an unregistered broker and exchange. Unlike Binance, Coinbase is listed on the NASDAQ and hence regulated by the SEC. The SEC claims that Coinbase violated rules that require it to register as an exchange and be overseen by the federal agency. Coinbase has denied the allegations and intends to defend itself in court. The SEC’s strategy has centered on using its enforcement division to subdue crypto companies and show why its regulations apply to crypto activities, with increasing focus on the biggest players rather than just the companies and currencies at the margins. Coinbase pushed back on Tuesday, accusing the SEC of taking an “enforcement-only approach” with the crypto industry in the absence of clear rules. Brian Armstrong, CEO of Coinbase, had the following take:  

“The solution is legislation that allows fair rules for the road to be developed transparently and applied equally, not litigation,” Paul Grewal, chief legal officer of Coinbase, said in a statement. “In the meantime, we’ll continue to operate our business as usual.” The lawsuits are part of a growing regulatory crackdown on the crypto industry in the post-FTX fallout. (Source: WSJ)

Global Tech Giants Bet Big on AI, Back Cohere with $270M Funding

AI startup Cohere has raised $270M in a Series C financing round, attracting investors from around the globe and notable tech firms like NVIDIA, Oracle, and Salesforce Ventures. This surge in investment underlines the growing recognition of AI as a critical driver of business success in the coming decade. The round was led by Inovia Capital and included participation from investors in the USA, Canada, Korea, the UK, and Germany. Cohere's CEO, Aidan Gomez, emphasized the company's readiness to lead in the next phase of AI products and services that will revolutionize business, while NVIDIA's CEO, Jensen Huang, hailed Cohere's contributions to generative AI as foundational. (Source: Cohere)

GM and Ford's EVs to Plug into Tesla's Charging Network

General Motors (GM) and Ford electric vehicles will gain access to Tesla’s vast U.S. charging network starting early next year. Both GM and Ford are aligning their electric vehicles to be compatible with approximately 12,000 out of Tesla's 17,000 chargers. The Detroit auto giants are advocating to establish Tesla's connector as the industry standard. At first, GM and Ford EV owners will need an adapter to hook into the Tesla stations, but both GM and Ford will switch to Tesla’s North American Charging Standard connector starting with new EVs produced in 2025. (Source: CBC, CNBC)

Data Management: An Inescapable Necessity in the World of Generative AI

As interest in Generative AI rises, the importance of robust data management in businesses comes to the fore. Efficient data storage, filtering, and protection are necessary for successful AI integration. A properly structured data management system is essential for companies to effectively utilize large language models. A key concern for these companies is the quality of data, which must be well-structured, relevant, and organized for effective AI training. Therefore, firms must carefully cleanse, categorize, and format their data to avoid retaining useless information. As highlighted in the Wall Street Journal, organizations such as Syneos Health are prioritizing such data cleansing efforts. Syneos spent roughly 18 months prepping this repository for AI model training and construction. This process involved a team of data scientists and business experts who created centralized, reusable machine-learning elements. (Source: WSJ)

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.

Is the SVB Collapse the Start of Another Financial Meltdown? A look at what went down!

By now we have all heard about Silicon Valley Bank’s (SVB) sudden collapse and we are wondering whether we are on the precipice of a 2008 scale meltdown. After all it is the second largest bank failure in U.S. history. Even more concerning is the recent rattling at Credit Suisse. In this post we'll explore, some key takeaways from the pundits and publishers out there.

Examining the Connection Between Silvergate Bank’s Collapse and SVB’s Bank Run

A few weeks ago, the well-known cryptocurrency bank, Silvergate, suffered a sudden collapse. As a prominent institution within the world of crypto, Silvergate served as a crucial entry and exit point for individuals looking to convert their cryptocurrency into fiat currency. It also maintained substantial exposure to both Alameda Research and FTX.

 

In contrast, Silicon Valley Bank (SVB) maintains no direct connections with the cryptocurrency sector or Silvergate Bank. However, the dramatic downfall of Silvergate likely instilled enough fear among SVB depositors, prompting them to trigger a panic. For a more in-depth exploration of the Silvergate collapse, check out Wall Street Millennial’s take on the situation:

 

 

Unveiling Risk Management Flaws: What did Warren Buffett say about low tides?

Warren Buffett once said, “You don’t find out who’s been swimming naked until the tide goes out.” This sentiment rings true for SVB, which suffered from a maturity mismatch between its depositors' on-demand withdrawals and the long-term debt it held. The bank was exposed to interest rate risks but took no action, leaving it vulnerable.

 

How did things go so wrong?

 

When looking at what happened at SVB, we need to go back in time an examine the impact of the zero interest rate policy that's been in place for decades. It resulted in “the search for yield”. This search for yield funded everything from mortgage-backed securities, cryptocurrencies, investments in emerging markets as well as risky investments in the oil sector. And this is what likely prompted the executive management at SVB to lock in their money in long term debt. Specifically, SVB owned over $80bn of mortgage-backed securities with 97% of them being 10+ year duration at a weighted average yield of 1.56% (link).

 

Interestingly, SVB contemplated managing this risk but decided against it. As noted on Bloomberg:

 

“In late 2020, the firm’s asset-liability committee received an internal recommendation to buy shorter-term bonds as more deposits flowed in, according to documents viewed by Bloomberg. That shift would reduce the risk of sizable losses if interest rates quickly rose. But it would have a cost: an estimated $18 million reduction in earnings, with a $36 million hit going forward from there”

 

Then inflation struck. This caused the Fed to aggressively reverse its zero-interest rate policy. The swift increase in interest rates led to a significant decline in the value of SVB’s debt holdings, as the value of debt falls when interest rates rise. 

To deal with this widening hole in their balance sheet, management failed to raise $2.25 billion. This left SVB unable to cover the unexpected withdrawal of $42 billion in deposits (that occurred in 1 day!), as the value of the debt they held had severely diminished and could not cover the outflows. For more on the numbers, check out Patrick Boyle’s take:

 

 

 

Furthermore, the absence of a risk officer from April 2022 to January 2023 compounded these issues. Moreover, the CAO was none other than the former CFO of Lehman! For more on this check out Cold Fusion’s take:

 

The Race to escape the Sinking Ship: Who will be left holding the bag?

Venture capitalists, known for their interconnectedness through WhatsApp groups, began to realize the bank's shortcomings. They themselves were quite vulnerable as 90% of SVB's deposits were uninsured, in contrast to the industry average of 52% (link).  As noted in this Bloomberg Odd Lots podcast, SVB was not actually dealing with a diverse set of clients. Instead, they were dealing with a handful of VCs. Consequently, the clients pulled out their funds in unison as a response to the request from their respective investors.

 

The Ripple Effect: Contagion Risks Loomed

The inability of Silicon Valley to access cash for payroll could have spelled disaster for numerous startups. This cash flow issue would have also generated incentives for customers to avoid smaller banks, potentially triggering bank runs on other vulnerable institutions. It would also lead to consolidation of customers around the “too big to fail” banks, as people will not trust banks that are the same size or smaller than SVB.

 

Questionable Timing: Bonuses and Stock Sales

The timing of bonus payouts and stock sales raised eyebrows, with bonuses ranging from $12,000 for associates to $140,000 for managing directors issued the day FDIC took over the bank. (link) Silicon Valley Bank CEO Greg Becker's stock sales, totaling nearly $30 million over two years, also drew scrutiny. Most notably, Becker sold $3.6 million worth of shares just days before the bank disclosed a substantial loss that led to its stock plunge and eventual collapse. (link)

 

Capitalism on the way up, Socialism on the way down?

The US Treasury jumped into shore up ALL deposits. The new "Bank Term Funding Program" will offer loans of up to one year to lenders that pledge collateral, which will be valued at par. Management and shareholders, however, will not be bailed out.

 

The Biden administration and other government officials have emphasized that the FDIC intervention is not a bailout, seemingly more concerned about potential backlash than addressing investors' needs. Their apprehension likely stems from the possibility of sparking a new Occupy Wall Street or Tea Party movement, as Uncle Sam's aid tends to favor those deemed "too big to fail" rather than offering support to smaller, struggling entities.

 

And the Biden Administration has good reason to be aware of this perception.

 

As reported in the Washington Post, prominent venture capitalists and tech executives, including LinkedIn founder Reid Hoffman and investor Ron Conway, leveraged their connections and influence to lobby Democratic lawmakers and administration officials for intervention in the bank crisis. As prolific donors to Democrats, including Biden, they worked with Pelosi and Gov. Newsom to pressure the White House and Treasury Department. Over 600 tech industry executives joined a call with Rep. Ro Khanna, who then emerged as a vocal advocate for the Biden administration to support the bank's depositors and prevent broader financial repercussions. Washington Post summarized the situation as follows:

 

“The lobbying blitz reflected a broader sea change in the normally libertarian tech industry — one that typically tries to ward off federal intervention. Now, many of those same voices were calling on the Biden administration to act and protect an ecosystem in which they had a large stake.”

 

Ironically, it was none other than the CEO of SVB, Greg Becker, who lobbied back in 2015 to evade the Dodd frank regulatory constraints and thereby get lighter scrutiny. Here is an excerpt from this article:

 

“Touting “SVB’s deep understanding of the markets it serves, our strong risk management practices,” Becker argued that his bank would soon reach $50 billion in assets, which under the law would trigger “enhanced prudential standards,” including more stringent regulations, stress tests, and capital requirements for his and other similarly sized banks…Becker insisted that $250 billion was a more appropriate threshold…“Without such changes, SVB likely will need to divert significant resources from providing financing to job-creating companies in the innovation economy to complying with enhanced prudential standards and other requirements,” wrote Becker…”

 

Commenting on the contradiction between this attitude and the SVB bailout demanded by the 600 tech execs, Scott Galloway, a prof at NYU’s Stern School of Business, offers a succinct and insightful summary of the underlying dynamics (see here and here):

 

 "We have capitalism on the way up and socialism on the way down."

 

Sure, this protected the depositors. And yes, it was not for the shareholders or management. However, one cannot deny that it was the special access to the powerbrokers that brought in the FDIC to save the day. In the absence of such privileged access, the account holders would have likely met the same fate as mortgage holders who were left stranded in the 2008 crisis.

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.