Episode 053 - Scams in the Bitcoin world
In this week's episode, I'm going to talk about the Bitclub Network. This was one of the many scams that hit the Bitcoin community back from 2015-2019 and how it took what I believe to be a very good business model, a cooperation based system and ability to pool resources to mine and help keep the Bitcoin protocol safe, and turned that into a MLM scam, and now three of the four founders are in jail in New Jersey, and the fourth one was scooped up on an Interpol warrant in Indonesia.
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First, let me explain where I sit in regards to innovation and new frontiers:
- There is no progress without risk
- If you want to make an omlette, you have to break some eggs
- The first through the door gets the arrows
- We want to celebrate entrepreneurs as risk takers as they take on all the risks we don’t want to
- A good idea can make you Elon Musk if you have the psychology to handle it
That’s a “private sector” view point. Those that live in that world understand these fundamental truths.
Then you have a sector of society (the largest sector) that don’t want to live in the world of chaos that is creation. Many times, this is cultural - most countries have an underlying culture that restricts and in many ways rejects creativity. This is very true in Asian countries for example, where creativity is not a “natural” thing culturally. This is why you see certain countries excel in their ability to duplicate, fabricate and manufacture from someone else’s idea. In a way, it is like the simple observation that most people in society cannot respond to an idea, but can respond to a prototype. It is a difference in the human’s willingness to imagine something.
Entrepreneurs are experts in imagination. They see something before it exists and they act upon that vision - often needing the help of others to see what they are seeing, pony up capital or labor to help create it, and often for a share of the proceeds of it.
The polar opposite of this is the “public sector”. In this portion of society, there are few risks taken because of the political risk associated. No one wants to be the guy who underwrote some project or expense that didn’t pan out. Those that live in that world prefer to have a predictable lifestyle, with little or no risk. They want a predictable job, with a start time of 9AM and an end time of 4PM and they don’t work one minute after the end time. They do the minimum needed to skate through and typically have to do work that doesn’t make any motivational sense to them. They are promised a pension if they can last long enough in that world, and that’s a predictable end point that keeps them focused on the task.
Different countries have different levels of government and public sector. Whereas the private sector is motivated in the world of creation & profits, the public sector is motivated on stability and power. Given the choice, lazy wins out in the public sector. I don’t say that in a negative way - I’m saying that everyone in that sector agrees that making a living by doing the least amount possible is the goal. It is just how it is. And that’s why most government projects fail without private sector involvement. They are better to issue contracts to the private sector to do something and let them take the risks. They don’t care as much about the money, because they are getting paid anyway. If that motivates the private sector to do their bidding, so be it. Pay them and let’s worry about the football game on the weekend rather than this “dead end job” that is my work as a public servant.
Look this is reality. If you are a public servant, don’t take offense at this. Know that in our popular culture, we see this. I mean think about Marge Simpson’s sisters working at the DMV on the TV show “The Simpsons” and that tells you pretty much how society views the role of a public servant.
When I grew up in Australia, I came face to face with this. Australia is a “Democratic Socialist” country. Much like western Europe, government represents one of the largest employment sectors in the region. For a country that had (at the time) 18 million people, they had more public servants controlling more of society than most. But if you promise a long term career in a job you can’t be fired in, then everyone wants in. And if power is measured in how many people work underneath you in what is some pyramid based hierachy (much like Amway or some MLM model), then you get more and more and more people. That’s how you get more salary and more power. In order to stay relevant, those societies will enact draconian laws because the one thing that public servants can do is create laws.
Additionally, when more than half of the working society are working for the government (either directly or indirectly), then over time the dysfunction of “not rocking the boat” becomes social norms. They have a term there called “The tall poppy syndrome” (explain it). It is core to societal values.
That’s why I left. The struggle of trying to be an entrepreneur in that climate was so hard. Most small businesses failed in 12 months and that was just a “statistical norm”. It shouldn’t have been, but god forbid you created a business and employed people because then they would organize with strong support of trade unions and the business owner would have all the risks and no rewards. It’s a bad deal to begin with, and the reason why you don’t see a lot of Australian inventions. In fact it is pretty much understanding there that if you want to “make it” in whatever field you are in (business, music, acting, etc.) you have to leave Australia. You can’t do it from there. Kinda like a big fish, small pond thing. But more because of the social walls that are built up around you succeeding. The truth is despite what they might want the reality to be, the reality is that society in Australia doesn’t not want you to create anything new and succeed because that could shine a light on the vast majority of the population that doesn’t do that, and wants a predictable, low risk life style.
You can’t have your cake and eat it to. Society wants the wealth that comes from creation and risk taking but doesn’t want to take any risks. How do you achieve that? Easy. Taxation and regulation. The more you do that, the more you can leech off the work of the risk takers.
Now as I record this, it is an election year in the USA. Part of the decision that people will make is between two opposite ideologies. On the one hand, you have an ideology that would wish to be known as “friendly” to business and money - the GOP. On the other hand, you have an ideology that is “friendly” to people, social life and health & well being - the Democrats. That’s how they sell their messaging as to who you should vote for.
But the truth is that both parties breed public servants, lust for power and want extract taxes off the efforts of those that take risks, etc. And both parties support law makers that can empower agencies to enforce their end points. If you have too much focus on business and money at the expense of human well being, then you have a problem. If you have too much focus on the benefits of human well being, health, education, etc. but you become like Australia, then you destroy the fabric of innovation in your country. These are the choices we must make. There has to be some form of balance here in the USA and our 4 yearly cycle of Federal Elections helps find that balance.
But we don’t elect public servants. They are there and they need to feel that they are doing something ethical, right and justified. Considering that they should be not getting in the way of the path of the citizens of their country and their life journey, when they do we feel there is “too much government”. If you have to spend years to get through some regulatory hurdles to get anything done, and the original purpose of those regulations has been lost in the annals of history, then you know something has to change.
So why am I going into such depth to talk about this?
Well what if some new invention comes out, and it has no regulations (yet). What if that invention is massively important to society, disrupts industries that are clearly dinosaurs and need to be destroyed, like the old deadwood in a forest as a bushfire descends on it, and what if that old deadwood had become more like a public servant that doesn’t want to be fired, doesn’t like upsetting the apple cart and doesn’t like to have the pure light of transparency shone upon them so that their dysfunction is now in the public eye?
Don’t you think that the encumbered industry that is at risk here would push back at the new comer? Do you think they would use their power to regulate, enact laws and stifle the risks of the disruptor?
And that is what brings me to Bitcoin.
It is a topic that has been covered to death on most podcasts. Those that don’t understand it, and have money in traditional investments, often take the public servant approach - don’t threaten my existing investment strategy with this new thing, don’t threaten the fabric of my understanding of the world (Fiat money - that is “money by decree” from government), even though we accept that 40%+ of our GDP is going to the financial services sector, that everyone is taking their piece of the transactions that we make and taxes are applied based on some understanding of Fiat money value of something. If you threaten that in anyway, its not going to end well.
And this is what happened. When Bitcoin came out as a concept in 2009, those in the cypher-punk (ie. anti-government, anti-surveilance, etc.) loved it. Remember at that time, the faith in the banking sector was at an all time low - the 2008 recession was with us, banks were evil and created the mess where people lost 50% of their home equity, stock market dropped to 8,000 in the DJIA and the chance of retirement was forcibly stolen from most of society. We created a bottom point in the cycles of economics by the greed and lust for power of human society. Riots and protests such as the months and months of “Occupy Wall Street” happened. Remember that?
Bitcoin was considered an answer to this. No longer could central banks just print money with abandon. Now they had to be creating money within the rules of math and limited supply. It was Austrian economics in its purest form. But even the author of that paper went underground, never wanted to admit to their identity and realized that if you poke the bear that is the encumbered world of money, it isn’t going to like it.
And it didn’t. But as more and more and more people got it, Bitcoin became more valuable and more of an answer to what money should be vs. what money has become.
Any new technological innovation comes before regulations and laws can be written to rangle it in. This is true of any invention. And typically regulations and oversight are empowered with unbridled fear of what the disruptive technology can do. If you remember the invention of the motor vehicle and eventually consumerization of it by Henry Ford, etc. The regulations that were enacted to have to have someone drive a car, someone sit in the passenger seat “just in case” and someone walk out in front of it to tell people to move aside - well what’s the point of a car then? It took about a decade to get government and regulations to understand what it was, and to find a balance of “light touch” vs. “what’s good for society”. If we didn’t get that right, the dominance of the 20th century by America, based on the invention of the internal combustion engine and fossil fuels would never have happened and the world would look a lot different to how it is today.
Well the 21st century has the same opportunities, yet we seem to be doomed to ignore it. We will likely give away all the good reasons why the USA has become the empire that it is due to creativity, invention and innovation because of the rise of the public sector, regulations and extortion of wealth that comes with corruption and lust of power. If so, we only have ourselves to blame for it.
Which brings me to the core point of this episode - finding the right balance between innovation and regulation.
This takes time. Like a good wine, it must be seasoned and like the ridiculous regulations that came with the emergence of the motor vehicle, we seem doomed to repeat this with crypto-currency.
Now here’s the truth - if you want to go to jail for the longest period of time, you will find that murder, rape, and violence isn’t going to result in that. What will result in that is financial fraud or anything to do with money. Al Capone went to jail not because of the history of terror that his organization inflicted on Chicago, but because of “tax evasion”.
In 2015, Ross Ulbricht, the young Libertarian and software developer who developed “The Silk Road” marketplace for drugs and other underground products & services on the Dark Web, was sentenced to a double life sentence plus forty years without the possibility of parole. And because the currency of that marketplace was Bitcoin, it created the perfect setup against the disruption of that technology by the entrenched money industry.
I’m not going to go into detail on whether I think what he created was good or bad. You have to be the judge of that. But can you honestly see how the punishment fits the crime here? Is it not over-reach like the regulations imposed on the automobile industry back in the early 1900s? His sentence was more like what a serial killer would get and even that is a stretch. The “Son of Sam” serial killer, arrested in 1977, received six 25 years to life terms for killing six people.
So with any new invention, it appears to go through the following evolution:
- An “entrepreneur” creates it and is celebrated as a “disruptor”
- Society sees opportunity and wants in on the thing
- Government sees threat, is lobbied by entrenched industries most affected by it, and begins to try and understand it and draft laws to control it. Remember the famous congressional quote by the late Senator Ted Stevens, “The Internet is a series of Tubes”
- Either the entrenched industry backs off and finds a way to live WITH the new invention, as the telephone companies did with the Internet in the 1990s, or they continue to use their financial lobbying power to convince law makers to either outlaw it, or regulate it to the point where the new invention has no efficacy.
- Over time, which can take decades, regulations are rolled back as society rebels and government sees that they are not doing the will of the people
- Finally a balance is found that everyone can live with.
That’s how it is supposed to happen. But in the case of Bitcoin, it hasn’t yet. And its been 11 years at the time I am recording this episode. The Internet took less time to find a balance of regulation, and so did the auto industry.
Now there is also the risk of human greed, without some form of ethical rule set enforced, going out of control. That happened in the days of unregulated Bitcoin. The most noteworthy was the scam of Bitconnect. This scam went crazy as people came up with some inventive ways to convince people to give up their money to them, and in a world of FOMO, Lambos, and instant Billionaires, people wanted in. When society got that crazy without some form of regulations, that’s when I got out and sold the majority of my Bitcoin holdings. Eventually the US government used its power through the SEC to regulate “ICOs” (the attempt of the crypto industry to create new ventures, funded by crypto investments in shares of something), vs. the encumbered “IPO” world of Wall Street and emergence into the public traded share market that is our stock market.
It was common knowledge back in 2017 or so that ICOs were all scams. The OG’s of the Bitcoin world went public to warn people of this, but the majority of the herd of humans ignored them with the lights in their eyes of “to the moon” and “lambos” drowning out the voices of reason. Eventually the government stepped in and shut it all down.
They went after the creators of these schemes with abandon. The more successful arrests and incarcerations that could come from this made the careers of many in the DOJ and it was just another way that the government could use the power of the gun as a legal threat against anyone wanting to create something new. I mean they took all the abandon out of invention - if they had done that when the 2009 Bitcoin white paper was released, we would not have Bitcoin today. The banks certainly didn’t want it.
The thing is, “If something is too good to be true, it probably isn’t.”. But let’s define “probably”. I mean if private space travel is too good to be true, tell Elon Musk that he shouldn’t do it. Meanwhile we just returned two astronauts to the International Space Station and back to earth - something the very same government has not been able to do for nine years, giving the “business” of launches to the Russian government. And in the same vein, who would have thought that electric powered cars would represent the highest valued automobile manufacturer in the world today (Tesla)? Is that something that is too good to be true, but actually is?
Common wisdom here has to be applied in context with the actual situation.
Look there are bad people out there. Those that don’t have control of their natural human greed. Look at yourself in the mirror. If someone offered you some way to get rich quick, would you dismiss them outright because you pre-judge it to be unethical or would you at least hear it out? What drives you to hear it out? Greed. Plain & simple. We are all implanted with the greed gene. It is just that the balance of ethics and greed is something that takes time, and often only comes with age. If you do nothing because of fear, nothing gets done. If you do everything, unethical and illegal things get done. There’s a balance here and it takes time to find the “right” balance.
Which brings me to something that is near & dear to me. A gentleman by the name of Joby Weeks.
I discovered a guy on YouTube many years ago by the name of Jeff Berwick. You can Google him to find out more about him. He’s a Canadian born guy, who lives in Mexico. He started a very large Internet stock market website in the early days of the Internet, and sold it for about $250 million and expatriated from Canada to Acupulco, Mexico. He’s a strong believer in anti-government and is really the poster child behind the “Anarcho-Capitalist” movement. He ran an annual convention in Acupulco called “Anarchopulco” which is attended by thousands, even bringing in Keynote speakers such as Dr. Ron Paul each year.
Those that follow in that movement are typically without any form of governance. The literal meaning of “anarchy” is “Without Rulers” and if you were to think of it this way, and to embrace a non-violence principal, it makes a lot of sense. It is the village like model that we all came from. Yet the term “Anarchy” is thrown around by our current leaders like a threat to their power - the uprisings in Portland Oregon recently were ridiculed by government as “a bunch of anarchists” because that threatens the power of the state.
Anyway Jeff Berwick had a YouTube channel (still around, but hosted by someone else now) called “Anarchast”. It was a celebration of those that have embraced the non-violent principles of anarchy, mixed with the desire of entrepreneurial and capitalism to form “anarcho-capitalist” movement. The guests he interviewed over hundreds of episodes brought a different view to the world, and front and center with this was Bitcoin and the crypto-currency movement.
The capitalist part of anarcho-capitalist was best represented by Bitcoin and the limited supply of money, etc. allowed Austrian economics to thrive in that world. Jeff was a bit of a crazy guy - willing to go where few would with his opinions, etc. And even to this day he is still doing it - challenging the power of law and regulations from Mexico by governments. His positions on COVID19 are what many will call “conspiratorial” and he’s constantly having videos deleted from YouTube, Facebook, etc. as the mainstream don’t want to allow his message to get air time.
I had COVID19, so I know it is real. I suffered through it. I also saw a portion of society that were scared to death of it, treating those that get it more like lepers in a leper colony and isolating them from society for fear of it spreading. I see over-reach beyond belief and manipulation of statistics that empowers government and law enforcement, much like what I’ve seen with the emergence of any other disruptive technologies. There is truth to a need to expose government overreach here, but while we don’t understand the science of this virus, I’m fine with leaning on the side of caution. But it is not a “black or white” thing. You can lean too heavily and destroy economies and the fabric of society, and we run the risk of doing that. People like Jeff Berwick does have a role to play to help allow people to find balance in this and establish a position that is theirs - with all the facts. You have the right to make your own decisions on how you feel about this, but not to risk other’s well being over it, of course.
That said, over the years, Jeff has had guests on his show. One such guest that impressed me was a guy by the name of Joby Weeks. Joby was a young entrepreneur who promoted the value of Bitcoin. He spoke at events all over the world and lived a life as a perpetual traveler. Now you all know that I love those that are willing to leave their native land and find out what the world has to offer. Joby managed to do this on private jets, with yachts in Monaco, etc. He took his family along for the ride, on champagne budgets, etc.
Who wouldn’t want to be like that? Who wouldn’t want to fly on private jets all around the world and be an “International Man of Mystery”? How did he do this?
Well he got into Bitcoin early and probably made a lot of money with buying BTC at $1 each. But he studied BTC like most of us did and realized that it was “mined”. He took the approach that it is better to own the Goose that lays the golden eggs, than a pile of eggs. This is the same mantra I preach. You own the asset that generates the dividend rather than just stockpiling dividends. Because if you just withdraw down over time against your holdings, eventually they will run out. You need to invest in “engines” that generate cashflow - this is the pretense of Smart income.
Joby realized that buying Bitcoin mining hardware and taking advantage of low power cost regions, such as Iceland where geo-thermal power is cheap - basically free, could allow you to scale up with thousands of Bitcoin mining rigs and generate massive amounts of wealth. But he didn’t have the capital to scale this to a level he wanted to. So he teamed up with a few other like minded folks that created a thing called “Bitclub Network”.
Joby went public on this concept at events, etc. and I saw him explain this on Jeff Berwick’s show multiple times. He even took Jeff and his family to the Caribbean on his private jet for lavish holidays, etc. Again, he was becoming the poster child of the wealth that comes from disruptive technologies.
The concept of the Bitclub Network was pretty simple - people could sign up and pay a small fee to becom part of the club. Once you were in, you could buy “shares” in mining rigs. You would effectively become the capital that BCN could use to buy more hardware, and in return you would get a share of the proceeds of that hardware. You probably couldn’t afford to build a large facility in Iceland and get through their regulatory hurdles, but you could become a shareholder in an organization that could do this. You would buy a time-limited “Contract” and that contract would give you the proceeds of the mining, shared with the BCN folk who managed the whole thing. Think of BCN like property managers on rental real estate, where you owned a share of the building and they charged a management fee, and you got a piece of the rents.
This is a concept that has been around for a long time. A “co-op” model so to speak. But since this was all being done in Iceland, Joby and his cohorts felt they didn’t have to comply with US laws regarding regulated entities, shares, etc. This was a common misconception of these types of partnership arrangements throughout the early days of Bitcoin. Since the “Intern”net was international the laws and regulations were typically limited to the domain of the governments that had imposed them. They could operate (in their minds) outside of the laws of any state - furthering the anarcho-capitalist mantra.
On the surface, BCN looks pretty legitimate. But they then started to find ways to market to get more club members and they turned to the old world of MLM (Multi-Level Marketing) for this. They felt that the power and lust of greed was more of a motivator to their existing members, so they crafted ways that members could create “downlines” and bring others into their group, and benefit from the mining rewards of their downline. Sharing in other’s shares of the mining rewards.
MLMs are 99% of the time either directly illegal, unethical or a scam. I think we all know this. But in the glory days of BTC and “to the moon” mentality, caution was thrown to the wind and BCN embraced using this technique to try to scale their business. It worked. Soon they got over 1 million club members.
They knew, however, that they were operating against the regulatory laws of the USA. The same scams that came from the ICO world in crypto-currency brought a crack down of the SEC on those organizations, and BCN started to not want US customers. This is much like how international banks don’t want US customers - the laws in the US became so draconian that what might be unregulated or acceptable private industry managed investments were not in the USA, and banks just felt the risks of them taking on US customers wasn’t worth it. So no bank account for you.
Same is true of BCN, but behind the scenes the BCN people would openly tell US customers that they could use a VPN (Virtual Private Network) to make it appear that they were not in the USA and they didn’t ask their customers to provide identity. The common practice of KYC (Know Your Customer) that was part of banking regulations wasn’t applied - further supporting the cause of anarchy.
Meanwhile all the founding members of BCN were living lavish lifestyles. Money flowing everywhere. Hundreds of millions of dollars. Over time the mining rewards of Bitcoin (and other currencies they expanded to mine) would get diminished due to the normal halving of mining built into the protocol. But the average Joe who signed up for this scheme didn’t know that so they just saw their rewards reducing over and over and over again. Their naivety to this was never their problem - it was BCN’s problem. But since their friends brought them into the “club” through MLM methods, their friends didn’t tell them how this worked. So rather than criticizing their friends, they all started to criticize BCN.
The light started to shine on BCN as a Ponzi-scheme. The founders and who they were started to come out. One of the founders, Russ Medlin, was an alleged paedophile, and eventually arrested in Indonesia on child sex charges. But the club members turned a blind eye to this because they were making money on the mining.
Joby started to want to expand into other areas, such as the emerging marijuana industry that had recently been made legal in his native Colorado state. He felt that just as BTC mining could be done in some “club” shared investment world, maybe the same could be true of growing dope. And then he started to move into solar power farming, using the same methods as BTC mining. That way, if the BTC rewards became so small, he could leapfrog to these other industries.
But the club members were furious at the MLM scam someone had sold them. They were not getting the rewards they were promised, and many were late to the party with Bitcoin. They didn’t use their own observance of what was going on - preferring to ignore it in favor of the massive wealth that they were seeing of those early adopters in BTC were enjoying.
Soon they would lobby US DOJ to go after BCN, and the founders. Which exactly happened. Joby was arrested in early 2020 and currently is in prison in New Jersey, along with his cohorts. He is awaiting trial.
Russ Medlin fled to Indonesia, but eventually was scooped up by the local authorities pending extradition to the USA to face charges relating to BCN’s activities. The US Department of Justice has the case on their website here:
Their indictments are detailed and well documented in court documents. It states the goal of the conspiracy as “to enrich themselves by soliciting and causing others to solicit investments in BCN through materially false and fraudulent pretenses, representations, promises and omissions”
If you want to see how this worked in detail, the court documents are not only very readable but actually quote comical. This must become an episode on the TV show “American Greed”.
In a guilty pleading by one of the defendants, a 35 year old Romanian programmer stated that the mining scheme stole $722 million of club members money.
So why is this a perfect case study for investors? Well first let’s look at this from different angles:
On the “For” side for BCN, the basic premise of the business is sound. In order to build any form of manufacturing plant, you need capital. The output of the manufacturing was highly profitable - the cost of power was small, the cost of creating and securing the facility was finite and the rewards would continue over time without being subject to unpredictable markets, competition, etc. BCN represented a huge portion of the global mining power out there to mine and secure Bitcoin. In that manner, they were helping to keep the Bitcoin eco-system healthy.
Most businesses involve partners and shareholders. This is the basic construct of corporations in the US and around the world. However there are laws in regards to meeting minutes, etc. that must be followed. I can only assume they did this to remain in compliance with local US laws.
Those that invested in mining shares knew what they were getting into. However if they were told to do this by some upline club member who didn’t know squat about Bitcoin, then they only have themselves to blame. By using MLM methods, the founders of BCN could use some form of plausible deniability against this if things went wrong, but unfortunately their motives were not pure from the start.
On the “Against” side for BCN, it was founded by shady operators, who cloaked what they were doing behind some “selling the dream” method that Joby was so eloquent about and he became the public face of BCN. The other founders kept in the shadows, only emerging briefly to help dispel any fear that BCN was nothing more than a legitimate organization with a solid management team.
They used the shield of complexity to hide the real earnings of the mining hardware, distributing only a small portion of it to the members and keeping the difference for themselves. Think of this like a property manager who charges $1,000 in rent to a tenant for a unit, but only pays the owner of the building $300 of that rent, keeping the difference for themselves, but never disclosing to the owner of the building that the rents are anything more than $300.
So what is to be learned from all of this? What can someone on the path to being unconstrained take from this whole ordeal?
Look not only to what a venture purports to be, but who is behind it. Know that every successful entrepreneur has failed at something at least once before, and if they haven’t walk away from it. See how they handled their failure. Was it a failure because they did something unethical, or was it due to factors outside of their control. Are they serial failures at something - that’s not a good thing. But if they only ever seem to succeed at something, then you can’t trust them or what they are selling you.
Is the venture being done without the laws of the region that you are in, and the region that they are in? Is there any form of “grey area” that seems to be the core of the business model? If so, what happens if things evolve that are negative to the mission of the business?
Don’t become enamored at the personalities behind the venture - look purely at the venture itself and ask, “What could go wrong? What may be a lie? What may be untrustworthy? Is there a risk that the founders could abscond with the assets?”
Realize that anything you invest in is a risk. There is no such thing as a “sure thing” or a “no-risk deal”. Risks are everywhere. Rewards are typically returned to you based on the level of risk, but if you have the ability to manage the risk, you have some control here. Blindly giving up everything to the cult of greed and personality is stupid. You would be better to buy your own mining hardware and run your own rigs here, but if you can’t scale without help, then sometimes you have no choice. But realize when you give up control of your asset investments to a third party, bad things can happen. And that you MUST take full responsibility for your decision to do that.
If you point the finger at the venture or its founders without owning the responsibility of the decision to buy into it, then its on you. 100%. There are no free rides here. If you are that person, you should be working in the public sector and not playing in the world of private capitalism.
But here’s where things get pretty strange. I don’t condone what these guys did. They are scammers and criminals. But as the saying, “there is no honor among thieves”, I have to question if Joby Weeks was scammed too. I think that he may have been. Sure, everyone needs a “fall guy” but his attempt to try and disrupt an already corrupt and dysfunctional system should be celebrated.
The DOJ have stated that he is a flight risk and needs to be held in prison, but there is no trial date yet. He’s languishing in a prison right now, not yet having his day in court. And the level of incarceration here is likely to be massive. Like Russ Ulbricht, many DOJ prosecutors will try and make this a part of their career resume and they want blood here. The statements attesting to what they put in front of the judge in some cases are comical. They even state Joby Week’s statements as “anti government” as a reason to request the judge denies bail.
Given the entirety of this podcast, my position in regards to those that prefer to live in low risk, predictable outcome worlds, work for the public sector, vs. those that risk takers, entrepreneurs and create new ventures, it is clear that the balance of regulations vs. incentive to create has not been worked out here yet. And the failure of government to find that balance is reason for the anti-government rhetoric by the Anarcho-capitalist community. Joby is no different to Jeff Berwick, or any other anarcho-capitalist in this regard. They distrust government based on the troves of evidence of how absolute power corrupts absolutely.
I still believe that the answers lie somewhere in the middle. That there is no progress without risk, particularly for your investments. You must own the risks in order to own the rewards. You must seek out the truth even if it is hard to find. You balance the risks of not knowing what is going on behind the scenes with your hoped outcomes. You know the DNA of humans includes the “greed” gene. Yes, you have it too. That’s why you want a return on your money for no effort. But your “partners in crime” here, also are likely to be dancing with the same greed DNA and giving them keys to the kingdom with little or no oversight is not going to end well.
The balance between government over-reach, technological understanding and the power of those that lobby against change cannot be ignored. If you are blindly embracing the power of Bitcoin as a way to change the world, I celebrate you and that. But know that the world doesn’t like to be changed. The innertia that is present in any moving large vessel cannot be stopped by small things. It needs a massive disruption in order to stop the aircraft carrier in its movement forward.
But we must all believe in a better tomorrow. And that’s where the mental struggle comes. We want the world to be a freer and unconstrained place. We want to be able to trust in ourselves rather than live in a “nanny state” of government over-reach. We can’t take away the desire to invent something better, create something new, and be fearful of doing that because of the world of greed and the dysfunctional human criminal behavior is a reason we won’t do anything. Yet as much as we can’t trust each other, given these examples, we also have to ask whether we can trust our government either.
I deal with this issue everyday. I came to the USA to get away from government over-reach. Where the government only wanted to constrain and limit what few freedoms humans had. We don’t consider Australia as being some totalitarian state like North Korea or the USSR. But the reality is that the quest of power in government is as real as the quest of greed in the private sector. Both are wrong and both must be confronted. The difference, however, is that the government has the legal power of the gun and jails to support its cause, whereas that power is only provided in the dark underworld of crime and gangs in other domains.
I have to criticize both here. I criticize thieves for being evil bastards. I criticize government for their lust for power and control. The balance is in the middle. And we must seek out that balance that makes sense for us as individuals.
There is no general rule that everyone can agree with here. Whereas I tend to think that since government over-reach, taxation, surveillance, and a quest to create some Utopian “nanny state” is not what I want personally, when faced with a choice at an election towards a pure socialism world, it is those that have never experienced such a world that would gravitate towards it in search of what is good for the human being - abundant and free healthcare, education, welfare, etc. That sounds so good on the surface, but know that it comes at a cost. A cost of taxation, a cost of increased regulations and a direct statement that stops the next Elon Musk or Steve Jobs in their tracks. They won’t stay in a world that forces them with overt regulations.
And this is evidenced right now as we see the likes of Joe Rogan and Elon Musk abandoning California for Texas - in search of a place that is more supportive of disruptors and entrepreneurs than the “nanny state” of California. If we don’t stop this from continuing, the next move they will make will be to “Get out of Dodge” as so many of my friends have done, and is the same likely path I and my own family will take. And if after doing that we find ourselves like Jeff Berwick, living in some freedom Utopia where thousands and thousands of others seeking the same freedoms congregate at his annual conference in February every year for a taste of what being truly free feels like, then I can only expect to see more US citizens renouncing their citizenships to be free of toxic over-reach of their government. Just like Andrew Henderson has done.
I tell this story only to illustrate the basic struggle that comes with a quest to be unconstrained. This is why many of us attempt to be unconstrained. We are not trying to do anything evil, break any laws, etc. We just want what is our human right - the right to be free. And yes, with great power comes great responsibility - to quote Stan Lee, the creator of Spiderman. The truth is that we celebrate those that want to be free in movies, TV shows, books, etc. and yet there are those in our world that fear change and fear disruption and will use unethical and immoral means to force their will onto others.
Given the choices here, what would you do?
I’ll see you on the next episode.