I saw this tweet yesterday from @deepfates, and I am very on board with this:

Watching in real time as "slop" becomes a term of art. the way that "spam" became the term for unwanted emails, "slop" is going in the dictionary as the term for unwanted AI generated content

I'm a big proponent of LLMs as tools for personal productivity, and as software platforms for building interesting applications that can interact with human language.

But I'm increasingly of the opinion that sharing unreviewed content that has been artificially generated with other people is rude.

Slop is the ideal name for this anti-pattern.

Not all promotional content is spam, and not all AI-generated content is slop. But if it's mindlessly generated and thrust upon someone who didn't ask for it, slop is the perfect term for it.

Remember that time Microsoft listed the Ottawa Food Bank on an AI-generated "Here's what you shoudn't miss!" travel guide? Perfect example of slop.

One of the things I love about this is that it's helpful for defining my own position on AI ethics. I'm happy to use LLMs for all sorts of purposes, but I'm not going to use them to produce slop. I attach my name and stake my credibility on the things that I publish.

Personal AI ethics remains a complicated set of decisions. I think don't publish slop is a useful baseline.

Many are frustrated that the SEC appeared to have internally reached a decision on ether's status about a year ago, but continued to be publicly coy about it. However, the authorization of an investigation into whether securities laws may have been violated with respect to ether is not necessarily a declaration that ETH is broadly a security, and it's not clear to me that Consensys is correct when they describe this as a formal position by the agency.

Speaking of Wells notices, the SEC has sent yet another one — this time to Robinhood Crypto [W3IGG]. Robinhood has seemed to take a cautious stance towards which tokens they list, and in June 2023 removed their offerings of Solana, Cardano, and Polygon after the tokens were described as securities in SEC lawsuits against Coinbase and Binance [W3IGG]. However, their choice to list one or more of the fourteen non-bitcoin cryptos they offer has apparently not been cautious enough for the SEC's tastes.

The SEC has certainly been busy with their Wells notices, which are formal notices warning of impending litigation. They've sent at least three in the last two months: one to Uniswap [W3IGG], one to Consensys, and one to Robinhood Crypto. Given the massive cases the agency has open against Coinbase, Binance, and Kraken, and various others, it's hard to imagine where they'll find the resources to litigate even more cases against big companies with lots of resources, who are likely willing to shell out for aggressive defense lawyers and are also likely to receive additional support from the same crypto industry groups that have vigorously involved themselves in the ongoing cases. Unlike Uniswap and Consensys, Robinhood could feasibly back off its crypto offerings and return to its other business activities in world of traditional stocks. But that doesn't sound like it's going to be their choice, as they've issued a statement that they "look forward to engaging with the SEC to make clear just how weak any case against Robinhood Crypto would be."

Some in the crypto world believe that the SEC is "abusing" Wells notices as a scare tactic without actually intending to follow through on lawsuits. That's a little hard to say, given that the whole point of Wells notices is to give companies the opportunity to argue that the SEC shouldn't pursue legal action. If the SEC sends a Wells notice, the company responds, and the SEC doesn't continue to litigate, isn't that the process working as intended? That said, if the SEC is sending these notices, receiving little beyond the chest-puffery that increasingly has become the default response to such notices in the crypto world, and is still not pursuing litigation, there could be something to that complaint.¹⁰

Lastly in SEC news, remember that case by the SEC against Debt Box where some SEC lawyers made false statements [I45, 47]? After earning sanctions for their agency in March, the two lead attorneys in the case took the opportunity to resign from the SEC, rather than be fired. The fate of the case is still uncertain, as the judge has not yet ruled on the SEC's motion to dismiss it without prejudice (which would leave a pathway open to refiling it later on).¹¹

Coinbase

PlainSite founder Aaron Greenspan FOIA'd the FBI for documents pertaining to Coinbase. He received a set of documents reflecting the many complaints received by the FBI's Internet Crime Complaint Center, pertaining to the company's apparent tendency to shut down customer accounts without returning any funds. "Based on a review of victim complaints, open source reporting, and bank reporting, COINBASE, INC (COINBASE) may be involved in an investment fraud scheme," stated a memo drafted in 2018. It reveals the FBI had received around 60 such complaints, but refers to other agencies such as the Consumer Financial Protection Bureau who had received even more. Further documents show that an investigation was opened by the San Francisco branch of the FBI, who had been working with US Attorneys, the Department of Justice's fraud department, and the CFTC. A document from the following month details how the case was expanded to include allegations of investment fraud and corporate fraud.

Other documents describe an investigation by the US Attorney's Office in the Northern District of California into allegations of insider trading that emerged shortly after Coinbase listed Bitcoin Cash for trading on the platform in 2017. Coinbase had themselves acknowledged the allegations and performed an internal investigation, which found no wrongdoing (shocking). Apparently the DOJ also investigated, but decided in 2019 not to pursue the case because there was no precedent regarding cryptocurrency insider trading, and they felt the incident would serve as a bad inaugural case. In their declination, they also included an interesting tidbit:

The DOJ would later successfully prosecute a different Coinbase insider trading case against a Coinbase product manager [W3IGG] who was ultimately sentenced to two years in prison after tipping off his brother and a friend about upcoming Coinbase listings.¹²

The FBI's portion of any investigations was closed in July 2019.

Elsewhere in crypto

After Bitcoiner and venture capitalist Nic Carter published a chart suggesting that "stable[coin]s are catching up to established settlement networks" like Visa and ACH, Visa's crypto department decided to do some digging (with the help of an outside data firm). Their research suggested that around 90% of stablecoin "volume" is "inorganic" bot activity. "When we apply a simple heuristic that removes inorganic data, we see that transfer volume for the last 30 days can be adjusted from $2.65T to $265B", they write. The "inorganic" activity is mostly arbitrage, market-making, and similar activities — all of which serve a purpose, but which also weaken suggestions that there are real people out there throwing trillions of dollars' worth of stablecoins around each month.¹³

Shortly after the indictment of Samourai Wallet's founders on charges relating to their operation of a bitcoin mixing service [I56], Wasabi Wallet has announced they will be shutting down their bitcoin Coinjoin privacy service due to fears over regulatory action.¹⁴ Days earlier, they had shut off access to customers in the US, citing the legal action against Samourai.¹⁵ The Coinjoin service offered by hardware wallet manufacturer Trezor, which was created in partnership with Wasabi Wallet, will also be shutting down.¹⁶

Excitement over Bitcoin Runes [I56] is dwindling, and bitcoin transaction fees are coming back down to earth a little bit. This is good news for bitcoin users trying to transact more cheaply, but bad news for miners — who increasingly rely on these transaction fees to keep them afloat as bitcoin block rewards are slashed in half every couple of years. Meanwhile, bitcoin prices have failed to skyrocket in the wake of the halving as some hoped, which would also help to bolster miners. Now, NASDAQ-listed Stronghold Digital Mining has announced in a press release that they are exploring options to "maximize shareholder value, including, but not limited to, the sale of all or part of the Company, or another strategic transaction involving some, or all of, the assets of the Company." Wuh-oh.¹⁷ Elsewhere, Canadian mining company Bitfarms has reported its lowest monthly earnings in more than two years — and that's with around 20 days of mining with the previous level of block rewards.¹⁸

Over in ETP land, the initial excitement for the new instrument has also dwindled, and April was the first month since their release in January that there were higher outflows than inflows to the tune of $343.5 million net outflows. Much of this is thanks to Grayscale's GBTC, which has hemorrhaged roughly $17.4 billion since its conversion to an ETP allowed customers to cash out for the first time.¹⁹ To be clear, it's expected for any ETP to have inflows and outflows — I guess, unless you expect everyone to HODL their ETP positions — but there was some panic amid crypto enthusiasts who have pinned a lot of their hopes for another bull run to these ETPs.

On the topic of ETPs, Representatives Mike Flood (R-NE)and Wiley Nickel (D-CA) have been writing letters to Gary Gensler to try to pressure him to approve options trading on spot bitcoin ETPs, because I guess that's an important thing for Congresspeople to be doing right now.²⁰ Axios also points out that they don't seem to have realized their letter might have been more appropriately addressed to the CFTC — but I suspect that doesn't matter to a pair of lawmakers who are more posturing for a crypto base that sees Gensler as the Big Bad than actually trying to effect any change.

Elsewhere in Capitol Hill, Elizabeth Warren (D-MA) has joined up with Angus King (D-ME) on a letter to the Biden administration "to inquire about the Biden administration’s efforts to combat Iran’s rampant evasion of U.S. and international sanctions through cryptocurrency (crypto) mining".²¹ It is not immediately clear to me what Warren and King are hoping the Biden administration might do about such a thing — though, again, this is more a political move than anything, aimed at highlighting the use of cryptocurrencies by sanctioned groups.

Finally, before I move off of bitcoin in this very bitcoin-heavy issue, let me treat you to a video of Ohio State's commencement speaker getting roundly booed after trying to shill bitcoin to new grads.

Chris Pan, an OSU alum who worked as a Facebook executive and now runs a company selling bracelets that seem to just be metal washers on strings with inspirational words stamped onto them, decided there was apparently no better opportunity to discuss how bitcoin was a "very misunderstood asset class" that he had just discovered a few months prior with the launch of spot ETPs.

He also tried to lead a sing-along to the 4 Non Blondes' 1993 hit "What's Up?" (what better pick for a group of people in their early twenties), and spoke of how he treated his depression with singing, not antidepressants. Believe it or not, this was all somewhat of an improvement on an earlier draft that he had shared on social media, which was going to feature him removing his shirt before poorly explaining the blind men and an elephant metaphor, then abruptly launching into a discussion of the Israel–Hamas war. Pan wrote on LinkedIn that he'd tried to use ChatGPT to write the speech, was disappointed, and then turned to ayahuasca for inspiration. It shows.

Yuga Labs tried to pull a take-backsies with their Moonbirds NFT collection, which they acquired in February. The pixel art owls — which I have to say I actually think are pretty cute — were released under CC0: a Creative Commons designation to release a work into the public domain and relinquish all rights to the extent possible. On April 29, Yuga tried to snatch back the copyright that had been irrevocably waived by posting, "If you’ve made stuff during the CC0 era - cool. But from now on, you’ll need to own a Moonbird to keep doing so."²² After pushback, including from legal experts explaining to Yuga that that's not at all how this works, they adjusted their statements to announce that, oh no, they meant they would be releasing new artwork and 3D avatars that would not be freely licensed.

I think if anything this all just helps to illustrate how much "you own the IP" is an empty marketing promise — though one that seems to work on people who broadly seem to be more interested in the idea that they could develop something with their NFT's artwork than actually doing so. But furthermore, when it comes to developing branded stuffed animals or t-shirts or hamburger restaurants [I55], it's really more of a trademark question than a copyright one, and CC0 deals with copyright. And if Yuga wants to start suing people who don't own a Moonbirds NFT for using those original pixel art images, they can do so — and they could have always done so, even without their hamfisted attempt at revoking its CC0 status. I think any NFT holders who still buy into this "IP ownership" thing, and who actually intend to try to profit from the artwork they "own", would be wise to understand that it's all just a pinky swear. At best, they could try their chances in court, hoping they could convince a judge that often slapdash terms of use granted them the right to use the work in such a way, but that's not something I'd want to build a business on.

The Web3 is Going Just Great recap

There were nine entries between April 24 and May 7, averaging 0.6 entries per day. $75.97 million was added to the grift counter.

Record theft via address poisoning attack

[link]

The operator of an Ethereum wallet lost 1,155 wrapped bitcoin (~$72.7 million) to an address poisoning attack in the largest known attack of this type thus far.

Address poisoning is a scam tactic that takes advantage of crypto traders' tendencies to copy and paste wallet addresses from their transaction histories, since the addresses are long strings of characters that are not practical to type from memory. By creating a new wallet address with identical start and/or ending character strings to addresses used by the victim, and spamming the victim with transactions from that similar address, scammers are sometimes able to get victims to erroneously copy the spoofed address for future transfers.

No individual or company has publicly identified themselves as the owner of the victim wallet, which still holds around $1.6 million in the DAI stablecoin.

Pike Finance screws up twice

[link]

Pike Finance, a cross-chain lending protocol backed by the likes of Circle and Wormhole, fumbled massively. First, they were attacked on April 26 by an exploiter who took advantage of a bug that Pike knew about, but had failed to address. The total theft amounted to around $300,000 in the USDC stablecoin.

Then, in an attempt to patch the vulnerability that enabled the first theft, Pike introduced new, worse vulnerabilities that allowed an attacker on April 30 to replace the project's smart contracts with malicious ones, then withdraw around $1.68 million in various tokens.

I guess that $50,000 grant they received weeks earlier from Circle and Wormhole didn't go towards any security efforts.

Everything else

• Instagram influencer Jay Mazini sentenced to seven years in prison for crypto fraud [link]
• GNUS.ai exploited for $1.27 million [link]

Worth a read

That's all for now, folks. Until next time,

– Molly White
professional anti-crypto person