The curtailment of freedoms in the United States over the past two decades through revolving doors corruption has been made clear once more to this space by the Securities and Exchanges Commission busying themselves with bullying a bitcoin app that had banned US users.
The comical justification of SEC that designers were Americans and therefore pay up, is another indication of how this institution has made a mockery of the law by bypassing the court system and therefore the legal and constitutional system of the United States to give itself freedom to interpret acts of Congress as it pleases.
And yet, despite the best efforts of Capo Jay Clayton (pictured,
ya it’s real) who has been paid to serve bankers all his life, the ethereum space in particular and the crypto space in general keeps moving and arguably has checkmated the corrupt paper system that unduly gives power based on long outdated laws to bankers’ servants like Clayton.
The Maze of SEC
There can be no good literary education without the books of Kafka which very vividly, and far better than we can, bring to life the tendency towards monstrosity in the bureaucracy.
“The right understanding of any matter and a misunderstanding of the same matter do not wholly exclude each other,” Bohemian Franz Kafka said in 1914 in The Trial.
It is around that time or a few years later that SEC and its maze was created after centuries of battles between the elected and bankers that concluded with the latter taking dominion over the matter of money.
Money formation of course, its printing, but also the related and crucially important function of capital formation through public ownership of economic activity.
Public being the key word, and yet fundamentally there is nothing public – as in commoners – about it.
The stocks are issued by banks, and the stocks are IoUs, paper certificates given from the bank to the public, with the public itself never really having the actual stock.
At the other end is the entrepreneur, the owner of his life’s work, who by law has to sell ownership of all of it to the banks, not the public.
The understanding, the expectation, and the practice is of course that the bank sells it to the public, and that the bank is merely a conduit.
But technically, and this applies to governments too, both at the Federal level and the State level as well as down to the neighborhood council level, they and the entrepreneurs sell ownership over tax income or the company’s revenue to the bank, who then sells it to the public.
The total power here is self evident. Bankers refused to be conduits for the State of New York in the 70s, demanding in effect the state instead pays back all the debt it had accrued technically to the bankers, but practically or narratively to the public.
Those bankers thus moved to take over the running of New York by taking key positions especially over its budget and thus over its income.
For businesses, the risk is not that they can be enslaved by being forced to default at least where stocks are concerned, but that the banks can do whatever they want with their stocks.
You can say of course that they bought it so they can do with it what they want, but the abuse is not in regards to legal rights over ownership, but in regards to the double spending of the stocks ledger which they control.
Pension funds sued banks in court for ‘lending’ stocks owned by the pension funds to short sellers without their permission.
Although the bank has sold you a stock therefore, since you don’t have actual ownership or custody of the stock, the bank does, they can do with it whatever they want.
This is the same trick as with money, an artificial creation, but with stocks, also an artificial creation, with both having banks at the centre not necessarily due to any technological requirement but because they have bought these laws that effectively spell out only a bank can do these functions.
Not a Duck
The absolute grip of banks over these matters, and thus their almost total power, can be shown by the delay of Bakkt by more than a year because:
“The regulator’s rules require clearinghouses to deposit customer funds at a bank or trust company, and Bakkt is currently neither of those things.”
As a subsidiary of one of America’s biggest stock exchange, they just completed a self-certification process and eventually launched, but this requirement shows clearly that unless you are one of the very big boys, you need to be under the orders of banks.
For stocks, there are registry requirements of who owns the stocks, and of course you need a bank to keep all those accounts and ledgers.
There are restrictions in selling exempted stocks that the rich can buy as ‘accredited’ investors, and of course the sure way to ensure such restrictions are applied is by a bank having custody of the stock.
This is how SEC ‘got’ Telegram. The Southern District of New York in a preliminary injunction setting thought “that the SEC had shown a substantial likelihood of proving that Telegram’s sales were part of a larger scheme to unlawfully distribute the Grams to the secondary pubic market,” according to SEC.
The burden of proof in an injunction setting is almost zero, especially if you are SEC. Telegram wanted SEC off their back however, and agreed to pay a fine of $18,500,000 in a settlement.
A settlement is basically a contractual agreement where the court has no involvement and pretty much no role at all except to rubber stamp it so as to extinguish any legal rights of both parties because they have been settled between themselves.
And yet SEC went to another court concerning another project, Kin, and claimed this contractual agreement was somehow binding on the court!
If it was a junior lawyer that did this, they would be shouted so ferociously by the judge, and if they repeated this behavior they would probably be disbarred by the Law Society as it is discourteous behavior, to put it very nicely.
This was SEC however and the judge said the obvious that some settlement doesn’t bind him and that there is no precedent in regards to these matters.
Conceptually that SEC has been bullying hundreds of projects without any court validation is an absolute indication of how they have turned on its head the ancient principle of innocent until proven guilty.
And that no other branch has interjected, no other institution, is an obvious indication that we have no legal protection against the burocracy.
If you want to buy foreign stocks you need what is called an ADR which of course is given by banks.
If you want to only track the price of stocks and allow others to bet through your platform on whether this tracker will go up or down, you need SEC permission and of course custody which customary according to non ducks is provided by the bank and therefore the law kind of demands it unless you are big enough to persuade them you are a bank.
The examples are too numerous to illustrate how by law the requirements that place banks at the centre of it all are so numerous to the point they effectively amount to a bankers’ license.
It is no surprise therefore that Jay Clayton has been paid by banks all his life – and his wife works for one of the biggest American bank even today – until that is they rewarded him to do their bidding as chair of the SEC for a salary of close to $1 million a year.
A very nice futuristic yacht costs half a million dollars. The median American wage is $25,000 a year. The Capo receives 50x that a year – in the books – for the privilege of stifling innovation in America.
And thus now you maybe know why Satoshi Nakamoto remains an anonymous person even after so many years.
The Nakamoto Way
There is not one function that bankers perform which can not be performed by code and there is not one regulation – at least as far as the spirit of the regulation is concerned – which Clayton claims gives him bullying rights, that can not likewise be performed by code.
The beauty of code is that it can be published anywhere, by anyone, and then on the ethereum world computer, it just runs.
SEC therefore can bully some centralized app or site, and they can shut it down, but they can not shut down a smart contract operated by 10,000 nodes across the globe and if Musk has his way even on Mars.
As such, good entrepreneurs in this space need pay no heed to SEC in our view for this institution is behaving no differently than the attempts of the 15th century church to shut up Galileo.
And unlike for Galileo, the worst here is a fine based on profits and even then if you agree because courts have passed no judgment yet on these matters, nor has Congress, and the only law making body that has, has passed such judgment in our favor.
And any such judgment would have no effect whatever because you can’t stop the contract, not to mention that Frankfurt, Paris, London, Geneva, Milan, and even the Durres riviera if you want to live a very lavish lifestyle on what to us is very little money, or any other European city, all can be a very nice place to base as they can’t practically enforce there any such fines if so wanted.
The boys in the very serious offices of course are far, far more busy with far more serious matters to spend any time or valuable resources on very good men trying to digitize their own economy.
Hence why Nakamoto remains anon because presumably if they really wanted to find out who he is, they probably can, but they obviously have no business there whatever.
Thus, if one wants to increase the resource requirements for SEC to do their bullying, and thus increase their costs, one can always just publish code anonymously.
And just because one does so it doesn’t mean they have to be super secretive. It’s only a monetary fine at the end of the day so if their dapp needs reputation they can sorta be themselves with ordinary people, it’s more there’s no need to be on the global stage like a new young Vitalik if, that is, SEC wants to challenge the Supreme Court judgment that code is speech.
And therefore despite these attempts by the Securities and Exchanges Commission to beat down the public into self enforcement through making examples of some despite no legal legitimacy whatever due to their conscious attempts to bypass the courts, innovators in this space should in our view just ignore the bully and should perhaps even try to raise their costs because this institution is a paper bureaucracy, not the full arm that Nakamoto was bravely willing to face with his launch of the bitcoin code, and checkmated even them in the process.