Thursday, February 06, 2014

More bad news for the Winkelvoss twins

I will be the first to admit that, were it not for their wonderful name, I would not have one iota of interest in anything to do with the Winkelvoss Twins. If they were called something pedestrian, like the Smith Brothers, or the Jones Boys, their snippy contention that Mark Zuckerberg ripped off their idea for Facebook would be of far less interest. And I probably wouldn’t have enjoyed their portrayal by Armie Hammer in The Social Network quite as much. The scene in which Tyler and Cameron Winkelvoss make their appeal - based on their conception of old school tie, playing-fields-of-Eton, Fight Fiercely Harvard proprieties – to then-Harvard president Larry Summers is priceless.

Speaking of priceless, if we play a bit of word association, priceless is not all that many degrees of separation from Bitcoin, yet another one of those virtual-digital-the-Internet-changes-everything thangs that hurt my head and make me want to move to an unplumbed, unheated cabin where I grow marigolds and chop wood.

Anyway, a recent bit of Bitcoin news is only a degree of separation or two  from – ta-da! – the Winkelvoss twins.

That degree of separation is in the person of Charlie Shrem, whose Bitcoin exchange, BitInstant, had received financial backing from the Winkelvossen.

Alas, Charlie Shrem has found himself:

…arrested and accused of conspiring to provide $1m-worth of the virtual currency to shoppers on Silk Road, an online marketplace for illegal drugs. Silk Road was shut down last year. Its alleged founder, Ross Ulbricht, has since been indicted. Now crimebusters are turning their attention to the exchanges that allowed customers at such black-market bazaars to trade traceable old-economy currencies for near-anonymous virtual ones. (Source: The Economist.)

What is bitcoin, you may well be asking. (Personally, I ask myself that question every time I hear it mentioned.) So here’s what Bitcoin has to say for itself.

Bitcoin is a consensus network that enables a new payment system and a completely digital money. It is the first decentralized peer-to-peer payment network that is powered by its users with no central authority or middlemen. From a user perspective, Bitcoin is pretty much like cash for the Internet. Bitcoin can also be seen as the most prominent triple entry bookkeeping system in existence. (Source: Bitcoin.)

Got that? Sure you do…

Anyway, one of the fears about Bitcoin is that it can be exploited for nefarious purposes and criminal transactions. Bitcoin pooh-poohs this. After all, real money can be used for nefarious purposes and criminal transactions, too. Think of all the cash that the Sopranos kept around their house?

According to the complaint, however, Mr Shrem personally processed orders for Robert Faiella, who faces similar charges, despite knowing the Bitcoins would be resold to Silk Road users (at a 10% markup); he concealed the orders from his business partner when the partner grew suspicious; and he advised Mr Faiella (whose online alias was BTCKing) on how to circumvent transaction limits imposed by BitInstant’s anti-money-laundering policy, even though it was Mr Shrem’s job to enforce these as compliance officer. If convicted, the two men face up to 30 years in prison.

As Shrem is only 24, thirty years in the slammer could really put a crimp in his productive lifeline. But that’s the risk you take when you substitute dollar signs for “Go Slow” or “Stop” signs.

If Shrem ends up in the stir, and this puts a crimp in BitInstant’s viability, then the Winkelvoss twins will be out a few bucks. And, since they’re no Mark Zuckerbergs, every little chunk of change (virtual or cold, hard) counts.

Those poor Winkelvoss twins.

Remember the quaint old days when we used to ask “Who wants to be a millionaire”? Now it’s “Who wants to be a billionaire?” (Answer: the Winkelvoss Twins – and Charlie Shrem – among others.)

Anything other than billionaire-hood is, well, just chump change. Or chump bitcoins.

Those poor Winkelvoss twins! They just can’t seem to win. Maybe they should have gone to law school instead…

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