ET Zeitgeist: Ransom Paid

Here’s what we’re reading and working on this week at Epsilon Theory.

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Ransom Paid

From a Bloomberg article on Thursday:

Colonial Pipeline Paid Hackers Nearly $5 Million in Ransom

“Colonial Pipeline Co. paid nearly $5 million to Eastern European hackers on Friday, contradicting reports earlier this week that the company had no intention of paying an extortion fee to help restore the country’s largest fuel pipeline, according to two people familiar with the transaction.”

“The company paid the hefty ransom in difficult-to-trace cryptocurrency within hours after the attack, underscoring the immense pressure faced by the Georgia-based operator to get gasoline and jet fuel flowing again to major cities along the Eastern Seaboard, those people said. A third person familiar with the situation said U.S. government officials are aware that Colonial made the payment.”

Once they received the payment, the hackers provided the operator with a decrypting tool to restore its disabled computer network. The tool was so slow that the company continued using its own backups to help restore the system, one of the people familiar with the company’s efforts said.

I love how Colonial thinks it’s important for you to know that they were very dissatisfied with Darkside customer service. The decryption tool was so slow! LOL.

I think there’s zero coincidence that you also saw this Bloomberg article on Thursday:

Binance Faces Probe by U.S. Money-Laundering and Tax Sleuths

“The officials involved include prosecutors within the Justice Department’s bank integrity unit, which probes complex cases targeting financial firms, and investigators from the U.S. Attorney’s Office in Seattle. The scrutiny by IRS agents goes back months, with their questions signaling that they’re reviewing both the conduct of Binance’s customers and its employees, another person said.”

“The U.S. Commodity Futures Trading Commission has also been investigating Binance over whether it permitted Americans to make illegal trades, Bloomberg reported in March. In that case, authorities have been examining whether Binance let investors buy derivatives that are linked to digital tokens. U.S. residents are barred from purchasing such products unless the firms offering them are registered with the CFTC.”

The tax sleuths are on the case! More from that Bloomberg article:

“In the U.S., authorities have been cracking down on exchanges for flouting laws that are meant to prevent financial crimes, with officials citing the platforms use by terrorists and hackers. Tax violations have also been a priority, with the government recently winning a court order as it seeks to unmask U.S. clients of Kraken, a San Francisco-based exchange.”

It’s so weird that a Kraken affiliate was so vocal on Twitter saying that my In Praise of Bitcoin article was nonsense. Still more:

“In October, federal prosecutors in Manhattan announced charges against the founders of Seychelles-based BitMEX, accusing them of violating the Bank Secrecy Act by permitting thousands of U.S. customers to trade while publicly claiming to restrict their access. The claims included failing to register as a futures merchant with the CFTC and not having adequate anti-money laundering controls. Three of the BitMex officials pleaded not guilty and a trial has been scheduled for March 2022. One remains at large.”

I missed this Arthur Hayes news! From April 6:

Former BitMEX CEO Arthur Hayes Surrenders to Face Charges

“A Singapore resident, Hayes on Tuesday surrendered to U.S. authorities in Hawaii, six months after federal prosecutors in New York accused him and his BitMEX co-founders of conspiring to skirt U.S. laws requiring the implementation of money-laundering controls. He appeared before a federal judge in Honolulu and, pursuant to an earlier agreement, was released on $10 million bond pending future court proceedings in New York.”

Arthur Hayes is the most fascinating criminal defendant since Martin Shkreli, and I think (hope?) his trial next March will live up to its amazeballs potential. Hayes writes a really smart blog, btw, and his latest blog post – “Fear Is The Mindkiller” – came out yesterday. It’s a great read! Honestly, I think everything Hayes writes in this post is spot-on, with gems like this:

“Most new entrants to our pond want an easy way to acquire Bitcoin vs. fiat risk. That is, they believe Bitcoin Number Go Up, but have zero interest in becoming their own financial institution. They want the 1-800 number to call when they forget their password, and a human to complain to when things don’t go as planned. Service providers are happy to sell paper Bitcoin derivatives that provide exposure to the asset, while dealing with all the pesky blockchain issues for a fee.”

Judging by the asset gathering success of Grayscale’s GBTC, Coinshare’s XBT Provider, and other paper derivatives, the average investor just wants price risk.


Or like this:

“Crypto has nothing to fear from Doge. It instead should be used as a foil to show the emperor has no clothes. Money is a mental abstraction. The sooner gen pop realizes that everything is make-believe, the sooner they can make the leap from physical government issued bank notes, to a purely digital decentralized currency.”

They are both equally as fake.

It’s all true, as Hemingway said. It’s all fake, as Hayes says. Both statements are correct!

Because that is the definition of good art: a fake that tells the truth.

And crypto is such good art.

Man, I can’t wait to read what Hayes writes next.

Unfortunately for him, if Sauron has anything to say about it, he’ll have a lot of free time on his hands for writing over the next few years. Just maybe not a lot of access to his blog.


  1. Judging from the references in Fear is the MindKiller I think we’ve found Ben’s burner account. Or is “Ben” really Arthur? Hmmmm….

  2. I just read “Fear is the Mindkiller” and it is brilliant. The biggest reason that I subscribe to ET is that Ben (and apparently Arthur Hayes also) is able to write articles that succeed in distilling and summarizing gut feelings and notions that I have in a much more logical and ordered manner than I have them in my mind. Reading the articles helps me make much more sense of my own thoughts.
    Hayes’ article makes me more convinced of my own feelings that real things will soon take precedence over the digital “reality” that everyone seems to believe in. The Colonial Pipeline hack is an example. You might have had a futures contract for gasoline or even a contract for delivery of gasoline on the East Coast however you still don’t have the gasoline. Now imagine that the problem in deliveries was food or even worse, water. It wouldn’t take long for havoc to break out. Our needs in order of timeliness are oxygen, shelter (clothing and housing), water, and food. I don’t need the preceding sentence to be true (as Rusty would say), it IS true. The digital versions of these necessities are not a substitute. With too much funny money floating around it has become more profitable to trade the paper versions of these instead of produce the real thing. This will change.

  3. The quality of writing and thinking in this realm is incredible. I’m amazed every time I read a new entry.

  4. “The most talented comedians take our most cherished beliefs as a society and show logical fallacies using the arc of humour. If you can’t take a joke, then you might want to meditate for a while on why you are so insecure in your beliefs. Maybe it is because you know deep down that they are complete bullshit”.


    “Love him or hate him, he (Elon) is the poster boy for Number Go Up! The joke of Dogecoin has produced many basement dweller millionaires. How infuriating that must be to the traditional financial gatekeepers who pontificate about value and growth investing on television while barely managing to generate single digit percent returns in an era when global central banks have expanded their balance sheet at 15% CAGR since the 2008 GFC. The joke’s on you.”.

    Both of these paragraphs are bang on. Whilst the first is a good observation about Society’s never ending march toward pseudo totalitarianism vis a vis a generation of Karen’s, the second touches on something much deeper, when you think about it.

    Not only is it infuriating to those “traditional financial gatekeepers” for the reason given above, its infuriating for us, for having nudged us into taking the actions that we now do (crypto) just to stay alive, in purchasing power terms.

    Why couldn’t the central planners and the politicians have avoided the temptation to f##k with the value of money. Our money. Is it too much to ask?

    Seeing how generationally, winners and losers have already been chosen, as a loser, I’m now a target for their ire when I act to opt out of the system that they game for their own advantage.


    Great overall read.

  5. “Ban Cryptocurrency to Fight Ransomware” WSJ 5/26/21. It’s like reading a script!

Continue the discussion at the Epsilon Theory Forum


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