On The Origins of the Digital Age of the Historical and Global Shadow‐Banking Empire

On theWealthOfChips

We have a website called theWeathOfChips in which we traverse the history of gambling in relegation to money and law as it unfolded. The dissertation shows the relationship between these things and technological advances. There are many rough and unorganized insights there as well as collections on the history of the legal advancement in regard to online poker.

We find it relevant to now go over a brief legal history and consider our framework from our monetary works and tools.

The Relevant History the Wire Act

In 1961 John F Kennedy sign into order The Wire Act stating:

(a)Whoever being engaged in the business of betting or wagering knowingly uses a wire communication facility for the transmission in interstate or foreign commerce of bets or wagers or information assisting in the placing of bets or wagers on any sporting event or contest, or for the transmission of a wire communication which entitles the recipient to receive money or credit as a result of bets or wagers, or for information assisting in the placing of bets or wagers, shall be fined under this title or imprisoned not more than two years, or both.

This was said to be in response to the ‘mob’ using tele-communications to run inter-state gambling schemes.

The act was meant to be very limited in its scope however telecommunications grew so fast that the economy force of gambling mixed with crime was evolving the legal boundaries

In a 2002 letter to Nevada state officials, the U.S. Department of Justice (DOJ) stated its opinion that the Wire Act "prohibits gambling over the Internet, including casino-style gambling."[8][9]

A More Restrictive Interpretation and the “Moneymaker” Poker Boom

This caused an explosion in online gambling such as poker:

The Moneymaker effect is the name of the sudden growth in interest in poker after the 2003 World Series of Poker Main Event.[1][2].

Months later the United States Court of Appeals for the Fifth Circuit rule dealt with a case involving defendants who were running an online ‘casino’ in which you could exchange mastercard credits for online credits.

When the defendants got caught however, they got clever and tried to assert that if they were guilty then Mastercard had breached the RICO act:

Thompson and Bradley allege that the Defendants, along with unnamed Internet casinos, created and operate a “worldwide gambling enterprise” that facilitates illegal gambling on the Internet through the use of credit cards.   Internet gambling works as follows.   A gambler directs his browser to a casino website.   There he is informed that he will receive a gambling “credit” for each dollar he deposits and is instructed to enter his billing information.   He can use a credit card to purchase the credits.2  His credit card is subsequently charged for his purchase of the credits.   Once he has purchased the credits, he may place wagers.   Losses are debited from, and winnings credited to, his account.   Any net winnings a gambler might accrue are not credited to his card but are paid by alternate mechanisms, such as wire transfers.

Under this arrangement, Thompson and Bradley contend, “[t]he availability of credit and the ability to gamble are inseparable.

In response to the defendants challenge, th outcome was the court decided a more restrictive interpretation of the act, “that the Federal Wire Act prohibits electronic transmission of information for sports betting across telecommunications lines but affirmed a lower court ruling that the Wire Act "in plain language does not prohibit Internet gambling on a game of chance."

This marked the beginning of a golden era for poker and online poker.

On the Unlawful Internet Gambling Enforcement Act

In 2006 the Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA) was passed as hastily as the technology was growing:

The Act was passed on the last day before Congress adjourned for the 2006 elections. According to Sen. Frank Lautenberg (D-N.J.), no one on the Senate–House Conference Committee had seen the final language of the bill before it was passed.[4][5] The Economist has written that these provisions were "hastily tacked onto the end of unrelated legislation".[6]

It was passed with the following findings:

(a)Findings.—Congress finds the following: (1)Internet gambling is primarily funded through personal use of payment system instruments, credit cards, and wire transfers. (2)The National Gambling Impact Study Commission in 1999 recommended the passage of legislation to prohibit wire transfers to Internet gambling sites or the banks which represent such sites. (3)Internet gambling is a growing cause of debt collection problems for insured depository institutions and the consumer credit industry. (4)New mechanisms for enforcing gambling laws on the Internet are necessary because traditional law enforcement mechanisms are often inadequate for enforcing gambling prohibitions or regulations on the Internet, especially where such gambling crosses State or national borders.

The UIGEA was meant to upgrade the law to capture the internet's effects on interstate and foreign commerce:

No person engaged in the business of betting or wagering may knowingly accept, in connection with the participation of another person in unlawful Internet gambling--

(1) credit, or the proceeds of credit, extended to or on behalf of such other person (including credit extended through the use of a credit card);

(2) an electronic fund transfer, or funds transmitted by or through a money transmitting business, or the proceeds of an electronic fund transfer or money transmitting service, from or on behalf of such other person;

(3) any check, draft, or similar instrument which is drawn by or on behalf of such other person and is drawn on or payable at or through any financial institution; or

(4) the proceeds of any other form of financial transaction, as the Secretary and the Board of Governors of the Federal Reserve System may jointly prescribe by regulation, which involves a financial institution as a payor or financial intermediary on behalf of or for the benefit of such other person. > ``Sec. 5364. Policies and procedures to identify and prevent restricted Transactions The United States was starting to take interest in the off shore casino’s serving their public. They needed to have jurisdictional defense against money laundering and other crimes

It specifically recognized the criminal actively associated with the online gambling boom:

The booming industry of offshore websites accepting bets and wagers from persons located in the United States raises a number of social and criminal concerns related to Internet gambling. The Internet's ease of accessibility and anonymous nature: (1) make it difficult to prevent underage gambling; and (2) feed on the compulsive behavior of the millions of Americans suffering from gambling addiction. Worldwide Internet gambling sites offer organized crime groups another avenue to launder the proceeds of their criminal activity, and assist in the facilitation of crimes. As a general rule, Congress has found that: (1) the States should have the primary responsibility for determining what forms of gambling may legally take place within their borders; and (2) the Federal government should prevent interference by one State with the gambling policies of another, and should act to protect identifiable national interests. (Title 15 U.S.C. 57, Sec. 3001.) The stated intent was not to change existing law but to fit within the existing framework of the wire act.

But in the Purpose And Summary it EXPLICITLY stated that it was not intended to steer the intent of the wire act. Given the precedent then online gambling would be safe:

Purpose and Summary
H.R. 4411, the ``Unlawful Internet Gambling Enforcement Act of 2006,'' prohibits the acceptance of any bank instrument for unlawful Internet gambling. This legislation does not amend the Wire Act (Pub. L. No. 87-216). H.R. 4411 prohibits persons engaged in the business of betting or wagering from knowingly accepting credit, electronic fund transfers, checks, drafts, or similar instruments, or the proceeds of any other financial transaction in connection with unlawful Internet gambling.

Thus some sites endured while others took the law as a threat and warning effects tested the stability of the industry:

… according to syndicated columnist Jacob Sullum, the law did not define or alter the definition of unlawful gambling, which under Federal law only applies to sports betting via the Wire Act.[13]

Nevertheless, Party Poker, at the time the largest provider for U.S. demand, decided to withdraw from servicing the United States poker market:

As the online gambling industry started to grow the Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA) passed, putting a brief halt in the economic force specifically in regard to sites that served us players. It was report at that time that immediately:

This article explains the effects were dramatic and immediate as if like tariffs:

Shares in PartyGaming plunged 13% yesterday after analysts suggested its exit from the US on Friday in the face of new anti-gambling legislation may have wiped up to 90% off revenues from the online operator's PartyPoker business at a stroke.

PartyGaming, which runs PartyPoker.com, had its publicly traded stock drop almost 60% in 24 hours as a result of the bill's passage. The company was moved from the FTSE 100 Index to the FTSE 250 Index on October 11, 2006.[23]

Poker’s Black Friday

However, on April 15, 2011 US Poker Players signed into their accounts to see an FBI splash screen:

United States v. Scheinberg, No. 1:10-cr-00336 (2011), is a United States federal criminal case against the founders of the three largest online poker companies, PokerStars, Full Tilt Poker and Cereus (Absolute Poker/Ultimatebet), and a handful of their associates,[1] which alleges that the defendants violated the Unlawful Internet Gambling Enforcement Act (UIGEA) and engaged in bank fraud and money laundering to process transfers to and from their customers.[1] A companion civil case, United States v. PokerStars, et al., 11 Civ. 2564 (2011),[2] included Full Tilt and Cereus as defendants and seeks the recovery of forfeiture equalling approximately $3 billion in assets belonging to the companies.[3] After the indictment was unsealed on April 15, 2011, a date quickly dubbed Black Friday by the online poker community,[4][5] PokerStars and Full Tilt stopped offering real money play to their United States customers.[6] Three years after the start of the poker boom in 2003, the U.S. Congress passed UIGEA to extend existing gambling laws into cyberspace. The law made processing payments for illegal online gambling a crime; however, the defendant companies remained in the U.S. market in the belief that the law did not cover poker.

A Monopoly is Born

The results were that Poker Stars and Full Tilt, the owners of the two major competitors at the time, had to admit guilt. Poker Stars was ordered to absorb Full Tilt and withdraw from serving US players:

On July 31, 2012, US government dismissed "with prejudice" all civil complaints against all PokerStars and Full Tilt Poker companies after coming to a settlement with PokerStars which includes PokerStars purchasing Full Tilt.[10] PokerStars and Full Tilt admitted no wrongdoing as part of the settlement, which ends all litigation between the government and the poker companies.[11] The criminal indictments resulted in prison time for all three defendants.

Full Tilt was said to have been a ponzi and that when its payment processing was frozen by the FBI/DOJ in which the apparently immorality was revealed. Full Till was a popular player run site and the players that owned the site were ordered to not speak about the proceedings:

On July 31, 2012, US government dismissed "with prejudice" all civil complaints against all PokerStars and Full Tilt Poker companies after coming to a settlement with PokerStars which includes PokerStars purchasing Full Tilt.[10] PokerStars and Full Tilt admitted no wrongdoing as part of the settlement, which ends all litigation between the government and the poker companies.[11] The criminal indictments resulted in prison time for all three defendants.

Of Poker Stars owner Isai Scheinberg:

Scheinberg was indicted on five criminal charges related to Pokerstars under United States federal laws.[4] In September 2020, he was sentenced to pay a fine of $30,000 with no jail time.[5]

Of Bodgog Casino Owner Calvin Ayre

On February 23 2012 Calvin Ayre et al faced charges for their website casino Bodog based on the new re-interpretation of the Wire Act:

In February 2012, Ayre and three other individuals were indicted by the US Attorney for Maryland on charges of illegal gambling and money laundering related to conduct that occurred before the 2006 passage of the Unlawful Internet Gambling Enforcement Act (UIGEA). Ayre released a statement via CalvinAyre.com saying he viewed the indictment as "abuse of the US criminal justice system for the commercial gain of large US corporations." Ayre also noted that the US Attorney had seized Bodog.com, a domain that had been dormant since the Bodog brand revoked its licensing agreement with MMGG the previous year.[35][36]

Bodog And Four Canadian Individuals Indicted For Conducting Internet Gambling Business Generating Over $100 Million In Sports Gambling Winnings

Alleged Online Sports Betting Conducted Over a Period of Seven Years FOR IMMEDIATE RELEASEFebruary 28, 2012 Baltimore, Maryland - A federal grand jury has indicted Bodog Entertainment Group S.A., d/b/a/ Bodog.com and the following individuals, all from Canada, for conducting an illegal sports gambling business and conspiring to commit money laundering:

Calvin Ayre, age 50; James Philip, age 58; David Ferguson; and Derrick Maloney.

Bodgog was serving US accounts from different countries around the world:

The two count indictment alleges that from at least June 9, 2005 to January 6, 2012 the defendants conducted an illegal gambling business involving online sports betting. The defendants and their conspirators allegedly moved funds from Bodog’s accounts located in Switzerland, England, Malta, Canada and elsewhere to pay winnings to gamblers, and to pay media brokers and advertisers located in the United States

Antigua and the WTO Relations With the US

Antigua’s offshore banking economy made it prime a hub for the digitization of casino offerings. But as we showed on thewealthofchips casinos function like banks, and so the setup would become a nuisance to the US and the USD:

Antigua was one of the first nations to legalize, license, and regulate online gambling and is a primary location for incorporation of online gambling companies. Some countries, most notably the United States, argue that if a particular gambling transaction is initiated outside the country of Antigua and Barbuda, then that transaction is governed by the laws of the country where the transaction was initiated. This argument was brought before the WTO and was deemed incorrect.[40]

HOWEVER, when the US enacted the UIGEA it put it self at odds with the WTO agreements:

In 2006, the United States Congress voted to approve the Unlawful Internet Gambling Enforcement Act which criminalized the operations of offshore gambling operators which take wagers from American-based gamblers. This was a prima facie violation of the GATS treaty obligations enforced by the WTO, resulting in a series of rulings unfavourable to the US.

Antigua challenged and won:

On 21 December 2007, an Article 22 arbitration panel ruled that the United States' failure to comply with WTO rules would attract a US$21 million sanction.[41]

The WTO ruling was notable in two respects:

First, although technically a victory for Antigua, the $21 million was far less than the US$3.5 billion which had been sought; one of the three arbitrators was sufficiently bothered by the propriety of this that he issued a dissenting opinion.

Second, a rider to the arbitration ruling affirmed the right of Antigua to take retaliatory steps in view of the prior failure of the US to comply with GATS. These included the rare, but not unprecedented, right to disregard intellectual property obligations to the US.[42]

From Antigua

Thus Ayre avoided charges by self exile in Antigua:

Ayre delighted in thumbing his nose at the U.S. Department of Justice. Even before Congress enacted its 2006 restrictions on Internet gambling, the feds alleged that Bodog was violating existing laws prohibiting the use of phones or other communications devices to accept bets. But Bodog collected $7.3-billion in wagers in 2005, 95 per cent of it from the U.S. Yet Ayre reportedly paid no personal or corporate income tax in Costa Rica or the U.S.

…a combative Calvin Ayre, who is still a fugitive from U.S. justice himself, thinks that Amaya may be in for a rough ride from the feds and regulators in other countries.

… in 2009, he launched CalvinAyre.com, a gambling news site. In 2012, however, federal prosecutors in Baltimore indicted him on sports betting and money laundering charges that date back to activities before Congress’s 2006 gambling clampdown. Ayre denounced those charges as “an abuse of the U.S. criminal justice system.” He was also placed on the U.S. Immigration and Customs “Wanted” list.

Answering questions by e-mail from his new home base of Antigua, Ayre says that the Scheinbergs cleverly unloaded a hot potato on Amaya. “I think the Scheinbergs clearly got the best of that deal.

Re-visiting Ideal Poker

On thewealthofchips website by synthesizing Nash’s work Ideal Money with poker we extended the theory of poker in relation to emerging economics. Our observations were about how the networks and economies of poker sites map to the field of banking where casinos and chips are as if like banks and currency units.

On Digital Gold As A Math Formula

In Bitcoin there are different evolutions of digital money attempts that are often cited as early inspirations of Bitcoin, but there are also those that are known to be early e-currencies but do not qualify as the type of venture that would be considered the holy grail of protocols.

The Liberty Reserve Gang

One such venture was Liberty Reserve:

"In May 2013, Liberty Reserve was shut down by United States federal prosecutors under the Patriot Act after an investigation by authorities across 17 countries."

The indictment listed the following names:

LIBERTY RESERVE S.A. ARTHUR BUDOVSKY, a/k/a "Arthur Belanchuk," a/k/a "Eric Paltz," VLADIMIR KATS, a/k/a "Ragnar," AHMED YASSINE ABDELGHANI, a/k/a "Alex," ALLAN ESTEBAN HIDALGO JIMENEZ, a/k/a "Allan Garcia," AZZEDDINE EL AMINE, a/k/a "Amine," MARK MARMILEV, a/k/a "Marko," a/k/a "Mark Halls," MAXIM CHUKHAREV

It didn’t have trustworthy protocols. It was the opposite. It was a shell for money laundering and criminal actively around the world including, ‘Cyprus, Russia, Hong Kong, China, Morocco, Spain, Greece, and among other places...

...Australia:

ARTHUR BUDOVSKY, a/k/a "Arthur Belanchuk," a/k/a "Eric Paltz," the defendant, and his co-conspirators, intentionally created, structured, and operated LIBERTY RESERVE as a criminal business venture, one designed to help criminals conduct illegal transactions and launder the proceeds of their crimes. The defendants deliberately attracted and maintained a customer base of criminals by making financial activity on LIBERTY RESERVE anonymous and untraceable. The defendants also protected the criminal infrastructure they created by, among other things, lying to anti-money laundering authorities in Costa Rica, pretending to shut down LIBERTY RESERVE after learning the company was being investigated by U.S. law enforcement (only to continue operating the business through a set of shell companies), and moving tens of millions of dollars through shell-company accounts maintained in Cyprus, Russia, Hong Kong, China, Morocco, Spain, and Australia, among other places.

Each named with specific roles:

MARK MARMILEV, a/k/a "Marko," a/k/a "Mark Halls," the defendant, and MAXIM CHUKHAREV, the defendant, were associates of ARTHUR BUDOVSKY, a/k/a "Arthur Belanchuk," a/k/a "Eric Paltz," and were principally responsible for designing and maintaining LIBERTY RESERVE's technological infrastructure.

The enterprise was a cesspool for black market type transactions:

Through the defendants’ efforts, LIBERTY RESERVE has emerged as one of the principal means by which cyber-criminals around the world distribute, store, and launder the proceeds of their illegal activity. Indeed, LIBERTY RESERVE has become a financial hub of the cyber-crime world, facilitating a broad range of online criminal activity, including credit card fraud, identity theft, investment fraud, computer hacking, child pornography, and narcotics trafficking.

And the market was massive:

Because virtually all of LIBERTY RESERVE’s business derived from suspected criminal activity, the scope of the defendants’ unlawful conduct is staggering. Estimated to have had more than one million users worldwide, with more than 200,000 users in the United States, LIBERTY RESERVE processed more than 12 million financial transactions annually, with a combined value of more than $1.4 billion. Overall, from 2006 to May 2013, LIBERTY RESERVE processed an estimated 55 million separate financial transactions and is believed to have laundered more than $6 billion in criminal proceeds.

After getting caught they pretended to shut down, and run legally, but they just ran a shadow bank regardless and continued to shield criminal activity:

The defendants deliberately attracted and maintained a customer base of criminals by making financial activity on LIBERTY RESERVE anonymous and untraceable. The defendants also protected the criminal infrastructure they created by, among other things, lying to anti-money laundering authorities in Costa Rica, pretending to shut down LIBERTY RESERVE after learning the company was being investigated by U.S. law enforcement (only to continue operating the business through a set of shell companies), and moving tens of millions of dollars through shell-company accounts maintained in Cyprus, Russia, Hong Kong, China, Morocco, Spain, and Australia, among other places.

On Costa Rica

It is notable that Costa Rica hosts many crypto-celebrities such as Brock Pierce:

In a high-stakes legal clash veiled by the shimmering Caribbean Sea, Brock Pierce, a crypto entrepreneur and erstwhile child actor, is embroiled in a dispute over the ownership of a hurricane-devastated resort in Puerto Rico. The legal battle sees Pierce pitted against Joseph Lipsey III, a trucking magnate.

Liberty Reserve and Off-shore Dollar Based Shadow Banking

That online casino’s act as if digital banks offer interesting and complex game theoretical considerations that we can’t get all into here. What we want to call attention to here is to both the interesting notion of a global scheme to hoard PHYSICAL dollars as this is what such a setup would entail.

In one example of Liberty Reserve related activity it seems actors were withdrawing dollars from machines in different nations:

One specific allegation of the prosecutors is that the site played a role in laundering the $45 million stolen from the Bank of Muscat and the National Bank of Ras Al Khaimah in May 2013.[15][17]

German prosecutors said on Friday they had arrested two Dutch people suspected of involvement in a global cyber theft of $45 million from two Middle Eastern banks.

On Thursday U.S. prosecutors said a criminal gang had withdrawn the money from cash machines in 27 countries.

In another example stolen australian bank accounts were sold:

In 2011, Liberty Reserve was linked to (unrelated) attempts to sell thousands of stolen Australian bank account numbers and British bank cards.[10][11] In 2012, a group of hackers attempted to blackmail anti-virus software company Symantec into transferring $50,000 into a Liberty Reserve account.[12]

Liberty Reserve E-Gold as a Precursor to Digital Gold

Liberty Reserve provided accounts for e-gold. Which started in Florida and grew to have connections as far as London and Dubai.

e-gold was founded by Douglas Jackson, an oncologist,[3] and Barry Downey, an attorney, in 1996. The pair originally backed e-gold accounts with gold coins stored in a safe deposit box in Melbourne, Florida.[4] When e-gold was at its peak, the company stored its gold and platinum in bank vaults in London and Dubai.[2]

On Triple Accounting

Consider Ian Griggs Concept of Triple Accounting:

We don’t have time for a full audit right now but we have an interesting computation shortcut as the author is the best poker player in the world and so we can simply declare our opinion for brevity. Consider these statements on the workings of the system:

Far from reducing the relevance of this work to the accounting profession, it introduces digital cash as an alternate to corporate bookkeeping

Although the core of the system looks exactly like an accounting system, each department's books are pushed out as digital cash accounts.

Liberty Reserve As Bitcoin 0.0

Triple Accounting is Liberty Reserves WHITEPAPER, and it marked the beginning of a MASSIVE global digital shadow banking that effectively used Geoge Selgin’s concept of free-banking to create what is called ‘inside’ money:

We have operated this system on a small scale. Rather than be inefficient on such a small scale, the system has generated dramatic savings in coordination. No longer are bills and salaries paid using conventional monies; many transactions are dealt with by internal money transfers and at the edges of the corporation, formal and informal agents work to exchange between internal money and external money.

However, INSIDE MONEY (something Selgin explains well), on the internet like this isn’t actually ‘internal’. Once created and boot-strapped these guys had actually created an untraceable global shadow financial system. The amazing thing is you could get an account from anywhere on the internet completely anonymous.

Nick Szabo On Trusted Third Parties:

Szabo explains trusted third parties are security holes:

The best "TTP" of all is one that does not exist, but the necessity for which has been eliminated by the protocol design, or which has been automated and distributed amongst the parties to a protocol. The latter strategy has given rise to the most promising areas of security protocol research including digital mixes, multiparty private computations, and Byzantine resiliant databases.

On the Perceived Security of Casinos and Poker In General

We haven't completed our thesis on this particular aspect of this subject that this time but eventually we mean to show that the designing of certain institution such as pokers sites can be INTRINSICALLY such that they TREND towards a single point of failure.

Thus if the goal is to take out all of the points of failure up to the point of the head of the system. It's false sense of security building is simply the exit scam preparing (it's probably human nature that we can't resist the temptation from such scenarios as the central authority etc.).

Hermeneutics, then suggest that we can use Szabonian deconstruction to work through the history of poker and online gaming in relation to law to peel away the culture of construction that might have bred around this practice.

We don't expect to find the games, for example poker, to have been very secure from the players standpoint.

NioNio The Ultimate Bet Poker Superuser Cheating Scam

In one such example an admin account from the site Ultimate Bet Poker was found to have 'god' access to the site and was playing against users with the advantage of being able to see all of the cards as if they were face up.

At first players complained about the outlier but the propriety of the community seemed to deny there was problem.

Eventually Micheal Josem a well known now ex-PokerStars Employee) that used a statistical approach to show the likelihood of cheating made it undeniable.

This sort of a 'signal' allowed the game theorists to decode the cheating. On thewealthofchips.com we showed over the time players have been deprived of this signal.

This is where we got the idea such a signal exists in our global financial systems.

It is the Nash equilibrium in a Hayekian Field.

Problems with Triple-Accounting Shadow Banking

Why should Griggs project be a Eureka for shadow banking but not be considered as a trustworthy protocol?

Firstly at a glance it certainly provides perfect crypto-graphic security.

Grigg is Satoshi then!?!

No because he’s done it with a trick.

Nonetheless believe it or not one of the ‘brilliant’ aspects of this system is if criminal A and criminal B want to do an illegal transaction through liberty reserve, liberty reserve as an intermediary actually CAN’T link the real world identities (notice our language!).

That is to say from the criminal’s perspective this is the DREAM!!!

What’s the catch? Simply finding the home for this obviously illegal digital shadow bank that threatens the US dollar’s capital controls..

On the Fraud Proofing of Double And Triple Accounting

However Grigg notes:

Double Entry bookkeeping provides evidence of intent and origin, leading to strategies for dealing with errors of accident and fraud.

And so his system, by the nature of the creation of inside, effectively holds an immutable ledge of transactions

Once there, governance receives substantial benefits. Accounts are now much more difficult to change, and much more transparent. It is our opinion that various scandals and failures of governance would have been impossible given these techniques: the mutual funds scandal would have shown a clear audit trail of transactions and thus late timing and otherwise perverted or dropped transactions would have been clearly identified or eliminated completely

On Ricardian Contracts and Silk Road

Ricardian contracts are like smart contracts but have the capability of encrypting messages to be sent that either the central authority could or couldn’t read depending on the party's wishes. This would allow ANY complex type transactions the parties wished.

Back-Door of a Shadow Honey Pot

Like Hal Finney’s RPOW however the system needs to link all of the transactions in order to build the accounts. This is by Griggs own admission:

the mutual funds scandal would have shown a clear audit trail of transactions

In this sense the system is like Bitcoin, the criminals are safe, as long as the good guys don’t find the database of transactions and link the accounts somehow externally!

Grigg as Faketoshi!

How did Grigg solve so many problems before Satoshi, and even smart contracts?! Is he Satoshi? No, he didn’t solve anything, he baked it into all centralized authority such that all of the petty criminals couldn’t be bothered to care about linked transactions and perhaps the larger one’s didn’t know or care.

Bitcoin and Liberty Reserve, and the LIberty Reserve Database

Liberty Reserve had already effectively proved the Mises violation but only internally in a shadow banking system. By functioning as a private bank it was able to create its own internal system which users around the world could easily subscribe to.

It's an untold absolute marvel of a monster!

And Linkable Shadow Ledger Meets and Immutable Global Leger

And if Bitcoin was released in 2009 and these guys were involved with the cypherpunks then of course liberty reserve started to hold bitcoin and was thus no doubt instrumental in its bootstrapping (although for at least now history can’t reveal the details).

On Mises Capacitance And Proto Digital Banks

Mises gives us an interesting statement in regard to inside money that Liberty Reserves created:

The valuation of money by the market can only start from a value possessed by the money in the past, and this relationship influences the new level of the objective exchange value of money

The liberty reserves were as if the separation of liabilities and assets created a new asset class for the world out of an old accounting method not yet ported to the internet.

From our previous frameworks of using electrical metaphors its as if a network of criminals was able to coalesce and induct their cultural capacitance into the liberty reserves.

On Comparisons To Selgin’s Ruritania

The Liberty Reserve Reserves, the inside money, then would be able to hold value and that value could be exchange against bitcoin. This system ports to Selgin’s explanation of Ruritania

In the evolution of Ruritania's free banking system, bank reserves do not entirely disappear, since the existence of bank liabilities that are promises to pay continues to presuppose some more fundamental money that is the thing promised. Ruritanians forego actual redemption of promises, preferring to hold them instead of commodity money, so long as they believe that they will receive money if they ask for it. Banks, on the other hand, have a competitive incentive to redeem each other's liabilities regularly. As long as net clearing balances are sometimes greater than zero, some kind of reserve, either commodity money itself or secondary reserves priced in terms of the commodity money unit of account, has to be held.

On Ricardian Inductance and Triple Account Ledger Digital Banks as Motors

The system has all the workings of an ecosystem. Once bootstrap it can hold its own value and if it can keep its own internal auditing it theoretically it could function without connection to the real banking system!

On the Linkability of Bitcoin Transactions and Liberty Reserve Transactions

The suggestion here is that any linking of transactions between the two systems would link everything to immutability.

The Problem Wright, Ayre, Grigg Face

The problem is clear. The Ricardian inducted value, of the inside money, is inextricably linked to the database of all of the greatest shadow criminal activity around the world, and its all linked to the blockchain. A MASSIVE LION share of Bitcoin with evidence of an untold amount of unfathomable crimes.

On the Nature of Law and Precedent

The history and nature of law shows how sometimes a ruling in one area can have unintended consequences in another. One can think of the strategy ramifications on a global scale where there could be forking opportunities available.

On Shadowbanking as an Extension of Central Banking 101

Joseph Wang gives us a primer on shadow banking, central banking, and private banking, in his book Central Banking 101:

The basic business model of a shadow bank is to use shorter-term loans to invest in longer-dated assets. This mismatch creates an opportunity for profit as longer-term interest rates are usually higher than shorter-interest rates. The shadow bank may also be earning a risk premium by investing in riskier assets. This bank-like business model also makes shadow banks vulnerable to bank runs when their investors refuse to renew their loans. Without access to the Fed as lender of last resort, shadow banks may have to sell assets to meet investor withdrawals. During a panic, they would have to sell assets at large discounts, potentially incurring large losses. The 2008 Financial Crisis and the 2020 COVID-19 panic were largely due to runs of the the shadow banking system.

And so we have discovered that shadow banking system.

On Fed Bail-outs, Shadow Banking, Interest Rate Signals

Earlier in works we can't find reference to we showed a battle between two forces in the crypto-sphere we called red and blue. We showed that 'tether' gives the blue side the advantage because they can control the honesty of the markets prices signals (they can add noise to the signal if they want, or not, like encrypting the signal).

Consider what Wang says about the relationship between The Fed and shadow-banking in a section called 'How the Fed Bails Out the Shadow Banks:

The Fed only transacts with the primary dealers, but, through the primary dealer system, it is able to indirectly reach deeply into the dark corners of the financial system. This is because the primary dealers have relationships with virtually all the major financial institutions in the world. Fed policy is transmitted through these relationships.

On the Shadow Effects of Ricardian Shadow Banking

For the astute reader this means leading up to the global financial crisis and especially to COVID, the USD had an untraceable jamming signal growing on it.

When China shut down the economy and sent us into deflation the Riccardian banking system couldn't handle the reversal.

Thus it shook this discorance from the fed signal and cut the shadow banking off from it support compressing the economy and price system into a black-hole.

On the Black Hole Residue of the Ricardian Implosion

The resulting artifact, we will stop here in philosophizing, but it has paradoxes associated.

Consider the Role of ClearingHouses In a Selginian Landscape of Private (Shadow) Banking

Along with our metaphor tools we bring along Selgin's Ruritania a central banking free realm of Private Banking assumptions:

Another approach, which also helps in interpreting historical evidence, is to base assumptions on a logical (but also conjectural) story of the evolution of a “typical” free banking system, as it might occur in an imaginary, unregulated society called Ruritania.

Notice the fourth stage:

Our story involves four stages: First, the warehousing or bailment of idle commodity money; second, the transition of money custodians from bailees to investors of deposited funds (and the corresponding change in the function of banks from bailment to intermediation); third, the development of assignable and negotiable instruments of credit (inside money); and fourth, the development of arrangements for the routine exchange (clearing) of inside monies of rival banks.

Here were are thinking about the lack of limitations of multiple Ricardian banks arising suggesting the natural arising of a higher order of clearing function:

Suppose Ruritania has three banks, A, B, and C. A has $20,000 of B’s notes, B has $20,000 of C’s notes, and C has $10,000 of A’s notes. 24 If they settle their obligations bilaterally, they need to have $20,000 to $40,000 of commodity-money reserves on hand among them, depending on the chronological sequence of their exchange. On the other hand, if they settle their balances multilaterally, they need only $10,000 of reserves among them: A’s net balance to B and C combined is +$10,000; B’s net balance to A and C combined is $0; and C’s net balance to A and B combined is -$10,000. Hence all three balances can be settled by a transfer of $10,000 from C to A. Apart from reducing reserve needs, multilateral clearing also allows savings in operating costs by allowing all debts to be settled in one place rather than in numerous, scattered places.

On Machiavellian Studies of Ricardian Shadow-Banking

In Ruritania, there is a lack of a single controller of the currencies issued (but still could be a most powerful issuer etc.) and so the natural order is a tendency towards the idealization of the network, Or that the network will have inter-relational ducat stability.

Each of the participating Ricardian Shadow Banks would be forced into this equilibrium. Although good for the customers of the system.

It begs the question of what the exit scams could be? And the complexity of order of exit among thieves and criminals involved.

On the Comparability of Mt. Gox And Full Tilt Poker

We-revisit an observation we made many years ago that showed the same "modus Modus operandi" between the cause of the Full Tilt poker failure and the Mt. Gox failure.

It was also confirmed by Kim Nilsson that at the time Roger Ver confirmed Mt. Gox was solvent it in fact had already lost its Bitcoin's.

Re-Visiting the Complexity Distance Between Jeffery Tuckers Misses Termination and the Origins of Ricardian Banking

This leads to an obvious question as to how Tucker coincidentally described the birth of the value of bitcoin the 'Ricardian' Bankers perspectives:

As time has passed—and I read the work of Konrad Graf, Peter Surda, and Daniel Krawisz—finally the resolution came. I will cut to the chase and reveal it: Bitcoin is both a payment system and a money. The payment system is the source of value, while the accounting unit merely expresses that value in terms of price. The unity of money and payment is its most unusual feature, and the one that most commentators have had trouble wrapping their heads around.

We find it improbable to reason to and we offer Hayek as our evidence. How is Hayek evidence?

He shows where reason leads:

This definition was established by Carl Menger [43], whose work also ought to have finally disposed of the medieval conception that money, or the value of money, was a creation of the state. Vissering [61], p. 9, reports that in early times the Chinese expressed their notions of money by a term meaning literally 'current merchandise'. The now more widely used expression that money is the most liquid asset comes, of course (as Carlile [8] pointed out as early as 190I), to the same thing. To serve as a widely accepted medium of exchange is the only function which an object must perform to qualify as money, though a generally accepted medium of exchange will generally acquire also the further functions of unit of account, store of value, standard of deferred payment, etc. The definition of money as 'means of payment' is, however, purely circular, since this concept presupposed debts incurred in terms ofmoney. Cf. L. v. Mises [45], pp. 34 if.

Why does it matter that reasonable philosophy doesn't lead to Tucker's conclusion? Because it's HIGHLY improbable his 'ship' accidently was blown by the winds of randomness to find a constructed truth consequently that served the Ricardian order.

On Hermeneutic Observations Of A SuperNova Griggorian Event

Consider Hayek on the nature of a price system:

Fundamentally, in a system in which the knowledge of the relevant facts is dispersed among many people, prices can act to coördinate the separate actions of different people in the same way as subjective values help the individual to coördinate the parts of his plan.~Hayek, On The Use of Knowledge

We have a tool to this regard to crafted from synthesizing our deconstruction of Cantilon with our observations from On The Use of Knowledge:

Because of our Cantillon framework, we can understand Hayek's thesis that prices can create a simultaneous signal in an countryside extended from the capital which established them like as if the consensus from '...standard communication model of synchronous networks in which each pair of processors is connected by a private communication line'

Conisder a scenario where the economic order reversed, this tool, or our explanation of the Cantilon unfolding of a mesh of prices over a network, the special qualities of the simultaneous signal would also reverse (some measure of a reduction of factor of metcalfe potential ensues).

Such an event would be the reversal of the phenomenon Hayek describes the price signal implies:

The mere fact that there is one price for any commodity—or rather that local prices are connected in a manner determined by the cost of transport, etc.—brings about the solution which (it is just conceptually possible) might have been arrived at by one single mind possessing all the information which is in fact dispersed among all the people involved in the process.

And remember that the problem in the first place was to SPECIALLY coordinate the previously dispersed knowledge that is now again dispersed:

There is beyond question a body of very important but unorganized knowledge which cannot possibly be called scientific in the sense of knowledge of general rules: the knowledge of the particular circumstances of time and place.

We mean to coordinate the otherwise uncoordinated knowledge of each individual's unique perspective, when the coordination, transfer, and exchange of the information is infinitely reflexive (we each need to know the others decision before we make our own!). Put another way, we need ‘simultaneous’ broadcast but without reliable broadcast channels (aka unreliable communication):

It is rather a problem of how to secure the best use of resources known to any of the members of society, for ends whose relative importance only these individuals know. Or, to put it briefly, it is a problem of the utilization of knowledge which is not given to anyone in its totality.

And so when the Giggorian Order fails the price system that collapsed, the ‘simultaneous’ that no longer existed, left the otherwise perfectly coordinated rationally self-interested criminals and thieves without the coordinated signal that allowed them to cooperate with non-cooperative morals.

Now they rely on traditional methods of coordination as if they each no longer can reliably communicate (for a variety of complex reasons but this should be obvious as, for example, the sub groups of the organization themselves would probably largely be organized by language etc).

We have thus hermeneutically re-interpreted the story of Babel as the loss of prices due to Giggorian pride

On Giggorian Privacy

With regard to this special offering for Liberty Reserve customers we can consider then the trickery of it:

In addition, for an additional "privacy fee" of 75 cents per transaction, a user could hide his own LIBERTY RESERVE account number when transferring funds, effectively making the transfer completely untraceable, even within LIBERTY RESERVE's already opaque system

Not only are transactions as linkable as Bitcoin, not only are linked transactions in the hands of the world's most professional money launderers and crooks, but you PAY to FEEL more secure about it.

No doubt someone thought this was the termination of Mises regression theoreum (we noted Tucker did at least).

Mises they would say, “Just can’t Machiavellian think”.

On the Ark of the Covenants

And so there is a search for a holy grail protocol upgrade that can release the Griggordian Knot. And a presupposed religious belief in its existence.

But who believes it exists, who wants to believe, and who wants who to believe?

On Smart Contracts of the Smart and of the Griggorian Sort

We designed cypherPoker to run with the same sort of Griggorian Implementation of Szabo's smart contracts.

Szabo is the coiner of the term and he has specific concerns about the nature of language and code and law etc. Here he explains the difference between 'dry' and 'wet' code:

There's a strong distinction to be made between "wet code," interpreted by the brain, and "dry code," interpreted by computers. Human-read media is wet code whereas computer code and computer-readable files (to the extent a computer deals meaningfully with them) are "dry code." Law is wet code, interpreted by those on whom the law is imposed, and interpreted (often somewhat differently) by law enforcers, but most authoritatively (and even more differently) interpreted by judges. Human language is mostly wet code but to the extent computer programs crudely translate from one language to another, keyword-ad programs parse text to made an educated guess as to what ads a user will most likely click, and so on, human language text can also be dry code. Traditional contracts are wet code whereas smart contracts are mostly dry code. Secure property titles and the domain name system are mostly dry code.

Note dry code, or programmatic code isn't as verifiable as we would think:

Even "mostly dry code" often has surprisingly soggy portions.

In the case of a Griggorian contract there was wet code quite readily and costlessly avaible (eye is in the beholder as to whether or not there was cost here).

We derived this same use from Ideal Money and infused it in our implementation of Ideal Poker-cypherpoker.

However, in our implementation the 'security' of the system relies on the lack of a centralized authority that would expect to profit on the enterprise as well as the relatively small sized transactions involved etc.

It's much like the same system whereby the contracts are sent to a decentralized set of trustworthy validators like a nostr field.

In this sense we still call OUR contracts Szabonian smart.

On the Complexity Distance of Grigg And Wright

We find it obvious that Craig Wright suffers from a phenomenon related to an inverse of pareidolia. People seem to take his literal words as if he said the opposite.

As if he could convince the jury he said something in which he actually said the opposite. Like a perpetual sarcastic tone that everyone follows.

A True Pied Piper.

However in tandem and relation, we find Grigg, through our findings outlined in this essay, of his ideas, has zero complexity difference in intellect from Wright. Their reasoning and implementation, suggests some amount of probability such as twin genetics.