Latest / Monero Talk / Privacy is Pro-National Security w/ J.W. Verret | EPI 310

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Privacy is Pro-National Security w/ J.W. Verret | EPI 310 · Monero Talk

• Doug All right, J .W., what's going on, man? Good morning. So what's going on? I feel like it's gotten a little more dark and stormy since you were last on. JW Verret I keep thinking about that song by Warren Zevon, send lawyers, guns, and money. Send lawyers, guns, and privacy coins, man, because the shit has hit the fan. Doug Uh, we, we are definitely on the front lines experiencing it firsthand. I know you, you've very much been on the first lines. You were, you were part of that trial. Uh, is there anything you could tell us about that now that it's over? JW Verret Yeah, man, US versus Sterlingov, you know, I really got to thank you, Doug, because I learned about the trial in a great Monero talk podcast that where you had Tor Eklund and Mike Hassard on, and I'm walking my dogs one night, listen to those guys talking about this case. JW Verret And I said, shit, I got to get involved in this trial, because this is, they're putting an innocent man in jail. So I reached out to them. And they said, Yeah, we could use you, you know, one of the things I do for for living is part of its law professor of banking securities law stuff. JW Verret Though I'm a libertarian, so I hate everything I teach about. And then I do some forensic accounting stuff, help, help in litigation. So I reached out to them and said, Can I help in that way? They said, Yes, you're in, you're in definitely, we're not sure we can pay you, but you're in. JW Verret So I said, All right, fine, let's do it. And I got qualified as an expert in the in the trial. For six hours, the prosecutors grilled me to try to disqualify me as an expert, but I got in and then I got to know Roman Sterlingovice spent about 30 hours with him in prison, really got to know this kid and dug through every little piece of his financial life. JW Verret I mean, he's innocent, he's innocent. And and I went from just being skeptical from what I heard on your show, what I read in the indictments, what I read in the evidence to spending 30 hours with this kid. JW Verret And just every piece of his financial life, imagine if someone ever went over every piece of your financial life over the last 10 years of your life in prison, brought the documents with them, asked hard questions about why this pattern? JW Verret Why that pattern? Well, that was when I sublet an apartment that was when this was not it was just obvious to me, he is innocent. He did not run Bitcoin fog. So I got to know him and when he when he was found guilty, it was like getting punched in the gut. JW Verret I mean, it was hard. It sucked. It was a sucky day. And courtroom was filled with, you know, 30 DOJ people all kind of looking like the looking like the wolf who just walked in the hen house is a tough day. Doug And what kind of role did you, did you play in the trial as a, as an expert witness, what were you kind of really there there to do? JW Verret Well, two things really. My main focus was the government had a forensic accountant, someone from one of the big four accounting firms who was on loan to the IRS, which sounds like a miserable career. JW Verret The government's argument was that he had a record of transfers from Bitcoin fog to his KYC Kraken account, amounting to about $1 .8 million worth of Bitcoin. The government said, well, obviously, that's fees from running Bitcoin fog. JW Verret And he testified in the stand. He said, no, I was early to Bitcoin. I bought Bitcoin back in 2011 and 2010. And if you're buying Bitcoin in 2010 and 2011, it's hard not to be worth a couple million dollars worth of Bitcoin. JW Verret This is back around the time of Bitcoin Pizza Day. He said, I used Bitcoin fog because that's what everybody did for privacy. I used Bitcoin fog. And he said, then I would send it back to when eventually I wanted to start selling it because there was some price action in 2014, 2015. JW Verret I wanted to sell it on Kraken because that was a lot easier than peer to peer. So I sent some of my Bitcoin that was at addresses that had been mixed at fog to get personal privacy because I was going to meetups and buying and selling with people and I didn't want to get hit with some kind of wrench attack. JW Verret I sent it eventually to Kraken because I didn't have anything to hide from Kraken. So I went in to say a few things. First, I did an analysis of Bitcoin fog. I said, look, the government says based on the government's own numbers and the chain analysis numbers, which that's a big if, but even if you accept those numbers about how big Bitcoin fog was, the amount of Bitcoin going through Bitcoin fog, there's a million Bitcoin that went through fog. JW Verret They said in total, the fees were about two to 3% variable between two and 3% as a mixing fee. So I said, just on that basis, you're talking about 24 ,000 to 36 ,000 Bitcoin that the operator of Bitcoin fog would have earned. JW Verret That's a lot of Bitcoin. How do you price that? Well, it depends on what day you price is, what day the operator, the hypothetical operator fog is selling, right? If they're selling early, it's low. If they're selling late, that's a billion dollars worth of Bitcoin. JW Verret Let's do somewhere in the middle and put up a chart for the jury. If you have a convention of assume they held for one year after earning the fee, two years after earning the fee, three years after earning the fee, what would the operator fog earn? JW Verret My professional opinion is it would have been a couple hundred million dollars in fees. And I said, my graph is logically consistent with testimony from someone else who ran another mixer, Helix, Larry Horman, who pled guilty to running the Helix mixer. JW Verret He said on the stand, same numbers that I was giving for whoever ran fog, Larry Horman said, I made about $200 million from running Helix. That's what he said on the stand. Now Helix was a smaller mixer than fog. JW Verret Helix operated after fog started, closed down before fog closed down and ran less Bitcoin through Helix. So I said, ladies and gentlemen, the jury, whoever ran fog based on my calculations of the government's own numbers of the fees and held up by comparison to Mr. JW Verret Horman is kind of a market comparison. This person would have would have earned hundreds of millions of dollars. Now let's look at Roman Stirlingoff. I've been through his finances with a fine tooth comb. JW Verret This kid never spent more than $50 ,000 a year on himself, except he bought a Tesla, except that was his one extravagance over 12 years of his life. He bought a Tesla with Bitcoin. He bought a Tesla. JW Verret Otherwise he spent about 50K a year on himself. He did do it in a weird way that you're not used to as a jury. Yes, he used gift cards because he would send his Bitcoin to get gift cards, but he also used KYC gift cards for all of this spending when there were options to use non KYC gift cards. JW Verret So ladies and gentlemen, the jury, if he had to have earned, if he ran fog as the government believes, he had to have earned hundreds of millions of dollars and yet the government never shows him worth more than 1 .8 million, never spending more than 50K a year on himself. JW Verret his finances and everything in the government's records, don't show anything more than that. My forensic investigation of him for 30 hours in prison, don't show more than that. Where is the missing Bitcoin? JW Verret The mystery of the missing Bitcoin. We put it up in a giant PowerPoint. It was like a title of a Sherlock Holmes story, Professor Verrett and the mystery of the missing Bitcoin. That's what we put as the title, right? JW Verret And I just tried to just simplify this for the jury. And I just don't see how he was connected, convicted. That was my little piece of this. There were other pieces of it that, that, that Eklund and Hassard put together. JW Verret That was my piece of it. That, and also just saying, this is, this is one of the frustrating things about this case. The FBI, they had an FBI agent up there who was a kid a couple years out of college and the government said he's a money laundering expert. JW Verret He wasn't a money laundering expert. But anyway, what he would do is he would look at patterns of transactions that were complicated. And for no other reason than that, they were complicated. He would point to them and he would say, that's consistent with money laundering. JW Verret And I would be like, it's also consistent with how things work in crypto. Because if you're like me, like if you were to pull up my wallet, the wallets on my phone right now, you would see a pattern of buy an NFT, then it goes to a privacy tool. JW Verret Then it goes over here to play around with some DeFi stuff. Then it goes here, then it goes there. You would see these same spider webs of stuff that they put up on charge with Roman. And it's like normal in crypto, but it's, it's, if you're the average person who works at the post office in the district of Columbia, you're like, what is all this complicated stuff? JW Verret And an FBI agent just told me this complicated web of transactions is consistent with money laundering. Therefore it must be money laundering. So I was there to try to counteract some of that. But it's, it's hard. JW Verret And you see on the front lines, the advantage the government gets when they bring a conspiracy to commit money laundering case, they get to just say, you know, your finances are weird and complicated. JW Verret Therefore must be money laundering. And it was, it had such a Kafka like element to it. I get, I get excited about this trial, but, but that was my role. That was Doug What would you say is the big takeaway from a legal perspective of what this means moving forward? What comes out of this trial? How has it changed the scene? JW Verret yeah you know i i think that that um it's it's a tough one man i i think it's Doug It's a win for chain analysis, right? It's a win for the DOJ in how they use chain analysis, right? JW Verret They interpreted it that way after the trial, but you know, I'll say this, um, tour, so tour Eklund and my cast had fought like lions. I mean, I've never seen lawyers like this. Every motion, every objection was like the last stand in the trial for them. JW Verret And they frustrated the pro you can tell how good a defense lawyer is by how frustrated the prosecutors are. And they were frustrated all the time. They are the lawyers I would use if I was in trouble. JW Verret Um, and one of the things they were successful at doing was putting such a spotlight on chain analysis, tracing that when chain analysis actually testified, they qualified their testimony a lot. And they said, whoa, whoa, whoa, whoa, we're not attributing any Bitcoin addresses to Roman Sterling. JW Verret All we're doing, all we're doing is just tracing links and clustering addresses and claiming they're the same entity, Bitcoin fall. That's all we're doing. We're not attributing ownership of an illicit address, illicit proceeds addressed to Roman Sterling law. JW Verret Whoa, whoa, whoa, we're not. So they backed off a ton to which tour said, wait, you're not attributing any illicit funds or proceeds to that man right there that what are you doing here? That what's the point of you being here? JW Verret So they qualified their testimony a lot. And yet they spun it as a win for chain analysis, but in the end, chain analysis, wasn't as relevant to the case because of all the fights that Tor put on the front end of pretrial motion. JW Verret Yeah, but I have to tell you, I have to tell you, Monero talk came up in the case. Doug Oh yeah, yeah. Tell me this story. This is a little scary. JW Verret So, one of the things they tried to do to discredit me was use my association with Zcash and use the fact that I appeared on Manero Talk. So the prosecutor asked me how I heard about the case and I had to tell him honestly. JW Verret So I said, you know, I listened to a podcast with the attorneys in the case, and then I reached out because when I read the indictment, it was clear to me that that man is innocent. Objection, objection, boom, boom, boom, boom, and the judge says, you can't say that, you can't say that. JW Verret So the prosecutor says, podcasts, huh? Is that the Manero Talk podcast? And he looks at everybody else in the courtroom like, oh, and I was like, yeah, yeah, it's a great, you can definitely, it's a great podcast about privacy in a particular community. JW Verret It's cool. And he's like, you sit on the Zcash Foundation board, a board that supports a cryptocurrency that can't be traced. Yes, because we believe that privacy is normal. And I said, I looked at the jury, I looked at the jury and I said, I believe that privacy is normal. JW Verret The thing about cryptocurrency, is this without some privacy enabling technology, cryptocurrency transactions are for the whole world to see. So it's like your bank account, your checking account, is public to the entire world. JW Verret And they all looked at me for the first time in the trial and said, huh, we didn't think of that. Maybe privacy is okay. You could see the wheels turning a little bit, but it wasn't enough, man. It wasn't enough. Doug I'm laughing here, but it's freaking terrifying. I mean, where are we headed, right? So the government appears to be currently winning this fight. Obviously, cryptos like Monero and Zcash, they're built to be unstoppable. Doug But the fact of the matter is, there's a lot of shrapnel that's being spread out there right now. And there's real victims. So the Bitcoin fog thing is one thing. And in that case, the tech itself that was used there was clearly not decentralized. Doug That was a centralized mixer. Who was running it? We don't know. But it was clearly a centralized service. But now we're seeing things go a step further with this indictment of samurai, which is not analogous to the Bitcoin fog mixer at all, built in a way where the samurai never held custody of anybody's crypto. Doug Effectively, it's not a mixer. It's a coin join. A lot of technical differences, but the government just doesn't care. And now they lopped it all into one, and they're going after samurai. What is your take on this? Doug They're being accused of money laundering as well, right? Conspiracy to commit money laundering. And for, I guess, the second charge is operating without a money license, right? Money transfer license. JW Verret Conspiracy to operate up, unless it's a conspiracy. Yeah, they're both conspiracy. Conspiracy is the government operating on video game god mode, basically, you know? I liked the technical description that Seth for privacy has. JW Verret I think it was on your show about how the coordinator worked that it was akin to like an email service where people would think of it like people emailing each other, hey, you wanna sign with me? Yes, you wanna sign with me? JW Verret But in a way that's a lot more efficient and can't be, that's anonymous. Yeah, man, it's obviously a stretch and it should be read in conjunction with the government's latest response to the tornado cash indictment where the government advances a theory that we can get you on a money transmitter or conspiracy to operate in, unless it's money transmitter, even if your service is decentralized and doesn't take custody, which is, I mean, it's like saying, you know, FinCEN gave you guidance and they said it was okay, but ha ha ha, we're the DOJ, we get to put you in jail anyway. JW Verret The DOJ's position in tornado cash and the theory they're advancing in samurai have been like widely criticized by a community of crypto lawyers who are former Treasury and DOJ and SEC people. So this is people who used to be prosecutors, people who used to work at Treasury FinCEN who say, oh my God, what? JW Verret No, that's not, that's a terrible abuse of power. Hopefully that tells us something about what a judge will do with it, particularly with all the good amicus work that is going into this. So in the tornado cash case, you know, people don't wanna touch money laundering. JW Verret They think, oh, I don't wanna be associated with, but Blockchain Association came in with an awesome amicus brief and support, DeFi Education Fund, Coin Center, God bless Coin Center. They're fighting for all of our lives here. JW Verret So those amicus briefs were powerful. I expect there's gonna be an amicus fight to support the samurai guys too. So, you know, when legit amicus briefs come in from, you know, like people to judge respects, lawyers to judge respects and institutions, maybe that helps take a step back and fight some of this kind of government privacy is, you know, privacy means you must be doing something bad. JW Verret I don't know. Anyway, the amicus stuff is gonna be important. But look, yeah, the government's position now is that they basically ripped up the 2019 Fincin Guidance and said, we can come after you. If a bad guy uses your tech, I guess is the rule now. Doug Right. What currently is a money service business? What is the current thing? JW Verret It's a short hop from there to saying, we take it back, an unhosted wallet is a money transmitter. Doug Crazy. Can you give us any insight into how this is happening behind the scenes? I mean, FinCEN came out with these rules or this guidance in 2019 that clearly defined what a money service business was. Doug They've been completely ignored, ripped up. How is that like, aren't these people kind of talking to each other or aware of each other? I mean, what's the point of guidance if it's not, if it effectively isn't guiding anything? Doug Can you give us any insight into how that works in the federal government? I mean, what do you know? Tell us, I mean, what's really going on behind the scenes? I mean, at the end of the day, is it just government doing whatever it wants to do? JW Verret Yeah, I don't know man. I I don't have a very much interact the only interaction. I mean so I I The only interaction with I have with doj is is As a witness for criminal defendants so they don't tell me anything you know, um I did have one interaction with one prosecutor from doj at a um at a stanford blockchain conference Uh, one of the prosecutors at doj who led the case against welcome to video that was profiled in tracers in the dark Which is a great case. JW Verret I mean for you know, welcome video is an evil some evil shit And the people buying child sexual sexual abuse material from welcome to video were all just They bought they put they you know They buy bitcoin to crack and then they transferred from the kyc to count to welcome the video. JW Verret So it wasn't even really that Complicated investigation. They just it just they just subpoenaed the um crypto exchanges Uh for the addresses that sent to that to that thing once they found it um, but to this guy but this Some of the prosecutors, you know They use chain analysis in some cases where you think that's a good case and i'm glad that case happened But the prosecutors involved the investigators involved in chain analysis are all also involved in clear witch hunts against innocent people Um, anyway talk to this prosecutor a little bit And it was this weird experience of a room full of half Like people like me and people who created the julian assange dao And people who were building dark phi kind of that group And like federal prosecutors and regulators in a privacy breakout session, and it was weird. JW Verret It was like a civil war in there, man. Like, there was no common ground at all. But the DOJ prosecutor guy says, says, okay, let's all agree as a beginning point that we don't, you know, we wish we could get rid of Monero and we don't want a Monero only world, right? JW Verret So the other half of the room was like, I don't want to be foul on your show, but we were not nice to that. We did not agree to those terms of the discussion. And it was clear from him that like, if he could, if he could light Monero on fire, he would, but he doesn't feel like he can. JW Verret That's why I think that layer ones like Zcash or Monero, like there's the basic design is not at risk here from this. I think they know that building an L1 in a decentralized, open source way is nothing like the central entity that they're going after in these cases. JW Verret But the future I see for my own protocols, Zcash is one where we hope to become programmable in a way that eventually the day would come where people want to build something on top of it, smart contracts on top of it they can. JW Verret And if that happens, those people will themselves need to think about what they're building. Doug Well, when you say the layer one, I mean, obviously, if last week, yeah, I would agree with you. It's safe from being under attack. But now we're seeing, I think it was just yesterday, Representative Sean Caston is proposing a bill to essentially has been, what is it, cryptocurrency, his tweet, cryptocurrency currency has been used to finance terrorist attacks around the world made possible by digital asset mixers. Doug I'm introducing legislation to temporarily prohibit crypto mixers while we studied the technology and how it is used for illicit purposes. So he he's proposing to temporarily ban crypto mixers. And I believe he calls out privacy coins in that bill as essentially being a crypto mixer. Doug So he's proposing to ban layer one privacy coins. JW Verret the bill it's a bad bill I think what it does is it does a study of privacy coins it bans mixers I think that's what it does okay I don't see it passing it's a bad bill we have to fight it but it's a Democrat only bill in the house so you know I don't see it passing but it's a it's a continued threat and the delistings are a threat I mean I just I hate that so you're right there are still attack vectors other than just going after the devs and calling them money launderers right there are lots of other attack vectors we have another one too is the cases against like whale big users frequently if you're too whale a user and too frequent a user of local Bitcoin or local Monero sometimes they go after you and say you're an unlicensed money transmitter which is another really scary attack vector that we can talk about a little bit I'm sure you've probably seen those cases Doug Yeah, I've seen it. Have you seen that they shut down local or local Monero shut is shutting down They're shutting down. Yeah, they haven't given details as to why But I assume they feel like they're they're under the gun here and that they may be accused of you know, whatever operating JW Verret being a large peer -to -peer transactor, if the government can find you, they go after you. And here's the trick they do. I am sure part of the trick that they're doing, so to be an unlicensed money transmitter, you have to be operating a business for a profit. JW Verret They're supposed to not go after you for just being an individual who's using, you know, money. Right. So if you're using a platform, a peer -to -peer kind of coordinating platform, and you're a whale user, you're regularly going in there to like speculate or just to buy and sell for your personal use or to be a speculator. JW Verret You're never going to be doing that at the spot market price because a peer -to -peer platform is going to have just a widespread, right? Because it doesn't have like an oracle or something. It's so rough and messy that that's going to be a huge spread to those transactions. JW Verret So you'll be making a spread like, like there's no way to be a large regular user of a peer -to -peer platform and not kind of be a market maker. Like that's just, you can't avoid that. So the government will say, well, see, see, because of the spread, they must be making fees. JW Verret Therefore it's a business. And so it's just another attack vector. Doug Yeah, something I've always put out there as a warning to people when you use things like local Monero, local Bitcoin, realize that you can't be using it to make money. It has to be that you're using it out of your own personal need. Doug Perhaps you're Monero only and you're living off this stuff. You need to, once in a while, turn it into cash so that you can purchase certain things. But the moment they have evidence that you're using it for purposes of running your own business where you're profiting off the trade, you're considering a money transmitter at that point. Doug Really, that's just their word against yours. If you're using it on a weekly basis, they'll have more evidence against you, perhaps, to say, no, you're doing this as a business versus if you're using it seldom. Doug Where do you draw the line of that? And now, I mean, local Monero effectively is no longer going to even exist. It's kind of the end of an error with that concept in general of things like local Bitcoin, local Monero, that it's too risky, too much of a gray area for them to safely exist without them being constructed in some kind of different way. Doug Yeah, I don't know. JW Verret I don't know what another thing to think about here is one of the theories that the government seems to be advancing in the the samurai case is Because notice they just brought conspiracy charges they didn't bring The direct charges so they brought two of the four they brought against Roman but not two of them They didn't say they're directly money laundering directly Money transparency said they were in a conspiracy to do both of those things. JW Verret So the government's theory seems to be that Whirlpool and the coordinator is the unlicensed money transmitter is the core is the is the money launderer of both And then these guys are in a conspiracy with this thing in a conspiracy with with computer code We'll see if that theory holds up but that's that's novel that's new I I'm guessing by it you conspired with the code. JW Verret That's weird, right? Doug Well, I guess part of the conspiracy, the reason why it's a conspiracy charge too, is because I guess they don't have any direct evidence that they were aware that it was being used to quote unquote launder money, right? JW Verret Yeah, that's part of the government tries to trip they need to even to get a conspiracy charge. They have to attribute criminal intent They've tried to do that with twitter posts twitter kind of shitposting these guys were doing but in the indictment at least I haven't There's like general stuff that kind of jokes about oligarchs and stuff But there's still nothing direct like, uh Nothing that directly shows knowledge of a specific Set of criminal proceeds that are being laundered so Doug They need to show that there was the mens rea there, that they had the will and the intent to actually go out and actively launder money or assist somebody in laundering money. Not to belittle the money laundering charge, but the more concerning one is the money service business charge because this is going to really now define what is a money service business. Doug And if they're successful with this charge against Samurai, like we're saying now, the entire definition changes, right? And effectively, any service that's dealing with crypto, even if they're not custody, the cryptocurrency will be considered a money service business if they're successful with these charges. JW Verret Yeah, there's no real outer limit to what they're claiming, which is part of the reason why I just don't see that it can possibly survive. It won't necessarily help the defendants in tornado cash, even if a judge comes back and says, whoa, whoa, whoa, I keep throwing a bunch of stuff at the wall. JW Verret Let me draw the lines here. Most of what you said doesn't apply. Let's hope that happens. And then has president of everyone else. I mean, I hope to help the guy, the defendants in that case. But one of the things that might happen is the judge will draw a line and say, well, no, let's distinguish here. JW Verret Um, because there are some facts in the tornado cash case that make it a little more messy, uh, the, the, the relayers and the torn tokens work to help facilitate the relayers and you know, it's like, uh, the code is speech arguments at the center, but on the periphery, there's some complicating factors. JW Verret And so if the case outcome focuses on those kind of complicating factors and we get some, we might get some kind of a ruling from the judge that no, uh, you know, you, the, the fence and guidance maybe still holds, I dunno, it could be kind of a messy outcome that has some partial wins for privacy. JW Verret I just don't know. Doug Let's talk a little bit more about the layer one concept, right? So obviously we've seen this coming down the pipe, right? That's why guys like me and you are more interested in layer one than building tools for things like Bitcoin that are inherently transparent, because by way of these tools, it's like you're opting in to mix your crypto, clean your crypto, you're taking some action to to erase your history, right, as opposed to the tool being built into the protocol itself so that things are private by default, fungible by default. Doug So there is no overt action that's being taken by users to erase their history. It's just people using this tool and every transaction is equal to every other transaction. It's just fungible. You can't then accuse somebody of saying, hey, you were trying to erase your history here, you're trying to wash your coins. Doug No, you were just making a transaction. What do you do? I mean, is that is that are we safe in that assumption that that will hold up in the US that they won't be able to ban that, that the Constitution eventually will be looked at and respected? Doug Do we think this is something that they'll attempt to do? Like we see with this legislation that was proposed yesterday and then perhaps it goes to like the Supreme Court. I feel like I've asked you these things in the past, but now that we're a little further down the road, how do you potentially see these things playing out for for these layer one privacy coins? JW Verret Um, so on the, on the, the first thing we talked about today, I think that developers are safe who build an L one protocol, uh, that just has privacy as a feature of the L one, um, they're just building Bitcoin or Ethereum. JW Verret Just in a different way. So there's no central mixer. There's no custodial function, um, which should matter despite the adjacent during the fence and guidance. There are other threat vectors, um, like the listings, like banning financial institutions from touching something. JW Verret Not that we need to, we need more threats, but let me, let me tell you about a bill that's that has better chances of passing that's even more of a threat than the cast and bill that you mentioned, um, there's another bill from two Republican senators, uh, that, um, uh, that would do a couple of things. JW Verret But one of them is they would give, uh, the treasury department special measures authority to ban a particular type of transaction as good of money laundering concern, and which could mean, which could mean that treasury could effectively say one day. JW Verret Privacy coins are used too often by bad guys. Therefore, no financial institutions allowed to touch them, which would include every, uh, central, um, central exchange, uh, they could do that. So it's, it's, I hate it because it's a, I've been fighting within the crypto community about this because so many people in the crypto community say we need an alternative to Liz Warren's bills. JW Verret We need some Republican alternative. That's kind of national security, but it's like Elizabeth Warren light. And so it's not going to be as bad. And then we can say that we did something. And I say, first of all, you assume that we need to do something. JW Verret Um, I'm not for Elizabeth Warren light. And that's what this bill is called the enforce act, the enforce act from Senator Tillis and, um, uh, the Senator from Tennessee, uh, Bill. I'm blanking on his last name right now. JW Verret He was ambassador to paying under Trump. Uh, anyway, Senator Tillis it's called the enforce act. Keep an eye on it, raise the alarm about it. Cause to me, it's just Elizabeth Warren light and we need to kill that thing too. Doug I think I've asked you this in the past too. Any insight or what's your theory as to who the puppet masters are behind these bills and these actions? We all know how things work, right? It's not Senator Warren sitting there thinking, I got to go after crypto. Doug It's somebody who's telling her, go after crypto, go after crypto. It's the people that are putting the money in her pocket, that are keeping her in that seat. We know how DC works. You have the politicians and then you have the people behind the politicians. Doug How do we define this group, these people, who are the puppet masters here that are pushing these initiatives forward in your mind? JW Verret Yeah, it's there's a few different forces. I think one of them is a Liz Warren's ideology Uh, I think she's she's decided That she's okay allying with traditional banks now Uh, she made her case. She made her name beaten up on them for a decade and she's now she's okay a lot allying with them because You know the kind of the new left view of banks Is let's ally with them. JW Verret Let's get the banks to subsidize the communities we like through the community reinvestment act So which is basically like uh affirmative action type lending So that's a kind of an alliance between the new left and the banks and As crypto comes up if you're on the left and you see the potential to control people's lives with money um through taxation through spending through uh Through through um full employment focus monetary policy Which is say just lacks monetary policy Then you see crypto is a threat to all that and so I think ideologically she's just opposed to crypto generally and and um Financial privacy is also not something the left has any care for which is weird Because their ideology has always been so focused on privacy And I think they had the moral high ground Against the right in the 70s 80s and 90s, you know and fighting for privacy um But I don't know when it comes to financial privacy They're like, whoa, we just know we should be able to trace everybody's money because people might get rich. JW Verret We don't want that um So I think it's ideological with her But she does have some some common ground with the big banks I think that's that's fair Uh, and it's also law enforcement Uh, the the ratchet up of kyc aml every bill ratchets it up increases the reach of it Uh law enforcement just loves this tool loves the ability to deputize the banks to kind of help them make their cases because they're lazy and they don't care about the fact that this kyc aml system is like The compliance around it is so massive relative to the very small number of cases in which that information is actually useful in prosecutions But they don't care. JW Verret There's no cost limitation for them at all um, and I think they're the ones for example that are That slipped in this special measure. This is so dangerous special measures crypto banning authority in the enforce act draft That senator tillis is pushing uh for crypto So but you know what we've we've um We've got it and we've got allies We've got allies and You know, our community is not necessarily always a lot allied with like, uh the the Groups in the blockchain association that are Kind of trad five partnered and stuff like that. JW Verret But You know blockchain association is hardcore sometimes on this stuff. They I mean i'm sure it wasn't easy To align everybody to do what amicus brief in support of the tornado cash guys in the criminal money laundering case But they did it god bless him. JW Verret They did it And we have an ally in tom emmer the number three guy in the house Is for privacy And he says this slogan right here privacy is normal. It's in the congressional record from tom emmer god bless him Uh, so hopefully he can kill Efforts to slip things into must -pass bills and we need to cheer him on as a community I think he he cares about what crypto community says about him on twitter So if you can folks if you can amplify my monero friends Amplify the alarm about the enforce act and why it's bad and amplify that tom emmer is a hero for privacy I think that would be good. JW Verret Those would be good good takeaways from today. How about that doug? Doug Great. Any other allies we can we can name that other than Tom ever? I mean, he's really the I guess the biggest one we have in Congress. JW Verret I don't follow names as much as I used to. Warren Davidson is an ally. Representative Warren Davidson. And why am I blanking on his name right now? The congressman from Kentucky Doug Oh, libertarian? Yeah, libertarian. JW Verret from Kentucky who's really close with Senator Paul. They're good friends and he's kind of like Paul's counterpart in the house. He'll come to be after, but Tom Massey. Tom Massey, yeah, yeah, yeah, very smart guy. JW Verret Very smart guy. Doug The problem is, it's a small group, and they're looked at as being the guys with the big crazy libertarian ideas. JW Verret But Emerson leadership, he's number three. Doug leadership so that's good that is promising that is promising any any any thought obviously this is the million Manero question any thoughts on how we we make it a more of a mainstream concern JW Verret I mean, as we think about all that, all the time in Zcash too, you know, and, and we just focus on, on use cases when we find use cases. We know people who use Zcash for humanitarian issues, humanitarian relief in the Middle East and in Asia. JW Verret And so we talk about those use cases anytime we can. We talk about the threats to privacy. We talk about wrench attacks. There's a collection of wrench attack stories on GitHub that there's like 150 of those things. JW Verret Just these terrible stories about I was at a crypto conference. I was walking around the back streets. I got hit in the head. I woke up. I was in a warehouse and there was a guy saying, give me your safe phrase or else parts start coming off, you know, shit like that. JW Verret It's real. It happens. I mean, you start telling the stories to people. I tried to do it in front of the jury in that in the Sterling of case in that environment, the judge constrains every little word you say. JW Verret So I couldn't do much, but the little bit I did, you could see in their eyes, they were like, oh, okay, maybe privacy is not evil. And I've done congressional briefings with bipartisan groups of congressional staffers. JW Verret And when I start doing my thing, even the Liz Warren allies look at me like, oh, okay, okay. I hear a little bit of what you're saying. So that stuff does resonate when you can get the message out and get get that message out over the noise of the on the one hand, the Liz Warrenites on the other hand, the National Security Republican kind of bushy Patriot Act type people. JW Verret They're pretty loud, but but I think our voice can get heard too. If we keep at it, we can have natural allies to your libertarians and ACLU coming together. This is one issue I think where they can. Doug Coin Center is doing a great job. Do you think we need somebody, something else, like some other kind of association that's really just geared towards privacy coins? That would be awesome. What is the closest thing we have? Doug I mean, we need people out there that are organizing and right? I mean, how would you envision this? JW Verret Yeah, you know, we in CCASH, we put together and we love more people involved. I think Paul Brigner, who's the policy lead for the Electric Coin Company, is involved with a privacy alliance, the Universal Privacy Alliance. JW Verret The people from NIM are part of that. NIM is kind of a ... I don't understand NIM fully technically. It's like Tor, but it has a different process from Tor to anonymize your ... Yeah, we ... Doug We have them at Monerotopia. Yeah, they're great, they're great. So there's the privacy alliance of. JW Verret some of the usual suspects that folks in Manero community want to join that. I'm sure Paul Bregner would welcome, you know, more more supporters in that thing. So who's who's running this? Paul Bregner. JW Verret Paul Bregner is the policy lead for electric coin company. OK. And so, you know, he also does a he does something called a PGP breakfast, a morning breakfast every month for people in D .C., for just general crypto. JW Verret But they're probably people who come. And I'm sure it'd be great to have somebody from the community join remotely and present over Zoom to that group. I'm sure I'm sure that would be I'm inviting for his behalf, for his thing. JW Verret But he's very open, so I'm sure we could find a way to make that work. Doug Yeah, there needs to be more collaboration here among these groups. I mean, because we're collectively, we're a small bunch. JW Verret Zcash are in the foxhole together. So let's share provisions. Absolutely, man. Doug 100%. We got to get Zcash down at Monerotopia. You got to help me make that happen. Maybe we could get Paul down there or anybody. It would be great even from the technology side or from the policy side. Doug It does lead me to another question though because we're talking about the layer ones being the ultimate safe ground because if they're banning these, then it's a real infraction against our constitutional rights. Doug The code is no longer speech. But the concern is with things like Zcash has the company that potentially can be a target they have the dev tax. Are they getting rid of that? Did I see that? That's no longer. Doug Give me your latest thoughts on these things and whether or not you see them as potential issues and is Zcash doing things to avoid these potential issues? JW Verret Well, so I see some analogies between Zcash and Ethereum and Bitcoin. So if Bitcoin had its core developers, Ethereum had the Ethereum foundation. Zcash has the electric coin company and then later came the Zcash foundation to fund the more theoretical cryptography stuff. JW Verret You know, when people built smart contract privacy tools on top of Ethereum or people came in along and built mixers on top of Bitcoin, at no point were the Bitcoin core devs charged within or implicated or was that even asserted, same thing for the Ethereum foundation because they didn't coordinate with whoever was building the alleged money transmitter on top of that protocol. JW Verret So I don't have any concerns that Zcash foundation or ECC are going to face any accusation that they were involved in the operation of money transmitter or money laundering in the same way, because they're just building a layer one protocol that allows for individual transfers in the same way that the other two layer ones were built. JW Verret Where everything goes forward? I don't know, man, there's a there's a strong debate going on. So we'll see how that shakes out kind of a decentralized community. What is the debate? Whether to continue the dev tax or not, when they continue the founders reward is what it's called or not, whether to instead move toward a different model. JW Verret I don't I don't know how that's going to all shake out and yeah. Doug Yeah, I don't know. Yeah, because the founder's rewards, dev tax, it does, given what we've seen, right, with the indictment of samurai and all these, and what would they come on, will come down on is the fact that there's a group of people that are benefiting, right, that are profiting from this technology, right? Doug And it becomes the whole conspiracy again, right? You have this group of people that are profiting, essentially, from the use of this system. And over here, we're proving that there's bad guys that sometimes use this system to launder their money. Doug Yeah. One thing that helps E -Catch right now. JW Verret is that bad guys don't like Zcash. Bad guys hate Zcash, right? I mean that's we had a Rand Institute study that said that dark web doesn't use Zcash. Now that changes one day in the future, I still don't think that makes us intending to conspire together with... JW Verret Don't give me your eye! Doug I obviously would never would never think that I don't think that's the you know, obviously that they're wrong with samurai, they're wrong with tornado cash. But the fact is, this is the direction they're moving in. Doug So any any any tech that exists, where there's a group of people that they can say are the people that control it, or even if they don't control it, they somehow benefit from it financially. They're saying, okay, these people are conspiring to run a money transmitting business or conspiring to money launder. Doug That's literally what they're saying right now, right? Right. JW Verret The difference is that people who are transferring are transferring from their own private wallets to other private wallets. There's no stop in the middle that takes custody of it and does something with it. JW Verret It's all individual wallet -to -wallet transfers, which is not money transmission. Doug which is somewhat similar to samurai. I mean, I guess they did have that server, but they were never custody anybody's crypto. They never. JW Verret whenever testing the vice crypto, they had a central coordinator that signed transactions for people. Right. Doug Yeah, it's just not a stretch. I don't know. I don't know. It's it's scary. It's scary. How JW Verret Once you once you once you if the government's allowed to just just just say that anything is anything if that's really what happens then anything is anything and therefore there's no limiting function limiting factor and and and in that case they could say you know the creator of Bitcoin was in a conspiracy to commit money laundering because in the early days of Bitcoin most Bitcoin transfers were illicit transfers. JW Verret Right. And in 2012 if Satoshi were not anonymized maybe some prosecutor would have tried it to try to take down Silk Road. I don't know man. Doug Yeah, I mean that that's when Satoshi left the scene right is right and they started talking to the to the CIA right and now and now JW Verret BlackRock has an ETF for Bitcoin, so it's a weird world. Doug I don't know, man. I don't know. Give, give, give us some hope though. Give us some hope. I mean, obviously you're hopeful. Obviously I'm hopeful. I wouldn't be here doing this thing. You wouldn't be doing what you're doing. Doug What's it? What's your hopeful pitch to people? JW Verret that privacy is pro -national security, the best way we can get, you know, I don't know why the CIA doesn't use Monero and Zcash to pay agents, right? Why not? Why not? Maybe they do. Maybe they do. Maybe they should, or maybe they do. JW Verret And I don't know why the UN is starting to use stablecoins to try to pay refugees, get money to refugees, which is great until the bad guys who hate the refugees start tracing those funds. I think the UN should be using privacy coins to pay refugees, and then refugees can go unload them on central exchanges that have liquidity unless those get delisted, which is the problem in Europe. JW Verret Yeah, so maybe we can make that known that privacy is pro -national security. Doug Do you think that that's that's kind of the best, one of the best arguments we have? I'm trying. Well, you're doing a good job, man. You know, I think we're all we're all trying out here. I mean, what do you think of this, you know, the idea that technology like like Monero and Zcash just needs needs to be built essentially to be unstoppable. Doug So in spite of what the governments may want to do, it won't matter. We just build something that can't be stopped. And people will just continue to use it, not comply. Or do you think that's a bit of a pipe dream? Doug And that it's going to be you know, the reality is that most people will will comply. And although, you know, the chilling effect will will dampen things out. JW Verret Um, so first, let me say something. So when you say that, right, let's make sure we, the world understands what we mean by what you're saying that we won't, we want to make it build tech that, that that's unstoppable by a government, when we say government, we don't mean the us government prosecuting cases against truly bad guys. JW Verret What we mean is around the world, totalitarian governments all around the world that use money to persecute people. That's what we mean. Because I watched in Stirlingov today, they use similar language against him and they said, see, he had an intent to help criminals who want to want to sell drugs. JW Verret But that's not what that language means. Really, that language means totalitarian governments around the world. Russia, China, Venezuela, North Korea who use money to persecute and hurt people. And so we want to build technology in both of our communities that is resistant to the effort to use money to persecute and hurt people or Argentina, where people have to just eat the inflation and capital control, stop them from saving their money in something other than the Argentinian peso. JW Verret Um, and yes, we have to build in that way. I think we can. And I think there's, uh, in the crypto community, generally, there's a kind of, uh, a goal of kind of winning the uber way. You know, when uber first started, it was like illegal. JW Verret Most of the places it was being used, but people cared about it so much. They were like, don't, don't you dare take my uber from me. Um, that the political fight became so much easier just because of that groundswell of user, uh, user, you know, demand. JW Verret Um, so if we win, I think we'll win that way. Doug All right, man. I'm checking my notes here to see if there's anything else I wanted to bring up with you today. Oh, I was I was looking back at our interview, the book that you had written hiding, hiding your hiding your money. Doug Yeah. JW Verret That came up in the trial too. Doug that title. Yeah, they loved it, they loved it. What did they say about that during the trial? JW Verret Is it true you're working on a book about how to, and then he looks at the jury, hide money using crypto. And I was like, yes, absolutely, I'm working on a book that teaches people how to protect themselves from wrench attacks, how to protect themselves from North Korean hackers. JW Verret And that focuses on the tension between forensics and privacy that is inherent to this community. And the jury got it. I think it's a cheap trick. These two prosecutors did a lot of cheap tricks, but the jury understood it. JW Verret The status is it's been under peer review for a while. I'm going to have to adjust it in a lot of ways. I had a chapter about Samurai Wallet, and obviously that chapter is going to be different now than it was before. JW Verret Basically by focus, I want to write about Zcash, Monero and Samurai Wallet because I thought those were the three best privacy tools out there. Now there's two. Now there's two. You know? Doug Wow. When do you think the book will come out? JW Verret It's gonna be a while. It's an academic book so it'll take a while. Okay. Doug Very cool that you're working on anything else you want to bring up while you while you have the platform here the audience JW Verret Yeah, you know, I just, I appreciate the many our community appreciate you guys. And I appreciate, um, what I learned from, from, from your show, man. Uh, I got it to the sterling of case from your show and appreciate, uh, learning from, from guys like Luke, uh, who, who keep everybody honest and who are building for the right reasons. JW Verret And, uh, let's keep, let's keep the, keep the lines of communication open about the threat, about the threat vectors coming our way. Doug people that are sitting on the edges of the seat here thinking that they can help in some way, maybe they're attorneys, whatever it may be, what do you recommend they do to try to help, to try to advocate on behalf of Monero, Zcash? JW Verret Amplified Tom Nimmer, as a real hero for privacy, raised the alarm about the Enforce Act and what Special Measures Authority could do to destroy privacy coins. I know Tor and Mike are fundraising for the appeal for Roman Sterlingov on their law firm's webpage, and they've appreciated a lot of support from the privacy and Bitcoin communities for that. JW Verret That's a way to get started, and otherwise I'm @blockprof on Twitter. I'd love to interact with you all more, and thanks for this opportunity, man. I love coming on here, so I'll join you anytime you want, man. Doug JW, man. Thank you so much. I hope we see you down in Monerotopia. We get some Zcash people down there. That would be fantastic. That'd be awesome, man. All right, buddy. Thank you so much. Cheers.