Would You Risk Jail To Watch The Superbowl?

Dear Studio Fam,

This week we cover some suspicious activity on the part of disgraced FTX founder Sam Bankman-Fried, quickly review one of the darker social media trends, and take a look at the billion dollar pivot by one of the biggest names in e-commerce. We also summarize the onslaught of new enforcement actions taken by the Federal government against the crypto industry and explore the implications of new ID requirements for adult oriented websites.

SBF Back in Court Over Virtual Private Network Use

Disgraced former FTX CEO Sam Bankman-Fried is still on house arrest in his parents’ Palo Alto home while he awaits trial for fraud, embezzlement, and a slough of campaign finance violations. He’s not supposed to leave except to exercise or receive mental health counseling, and his Internet access is to be supervised. That’s why Federal prosecutors were reasonably concerned when they learned SBF had used a Virtual Private Network (VPN) server on at least two occasions earlier this year.

In a letter to the judge, Prosecutors reveal they have a “pen register” of SBF’s Gmail account which indicated SBF had used a VPN. A pen register was originally a device used to wiretap a phone line and is now used to describe any type of backdoor access to an Internet service granted to the government. Using a VPN effectively camouflages an Internet user, encrypting their Internet usage and redirecting it through a third party server. It’s the kind of thing criminals use to transact on the Dark Web and that crypto scammers use to cover their tracks. It’s exactly the kind of thing one should not use when about to go on trial for billions of dollars of digital fraud.

In response, SBF’s attorneys claimed that SBF just wanted to watch the NFL championship games and he needed an VPN to access his NFL International account. It’s actually reasonable to imagine that SBF’s Stanford professor parents aren’t the type of people to have cable TV (let alone the NFL package) so this might actually be much ado about nothing. But let’s not kid ourselves that the alleged orchestrator of an international digital money fraud might not consider this a perfect opportunity to make some encrypted transfers of ill begotten assets.

It’s A Wonder It Took This Long For Marc Lore To Figure Out Food Delivery  

Marc Lore is a legend in the startup community. After early success in the first dotcom boom, Marc went on to exit multiple e-commerce startups to the biggest players in the industry: Diapers.com was acquired by Amazon for $545 million, and Jet.com was acquired by Walmart for $3.3 billion. So when Marc announced that he was getting into the food delivery business, he had no trouble raising hundreds of millions of dollars of investor capital.

Enter Wonder, which started off with the mission to prepare gourmet meals directly in front of customers’ homes in streamlined food trucks. Unfortunately this just didn’t work and Lore quickly realized that no amount of venture capital can override the well established economics of food trucks. While inexplicably high valuations are not uncommon with venture backed technology companies, Wonder’s business was solidly grounded in the real world: Wonder cooked and delivered food. How good was Wonder’s technology for it to be worth more than publicly traded restaurant groups with hundreds of locations and billions of revenue? The answer is: not good enough.

That’s why Wonder has now pivoted away from its food truck business and adopted a more conventional ghost kitchen model starting with a new Wonder restaurant in the Upper West Side of Manhattan. The new Wonder restaurant features menu items from notable celebrity chefs like Bobby Flay, but is otherwise indistinguishable from the many other ghost kitchen companies claiming high quality food delivered quickly with proprietary technology.

Short Bytes: Crypto Crackdown Rundown

Crypto Winter continues amidst the collapse of FTX and renewed regulatory scrutiny from the Securities and Exchange Commission. While crypto stans pray for “regulatory clarity” (ie, new laws exempting crypto from well established financial regulations), here’s the latest headlines making them sweat:

• Crypto Investors Brace for More Crackdowns From Regulators - WSJ
• SEC Kracks Down on Kraken - JD Supra
• Paxos Receives Wells Notice from SEC - Bitcoin.com
• Circle Denies That SEC Sent Any Wells Notice - Cryptoslate.com
• SEC Says Binance Stablecoin Is a Security - Blockworks

New Porn ID Laws Show More Bipartisan Support To Regulate Tech  

Before it became ubiquitous online, porn was something bought late at night from behind the counter of a gas station. Just like buying cigarettes or alcohol, the curious customer had to show ID to prove they were an adult. But today, the most graphic and extreme pornography is available on demand through every Internet device by doing little more than clicking a button that says “I am 18+.”

Last month, Louisiana became the first state to require porn websites to actively verify the age of their users with the same type of “know your customer” (KYC) technology that banks and gambling websites use to verify customer information. A bipartisan effort, the law was written by Republican State Rep. Laurie Schlegel and signed by Democrat governor John Bel Edwards.

“Online pornography is extreme and graphic and only one click away from our children. This is not your daddy's Playboy. If pornography companies refuse to be responsible, then we must hold them accountable. This law is a first step." -Rep. Laurie Schlegel

Now, seven more states have announced similar pending legislation. A dirty secret of the tech industry is that much of the Internet’s early growth was financed by porn so it comes as no surprise there is an organized effort to resist regulation of this very profitable industry in the guise of “defending free speech.”