Code meets law • Letter 122

Hedgehog Admin -

Happy November! This is Colton from Hedgehog. Our motto is Buy. Balance. Relax. because we make it easy to apply sophisticated strategies to your crypto portfolio.

While we usually run these strategies 24/7, please prepare for approximately 2 hours of downtime next Thursday morning, November 9th at 2am PT/5am ET while we undergo routine maintenance.

It's been a while since we did a speed round in the newsletter. Here are six interesting tidbits from the crypto headlines, with my thoughts…

Fresh SUSHI

Something smells fishy:

Blockchain sleuth Lookonchain has uncovered evidence suggesting that someone may be manipulating the price of SUSHI for personal profit. A fresh wallet has been observed purchasing large quantities of SUSHI on decentralized exchanges and concurrently depositing USDC on perpetual exchanges like dYdX.

The investigator's name says it all: Look on-chain. This is one of the coolest aspects of crypto, how much market information is freely available for everyone to scrutinize. Open blockchains pose privacy challenges, for sure — but as the adage goes, sunlight is the best disinfectant. Well, at least the best illuminator.

Apes on the run

Ryder Ripps and Jeremy Cahen were fined almost $1.6 million for a satirical copycat project of NFTs that "aped" the Bored Ape Yacht Club. (Sometimes the pun is irresistible.) Copyright and trademark battles are not very cypherpunk, but the reality is that crypto is intertwined with traditional legal governance of intellectual property, not to mention financial assets. Nonetheless:

Ripps and Cahen will also transfer various web domains to Yuga Labs; they are additionally restricted from selling products with the Bored Ape trademark.

Despite those injunctions, the RR/BAYC collection is still in circulation. It is unclear whether marketplaces that still support the collection will delist it.

Code isn't law; law is law. But code doesn't know that, so it persists anyway. Until someone gets around to cutting off all the convenient access points.

Kraken Tax

Speaking of code and law — and privacy, for that matter — crypto exchange Kraken will be sharing info with the IRS this month, acting on a court order received in the summer:

Kraken must provide profile information and transaction histories for clients who conducted transactions exceeding $20,000 in any single year between 2016 and 2020. This information includes names, birthdates, taxpayer identification numbers, addresses, phone numbers, email addresses, and transaction histories for those five years.

The IRS had sought more extensive information, including users' IP addresses, employment details, sources of wealth, net worth, and banking information. However, Kraken said in Thursday’s email that it had successfully convinced the court to "substantially reduce" the number of affected clients and the amount of client data it must produce.

The long arm of the law is particularly interested in turning out your pockets to see what's in there. As the kids say, we live in a society. And as the adults say, nothing is certain except death and taxes.

Speed round of the speed round

Another code-versus-law dispute, but this time the "law" in question is DAO governance.

Follow-up on a recent newsletter topic. Is nothing sacred?!

File under "technically true, but not an ideal answer to prosecutorial questions."

That's all for today. How was your Halloween? Did you get spooked?

Keep hedging,
— Colton

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