WBD706 Audio Transcription
Is Chainalysis Prosecuting Innocent People with L0la L33tz
Release date: Wednesday 6th September
Note: the following is a transcription of my interview with L0la L33tz. I have reviewed the transcription but if you find any mistakes, please feel free to email me. You can listen to the original recording here.
L0la L33tz is a privacy advocate and writer. In this interview, we discuss her recent article about flaws in Chainalysis blockchain analysis software. They discuss the impact of such issues in the case against Roman Sterlingoff, who has been held in jail based on Chainalysis' evidence, the need for regulation in the blockchain surveillance industry, and Coindesk’s subsequent hesitance over L0la’s worthy article amid a conflict of interest.
“This software is being used to imprison people, it’s being used for compliance reasons, to censor transactions. So, if this thing is inaccurate we’re just randomly pointing fingers at people. This is neither just nor democratic.”
— L0la L33tz
Interview Transcription
Peter McCormack: Hi Lola, you've had quite the week.
L0la L33tz: I definitely have yes.
Peter McCormack: I didn't have this show planned in, obviously. I was on Twitter the other day and I saw a tweet thread from you and I was like, "Huh, I've had Johnny from Chainalysis on my show, I've got my suspicions about them".
L0la L33tz: Yeah?
Peter McCormack: Yeah, he was on the show a long time ago. I gave him a hard time. I don't often give people a hard time, I gave him a hard time though.
L0la L33tz: That's interesting, I'll have to watch that.
Peter McCormack: Yeah, I'm not a fan of Chainalysis. Not only do I not like what they do, but I also think they're full of shit.
L0la L33tz: Yeah, that's a nice way to put it. I think anyone that is a fan of Chainalysis may have a little bit of a problem.
Peter McCormack: Well, before we get into this, obviously anyone watching is going to see that you are green, but you're not really green in real life and you don't normally have this toxic background to you, in more ways than one. What can we tell people about you, like how much can we tell them about you so they understand who I'm talking to you?
L0la L33tz: I mean my name is Lola, I've been in Bitcoin for quite a while. I write about Bitcoin, that's what I do. And I mean I don't think there's much more to know about me.
Peter McCormack: But you're a journalist.
L0la L33tz: I mean, I wouldn't call myself a journalist. I write opinion pieces mostly, so it's debatable whether that is journalism or it isn't, right?
Peter McCormack: Well, I would call it journalism, even if it's your opinion.
L0la L33tz: Thank you.
Peter McCormack: You can be journalism. I think what you've done over this last few weeks, leading up to the last week, is certainly journalistic, it's the reason I want to talk to you today.
L0la L33tz: Thanks.
Peter McCormack: But you but you do also focus on privacy, right?
L0la L33tz: I do. Yeah, I focus on privacy mostly. So I mean, to give a little bit of background, how I got into Bitcoin, maybe that can give a little bit of context. So, I got into Bitcoin, really opposite, I would say, of how normal people get into Bitcoin, maybe. So, there's this meme of, "You come for the money and you stay for the revolution", and for me, it was really the other way around. So, I had a friend who was telling me about this new form of money, this digital gold that has all of these perfect economic incentives, and I really couldn't care less. I'm completely disconnected from this whole world of finance and investment. But then he ended up saying something that really caught my attention, and that was, "It's a money that can't be controlled by anyone but you". And the reason that I found that interesting was because I've always been really interested in counterculture.
There's this saying in Bitcoin that, "It's a tool to opt out", which I think is a little bit of a sad way to put it, maybe. So, I would rather like to say, "Bitcoin is a tool that allows us to build a parallel society that is potentially more fair and more just than the world that we're living in today". And that's one of the reasons that I write about the stuff that I write about, because I felt like a lot of this viewpoint was missing just from the mainstream discourse and Bitcoin.
Peter McCormack: And so, how well do you think we've done in building this kind of parallel society that you want to opt into? Because we do have people now who live on a Bitcoin standard, they travel the world; when they get to a country or a city, they look to find people they can sell Bitcoin to so they have local currency. We do have these nodes, whether it's Berlin, Bedford, where I live in a small node, El Salvador, Nashville, there are these kind of nodes popping up where there is a density of bitcoiners. There are places which will accept and take your Bitcoin. Whenever you go to these places, you tend to meet people who, they don't have to be exactly like-minded, but there's going to be things you're going to agree on. So, how far do you think we've come?
L0la L33tz: I do think that we've come pretty far with doing this. I mean, just imagine that 15 years ago, something like this would have been completely unimaginable, right? And so, I do think despite all of the criticism there may be, I do think that there's a lot of people doing these things and these parallel societies already existing in a way around the world.
Peter McCormack: So, you think we're getting there?
L0la L33tz: We're getting there, yeah.
Peter McCormack: We're getting there. And in terms of coming into it from that direction, when you said you kind of have a background in counterculture, or you like counterculture, do you therefore think by focusing on the economics, which a lot of people do, I mean I do on my show, we cover macro a lot, do you think we are actually missing an opportunity to engage with other communities?
L0la L33tz: Well, I think the two things really go hand in hand, right? I mean Bitcoin wouldn't have come this far if it had have been just another banking asset. So, you really can't have the whole freedom money meme without having some sort of this whole macroeconomic view on it.
Peter McCormack: I guess so, yeah. All right, well listen, let's talk about what happened this last week. You blew up.
L0la L33tz: Oh God!
Peter McCormack: You blew the fuck up!
L0la L33tz: I did.
Peter McCormack: Okay. Do you want to give me the background, what happened, the article you were working on?
L0la L33tz: Yes, so I was working on an article about the Head of Investigation for Chainalysis. She was cross-examined in court and had to testify that there was no scientific evidence, or that she was unaware of scientific evidence, for the accuracy of Chainalysis, which is a huge fucking deal, right? This software is being used to imprison people, it's being used for compliance reasons to censor transactions. And so if this thing is inaccurate, we're just randomly pointing fingers at people, this is neither just nor democratic. And so, I wrote about this cross-examination, and yeah, then a series of very unfortunate events followed, I would say.
Peter McCormack: Let's do the background first. Okay, where was she being cross-examined?
L0la L33tz: She was being cross-examined in the case of US v Sterlingov. So, I think you've had his lawyers on your show as well. It was a great show.
Peter McCormack: Yeah, Roman Sterlingov. Do you want to give the background for the case?
L0la L33tz: Yeah, sure. Roman Sterlingov is a Swedish citizen who is accused of operating the custodial Bitcoin mixer, Bitcoin Fog. And so what's interesting about this case is that usually the way that this blockchain analysis, the surveillance software works, is that it's being used to generate leads for things. And then law enforcement goes in, they seize your servers, they seize your phone, they seize your computers, and you know, they will find some sort of corroborating evidence that you actually did the crime that you're accused of. This was not the case with Roman Sterlingov though. The entirety of the evidence that is there against him is based on blockchain forensics, so-called. So, this leaves us to come to two conclusions. Either he's a criminal mastermind that has orchestrated the perfect crime, or there's something wrong with this software.
So, the reason that this case is so hugely significant is because it's the first time that this software is actually being challenged in a court of law. It's generally, I think, the first time that someone on a higher level is actually asking, "Show us the evidence that this stuff works", and it's not looking very good for them so far.
Peter McCormack: On what grounds were they testing whether it worked, and how were they saying they were using it to prove Roman had done what they had accused him of doing?
L0la L33tz: So, the way that you test this stuff is, in the US justice system there's a standard called the Daubert standard. It's something that you use to evaluate, "Is this something that we can take into scientific evidence?" and there's a couple of pillars for this test. One, for example, is, "Has this been peer-reviewed?" Another is, "Are there false positive rates for the software?" Another is, "Are there false negative rates for this software". So, all of these things are kind of in place to determine the scientific accuracy of the software that's being used. And in this cross-examination, the head of investigation had to admit, " I have no idea. I don't know if this works".
After this cross-examination, Chainalysis actually put out a statement where they said, "Yeah, we don't have any of these rates right now, but we promise to do that in the future", which is fucking insane. They've been around for almost ten years now.
Peter McCormack: But you would have thought that Chainalysis would already know this information well.
L0la L33tz: Right?
Peter McCormack: What is this, hold on here, do you remember, didn't they get some insane valuation? Was it billions?
L0la L33tz: Yeah, they're valuated at over $8 billion.
Peter McCormack: "Chainalysis raises $170 million in 6th funding round with $8.6 billion valuation".
L0la L33tz: That's crazy, right?.
Peter McCormack: Well, if their software doesn't fucking work --
L0la L33tz: They have a problem, yeah!
Peter McCormack: Yeah, they have a problem.
L0la L33tz: Yeah.
Peter McCormack: Have you got the --
L0la L33tz: I'm looking for it. I think, oh, hold on. I think it's actually linked in my article. So, the article was put back up on Bitcoin Magazine.
Peter McCormack: Oh, yeah. Nice work, Bitcoin Magazine.
L0la L33tz: And it was actually republished on CoinDesk later as well.
Peter McCormack: Right. So, let me go into the articles, let's try and find you. "Chainalysis investigations lead is 'Unaware' of scientific evidence", I mean what a headline!
L0la L33tz: Yeah!
Peter McCormack: "Chainalysis' head of investigations doesn't seem to have a great understanding whether a company's flagship software even works. Elizabeth Bisbee, head of investigations of Chainalysis Government Solutions", just sounds fucking awful itself, doesn't it, "testified that she was 'unaware' of scientific evidence for the accuracy of Chainalysis' Reactor software used by law enforcement, an unreleased transcript of a June 23rd hearing shows". Oh, my God!
L0la L33tz: I have the statement here. So it says, "Margin of error/false positive/false negative: Historically, Chainalysis has not gathered and recorded in a central location false positives or false negatives because there is design to be more conservative in the clustering of addresses", whatever the fuck that means, "In response to the Court’s inquiry, Chainalysis is looking into the potential of trying to collect and record any potential false positives and margin of error, but such a collection does not currently exist".
Peter McCormack: But the crazy thing about this is they are putting, well I was going to say the future of people's lives, but we know for Roman, it's current, right? He's currently being held in jail.
L0la L33tz: He's in jail, yeah, he's been in jail for two years.
Peter McCormack: So, his life is on hold based on what sounds like a Sudoku puzzle?
L0la L33tz: Yeah, that's a nice way to put it.
Peter McCormack: You've got a little bit of information here, a little bit of information there, and based on that, we're going to say you've done X.
L0la L33tz: Yeah. I mean, another thing that was striking in this cross examination was that when she was asked how they determined that their software works, she said that they're basing it on customer feedback. That was really funny. So, she argued that when they generate a lead with the software and then they actually go in to investigate, that a lot of the times they actually find someone who has committed a crime. So, that's me walking around the street pointing the finger at 1,000 people and I'll probably find 10 that have done something illegal.
Peter McCormack: That's like the basis of the UK Met Police racist stop and search.
L0la L33tz: Yeah.
Peter McCormack: In that they believed if they profiled people and they stopped enough, they would find them with maybe offensive weapons and drugs. But that was proven to be racist and a way of profiling, but you can't base your law enforcement and justice on that, because what's your margin of error, and how many people therefore sat in jails are going to go to jail based on, "Well, it's within our margin of error"?
L0la L33tz: Exactly, based on pointing fingers, yeah. It's not just, it's not democratic, and it's pretty baffling that they've come this far with this stuff.
Peter McCormack: Yeah, I mean justice should also be based on "beyond reasonable doubt".
L0la L33tz: Right, and you're supposed to be innocent until proven guilty, so it looks they've turned that around.
Peter McCormack: So, what hearing was this; what stage of his -- I haven't followed it since my interview, but what stage is his prosecution at?
L0la L33tz: So, the stage that they're at right now is that they're preparing for trial. The trial starts on, I think, 14 September, so in about two weeks. And what they've been trying to do in the past couple of months is they've tried to find experts that can kind of look at the way that this blockchain forensics was done and say, "Okay, we can corroborate this or we can't". And every single expert they've produced so far has said there's absolutely no evidence on-chain that this person has committed this crime. And then, what's also interesting is then you pay into that huge profit motive that Chainalysis has to, to put this guy in jail. So, right after he was locked up, they raised another $100 million-something.
Peter McCormack: Do I remember correctly, didn't somebody who was working in law enforcement, they're now working privately, and they've got a company that works alongside Chainalysis?
L0la L33tz: Yeah, that's a company called Excygent, I think I want to say it's called. That was founded by, I think it was an ex-FBI agent. That was also used in the case to help with the investigation, but they were actually acquired by Chainalysis in 2021. But these whole revolving doors in Chainalysis, the majority of people that work in executive positions at Chainalysis have been with the DOJ, the FBI, the DEA. Their new Head of Investigation, the one from the cross-examination, she used to be at the DEA, for example.
Peter McCormack: So, all these incentives are so screwed up. And the weird thing about this thing is like, as we've said, Roman is there, sat in jail at the moment, his life is on hold, probably very nervous about the future, and Chainalysis have software which they've admitted they can't prove works, and now we're in a position whereby they're probably running around trying to prove it works rather than trying to do the right thing for somebody who's currently held in jail?
L0la L33tz: Yeah, I mean, this is going to be the most interesting part of this, like can they prove that it works? Because a lot of these heuristics that they use are just very, very inaccurate. So, the way that blockchain surveillance works is that you're basically trying to look for patterns in transactions, and then you're trying to tie that to real-world identities. And so, some of these heuristics, they're called, some of these heuristics work fairly well. One of them is, for example, the co-spend heuristic.
So, in the co-spend heuristic, I assume that every input I have to a transaction is owned by the same person, because that person has to have control over the private keys, etc. That kind heuristic has a problem when somebody starts using technologies like coinjoins, one of those mixing services, a payjoin, because those are collaborative transactions. So, you can have 400 people contribute an input to a transaction. So, that's a heuristic that works, it's okay. But the heuristic that they've used to nail down Roman is called a behavioural clustering heuristic. And the way that that works is, they look for patterns and the way that people make transactions themselves. So, say they look for the types of addresses that you're using, are you using a SegWit or are you using a legacy address? They look at the way that the change behaves, they look at the timing, they look for patterns and maybe the amounts that you're spending.
This is something that's highly inaccurate. Because, just because you wear a red sweater every day, that does not mean that every person that wears a red sweater is you. And so, this thing is then compounded upon by running these co-spend heuristics on top, so you just get a whole bunch of transactions that come out of that that have nothing to do with you.
Peter McCormack: And that's what happened with Roman, right?
L0la L33tz: Yeah.
Peter McCormack: And so, they've based their entire prosecution on this?
L0la L33tz: Yes.
Peter McCormack: Do you think this Chainalysis stuff can ever work?
L0la L33tz: I mean, I said I think that first of all, it's definitely not going away. Anything that is surveillable will be surveilled and the blockchain will forever be public. And I do think, like I said, there are heuristics that work better and there are heuristics that do not work better. And so, I think that the only right approach to this stuff would be to say, "Okay, we need a unified standard for these things. We need to have some scientific proof, first of all, for the things that actually work". And then we need to regulate these companies and say, "You're allowed to use this, but as soon as you start doing some fucking voodoo, or whatever it is you're doing there right now, that's where the fun stops". Because it's the Wild West right now, they can do whatever the fuck they want to, and that's not cool.
Peter McCormack: Yeah, but at the same time I'm surprised to hear you say you're keen on some form of regulation.
L0la L33tz: Oh, most definitely. I think my best-case scenario would be that this technology would just be completely open source, and then you wouldn't need regulation for it because you can just look into it and prove everything yourself. But I think that this is a point where we also have to be realistic. These are very much for-profit companies and I don't think that that's going to happen. So, I do think that there needs to be some form of keeping these companies in check.
Peter McCormack: Okay, so let's go back. So, okay, were you already working on this or were you just following the case and you noticed what happened and then pitched CoinDesk an article?
L0la L33tz: I mean, I've been working on privacy stuff for a while. But I came across this case, I met Tor and Mike at a meetup, actually, in Berlin, and that's how I came across that case. And then this, cross-examination was uploaded to CourtListener, which is the public database where you can follow federal court cases. And yeah, I wrote the article, I sent it to CoinDesk, and everyone was extremely happy with it. You know, they said, "This is great reporting, happy to read more of this". It was even read on their fucking daily markets podcast.
Peter McCormack: The one I'm looking at on bitcoinmagazine.com, is it word-for-word the same?
L0la L33tz: That's word-for-word the same as the first version that was published, yeah, on CoinDesk.
Peter McCormack: Okay, I'm just scanning through it now. Yeah. "Unfortunately for Bisbee and her corporate overlords, we still live in a democracy in which criminal convictions prerequisite the existence of scientific evidence. Maybe Bisbee would be better suited to pursuing an art history degree". All right, savage!
L0la L33tz: I mean, that was one of the reasons that I was given for the article being taken down, was that it was a personal attack; and because I wrote under a pseudonym, I couldn't be held accountable for what I was saying. And, I mean I do have a foul mouth, I'll give you that.
Peter McCormack: Look I'm with you 100% Lola. Okay, so the article, how long did the article sit live for?
L0la L33tz: The article was live for, I want to say, four weeks.
Peter McCormack: Okay, so four weeks, then what happened?
L0la L33tz: Then I woke up on Monday morning and I scrolled Twitter and I saw on my feed that someone tweeted, "CoinDesk retracts articles", and I was like, "Okay, interesting". And then I saw that there was a screenshot of my article attached! And I thought that this was some sort of a joke. And then I went to look it up and instead of my article, I found "RETRACTION" in capital letters and a statement that said, "An article personally attacking a senior Chainalysis employee should never have been published".
Peter McCormack: Hold on, hold on. Is the retraction on the website?
L0la L33tz: No, I think they took it down.
Peter McCormack: So, they took down the retraction as well?
L0la L33tz: Yeah, they took down the retraction and republished the article.
Peter McCormack: So, they've now -- so hold on. They published the article, then they took it down with a retraction, and then now they've retracted the retraction by putting the article back?
L0la L33tz: Yeah. I had a call on Tuesday, so a day after, with CoinDesk, and they gave me two options. They said, "Either you publish this under your clear name, then we can put it back up because that makes you more accountable to what you're saying; or we take out the personal little attacks that could be interpreted as personal attacks, we take that out and then we republish it the way that it was". And you know, in the end, they did right by me, they apologised. It was just very unfortunate that nobody had talked to me beforehand and that anyone I reached out to at CoinDesk had absolutely no idea what was happening. And yeah, someone just made an executive decision.
Peter McCormack: Okay, but when they gave you those two options, you told them to go fuck themselves, right?
L0la L33tz: No, I didn't. I mean, I got very angry with them and I told them that this is beyond fucked up, because my nym is what I use to write, which is how I make a living, and that's my reputation there on the line. So, I told them that that definitely wasn't cool. But I did think that putting the article back up was the best way forward, I think, for all of us.
Peter McCormack: Yeah, but hold on, is it back up with you retracting the personal elements, or under your real name?
L0la L33tz: No, it's back up with, I think there's only the sentence where it says, "Maybe she should have a different job", that was taken out.
Peter McCormack: But that's the best bit!
L0la L33tz: I know, I liked it too, but it's still on Bitcoin Mag, so... And there was also a line added that says, "This is not meant to be a personal attack on this person, but rather to question the accuracy of the software overall".
Peter McCormack: It's very 1984.
L0la L33tz: It's strange, right, yeah.
Peter McCormack: Yeah, I don't like it. Do you have suspicions as to why they retracted it? Do you think this came in -- because did I see something about CoinDesk are investors in Chainalysis, or something?
L0la L33tz: CoinDesk's holding company, Digital Currency Group, is invested in Chainalysis, yeah, and that was something that made me extremely angry as well, because I had no idea. And none of this was disclosed on the page of my article. So, CoinDesk has, all the way at the bottom of their website footer, they have kind of terms and conditions. It's a very small line that says, "Hello, we're owned by Digital Currency Group, and here you can find the list of things that we've invested in". Nobody fucking reads that, right. So, what made me so angry about that was that because this wasn't clearly disclosed in my article, that could have been something used to discredit me.
Peter McCormack: Yeah, of course.
L0la L33tz: That's something that I really didn't like about it. And I mean, we can speculate on what the real reason is for why they did it. I don't think that makes much sense. I think the way more interesting question is, why the fuck is nobody writing about this? Because we're not talking about some fringe software project here, we're talking about a multi-billion dollar US Government contractor. And every time they lock someone up, the first people to jump on these stories are people like The New York Times and the Wall Street Journal, trying to paint these people they're fucking Batman. And no one apparently has ever stopped to ask the question of, does this actually work? Like, is this the state of journalism that we're in that you're just taking things for granted that people tell you now?
Peter McCormack: But this is the state of journalism we're in right now.
L0la L33tz: I know. Unfortunately, apparently.
Peter McCormack: Let's be very honest about this. If anyone from the Wall Street Journal, New York Times, etc, writes about Bitcoin, they either write about when the price is going up, or they write negative hit pieces, whether that's to do with mining or whatever. They've all been approached multiple times with facts and more accurate information accurate articles and they've ignored it. Even the piece, I can't remember it, there was a piece in The New York Times a few months ago, I'm pretty sure Troy Cross was helping them, and they still wrote a hit piece. I mean, they write hit pieces now and they only ever write hit pieces on Bitcoin. So, that is, L0la, that is the state of journalism we're in now. I mean, you only have to be in Bitcoin for a short amount of time to realise the entire media sector is bullshit now.
L0la L33tz: Yeah, and it's crazy. I mean, what do you do about it? I mean, a lot of people said to me like, "Just self-publish these things, put them on Nostr, do value for value". Those are really nice ideas, but I can't survive off someone tipping me 10 cents for a 2,000-word article.
Peter McCormack: No, you won't. And on Nostr, you're only ever going to reach an audience that, it's a bit the bitcoiners talking to bitcoiners about Bitcoin, "Yeah, fuck them. Fuck, this is bullshit", and it's just they're sat in a very neat circle of people who agree. You actually want to break through and communicate this to a wider audience to help them understand it. So, yeah, I'm completely with you but that is a much wider question about what we do about it, because I think there's definitely a lot of big issues within corporate -- I mean Michael Malice is the one who very directly tells me, "This is corporate media now. So, don't call it media, call it exactly what it is, corporate media". I think even Dave Smith on Rogan the other day was referring to it as corporate media. It is now corporate sponsored media, it is not journalism. There are very few journalists out there any more. It's corporate media. So, you're asking a very important question. Look, I've got ideas, but what do you think we do about it?
L0la L33tz: I have no idea, I really have no idea.
Peter McCormack: Well, I just it's a long game. It's a bit like Bitcoin. We all know why Bitcoin matters, and it's different for different people. For you, L0la, it's one reason; for me, it's another reason; for an activist working in the Middle East, it's another reason; for somebody in Africa trying to transact cross-border, it's another reason. There's all these different reasons, but we all know it's a very good form of money for certain things, maybe not a unit of account yet, but we do know that. Yet we still have this issue where lots of people aren't buying the story.
Listen, I operate a Bitcoin podcast, all my friends know what I do, none of them are buying Bitcoin. I talk to them about it, and none of them are buying Bitcoin. I think media is the same. It's a long game. You know, the 13 years, 14 years nearly we've had Bitcoin, it's grown out of the cypherpunks and through the nerds, through some of the macro people, into wider culture. But it's still, whatever, millions who own it. It's going to take years, maybe decades. I think the same thing is going to happen with media. I think you will support it for as long as you realise it's bullshit, and it's going to keep taking beatings until people realise that they can't trust it, and then you have to trust more independent sources, whether it's someone listening to my podcast or reading your articles, you've got to slowly just beat them down.
L0la L33tz: Infiltrate.
Peter McCormack: Infiltrate, yeah. But I was thinking about it today. I often think of articles and never write them, but today I was thinking about, how do I write an article to get people interested in Bitcoin when I know really they want to buy it for one reason, which is make money, what you talked about at the start? That's the one reason. And I was trying to kind of articulate it in my own mind this morning, and I was thinking it's trying to communicate to people that, "Don't buy Bitcoin to make money, buy it as a protest vote".
L0la L33tz: Yeah.
Peter McCormack: Whether you hold £50 or £100, you're part of the protest, part of the movement, and can you gradually bring people into this, because I think the benefits of getting more people into this make it a stronger network. So, I think it's the same with the media. It's like your articles are not only facts, well maybe opinion pieces, but journalism, but they are a protest as well because you're doing proper journalism.
L0la L33tz: Thank you.
Peter McCormack: Okay, so how are you going to infiltrate The New York Times and get L0la on the front cover?!
L0la L33tz: I don't think that will happen anytime soon. But I did realise that there there's been so many layoffs lately, with CoinDesk, with Vice as well, and some people from Vice Media actually founded a new media outlet, called 404 Media, which I can highly recommend. They're doing a lot of investigative tech reporting, and I think that that's maybe the only way forward. It's like, you need to take a risk and you need to start self-publishing things. But for that, you need a platform and you need a reputation for these things.
Peter McCormack: Yeah, I'm just looking at the 404. It's a cool name for a media company.
L0la L33tz: It's cool, right? Yeah.
Peter McCormack: It's paid subscription. Yeah, it's these tricky things. I think it's very difficult to build big media companies now. I mean, Vice found out. They were very cool. I mean, I assume like me, you absolutely loved them at the time where Shane Smith was travelling the world, and they were making cool films. And then they wanted to be worth $5 billion, and just they went woke. They created a lot of bullshit, they lost their roots and then died off. But there are a lot of successful people who managed to do it as one person or three people or five people. We just need the larger ones to also go broke.
I did find out, a lot of the 24-hour news channels that you get as part of your cable, the only reason they survive is because they're part of those packages. When you sign up, you get a certain number of channels as part of it. Revenue-wise, that's why a lot of them survive. I think, again, that might have been Michael Malice who told me that. But without those cable package deals, most of them would be dead.
L0la L33tz: Yeah, I mean, it makes sense. I mean, the shift that we've seen just in how we consume media as well, nobody's really interested in information any more. You want to sit in front of your phone and watch fucking Instagram reels. Everything's changed. You don't go out in the morning on a Sunday and buy a newspaper for $5 and read the whole thing. This is how this stuff used to work. Nobody pays for media any more. And what you can do now is you can have these subscription models. That works okay for some people, or you can do the corporate sponsored route. But then again, you have to be really careful about who you let into your den in the end, because it's really hard to be critical of the people, like bite the hand that feeds you.
Peter McCormack: Have you tried the Substack model?
L0la L33tz: I haven't. I've been thinking about it though.
Peter McCormack: Yeah, I've found that's a good way of supporting people. I have four or five Substack subscriptions, and they're a bit like gym memberships; even when you're not using it, you're still paying for it.
L0la L33tz: You still pay for them, yeah.
Peter McCormack: Yeah, and you get kind of stuck with it. I refresh about once a year just get rid of the ones I don't read. But you're right, I mean, I feel there's two ways people are consuming media. It's your very quick snappy tweets and Instagram reels, or two-hour long podcasts.
L0la L33tz: Yeah, it's either/or.
Peter McCormack: Yeah, that kind of middle ground has died. So, are you not going to be doing anything for CoinDesk now?
L0la L33tz: I'm not sure. They were very kind to me. They told me that if I ever write anything like this again, I should reach out to them. I don't know, I've kind of lost trust, and with what they've done to me, I don't really feel like they're going to have my back if stuff happens, you know.
Peter McCormack: Yeah, but you can do that now with Bitcoin magazine, you have that relationship.
L0la L33tz: Yeah, I've had that for a long time. Yeah, I thought I'd try something else for a change, and that's come around to bite me in the ass, unfortunately.
Peter McCormack: So, what are you going to work on now? Are you working on any other stories?
L0la L33tz: There's actually a follow-up story coming up, which is also an expert report in the same case, of the Head of Investigation of CipherTrace. So, CipherTrace is also a blockchain surveillance firm, it's owned by Mastercard. And what they've done is they've looked at all of the evidence that is there, and they try to kind of evaluate all of these heuristics and these things, these conclusions that Chainalysis came to, and they found that the heuristics used by Chainalysis are "reckless". Yeah, so that's the next article that's coming out.
There's a lot of spicy stuff in that expert report. There is there is one statement where the expert says that a lot of Chainalysis customers would allegedly approach CipherTrace complaining that Chainalysis doesn't work.
Peter McCormack: Huh?
L0la L33tz: Yeah, this is in court, this is not just something that someone made up.
Peter McCormack: But therefore, this is really good for Roman, right?.
L0la L33tz: Yeah, it's really good for him, definitely.
Peter McCormack: I wonder if therefore, he would be within his right to take legal action against them for the two years he's spent unnecessarily in jail.
L0la L33tz: I'm not sure how that works, but I do think that you get compensation if you're unjustly imprisoned.
Peter McCormack: Which he has been.
L0la L33tz: Apparently. I mean, that's also what the expert report from CipherTrace finds, is that they say they have found zero evidence of Roman having committed that crime.
Peter McCormack: Do we know if there's anybody else who's currently sat in jail who's been prosecuted because of Chainalysis software?
L0la L33tz: I mean, the last numbers that I've had was that Chainalysis was used in over 500,000 cases I think last year.
Peter McCormack: 500,000?
L0la L33tz: Yeah, I don't want to say anything wrong, but I think that that's the number that I have in mind, just to investigate, yeah.
Peter McCormack: Wow! So, I mean I'm going to assume amongst that, there's a large number where the evidence was crucial for the prosecution, which I think that's possibly going to lead to -- that could lead to a whole number of appeals.
L0la L33tz: Yeah, this is what the CipherTrace expert, the conclusion that they also come to. They actually say that all cases in which Chainalysis has been used should be re-evaluated, and that, "Under no circumstances should blockchain surveillance", and this is somebody that is head of investigations of a blockchain surveillance firm says, "In no cases should blockchain surveillance or blockchain forensics be used as actual evidence, but it should only be used to generate leads".
Peter McCormack: Wow, okay, good. Then hopefully, this is going to make life very difficult for Chainalysis, and hopefully their valuation will plummet and fuck them for this. Okay, cool. I think I'm going to want to jump on the phone with Tor and have a catch up with him following this and see what he says, and I might append that to this, because I think this sounds like one of those things that's blowing the case open.
L0la L33tz: I really hope it does because this entire case can really change the way that we're applying AML, that we're dealing with KYC, OFAC regulations. All of this can be impacted just by this case, so it's super-important.
Peter McCormack: Wicked. Well, listen, pimp where people can follow your work and read what you're doing because we'll share that everywhere.
L0la L33tz: Yeah, I'm on Bitcoin Magazine obviously, or you can find me on Twitter @l0lal33tz.
Peter McCormack: We'll put that in the show notes. All right, listen, L0la, I appreciate you coming on talking about this.
L0la L33tz: Yeah thanks for having me.
