Year: 2017

An Interesting Take on Pommes Frites

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Natalie came across a french fry recipe online.

First, you pickle them in brine before you fry them up.

After a week or so, open the jar and rinse the fries off and then pat dry.

Fry up as you would normal fries, and add salt immediately after cooking is done, and put on paper towels to drain the oil.

Some notes:

  • Rinse very thoroughly.
  • The fries turn brown much faster than regular fries, well before they are done.  I think that some of the starches are converted to simple  sugars.
  • They are a lot like salt and vinegar potato chips.

I rather liked them.

Elon Musk Naked

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No, no pictures, I am referring to the fact that the emperor may have no clothes, and Elon Musk, in particular his Tesla Motors project, seems to be increasingly unmoored from reality:

If you’re a hedge fund analyst looking over a public company’s numbers and you see a troubling financial trend making itself evident in the data (like a company burning through cash while booking revenue for a product that is seems perhaps incapable of delivering in the volume promised in the timeframe laid out), you will feel the natural urge to short that company’s stock and wait quietly for the money and praise to roll in.

But we want you to pause for a moment and look at the top of that file. Does it say “Tesla Motors, Inc. (TSLA)”?

It does?

Yeah, you’re going to want to rethink that short, homie, because you have not factored “Blind Elon-ic Faith” into your Alpha.

But you wouldn’t be alone.

Tesla reported yesterday, and from a purely logical perspective it was a mixed bag:

Tesla’s reported a net loss of $336 million, or $2.04 per share, compared to a loss of $293 million, or $2.09 a share, a year ago.

 Excluding stock based compensation, Tesla lost $1.33 a share, which was narrower than expected, according to a consensus estimate from Thomson Reuters.

 Revenue climbed to $2.79 billion from $1.27 billion in the year-ago period, and outpacing Wall Street’s estimates of $2.51 billion.

Yeah, we said “mixed”:

Heading into the earnings report, analysts expressed concerns about whether Tesla would ramp up production of its Model 3, a more affordable electric car with a base cost of $35,000, quick enough. In the past, Tesla has struggled with production issues.

Musk also said that he hasn’t ruled out dipping a toe back into the debt market.

See, Tesla is currently promising that it can make 1,500 of these things in the entire third quarter of this year, but Elon is also telling anyone who will listen that he will be able to make 10,000 in a week by the end of 2018. That kind of ramp-up has led a lot of people in the asset management game to doubt Tesla’s long-term strength, what with logic dictating that cash will burn at the altar of Elon’s ambition, and that the fire might rage out of control while he’s busy glancing over at his rockets, his Hyperloop tunnels or putting the finishing touches on his dope-ass new solar roof. All those factors are causing David Einhorn and a legion of his fellow traders to go short on TSLA.

Just to remind you, their plant used to be the joint Toyota-GM NUMMI plant, and the most cars that it ever produced under that management was 428,633 units in 2006, or less than 8,500 units a week, and Tesla is saying that it can ramp up from about 120 units a week to 10,000 units a week over the next 18 months.

For his next trick, Elon Musk will appoint a horse to his board of directors.

But the underlying story here is that Tesla releases profoundly mixed numbers, reveals that its production ramp up plans are unrealistic, and they get shorted by speculators.

In response to an awful quarterly report, the stock goes up, and the speculators take it on the chin, because ……… Elon!

This is what happens when you short a cult. At this point, R Kelly has nothing on Elon Musk. And the notion that a short squeeze might put a shudder in Tesla’s rise seems – like all other rational ideas that come in contact with Tesla – to be neutered by whatever Tesla investors think of Tesla.

 So, here’s our last word of caution to you hedgie analysts out there crunching numbers on TSLA: You’re wasting your time. Tesla isn’t about facts and figures, it’s about belief in the divinity of Elon f%$#ing Musk. You’ll never understand what is happening because the Kool-Aid is the stock and a lot of people can’t stop drinking it.

(%$# mine)

So, Tesla is facing a unionization effort from employees who say that their manufacturing facility is abusive and dangerous, and the corporate response has been (I am not kidding here) free frozen yogurt at their Freemont, CA plant.

So now Tesla is warning its workforce, one that already has issues with excessive mandatory overtime ans safety issues that they will be facing, “Production Hell“.

Honestly, I’m half expecting a strike in the next 18 months:

When Tesla chief executive Elon Musk handed over the first 30 Model 3 sedans to reservation holders last Friday, he warned employees they’ll be in “production hell” for the next several months. It was a curious remark, as Tesla employees have been voicing concerns about workplace injuries since earlier this year. Employees reiterated those points in a letter to Tesla’s board Monday, and demanded answers to questions about pay transparency and safety.

“We’re tired of suffering preventable injury after preventable injury,” said Michael Catura, a production associate at Tesla, in a statement. “It impacts morale, it slows down production and it’s of course traumatizing and financially difficult for the affected person. We want to know what the company’s plan is to address this problem, and to see whether or not any progress is being made.”

The letter, signed by the Tesla Workers’ Organizing Committee, said it believes in Tesla’s mission to build a mass-market, emission-free electric vehicle. But the committee cites a number of ongoing issues, and it requests access to a safety plan and clarity on pay and non-retaliation agreements for employees trying to form a union. Earlier this month, a group of 10 factory employees presented a petition with questions about how workers are paid and how raises are distributed. BuzzFeed reported that about 400 employees had signed the petition.

Welfare For Overprivileged Caucasians

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Here is a new phrase to me, “Rest and Vest”.

It refers to a phenomenon where entitled dotcommers are allowed to do no works for months on end until their stock options vest.

The sense of entitlement is really staggering:

On a sunny summer morning, a Facebook engineer woke up to go to work but felt ill. She ran to her bathroom and threw up. “I thought I was getting sick,” the engineer recalled.

It wasn’t a virus or food poisoning. She was having a bad reaction to her job.

She was making $1 million a year, mostly in stock, and running a team of about three dozen people, she told Business Insider. And she had worked herself into a state of exhaustion in the three years since Facebook had acquired her previous company. The acquisition had been highly political, the integration wasn’t going well, and she had been killing herself to make it more successful and protect her people from losing their jobs over it.

As tired as she was, she couldn’t just quit this job. She owed a big chunk of money in taxes thanks to that stock and needed her salary to pay those taxes.

But after getting violently ill at the thought of going to work, she decided not to go in. Not that day. Not ever again. And she knew she wouldn’t get fired.

Because not going to work was actually her manager’s idea.

The previous day she had told him she would be leaving the company at the end of the year, six months away. She wanted to spend the rest of the year wrapping up her projects but not taking on any more, collecting on the stock that would vest by year end and making the money she needed to pay her taxes.

“My manager and I had lots of conversations. I teetered on leaving so many times,” she said. “But this time was for real. I was going to see these projects to a healthy state and then I needed to go. I felt good about it. The next thing, he told me not to come in.”

She panicked thinking he was firing her, but he explained she wasn’t being terminated at all. “Just don’t come to work,” he told her. “You’re burned out and need a break. Just don’t talk about it, and everyone will assume you’re on someone else’s team.”

………

And that’s how this hardworking, conscientious engineer wound up joining the least secret secret club in the Valley, known as “rest and vest.”

“Resting and vesting” is when an employee, typically an engineer, has an easy workload (if any job responsibilities at all) and hangs out on the company’s payroll collecting full pay and stock. Stock is often the bigger chunk of total compensation for a senior engineer than salary.

Once she was in rest-and-vest mode, this engineer spent her time attending tech conferences, working on pet coding projects, networking with friends, and planning her next career move.

She realized that her manager let her rest and vest to keep her quiet about the problems with that acquisition, so she had time to find her next thing. Had he terminated her immediately, she would have been incensed. “Everyone knew I had a big mouth and would speak out,” she said. “He figured, ‘Hey, it costs us next to nothing keep her happy for six months.'”

This is nuts, and it is a sign of a bloated and dysfunctional industry.

The reason that this effects the rest of us is that these excesses indicate a misallocation of resources, and as such they are not available to more useful purposes than sharing cat pictures.

To paraphrase Ike, every redundant social media site that is made, every web 2.0 site that is launched, every IPO that is launched signifies, in the final sense, a theft from those who actually do useful work.

What a Surprise………

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America’s state security apparatus is using the classification review process to suppress a book that details torture at Guantanamo Bay:

A former NCIS investigator who worked at the wartime prison during the Bush administration has written a book, “Unjustifiable Means.” Now his civil liberties lawyers are asking a bipartisan group of senators for help getting the Pentagon to clear it for publication.

Retired 27-year career federal worker Mark Fallon’s manuscript “has been held up for more than seven months in ‘pre-publication review,’ and we are increasingly concerned that some in the government are committed to suppressing Mr. Fallon’s account,” the lawyers write six senators. They include Republican John McCain, the former Vietnam War prisoner, and Democrat Dianne Feinstein, who chaired the Senate Intelligence Committee when it drew up the so-called Torture Report on the Bush administration’s secret CIA prison network.

The lawyers’ letter describes what might be troubling Defense Department officials about the book:

“ ‘Unjustifiable Means’ concerns the Bush administration’s policies authorizing the cruel treatment and torture of detainees. It is an insider’s account of the moral and strategic costs of those policies and the many ways that honorable Americans working in government protested and resisted them.”

Between 2002 and 2004 Fallon was Special Agent in Charge of the Department of Defense’s Criminal Investigation Task Force, and was responsible for some interrogations and evaluating intelligence with an eye toward prosecution by military commission. He has been outspokenly critical of decision making during that period, telling the Miami Herald last year that some captives were brought to Guantánamo based on “the sketchiest bit of intelligence with nothing to corroborate.”

The did the same thing with Valerie Plame’s book.

This sh%$ is getting really old.

Linkage

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Have some Simon’s cat:

The Democratic Party Establishment in a Nut Shell

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The web publication Slate is fairly consistently center left.

Of course, that won’t stop them from an aggressive campaign of union busting against their own employees, including firing organizers.

This is the problem with Clinton/Obama liberalism:  they are all for progressive ideas, until those might slightly inconvenience them.

They support the working man, but they want their cheap sh%$ from China, and they want “Undocumented Americans” treated fairly, but they don’t want to pay more to get their landscaping done, and they are horrified by price gouging by big Pharma and excesses of Wall Street, but they want the campaign donations.

If you wonder why promises of economic justice by the mainstream Democratic party are not taken seriously by much of the electorate, this is it:

Slate has been a solidly liberal voice online for the past two decades. So when its staff decided to form a union earlier this year, they didn’t expect a drawn-out labor fight. Yet Slate management has put up stiff resistance to the effort for months, using rhetoric that anyone familiar with attempts to weaken organized labor will recognize.

The site’s management declined to voluntarily recognize a union in March, after more than 90 percent of editorial staff signed cards signaling their intent to join the Writers Guild of America-East. Higher-ups, including the site’s editor-in-chief and the company’s chairman, have since tried to dissuade them from unionizing at all, according to internal emails obtained by Splinter.

Current and former employees, some of whom spoke on the condition of anonymity out of fear of retribution, said it’s left Slate organizers grappling with how aggressively they should force the issue in a newsroom known for technocratic liberalism. The question has become even more complicated as the publication has fashioned itself as a standard-bearer of the anti-Donald Trump resistance.

………

Current and former staffers said that the top-down campaign against the union hasn’t been as cartoonish as what’s been seen at other media outlets, such as DNAinfo and Gothamist, where management essentially threatened to shutter the sites if they unionized. But the pushback has been consistent from the start.

Soon after the vote to unionize in March, Editor in Chief Julia Turner led a non-compulsory staff meeting at which management outlined its anti-union position in full, according to both interviews with staffers and internal emails. Jacob Weisberg—former editor of the site, and currently both the chairman of the Slate Group and primary host of its popular Trumpcast podcast—has largely spearheaded the efforts through memos to staff filled with familiar anti-union talking points.

………

Slate management has called for a second vote to be administered by the National Labor Relations Board, sowing trepidation among organizers who fear a time-intensive process in an agency increasingly stocked with Trump appointees. Union organizers counter-offered, calling for a second vote conducted by a private third party. So far, Slate brass haven’t budged.

“We can only conclude that this is their time-consuming and demoralizing way of discouraging us from unionizing,” the Slate Organizing Committee said in a statement to Splinter. “We still feel strongly that we deserve a seat at the table to negotiate a contract that offers us more security in this volatile and uncertain industry.”

………

Slate’s union drive began during the final stretch of the 2016 presidential campaign, when then-politics editor Tommy Craggs—a onetime executive editor of Gawker Media—began discussing the idea with colleagues in earnest. He told Splinter in an email that he approached Turner in October in order to avoid appearing overly hostile.

………

“I really don’t know if the union drive would’ve been better off if I’d never said a word to her,” Craggs continued. “I do know that I never expected to hear the Slate [editor in chief] talking like a Heritage Foundation white paper.”

………

Craggs was among five staffers, including another editor involved in the union drive, L.V. Anderson, let go from Slate in February. A company spokeswoman called all the job losses “layoffs” at the time, saying that they “were unrelated to any union activity.” But Craggs, pointing to the ongoing search for his replacement, disputes that characterization. “I don’t think I got fired for trying to unionize Slate,” he wrote. “I got fired because I’m the sort of person who would try to unionize Slate.”

One of the Rules of Whacked Out Conspiracy Theorists

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No matter where they start, all end up blaming the Jews, case in point, Russia conspiracy nutjob Louise Mensch:

You can say a lot of things about Louise Mensch, everyone’s favorite conspiracy theorist and unhinged internet troll, but you can’t accuse her of not knowing how to spin a good yarn. The author of novels like Venus Envy and A Kept Woman—the titles give you a pretty good idea of what’s inside—is a natural storyteller, a gift she’s been using lately on Twitter to convince her hundreds of thousands of followers that she is, as my friend Jamie Kirchick wrote, “perpetually on the cusp of exposing a massive conspiracy on the part of Russia, dating back decades, to make Donald Trump president of the United States.” Yesterday, Mensch introduced an unexpected plot twist to her Twitter potboiler: America wasn’t hacked by the Russians alone; the Jews helped.

One Jew in particular: Bibi Netanyahu, dark lord and, apparently, apprentice to puppet-master Putin.

Because the pleasure of indulging in lunacy lies in the minute details, here goes. The saga began last night, when Mike Cernovich, himself a fan of anti-Semitic conspiracy theories, tweeted to protest the firing of Derek Harvey, a National Security Council official sacked by National Security Advisor H.R. McMaster, suggesting that Harvey was let go because of his allegiance to Israel. Another Twitter user responded and accused Cernovich of being an agent of a Russian-sponsored coup d’etat. It was precisely the kind of language that summoned Mensch into the fray.

“Love you sir” she tweeted back, with all the subtlety of an oversexed British boarding school adolescent. And then, having warmed up to her subject, she continued: Obama, she tweeted, was right to despise Netanyahu. Oh, and Netanyahu was colluding with Russia to help Trump take an ax to the beating heart of American democracy.

………

What is Netanyahu, then? And where’s the proof of his subterfuge? What’s up with the RISSAD, which used to be called the Mossad but which Mensch has renamed Russian Israeli Trolls Loyal to Moscow Over Jerusalem, suggesting Israeli intelligence, too, is in Putin’s pocket? And why rehash, as Mensch did this morning, the ridiculous canard that Chabad is secretly a vessel for connecting the Kremlin and the Knesset?

Anyone who had two brain cells to rub together knew that Mensch was an addled conspiracy theorist, but because it fit a narrative, she got an OP/ED in the New York Times.

Even if Russia did everything that they have been accused of in exactly the manner accused, and the evidence is at best sparse, it is neither unusual nor unprecedented behavior.

US interventions in foreign elections, including Yeltsin’s 1996 reelection in Russia was far more extensive, including tacit support of vote fraud, as was Winston Churchill’s intervention by his intelligence agencies in the 1940 US Presidential election.

As I’ve said before, Donald Trump’s election was a perfect storm of many factors, but the entire, “A noun, a verb, and Vladimir Putin,” crap serves only to gloss over the very real institutional failures of the Democratic Party, and as such continues to set it up for electoral debacles.

Not a Surprise

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Getting rid of Travis Kalanick may have been hard for Uber’s investors and board of directors. But replacing him could prove harder.

As the company’s board inches ahead in its search for a new chief executive to run the embattled ride-hailing company, candidates are dropping out before they’ve even met with every board member. Kalanick himself is rumored to be angling for a return, and some investors question whether any candidate could fill its departed leader’s shoes.

In other words, this is not a typical job opening.

This is not a surprise.  The best parts of Uber are profoundly toxic, the worst parts are illegal, and Travis Kalanick is attempting to regain control of the company, which, considering that he may have control of a majority of voting shares, is likely to put off anyone who has any concern about their reputation.

Any attempt to fix Uber will likely fail because, with Kalanick in the wings, the employees will likely slow-walk any attempted reforms, because they believe that they will be reversed.

It’s a toxic mess, and the only person willing to step into it will have to either have nothing to lose, or have no f%$#s left to give.

There aren’t a whole bunch of those in the C-suite.

When Donald Trump is the Adult in the Room………

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Donald Trump has decided (IMNSHO correctly) that Afghanistan, aka, “The Graveyard of Empires,” but the very serious people in his security establishment want to continue doubling down on failure:

President Donald Trump’s top national-security advisers are searching for a way to overcome the commander-in-chief’s reluctance to send thousands more troops to Afghanistan as divisions on the National Security Council complicate strategy for the 16-year-old war, officials said.

The president’s reluctance to embrace an open-ended commitment has resurrected discussion of other options, including proposals to scale back the U.S. military presence in Afghanistan or to hire private contractors to play a bigger role. Top Trump administration officials met to discuss the options Thursday after Mr. Trump asked his team for alternatives, according to current and former Trump administration officials.

The search for a strategy for Afghanistan comes amid upheaval at the NSC following the removal of three staff members by H.R. McMaster, the national security adviser. The three officials were hired by his predecessor, Mike Flynn, before he was forced to resign after 24 days in the post.

………

Defense Secretary Jim Mattis had hoped to have a new Afghan strategy in place by mid-July, but White House talks bogged down as Mr. Trump challenged the need to send more U.S. forces into a fight with no clear plan for success, the officials said.

At a meeting last month with his national security team, Mr. Trump questioned the leadership of Gen. John Nicholson, the Kabul-based commander of U.S.-led forces in Afghanistan, the officials said. The president’s criticism, reported first by MSNBC on Wednesday, drew a brusque response on Thursday from Sen. John McCain, (R., Ariz.).

Trump is right, and the US foreign policy establishment, aka, “The Blob,” is wrong.

This should be no surprise.  The Blob supported Libya, and supporting al Qaeda in Syria, and fomented a coup in the Ukraine, and they were all disasters.

Rule 1 of foreign policy:  The Blob is always wrong.

Rule 2 of foreign policy:  See rule 1.

Live in Obedient Fear, Citizen!

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………

In February, San Antonio District Attorney Nico LaHood allegedly did just that. LaHood was prosecuting Miguel Martinez, who stood accused of shooting a graduate student named Laura Carter in the head during a drug deal gone bad. Martinez’s trial derailed soon after it began. On the second day, the government disclosed that its star witness, who was also a possible suspect in the killing, had once had a sexual encounter with a prosecutor in the DA’s office. The defense argued that the relationship gave the witness a motive to help the government and gave the government a reason not to investigate or charge the witness. The defense accused prosecutors of violating their constitutional duty by failing to disclose that information before trial. The defense lawyers asked for a mistrial and indicated they may ask the judge to bar further prosecution.

According to defense pleadings, LaHood threatened to shut down the opposing counsels’ practice during a meeting in the judge’s chambers. He allegedly said he would “go to the media and do whatever it took” and that he did “not care what happened to him.” Their client would also be at risk, LaHood allegedly said, because he would be “better prepared for trial the next time” and he would “pick a better jury.” The defense lawyers, Christian Henricksen and Joe Gonzalez, asked for a mistrial. Trial Judge Lori Valenzuela granted their motion.
In March, the defense moved to bar future prosecution. At a hearing the following month, LaHood denied under oath that he’d threatened the lawyers’ livelihoods. He claimed the defense’s allegations were false and accused the defense attorneys of acting in bad faith when they alleged prosecutorial misconduct.

Valenzuela, who had observed the incident, then took the stand. (Valenzuela did not preside over this April hearing, as she was a witness to the events at issue.) She described how, without provocation, LaHood had threatened to make sure the defense lawyers never got appointed on another case, becoming so enraged that she feared “somebody would get hurt physically.” She explained that LaHood may have committed misdemeanor official oppression, a crime that occurs when an official uses his power to “mistreat” others or impede them in the exercise of their rights.

Might have committed official oppression? Might have?

Seriously?

He did it in front of a judge who testified against him.

He needs to be jailed and disbarred.

Schadenfreude Overload

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New favorite German word: Backpfeifengesicht, a face that needs to be slapped.

— Sarah Sh. (@psygh) July 11, 2017

Martin Shkreli has been found guilty of fraud and faces up to 20 years in prison:

Martin Shkreli, 34, has confidently courted controversy in recent years, bulldozing his way into Wall Street and the drug industry, raising the price of a lifesaving drug by 5,000 percent overnight, boasting that he would outwit prosecutors in his federal fraud case, and live-streaming and tweeting throughout his five-week trial.

But on Friday, after five days of deliberations, jurors convicted him on three counts of fraud in federal court, and he now faces up to 20 years in prison on each of the first two counts, and up to five years on the final count.

Mr. Shkreli looked shaken as the judge read the verdict. But not long after, he appeared outside of court and returned to form, saying that he was “delighted, in many ways,” with the verdict. “This was a witch hunt of epic proportions, and maybe they found one or two broomsticks,” he said.

Later in the afternoon, he was live-streaming once more, sipping beer and joking about prison life from his Manhattan apartment.

………

He never seemed to take his case seriously, meeting with federal authorities without a lawyer, making faces during testimony, calling the prosecution “junior varsity” and reading a book during final statements.

Jurors convicted Mr. Shkreli of three of the eight counts: securities fraud in connection with his hedge fund MSMB Capital; securities fraud in connection with MSMB Healthcare; and conspiracy to commit securities fraud related to the Retrophin stock scheme, in which he tried to quietly control a huge portion of Retrophin stock.

It would be nice if something like this happened to Lloyd Blankfein and Jamie Dimon, though.

You shouldn’t have to be as Backpfeifengesicht as Shkreli in order to be prosecuted.

Linkage

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Reader(s) of this blog may be aware of my fondness of the juxtaposition of engineering and history. Case in point, this military training film about mechanical ballistic computers from the early 1950s:

A Big Deal, but Not a Huge Deal

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Robert Mueller has empaneled a grand jury as a part of his investigation of the Trump campaign.

There have been a lot of people implying that an indictment is imminent, but it’s not.

I would be surprised if to see any indictments before year’s end.

What it does mean, however, is that Muller can now issue subpoenas to compel testimony and turn over evidence.

It’s serious, but not, “Oh my God,” serious.

Needless to say, for anyone contacted by Mueller’s team, it’s time to lawyer up.

Zuckerberg hires former Clinton pollster Joel Benenson – POLITICO

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My first though upon hearing that Facebook CEO Mark Zuckerberg hired former Clinton pollster and political advisor Joel Benenson, oh my God, this dirt-bag is going to run for President.

My second thought was that I didn’t have to worry, because if he is going to be relying on the incompetents who managed to lose an election to an inverted traffic cone, then he has a snowball’s chance in hell of actually winning anything:

Facebook CEO Mark Zuckerberg and his wife, Priscilla Chan, have hired Democratic pollster Joel Benenson, a former top adviser to President Barack Obama and the chief strategist for Hillary Clinton’s failed 2016 presidential campaign, as a consultant, according to a person familiar with the hire.

Benenson’s company, Benenson Strategy Group, will be conducting research for the Chan Zuckerberg Initiative, the couple’s philanthropy. The organization — whose mission statement, according to its website, is “advancing human potential and promoting equality” — is endowed with the couple’s Facebook fortune.

Zuckerberg and Chan have vowed to give away 99 percent of their Facebook shares, worth an estimated $45 billion, to charity. Bringing on Benenson is the latest sign that they’re pushing their philanthropic work more heavily into the political and policy world.

In January, the couple hired David Plouffe, campaign manager for Obama’s 2008 presidential run, as president of policy and advocacy. Plouffe had previously worked at Uber. Ken Mehlman, who ran President George W. Bush’s 2004 reelection campaign, also sits on the board.

Yes, Mark Zuckerberg is seriously considering a Presidential run, and he is availing himself of the most incompetent people available, so it’s going to be a clown show.

There is nothing to worry about.

Then again, that’s what they said about Donald Trump.

Pass the Popcorn

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You may recall that in 2012,  Bruno Iksil, aka the, “London Whale,” lost billions of dollars for JP Morgan by playing Russian Roulette with credit default swaps.

He agreed to testify against two relatively low level employees, but is now saying that the orders to cover up the losses came from Jamie Dimon and his Evil Minions™:

The U.S. case against two former J.P. Morgan Chase & Co. traders charged with concealing billions of dollars in losses fell apart because a key witness known as the London Whale shifted blame to Chief Executive Officer James Dimon and other top executives, according to a person familiar with the matter.

The 2012 trading debacle that unfolded inside a London outpost of J.P. Morgan ultimately cost the bank more than $6 billion. Former trader Bruno Iksil, who was nicknamed the London Whale for his outsize bets, agreed in 2013 to testify against ex-coworkers Javier Martin-Artajo and Julien Grout for their alleged roles in hiding the losses.

But over the past year, Mr. Iksil changed his story.

“I mostly inferred that Dimon and his close lieutenants were responsible much, much more than my two colleagues could ever be,” Mr. Iksil said in an email, his first comments since prosecutors requested the case be dropped on July 21.

Mr. Iksil’s shifting explanations about who was responsible helped to end the high-profile U.S. criminal case, the person said.

On July 21, prosecutors in the Manhattan U.S. attorney’s office filed a motion in federal court to drop the charges against Messrs. Martin-Artajo and Grout, saying the government “no longer believes that it can rely on the testimony of Iksil in prosecuting this case” after “a review of recent statements and writings made by Iksil.” The office provided no other details beyond that statement.

………

Mr. Iksil never asserted that Mr. Dimon gave this initial order, but on his website, he cited a September 2010 public presentation from the CEO that predicted such reductions as a way of meeting new regulatory demands.

Even as losses mounted in 2012, valuations of those positions weren’t hidden, Mr. Iksil wrote in his memoir. Instead, he wrote, they were communicated to top bank officers, suggesting to Mr. Iksil that others were fully aware of the issues.

A J.P. Morgan spokeswoman declined to comment about Mr. Iksil’s allegations.

There is an old saying, “A fish rots from the head down.”

It seems to apply here.

This is Profoundly Weird

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Marcus Hutchins, a white hat hacker who shut down the WannaCry ransomware, was just arrested by the FBI, and charged with creating and distributing a banking Trojan 3 years ago:

On Wednesday, US authorities detained a researcher who goes by the handle MalwareTech, best known for stopping the spread of the WannaCry ransomware virus.

In May, WannaCry infected hospitals in the UK, a Spanish telecommunications company, and other targets in Russia, Turkey, Germany, Vietnam, and more. Marcus Hutchins, a researcher from cybersecurity firm Kryptos Logic, inadvertently stopped WannaCry in its tracks by registering a specific website domain included in the malware’s code.

Hutchins was arrested for allegedly creating the Kronos banking malware.

Motherboard verified that a detainee called Marcus Hutchins, 23, was being held at the Henderson Detention Center in Nevada early on Thursday. A few hours after, Hutchins was moved to another facility, according to a close personal friend.

The friend told Motherboard they “tried to visit him as soon as the detention centre opened but he had already been transferred out.” Motherboard granted the source anonymity due to privacy concerns.

“I’ve spoken to the US Marshals again and they say they have no record of Marcus being in the system. At this point we’ve been trying to get in contact with Marcus for 18 hours and nobody knows where he’s been taken,” the person added. “We still don’t know why Marcus has been arrested and now we have no idea where in the US he’s been taken to and we’re extremely concerned for his welfare.”

So, they have arrested him, and are holding him incommunicado, and at this time it appears that he has not been allowed to talk to a lawyer.

Also note that “MalWareTech” seemed to confirm that the WannaCry code originated with the NSA, which might imply that there some institutional imperative to go after him that was not strictly judicial.

Also, at the time of the Kronos release, Marcus Hutchins was casting about on Twitter for a copy of the code, which seems to an awfully odd thing to do if he wrote the code in the first place:

Anyone got a kronos sample?

— MalwareTech (@MalwareTechBlog) July 13, 2014

Marcy Wheeler also noticed an odd coincidence that corresponded to his arrest:

In remarkably timed news, between 3:10 and 3:25 AM UTC this morning (8 PM last night Mountain Time), someone emptied out all the WannaCry accounts.

So, while Hutchins was detained, someone took all the ransom money that 

This is all profoundly odd.

Is it Possible that Much of Silicon Valley is Just White Boy Criminality?

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It turns out the vaunted “Unicorns” of Silicon Valley may have a lot more in common with bucket shops than they do with any meaningful technological innovation:

Unicorns aren’t real, and neither are the valuations ascribed to many of the startups that say they’re worth $1 billion or more.

 About half of private companies with valuations exceeding $1 billion, known as unicorns, wouldn’t have earned the mythical title without the use of complex stock mechanics, according to a study by business professors at the University of British Columbia and Stanford University. The tools used to negotiate a higher share price with investors often come at the expense of employees and early shareholders, sometimes drastically reducing the actual value of their stock.

 The chasm between public and private valuations is a topic of increasing prominence following several disappointing listings. Among them is Blue Apron Holdings Inc., which is trading well below the price venture capitalists paid in the last fundraising round.

 An often-overlooked explanation for the divide is buried in investor contracts. Blue Apron, which delivers meal kits to customers, gave stock preferences to some shareholders in 2015 in exchange for a $2 billion valuation, according to the study. A convertible loan this year included a provision that offered equity at a discount to the IPO share price, and investors took advantage of the mechanism.

 The use of special investor protections has soared in recent years as startups chase dreams of becoming a unicorn. A lofty valuation can build credibility and help recruit talent in a tight labor market. But it has also complicated the already-opaque process of valuing a private business.

One provision frequently afforded to investors is called a liquidation preference. It guarantees a minimum payout in the event of an acquisition or other exit. The study found that it can exaggerate a company’s valuation by as much as 94 percent. Researchers pointed to AppNexus, a digital advertising startup. The company sold shares with a liquidation preference that guaranteed new backers at least double the amount they put in if AppNexus is acquired.

When we look at the larcenous and corrupt cultures of companies like Uber, we sometimes miss the forest for the trees.

The basic culture of the Silicon Valley startup is pump and dump.

If prosecutors ever looked at the business practices of Silicon Valley with anything near due diligence, I think that half of the company founders, and ⅔ of the venture capitalists would end up in the dock.

Of course, that’s never going to happen, because ……… Markets!