Events like these have become a major revenue source for trade publications across the board.
This is an edition of the Revolving Door Project’s “Hack Watch” newsletter. Subscribe to the Revolving Door Project on Substack.
Welcome to Hack Watch from the Revolving Door Project. This (hopefully) weekly newsletter will document the conflicts of interest, perverse incentives, and just flat-out wrong analyses endemic to the 90’s types whom the mainstream media turns to for quotes about the economy far too frequently.
Last Tuesday, Politico hosted an event, Writing the Rules of Crypto, which was sponsored by Ripple — the crypto platform currently being sued by the Securities and Exchange Commission for raising over a billion dollars through the sale of token XRP in unregistered securities transactions. No doubt, corporate sponsorship of editorial products is a key part of Politico’s operation (hardly unprecedented, to be sure; the New York Times ran 819 op-ed page “advertorials” from Mobil from 1985 through 2000). Chevron, ExxonMobil and the American Petroleum Institute are regular sponsors of its Power Switch newsletter which is supposed to be a “guide to the political forces shaping the energy transformation.” The guide is presented by the political forces blocking the energy transformation.
Anyway, back to crypto. Ripple’s sponsorship landed their general counsel Stu Alderoty 15 minutes of airtime to field softball questions such as “what do you want still skeptical consumers and policy makers to understand about the promise of crypto?,” launder the company’s image and mischaracterize Gary Gensler and the SEC’s approach to regulating the space. This is all fitting for an industry with an overarching desire to cultivate media allies to provide cover for a Ponzi scheme of epic proportion. After all, without the requisite press skepticism of the grift and the clear danger to consumers and the environment, crypto boosters can hide under buzzwords like effective altruism, pandemic preparedness, and banking the unbanked.
Events like these have become a major revenue source for trade publications across the board. Bloomberg, The Information, the Financial Times…not to mention broader publications like The Atlantic’s long-running Atlantic Ideas Festival. Journalism, of course, is amid a long-running financial crisis for which we have no ready solutions. Events like these may well help provide funding for the investigative journalism all of the above-mentioned publications do engage in regularly.
But it’s also undeniable that these hobnobbing sessions trade on their outlets’ reputations for professionalism to let speakers legitimate their talking points, which are typically whatever is advantageous for their employer’s bottom line. Rare indeed is the reporter willing to call out lies or misrepresentations to an industry talking head in front of an industry audience at an industry-funded event.
So it was at the crypto event. Alderoty parotted the usual industry lines: appropriate enforcement of existing securities law is a cardinal sin; Gensler should shy away from doing his job of enforcing the law; the industry is suffering from domestic regulatory hostility and being forced into “sophisticated economic centers like Singapore, London and Dubai;” the underfunded and understaffed Commodity Futures Trading Commission (CFTC) should be the primary digital asset regulator.
Quite frankly, these industry claims fly in the face of common sense. Most crypto assets pass the elements of the Howey test, which is used to determine whether a transaction is a security, XRP included. There are four elements of the test:
(1) investment of money…
(2) in a common enterprise…
(3) with the expectation of profits…
(4) derived from the efforts of others.
Take XRP for example. People invested money in a common enterprise by purchasing the Ripple tokens. These investments were guided by Ripple’s claims that it would find a use case for the token that would result in an increase in value, which to an investor is a clear expectation of profits derived from the efforts of Ripple. This is in no way rocket science, and is also not some left-wing Democratic crusade. Former Republican-appointed chair Jay Clayton made sure to bring the case against Ripple right before the end of his tenure.
Raising these points isn’t ideological, and it isn’t unfair. It’s the due scrutiny and contextualization of comments one would expect from a written report about how Ripple is responding to claims that it’s a security. If these industry events serve a journalistic purpose, that should require an independent journalistic eye on the claims being made.
Compare the old saw that reporters aren’t stenographers, meaning they don’t just broadcast whatever someone says word-for-word to the world. They’re storytellers and investigators who need to apply sound judgment to what they’re being told. If journalists aren’t stenographers, then journalistic event hosts shouldn’t be sagely nodding along when their panelists spout bullshit. Or worse, preview questions to their co-panelists so the responses will be more clever — as NPR’s Supreme Court reporter Nina Totenberg is getting rightly trounced on — in Politico! — for doing in her events with Ruth Bader Ginsburg.
Now, that’s not to say that reporters have an obligation to badger any politician or businessperson they share a stage with. But they do have an obligation to scrutinize nonsensical attacks, like Alderoty’s claims about the SEC. It’s fine if crypto companies want to offer securities, but they must register with the SEC instead of disparaging chair Gensler for effectively carrying out his job and dutifully fulfilling the agency’s mandate to protect investors.
And that leads to the most ridiculous portion of Alderoty’s remarks, which was the claim that cracking down on crypto platforms for ignoring and breaking the law hurts the retail participant. In Alderoty’s bizarro universe, the SEC is to blame for BlockFi’s liquidity crisis, not the company’s decision to illegally offer retail crypto lending products, nor its reckless overextension of credit. He even took this hare-brained line of thinking further, defining the SEC’s decision to levy a fine on BlockFi as the reason other crypto lenders — Celsius and Voyager — crashed and consumers are now holding the bag in bankruptcy court. Serious people are aware of the real story: these shadow banks looked a lot like Ponzi schemes.
Boosters of Ponzi products should not be granted the freedom to tout their products without ample pushback and skepticism. Because, as is all too common in Washington, when this media cover is combined with other forms of political pressure including lobbying and campaign donations, industry interests take precedence over the public’s. Politico knows where to find skeptical voices; they had Healthy Markets President and CEO Ty Gellasch on the panel that followed Alderoty’s remarks, albeit alongside three other preachers of crypto’s so-called greatness.
Maybe next time they can remember to ask the hard questions, or better yet, put Alderoty together with a panel of expert skeptical voices whose livelihoods are not propped up by this fraudulent, energy-sucking industry. The point is to encourage free debate and discourse, right? Why segment the crypto supporter and the crypto opponent away from each other, unless you’re trying to protect somebody’s ego? The bar is so low that even having only half of the “experts” lack a conflict of interest would be much better.
IMAGE: “Bitcoin and Ripple XRP on mobile trading app screen” by QuoteInspector.com is licensed under CC BY-ND 2.0.