Obstruction of Justice: PayPal's Conditional Bitlicense COVID-19 Earnings Manipulation Scheme

[Gunnar Larson]

As the MIA Coin and NYCCoin fraud rages on, one must think back and glean
insights on how we got here. Whatever (!) Is going on down in Miami, seems
to be leaching into New York.

Yes, the rumors are true, Interlocking Board
Directorates likely participated in PayPal's Conditional
Bitlicense COVID-19 earnings manipulation scheme. Failure to rectify the
matter racks up to one of the largest Obstruction of Justice instances of
modern virtual currency times.

Graduate research conducted over the last six years by preeminent global
industry scholars, who embody a strong sense of integrity and pride in the
social importance and credibility of good institutional design, tease out
the following incidents.

With friendly intentions, there is no way out of us moving forward.

Corruption occurs when the private search for economic advantage and
personal advancement clashes with laws and norms that condemn such
behavior. Further complicating the picture, some illegal corrupt
transactions drain public resources away from education, health care, and
effective infrastructure—the kinds of investments that can improve economic
performance and raise living standards for all.

Perhaps even more significant, there is no reason to think that PayPal, one
of the more convenient and commonly-used online payment methods out there,
will behave any better given their clear anti-cryptocurrency policy
history. Paypal will likely further exploit their monopoly position and
risk undermining a pure environment that maximizes the socially beneficial
conditions of virtual currencies.

Our estimation strategy so far has been predicated on the assumption that
political and legal institutions affect sustainability directly and that
the effect of corruption can be estimated conditionally on the
institutional context.

As we previously reported, it is perhaps no coincidence that the systemic
risk to cryptocurrency and blockchain systems are tethered to activities of
BitLicensees.

The cost of corruption is greater than the sum of lost money: distortions
in spending priorities undermine the ability of the state to promote
sustainable and inclusive growth. This is possible in a framework already
characterized by "weak law" that creates both a certain alteration of the
rules of the market and perverse dynamics distorting the economy and
inhibiting free competition.

PayPal’s Crypto Corruption

The heads of enterprises must curb corruption by setting a clear tone at
the top. A statement from the founding CEO of Paypal Holdings Inc., Bill
Harris, described Bitcoin as a “scam” and a “colossal pump-and-dump
scheme”. “I’m tired of saying, ‘Be careful, it’s speculative.’ Then, ‘Be
careful, it’s gambling.’ Then, ‘Be careful, it’s a bubble.’ Okay, I’ll say
it: Bitcoin is a scam,” he wrote in June 2019.

Later in October 2019 Fortune asked PayPal’s current CEO, Daniel Schulman
if he could share some details of the projects Paypal is working on.
However, he replied: “Yes and no. Some of this is competitive, and we don’t
really want to,” but noted that what Paypal is working on is “not
necessarily competitive with Libra.”

Emphasizing that cryptocurrency is “still very volatile,” the CEO revealed,
“we don’t have much demand for it by merchants because merchants operate on
very small margins.” He continued: “Until it becomes less volatile, it
won’t be a currency that is widely accepted by merchants on the web — not
the dark web, but the web.”

PayPal’s fundamental longtime assault on the crypto industry policy was to
freeze user accounts connected with any cryptocurrency-related activity.
While some people may consider this to be borderline illegal, the company
can close user accounts or freeze funds for extended periods of time
whenever they feel the need to.
In less than a year, everything changed for PayPal with the October 2020
announcement of achieving another regulatory first: through Paxos, PayPal
has been granted the first virtual currency conditional license from the
New York State Department of Financial Services. It seems that PayPal’s
dance with “regulatory arbitrage” now engages the ability to provide crypto
to their customers.

Turn this matter as we will, and look at it from any side whatsoever, and
it presents the appearance of anti-competitive behavior. PayPal’s deception
and corruption in building its crypto business infrastructure now acts as a
cartel sponsored by regulators.

PayPal forbids user access to their own private keys. What’s more, users
will not be able to transfer their crypto holdings out of their PayPal
account, nor will they be able to send crypto to other PayPal users.

In other words, PayPal more or less dictates what users can do with their
cryptocurrencies, and could presumably freeze accounts if they see fit.

Additionally, merchant processors exist to assist merchants in processing
transactions, converting bitcoins to fiat currency and depositing funds
directly into merchants' bank accounts daily. As these services are based
on Bitcoin, they can be offered for much lower fees than with PayPal or
credit card networks.

Note, however, that this potential monopoly could arise not from corruption
but simply from a revenue-maximizing government that does not factor in the
social benefits of competition or of effective natural monopoly regulation.
Second, the hope of corrupt gains might lead government officials to
privatize the wrong firms. That is, regulators may grant license(s) to
firms that are operating at a high level as state firms and so appear
valuable to private markets.

The cute part of the "long story short" business about PayPal's Conditional
Bitlicense COVID-19 Earnings Manipulation Scheme and interlocking board
directorates point to Libra renaming to Diem, then just three months later
PayPal winning a New York Cond. BitLicense.

 COVID-19 fraud is illegal and this should be prosecuted, or publically
deferred.
-------------- next part --------------
A non-text attachment was scrubbed...
Name: not available
Type: text/html
Size: 6315 bytes
Desc: not available
URL: <https://lists.cpunks.org/pipermail/cypherpunks/attachments/20211129/5912cf84/attachment.txt>