Tesla retail shareholder and cult follower Alexandra Merz has posted a misleading and outrageously stupid diatribe on Twitter falsely accusing Chancellor McCormick—whom Musk despises—of corruption. Merz has absolutely no idea what she's talking about.
In her ten-minute tirade, she argues that a totally unrelated case involving a small business deal gone wrong proves that the Chancellor is corrupt because a court reporter made some errors in a transcript and no one bothered to file an errata. The Chancellor suggested that they should do that.
Merz also confused the Chancellor pointing out that she lacks federal criminal authority, which is an obviously true statement, with the Chancellor making some sort of criminal threat. This is just dumb.
It gets better. Merz is upset that Chancellor McCormick didn't automatically dismiss a legitimate lawsuit against individuals who allegedly engaged in wrongdoing—even though the docket shows that those individuals, whom she supports, never filed a motion to dismiss. So how would that work?
And Merz blames Chancellor McCormick for not giving proper instructions on how those individuals should have filed an appeal, even though that's not her job. Judges don't give legal advice. One could argue that they should, but that would require massive legal reform, and isn't her fault.
The real problem is that by banning any rational discussion on Twitter (while, of course, championing "free speech"), Musk has created a breeding ground for stupendous idiots like Merz and foreign state actors to seed conspiracy theories which can then spread without ever being checked.
Needless to say, there is absolutely no evidence that Chancellor McCormick is corrupt—only evidence that Alexandra Merz is a crackpot cult member with zero legal acumen who is upset that her pointless, time-wasting motions in the Court of Chancery have gone absolutely nowhere.
This morning, Alexandra Merz quote-tweeted a screenshot of my response that some account had posted in reply to her. 44 people responded. Then, for some reason, she deleted it.
In addition, as I expected would happen, Elon Musk has weighed in on Twitter to express his agreement with her video assailing Chancellor McCormick.
Why do I care? Because Chancellor McCormick is one of the only judges I've come across who is patient enough and detail-oriented enough to wade through thousands of pages of facts and lies and reach the correct conclusion most of the time, even when the parties involved are wealthy beyond imagining. And because I am genuinely concerned—and I know I'm not the only one—that the mob scrutiny Musk and his followers gin up is actually dangerous.
Meanwhile, it's obvious that Merz's and now Musk's purported concerns are much ado about nothing. McCormick addressed the insane notion that a deposition transcript was modified herself. She was extremely patient and clear. I'm not sure what more anyone could ask for. You can read the case documents here:
Once again, this case has absolutely nothing to do with Tesla, Elon Musk, or any issue related to them. Zero. It's just a random case.
Merz's followers think she should call the police and get a restraining order against me because I politely suggested via e-mail that she should take down her video in which she makes false and totally misleading statements. Things are pretty broken when the reflexive answer to a reasonable e-mail is police involvement, but sure, whatever, go ahead. You do you. I'm sure the police will get right on it, because, after all, according to Omar Qazi, I am an "extremely dangerous criminal." What was that about "free speech?"
Punch drunk after-party capitalism (that's capitalism well after late-stage): where the whim of one rich dude is more important than the entire rest of the world.
Hey, wait a minute... What if it's not Google that's the problem. What if...it's the entire industry that made Google think it's a good idea to put AI front and center? What if...it's Sam Altman and generative AI itself?
That would be super uncomfortable for someone like, you know, Paul Graham.
Translation: Omar doesn't like that the process server almost got him at his parents' house in LA where he's hiding—which wouldn't be necessary at all if he just showed up in court.
Just a guess... But it appears that Kyle Corcoran is the Morgan Stanley Managing Director who helped Elon Musk manipulate the market to amass his Twitter stake.
The name lines up.
And so does the timing. It looks like Morgan Stanley likely fired him in 2023 when this came up in discovery.
Kate Claassen's name also fits, and she has a work background at Merrill Lynch (as does Birchall), but unlike Corcoran, she still appears to be employed at Morgan Stanley.
10 years, $23M in attorney's fees and 1 dead kid later, the federal courts have washed their hands of their PACER fee problem. Lawyers and judges stole from the public—directly—killed a friend of mine, and just gave themselves a 3.96X lodestar bonus for doing it.
I have to say, I don't fully understand why Elon decided to release this video. In my view it proves, or at least strongly supports, the case against him that the WSJ (or the Tesla Board via WSJ?) was trying to make.
Today I was just revisiting the bizarre fact that I was banned from Reddit's /r/technology sub-Reddit on March 15, 2023, despite not having posted anything there for over a year at the time. It just showed up out of nowhere: hi there, you're banned. Kind of bizarre.
Even if no one sees this, I'm really glad I have control over this platform.
If you're interested in how Silicon Valley regulators evolved to allow virtual currency (bitcoin) startups to do whatever they wanted while cracking down on responsible players using only USD, here are two videos from 2013 I dug up:
Jay Powell is the cool dad who wags his finger and then leaves behind a big cooler full of alcohol, cocaine and meth for the kids when he goes on vacation.
Today, in violation of federal law, OpenAI's security physically shoved me out the door because I requested a public record: the non-profit's most recent tax return. Fortunately I wasn't hurt. The company also threatened me with criminal charges.
So one thing that has been bugging me about the Big News is that it doesn't make any sense. Company has disagreement with star CEO, decides to part ways. But 30 minutes before the close of trading on a Friday? Sending the NASDAQ down? Surprising Microsoft?!?! Come on. Something is up.
There are only two things that can make a corporate board of directors react suddenly like someone just poked them in the eye: a real threat of criminal penalties or proof of financial fraud.
In this case, if you look beyond the mainstream coverage, there's evidence to suggest both. First, the suggestion of financial issues comes from a pseudonymous user on Reddit.
But then there's something else. OpenAI, Inc. is a non-profit organization that is required to be, and is, registered with the State of California Office of the Attorney General, which manages tax-exempt organizations. Its exemption was granted on November 15, 2017 at the state level.
You're supposed to file a Form RRF-1 each year four months and 15 days after the end of your accounting period. So if you're on a standard calendar year accounting cycle, that means May 15th. Except that OpenAI has been filing six months late each year since 2018 for some reason.
In 2021, they filed on November 18th. In 2022, they filed on November 17th.
Hey, yesterday was November 17th! How weird!
My theory is that a lawyer got extremely nervous around question 2 on Form RRF-1, which should have been filed yesterday. According to the California AG at least so far, it wasn't.
Firing Sam makes a lot of sense if you sit on the OpenAI Board. Sure, the organization could lose its tax-exempt status, and that would be bad, but the California AG could also sue you for breach of fiduciary duty, or worse, if there's real financial fraud, start filing criminal charges.
This is the kind of risk mitigation strategy intended to reduce a Full Clusterfuck to a Slap On The Wrist.
(And most employees, who are not lawyers, would probably not even be aware of it.)
Cute. It's definitely been more than a "couple" of days. Not that I think that's a true or valid excuse for prohibiting anyone from cancelling a subscription.
Internet advertising is such a hilarious boondoggle. United wasted 100% of its money paying for these banner impressions aimed at me. Yes, I did start booking a trip to Chicago on the United website. Yes, back in the 1990s, it was thought that it would be miraculous if you could specifically target customers who left something un-bought in their shopping carts. Maybe just reminding them in an ad would compel them to finish the transaction! The only problem?
I did. I booked the trip to Chicago. Just not using that same shopping cart. I booked my ticket to Chicago in a new browser session probably because the first one expired, or I wanted a different time, or I wanted to use credit card points, or who knows. But I definitely have a ticket to Chicago, on United, and I'm not going to click on the ad to buy a second one. Thanks anyway, though.
Some of the FBI documents disclosed require a bit of reading between the lines to fully understand what's being said.
For example, when the FBI says "this investigation should be reclassified as a 245 matter," what that means is that it's a big enough deal that the Organized Crime Drug Enforcement Task Force (OCDETF) should consider it related to "Central/South American Organizations" or "Other Major Criminal Organizations." See https://oig.justice.gov/reports/FBI/a0439/app7.htm.
So I didn't really want to do this, but the United States Department of Justice isn't being very cooperative, and circumstances have shifted a bit.
In my FOIA lawsuit over records involving Bola Tinubu, who supposedly won the Nigerian presidential election, the IRS previously responded by stating that records were exempt from disclosure because they might be considered tax information. That sounded kind of ridiculous because in the 1990s, one of the many federal crimes that Mr. Tinubu committed was failure to file a tax return. So I pressed the matter.
After I filed my lawsuit, it turns out the IRS conducted a pretty thorough search for records and didn't turn up anything because the agency has record retention policies to prevent the entire country from drowning in paperwork. (The IRS's computer systems are very old; much is still handled on paper. Long story.) I had a phone call with the IRS attorney and USDOJ attorney about this earlier in the month, and the IRS attorney e-mailed me a declaration from another IRS attorney explaining how the search was conducted. That looked fine to me, but it was kind of strange because the declaration wasn't signed, it was a draft, and it was being provided in an e-mail to me that wasn't filed with the court.
I asked the lawyers to please file a signed version with the court. They hemmed and hawed and said they weren't sure how to do that properly—even though it seems fairly obvious—and in any event, didn't follow through.
Then the Nigerian Supreme Court moved up the date of the election hearing to *Monday*, October 23rd, three days from now (!), very likely to front-run the release of any FOIA documents.
We still don't have any FOIA documents from the federal agencies, but we do have this random IRS declaration about the documents they *don't* have. So I think in the interest of transparency, even though it's not officially on the docket like I asked for it to be, it should be out there. It at least reiterates that Mr. Tinubu was under investigation.
If a signed version gets filed on the court docket later on, everyone can just disregard this document, and I may actually delete it. I don't want a draft declaration posted due to government sloppiness to confuse anyone.
So contrary to all of the reporting in Nigerian media right now, Bola Tinubu has not officially filed any motion to do anything regarding the FOIA requests I filed about him. It's true that his attorney did file an appearance on his behalf to intervene. And it's also true that a motion will be forthcoming most likely. But it hasn't happened yet! So it's a bit strange to keep reading that it has.
The Nigerian media has covered the controversy over his Chicago State University diploma in a similarly confusing manner. Yes, he forged the diploma. He probably couldn't find it and needed to show something that suggested he graduated. But the records show that he was there and that he did receive a diploma. So while his dishonesty is noteworthy, that doesn't mean he never attended or graduated from the institution.
Today, in an article about Carvana Co. (CVNA) earnings—which were moved suddenly last night from early August to this morning, before market open—CNBC neglected to mention what Bloomberg referred to as a $1 billion share issuance. From a share price perspective, CNBC covered the positive, which was that Carvana had restructured part of its debt, but apparently glossed over the negative, which was that existing shareholders would be diluted.
The information about the share issuance was stated in the SEC forms filed by the company, but not in its press release. This isn't too surprising because Carvana Co. (CVNA) is run by a convicted felon and his son. Also, they sell used cars. Any reasonable person, let alone journalist, might be skeptical and on guard especially given the late-breaking change of earnings announcement and the fact that the internet was abuzz last night with rumors of new shares being issued.
I pointed this out to the reporter on the article, Mike Wayland. At 5:27 A.M. PDT, he said, "Thank you for the email. You are completely correct, that should be in there. Was unfortunately distracted with another editing problem and missed that. It is being updated now." This was about an hour-and-a-half after the news broke, and Carvana Co. (CVNA) stock was up 35% and climbing. When I pointed out that there should be an alert to offset the first alert containing the omission, he balked, stating, "articles are frequently updated as information becomes available."
The problem is that the information was available when Mike wrote his article. He just didn't bother to do any research.
Presumably Mike's billion-dollar editing error is fixed now. But it's not clear that it matters; the damage is done.
On Thursday, July 13th, CNBC published a headline suggesting that Ripple had sued the SEC and won a victory. No. The SEC sued Ripple. Which makes things slightly different. I've talked about why that order is a logical disaster elsewhere. (So has Matt Levine, who practically wrote a book about it in his newsletter for Bloomberg.)
Then, on Friday, July 14th, CNBC reported that the FTC's Ninth Circuit appeal had been denied—in a day. The headline was basically accurate, that the "bid," meaning "motion," for a preliminary injunction had been denied. But denying one motion in an appeal is a very different thing than denying an entire appeal.
Fortunately, CNBC corrected both of these problems after I explained them. But come on guys.
Judge Torres basically says a few things that are deeply concerning, no matter what you think about cryptocurrency:
1. She says that depending on how closely investors read disclosures, that might affect whether something is a security. (What?)
2. She says that it effectively might not be possible to regulate algorithmic trading of securities because the things being traded might not be securities since the computers don't read the disclosures. (What?)
3. She says that what the SEC describes on its website as "essential managerial efforts" of a token don't matter as far as "profits derived from the efforts of others," and therefore XRP isn't a "investment contract" under certain circumstances. (What?) So I guess that if Ripple went out of business and XRP could keep trading as usual, she might have a point, but it doesn't seem to me that it would in that eventuality. *See* every other crypto token that halted trading after an implosion.
Naturally, social media and too-quick-to-publish-because-they-want-to-be-first reporters are totally misinterpreting this ruling, which also has a footnote on page 23 stating, "The Court does not address whether secondary market sales of XRP constitute offers and sales of investment contracts because that question is not properly before the Court." Thank god, because this Court clearly isn't particularly well versed in anything securities related.
The fundamental flaw in Judge Torres's reasoning regarding the Programmatic Sales portion of her ruling seems to be A) that she is interpreting Howey's third prong, that an investor "is led to expect profits solely from the efforts of the promoter or a third party" (on page 11 of the ruling) to mean that the profit has to be based on the work on the *specific* promoter of the security, in this case, Ripple. That's not what it says.
In this case, the third party (or in reality, many parties) would be everyone else buying the tokens. That's because cryptocurrency is a giant Ponzi scheme. With no inherent value, everything rests on Greater Fool theory, i.e. you hope that someone else is foolish enough to pay more for the worthless token than you did. So investors absolutely put their money in hoping to "profit[] solely from the efforts of the promoter or a third party." The precedent, which by the way is from 1946, says nothing about the role of a company like Ripple specifically.
Judge Torres also compares XRP tokens to a horse or an automobile based on other precedent, saying that people might not expect those things to appreciate in value. The analogy is ludicrous. There has at no point been a globally distributed network of people trying to pump up the value of a given car or horse, or even type of car or type of horse.
It seems pretty clear she didn't talk to any experts in the field before writing this one. Yikes.
I am going to start documenting all of the errors I find on CNBC.
CNBC is a really important media outlet and crucial resource for public markets. But the frequency with which it posts misinformation is just astonishing, and that's not even counting the infamous Jim Cramer, who I'm embarrassed to say graduated from the same school I did.
So here's a story from a few days ago. Coinbase Global, Inc. (COIN) filed an Answer in the SEC's lawsuit alleging that it had sold unregistered securities. CNBC reported, both on its website and in a video segment, that Coinbase Global, Inc. (COIN) had asked the court to dismiss the lawsuit. That wasn't true. If it had, it would have filed a Motion to Dismiss, effectively the opposite of an Answer. The video segment even said that Coinbase Global, Inc. (COIN) had asked for dismissal even as the graphic displayed showed the document filed, which clearly said "Answer" on the first page. Apparently editors don't know the difference, which is concerning.
Today, reporting on a confusing court order on summary judgment in the SEC's lawsuit against Ripple, CNBC reported "The news marks the end of a three-year battle between Ripple and the Securities and Exchange Commission, which initiated a lawsuit against the company in 2020 for breaching U.S. securities laws by selling XRP without first registering it with the agency." See https://www.cnbc.com/2023/07/13/xrp-surges-after-judge-delivers-a-huge-win-to-ripple-in-its-case-against-the-sec.html. That's also not true. The court order says a trial will be scheduled, so the case is ongoing.
If you've followed me on Twitter, you know that I am rather skeptical of Tesla's undefined "deliveries" metric. So here's what actual vehicle registrations look like in New York as of yesterday.
It's not at all clear why they're even manufacturing the Model S and X anymore. Barely anyone buys them and the reliability of the Model X in particular is abysmal.
Elon did not respond. I sent his attorneys two polite warnings about default. He still did not respond. His attorneys also did not respond (they're also cross-defendants), which is consistent with what they previously told me: they believe there is no lawsuit at all.
As described above, they believe there is no lawsuit because the court lacks jurisdiction given that they dismissed their claims voluntarily on May 1, 2023. I didn't file a cross-complaint until May 3. By their logic, the court had no authority to issue summonses on that cross-complaint because it was filed after.
Well, I thought about it. And I realized that even if you agree with Elon's lawyers' reasoning, he's still wrong. That's because California law bends space-time.
There's this thing called California Code of Civil Procedure § 1010.6(a)(3)(B).
It says anything electronically served gives the other side two extra days to respond. So basically, filing two days later is like filing on the same day—or maybe even earlier on the same day.
Guess who served the request for voluntarily dismissal electronically?
Now guess who got two extra days to respond?
And guess who responded exactly two days later?
(Answers: Elon, me, and me.)
Suffice it to say that Elon's strategy here is interesting.
He filed the initial [CA state] lawsuit, which means that there was no need to serve a summons on him for the cross-complaint. He was served the Cross-Complaint electronically on May 3rd and the First Amended Cross-Complaint electronically on May 15th.
After his lawyers received the Cross-Complaint they tried to revoke their agreement to receive e-mail service, but as I pointed out, that was unethical, a violation of California law, a violation of State Bar Rules, and a violation of the Local Rules of the Superior Court of Alameda County.
Oops.
And then I added a claim for abuse of process involving those violations (and others) to the First Amended Cross-Complaint, and served that on Elon via his Hardcore Litigation Department on the 15th.
They get 30 days + 2 for electronic service (because California law makes no sense).
So May 15 + 30 days = June 14 + 2 days = June 16 = tomorrow.
Normally when someone has a jurisdictional argument like the one Elon's lawyers are now making they file that in a motion to dismiss, or in California, a "demurrer" as they call it.
Will they file anything? Or is there no need because the case is so closed and the summonses are invalid and the service is inapplicable and no court can contain the great Elon Musk and I'm so hopelessly wrong and in need of legal counsel as they keep reminding me?
We shall see!
(One hint: under California Code of Civil Procedure § 430.41, if you intend to file a demurrer, you have to "meet and confer" "in person or by telephone" at least five days before. They haven't done that, and have expressed no interest in doing so. Last time they had to it didn't go so well.)
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CONF ORD 7.25.2023/Kevin Kulak v. Itshak ("Itzik") On, Court of Chancery of Delaware Case No. 2023-0011-KSJM