The Chain of Issuance: The People and Patents That Built The Financial Surveillance Network

Whitney Webb & Mark Goodwin- The patent hoarding developers and investors associated with PayPal and Google who built the first iteration of e-commerce and digital advertising have turned to the blockchain to fulfill their vision of total financial surveillance and the circumnavigation of government-issued money.

Key Takeaways (click arrow to expand)

• The same technology incubator behind Yahoo!/Google’s AdWords commercial advertising model, Idealab, was instrumental in the founding of PayPal.
• PayPal co-founders have admitted to being advised by numerous U.S. intelligence agencies at its founding. Palantir, the CIA-funded company behind the current private-sector iteration of the U.S. surveillance state, started as the anti-fraud algorithm at PayPal.
• CargoMetrics, the shipping and ocean analytics company founded by Ghislaine Maxwell’s husband Scott Borgerson, shares advisors and funders with Paxos, the issuers of PayPal’s stable coin PYUSD. The company’s marriage of currency trading and satellite surveillance is now being replicated by the Endeavor and Tether-backed Satellogic.
• Paxos and Blockchain Capital were extremely early members of the Bitcoin network, specifically within the mining of bitcoin, both boasting of a significant share of hash rate at the network’s infancy.
• Brock Pierce, an early pioneer of Bitcoin and cryptocurrency including the founding of Tether and Blockchain Capital, has numerous connections to Idealab, Goldman Sachs, and PayPal.
• Blockchain Capital, the first venture firm in the cryptocurrency space, emulated Idealab’s shared equity model, forcing collaboration and ensured mutual success/failure of the earliest companies in the industry.
• Many of the figures, be it individuals, companies or firms, featured in this piece hold the patents cited by the industry titans that built the digital financial network.
• Bill Gross, the first investor in PayPal and founder of Idealab, has numerous connections to intelligence and government contractors via the data brokers that service his company Azira, the world’s leading provider of human movement data.

Data is the most liquid commodity market on the planet. In the modern computer and smartphone era, everywhere you go, everything you say, and everything you consume is quantifiable among the nearly infinite spectrum of the digital information market. The internet today, along with other digital technologies for computation and communication, serves as comprehensive e-commerce infrastructure, facilitating the entire life cycle of designing, producing, distributing, and consuming a wide array of data. Due to expansive growth in both the hardware and software sectors, the seamless transition of existing data, or information goods, from traditional analog formats to digital formats is easily achievable, not to mention the collecting, storing, querying, and distributing of data formats in ways otherwise infeasible in the analog world.

A preliminary examination of digital data reveals that, while they all exist as purely bits and bytes, their respective markets undergo distinct economic transformations with each technological maturation. For example, mass surveillance was never practical at a large scale when the creation of even a single photo meant hours of labor within a specialized photo development room with specific chemical and lighting conditions. Now that the proliferation of smart grids has led to a camera on every city street corner, and the mass adoption of smart phones has placed a microphone in every pocket, and the rise of a truly global internet has birthed the means to transmit said data at zero cost across the planet, the market conditions for mass surveillance have unsurprisingly given rise to mass surveillance as a private sector service. Mostly, we have seen this new market take shape in the form of popular, free-to-use yet for-profit social networks, email providers, and search engines.

As the global financial system has embraced the computer age, the parsing of a user’s banking and financial information have become one of the most valuable and efficient means for public and private sector organizations to glean and amass information about any individual. This technological maturation furthered with the integration of the internet, as the infrastructure providers of the DotCom boom at the turn of the millennium quickly monopolized the market of banking information. They accomplished this through the invention of e-commerce via advances in encryption and telecommunication technology. Only a decade later, at the start of 2009, the internet as a commerce platform led to an otherwise impossible proliferation of a novel database structure known as the blockchain –– an immutable and public ledger with an entry created for every financial transaction. In the case of Bitcoin specifically, information itself has become a commodity, and a nearly trillion dollar market has developed around upholding the distributed database across tens of thousands of nodes across the globe.

While Bitcoin and the associated blockchain industry are often positioned as a bastion of freedom and a means to circumnavigate centralized power structures, the reality is that – even while economic policy and the ability to debt pardon is taken away from nation state central banks – the means of upholding the trustless settlement of information as a commodity now solely lies within the infrastructure providers themselves. These infrastructure service providers include the energy companies powering the server farms, the telecommunication firms building and maintaining the fiber optic cables or satellites of the global broadband internet system, and the software firms processing, creating, and distributing search results and content across their various iterations of network types.

This piece focuses on the network of developers, investors, and figureheads behind the first iterations of online commerce that appeared right before the turn of the millennium. It should perhaps come as little surprise that many of the same venture firms and patent barons behind the DotCom boom, enabled by internet information brokers such as Google, and the ensuing e-commerce revolution dominated by the rise of PayPal, are once again heavily influencing the creation, the lobby, and the infrastructure of issuance itself as the next guided evolution of the global financial system takes form via the digitalization of the dollar on the blockchain.

Our most recent article, The Chain of Custody, ended with Xapo’s Wences Casares and Paxos’ Charles Cascarilla joining BlackRock’s iShares team in ringing the Nasdaq opening bell for the January 11 launching of the 11 Bitcoin spot ETFs. This was a critical moment in the evolution of the previously described bitcoin-dollar system and, while Casares’ invitation was presumably due to his development of Xapo’s infamous bitcoin custodial solutions (later sold to BlackRock’s custodian Coinbase in 2019), Cascarilla’s appearance is perhaps less obvious at first glance. A long time friend of Casares, Cascarilla founded Paxos purposefully to build out the highly regulated infrastructural needs of a blockchain economy, with a specific focus on U.S. dollar stablecoin issuance –– a task he described as “a strategic national security” priority for the United States during testimony before the House Financial Services Committee in December 2021.

“Well, I think one way to frame this is thinking of money as a product. And maybe we don’t always do that because it’s so ubiquitous and we all use it every single day. But it really is a product. And if you think of it as a product, is it meeting the needs of users. Is it meeting the needs of the economy as it continues to shift and become much more digital? And I think the answer is no. And that’s what stablecoins are providing is a way of having money have different properties, become a different product, adapt to new technology. And this is an important shift that’s happening. And if the dollar is not able to respond to this new technology, to the new needs of users, then someone else will, something else will…it’s crucial for the US dollar to be able to meet these changing needs. And if it does, I think it actually is likely to increase its ubiquity even more. Because the reality is people want dollars, not just digitally in the US, but they want them all over the world.

Anywhere you go, people want to use a US dollar. They’re using physical currency. They can’t get bank accounts. Or maybe they have to go use crypto because they can’t get dollars. And if you can get them and you can use them ubiquitously and very simply like you can when they’re tokenized, it really will actually change the position of the US dollar for a real positive. But keeping that reserve currency position is something that’s also will depend on regulation. So if we get it right, I think this is a huge opportunity for the US and for the dollar. If we don’t get it right, it could be a real huge problem. An innovator’s dilemma is something that doesn’t just exist for companies, it also exists for currencies as well. And we need to meet that challenge.”

– Charles Cascarilla on Yahoo Finance December 9, 2021

The Set Up: Paxos Puts PayPal On The Blockchain

The company that would later become Paxos was started by Charles Cascarilla in 2010 as a bitcoin mining farm. The proto-Paxos mining farm was built inside the former Manhattan branch office of the failed French bank Dexia, infamous for being the largest international borrower from the Federal Reserve’s discount window during the Great Financial Crisis during which it borrowed over $33 billion through the New York branch in 2008 and 2009. Due to a clause in their lease supplying zero cost energy at the 57^th and Park location, Cascarilla “maxed out the floor plate with servers and ASICs and GPUs” and eventually controlled “up to 25% of Bitcoin’s network capacity.”

Cascarilla, an Ohio native who spent nearly 2 years at Goldman Sachs, co-founded a hedge fund called Cedar Hill Capital Partners, which he directed until leaving to work full time on Paxos, which was officially formulated in 2012 under the name itBit. Cascarilla had first heard of Bitcoin in 2010, forming the aforementioned mining farm only a year after Bitcoin’s launch. “We were there from the very beginning” explained Cascarilla. “I know I definitely was not patient zero but I’ve got to be like patient 100 or something of the whole network.” He claims to have been drawn to Bitcoin due to his experience in the traditional finance system during the 2008 financial crisis. “The technology made sense to us, because we had seen how the plumbing of the financial system had failed us and exacerbated the crisis.”

Cascarilla co-founded itBit with Rich Teo in Singapore in 2013, all while working on making inroads in New York City’s infamously difficult regulatory environment in regards to cryptocurrencies. More specifically, they sought to secure a trust company charter in the United States for Paxos. They moved back to New York and began to focus on what would become their bread and butter –– a regulatory compliant, white glove service for issuing tokenized dollars known as stablecoins. In September 2018, Cascarilla published the PAX Standard white paper describing a new tokenization standard of short-term U.S. Treasuries known as T-Bills, and the stablecoin itself (PAX) was released as an ERC-20 token on the Ethereum blockchain shortly thereafter. In that paper, Cascarilla also described Bitcoin as “plagued by significant issues that limit its utility”, while concurrently pushing that PAX represents “a significant advancement in digital assets” by “leveraging the infrastructure, oversight and stability of the traditional financial system” with “the speed of the internet.”

Two large exchanges from Asia, Huobi and Binance, were quick to pounce on the new regulatory and infrastructure standard set by PAX, and launched their own stablecoins using Paxos’ service in 2019. Eventually, Paxos had claimed the regulatory mountain, gaining not only approval from the US’ Security and Exchange Commission to “settle stocks on a blockchain,” but the first and only crypto service provider to access a full account with the Depository Trust & Clearing Corporation (DTCC), the largest settler of securities in the entire global financial system. Perhaps instrumental to receiving this account is the DTCC’s Steering Committee member, Steven Wager who worked at Paxos from 2015 to 2017 after nearly 7 years at Citi, before working on Fidelity’s, J.P. Morgan’s and BNY Mellon’s digital assets teams. He now works at Fireblocks, which was founded by Israeli intelligence veterans and enjoys close ties to the Israeli state.

The Head of Strategy of Paxos, Walter Hessert, described Paxos as “one of the most regulated players and platforms in the space” who “ask for permission rather than forgiveness.” Hessert articulates that “we’re just the infrastructure” and firms which include “the likes of PayPal, Venmo and MercadoLibre” are using “[Paxos] to power access to crypto” by “building on top of our platform” via APIs “to power B2B2B or B2B2C type solutions with digital assets.” He claims Paxos directly “powers about half a billion in user wallets” via their “crypto brokerage infrastructure” while also being “the largest issuer of regulated stablecoins.” Cascarilla takes this a step further by claiming that “what we’re here to do is be an infrastructural layer so anybody can join this ecosystem.”

Lesley Chavkin, Paxos’ Global Head of Public Policy, summarized her role as “engaging with policymakers in the United States and key markets overseas” to inform “the development of sound policies on digital assets.” Chavkin claims we are at “an inflection point when it comes to blockchain technology” with “so much potential to build a framework that supports responsible innovation and drives much-needed modernization in the financial system.” She stresses “it will require dialogue between policymakers and industry to get it right” and that “we won’t have another shot at this.” Chavkin joined Paxos in February 2024 after 2 years as a Senior Fellow at the Geoeconomics Center for the Atlantic Council, a brief stint as Head of Policy at Stellar during 2023, a year as a Vice President of Global Engagement at J.P. Morgan Chase, almost 6 years at the U.S. Treasury, and a nearly 5 year career as an Economic Analyst at the Central Intelligence Agency.

In a discussion with Blockworks, Cascarilla spoke on the importance of defining stablecoins. “To me, a stablecoin is a tokenized asset. The asset used to be on a centralized database, and now it’s on a decentralized database. It’s still the asset.” Cascarilla made note that as it relates to Tether, the largest stablecoin on the market today, “they’re not totaling T-Bills and tokenizing the T-Bill” but rather “they’ve tokenized a liability of Tether and they hold a bunch of assets that fluctuate in value and say it’s always worth a dollar.” He refers to this service as being akin to a bank, not a tokenized asset issuer, while noting that “Paxos only tokenizes T-Bills with an average maturity of less than 30 days.”

Paxos maintains FDIC-insured deposits for their stablecoins at BMO Bank National Association, Customers Bank, State Street Bank and Trust Company and Western Alliance Bank. The first listed bank, BMO, or Bank of Montreal, was chaired by Charles Bronfman –– the uncle of the Endeavor-connected Edgar Bronfman Jr. –– throughout the 1980s, and has two connections of interest with fellow stablecoin issuer Tether: in 2017, $61 million of the funds supposedly backing their token were placed in their General Counsel Stuart Hoegner’s account at BMO, and a year later the company hired the former BMO AML Quality Control Manager officer Leonardo Real to serve as its new chief compliance officer (CCO). While BMO purchased Chicago’s Harris Bank in 1984, becoming the first Canadian bank to acquire an American branch, Bank of Montreal’s operating head quarters remains in Canada and is currently the country’s oldest bank. In the aforementioned Senate testimony, Cascarilla stated that “without reputable, US dollar backed stablecoins or a central bank digital currency and the infrastructure to support them, it will become less viable for other countries and multinational companies to continue using the US dollar as the global reserve currency.”

He added that “Paxos has created a digital dollar, not a digital representation of a dollar. What’s more important, we have a primary prudential regulator – the NYDFS [New York State Department of Financial Services] – and they oversee our token and the Trust company to make sure all the reserves are held bankruptcy remote and fully segregated. If Paxos fails, you still have a dollar. It’s not meant to be a sexy business, it’s about financial innovation.” (emphasis added)

Cascarilla also explained that the intention of Paxos is to “replatform all the assets in the financial system” and that “it’s important to have tokenized dollars because they are the lifeblood of the system.” “We did this because we thought we could change the actual basis of financial services, both the plumbing and broadly in how people consume them,” Cascarilla said. In their quest to achieve these goals, Paxos has built out enterprise blockchain solutions for “institutions like PayPal, Interactive Brokers, Mastercard, MercadoLibre, Nubank, Bank of America, Credit Suisse and Societe Generale” in addition to “StoneX and Revolut.” Paxos, under the moniker Castor Pollux Holdings SARL, had filed for a patent in 2016 entitled “Device, system, and method for transfer of commodities” which would later go on to be cited by J.P Morgan, Bank of America, IBM, Accenture, the Chicago Mercantile Exchange, eBay, and Microsoft, among others.

Paxos’ Seed Round in November 2013 raised $3.3 million and was funded by Ben Davenport of Blockchain Capital, Canaan Partners, RRE Ventures, Liberty City Ventures, Jay W. Jordan II and Barry Silbert’s Digital Currency Group. Other notable investors include Patricia Kemp’s Oak HC/FT, David Rubenstein‘s Declaration Partners, Peter Thiel’s Founders Fund, Peter Thiel’s Mithril Capital, PayPal Ventures, Blockchain Capital, Drexel Burnham Lambert’s Ken Moelis, FTX- and Tether-affiliated Alameda Research, and the Endeavor-affiliated MercadoLibre founded by Marcos Galperin.

Among Paxos’ largest institutional integrations was the 2021 partnership with Facebook, when Paxos collaborated with their Diem project to bring their PAX stablecoin to WhatsApp’s nearly 2 billion users. The wallet integration for the stablecoin project formerly known as Libra was called Novi, with their website boasting “transactions will be instant, free, and will not affect WhatsApp’s end-to-end encryption.” Novi and WhatsApp would require users “to provide government-issued photo ID cards” and even “video selfies” in some cases “to ensure transaction meet international anti-money-laundering (AML) laws.” The “WhatsApp’s Novi/Paxos transactions” noted offering “something largely unheard of in the crypto world” with an ability to process a “full refund for unauthorized transactions.” This collaboration was termed “the best farewell gift from the best team ever” by former PayPal President and head of the Diem project David Marcus as he departed Meta, WhatsApp’s parent company, to focus on institutional Lightning payments with his start-up LightSpark.

The integration was announced a day after Rep. Maxine Waters (D-Cal.), the head of the House Financial Services Committee, questioned Cascarilla in a hearing on “Digital Assets and the Future of Finance.” Waters directed the first question of a four-hour session to the Paxos CEO saying, “I’m a bit concerned about your company Paxos’s partnership with Facebook, which is now calling itself Meta. As you know, Facebook has attempted several times to enter the cryptocurrency market starting in 2019.” Waters added, “What is stopping Facebook from in the future allowing its nearly 3 billion monthly active users to make payments and save funds with a PAX dollar or other previously issued stablecoins through a Novi wallet?”

On August 7, 2023, PayPal announced the launching of their U.S. dollar stablecoin, PYUSD, issued by Cascarilla’s Paxos Trust Company. PayPal USD would be “available to consumers, merchants and developers to seamlessly connect fiat and digital currencies”, while noting it would be “the only stablecoin supported within the PayPal network.” Launched as an ERC-20 token on Ethereum, PYUSD will be “available to an already large and growing community” and “can be easily adopted by exchanges” while being “deployed to power experiences within the PayPal ecosystem.” PayPal had successfully filed for a BitLicense from NYDFS in June 2022, after previously having obtained a conditional BitLicense. In addition to PYUSD issuance, PayPal and Paxos are “focused on increasing consumer and merchant comprehension of cryptocurrencies, stablecoins and central bank digital currencies (CBDCs)” while they work “closely with regulators” as the cryptocurrency industry matures. “The shift toward digital currencies requires a stable instrument that is both digitally native and easily connected to fiat currency like the US dollar,” PayPal CEO Dan Schulman said in a statement. “Our commitment to responsible innovation and compliance, and our track record delivering new experiences to our customers, provides the foundation necessary to contribute to the growth of digital payments through PayPal USD.”

PYUSD was first accessible on PayPal itself, before compatibility was made with PayPal’s Venmo in September 2023 and later the Visa-partnered Xoom in April 2024, giving approximately 160 countries access to PYUSD. PayPal’s first CFO, Roelof Botha, had left after the IPO to join Sequoia Capital and – while there – joined the board of Xoom and helped navigate their acquisition by PayPal in November 2015. PayPal ultimately acquired Xoom for $890 million, with Brian Nowak of Morgan Stanley commenting that the acquisition allowed PayPal to enter the $580 billion international remittance market which is “ripe for technological disruption.” Notably, Andrew Jeffrey of SunTrust Robinson Humphrey suggested that the acquisition could “protect” PayPal from potential exclusion from Android Pay and Apple Pay wallets. Bank of Montreal, only months before, had already labeled PayPal as “the purest pure-play” in the mobile payments market before the partnership massively expanded their user base.

Paxos had partnered with PayPal near the end of 2020, allowing users to buy, hold and sell Bitcoin, Ethereum, Bitcoin Cash and Litecoin “directly within the PayPal digital wallet.” At the time, CEO Schulman commented that “the shift to digital forms of currencies is inevitable, bringing with it clear advantages in terms of financial inclusion and access” noting the “efficiency, speed and resilience” of a digital payments system giving “the ability for governments to disburse funds to citizens quickly.” The PayPal CEO claimed their “global reach, digital payments expertise, two-sided network, and rigorous security and compliance controls” would provide “the opportunity, and the responsibility, to help facilitate the understanding, redemption and interoperability of these new instruments of exchange.” He claimed PayPal was “eager to work with central banks and regulators around the world” in order “to meaningfully contribute to shaping the role that digital currencies will play in the future of global finance and commerce.”

Rep. Patrick McHenry (R-NC), chair of the House Financial Services Committee, perpetuated this sentiment in a statement at the time of PYUSD’s launch: “This announcement is a clear signal that stablecoins — if issued under a clear regulatory framework — hold promise as a pillar of our 21st century payments system.”

“It’s very fitting that someone like him is helping PayPal bring this to millions of people that necessarily at first have to do it through custodial services,” Wences Casares told CoinDesk in 2020. “Chad [Cascarilla] stands quite tall and quite alone as someone who can hold a conversation with a Bitcoin Core developer or he can turn around and have a conversation with Jamie Dimon or Steven Mnuchin. It’s very unique and we’re all in Bitcoin better for him doing that.”

Past members of the Paxos board include Sheila Bair, the 19^th Chair of the US Federal Deposit Insurance Corporation under President George W. Bush and Chair of the CFTC under President Bill Clinton; Robert Herz, partner at PricewaterhouseCoopers and board member at Fannie Mae, Morgan Stanley and the Sustainability Accounting Standards Board Foundation; and Duncan Niederauer, partner at Goldman Sachs and board member at First Republic Bank, the DTCC, and NYSE.

The current Paxos’ board is reasonably small in number but packs a formidable punch of public and private sector stalwarts including Scott Malpass, former Vice President and Chief Investment Office of the University of Notre Dame while on the board of The Vanguard Group and the Institute for the Works of Religion in Vatican City, commonly referred to as the Vatican Bank; Brian Stern, a former manager at McKinsey & Co and Director at Merrill Lynch currently serves as a partner at David Rubenstein’s Declaration Partners after serving as Head of Strategic Investments for Stone Ridge Asset Management, eight years as Managing Director and Head of BlackRock Private Markets after a stint in the US Treasury as a member of the Presidential Task Force on the Auto Industry; Patricia Kemp, co-Founder and Managing Partner at Oak HC/FT having previously held positions at Hewlett Packard and Merrill Lynch; J. Christoper Giancarlo, the 13th chair of the CFTC, former US Financial Stability Oversight Committee member, co-founder and executive chairman of the Digital Dollar Project, senior counsel to the law firm Willkie Farr & Gallagher, chairman of the board of Common Securitization Solutions LLC venture between Fannie Mae and Freddie Mac, Senior Advisor at eToro, former director at BlockFi, a member of the advisory board of the Chamber of Digital Commerce, and director of the Citi-partnered American Financial Exchange (AFX) founded by the former Drexel Burnham Lambert’s Richard Sandor; Jim Manzi, a former chairman, president and CEO of Lotus Development Corporation, later acquired by IBM, and chairman of Thermo Fisher Scientific, having started his career as a research assistant for William F. Buckley before joining McKinsey & Co as a consultant; and lastly Bill Bradley, a former Senator from New Jersey, managing director of Allen & Company, a chief outside advisor to McKinsey & Co, board member at Starbucks, and an enshrined member of the Naismith Memorial Basketball Hall of Fame.

When outgoing Senator Bradley made his failed 2000 presidential campaign for the Democratic nomination, Manzi was a leading donor, having been one of the country’s highest paid executives after taking over as the CEO of Lotus. Paxos’ board aside, this would not be the last time these two would cross paths, as both were funders and advisors of the shipping analytics company CargoMetrics, founded by Ghislaine Maxwell’s husband, Scott Borgerson.

CargoMetrics: The Proto-Satellogic

Scott Borgerson, who “secretly” married the infamous, intelligence-linked Ghislaine Maxwell in 2016, resigned from the company he created – CargoMetrics – shortly after Maxwell’s arrest in order to “ensure his presence would not become a distraction from the work he believes in so deeply,” according to a company statement. Borgerson and Maxwell are believed to have met around 2012-2013 through “speaking engagements connected to ocean preservation.” However, Maxwell’s ocean preservation project, TerraMar, where Borgerson served on the board, and Borgerson’s own CargoMetrics have long suggested other interests in the ocean that go well beyond its preservation.

Borgerson grew up in Missouri, attending the same church as former U.S. Senator Bill Bradley, previously mentioned as a member of the Paxos board. Borgerson reportedly used Bradley’s backboard “for basketball practice” growing up. Borgerson later joined the Coast Guard and attended Tufts University. Shortly thereafter, Borgerson applied for a fellowship at the Council on Foreign Relations (CFR), where he became acquainted with Ed Morse. Morse, at the time, was Citi’s Global head of commodities, having previously worked at Lehman Brothers up through its bankruptcy as its chief energy economist as well as in the Carter and Reagan administrations. Morse recommended Borgerson as a CFR fellow and subsequently introduced him to commodity trading.

Borgerson’s CFR fellowship also led him to reconnect with Bill Bradley. As noted by The Institutional Investor, “Bill Bradley’s aunt called the former senator to say: ‘The son of a family who went to our church in Crystal City is in New York. Would you welcome him?’ Bradley did — and would later play a part in Borgerson’s career development.” At the time, Bradley was no longer a Senator and was a managing director of Allen & Company, a company linked deeply both to organized crime and Silicon Valley and whose top “deal makers” include another former member of Congress, ex-CIA analyst William Hurd, as well as George Tenet, who served as the director of CIA during the 9/11 attacks and the 2001 anthrax attacks. Bradley still retains that post at Allen & Company.

In 2008, while still at the CFR, Borgerson embarked on building a “data analytics firm using satellite tracking of ships” with a former classmate, Rockford Weitz, and their former PhD adviser, John Curtis Perry. The trio struggled to finance their idea and turn it into a company until Borgerson approached Randy Beardsworth, who he had met at a 2007 Coast Guard Academy Dinner. Per Beardsworth, the two “have been friends ever since.” Borgerson approached Beardsworth for help funding their new company GlobalFlows, which would later become CargoMetrics, in 2009.

Beardsworth, a former DHS Assistant Secretary, had joined Catalyst Partners, one of the most influential homeland security consulting firms, a year earlier. However, Beardsworth still maintained links to the federal government and was also advising the Obama transition team on aspects of DHS policy at the time Borgerson approached him. Prior to 2008, when he joined Catalyst Partners, Beardsworth had been a Vice President of ANSER, a Pentagon and CIA contractor whose top leadership had apparent foreknowledge of the 2001 anthrax attacks and which sponsored the “Dark Winter” bioterror exercise that predicted major aspects of those attacks just months prior. The attacks were initially blamed on Iraq until the anthrax strain was determined to be a strain only accessible to the U.S. military. ANSER had also previously helped draw up the plans for what would become DHS well before the 9/11 attacks that were then used to justify the agency’s creation. In great similarity to the Project for a New American Century (PNAC), which had significant overlap with the George W. Bush administration, ANSER – then run by former top CIA official Ruth David – warned of an imminent, “next Pearl Harbor” in the lead-up to 9/11. David is notably credited with creating the idea behind what is now In-Q-Tel, the CIA’s venture capital arm.

ANSER was also one of the earliest promoters of U.S. law enforcement use of biometric and facial recognition software, as well as of the “smart” virtual border wall on the U.S.-Mexico border that employs facial recognition. Notably, Beardsworth helped create and manage the earliest version of the “smart” wall, the Secure Border Initiative, as DHS Assistant Secretary for Strategic Plans under George W. Bush. In 2002, Beardsworth had previously helped create DHS, specifically its Border and Transportation Security Directorate, which includes CBP, ICE and TSA.

Beardsworth committed to fund CargoMetrics and brought on his friend Doug Doan, who also invested in the company. Doan is a former military intelligence official who joined DHS at its inception to provide “America’s private sector with a direct line of communication to” DHS and has since morphed into a venture capitalist at a firm he co-founded with Beardsworth, Hivers & Strivers Capital. Doan introduced Borgerson to “a few friends” who also agreed to fund the company.

Also joining the ranks of CargoMetrics funders in 2009 was Jim Manzi, the aforementioned former Lotus CEO, who “had mentored Borgerson since the company’s early days.” Manzi became an investor at the behest of his friend, Bill Bradley, who – as previously mentioned – had long-standing connections to Borgerson (in fact, Bradley once said of Borgerson: “we are homeboys”). Bradley would become an adviser to CargoMetrics, along with the aforementioned Ed Morse as well as Gerald Rosenfeld, who had just joined Lazard as vice chairman of investment banking after over a decade at top positions (e.g. CEO and deputy chairman) at Rothschild North America.

With Beardsworth, Doan, and Manzi in his corner, Borgerson’s CargoMetrics was able to attract its first VC investments. Later investors in CargoMetrics include former Google CEO Eric Schmidt – now a major figure in the U.S. military and intelligence communities’ AI policy and “heir” to Henry Kissinger; Paul Tudor Jones – a pro-Bitcoin hedge fund manager with close ties to Glenn Dubin (a very close Jeffrey Epstein associate) and disgraced film mogul Harvey Weinstein; Howard Morgan – a member of the Epstein-linked Edge foundation as well as a former developer of the early Pentagon-run pre-cursor to the modern internet who also helped launch and lead Bill Gross’ Idealab incubator (discussed at length in this piece) and served on the board of Idealab’s spin-off Internet Brands; Texan billionaire Billy Joe McCombs – co-founder of ClearChannel and former chairman of CIA contractor and mercenary group Academi (formerly Blackwater); Mehmet Sepil, whose company Genel Energy is co-owned by a consortium led by BP’s Tony Hayward and Nathan Rothschild; and Israeli billionaire Idan Ofer. Ofer is notable because he was chosen by the family of another Israeli billionaire, Shaul Eisenberg, after Eisenberg’s death to serve as the heir to his majority interest in Israel’s largest holding company, the Israel Corporation.

Eisenberg had created Israel Corporation with the Israeli state, which maintains a minority interest, in 1968. Shortly thereafter, Eisenberg became deeply connected to Israel’s intelligence apparatus and was later the person who first connected Ghislaine Maxwell’s father, Robert Maxwell, with the Mossad. When Maxwell first met then-head of Mossad David Kimche at a meeting with Eisenberg, Kimche reportedly told Maxwell that it was a “big question […] whether the State of Israel owns Eisenberg or whether Eisenberg owns the State of Israel.” During that same meeting, Eisenberg had tasked Maxwell with making connections in Washington, DC alongside top Mossad figures. Robert Maxwell did so, developing a close relationship with Eric Schmidt’s future mentor Henry Kissinger, among others.

Another institution that facilitated Robert Maxwell’s entry into the United States during this period, Rothschild North America, is also tied to CargoMetrics. As previously noted, CargoMetrics adviser Gerald Rosenfeld had been a long-time CEO of Rothschild North America. In the 1980s, Rothschild North America, then known as Rothschild Inc., played a major role in securing Robert Maxwell’s takeover of Macmillan, which was part of Maxwell’s “campaign to establish a strategic presence in the United States,” something he had previously been tasked with by Shaul Eisenberg and Mossad leadership. According to The New York Times, Maxwell’s Macmillan takeover was not only crucial to Maxwell’s efforts on behalf of Israeli intelligence, but also to “the Rothschild family, who yearn for a prominent foothold in Wall Street.”

Considering that Rosenfeld and Ofer have long represented the modern interests of Rothschild North America and Shaul Eisenberg, respectively, and considering the presence of other Rothschild-connected figures in financing CargoMetrics (i.e. Mehmet Sepil), it appears that CargoMetrics under Borgerson’s leadership sought to front for the same interests. This becomes even more likely considering that Borgerson married Maxwell’s daughter Ghislaine, who – after her father’s death in 1991 – pegged herself to the de facto heir to her father’s intelligence portfolio, Jeffrey Epstein.

The Rothschild connections made during this period may have had something to with CargoMetrics pivot around 2011, when it attracted many of the aforementioned individuals as investors and when Borgerson is said to have first met Ghislaine. It was also around this time that Borgerson sought to change the direction of the company, despite the complaints of his other co-founders, from just supplying information on cargo shipping to becoming a hedge fund. CargoMetric’s transformation was cemented after the company’s funders backed Borgerson’s ambition to forever alter the company’s course.

The new course Borgerson had charted saw the company link “satellite signals, historical shipping data and proprietary analytics for its own trading in commodities, currencies and equity index futures.” It built a “learning machine” that would allow the company to “automatically profit from spotting any publicly traded security that is mispriced, using what [Borgerson] refers to as systematic fundamental macro strategies.” Describing himself as “the Steve Jobs or Elon Musk of portfolio management,” Borgerson’s efforts to use surveillance of the world’s oceans to get an edge in currency and commodity trades were explicitly linked in new reports to past infamous of the Rothschild family, which – as noted earlier – boasts significant connections to several CargoMetrics funders and advisers.

As stated by the Institutional Investor:

CargoMetrics is pursuing a modern version of an age-old quest. Think of the Rothschild family’s use in the 19th century of carrier pigeons and couriers on horseback to bring news from the Napoleonic Wars to their traders in London, or, in the 1980s, oil trader [and Mossad asset] Marc Rich’s use of satellite phones and binoculars for relaying oil tanker flow.

Borgerson’s push to turn the company into a money manager and hedge fund was greatly influenced by Borgerson’s conversations with Peter Platzer. Platzer, a “friend of one of CargoMetrics’ original investors,” was the co-founder of Spire Global, a “satellite as a service” company that uses low-orbit satellites to track shipping, commodities and other things for its clients, including the U.S. military. It was recently taken public via a SPAC, where the company merged with the CIA-connected NavSight holdings, which counts several intelligence veterans on its board, including Gilman Louie – the first CEO of the CIA’s In-Q-Tel. Platzer, who spoke at length with Borgerson about using satellite surveillance data to trade currencies and commodities, had previously worked as a quantitative hedge fund manager at the Rohatyn Group. The Rohatyn Group was created by Nicholas Rohatyn, who led J.P. Morgan’s Latin American debt operations for over a decade, and continues to be heavily focused on profiting from that continent’s debt woes. Platzer only abandoned his Wall Street career after attending Singularity University, which was founded by Google futurist Ray Kurzweil and originally sponsored by Google and the Kauffman Foundation. As noted in previous Unlimited Hangout reporting, the CIA and Wall Street have long worked together as it relates to the “Latin American debt” situation, which has been aggravated by institutions like the IMF – recognized by the U.S. military as a “financial weapon” of unconventional warfare.

While companies like Spire provide this satellite surveillance data to trading houses and hedge funds, Borgerson’s CargoMetrics decided to use its extensive database to do the trading itself and manage money for clients, eventually managing $250 million. Their pivot brought them another backer, Blackstone Alternative Asset Management. Also during this period, Borgerson and Weitz filed for a patent in 2016 titled “System and method for generating commodity flow information”, which intended to provide “a global strategic picture of commodity movements generated by tracking ships from satellite and other sources” via data such as “vessel, port, cargo, weather, and market information” in order “to create a global strategic picture of commodity flows.” This patent referenced references a patent held by Spire Global titled “Systems and methods for satellite communications using a space tolerant protocol” and was later cited by a patent awarded to J.P. Morgan entitled “Systems and methods for managing a storage location associated with an exchange-traded fund of a physical commodity.”

However, in 2018, CargoMetrics began “winding down” its hedge fund and shifting again to become a data intelligence provider. After Borgerson’s departure, the company has since moved into leveraging satellite surveillance data into tracking “maritime [carbon] emissions” with big plans to soon focus largely on carbon trading.

The marriage of ocean surveillance with carbon trading can also be found in another entity where Borgerson served on the board, TerraMar. TerraMar, publicly, was aimed at creating a “global ocean community” whose “citizens” were granted passports to promote shared ownership over international waters, which are “owned” by no one. Within the inaugural list of TerraMar’s supporting citizens sits Maxwell as well as billionaire Richard Branson, who created the Carbon War Room with Idan Ofer; Professor Murray Gell-Mann, who had extensive ties to Jeffrey Epstein; and Edie Lutnick, sister of Cantor Fitzgerald’s Howard Lutnick (Epstein’s neighbor).

TerraMar, as part of its ocean “outreach” effort, employed Google Ocean, with Ghislaine Maxwell once remarking that “Google Ocean makes the high seas super-attractive and engaging.” Notably, Google co-founders Larry Page and Sergey Brin have controversial links to Ghislaine’s long-time “companion,” Jeffrey Epstein. Though Maxwell and others have framed the program as allowing people to virtually explore coral reefs and shipwrecks, Google Ocean’s real ambition lies in “maritime domain enforcement,” particularly as it relates to ensuring compliance with Marine Protected Areas, or MPAs. Notably, Peter Platzer’s Spire Global has also become increasingly focused on related aspects of ocean surveillance.

While MPAs appear to be an important part of conservation, they are largely being determined by Wall Street banker-run “environmental” NGOs, like the Nature Conservancy, as part of “debt-for-nature” swaps that are then imposed on debt-saddled countries in the Global South. Some MPAs, like in Seychelles, have been designed to essentially eliminate local subsistence fishing, making the only areas locals can easily access for fishing “protected areas” while multinational corporations exploit the fisheries that lie further offshore and out of reach of local fishermen. However, the main goal of MPAs seems to be creating MPAs that then serve as generators of so-called “blue carbon” credits for an upcoming global carbon market, where creditors of the “debt-for-nature” swap stand to benefit the most from the issuance of these credits. Those credits are insured and verified in part by preventing locals from accessing or using these areas through satellite and other forms of surveillance.

As past reports from Unlimited Hangout have shown, much of the UN-backed Sustainable Development agenda is about creating new markets, and using “sustainable” debt to impose them on nations specifically in the Global South, under the guise of sustainable development. The Sustainable Development Goals, again designed largely by bankers, seek to establish centralized control over these new markets and use “sustainable development” policy framework to generate artificial demand for these market’s new “products.” TerraMar, a UN-backed organization, was explicit about promoting the SDGs, particularly SDG 14 which deals with the world’s oceans, and worked to normalize promoting increased global governance of the “global commons”, a key policy within the SDG framework which seeks to incorporate “the commons”, including the unclaimed parts of the ocean, into these aforementioned markets. Indeed, Maxwell as well as Borgerson attended a CFR-linked event explicitly about “Governing the Ocean Commons.”

While Borgerson was active in TerraMar and its unique approach to “conservation,” he was specifically a promoter of the “preservation” of the Arctic. In 2013, he co-founded the organization Arctic Circle with then president of Iceland Olafur Ragnar Grimsson under the guise of raising awareness about climate change’s impact on the Arctic and to “facilitate dialogue and build relationships to confront the Arctic’s greatest challenges.” However, for Borgerson, his interest in the Arctic was not linked very much to conservation at all. Roughly two years prior, in July 2011, Borgerson testified before U.S. Congress about “defending U.S. economic interests in the changing Arctic.” Borgerson spoke of the need for the U.S. to seize the “historic economic opportunity presented by the Arctic’s radical transformation,” referring to the loss of Arctic ice that he attributes to climate change, and called the Arctic “the world’s last and potentially most attractive emerging market.” He then presented various resources that could now be exploited in the Arctic and economic policies the U.S. could pursue to strategically insert itself into this “attractive emerging market.”

Another emerging market of great interest to the U.S., Latin America, is quickly becoming ground zero for the use of technology similar to that once used and pioneered by CargoMetrics for the purpose of rolling out commodity-backed stablecoins and carbon markets, both of which are poised to hinge extensively on satellite surveillance.

For instance, a satellite company deeply tied to the Endeavor network known as Satellogic has been seeking to develop, alongside other companies, a Latin American carbon market called GREEN+ on the Bitcoin side-chain, Rootstock (RSK).

Satellogic’s board includes figures like former U.S. Treasury Secretary Steve Mnunchin, former top U.S. military official Joe Dunford, Cantor Fitzgerald’s Howard Lutnick (Jeffrey Epstein’s neighbor whose sister was a founding citizen of TerraMar), and Marcos Galperin of MercadoLibre (sometimes called the Latin American eBay). Lutnick’s firm Cantor Fitzgerald has a close relationship with the dollar stablecoin Tether, which also recently invested in Satellogic. Another player in the effort to link stablecoins, dollars and bitcoin –– Endeavor-linked Xapo Bank –– also has ties to Satellogic.

RSK co-founder Diego Gutierrez, a long-time associate of Xapo founder Wences Casares, stated in a recent interview that, in the near future, there will be a proliferation of commodity-backed stablecoins linked to the prices of commodities like “soy, wheat, corn or energy” and that these would soon prove “superior to any currency issued by the state.” In Argentina, where Gutierrez is from, efforts are already being made to expand the use of commodity-backed stablecoins, particularly as it related to crop yields via companies like the VISA-backed AgroToken. The data to determine the crop yields backing these currencies comes from satellite surveillance, a service that companies like Satellogic offer and which CargoMetrics was pursuing back in 2016.

The eBay of Latin America: MercadoLibre

As noted in previous Unlimited Hangout reporting, the Endeavor Network – closely tied to the Bronfman family, the so-called PayPal mafia and to eBay billionaire Pierre Omidyar – has been responsible for the success of several start-ups critical to digital finance in Latin America specifically. These Endeavor-backed companies include the aforementioned Satellogic as well as Endeavor’s earliest success MercadoLibre. MercadoLibre, often called the Amazon or eBay equivalent of Latin America, is an e-commerce giant that is now poised to dominate the new era of digital finance in Central and South America, particularly in economies where inflationary crises have pushed locals into dollar stablecoins and other digital currencies/assets. MercadoLibre is particularly interesting in the sense that it was backed by the very network that has built much of that same infrastructure in the U.S. –– i.e. eBay and PayPal –– to be a de facto subsidiary of those companies in Latin America.

This is why, in addition to the Endeavor connection, MercadoLibre has enjoyed such extensive ties with both companies. For instance, the Omidyar and PayPal mafia-linked Endeavor helped negotiate a deal where Omidyar’s eBay took a major stake in MercadoLibre (about one-fifth of the company) and helped direct major aspects of its development for years. As noted in previous Unlimited Hangout reporting, Omidyar as well as eBay have long-standing connections to U.S. intelligence, particularly as it relates to financial surveillance of eBay users, and it seems highly likely that those forces, through eBay, also influenced MercadoLibre’s early development.

After eBay sold most of its stake in MercadoLibre, in moved PayPal, which was owned by Omidyar’s eBay until 2014 (Omidyar remains its largest shareholder). PayPal made a significant investment in MercadoLibre in 2019 and, the following year, fully integrated payments between the platforms. The integration of PayPal and MercadoLibre has been extensive, with PayPal CEO Dan Schulman stating that the melding of the two companies was in part due to their “shared vision” “to help drive inclusion and access to the global digital economy.”

MercadoLibre’s ties to the crypto space also include significant connections with Paxos, with MercadoLibre becoming a major investor in Paxos in 2022. MercadoLibre announced its investment in Paxos alongside its investment in 2TM, the holding company for Brazil’s largest crypto exchange Mercado Bitcoin, which is also backed by Softbank. As previously mentioned, Paxos issues PayPal’s dollar stablecoin PYUSD. Yet, even before MercadoLibre invested in Paxos, Paxos had already become a big part of MercadoLibre’s efforts in the crypto space, with MercadoPago integrating Paxos’ blockchain infrastructure for Brazilian customers back in 2021. According to reports, as part of the deal, “Paxos will handle crypto trading and custody for MercadoPago users” and Paxos claimed at the time that MercadoLibre was “creating the biggest crypto market in Latin America,” with “Paxos power[ing] the experience.” That same year, MercadoLibre disclosed a $7.8 million purchase of bitcoin and its bitcoin holdings have since ballooned to $29 million.

MercadoLibre also has their own digital currency, Mercado Coin, which can be used to purchase products on MercadoLibre. Like many of the company’s crypto efforts, it was launched first in Brazil and uses the ERC-20 token standard. Mercado Coin is operated in partnership with another Endeavor-backed company, Ripio. Ripio has also facilitated MercadoPago’s crypto trading features in Chile, as well as Brazil and Mexico. Ripio is also partnered with Paxos on a yield-bearing stablecoin called THE Lift Dollar (USDL). As noted in past reporting, Ripio, Mercado Bitcoin and MercadoLibre collectively dominate most of Latin America’s crypto ecosystem, an ecosystem which has become tightly interwoven with the likes of both PayPal and Paxos. While Paxos’ most recent public investor was MercadoLibre, within their seed round was Ben Davenport, a former Microsoft, Google and Facebook engineer responsible for building Facebook Messenger, who eventually became a venture partner at Blockchain Capital.

Blockchain Capital and IdeaLabs

Blockchain Capital was the first venture capital firm to fund the blockchain ecosystem, having been founded in 2013 by Brock Pierce, chairman of the Bitcoin Foundation, and Bart and Brad Stephens, the sons of investment banker Paul Stephens. The firm was an early investor in over 70 companies, including Anchorage, Bancor, BitGo, Bitwise Asset Management, block.one (EOS), Blockstream, Coinbase, Circle, Kraken, Ripple, Securitize, and 0x as well as Xapo and Paxos.

The Stephens brothers met Pierce in 2004 when he was running Internet Gaming Entertainment (IGE), a company that pioneered the digital goods markets, focusing primarily on in-game items and currency found in MMORPGs, such as World of Warcraft and Everquest. Pierce had founded the IGE-related IMI Exchange in 2001 that built out DAX, the “largest virtual goods exchanges in South Korea and the US/Europe market” having “raised over $100 million from investors like Goldman Sachs and Oak Investment Partners.” Pierce would eventually be forced out as CEO of IGE by Steve Bannon after a significant investment in IGE was made by Bannon’s employer, Goldman Sachs.

Goldman Sachs’ leadership has long been closely tied to the Bronfman family, with top executives at the bank doubling as money managers for the Canadian liquor oligarch clan. The Bronfmans, with historical ties to organized crime and more recent ties to the NXIVM sex cult, are also closely linked with the aforementioned Endeavor network. Goldman executives have also been closely tied with American economic crises and the government responses to those crises, which have had the inevitable result of transferring wealth from regular Americans to the oligarch class. Examples include top Goldman executives like Robert Rubin, Henry Paulson and Steve Mnuchin conveniently serving as Treasury Secretary during periods of economic crisis response (i.e. Paulson and Mnuchin during the 2008 crisis and the Covid crisis, respectively) or developing deregulation policies that produced major economic crises (Robert Rubin).

Notably, the Bronfmans and at least one of the aforementioned Goldman Sachs executives were connected with Epstein as it relates to Epstein’s role as a financial hitman and “bounty hunter” in the 1980s and early 1990s. For instance, the Bronfmans were involved in an insider trading scandal that reportedly resulted in Epstein’s dismissal from Bear Stearns due to the SEC investigation of that scandal. Former Goldman executive Robert Rubin, who led the bank during the time it enabled Robert Maxwell’s theft of British pension funds and other financial crimes, was also the first person to invite Epstein to the Clinton White House in 1993 when Rubin was head of the National Economic Council. Rubin would become Treasury Secretary shortly thereafter.

Bannon, himself a Goldman veteran, also shared considerable ties with Epstein. Bannon filmed Epstein for an estimated 15 hours for a supposed documentary film that has never materialized and is said to have coached Epstein on how to respond to his reputational and legal woes. Bannon viewed Epstein as an intelligence asset as he was “intrigued by Epstein’s role as middleman for intelligence services in the United States and abroad.” According to Chuck Johnson, an FBI asset working in the “alt-right” movement with close ties to Bannon and Peter Thiel (who also met frequently with Epstein), Bannon sought to rival or partner with Epstein when it came to Epstein’s relationship with various intelligence agencies.

“It all started with video games for me. I became an internet or technology entrepreneur. As internet games became networked and virtual worlds started to emerge, I recognized that the virtual currencies in these online games had value like World of Warcraft and Second Life. And so I started a business (becoming a market maker and running exchanges). I ran basically the equivalent of crypto exchanges and platforms like Coinbase but for video games. This was the decade before video games so it [was] throughout the 2000s…I built up a supply chain of about 400,000 people that played video games professionally to mine those virtual currencies that I sold by the Billions and Billions of dollars all over the world.” – Brock Pierce

Pierce’s forays into the digital goods space led him to brush up against the blossoming e-commerce infrastructure at a time when online advertising and finance were anything but the juggernaut markets they are today. “We were instrumental in the launching of Alipay. We were Google’s largest advertiser for a brief moment. And we operated all over the world. [In] South Korea, we had 40% of the population over there as our customers.” Pierce told Venture Beat that he was “PayPal’s largest merchant for three years. Project IGE, which is what became their credit card processing for companies, I demanded it. I was on their advisory board…I drove all the early users in the beginning because I was so big with PayPal.” According to his LinkedIn, Pierce was a member of the PayPal Merchant Advisory Board in 2004.

“We also had a lot of economists spending time with us,” Pierce recalled. “Because if you had economic theories in the world, it’s very difficult to test those theories because the ramifications could be very damaging to society. But inside of these virtual worlds that you could almost think of as virtual countries, we could experiment with all sorts of things. So, professors were becoming tenured. And so, after a decade of doing that, I wanted to see if those same ideas could be implemented in the analog world. So, naturally, that brought me into Bitcoin pretty early on. And, I have spent a lot of time in cryptocurrencies as a result of that. So, it was virtual currencies and online games (video gaming on the internet) that led me here.”

“Before Blockchain Capital, I was cranking out startups like an incubator,” Pierce told Hackernoon.“I started a payments company called GoCoin, an exclusive distributor of top mining equipment called KnCMiner, took over exclusive distribution rights for the first Bitcoin ATM for all of Asia called Robocoin, gave CZ of Binance his first job in crypto, started [Puerto Rico’s] Noble Bank which was the first crypto bank in the world, started Expresscoin. I was one of the founders of Mastercoin and created the first ICO in the summer of 2013, then started Tether which now does $2 trillion a year in transactions, is the second most traded token after Bitcoin, and was the first real world asset to be put on the blockchain.” The dollar stablecoin Tether (USDT) was co-founded by Pierce (initially known as Mastercoin on the Omni Layer of Bitcoin) alongside IGE board member William Quigley, a partner at Clearstone Ventures, the spin-off of the infamous DotCom incubator, Idealab.

The Idealab Incubator

Idealab was founded by Bill Gross in 1996, and is the “longest running technology incubator” having created over “150 companies” involved in “more than 45 IPOs and acquisitions,” including Coinbase, eToys.com, Tickets.com, Gem, Bill Gates’ Heliogen, GoTo.com/Overture, Twillo, UberMedia, among others. The four main figures at Idealab, alongside Gross, were Bill Elkus, Jim Armstrong, and William Quigley.

Bill Elkus was paramount in the eventual transition of Idealab Capital Partners into Clearstone Ventures, but managed Idealab in its infancy. In the 1990s, Elkus was listed as a trustee of the J. Epstein Foundation alongside Jeffrey Epstein’s brother Mark, and was also business manager to the Epstein-affiliated Deepak Chopra. Elkus was also one of PayPal’s first board members.

Jim Armstrong managed ICP, or Idealab Capital Partners, including their Coinbase investment, and he would later go on to found March Capital with Gregory Milken, the son of Drexel Burnham Lambert’s infamous “junk bond king” Michael Milken. William Quigley, a Kauffman Fellow, would join the firm later on, having spent years in the commercial department of Disney. Quigley was also instrumental in the incubator’s relationship with Pierce and digital currencies at large. Idealab was initially funded by Goldman Sachs, J.P. Morgan, Mellon Ventures, and MIT, to name a few, before later developing a relationship with the notoriously corrupt CalPERs.

Before moving into venture and software incubation at the precipice of the DotCom boom, Gross had founded GNP Development, which he eventually sold to Lotus Development Company in 1986. At the time, Lotus was run by future Paxos’ board member Jim Manzi. “My brother, Larry, and I sold our software company, GNP Development, to Lotus Development and spent the next seven years as Lotus employees. But we felt like owners because, unlike other Lotus employees, Larry and I earned royalties on the products we developed for the company.”

Gross would later bring this motivational financial incentive to the structure of Idealab itself after noticing early on that there was little collaboration between company leads: “[…] I’d hoped that the owners of the various spin-outs would actively share ideas and knowledge with one another. They didn’t. But that figured: they didn’t have ownership interest in one another’s companies.” Gross rectified this by giving these executives “shares in Idealab itself”, meaning they would “hold equity in each other’s companies.” Some of Gross’ hired CEOs told him “that the equity stake in Idealab played a role in their decision to accept the job.” Gross himself received an annual salary of $250,000 and held over 390 million Idealab’s shares and options, amounting to nearly 42% ownership of the incubator by 2000 –– a year in which the firm claimed an operating loss of over $241 million.

This profit-sharing incentive was instrumental in Gross’ future development of the Idealab incubation structure. However, first it led him to develop Lotus Magellan which, according to Gross, “allowed PC users to quickly scan the contents of disks,” eventually released in 1989. Magellan scanned the directories and files on a drive (or floppy disks) and compiled a master index, aware of various file formats, providing the novel ability to view files without launching the source applications that had created them. Magellan was perhaps best known for its “fuzzy searching,” which connected said files via a relative frequency of keywords, allowing users to organize found related data despite storage location or format type, eventually facilitating the organization of files and directories. The principals of Magellan’s ability to query indexes and relate otherwise disconnected files would be instrumental in the proliferation of web-based search engines, and the massive online advertising industry that would bring profitability to these early web-crawlers –– an industry that Gross would not only propose, but dominate through choice investments and sound provisional patent acquisitions.

By 1997, Gross was having difficulty attracting traffic to the nearly 20 internet-based startups that then comprised the Idealab portfolio. The industry standard for online advertising rates were determined by how many eyeballs saw an ad, often a banner across a website header, with little emphasis on if people actually clicked through to the website linked in the advertisement. Having been a pioneer in search and indexing for local computer systems, and in need of both revenue and clicks, Gross began developing new techniques for website search engines, coming up with the idea of giving the top results in searches to the companies willing to pay for it. “A keyword that someone types in with their fingers is the highest indication of intent for your product or service,” Gross said. His idea would order the results from the highest bidder to the lowest, and advertisers would only be on the hook to pay if users actually clicked on the link.

When Gross pitched this idea to fellow executives at Idealab, the response was sour. “You could never do that,” he recalled someone saying. “Charge for placement in search results? People would go nuts.” Gross had argued that if the new search engine had clearly labeled paid-for results, no one would mind, and rather users would greatly appreciate getting information they wanted. “There were no apologies that we were a pure commercial search engine,” said Bill Elkus, the eventual founder and managing director of the Idealab spin-off, Clearstone Venture Partners, which invested in exactly this search infrastructure via GoTo.com, a company formed in 1998.

Gross started by buying up one of the web’s first ever search engines, World Wide Web Worm (WWWW). Gross thought that, with a few modulations to the site’s design and user experience, he might create a search engine for the internet as popular as Lotus Magellan had been nearly a decade prior. Gross and the Idealab’s team focused on the search element to the venture, whereas other names in the space, such as Excite, began diluting their search experience, surrounding the search bar with extraneous features. In 1996, Excite purchased the Isabel and Christine Maxwell-led search engine also named Magellan, owned and operated by their company the McKinley Group (and in which Ghislaine held a significant stake). The newly revamped WWWW got rid of all of that fluff, leaving behind a single search field directly in the middle of the page, a look later copied by Google. In the spirit of their straight-to-the-point redesign, Gross dubbed the engine GoTo.com, and soon after publicly pitched the idea of paid search results at the TED8 conference in February 1998.

“People were saying, this is heresy,” said eventual Yahoo! COO Dan Rosensweig, who at the time was running ZDNet Inc. GoTo.com was dolling out millions of dollars for banner ads on the top of other sites, but their traffic was minimal, and without said traffic, online advertisers were hardly compelled to increase bids for better placement. As GoTo.com stumbled out the gate, Stanford graduate students Larry Page and Sergey Brin unveiled Google, which ranked websites not by advertising spend, but by how many other websites were linked to them. Almost immediately, Google became the internet’s most popular search engine, but the company had no plan or ability to make money aside outside of licensing its indexing technology to other companies. At one point, Gross recalled that Page and Brin “rebuffed efforts to partner or merge with GoTo.com” due to being “uncomfortable” with the mixing of advertisement and search at the time.

“One of the advantages of having an idea which is more heretical, if it’s a good idea, is that you have a two-year window before people copy you,” Gross would later say. Eventually striking deals with AOL, Microsoft and AltaVista to feature sponsored search results on their websites, the company rebranded as Overture Services Inc. in October 2001, abandoning its focused search engine to drum up more distribution deals. Google quickly saw the error of its way, and soon developed their own version of sponsored search, taking some of Overture’s partners, including AOL and EarthLink.

Luckily for Gross, he had been quite diligent in his belief of protecting intellectual property, and Overture eventually sued for patent infringement. Gross would later share the concept of patent control and protecting your IP as one of his “25 Lessons learned from 25 years of creating companies” series. “It is very important for a startup to have something novel and something protectable, so think through about what’s novel about your solution. Look even for obvious angles, but things that no one’s tried before, and then you can go ahead and protect it very inexpensively starting with provisional patents, maybe turning into full patents later.” Later in the lesson, Gross calls this “a very very valuable exercise,” a sentiment clearly proven in the success of selling Overture to Yahoo! for over a billion dollars, not to mention Google’s dominating AdWords/AdSense business model.

The AdWords business model had been patented by Gross while still known as GoTo.com, which was subsequently acquired by Overture, which was subsequently purchased by Yahoo!. In this acquisition, Yahoo! inherited an ongoing lawsuit between Overture and Google over their engine’s violation of GoTo’s AdWords patent, coming to a head 10 days before the Google IPO in 2004. In this settlement, Yahoo! received 2.7 million shares which they sold later that year and at the start of the next for $1.5 billion –– an extremely large number at the time for a patent settlement. In the ensuing decade, Google booked over $150 billion in revenue with likely 99% coming from AdWords.

Gross practiced early on what he preached later, and collected a plethora of patents throughout his decades of venture and incubation. One of these, US20130246170A1, is titled “Systems and methods for interacting with messages, authors, and followers” which covers the concepts in pay-for-click advertising queries described above. The listed abstract protects the “embodiments of a search engine” that “enable authors and third parties” to financially “influence the persistence and ranking” of posts or authors in result listings “using a bidding process or other compensation-based mechanism” allowing authors to “submit bids in auction for ranking” to keep posts “visible to targeted searchers for a longer period of time than would normally be available” to be “utilized with a microblogging service or a social networking service.”

This patent is currently assigned to Near Intelligence Holdings Inc, a “global, full-stack data intelligence software-as-a-service (SaaS) platform” that curates “sources of intelligence on people and places” using “patented technology” to “processes data from an estimated 1.6 billion unique user IDs and 70 million points of interest” throughout “more than 44 countries.” According to Near, they are “the world’s largest source of intelligence on people, places and products.” Near went public in May 2022 via a merger with KludeIn I Acquisition Corp with “a $100 million equity financing facility with a unit of Cantor Fitzgerald LP.” In 2021, Near acquired UM, or UberMedia, a company funded by Gross via Idealab in 2010 that was focused on delivering ads via the Twitter ecosystem, and former Idealab’s employee Gladys Kong was the CEO of UberMedia, UM, and Near which later became Azira. Near had filed for bankruptcy and rebranded to Azira after a series of controversies, including leaking the geolocational data of visitors to Epstein’s island, resuming operations “under the same leadership that initiated the bankruptcy proceedings.” According to their website, Azira is “the world’s leading provider of human movement data,” and “ingests millions of these points of data every second.”

Near has claimed their data was “intended to be used by companies hoping to determine where potential customers work and reside,” but an October 2023 report by the Wall Street Journal revealed that Near had “once provided data to the U.S. military via a maze of obscure marketing companies, cutouts, and conduits to defense contractors.”

As explained by the Wall Street Journal, when you “open an ad-supported app on your phone,” certain information on the user is “fed into a data stream that passes through many hands” including government intelligence agencies. “The moment before an app serves you an ad, thousands of advertisers compete for it to be their ad. While only one of the advertisers wins the spot, all the other advertisers in the bidding process are given access to information about your device.” This information is then collected by said data brokers, typically related to advertising exchanges, and then “repackage it for sale to their own customers,” with some selling “geolocation and other technical information about a device” directly to these data brokers.

Bankruptcy documents from their Chapter 11 filing, reviewed by WIRED, showed that in April 2023, Near had signed a year-long contract with nContext, a “subsidiary of the defense contractor Sierra Nevada,” and “a subcontractor on several large intelligence and defense data contracts.” According to Means of Control by Byron Tau, nContext had “secured six federal contracts” to supply data “in support” of “the National Security Agency and the Defense Counterintelligence and Security Agency.” The Defense Counterintelligence Security Agency, a subset of the Defense Department, “confirmed” it had signed a contract with Sierra Nevada during 2020 in their effort “to better analyze publicly available data and government information to identify cyber threats to cleared contractors.” Near’s relationship with government contractors and national security clients, according to people familiar with the matter, began with their acquisition of the Gross-founded UberMedia.

In an email viewed by the Wall Street Journal, Near’s general counsel and chief privacy officer, Jay Angelo, wrote to CEO Anil Mathews that the company had three unique privacy problems. “We sell geolocation data for which we do not have consent to do so…we sell/share device ID data for which we do not have consent to do so [and] we sell data outside the EU for which we do not have consent to do so.” In another email, Angelo called the brokerage of EU data a “massive illegal data dump,” claiming that the U.S. federal government “gets our illegal EU data twice per day.” The very concepts that pioneered the e-commerce and online advertising revolution are now used within the private-public partnerships that make up the U.S. intelligence state.

The aforementioned patent US20130246170A1 invented by Gross and assigned to Near, is referenced 160 times by patents used by Palantir, the CIA-funded private sector intelligence company that started as the anti-fraud algorithm at PayPal, a company that received its first outside investment from Gross and Idealab in 1999.

How Idealab Sprung PayPal

Looking for ways to further the revenue of the Idealab’s e-commerce-focused portfolio of companies, Gross founded EWallet just before the holiday season in 1998. EWallet was a “small browser extension” that “contains all the usual credit information” required at various e-commerce sites, dissolving the need for users to type their payment information “over and over.” After filling your e-cart, EWallet users simply need to “click the EWallet icon in your Windows task bar,” enter their PIN number, and “drag your plastic of choice onto the site’s order form,” allowing Gross’ applet to fill in “the necessary data.” While similar to the “fulfillment model already used by some of the larger Internet service providers and Web portal sites” at the time, what set EWallet apart, according to Gross, was that EWallet didn’t depend on mutual e-commerce pacts among Web merchants to work. “The major difference between us and Excite, for example, is that they work at only 12 participating merchants, who are paying Excite a transaction fee for every purchase,” explained Gross. “We are not holding the customer’s data. It’s on your PC; EWallet just passes it through to a site without us ever even seeing it.” Gross further iterated that other companies with similar wallet applications were trying to gain ownership of their user’s data to sell, a market and revenue stream Gross would later utilize heavily.

While Idealab might not be privy to what’s in your EWallet, the company made money by pairing with merchants and extending discounts to EWallet users while paying Gross’ company the difference. EWallet simultaneously displayed a task bar featuring various search engines, each of which “pays Idealab.” “This works because merchants have a high cost of customer acquisition, and we lower it,” Gross articulated. “We bring them customers with their wallets open.” Shortly after the holiday season launch, Idealab planned to build “an auction capability” directly into EWallet, an e-commerce technique later pioneered by eventual PayPal acquirer, eBay.

Gross had said EWallet used user feedback from his relatively unsuccessful DotCom e-commerce ventures to come up with the applet concept, with CNET noting that “most of the applications offered now require special software on both the merchant and consumer sides.” “By being just an applet it can truly be universal. If it were transaction [processing software], you would need cooperation from the merchants. And once you try to make merchants change their site or pay a fee, you lose the merchants,” Gross explained. While many businesses and programmers had attempted to ease internet shopper’s minds, it wasn’t until “the advent of 128-bit encryption” that got shoppers “somewhat used to the idea of sending their credit card data over the Net.”

EWallet would eventually acquire a pioneer in internet news, Microsoft-partnered PointCast, in May 1999 for around $7 million, after EWallet had rebranded itself as LaunchPad. EWallet had first partnered with PointCast in 1997. A year prior, Excite had acquired another tech company closely tied to Microsoft, the McKinley Group behind the Magellan search engine. As previously noted, the McKinley Group was led by Isabel and Christine Maxwell, Ghislaine’s sisters, who explicitly created the company to recreate their father’s “legacy” after his 1991 death. That legacy included using technology companies as fronts to facilitate Israeli espionage and Christine specifically was involved in at least one of those front companies with her father. Isabel, like Ghislaine’s long-time companion Jeffrey Epstein, had a close and quite odd relationship with Microsoft co-founder Bill Gates, as did her company after McKinley was sold to Excite, CommTouch.

About 18 months before the acquisition, the PointCast board, featuring Benchmark Capital partner and founder of the Lotus-acquired Approach Software, Kevin Harvey, elected David Dorman as the new CEO, having built one of the world’s largest ISP with Pacific Bell after “spearhead[ing] the first commercial customer project for Internet access with the federal government” while at Sprint. Dorman would later go on to become a member of PayPal’s board of directors, a position he holds currently. Perhaps unsurprisingly, the first elected member of PayPal’s board, and founding PayPal CTO Max Levchin’s former Californian roommate, was Scott Banister, a Vice President at Gross’ Idealab who had contributed to GoTo.com/Overture.

Max Levchin: I was squatting at Scott Banister’s apartment…A brilliant guy, classmate of mine from school… he was my first roof over my head in Palo Alto. So and — he had everything, a very, very small apartment and a mattress and he did not have air conditioning. And so I spent a lot of time sneaking into free lectures at Stanford… And summer of 1998 was ridiculously hot in Palo Alto… And so I would just look up a seminar… and somebody said “Oh there’s this really young, brilliant hedge fund currency trader Peter Thiel. You should get to know him.”

Charlie Rose: Currency trader?

Max Levchin: He was, at the time, I guess, well known for some clever ideas around currency trading and he ran a very small hedge fund. And I knew his name so when I showed up at Stanford that day looking for a place to camp for a while to cool off, I saw Peter Thiel was giving a lecture on currency trading. Well, I practically know this guy, I should go see him. So I went in, maybe nine other people or six other people in the room and I sort of parked myself in the back and I said if it’s boring I’m going to nap and if it’s not I’ll get to know this guy. And it was amazing. He was exactly that guy, the smartest guy, you know, with the best ideas and you just want to go and say hello.

Charlie Rose: He was that guy at that moment.

Max Levchin: Yes, and I so walked up to him which I normally don’t do afterwards and said ‘Hi I’m Max, I’ve heard of you from Luke [Nosek] and Scott [Banister]’ and I sort of stopped there and said ‘Well we should have breakfast.’ And so we had breakfast the next day and I showed up. He said ‘What do you do?’ and I said, ‘I start companies.’ He said ‘That’s great, I invest in companies.’ I showed up with a bagful of ideas and I said, ‘Here is my idea number one, number two and number three.’ He said ‘I like that one.’ And literally that one evolved into PayPal.”

Max Levchin on Charlie Rose, August 1, 2013

Confinity Inc: The Founding of PayPal

Launched in December 1998 as Confinity Inc., Levchin, Thiel, alongside eventual Founder’s Fund co-founders Luke Nosek and Ken Howery, sought to provide financial institutions with the technological ability to make mobile and online economic transactions secure, eventually finding a market in the blossoming e-commerce scene. Thiel had graduated from Stanford Law School in 1992, and then had a brief stint at the Wall Street law firm Sullivan & Cromwell, before joining Credit Suisse First Boston where he worked as a currency trader for a few years.

Thiel moved back to his native California in 1996 to launch a hedge fund, and using money gained via currency speculation and venture, seeded Confinity and joined as CEO. Levchin was focused on encryption technology, and initially their venture was focused on making Palm Pilot messaging more secure. Eventually the firm rebranded as PayPal, with Confinity, Inc remaining the name of the parent company. Early press releases from the firm called it “the first Web-based payment service that enables consumers to beam money to any email user via their PC or PDA,” with PDA referring to their Palm Pilot origins and a further nod to the precursor to the smart phone revolution that wouldn’t truly take hold until the end of the following decade. PayPal was keen on pushing their “state-of-the-art encryption technology” and “cutting-edge Web-server technology” in explaining why they were “the most secure electronic payment systems to date.” PayPal’s industry changing security system was developed alongside two Stanford professors, Dr. Martin Hellman –– the inventor of public key encryption –– and Dr. Dan Boneh –– a principal contributor to the development of pairing-based cryptography and eventual blockchain researcher.

Investment bank Goldman Sachs, alongside Idealab, invested $23 million in PayPal during their second round of financing, after investments from Nokia and Deutsche Bank. Thiel was quick to express that this round was for expanding the young company. “This significant second round of equity funding allows us to continue our aggressive expansion of leading-edge payment services. The backing of top-tier investors like ICP and Goldman Sachs validates the growing acceptance of email payments and recognizes the potential of this new e-commerce category.” PayPal, in their announcement press release, claimed they would use “the financial and strategic support of ICP and Goldman Sachs” in order to “drive aggressive customer acquisition, expand internationally, and support new mobile device platforms” while looking to provide the “infrastructure for person-to-person payments on auction sites and virtual communities.” “PayPal.com is bringing a new value to the consumer marketplace with its payment network,” claimed Bill Elkus. “Its team has the talent and drive to execute on its vision. We believe PayPal.com is solidly positioned to assert its leadership in the email payment space.”

Thiel further articulated his vision for the startup: “We are building the payments operating system for the world. In the same way that fax machines leveraged an existing phone infrastructure to speed widespread adoption, our technology leverages the existing email network. PayPal.com turns the current email network into a payments network.” Idealab, having been involved in funding PayPal since late 1999, once “owned about one-fifth of the company.”

Confinity was once stationed in Palo Alto, CA at 165 University Avenue, a building that had previously housed Google and Logitech during their “formative years.” Previously they had shared an office building with another stalwart of digital finance, the original X.com, a company run by the owner of the new X.com, Elon Musk. X.com had begun as an online banking platform that “allowed easy transfers between accounts using just an email address” while concurrently offering “investment options like S&P 500 funds and high-yield money market funds.” The infamous merger between X.com and PayPal occurred in March 2000. This new PayPal was growing by about 9,000 users per day only three months after their official launch. “This is what people in technology call a viral product,” explained Thiel. “It’s easier than catching a cold. And it is spreading as fast as a virus.”

Combining the then-proven technology networks of email and credit cards, PayPal was allowing their users to send dollar-denominated payments to anybody with simply an e-mail address. If the person receiving the dollars had not yet registered with PayPal, all the would-be-receiver needs to do to is simply fill out the form attached in the email to claim their newly made account.

Once money is within the PayPal system, it is free to be spent across the ecosystem of merchants. Money was slightly more difficult to get out of the system, however, at least at the time, with PayPal having to physically cut withdrawing checks and mailing them through USPS. PayPal was intending for users to keep their funds within the system, an intention with user-facing convenience hiding the true economic incentive behind it. PayPal accounts do not provide interest, like a bank account would, therefore PayPal itself can invest the money left there in the system, at least until a user goes to spend it. PayPal hopes it will “soon manage enough customer money to both make a profit and absorb all the fees involved in credit-card transactions.” At launch, PayPal was free to use, and Thiel had said that the company had no intention of ever charging its customers. The Venmo of its day (with Venmo eventually being acquired by PayPal in November 2021), PayPal’s initial popular use case was settling accounts between family and friends. Early PayPal user Andrew Brenner was quoted as saying “PayPal is replacing currency. This is becoming the payment service of the internet.”

PayPal would soon play a dominant role in the up-and-coming eBay e-commerce auction site founded by Pierre Omidyar, due to being able to settle funds instantly while still retaining the ability to claw back funds in the event of fraud. eBay would quickly purchase the freshly-public PayPal for $1.5 billion in October 2002.

“Sometimes I worry that we’re too obsessed with security,” confessed Thiel. “Fraud protection is a tradeoff. If you make it totally airtight, it becomes less user-friendly.” In the years leading up to the monumental merger, which made Idealab and the online-payment company founders a fortune, PayPal engineers were building software to help identify fraudulent transactions to mitigate the growing costs of rampant fraud in the ecosystem, eventually developing an adaptive algorithm named “Igor” after a Russian criminal that would frequently taunt PayPal’s fraud department.

In 2003, a year after PayPal was sold to eBay, Thiel approached Alex Karp, a fellow alumnus of Stanford with a new venture concept: “Why not use Igor to “track terrorist networks through their financial transactions?” Thiel took funds from the PayPal sale to seed the company, and after a few years of pitching investors, the newly-formed Palantir received an estimated $2 million investment from the CIA’s venture capital firm, In-Q-Tel. Intelligencer spoke with a former intelligence official who was involved in the investment who claimed the CIA had hope that “tapping the tech expertise of Silicon Valley” would allow it to “integrate widely disparate sources of data regardless of format.”

As of 2013, Palantir’s client list included “the CIA, the FBI, the NSA, the Centre for Disease Control, the Marine Corps, the Air Force, Special Operations Command, West Point and the IRS” with around “50% of its business” coming from public sector contracts. Palantir is closely connected to the U.S. government, but its financial spin-off, Palantir Metropolis, is focused on providing “analytical tools” for “hedge funds, banks and financial services firms” to outsmart each other. As The Guardian reports: “Palantir does not just provide the Pentagon with a machine for global surveillance and the data-efficient fighting of war, it runs Wall Street, too.” Thiel’s affinity for the surveillance arm of the state was echoed by Levchin when he explained to Charlie Rose how PayPal leaned on these agencies well before Palantir’s founding, at the formational period of PayPal itself:

“I am probably uncharacteristically pro-national security agencies writ large and NSA in particular despite the fact that they would not hire me at some point. I actually wanted to work for the NSA and I was not a U.S. citizen and that sort of ended right there. But I really value my privacy and I really value the government not knowing more than they absolutely must about me. But I also fundamentally believe that this country in particular so far has its citizenry’s interests in mind that I just fundamentally trust the national security establishment to care about the citizens, to spy on the things that needs spying. The National Security Agency is there to make sure we don’t have another September 11. And I think that’s a trade I would be willing to make…I think it’s very important to understand that these people do the sort of things that may seem unpleasant and intrusive and controversial but they’re ultimately protecting us…

I think the government working with a private sector is a great thing. When we were working on security and anti-fraud measures at PayPal, we collaborated with every imaginable three and four-letter agency and those were some of the best, most productive relationships I’ve had as a business person…These people don’t get paid a lot of money to make sure we don’t get ripped off, make sure we don’t get killed, make sure we don’t get bombed. You have to appreciate that. They’re doing this not because there’s a lot of money… They’re everyday heroes and they don’t think twice about doing it. So I think if the private sector can help them, we should.

The thing about security is that offense and defense are not different — at least in my view of the issue. There’s always the – everybody runs pretty similar systems. Everybody’s running more or less the same kind of technology. Knowing what’s vulnerable, how to exploit the vulnerabilities, figuring out how to get into a system, how to turn off the power grid, how to spin the centrifuges a little bit faster, is as much offensive as it is defensive. And so, if I have to place bets, I would say we as the United States is probably the strongest…I think the U.S. offensive capabilities are excellent.”

Max Levchin on Charlie Rose, August 1, 2013

Brock Pierce and Blockchain Capital

Idealab eventually reestablished itself as Clearstone Ventures. Its managing directors included Elkus, Armstrong, and Quigley, and a spin-off of the firm focused on the blossoming e-sports and online gambling sector was given to Brock Pierce. Pierce was named the managing director of the “Idealab-affiliated” Clearstone Global Gaming Fund, alongside Quigley, the aforementioned future co-founder of Tether along with Pierce. “Tether was one of the last startups I did before I went full time on the funds side,” Pierce said. “That’s really why Blockchain Capital started. I realized I couldn’t fund 10 to 20 companies simultaneously because I also had eight other businesses outside of crypto. The only way I could scale and get exposure in the ecosystem was by being a full time investor.”

The entrance to the Blockchain Capital office is “a museum of mining rigs from companies that are now defunct” because, according to Brad Stephens, it is “a reminder of where we came from.” According to Stephens, in 2013 the firm started mining and “got to about 1% of the global Bitcoin mining network” at a time when that was realistically achievable. “We had these hand-welded mining rigs and were making tons and tons of bitcoin but we exited in 2014 because it became financially superior to purchase bitcoin instead of mining it.”

Blockchain Capital was originally known as Crypto Currency Partners, and had adopted the Idealab’s incubator-style model of mutually assured success in the infantile blockchain industry:

“We basically went around to the early crypto CEOs and said, ‘Bobby Lee of BTCChina, give us $50,000 of your stock and we’ll make you a $50,000 limited partner in the fund. Steve Beauregard, give us $50,000 in GoCoin and we’ll make you a $50,000 limited partner.’ The investors in the fund were the CEOs or founders of our portfolio companies. We’d invest in their company and the CEO would invest in the fund, with a few exceptions like Coinbase.

Our pitch was you got the industry right but there’s risk. Give us some of your equity and we’ll give you 25 pieces of other equity so if your company fails, at least you’ll have a piece of your competitors. The companies were happy to work together because they were invested in each other. They were cross-pollinating and growing the ecosystem together. There wasn’t as much competition as there was coopetition. Everyone was trying to help each other.

That was Fund I, and the good thing for us was not only did we get exposure to the first 30 crypto companies which included BitGo, Chain, Circle, Coinbase, Kraken, but we also had 20 of the CEOs as limited partners which gave us access to information and connections that proved invaluable.”

Brad Stephens to Modern Consensus in June 2019

Blockchain Capital would eventually join Facebook’s Libra Association, with Stephens believing the “long term the establishment of supra-sovereign currencies should lead to the weakening of nation-states which I personally believe is a huge global net positive.” He further articulated that “a country’s currency printing press is the most powerful weapon of control” while that control gets “eroded by global currencies owned by individuals instead of countries” leading to “a new era of globalization driven by individuals with choice and freedom.”

Initially finding fame as a Disney child star in films such as “Mighty Ducks” and “First Kid”, Pierce’s resume beyond Blockchain Capital is littered with various ventures and businesses, mostly within the e-commerce space, including being CEO of Titan Gaming, the co-founder of Tether, the co-founder of Thiel-funded Block.one behind the EOS ICO, co-founder of the EOS Foundation, co-founder and CEO of the Eric Schmidt-funded Playsino, and the co-founder of GoCoin –– a bitcoin payment services startup seed funded by Facebook’s Owen van Natta and former Digital Entertainment Network president David Neuman. (Interestingly, van Natta’s leadership position at Facebook, having been considered one of the “token grownups” on the young staff, was replaced during an executive restructuring by eventual Xapo board member and Benchmark partner Matt Cohler.) Pierce sat on the boards of the Eric Schmidt-funded Xfire, EverTune, RevenueAPEX and Spicy Horse Games, is a United Nations OIJ Senior Advisor, a member of the Clinton Global Initiative (allegedly the brainchild of Jeffrey Epstein), and infamously the co-founder and Executive Vice President of Digital Entertainment Network, alongside ISP pioneers Marc Collins-Rector and Chad Shackley.

The Digital Entertainment Network

Digital Entertainment Network (DEN or >EN.) was founded in 1998 by longtime romantic and business partners, Marc Collins-Rector and Chad Shackley, and then-17 year old Brock Pierce, who was introduced to the pair by disgraced film director Bryan Singer. Collins-Rector, then 31 years old, had met Shackley on an early online message board when Shackley was only 15. After a year, Collins-Rector convinced the Bay City high school Student to quit Western High School, move in with him,and start Concentric Network Corporation, one of the first internet service providers. “The main reason we both met is because we were gay and both interested in computers,” Shackley said.

The pioneering internet firm was initially launched as Concentric Research, and its core focus was on enabling computer users to avoid long-distance charges from telecom providers when connecting to electronic bulletin boards, the pre-cursor to the message board. Needing access to local telephone numbers, but unable to make a dent in the network of regional phone companies, Collins-Rector hacked together a nationwide network by “installing phone equipment in rented space in Pay-Less Shoes store locations around the country.”

By 1995, the firm’s growth had attracted attention from Silicon Valley, and Collins-Rector and Shackley sold control to the New York City-based GS Capital Partners LP, an affiliate of Goldman Sachs and computer and internet venture legends, Kleiner Perkins Caufield & Byers. By 1997, Concentric Network had partnered with BNY Mellon and the U.S. Treasury to work on “secure electronic commerce,” with Concentric Networks providing BNY Mellon with a virtual private network, or VPN. A year later, in 1998, Concentric Network would build a VPN for The Vanguard Group, “the nation’s second largest mutual fund organization.” The following year, in 1999, Microsoft invested $50 million dollars in Concentric Networks to “expand [their] relationship to include development of co-branded MSN Portal and application hosting services.”

Henry Nothhaft, CEO of Concentric Networks from the 1995 sale to Kleiner Perkins through 2000, made note of Concentric’s patent control in a 2010 op-ed for IPWatchdog:

“Concentric is an interesting case when it comes to patents. As an ISP, we obviously saw ourselves as a service business and therefore didn’t patent as heavily as startups did in other tech sectors. Nonetheless, one Concentric patent for our “clustered hosting architecture” proved to be vital, not only in maintaining our market advantage and preventing rivals from copying our advanced technology, but also in our marketing strategy. As all of our PR at the time noted, “Concentric is the only solution awarded a U.S. patent for its Web clustered hosting architecture — a unique platform designed to deliver superior performance, reliability and security. We’re not just ‘one of the crowd’ of hosting providers competing on low price and traditional solutions. Another important point: Our “Concentric Host” offering produced much higher gross margins than our other non-patented service offerings.”

Kleiner Perkins Caufield & Byers, or KPCB, was formed in 1972 by stalwarts of the young computing market, including Eugene Kleiner, a founder of Fairchild Semiconductor, and Perkins an executive from Hewlett-Packard. KPCB was the first of the venture firms to grace Sand Hill Road, a road in Silicon Valley known for housing a disproportionate amount of venture firms including Khosla Ventures, Greylock Partners, Oak Hill Capital, Canaan Partners, Andreessen Horowitz, Institutional Venture Partners, Blackstone, and Sequoia Capital. More recently, KPCB famously touted prominent former U.S. government figures such as Clinton’s Vice President Al Gore and George W. Bush’s Secretary of State Colin Powell as partners at the firm, as well as partner Ted Schlein, a board member at the CIA’s In-Q-Tel, the NSA’s Advisory Board, the CISA Cybersecurity Advisory Committee, the Homeland Security Advisory Council, the National Security Institute Advisory Board, and the Council on Foreign Relations, among other positions. In 2011, former Reddit CEO and junior partner at KPCB, Ellen Pao, outed the venture firm for having invited Ghislaine Maxwell to their holiday party. “[Maxwell] was at the Kleiner holiday party in 2011, but I had no desire to meet her much less have a photo taken with her,” Pao wrote in a tweet. “We knew about her supplying underage girls for sex, but I guess that was fine with the ‘cool’ people who managed the tightly controlled guest list.”

Regardless of their recent controversy, KPCB was essential to the formation of Silicon Valley, having participated in the funding of Amazon, AOL, Compaq, Electronic Arts, Genentech, and Lotus Development, with massive windfalls from their astute seeding of Netscape and Google, not to mention the firm’s intimate connection with Sun Microsystems.

Sun Microsystems had begun as a computer project designed by Andy Bechtolsheim while he was a graduate student at Stanford. Bechtolsheim intended to break from the industry standard of custom hardware and proprietary operating systems, hoping to enable “different workstation brands running on a common operating system to share data” via AT&T’s UNIX operating system. By 1981, Bechtolsheim began selling licenses for his computer, called the Sun, which stood for Stanford University Network, and within the year, Bechtolsheim’s Sun attracted the interest of fellow Stanford graduates Vinod Khosla, who would later join KPCB as a partner, and Scott McNealy. Together, they founded Sun Microsystems Inc. in February 1982.

Early in Sun’s lifecycle, eventual KPCB partner Bill Joy designed a distributed file system software, called NFS (Network File System), that “allowed data to be shared among many users in a network regardless of processor type, operating system, or communications system,” which soon became the industry standard. Joy holds a plethora of patents essential to the file sharing and the peer-to-peer network systems that came to dominate the modern web, in large part thanks to Sun’s focus on network computing versus, for example, Microsoft’s PC-focus. “The PC is just a blip,” co-founder McNealy remarked in an interview with Business Week in 1999. “It’s a big, bright blip, but just a blip. Fifty years from now, people are going to look back and say: ‘Did you really have a computer on your desk? How weird.’” McNealy envisioned “network computing as the future,” in which “the billions of computer chips” in products ranging from “refrigerators and telephones to smart cards and door locks” would all be interconnected in a network of things.

Between 1985 and 1989 Sun was “the fastest-growing company in the United States,” complete with a successful initial public offering in 1986. By the start of the 1990s, Sun had established Sun Federal, a subsidiary specifically created to serve the government’s computing needs, and by 1991, Sun Federal was shipping “more than half the workstations ordered by local, state, and federal governments.” In 1995, Bechtolsheim left Sun to form Granite Systems, an Ethernet switching company later acquired by Cisco, with Stanford’s David Cheriton, who together became the first investors in Page and Brin’s Google in 1998, then known as BackRub. McNealy eventually became the CEO of Sun Microsystems while Khosla and Gross ventured into venture capital full time, and he infamously told reporters at the 1999 launch of Sun’s Jini, a technology that allows devices to “communicate and share processing resources with one another,” that consumer privacy issues are a “red herring.” Having been recently accused of sharing consumer’s data in violation of their user agreements, when asked about Jini’s privacy preservation, McNealy responded: “You have zero privacy anyway…Get over it.” The next year, McNealy had partnered with Enron‘s CEO Jeff Skilling in order to help build out their Enron Broadband Services (EBS). EBS was a subset of Enron which, while looking for new avenues of streamable content to leverage their pioneering fiber optic broadband network, had agreed to invest in Collins-Rector’s and Shackley’s DEN.

Collins-Rector and Shackley had pocketed millions from the merger with KPCB, and had kept some stock in the company, which was renamed Concentric Networks and later acquired by Nextlink Communications for $2.9 billion. Collins-Rector and Shackley used the funds from these sales to purchase an RV to scout the country for locations for their next venture, and eventually spent $2.47 million on a mansion in Encino, CA. This estate would be known as the “M&C Estate,” for Marc and Chad, and the base of the newly-formed company, providing a stage for the infamous –– and inappropriate –– parties and filming locations for the various attempts at launching original internet content. Much has been written and produced about DEN’s network of pedophiles and sexual criminals, including a prominent feature in the 2014 film An Open Secret, but less on the technology and the crew’s aspirations to create what Shackley termed “the Time Warner of the Internet.” “What makes DEN different than other internet companies that have come before it? It’s a fusion of the marketing power of Madison Avenue, with the technology of Silicon Valley, and the entertainment of Hollywood,” claimed Collins-Rector.

DEN was attempting to corner the market of internet streaming before there was even a true nation-wide broadband network. In spite of the lack of high-speed internet, Collins-Rector credited Pierce with coming up with a way to “speed video transmission” on the internet. “Microsoft spent $800 million trying to solve the problem… Brock looks at the problem and goes, ‘Oh, it’s simple.’” According to several former DEN executives, Pierce suggested to “move the camera as little as possible,” so computers would have “fewer image changes to process.”

Collins-Rector and Shackley were also awarded a patent in 1999 for “Targeting advertising using web pages with video,” later cited over 200 times by companies such as Google, Oracle, Yahoo!, Disney, and Microsoft, with the later two companies being closely connected with DEN’s executive leadership. DEN touted financial investment from Microsoft, as well as Dell Computers, Enron, Intel, Chase Capital Partners of New York, and expensive advertising contracts from Ford Motor Company and Pepsi-Co. According to reporting from the Los Angeles Times, Walt Disney Television President David Neuman was recruited from Disney to become DEN’s president, and would later go on to seed invest in Pierce’s GoCoin. DEN’s technical recruiter, Ailin Andrea Doman, was “personally recruited by Bill Gross” from the Santa Monica webcasting company to join Idealab as their Senior Talent Acquisition Partner before joining Idealab’s firstlook.com.

Microsoft announced it was working with DEN in September 1999 to “launch its Windows Media Broadband Jumpstart initiative.” Just a month prior, six-year Microsoft vet Greg Carpenter had left to join DEN as its Chief Technology Officer. During his six-years at Microsoft, Carpenter served as “a key developer of imaging and graphic software for DOS and Windows” as the director of marketing for Microsoft’s Windows Media Technologies, Windows Media Player, Windows Media Services and Windows Media Tools, while having also “led Microsoft’s direction onto the Internet.” Carpenter holds the patent for “Leveraging Collaborative Cloud Services to Build and Share Apps” via his Tropare Inc., a patent cited nearly 200 times by companies such as Microsoft, Google, Amazon, IBM, Apple, eBay, Facebook, and Oracle, among others. Carpenter would later become CEO of DEN after the sudden departure of Collins-Rector, Shackley and Pierce after the sexual misconduct allegations against Collins-Rector emerged.

In September 1997, Digital Entertainment had filed plans for a $75-million IPO. However, by November, the three co-founders unexpectedly left the company in “the midst of preparations” for their initial public stock offering due to a civil lawsuit alleging sexual misconduct by Collins-Rector after a complaint was filed in the U.S. District Court in New Jersey which alleged he had “engaged in sexual activity with a minor in 1996.” While the suit was settled under undisclosed terms, Collins-Rector denied the allegations. Shackley and Pierce would also resign to “join their partner in a new venture,” which Collin-Rector’s attorney Ron Palmieri said “had to do with encryption technology.”

In August 2000, Collins-Rector was “indicted for transporting minors across state lines for sex” and the DEN co-founders all took off for Spain. In May 2002, Interpol arrested the trio after “finding weapons and thousands of child-porn images in their house.” According to Spanish law enforcement, “enormous amounts of child porn” were found in the house and press reports indicated that “the FBI has been investigating the trio since late 1999.” During this post-DEN period, in 2001, Pierce funded the aforementioned Internet Gaming Entertainment while living with Collins-Rector and Shackley in Spain. In an online bio, Collins-Rector labeled himself a “shadow founder” of IGE. When IGE was founded, it listed an address in Marbella, Spain, the town where the trio lived, and “paperwork for the company’s incorporation in the United States was filed by Matt Rector,” Collins-Rector’s brother, along with Collins-Rector’s former business partner Randy Maslow — then the VP of IGE.

Framing The Digital Dollar

Pierce would eventually settle in Puerto Rico, and was associated with the founding of San Juan’s Noble Bank. Noble Bank’s founder and CEO, John Betts, had worked with Pierce and Quigley in a venture dubbed SunLot Holdings in their attempt to take over the recently-defunct Bitcoin exchange Mt. Gox. SunLot Holdings was advised by Freeh Group International Solutions, a law firm founded by Louis Freeh, known for being FBI director under President Clinton (overseeing the agency’s disastrous behavior at Waco and Ruby Ridge) and the lead prosecutor in the “Pizza Connection” trials. Noble Bank would become one of the few known banking partners of Tether, with its cash reserves held by BNY Mellon.

In December 2017, the CFTC subpoenaed Tether and Bitfinex, with Bitfinex CEO Jan Ludovicus at the time also acting as CEO of Tether. This led Tether to hire Freeh, Sporkin & Sullivan (FSS), the Washington, D.C., law firm of Freeh, to conduct an audit of the companies. In a conversation with Yahoo! Finance, Freeh discussed the audit:

Yahoo!: Wells Fargo cut ties with Tether last year. Were you able to discern why, or anything else about the two banks Tether uses?

Louis Freeh: We didn’t talk to Wells Fargo. But the two banks, which we haven’t identified publicly, are very significant and, I would say, very, very well known. We spent a lot of time with them, with their internal compliance people, really kicking the tires and getting down into the weeds.

Yahoo!: Where do you see the cryptocurrency space heading? Many regulators as well as big names in finance are extremely dubious. What do you think of it?

Freeh: I think it’s exciting. It’s the start of a whole new area of practice on our side. It’s innovative, disruptive. But it’s going to require the basic ingredient of transparency. Whether you’re dealing with gold commodities or cryptocurrencies, investors and government regulators want transparency, predictability, reliance.

So I think a lot of regulatory rules and concepts will ultimately be imported here, because investors will be disappointed, some will charge that they were defrauded. The government, I predict, will get much more active here in terms of regulation and rule making.

This idea of oncoming regulation and rule making was echoed by Paxos’ Head of Strategy, Walter Hessert, in an interview with Bitcoin Magazine about their recent partnership with PayPal for their PYUSD stablecoin. Hessert alluded to an incoming “trillions of dollars of stablecoins” which are “privately issued and highly regulated” while making note that Tether’s and Circle’s models of regulation are not “going to be sufficient anymore.” The stablecoin industry has made itself known to government regulators as both a solution to public concerns about government-issued CBDCs, as well as a new source of demand for U.S. Treasuries –– an absolute necessity for the servicing of both the country’s current $35 trillion in debt, in addition to any future congressional budgets.

“I think that PayPal has set the standard for regulatory oversight,” explained Hessert. “You’re going to need credential oversight for these tokens, and I think that PayPal has a really, really great opportunity to take a big share of this next wave of growth.”

The success of the U.S. dollar could very well depend on the current crop of stablecoin issuers and infrastructure providers, with perhaps none more poised than Paxos and PayPal to dominate the market via an incoming storm of king-making regulation.

As economist Murray Rothbard articulated in his book, A History of Money and Banking in the United States, the “only way to establish a cartelized economy, an economy that would ensure their continued economic dominance and high profits, would be to use the powers of the government to establish and maintain cartels by coercion. In other words, to transform the economy from roughly laissez-faire to centralized and coordinated statism.”

Much like how the Federal Reserve was ideated by the early dominators of American infrastructure, such as the Rockefellers and the Vanderbilts, along with the prominent banking dynasties of the day, the digital Federal Reserve, too, will be built by those holding the patents, running the internet’s underlying broadband network, and coding the consensus algorithms of the modern financial ledger –– the blockchain.

After decades of carefully building out the online commerce infrastructure and pay-for-click digital advertising that dominates their respective markets, the patent barons and payment processors have set their sights on the currency itself, while simultaneously nurturing the public-private partnerships that could push money from the public sector into the private capital markets for good. These same players are backing those writing legislation in congress that enforce capital requirements and neuter algorithmic alternatives to dollar instruments, while manufacturing consent within the U.S. regulatory regime to pass laws influenced by strategic lobbying efforts led by those closest to the digital dollar spigot.

As we will continue to see, the very same network detailed in this article and The Chain of Custody are busy doing all of this, and more.

To Be Continued

The Chain of Issuance: The People and Patents That Built The Financial Surveillance Network