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đź’ĄDigital Dollar Likely Won't Be Part of Retail Banking World, US Lawmaker Saysđź’Ą
September 21, 2022
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White House reports on central bank digital currencies "point the way" but Congress still has to pass legislation on these issues, Congressman Jim Himes told CoinDesk.

A U.S. central bank digital currency (CBDC) may be one step closer to reality after the White House published several reports analyzing the technical and policy aspects of a digital dollar last week. Congressman James Himes (D-Conn.) has been an outspoken advocate for a U.S. central bank digital currency, going so far as to publish a white paper on the issue in June 2022.

Himes, who chairs the House Financial Services Committee’s Subcommittee on National Security, International Development and Monetary Policy has also overseen a number of hearings on crypto assets and their role in national security and related issues.

The six-term Congressman spoke to CoinDesk after the White House, Treasury, Commerce and Justice Departments published half a dozen reports in response to U.S. President Joe Biden’s executive order on crypto on Sept. 16.

The following interview has been edited for clarity.

CoinDesk: Thank you so much for joining me. I really appreciate it.

Congressman Jim Himes: Yeah, happy to be with you.

I'm sure you must be busy and it's Friday, so let's get right into it. It's been a pretty intense day with the six reports published by the White House, as well as several federal agencies or departments today. But I know you in particular, have been talking about central bank digital currencies for quite a while now, and of course, you published a white paper titled “Winning the Future of Money,” I think in June, right, a few short months ago. What's your take on the multiple papers published today by the White House and the Treasury Department on this issue of central bank digital currencies?

The element of the various releases on central bank digital currency didn't break a lot of new ground. I was very happy to see that in the text, they sort of emphasize the importance of the United States not getting left behind technologically, I actually think that may be one of the more compelling reasons to continue, but it is a lot of work on the technological side, on the implementation side, making sure that if we do a CBDC, that it's really a very robust network with all of the safety considerations we would have.

I was glad to see they said, "let's keep cranking away." But, that's not enormously groundbreaking, I think. Overall, sort of when you move outside of just the narrow alley of central bank digital currency, I think the White House's releases were a good contribution to an effort that is really picking up very notable momentum in Washington.

I actually think the action is largely on Capitol Hill, in the Financial Services Committee on which I sit, there's a bipartisan effort to get a stablecoin bill put together. On the Senate side, you've got obviously a Agriculture Committee bill that would describe the authorities of the Commodity Futures Trading [Commission].

Where the rubber meets the road, I think Congress is making good progress. Now, not necessarily like we're going to pass new laws in the next couple of weeks progress, but you have to remember that two years ago, if you'd said “digital asset” or “cryptocurrency” in the halls of Congress, most people would look at you funny and not know what you were talking about. So I do think that there's been real progress on Capitol Hill.

Out of curiosity, have the reports today, or even just your own views on central bank digital currencies, have they evolved? Or where do you see any changes between what you've published, what the Fed is looking at, what Treasury published, and just this conversation in general that we’re hearing right now around CBDCs?

I think the story of the last couple of months has been one of the market re-instilling some rationality to the digital assets market. An awful lot of people have lost an awful lot of money, and that makes me sad, but – and when I say an awful lot of money, I mean you hear figures like $2 trillion thrown around, that's just a staggering amount of money. That says two things. Number one, clearly, people's desire to expose themselves to digital assets got way ahead of the underlying value, however you would wish to define that. And for that and other reasons, I think it's actually really good that Washington is beginning to focus hard.

Now, that doesn't mean that Washington is going to satisfy people. When you talk about digital assets, you've got points of view often extremely aggressively expressed, I'm here to tell you, ranging from the pure libertarian – total anonymity, untraceable, whatever – to the world of a central bank digital currency, where you see China actually operating what, my guess is, there's not a lot of privacy protection there.

You also have the interesting fact that we still don't have a digital asset that is proving to be a robust means of exchange, and it may be fun to contemplate questions like whether bitcoin is an appropriate asset class in your 401K. But where this will really be interesting for people is if and when it becomes a medium of exchange, and you can send money to South America or buy a consumer good in the UK, and obviously, we're not there yet.

To that point, do you think that the reports that we saw today are really doing enough to address these questions of usability and still maintaining some semblance of privacy, some semblance of not being a tool for just censorship or surveillance?

Yeah, I think they point the way. The language was pretty strong on urging the regulators to really take a firm hand with the more irresponsible behavior that we've seen. There are an awful lot of people buying into digital assets that are either imperfectly described, maybe that's a euphemism, where people really don't know what they're buying, to out and out fraud. Of course, the SEC and others have been pretty aggressive about going after the fraudsters

I think that the administration's releases point the way, but the real action, the real specifics aren't in those releases, right? The real action and the real specifics will ultimately be incorporated into legislation in the place where I work. And like I said, I'm gratified that there's been a lot of education, but I do think that the time is now to start to start moving something.

I'm very hopeful, for example, we're running out of time in this Congress, but I'm very hopeful that the Financial Services Committee might produce a stablecoin regulation bill, and … the Senate seems to be taking the lead on the jurisdictional questions of what regulator has authority over what product and hopefully, we'll make some real progress. And if we don't actually get anything done in this Congress in the few months remaining, then in the next Congress, we're in a position to do so.

Just jumping on that, do you think that the level of education is at a point now where once you're done with this stablecoin bill, and between you and me, I think the stablecoin bill sounds a lot like, between Libra, between the collapse of Terra/Luna, there's been a lot of stablecoin-specific action. Do you see other crypto issues, to the SEC and CFTC jurisdiction, for example, coming up and being something that we can see actual legislation on within the next maybe a year or two?

Yeah, absolutely. In fact, you already see it on the Senate side. It's not where I work, but on the Senate side, you already see the Senate Agriculture Committee defining the role for the CFTC, so you already see that happening. Again, I wouldn't anticipate – particularly with an election coming up in seven weeks or so – I wouldn't anticipate that that will pass. But this is how we start educating and discovering kind of what the various equities are.

I sometimes joke, this is a really interesting and important space, but it was introduced to the Congress in just about the most catastrophic way possible. And, of course, I'm referring to the hearings that the Financial Services Committee held on Libra. Prior to that, I don't know that many members of Congress had ever even considered the concept of a stablecoin or knew much about digital assets. I sometimes joke that if you had a bunch of evil lobbyists sitting around after a bottle of whiskey and saying, "what's the most catastrophic way to introduce the Congress to a concept," one guy would say, "well, give me [Meta (formerly Facebook) CEO Mark] Zuckerberg." And then let's have him talk about a pervasive global currency. I mean, it was just a catastrophe, right? That sort of soured an awful lot of people for no particularly good reason. I mean, I don't know that there's anything wrong with Mark Zuckerberg, I'm just saying that as a sort of presentational matter that may not have been the best introduction.

You've had a lot of work done since Libra to educate people. I am hopeful that in the next year or so, we may see a really serious stab at providing some regulatory clarity here.

Not to get into specifics here, but do you see any projects or any efforts out there – and feel free to not name specific names – but any projects that are kind of the counterexample to Libra? Ones that lawmakers can look at and say, "wow, okay, this makes sense, this is something that appeals to me, and this is helping me understand what you're trying to do better?’

I probably would not get in the business of predicting which models which stablecoins are likely to again cross that gap of becoming a common medium of exchange. We're not there yet, but there's no question in my mind that there's a use case there. Whether stablecoins are going to replace the current payment systems that are out there, everything from your debit card to Zelle and Venmo and all the various payments, I don't know, I'm a little skeptical about it. You don't you don't look at those current payment methodologies and say, "boy, this is really a pain in the neck.”

But, I have no doubt that two things are gonna happen. I sometimes draw an analogy, and maybe I'll be accused of being naive here, but I sometimes draw an analogy between the way we're thinking about crypto assets generally today, and the way we were thinking about the internet in, let's say 1996 or 1997. We sort of sensed that there was something there. There were all kinds of what, in retrospect, were absolutely wacky ideas. We're going to deliver cat food or kitty litter to your door for free, all these sorts of models that turned out to be sort of crazy. I'm not sure that we would have necessarily in the mid-90s predicted exactly what the internet was going to do. But lo and behold, it transformed our lives, really. I sort of feel like we're in a parallel moment like that.

If we sort of expand the aperture to blockchain generally, not just digital assets, there's no question in my mind that there's going to be some transformative aspects of it. But in the meantime, we're going to see a lot of nonsense, and we may not know that it's nonsense until an awful lot of people have lost a lot of money and in a non-common sense business model.

So I want to jump on something you said just now, referring to existing payment systems and tools, and this is kind of tying back to CBDCs, but the Fed recently announced that it's hoping to launch FedNow as a real time payment system within the next year. Given that, does the calculus around focusing on a central bank digital currency or digital dollar, is it the same? Or does it have to change now that the Fed is actually moving to be more active with this new system that you can argue solves a lot of the same kind of issues that digital dollar would try to solve?

Yeah, I think so. I think that's right, in the wholesale arena. I think that FedNow is probably a part of a really good, innovative modernization of our financial sector generally. It was not that long ago that trading 100 shares of stock was a $200 commission proposition with five days of closing, there's all kinds of risk associated with that. There's no reason for it, right? The only reason that transactions don't close instantaneously today is that the architecture doesn't support that. And so I do think FedNow is a really good step in the direction of where we want to be, which is taking out an awful lot of the time that used to be involved in the clearing and settlement of securities and currencies and commodities.

I think it's really good, but where I don't think we're going to go, I wouldn't say, "well, it's going to penetrate into the retail banking world." There are those who make the argument that individuals should be able to open an account at the Federal Reserve, or maybe they think it's a postal banking thing, a public banking thing. The idea of postal banking is certainly not unprecedented, and it's worth thinking about, I guess.

I do think that the notion that we're going to take the Federal Reserve, who already has massive regulatory duties, and by the way, needs to run our monetary policy and say, "now, you're going to be the banker to 320 million Americans," and in doing that, we're going to wipe out what is one of the primary competitive advantages of the United States, which is our banking sector, I think that's probably not likely. There may be those who think it's a good idea, but I think they're in a pretty small minority.

Fair enough. So something that I think is a little unique about your experience is you chaired the Subcommittee on National Security in House Financial Services and you're part of the Select Committee on Intelligence. Just looking to this idea through those lenses specifically, are there any maybe national security or national interest questions that you think a digital dollar could really address? Or just how are you looking at these questions or even the accessibility through those lenses?

I might add to your list too, I chair the Select Committee on Economic Disparity and if I can take you off course for one second, I get really excited about the possibility that digital assets could ultimately bring more people into a bank environment, or if not a bank environment, at least provide products and services that are cheaper and more relevant to more people.

So let's imagine a central bank digital currency exists. My intuition is, and it's only my intuition, is that it might have a special appeal because it's full faith and credit, it might have a special appeal to a percentage of Americans who are people in our country, by which I mean immigrants, who don't trust the banking system, who are skeptical of financial institutions, but if they believe that the money on their phone is full faith and credit, they might actually use it for payment, they might use it to do cheaper, money transfers, perhaps to family and other countries.

So I get pretty excited about the opportunity to expand in a cost effective way, services to people who are underserved, or if they are served, they're served by very high cost financial products. That's not your question, but let me come back to your question, which is that of course, I think that, like anything else, like any technological innovation, digital assets pose both opportunities and threats to our security. The obvious one that one talks about all the time is, anonymity poses some very serious issues. I mean, who really wants to use a fully anonymous payment mechanism? Yes, my libertarian friends want to use that because they don't want the, whatever the government knowing what they're doing.

But the other group of people who use that, of course, are those who are up to no good whether it's drug dealers or terrorists or human traffickers. So there's that and then there's also the interesting question and if you were British or Chinese or Korean, you would probably regard this differently than then I, that we regard it as Americans, which is the U.S. built SWIFT Network the clearing programs, the international payment mechanisms are one tool with which we are familiar and when we need to we can get visibility when and – this may be a particularly American thing – when you go before a judge and demonstrate probable cause you can actually access the information of those of whom you suspect breaking of breaking the law. That may not be true of other payment systems that are hosted or sponsored by other countries.

Editor’s note: Due to technical difficulties, Rep. Himes was asked to repeat his response to the final question.

An awful lot of people, the estimates are that 19% or so of Americans are unbanked or underbanked. Part of that, of course, is that a lot of people have suspicions about the big financial institutions and I'm intrigued by the possibility that a full faith and credit CBDC for example, might might offer the confidence that would cause somebody to use that as a payment mechanism or as a way to remit money to a home country or something like that. I do think there's real possibilities there, not to mention the possibilities that could be generated either by the private sector directly or by the private sector building on a digital token that was a full faith and credit card thing.

In the more traditional realm of national security there's what we always worry about, which is the question of anonymity if you have a payment system into which we have no visibility and that could be a foreign payment system or a payment system, which is deliberately obscured like what you see with some of these mixtures and such. There's, I think, two categories of people who really need anonymity. There's libertarians, who want that for their own reasons, and then there's, of course, people for whom anonymity is a professional necessity and that's the folks that are up to no good.

There may be others but obviously, we do not want a totally opaque means of payment that could be abused by terrorists or dealers or human traffickers. The other and the last thing I would say is to the point of transparency we're good in this country in terms of not abusing American civil rights or U.S. person civil rights, I should say, the distinction being that if you're in this country, regardless of if you’re a citizen or not, you're entitled to constitutional protection. We have a system that says that if you convince a judge that Sam is potentially committing a crime, that judge will give you permission to get evidence of that crime. There are plenty of countries where you wouldn't want that, because they don't care about civil rights. That's a pretty important part of our justice system here.

Lastly, I would just note we don't want technological developments to get radically away from us. The United States since World War II has been a technological leader in every realm, and we don't want to be – I suppose it's okay to be a fast follower, but we really don't want to be left behind by Chinese innovations or even European innovations. We may not worry about the Europeans as a foe, but every time I contemplate the possibility that we might not be at the technological forefront, it's sad.

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Loans without Banks, Trades without Exchanges, Contracts without Lawyers. Peer to Peer Capital Markets disrupts traditional finance by removing middlemen and counter-party risk, enabling you to become your own bank by holding the keys to it all in your own privately held digital wallet.
 
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For context, in the realm of open source, major corporations can engage in Intellectual Property theft by using open source projects to gain insights, technology, or legal protections without fully reciprocating to the community. Companies might contribute code to an open source project, only to later use that same code in commercial products, extending it with enhancements, essentially using open source as a low-cost R&D resource. Patents are crucial here, serving as a defense mechanism. Although open-source licenses cover copyrights, they don't extend to patents, meaning that companies holding patents can enforce legal protections against unauthorized commercial use, ensuring that any commercial application of their patented technology within open-source software requires proper licensing or recognition. This protection has historically led to the hyper-growth of industries like mobile phones and the internet, where patented technologies could be safely shared and built upon, promoting innovation and market expansion.
 

Validating Inventorship

In fields such as technology, pharmaceuticals, and manufacturing, patents are vital for safeguarding new inventions, with Nikola Tesla's extensive patent portfolio serving as a testament to his contributions to science.
 
However, Tesla's revolutionary inventions, like the Wardenclyffe Tower which aimed at providing free wireless energy, faced fierce opposition due to their potential to disrupt established control over energy markets. Financially sabotaged by investors like J.P. Morgan, legally challenged through "the war of currents" by Thomas Edison's promotion of the less efficient Direct Current system, and undermined by media smear campaigns, Tesla's work was systematically suppressed. After his death, the FBI's seizure of his documents further suggests efforts to control or conceal his ideas that could disrupt centralized energy distribution, illustrating how innovation can be stifled to maintain existing power structures.
 
Could this type of suppression still be happening today?
 

The Genesis of Decentralized Finance

Reggie Middleton first introduced Distributed Finance what would later become known as Decentralized Finance (DeFi), in 2013 when he invented and patented technologies under the title "Devices, systems, and methods for facilitating low trust and zero trust value transfers." This included groundbreaking concepts like programmable Smart Contracts, Swaps, Tokenized Assets, NFTs, Stable Coins, Digital Wallets, and even underpin Central Bank Digital Currencies (CBDCs).
 
 
Called by many as "The Most Valuable Property in the World", his patents US11196566B2, US11895246B2, JP6813477B2, JP7204231B2, JP7533974B2, & JP7533983B2 have been cited over 138 times by major financial institutions, underscoring their foundational role in the blockchain industry.
 

His patents cover:

  • Trustless Peer-to-Peer Value Transfers: Systems for enabling decentralized and secure value transfers between parties without the need for intermediaries. Applicable to cryptocurrency transactions, DeFi platforms, and digital payment systems.
  • Decentralized Financial Systems (DeFi): Methods and devices that facilitate decentralized trading, lending, borrowing, and yield generation. Impacting decentralized exchanges (DEXs) like Uniswap, SushiSwap, and similar platforms.
  • Smart Contracts: Implementation of self-executing contracts on blockchain networks, used to automate agreements and enforce conditions without intermediaries. Essential for platforms such as Ethereum, Cardano, and other Layer-1 and Layer-2 blockchain protocols.
  • Tokenized Asset Trading: Methods for creating, transferring, and trading tokenized assets, including cryptocurrencies, non-fungible tokens (NFTs), and digital securities. Platforms like OpenSea, Rarible, and asset tokenization platforms may fall within the scope.
  • Cryptographic Security and Wallet Systems: Systems for securing digital assets using cryptographic methods, including cold storage, multi-signature wallets, and multi-party computation (MPC). Potential overlaps with services offered by companies like Coinbase, Kraken, Gemini, and institutional custody providers.
  • Decentralized Identity and Verification Systems: Technologies for managing and verifying digital identities on decentralized networks, including for KYC (Know Your Customer) purposes. Likely touching on identity solutions like Civic, BrightID, and Blockstack.
  • Blockchain-Based Voting and Governance: Systems for implementing decentralized voting, governance, and consensus mechanisms, foundational to DAO (Decentralized Autonomous Organizations). Relevant to governance platforms like Aragon, Snapshot, and MakerDAO.
  • AI Economic Agentic Computing: First introduced by the VeADIR Platform refers to the application of autonomous agents in economic systems, where software entities can make decisions, negotiate, and execute transactions independently. These agents use artificial intelligence to analyze market data, predict trends, and optimize economic activities like trading, resource allocation, and supply chain management. Used by OpenAi, Claude Sonnet, Meta and xAI.

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True Decentralization

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Who is Reggie Middleton?

Reggie Middleton, through his BoomBustBlog, became a notable figure in financial analysis, particularly for his early and accurate predictions regarding the collapses of Lehman Brothers and Bear Stearns during the 2008 financial crisis. His blog was renowned for providing in-depth, contrarian insights into economic trends, investment opportunities, and corporate vulnerabilities. Reggie won the CNBC's stock draft consecutively for two years, and appeared on major financial news networks like CNBC, BBC and Bloomberg where he discussed market trends, his forecasts, and the implications of financial strategies adopted by major firms. His track record has undeniably positioned him as a significant voice in the financial commentary space.
 

Reggie's work gained public attention when he appeared on the Keiser Report and CNBC in 2014, premiering his innovations built on the Bitcoin blockchain called "Ultracoin", two years before Ethereum captured the crypto limelight.
 
 
His vision was to create sound markets for a financial ecosystem where loans could be issued without banks, trades executed without exchanges, and contracts enforced without lawyers, aiming to disintermediate traditional finance by removing the middleman that doesn't add value.
 

 
In 2014, Reggie pioneered a simple Apple trade using a Pure Bitcoin Wallet: The Ultracoin Client.
Ultracoin later renamed VERI short for “Veritaseum” meaning "of truth", was the
first to market in tokenizing precious metals, offering VeGold, VeSilver and even tokenized fiat currencies or so called "Stablecoins". Veritaseum also introduced VeRent creating yield through P2P lending, and the revolutionary VeADIR platform, an autonomous, blockchain-powered research platform that independently evaluates and acts on dynamic research in real-time, communicates in machine language, and operates by purchasing, analyzing, and distributing insights on various assets while allowing VERI token holders to access and trade this research.
 
In 2018 he created the worlds first Gold Denominated Blockchain Mortgage
with traditional written note, mortgage as well as a smart contract on a public blockchain, both of whom incorporate each other by reference. The transaction had traditional title insurance and the note was recorded with the county clerk. The mortgage was denominated in Veritaseum's VeGold product, a digital form of gold in bearer form, fully transferable and redeemable upon demand.
 
 
Merely a few examples of groundbreaking products offered by Veritaseum.
 

Coinbase's Challenge: The Patent Infringement Suit

Coinbase, a dominant force in the cryptocurrency exchange market, enlisted the services of Perkins Coie, one of the largest patent law firms, to contest the validity of Reggie Middleton's patents.
They launched an Inter Partes Review (IPR) at the Patent Trials and Appeals Board (PTAB), arguing that Middleton's patents lacked novelty. An overwhelming 85% of patents are invalidated through this process. However, Coinbase's challenge was denied along with the appeal, thereby upholding and strengthening the validity of Reggie's patents.
This IPR challenge came after Veritaseum sued both Coinbase and Circle USDC for $350 million each over patent infringement. Unfortunately, Reggie's patent attorney and close friend passed away during this suit, so the cases has been dismissed without prejudice, meaning they can be negotiated or the cases reopened at any time. This leaves Coinbase in a precarious position, especially if shareholders have not been properly informed of this risk.
 
This lawsuit details how Coinbase's infrastructure, specifically its Ethereum and Solana validator nodes, engage with client devices to facilitate transactions. Exhibit #3 meticulously outlines the patent's claims, detailing the roles of computing devices, the use of memory for key pair storage, network interfaces for transaction terms, and the generation and dissemination of transaction data records. It provides concrete examples such as the processing of NFT transactions on Ethereum and the management of transaction fees on Solana, supported by in-depth references to code and API interactions. Furthermore, the exhibit explains the verification of transactions through an external state, illustrating how Coinbase's technology aligns with the patent's principles for decentralized transaction processing without a central authority.
 

SEC's Intervention: A Turning Point

In 2019, with promising negotiations on the horizon with both the Jamaican and the Nigerian Stock Exchanges for digital asset platforms, Reggie's world was turned upside down.
 
The SEC accused Reggie of fraud, alleging he misled investors about the functionality of Veritaseum's VeADIR platform, which the SEC ordered to be shut down following a live demonstration. The SEC also made claims on the validity of Reggie's patent applications, which have since been approved by both the USPTO and the Japan Patent Office. Oddly enough, the SEC may actually infringe on these very patents through the disgorgement and storage of seized crypto tokens.
 
Despite Veritaseum's cooperation with the SEC over a two-year period, along with a detailed response addressing the SEC's allegations, and not one token holder claiming to be defrauded, these allegations still led to a Temporary Restraining Order (TRO) that froze millions in assets, destroying the company's operations, and forcing a consent judgment "neither confirming or denying the allegations". The SEC would top it all off with a gag order that barred Reggie from publicly discussing the matter.
 
Keep in mind, the SEC is claiming jurisdiction by calling Utility Tokens "Digital Asset Securities" but recently SEC Commissioner @HesterPeirce stated:
 
"...by using imprecise language we've been able to suggest the token itself is a security, apart from that investment contract, which has implications for Secondary Sales, it has implications for who can list it...
 
We've fallen down on our duty as a regulator not to be precise. So, tucking into a footnote that yes we admit that now that the TOKEN ITSELF IS NOT A SECURITY, that is something we should have admitted long ago and then started wrestling with the difficult questions."
 
 
This calls into question if the SEC even had jurisdiction to bring forth this case to begin with. The Veri Community would later challenge the SEC's unproven allegations against Reggie with
a Dossier supporting the Vacating or Setting Aside of this case, and suggesting possible misconduct by the SEC.
 

Allegations of SEC Misconduct:

  • Misrepresentation of Facts: Assertions that the SEC deliberately mischaracterized the
    functionality of the VeADIR platform, along with the patents and their value, by labeling them as lacking novelty and part of fraudulent activities.
  • Misleading Evidence: The SEC's use of declarations from Patrick Doody and Roseann Daniello, which contained misleading information about the personal ownership of a Kraken account used to misappropriate funds. Doody would later correct his statement, but the SEC did not update the court with this new information, potentially misleading the judicial process.
  • Conflict of Interest: Doody's undisclosed financial interests in the digital asset space through Lily Pad Capital LLC could suggest a bias in his testimony, which was pivotal in obtaining the TRO.
  • Coercion and Intimidation: Witnesses like Lloyd Cupp and John Doe provided affidavits claiming coercion by SEC attorneys to alter their testimonies, pointing towards witness tampering and intimidation.

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Summary Articles of the Bar Complaint and RICO Dossier

 

Comparisons with the SEC Misconduct in the DEBT Box Case

The DEBT Box case shares a troubling parallel with the Veritaseum case. In both cases a Temporary Restraining Order (TRO) freezing funds was issued using dubious evidence which suppressed the ability to defend themselves. This behavior was already admonished by five US Senators
in a letter to Commissioner Gary Gensler in which the SEC presented misleading claims in this now high-profile cryptocurrency case.
 
"Regardless of whether Commission staff deliberately misrepresented evidence or unknowingly presented false information, this case suggests other enforcement cases brought by the Commission may be deserving of scrutiny. It is difficult to maintain confidence that other cases are not predicated upon dubious evidence, obfuscations, or outright misrepresentations."
 
Given the similarities in alleged procedural misconduct between the cases, it raises systemic questions about the SEC’s litigation approach in cryptocurrency matters.
 
 
This parallel underscores a potential agency-wide issue that could involve either implicit biases against crypto companies or an explicit strategy to pursue aggressive, potentially misleading tactics in court.
 

Is The Fox Guarding the Hen House?

In a significant development, the Attorney Grievance Committee (AGC) has decided to forward a complaint against SEC attorney Jorge Tenreiro to the SEC's Office of General Counsel (OGC) for investigation. This controversial move suggests a potential conflict of interest, given that the OGC is part of the SEC, the very agency where Tenreiro was recently promoted to Chief Litigation Counsel. The complaint, filed by the Veri community, accuses Tenreiro of misconduct including alleged coercion, witness tampering, and misrepresentation during SEC investigations. The Veri Community argues that this decision undermines the integrity of the legal process, as the OGC's role is to provide legal advice and defend the SEC, not to independently investigate its own employees. This raises questions about the impartiality and transparency of the disciplinary process for attorneys, especially when it involves high-profile figures like Tenreiro.
 
"As noted in re Rowe, 80 N.Y.2d 336 (1992), the public’s confidence in the legal profession depends on transparent and impartial disciplinary processes. Delegating oversight to the SEC, where Mr. Tenreiro remains a senior official and where the OGC has a clear institutional stake, jeopardizes this confidence and risks the appearance of protectionism.”
 
The VeriDAO has submitted a response letter to the AGC along with creating a PDF generator
to help the estimated 100 complainants and anyone else interested in requesting the AGC to reconsider this action.
 

Legal and Judicial Trials

The legal battles would only continue for Reggie. The case of Hall v. Middleton, in which Hall, a 1% shareholder sued Reggie, raises concerns of judicial bias and procedural mishandling. In this case, Reggie was denied Due Process and barred from presenting crucial evidence or calling witnesses due to his former attorneys' "Office Failures" that missed deadlines to submit evidence without the knowledge of Reggie or the firm Brundidge & Stanger that outsourced his counsel as detailed in their affirmations.
 
"In my many years of practice it is a rare instance where I have witnessed an attorney intentionally not file critical documents as required by Court Order without the permission or knowledge of his client, who had an established and fully developed attorney client-relationship with said attorney, and then misrepresent that the requirements of the Court Order were being satisfied. This is one of those instances and I hope not to see another."
~ Carl Brundidge
The judge ruled that Reggie must:
  • Pay a $1M fine to his company Veritaseum Inc., in which he owns 99%
  • The plaintiff was awarded costs of $495k against Veritaseum Inc.
  • The Judge ordered Patents (filed before the creation of Veritaseum Inc.) to be assigned to the company without compensation.

Attorney's "Office Failures":

  • Sheridan England missed critical deadlines, resulting in the striking of exculpatory evidence. England’s inaction or inadequate defense exacerbated Middleton’s legal vulnerability, directly leading to adverse outcomes.

Judge Schecter’s Conduct:

  • Ignoring Exculpatory Evidence: Despite knowledge of its existence, Schecter struck Middleton’s post-trial memorandum.
  • Procedural Bias: The judge’s decisions systematically favored Hall, including allowing him to collect attorney fees from Middleton personally, contrary to the principles of derivative law.
  • Forced Patent Transfers: Schecter’s order to transfer patents to an underfunded entity (Veritaseum) which were court restrained by the same judge, rendering them defenseless against attacks and IP theft.
This ordeal was compounded when Reggie was held in Contempt for using personal funds (while Veritaseum’s funds were court-restrained) to successfully defend his patents against an IPR challenge by Coinbase in the PTAB of the USPTO in an attempt to invalidate these patents. The Forced Patent Expropriation to Veritaseum without compensation or the ability to defend them could be seen as coordinated as it benefited very large competitors seeking to avoid licensing fees or infringement claims, or possibly even IP Theft.

ETHgate: The Broader Conspiracy Allegations

Parallel to Middleton's struggles, "ETHgate" emerged, involving allegations by Ethereum co-creator @StevenNerayoff. Nerayoff claimed a government conspiracy aimed at controlling or monopolizing cryptocurrency development by targeting key figures. This narrative suggested that by attacking innovators (like Reggie Middleton as the Veri Community contends), the SEC might have indirectly cleared a path for Ethereum, which, despite its decentralized claim, benefited from a regulatory environment less scrutinized than its competition.
 
The term "ETHgate" encapsulates the belief that Ethereum's "Free Pass" from regulatory scrutiny might not just be due to its technological merits but also due to strategic regulatory maneuvers, where attacking smaller or less established DeFi projects could safeguard larger, more influential platforms like Ethereum.
 
Back in 2021, @JohnEDeaton1 from @CryptoLawUS explained XRP's side of Ethereum's "Free Pass". More recently, further SEC RICO Claims are insinuated in "RIGGED from the start" a documentary by @Fruition_News , along with posts by @KuwlShow and the XRParmy involving the SEC, Ethereum, a16z, and Consensys surrounding the Bill Hinman speech. Active FOIA requests by @EleanorTerrett seek to shed light on meetings between Hinman and Ethereum members.
 
Given the SEC protection of ETH and the high probability of Ethereum infringing on Reggie Middleton's patents as meticulously detailed in Exhibit #3 of the Coinbase case, is it ridiculous to believe Reggie Middleton could have been targeted?
 

 

Community Support: The Backbone of Resilience

Despite the SEC's narrative labeling them as "The Defrauded," the Veritaseum community rallied around Reggie.
 
                          SmartMetal with embedded NFT avalaible through VeriDAO.io
 
Financially devastated and with his funds frozen, Reggie faced foreclosure and was threatened with jail time after contempt charges for defending his patents using personal funds. In a remarkable show of support, the Veri Community rallied, raising an impressive $149,000 in less than two weeks to cover the fine while the case is under appeal.
 
They funded legal battles largely through donations and more recently with innovative means like NFT silver rounds called SmartMetal using Reggie's patented technologies, underscoring their belief in his vision. The first minted round was auctioned off for an astonishing $14,000 won by "M S"
 
"There is no better witness to the veracity of any defense than the alleged defrauded defending the alleged fraud at their own expense"
~ The Veri Community
This community support was not just financial but also moral, with efforts such as an Amicus Brief in the case against XRP, a No Action Letter (NAL) seeking clarity on secondary market sales of tokens, a Bar Complaint against the SEC's newly promoted Chief Litigation Counsel, and the @dao_veri's
#ProjectSunlight The SEC RICO Revelation.
 

A Call for a New Regulatory Paradigm

 
Reggie Middleton's saga is emblematic of the challenges faced by pioneers in the blockchain and DeFi arenas. His patents, now granted, underscore their foundational nature, yet the path to their recognition was marred by legal battles, suggesting a systemic issue where the regulatory framework might not fully comprehend or support emerging tech. His resilience, supported by an unwavering community and the validation of his intellectual property, underscores the need for a regulatory environment that fosters rather than stifles innovation. As blockchain technology continues to evolve, Reggie's story serves as a critical reference for balancing innovation with legal and ethical governance, ensuring that the future of finance remains open to all, not just those with the resources to navigate the legal maze.
 
For more information visit https://veridao.io/
 
 
I know what everyones question is, "HOW CAN I GET MY HANDS ON THE $VERI TOKEN BEFORE EVERYTHING GETS REVERSED AND RELEASED BACK TO THE COMMUNITY?" 
 
Your in luck: Mark is a trusted source, longtime Veri Vet that beta tested the VeADIR platform. Simply follow the thread below. I highly advise picking up a few, and tuck them away! This is the token that could literally FLIP BITCOIN $100k and beyond!
 
 

The information provided in this video, including but not limited to documents regarding legal matters, is for informational purposes only. It does not constitute legal (or any other) advice, and no warranties or representations are made regarding the accuracy, completeness, or fitness of the information for any specific purpose. VeriDAO and its operators do not act as attorneys or legal, financial or technical professionals or advisors and are not responsible for any actions taken or decisions made based on the content provided. Users should seek independent legal counsel for any legal advice or guidance. By watching this video, you agree that VeriDAO and its operators shall not be held liable for any damages or legal consequences arising from the use or misuse of the information contained herein.

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The content provided in this document is intended strictly for informational and educational purposes only. This document constitutes a research opinion and should be regarded as such. All claims, statements, allegations, and opinions contained within are based on publicly available information and are allegations unless and until proven in a court of law. The authors expressly disclaim any representation or warranty regarding the truthfulness, accuracy, completeness, fitness for a particular purpose, or durability of the information contained herein.
 
The authors of this document are not licensed attorneys or legal professionals and do not claim to provide legal, financial, or professional advisory services. Nothing in this document should be construed as legal advice, legal opinion, or any form of licensed advisory counsel. If you require legal assistance or professional advice, you are strongly encouraged to consult a licensed attorney or qualified expert in the relevant field. The authors are laypersons presenting research-based opinions, and as such, this document should not be relied upon to make any decisions of legal, financial, or professional significance.
 
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Furthermore, this document may contain statements of belief, criticism, or commentary, and all such statements are offered solely as opinions protected under the principles of free speech. The authors disclaim liability for any interpretation that may be construed as libel, slander, or defamation, as the document aims to present alleged facts and subjective opinions for educational research purposes only. All statements about individuals, organizations, or entities should be understood as unproven allegations, and readers are urged not to interpret them as established facts.
 
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SEC Drops Dealer Rule Appeal

 The US Securities and Exchange Commission (SEC) has abandoned its appeal of a contentious dealer rule designed to classify digital asset operations as regulated securities dealers broadly.

  • A federal judge ruled that the SEC had exceeded its authority by potentially categorizing nearly any participant in buying and selling securities as a dealer.

  • This decision is part of a broader reset in the SEC's approach to digital assets under new leadership.

  • The agency’s move to drop the appeal, amid concerns that continued litigation could reduce Treasury market liquidity and increase taxpayer costs.

  • Additionally, the SEC recently sought to pause its enforcement actions against Binance, indicating its readiness to resolve disputes through alternative means.

  • Blockchain Association CEO welcomed the dismissal, expressing hope for more productive discussions between regulators and the crypto industry as the US embraces a friendlier regulatory framework for digital assets.

What’s next: With acting chairman Mark Uyeda overhauling senior staff and legal strategies, the SEC is shifting away from its historically adversarial stance, a policy long associated with former chairman Gary Gensler.

For builders and investors: The new approach encourages constructive conversations between regulators and industry players, potentially leading to clearer guidelines and a more predictable operating landscape for both builders and investors.

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Tether Teams Up With US Lawmakers on Stablecoin Rules

Tether is reportedly working with members of the US House Financial Services Committee, specifically Representatives Bryan Steil and French Hill, to shape federal stablecoin regulations.

  • This includes contributing to the STABLE Act introduced by both lawmakers in early February, as well as offering input on two additional stablecoin bills.

  • According to Tether CEO Paolo Ardoino, the company wants its perspective heard during the legislative process and is prepared to adapt to US rules.

  • The new rules may include requirements like monthly reserve audits and 1:1 collateral backing.

  • Tether’s involvement comes amid broader regulatory discussions, including meetings between crypto industry leaders and the SEC, and the push to bring stablecoins onshore.

  • Meanwhile, the Federal Reserve is warming to stablecoins as a means of preserving the US dollar’s global dominance but remains concerned about risks such as de-pegging events and market fragmentation.

What’s Next: Tether’s collaboration with lawmakers suggests that stablecoin regulations could soon take a more defined shape and may introduce stricter compliance measures, including mandatory audits and full collateral backing.

Why it Matters: If lawmakers strike the right balance, stablecoins could cement their role in global finance, benefiting both the crypto industry and the broader economy.

Our Take: If Tether and other stablecoin issuers adapt to US regulatory frameworks, it could bring legitimacy to the stablecoin sector, encourage institutional adoption, and integrate crypto more deeply into the traditional financial system.

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