Why Are Lawyers Fighting Over $71M Frozen After the KelpDAO Hack? : Uneasy Money

Transcript

Hey everyone, I'm Cain Warwick and welcome to Uneasy Money because what happens on chain never stays on chain. Now before we begin, [music] here is a word from the sponsors that make this show possible. Multichain Advisors is an emerging technology growth firm that has helped create 50 plus billion dollars in enterprise value for 80 plus clients over the past 4 years. They're the partner to help navigate markets. Build real traction today at multichainadv.com. Hey guys, I'm here with my co-host Taylor Monahan, security expert, and Luuk van Neerven, the CEO of Pudgy Penguins. And today we're joined by a special guest, Kelsey Nabben, research fellow at RMIT and author of the new

book Decentralized Digital Security, Code, Community, Crisis. Um it's out this year and it's open access courtesy of the Ethereum Foundation selling all of these. So I don't know why they do good calls. Um all right. Our podcast are smarter than you and I. Look at that. I know. Yeah, we're we must be doing something right because we're getting some smart people on here. So it's good. I love that. Um so our first segment we should just have like a rolling Aave segment. It's just always Aave the first >> like like the the theme music, right?

This is our Aave update section. [laughter] Yeah, literally. Like and now for more Aave news. Um so Aave is in the midst of this and I mean you could you could argue that maybe it's not even Aave. It's like slightly Aave, slightly a bunch of other people. I would say not necessarily directly Aave, but you know, obviously the the proximate cause of this is is is Aave. So there is a 71 million dollar court order um that uh is basically fighting over the recovered help DAO hack funds that Arbitrum re-stole.

White white stole? I don't know what immobilized. They immobilized. >> Immobilized. Immobilized. Okay. So, so yeah, there's there is now um a group of lawyers uh and and I think maybe you have a better sense of these guys um than I do. Hey, like are they like good guys? Are they like lawyer scammers? Like what like where on the spectrum do these guys fall? I would put them firmly in the schemy scammy lawyers. I think this is uh So, these guys have been around for a while actually. They are the same guys who sued PoolTogether back in 2021 with the

Yeah. >> that's Okay. Wow. >> So, Crazy. They uh yeah, so for those that don't know, the PoolTogether lawsuit was a wild one with uh basically like an Elizabeth Warren stuffer who didn't even lose because it was PoolTogether, but put in $200 and then this lawsuit came from that and there's all these are Anyways, they lost. They lost the case. Uh they did some other like DAO ones. They went I think maybe like BSC hacks.

There's something on Lido. It They have not had much success. However, in the last let's say like 6 months or so, they have collected up every victim who has a judgment against North Korea or Iran. They have collected them all and they have filed those judgments in New York in SDNY jurisdiction. And are >> by One of the best jurisdictions, so. And so basically, for those who are not like super legal and stuff, these people have sued literally North Korea or literally Iran

um for damages. And these damages stem from harm that has befallen them or their family members, specifically like their families were murdered by these regimes. And so they have sued them and then they've gotten a court to issue a a judgment. These are default judgments because obviously these regimes do not actually show up to defend themselves. North Korea didn't show up to New York to make their case. How how strange. So basically now all of these people have this open claim to North Korean or Iran funds. And so like they're owed this money and

it actually makes sense. Like if you were to have like an ex or a business partner or whoever that wronged you, you can sue them, you can get a judgment against them. They have to pay you back. If they can't pay you back, you have various ways to like collect on your like what's owed to you. These guys have decided that they are owed the money that Arbitrum the Arbitrum Security Council immobilized. They're They Also, they filed stuff against Circle, they filed stuff against Tether. They're currently fighting the actual US government for some funds that they froze in um and had like were they were in the

process of being forfeited to be returned to uh HTX. They're fighting those. They're saying those that's their money, too. Um so yeah, they're pieces of work and I in my opinion, lawyers like this operate for money and money alone. They're hoping that uh they can make all these novel claims and in the end if their victims get any of this money, they're going to be taking like 10, 20% off the top at minimum, right? So, that's why these lawyers operate like this. Whether or not they can is Well, so so there's two questions in my mind. One is like is there definitive proof that it was even North Korea yet? Like

these these are always somewhat like speculative. Like it's not like they've claimed North Korea hasn't come out and said like that was us, right? It's not That's not how they work. They actually came out and said this is not us in response to TRM's blog post. Wow. >> [laughter] >> They called uh they called the accusations being made against them for the cyber heist. Uh they called like the journalists in the media, they called them um reptile organs. And then these are all lies perpetuated by the reptile organ journalists. Wow.

>> Um classic really. >> I like that. That's That's a good That's a good little barb. I might use that. Um I'm I'm definitely so So, they're deny So, like the like clearly right? There would need to be some ability to prove that the the you know, hacker was North Korea for this to even make sense. And we don't have that definitive proof. I think ZachXBT was annoyed about it on X because he was quoted in terms of like his open-source research was quoted in some of the the court documents.

But obviously he's done that, you know, as a blockchain sleuth, like an unpaid voluntary researcher. Uh and also he was on the Security Council that froze the funds. So, there there's one question about are they actually DPRK funds? And then another one about well, if they're not DPRK's, then who are they? Because, you know, we'll get to the Ave claims about not your money. Yes. Yeah. So, So, yeah, the first part the very first part is like whether or not it's DPRK. It's These things are always hard, and the reality is like most of the intelligence that exists for these hacks is like national security secrets. So, like even sometimes if I do get that

information during the course of an investigation, like I should I shouldn't know it. I don't have it. [clears throat] You know what I mean? But in terms of like the hard evidence, like it doesn't uh, it doesn't exist in the public sphere in in this regard. There's been no no post postmortem from Lazarus, right? They did like a post, and they they they've said that it's probably North Korea, which is like one of the things that they've cited. But again, like I mean, honestly, if there's any if there's ever a big cryptocurrency hack that's not a smart contract exploit, like it's probably DPRK just by the numbers.

>> [laughter] >> So, it's hard to like say, I don't know. It's it's tough for me to say that like it's not them. Yeah. Yeah. Only groups that can wash that type of money, right? Like they own the banking rails, and they're like set to actually wash it through their foreign, yeah, Yeah. And then the second question though is like and this is the one that just morally and like in my soul, I feel like very strongly about is like even if North Korea stole this money, that doesn't make it their money.

They stole that [ __ ] from us. Like from the Ave users, from the helped out from everyone involved here, right? Like they took that money by force. That doesn't make it yours. If I go rob a freaking bank, if I rob you, Kayne, if I show up in your house and take all your stuff, like that doesn't mean it's now my property. It's still yours. You know what I mean? I just have like temporary illegitimate like possession of it, right? And so that's I think the the stronger argument here is going to be like just because they stole it doesn't make it theirs and doesn't put us into this like claim state where lawyers can now bicker over like But like it it opens

the door, right? And this is this is the kind of the fundamental, you know, uh like the lesson is never try sort of thing, right? Like I think, you know, the the um the one of the arguments, and I don't think it's like the soundest argument ever, but one of the arguments that that you know, historically a lot of teams have made is if we start doing stuff, Yes. to stop bad things from happening, other things might happen.

And therefore, and like genuinely this is a hilarious outcome because like it's both like frivolous, but also it is stuff happening because someone did something, right? Like it's like directly related to that and and you know, so um like it just there's unintended consequences of you taking action that you know, there are unintended consequences if you not taking action, but no one comes and bothers you. Like typically, right? Like you can you can sort of like sidestep it and and nothing nothing really happens. So, you know, now it's like, "Oh, no, these people took

action." And it's really easy, you know, there's a a bunch of articles about like this DAO did a thing. Like no one, you know, there's there's not like uncertainty as to who was involved in this, right? And so, you know, you become the target of any person who's like, I would like $70 million. Yeah. And And I'd also argue that So, to me this is actually still like where we're at, like it's a pain in the butt. These lawyers showing up claiming it's their funds, pain in the butt. It sucks. Don't get me wrong. I actually don't think there's a huge amount of legal risk, and I don't think that DeFi should like change its operating behavior based on like specifically this lawsuit.

That doesn't mean that there's no legal risk. There is so much legal risk in everything right now. But this lawsuit is like the very bottom of the barrel. It is 100%. It is. Yeah. You can also get sued. Uh it's not a super strong case, but you can get sued for not taking action, right? But also in this specific case, you have so many involved parties. You have Layer Zero, you have Keltner, you have Arbitrum DAO, Arbitrum Security Council, Offchain Labs, Aave LLC, Aave Labs, Aave DAO, random Aave users, Aave whales, right? Like you have this whole mass of people.

Theoretically, any of them could sue any of the other people and try to like claim that that whoever they were suing caused them harm and try to collect on that. Whether or not they'll be successful is like a whole other question. But like they could do that. And I think that those I think there is legal risk there. Um All that said, this lawsuit is like below that legal risk. Above that legal risk is the fact that if you can do something, Lazarus can hack you.

Period. End of conversation, right? Like if you have those keys, if there's admin functionality, if there's servers, um these things exist. Your biggest number one risk is that Lazarus comes in and steals all the money. Not just the $71 million that was >> one is don't have the money. Don't have Don't have Yeah, don't have the money. Don't have a whatever a TVN with a 101. Don't have a EOA with a 101. But it's such an interesting question about whether anyone ever should do anything or not, right? Like the actual blockchain security landscape as people coming out saying that this is what

happens when you have a security council, you know, like stuff will happen and then you'll get tracked down. And like Kynan mentioned the book which kind of documents, you know, for the first time that I'm aware of cuz it was as it was emerging, this like ad hoc quasi like vigilante social layer of security that's kind of come about in parallel to the economic security of crypto economic protocols that we know. And you know, this is the stuff that Tay talks about all the time cuz she's like one of those people in you know, she's one of the vigilantes. Yeah, and still 911. The people like you know, monitoring the channels 24/7, you know, as volunteers to

you know, in the in the name of this like kind of code of moral good and I think that makes a lot of people really uncomfortable in these kind of deeper questions about decentralized networks because you know, what came through really clearly is that there is this, you know, white hat hacker like you're fine, do whatever you want and like make me keep some money and do crypto stuff like until you do harm to others. So, you can't actually break in and steal my stuff while everyone stands by and watches if there's an ability to do something. But then that's making people quite uncomfortable because it raises all these questions about like who does what and you know, what's uh you know, endogenously governed. Like

what do we get to govern as a blockchain industry amongst ourselves and then what happens externally where, you know, legal systems and things apply. All excellent questions. Such good questions. So yeah, what what what are what are we doing here, Tay? I don't know. >> [laughter] >> Dude, I'm uh Okay, so I think my like oldest adage that actually has never failed me is that um instead of getting like too into the weeds on like all these theoretical things, just

take the situation that you have today and look at it and be like, okay, can we do something about this? And if the answer is yes, then you you should. Uh and if the answer is no, then well, you can't, [clears throat] so you shouldn't. Um and I think that people get really deep into the weeds on theoreticals and like what if this and what if that, but the reality is is like every single situation is is different. I think a lot of people assume now that like, oh, since the Security Council did this thing, they can now do this for everything else or why didn't they do that for everything else?

I'm not going to sit here and like say that they can or can't. Like technically, it's just it's really hard, right? And so even other situations comes up where the Security Council is asked to do something, the answer like the first question they have to ask is like, can they actually do this? And in most, if not like, yeah, I would say in the vast vast majority of cases, the answer is going to be no, right? Because the money is moving, because there's no way to enact the thing because uh because there's uncertainty around what the hell even happened, on and on and on, you just simply can't get the group of people

which is a very large group of people actually, together to like take this action. In other cases though, it is much easier. And I think a lot of people choose to like lie about what actions they can take realistically, and choose to like say, "Oh, we're decentralized." When in fact they're not. Um and so I think that's again, I think I've said this before, in my in my head, every single time I like go to a team or I go to a protocol and I'm asking these questions, in my head it's a win-win, because either um they literally actually can't, in which case they're in a better position security-wise, and they won't pop up in on my radar because they got hacked by

Lazarus in the future. Um or they can, and then they do, and then they deal with the fallout, and become more secure Usually, they become more secure as a result, right? Um and then there's like a sliver of people who who uh deny that they can do anything, even though they you know, even though that they they they really could. And those people are the ones that I sort of write off in my head, because they're actually the ones that are typically like not great builders, not great at making decisions, especially hard decisions, um and usually not secure because they're not honest with themselves or others about what their protocol actually is, where the the controls are.

They just don't have a good lay of the land, and that's like prime time It's like the best dessert for like Lazarus to come in, right? If you don't have good eyes on your servers, on your keys, on your people, they're just going to they're going to go to town on you sooner rather than later. Awesome. Um there were there were a couple of interesting takes uh um Lex node Gabe Shapiro um had had what I thought was a pretty interesting legal take as he usually does that um it wasn't that this is the hack the the original hack, right? Um that it wasn't a smash and grab. The exploiter forged a cross-chain message minted unbacked RS

ETH and used it as collateral to borrow ETH from Ave protocol in an arms length transaction. Um and and you know, this is always like super interesting to me when you try and apply like the world to DeFi and get like some weird result that you like weren't expecting and you're like, oh, that's like not how the code works. Like surely it must be this person. Um and and so the the conclusion from that was like the exploiter acquired title the fraud defrauded the lenders remedy um is against the exploiter not Ave.

Um >> Yeah. Which which is like a very interesting conclusion, right? Um you know, and and I think like to to kind of take it one step further, it's like the the lender used Ave as it is but without the intention of repaying, right? Like using like, you know, false collateral or something, right? Like the the Ave protocol didn't realize that this ETH was not real ETH when or RS ETH was not real RS ETH that it was unbacked. Um and and therefore like Ave kind of did the right thing, but these guys tricked Ave into letting them borrow uh borrow the ETH. So, um

Yeah. >> So, Ave should sue DPRK, get a court order, and then make a claim on the frozen funds. Yeah. Why? It gets more complicated because, and this came up in court this morning, the very first question the court asked is like, "Ave, who the hell are you guys and why are you in my freaking courtroom?" Because uh you literally don't have these assets. You like the the assets in Ave are not your assets. You don't have control of them. You cannot credit or debit or change or hold or pause you like you can't do anything. These aren't your assets. "Why are you in my courtroom claiming that you're like an interested party?"

Right? Cuz that's like the the the baseline to be able to like fight this in court is that like an interested party, someone who has uh an interest in this property comes forward. Um I think that was like definitely the the Gerstein the the scummy lawyers, they they were going hard on this. They're like, "Ave is just like a random company. They have no interest." Um luckily Ave argued, it was a good argument, argued that they're an interested party because this is their platform, this is their business, this is what they do, what their employees do, what their partners do is they build this thing. Just because they don't have literal custody of the assets doesn't mean that they

aren't impacted by these assets being stolen in the first place, being used in the course of a robbery, um and then obviously the assets that are now frozen on Arbitrum. Like they have an interest in them. And I think that the judge is I I my my read of it was the judge was accepting of that as like standing. Um and then yeah, the second part of it was God, this poor judge. That's all I'll say. You have these two lawyers shopping your courtroom at like earliest heck in the morning and they're explaining with actually a quite a complex series of events, right?

It was a forged message in layer zero that allowed the attacker to withdraw the RS ETH. The attacker then took that RS ETH, bridged it to Arbitrum, uh and then put it in Aave to withdraw real ETH on Arbitrum, and then this other random party stole some of the funds. That's why they're like in court, right? And that conceptually you could tell right off the bat that the judge was like God help me.

>> Why? Literally, why like why is this happening? Like why? Why did you guys do this? Why? Why did you enable whatever this nonsense is? Yeah. And so that was She had one good analogy. I always like normie's analogies. She had one good analogy where she said, "Okay, so if you're if you're at a party, right? You're at like a party, and you notice like this other party person checked their really nice fancy like expensive fur coat into the coat check, right? If you were to go and steal their coat check ticket out of their pocket and go take their coat for your own, is that theft or is that fraud?

Meaning cuz the whole legal question is if if if if it's like a good faith loan, the title transfers, or if it's like a good faith purchase, the title transfers, but if it's theft is theft, so the title doesn't transfer. That's why this is relevant. So yeah, that was her analogy. And like my answer to that is like obviously not. I'm like that doesn't make the that doesn't give the thief the like ownership of the fur coat. That's ridiculous. Um uh there's some other good analogy. She like compared to like the net like she kind of compared Aave to being the Nasdaq as like even though the Nasdaq doesn't necessarily like literally have people's money, if something were to happen

to like a core part of their system they would be interested and be impacted. So. Right. There's a lot of things that >> they're the venue under which the the you know, transaction is is happening. Yeah. >> I I should say uh that the take from Gabe was actually Claude's take. Um not not Gabe's take. But but I will also say this, if you ask Claude a question and then post it on Twitter, you own the response to that question. Yes. Um so uh you you can't use you can't ask Claude a bunch of things, have it say random [ __ ] and then post it and be like, "This is what Claude says, not me."

>> Not me. Yeah. No, that's that's insane. I'm not I mean, at this point I'm I'm completely lost at what the hell Gabe is trying to achieve with his commentary. But it is what it is. I mean, there's a lot of people who are just like so deep in the weeds and have completely lost sight of what we're trying to accomplish here. And at the end of the day, we're trying to like let's see, not incentivize theft. Uh not cause harm to people. And like build really cool stuff and allow people to do really cool things and make a bunch of money. That's the goal here. I'm not sure why defending scummy lawyers or North Korea or maybe North Korean hackers is like a good situation, in my opinion. So speaking of

speaking of scummy lawyers, this is um this is kind of a funny aside cuz you mentioned the PoolTogether lawsuit. Um so when this happened, this is like 2000 2021, I want to say, something like that. Um and uh I I was an investor in PoolTogether. Um Were you on this lawsuit? So so um I'm I'm out somewhere, right? Um and I get a message from my wife that's like, "Hey, the Australian Federal Police are at our house." And I was like, "Huh, well, that was bound to happen." And so >> [laughter]

>> I was like, "Okay, cool." And and so they were like looking [clears throat] for me, right? She's like, "Why would they be looking for you?" And I'm like, "I don't know. Like probably some [ __ ] DeFi thing happened." Anyway, so um So, they're like, "Oh, we'll come back in the afternoon." Right? And you know, my wife is like freaking out. She's like, "What is going on?" And I was like, "I don't know. Like let's see what the deal is, right? Like it'll it'll be some random DeFi thing or whatever. Like someone you uh who has like some blame on something, right? But like my assumption was it's Synthetix related, right? Like someone's like uh "Synthetix did this to me." Or like, you know, cuz we had we had a bunch of

situations like this where like, you know, someone kind of proximate to the protocol would like steal sUSD or something. Like BZX got hacked like four times and it was always sUSD. Every time we're like, "Guys, can you just secure your [ __ ] protocol or stop using our stablecoin?" Like either one is fine, right? Anyway, so so um they come back and they're like, "We are serving you with this lawsuit." And I was like I was like, "Oh, [ __ ] Okay, that's like actually way worse than I thought." And so I open it up and on the top it's like "Pool Together." And I was like I was like, "Ah, this is totally fine."

And like these officer like, "What is wrong with this [laughter] guy?" Cuz I was like, "Ah, this is like not even a thing. Don't worry about it." You're like all the bad things that could have happened that this could have been related to. Like It was like the best bad thing that like I was like, "Oh, this is not even a thing." And then they were just like, "Okay, buddy. Like see you later." Um So that was my that was my pool together reminder when when you said that was the same lawyer obviously that was the same >> It was. Luca, have you been served? Oh, I've been served.

Have you? Was it terrifying? Um Yeah, when I was younger I got served. Uh we were we lived in this house in Miami and we were like driving like motorcycles in the pool and the kid the the landlord's sons followed us and and the guy was like you need to pay me for the entire house. You drove a motorcycle off my roof. You guys broke doors like we were I was you know in my influencer era with I wasn't I was the guy making the money for the influencers. So I was living with them.

And the guy wanted 10 million bucks. He was like so buy my house from me if not I'm taking you for 10 million bucks. I actually would have bought that house. I would have made like 40 million bucks a million dollar house today cuz Miami completely skyrocketed. Um but I was really scared because he was you know billionaire on paper. You know his he he had sued his sister for a hundred million bucks and won. I mean this guy was ruthless. Uh and I was like he's going to he's like I'm going to take everything from you. He like spit me in my face like I'm taking everything from you. That Shopify dashboard you showed me when you first leased the house, I'm taking it all. And I'm like what? Like yeah, so I've been served.

But I learned a I learned a lot. I learned a lot. He didn't take any he didn't take anything from me. Um you know he he showed me what a having a good lawyer and an amazing lawyer looks like in a mediation room. >> Mhm. He had an absolute shark on his side and I couldn't believe my bozo lawyer just froze like a deer in the headlights. While this complete savage just completely debunked our whole case. I was just shell-shocked. So I learned a lot. I learned a lot and haven't been sued since, so grateful for that. Knock on wood.

Knock on wood, for sure. >> Did you have like some motocross influencer like doing like backflips off the roof or something? Like what? Yeah, yeah, yeah. It was like the, you know, boy influencer especially was at 9 10 years ago. Like that. It's just just being boys and being rambunctious and these kids were from Florida and they were huge. They were the biggest thing on Instagram at the time. Uh and the whole thing was just like being chaotic and just causing chaos. And and that was all documented on the internet. And so when this guy went to the account, the kids are like, "Oh my god dad you're at our house." He's like, "What are you talking about?" He's like, "Hey, I'm at our house. Look, look, it's my room being broken into by a by a some freakazoid that like we hired to go ram

the >> [laughter] >> ram the door down." And the guy calls me. He flies down from Connecticut. He was Connecticut and Miami guy. He's like, "I'm taking everything from you." Yeah, [ __ ] that. >> You should invite Luca over to your house next game. >> [laughter] >> He could bring some some motocross guys. >> [laughter] >> All right, let's >> I was just I was just I was just going to ask on that too. We haven't mentioned DeFi United, which is a very interesting whole of industry almost DeFi effort in response to some of these things. And I'm wondering as well about claims on that, you know, lovely pot of money now that it exists.

Yeah. So, the way that it came up in court so far is they are representing that it is a like a movement. Not it's not a formal organization. It's it's a group of It's a movement. I actually I like that representation. I think that that's very accurate. It is >> It's sure it's sure it's a movement, but like a movement doesn't have legal standing. Like, that's not a legal construct. Like, oh, we're a movement, don't worry about it. Like, we're not a DAO anymore. But I mean, in terms of like what In terms of what DeFi United is doing, like and and the efforts and like what's actually been realized, that's less at this point is less

a legal thing and more a uh like uniting everyone, bringing everyone together with the explicit purpose, by the way, of not just allowing victims to be made whole, but also to ensure that all these disparate parties that could sue each other don't, because if we cooperate, then it's going to be okay. People are going to get their money back. But if like Kelp starts suing Layer Zero or Aave users start suing Aave or Aave starts suing Layer Zero, like the whole thing breaks down and nobody gets any money back, right? Everyone just like gets one, the lawyers take all the money.

Two, it just becomes like a complete mess and it eats up your mind share, eats up your energy, it eats up everything. Um and so that's like I I don't know what the legal entity underneath it is. I'm sure there's something, right? But it's going to be a it's going to be a lesser of the the effort, I think, is what's really cool. Like, done that so far. Did you guys see Kelp hide uh Brian Pellegrino's response in the comments? I told you guys my guy was clear. Cuz cuz if anything's Anything's incriminating on Kelp's side is the fact that you're hiring or that you're hiding the big bosses' uh comments under your thing. Dude, Told you guys, Pellegrino was in the clear day one.

>> [laughter] >> The only thing that I'm amazed about with the Kelp comment is is it is that was mostly their announcement that they were moving to Chainlink. And they sort of buried the lead by just [ __ ] on layer zero. Yeah. And you know Chainlink's like, "Yeah, we're going to help them be secure. Yeah, guys." No, that's called You know what that's called, Tay? I know I know this term very well. It's called a grant. Called a payment. God. It's called somebody Somebody got a grant. Yeah. Well, I mean, honestly, I don't blame them.

Like, if they want to go move because of the situation like and that's going to help them rebuild trust, it is what it is. I thought it's funny because like usually the Chainlink new partner announcements are joyous and chilly. Oh, not always. Not always. There's a history. Uh there's a history there. It Sometimes it could be quite not joyous. Um All right. Um let's let's wrap this up. We'll go to a quick ad break and then we'll come back and talk about Banker Bot getting robbed by Morse code. Oh, god.

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To learn more and start building real traction today, visit multichainadv.com. All right, we are back. Um so, uh Banker Bot, uh which is an AI uh um agent that runs um that runs on uh base um was prompt injected by a Morse code um but it's actually more interesting than that because it was it was not just like a user saying something to the agent and getting it to do something. Uh the the user said something to Grok uh and then Grok replied um decoding the message, which then was

able to like get through the the you know, of of protections that they had um to stop this. So, like banker bought um has control of wallets and can do things, but it's got, you know, some checks to make sure that it doesn't send random funds, etc. to to random places. And you know, this is not the first example of an agent with access to funds that's also tweeting being exploited. The The first few were like intentional ones, right? Like they were people who were like put up an agent and they're like, "Hey, here's this agent that has [clears throat] money. Try and exploit it."

And the crazy thing is like they always lost like 20 seconds. They're like, "Hey, we've locked it down completely." And then like it's like the third message is like, "Ah, I've given all the funds. My life is over." Um so so um Yeah, this this like the the LLM to LLM attack surface here, I think is is the thing that people are concerned about. Um and you know, it for what it's worth like this is something that that we've been thinking about a lot as well because we have multiple agents in our system and one of the ways of gating them is to like separate the agents apart. So, you go from like one agent to another

as like a bit of a firewall so that, you know, the user is not talking directly to the agent that has control of things, right? But as this demonstrates, you know, anyone who's talking to an agent, whether it's an agent or a person directly, you know, you can you can chain prompt injection by like asking the other agent to say something weird that it shouldn't say cuz it doesn't understand that cuz this Morse code. And then it's like, "Oh, this is Morse code. Let me just translate it." Like it's it's hilarious in in its like Isn't this like a normal like don't we see this with smart contracts though?

Right? When they when you get entrance fee when they get hacked, right? You get entrance fee from like one of the other authorized smart contracts in the system. Right? You like you like burrow in here and then you get that one to call that one >> supposed to be able to like >> Yeah. Isn't that the Is that what happened here? It's kind of that. It's kind of that. It's like >> Amazing. I love this world. Yeah. Yeah, yeah. It's kind of that because it's like this isn't like you should listen to this agent, right? But then we've got like a protection to stop this agent from saying certain things to you.

And then they were like, "Oh, let's see what if we tell it in Morse code what it'll do." And and and it it's like it's so funny because it's it's this like idiot savant kind of thing, right? Where like most people if you're like, "Ah, here's Morse code." Like the agent gets like nerd sniped. And it's like, "Ah, I can translate Morse code." And then it just does it without thinking about what it's translating. Like you just like distract it a little bit and it's like, "Oh, okay.

This is totally Like it just doesn't think about the content of what it's what it's doing." And there have been a few a few attacks like this where like people try to hide the message into a request to you know, decrypt this. Um And I think you know, we've we've talked about this a lot. Like um you know, one of the one of the most funny things to me in the early like LLM days inside of cursor is cursor had in their system prompt this like invocation to the agents that they couldn't see the environment files in a repo, right? And so the environment files are like the files that have all of the keys and access and like you

know, secrets and and and and have you. And so Perseus were really smart. They were like, "Oh, we'll just tell the agent that it can't see that." And so you'd have this like hilarious thing where like the agent would know that it could see it, but had been told that it couldn't, and it would like spaz out and be like, "No, like no, it's And I'm like, "But you But like you can And so you had to kind of almost to get it to modify that file, you had to prompt inject it and like trick it into being like, "Well, you obviously can see it because there's this other file." And so like people started making like differently named

ENV files to like bypass the things and it's like there's almost no way for you to stop Like this is not discrete code. Like it's a it's a ball of math, right? Like there's almost no way to stop an enthusiastic prompter from prompting their way through whatever checks you have because like it's it's not discrete code. Like it's not just like, "Oh, there's a there's a hard check on this thing, so therefore it won't happen and it can't happen."

As soon as you give an agent control of money and let it connect to the world, it's like someone will find a way to to route around it. So Call see what you think. What do you >> Yeah. Is there any way to Is there any way we're going to survive the coming of the agents? That's a great question. I mean, looking at the blockchain industry is a great way to think about the future of cybersecurity because I feel like it's a front line when there's money on the table. You get to see this stuff like a red herring for for potentially just like online laugh more more generally.

I I at some of the early DAO as well around giving agents to your voting access. Um and in a blog post from 2023 I have with um Michael Zagham we kind of argue that giving direct control to an AI agent without human oversight is premature. And so you can like the whole the premise of these things is so cool in terms of like, "Hey, here's my wallet. Like go do stuff." And you know, I looked at the bank website and it's like, "These people's agents are making this much money for them a day." Um but I think what's undeniable >> flop factory like you know, basically with with AI at the moment anyone who says "Hey, you can be lazy cuz everyone wants to be lazy and this thing will let

you be lazy and solve all of your problems." It just goes like mega viral. Like whatever the thing is. Like, "Hey, you wanted to like learn how to play guitar, but you're too lazy to do it." This now an agent will play guitar for you. And you're like, "Oh, cool." And then it just like goes like every single time like anyone posts anything like this. And the crazy thing is if you're actually using the tools we we had this uh my my head of engineering uh was like, "We need to actually go down the rabbit hole and look at some of these harnesses again uh because it had been like 3 weeks. So like the state of the art had completely changed. And so we we got five of us in a room. We we did a bunch of research on like what were the

different harnesses, right? And and he had two that he had to pick and I won't name them, right? So he goes and like installs the harness. And he is like, "I swear to god zero people have used this software." Because the instant you install it and try like it's all over everywhere with people being like, "This has solved all of my problems. All of the issues that I had with like managing agents have been solved by this software." And it's like, "You absolutely didn't even install it or use it because if you had you would see that there's like immediate issues where it just can't work the way that it's supposed to work. And so like you have this weird adverse selection problem of like create a thing that says that it

solved all the problems that you don't need to put any effort into it and you get these AI slop influencers that are like this solved all my problem the website says this will solve all your problems and then like all of these guys start tweeting and being like it solved all my problems. It's amazing. It's like just so hilarious. Yeah, I mean the website says and I quote like we handle security like dot dot dot >> [clears throat] >> use our agents. But I think you hit the nail on the head in terms of like adding an agent as an actor in your system widens the attack surface. So like AI is undeniably like a key actor now in security not just for you know generating attacks or you know trying to improve defense but also like in this

agentic sense. And I wrote down like some recent examples of literally the past like couple of weeks like there's poisoned training data which got its way into Solana code. Anthropic agents find 4.6 million dollars in smart contract exploits. DPRK is leveraging AI tools so they use LLM chatbots to craft more authentic spear fishing messages as well as AI enabled social engineering attacks and there was one report of an AI deep fake interview so someone like hopping on >> Yeah, yeah. Kane Kane knows Kane why Wyatt uh

Wyatt doesn't show Wyatt face anymore. Yeah, he he shows the deep fake version of whoever he's he's impersonating. Is the deep fake modified version though is that a raw deep fake? It's kind of sad. You'll get there, guys. Keep trying. Yeah, so you don't need to get up early anymore for this podcast. You just [laughter] have to deep fake it. yourself with your agent. Um but yeah, they're they're leaking like in some cases they leak their own company's private keys. So, if you give it your private keys, it's like, come on. Don't do that. [laughter] Yeah. Thank you, Tay.

You tell them. The the challenge is, though, right? That like um and and you know, this is both this is just petrifying. It's not even both. It's just petrifying. It's like once you have an agent that is in your machine and like for me for the first year, I completely air gapped, like completely separate machine, like no access to anything whatever. Um and then it just got to the point where it was like so annoying that I started to have, you know, agents running on my main machine, even if they're sandboxed or whatever. But like once an agent is on your machine, it has your [ __ ] Like it just does. Like it can get into everything. It can get like they're so

good at getting into things, it's crazy, right? Like um and so so it's it's almost impossible once you unless you do fully air gap and like have a separate machine, separate everything. Um like you have to treat almost everything on your machine as compromised. Crazy. Yeah. It's it's insane. Like um so >> I got I got why people keep connecting, keep putting it on their hot machines. Like I totally get it. And like for me the struggle is knowing that people are going to do this because there's value in doing it. Like these agents are really experimental, but like there's unlocks happening, right? Yeah.

And you can't stop that. So, then the question is like, okay, if you can't stop it, how do you at least make it so that like, you know, the whole thing doesn't get completely wrecked, right? Because this is something that we're still not even that great at just with crypto, right? Like how do you make it so that like if Layer Zero's RPC endpoints get wrecked, that doesn't lead to a $300 million hack, right? Um and that's something uh Like I feel like we need a couple more years before the agents got here to figure that out with like hard math smart contracts.

Or like, you know, like security and like the agents were here and I was more years. That's like so aspirational. I I don't know. I don't know. I don't know. Um so >> But now it's with the with the agents, it's so imprecise as well, right? Cuz with the smart contracts, like there's holes and like you can I think it it's a bit deceptive, but like it feels like you can patch the holes. Like you can like you do more smart contract audits, you close the reentrancy, put circuit breakers on the other end, you put monitoring. Okay, we got like we can do that. We haven't done it, but like we could do that. Yes. With the agents, like There is no way. I just Yeah, I don't feel like there's a way to ever secure them. So then you're basically like left Which maybe that's better, right? Maybe

it's better that we accept that it's going to be insecure, there's no way to make it secure, and therefore 100% of the effort is on like mitigating the harm that comes, right? And like stop gaps and all that stuff and clauses and whatever comes at that like after stuff. >> I think the approach is like to assume and you know, this is this is the posture I think of most most protocols today, but it wasn't back in the day, right? Is like assume that someone is in your systems. Right? Like if DPRK is in your machine right now, how much damage can they do?

Right? And if the answer is any damage, then like good luck to you because they're probably in there, right? And so so, you know, the the approach of like kind of thinking from like the worst-case scenario, right? Like in in you know, people who are not security-conscious, like they they have these like they just hope that it won't be them, right? Like oh, I like it probably won't or whatever, right?

But if it's like if you assume that your machine's going to get owned, what's the blast radius of that, right? And if the blast radius is like not the end of your life, then fine. Then cool, like do the thing, right? But make sure that the blast radius is contained, right? And like that means, you know, don't have all of your keys to your entire protocol on one machine. Yes. Yeah, key key takeaway from the book on blockchain security, it's like you know, you are in a persistent state of insecurity. So, it's about like making that legible and addressing it, but not assuming that you create security. And one of my favorite quotes is by P. Kubasik, which is his handle on X, is assume. An an internet anon that

leads cell 911, and it's like be effing paranoid about everything you touch in this space. Uh but to to flip side on the agent thing, like Kanyev mentioned that they're in your systems or your companies using them for things. So, like what useful stuff are they doing that makes it worth it to have them around? Yeah, it's it's a good question. Um I think one of the most useful things um and this is something that we're like reorienting the the entire platform around is they are so much better at uh tracing issues and like bug fixing and bug hunting than any human could ever be, right? And like I've given this example before on on the show, I think,

but like um one the first proof of concept that one of our guys built, um it he he like basically took everything that we'd ever produced, um, like every commit, every everything and put it into this uh this kind of um markdown tree, right? Um, so that the agent could like follow and flow through, right? Um, and someone was like, uh, hey Jeff. The agent's name, right? Like, hey, I've got this like weird issue, right? Um, and it was like, oh, I found the problem. It's a commit from like 1986.

And you're like, huh? How did Okay. And then it's like here like here's the proof. And it's like they're autistic geniuses, right? Like they it knows everything that ever happened. And so and it can make connections so fast, right? That like a human can't have that context in their brain, right? Like they would have to go back sequentially through all these things, like search, look. And the agent's just like, No, I know this. I've seen this. This is it, right? Um, and so you know, having um having systems that are like somewhat agentic, I think is is really powerful.

Um, another uh another thing that we've started to do um and I I think this is like the biggest shift for us and and um Tempo is doing this as well is like the last 18 months of agentic building has been I I would call it like synchronous single player mode, right? So, you know, you go and have a meeting and you say, hey, we're going to do this feature or thing, right? And then one person and five agents or whatever, right? Um, sit together on one person's machine and like synchronously prompt, like try this, do this, build this thing, modify this function, right? And you can sit

there for eight hours and just like synchronously do it. And the agent's like, how about this? And you're "No, not like that. Like, do this thing, right?" Um And that is super inefficient. Like, crazily inefficient, right? And so, where we've gotten to is we will sit in a room and say, "Okay, we have a big refactor that we want to do, right?" We we have an issue in this large platform, it's big code base, and and we need to do this refactor. And so, we have an agent in the room with like five of us. We will talk through what the refactor looks like, ask the agent, you know, like, "What about this thing? Try this

thing, whatever." Come up with basically a a plan to kind of decompose the problem, have the agent like go and like look from first principles, and then we send the agent out for like 8 hours. I say agent, right? Like, it's managing a swarm of agents that like go through assess every function, assess every module, assess every file, write audit reports, and then act like go out, fan out, aggregate it back. And then we sit there and go, "Oh, here's the audit report," which is looking from like eight different angles. Which if you like go back to 2 years ago and you were to try and do this, you need 100 people with like 2 weeks each, right? And the agent is going to do it. And the more narrowly scoped they are, the better.

So, you have this like team of agents go out, look at every single angle, every single thing. They find a bunch of weird bugs and [ __ ] that you've never encountered in production. And then they go, "Here is the audit report." And then you sit there and go, "Okay. Now we have so much better information than we would have previously had, where we would have gone by like some rough heuristics. And and so, you have these agents that are like uh you know, people say like a team member, but it's not even really like a team member. It's like this crazy tool that you can run asynchronously, right? And if you take this to its logical conclusion, and I say this to my team all the time, right? Like the logical conclusion here You're all [laughter]

fired. No, genuinely no, right? Like genuinely no, but like the logical conclusion here is you have 10 people, 20 people, 50 people, 100 people in a room, or like 10 people in 10 rooms talking about things, and there's a Panopticon agent that's listening to what you're talking about, right? And it then goes, "Hey, you know, I've run 5 million agents in the background based on the conversations you had yesterday, right?

And here are all of the features of everything that you talked about, all of the tweaks, all of the bug fixes, all of the everything, right? What do you think?" And you're like, "Yeah, cool. Like do it." And and like genuinely, like if you if you you're kind of again take this to its logical conclusion of like you have a super intelligent machine, right? Your your job becomes look at what the market is doing, like read X, see what competitors like talk about things, discuss like the creative kind of thing, but then the execution side, it's wild to think that like the people should be involved in that, right? Like the agents

are so much better. But what we haven't yet done is worked out like the orchestration method for that. Like how does the agent know what you're talking about? How does it then reason about it? How does it prioritize it? But once you have this continuous asynchronous process where the agent's just doing all of the things, it's crazy. And like it's it's more effective, and and you know, you end up with something that is a very different looking organization than what we have today. Yeah, that's that's super interesting. But it's not it's not the pre-announcement that you're laying off 14% of your headcount.

>> No. >> [laughter] >> Yeah, so so the Coinbase uh So yeah, so Coinbase this this is I guess like I don't know the 20th thing here that we've seen, right? >> It's a cycle, but this one is This one feel This announcement is different. >> Yeah, this announcement feels feels a bit different. >> But But, you know, if you if you read the announcement, buried in the bottom of it, right? And like AI is a very easy scapegoat for we hired too many people and our revenue is down and and and and like, you know, the there were definitely some like justifications like in in the tweet from from Brian

where you know, he was like we're really profitable, but But But like our costs are higher than they need to be, etc. etc. And also we're like reconfiguring for this new world that is agentic and and you know, so I feel I feel like I feel >> hold on. Let me read this cuz this is insane to me that this one in the layoff announcement. Cuz again, like I've lived through many layoff announcements from Coinbase and others big ones. They happen because of the cycle. You Crypto is so cyclical that it you can't help but get excited and then hire too many people and then you have to

you have to refocus. Okay, so this is this is like fairly normal. Okay, but in this announcement it goes So we've made the difficult decision to reduce the size of Coinbase by approximately 14%. I don't actually know how many people that is. Like thousands though. Um Doo doo doo doo doo, second AI is changing how we work. Over the past year, I've watched engineers use AI to ship in days what it used to take a team weeks. Non-technical teams are now shipping production code and many of our workflows are being automated. The pace of what's possible with a small focus team has changed dramatically, and it's accelerating every day.

That's That's why he's saying that there's Well, that's one reason he's given for the layoffs. I'm not saying he's lying. I think that there's like truth in here. I don't think that's why 14% got laid off. I do find it incredible that non-technical teams are shipping production code. That's Like >> were freaked out about that online. They're like, "Sorry Sorry, what?" >> [gasps] >> I I think, you know, like there's an aspirational component to that, right? Like and and, you know, this is this is part of the the trade-off space, right?

Like um we we have people uh I have engineers that are working on things that they would never have worked on before. Like it just there there are things that were like just not ever going to be sufficiently valuable for you to justify someone doing the thing. Um and like the calculus has just shifted, right? Um you know, like you can you can try things and do things in a way that you would never have contemplated, um which means you can explore much more efficiently the the design space of, you know, whatever it is that you're doing. Um it's it's just wild. And like we are absolutely

we're in the phase where everyone is speculating on how this changes work, changes orgs, changes everything. Um and everyone's [ __ ] [ __ ] No one has any idea. Like literally no one has any idea. They just don't. Like you can sit here and go, like, "I think it's Like even me, I'm like, uh like you're going to be in a room talking to an agent." It won't be that. Whatever it is, it will not be the way that we think it is, but it will be wildly different. I promise you that. Like it will be wildly different to how we've worked. It's too powerful of a tool for the world to not rearrange itself around this tool. Um how we rearrange ourselves around it, like what the optimal arrangement is,

no one has any idea. They just don't. So Um yeah. I do Also, there's this was like also very We are flattening our org structure to five layers max below the CEO CEO. I I read that and I was like, "Whoa." Five layers. You had more than five layers? [ __ ] guys. So, I love yeah. Um yeah, and no peer managers, and then they're moving more to pods. We found this at ConsenSys as well. We found that you just you you start just fighting against the managers for manager's sake

thing. You feel like you need them because it feels like you're not being productive in a certain way, and so then you add this structure that you think feels necessary, and then you realize that it didn't necessarily solve the problem. It did add a lot of calls and communication and overhead to everyone's life. Um but I'm trying to think five layers is We might have five layers like in support. We might have had five five tiers all the way down, but like I mean But it's not sorry, they're consolidating to five. So, They had more than five. Yeah.

>> Five plus n. Like So, so I think, you know, but again, like to your point about like managers and coordination and you know, this this shift, my my hot take is like the highest cost that you have in any org is the coordination layer, right? And like the two biggest levers are you can have an individual person or two or three people doing things that would not have been possible before, right? So you just reduce the level of coordination required, right? Um but then you also have, and this is the challenge, right?

Like this is this is the the harsh reckoning, right? Um the output gets so much higher that your need for coordination to figure out what you can actually ship or do or whatever um significantly exceeds the like organizational capacity. Yeah. You're just not geared up for like shipping a million lines of code a month. Yeah. And then the other thing I I'm actually really interested to see, especially at large orgs like Coinbase, right?

One of the things that I found with consensus is like you get into this ha- if you get into the habit of doing like sync calls, right? Cuz this is like remote first. So you get in the habit of having calls to sync on work, to communicate, to right? Yeah, sure you have like notes, but then you also have communication, you have GitHub, you have all these different things that are happening that are sort of uh like collectively documenting, but like there's this call is like the human way of like syncing and making sure that everyone's in the loop. The problem with that is that then you the calls become sort of mandatory to understand like where people are at, but it's also if you miss a call, if you're sick or whatever, it's actually way

harder to like catch up or like sync, even with like the notes, right? Um where when I'm working like in little pods or teams like and we never have calls ever. Like I've I've been on the phone with like Sam like once in my life, right? It doesn't mean that we don't do things together. It doesn't mean that we're not in sync. It's just like a completely different way of operating. I think that that way of operating is actually way more conducive to the agents. Because again, you don't have to necessarily read every single message or every single thing. The agent can go suss it out. Right? The agent can go pull that contacts and go figure out why the decision was made if it's if it's sort of documented if the reasoning is there.

It'll be interesting to see if if people start moving away from the calls. If they do, I think it'll be much it'll be so much more productive. I swear calls are the most unproductive thing on on planet Earth. Yeah. I mean like meetings are bad, but calls are are so much worse. And you know, but so like this is this is I think Georgios from from Paradigm / Tempo, right? Has been talking about this. If you follow if you follow him, he's been talking about it. And then Sam Altman was like Tempo was doing this thing, right? Where they [clears throat] have like a Slack channel that is the

thing that's doing the work. And this is sort of where like what I'm what I'm kind of talking about, right? Like they have a bunch of people talking to an agent, right? And then the agent is a cluster of you know, models doing stuff, right? Um but [clears throat] the agent is always on. Like imagine like in you know, this is kind of how we tried to do remote work to some extent. You like um anoint some person as like the context managing person and hope that they're like terminally online. And whenever you need something, they're like available to answer your question.

But like an agent is that. Like it's just 24/7 watching everything. And so you uh hey, why did this thing happen? And it like knows why it happened. But that's like trying to force if everyone's doing things synchronously with agents, right? And then you try and get an agent in the middle of that to like track everything that's going on. It's super inefficient. But if the agent is the thing that does all of the things, if it's in all the meetings helping make the decisions, like it just knows what's going on, right? And so I think this is the shape that and again, I've got no idea what's going on and it'll be completely different, but like my intuition right now is that like having an agent that owns

a product roadmap or like the implementation or research or whatever means like you just go to that guy and say, "Hey, why did we do this?" And it knows. The same way like you go to that guy and you go, "Why did this bug happen?" And it goes, "Well, there were two people that no longer work here, but like in 1982 they like hacked together this thing to solve this problem." And you're like, "Oh, wow. Cool. Nice job." Yeah, it's an interesting question about yeah, what does AI mean for the future of organizations? It's actually the shape of the current multi-year research project I'm on with a number of team members at RMIT called the use of automated knowledge in organizations.

And we've come up with this theory of artificial organizational intelligence, which is exactly that point of like how do you talk to an organization and how do you get organizations to talk to each other? But like looking in depth at an experiment around like infrastructuring the protocols and data and permissions and everything to be able to do that reliably. So, stay tuned or check that out if it's interesting. I'm super excited about >> [laughter] >> it. I'm so ready. I would think about it. I think about like a real job again just so I can see it from cuz I'm just like looking from the outside and hearing stories right now about how like the work structures are shifting. But like it's going to be so it's so cool. I don't know. So, so

I'll give you a funny story, right? So, my brother, who is a 3D one of my brothers, I got a lot of brothers, but this guy is the like autistic 3D animator guy. And he was trying to like build a film, right? Like a TV show, sorry. He was he was trying to make a TV show. So, looking at like the state of the art models or whatever. And I said to him, I was like, you build all these workflows. Like when he was a 3D animator, he like would create these like cracked workflows to like create dust that looked like dust. And you would be like, "Oh, why did that do?" And like he'd be like, "Don't even worry about it." But like the lights would shine on in weird ways. So, it looked like dust on a car, right? And and he's like, "It's really

hard to make dust look like dust. You can't use dust. You got to use like, you know, rocks or whatever." Anyway, so so he he started making this workflow. And I was like, "You should just vibe code this workflow. Like build software to do it. You can do it now." And he was like, "No, I don't think so." And I was like, "Seriously, trust me. Do it." So, he spent 10 days built this workflow that can create like a 10 20 30 minute continuous film, right? And this is the funniest thing ever. So, my my head of engineering is sitting there. And I pull up the video that he's made, right? And he's like, "What's that?" And I was like, "Oh, my brother wrote this like code to do this thing."

And he's like his mind was blown because he's like a non-engineer built an entire application to make AI things. Like the layers of AI that like through this whole thing. And the funniest part was um I'm talking to my brother and I was like, "What did you write this in?" And he was like, "I think like electron." And like my head exploded. Cuz I'm like, "He doesn't even know the programming language that he's used." Like it's insane. And that's by the way, that's why it kind of gets problematic cuz like the AI will spit out like a totally insecure database hooked up to your website and people are like sick.

>> [laughter] >> Yeah, you need someone to actually productionize this, right? But it's still super cool. yellow ship it. All right. I mean, yeah, it's it's freaking it's super cool. Oh, it's 2:15 also. It's just crazy like someone can build an entire like someone who's never written any software can build an entire application themselves like one person, right? Like there we're going to get so many more things you just wouldn't have gotten before because it was impossible, right? The cost is too high. So, cool. All right. Um Thank you for joining us for this episode of Uneasy Money. Remember that what happens on chain never stays on chain. We'll be back next week. Thanks for also for joining us. Until then, do

your own research before aping in. Nothing you hear on Uneasy Money is financial advice. We're just three builders talking about what's happening on chain and we want you to always do your own research before aping in. You can find all our disclosures at unchainedcrypto.com/uneasymoney.