Thursday links: financial tyranny, memecoin lunches, underground banking, and more

World Tyranny Financial

When World Liberty Financial deposits five billion WLFI into the DeFi protocol Dolomite to borrow $75 million of USD1, it’s a bit like taking out a $750,000 mortgage on a $100,000 house — why would you ever pay it back?

Five billion WLFI is nominally worth $400 million, but only on paper: trading liquidity is so thin that Dolomite’s lenders are effectively stuck with them.

You might then wonder why anyone would make such a loan. In this case, the answer may be that the co-founder of Dolomite, Corey Caplan, is also the CTO of World Liberty Financial.

Tellingly, I had to check LinkedIn to confirm Caplan’s employment status at World Liberty — like Homer fading into a bush, the management of World Liberty have disappeared off their website. 

Caplan was once featured on the site alongside World Liberty’s Chief Crypto Advocate (President Trump) and Web3 Ambassadors (Eric, Don Jr, and Baron Trump). Now there’s only a boilerplate about-us page, with no mention of who the team is, let alone meeting them.

In their place, the closest thing World Liberty Financial now has to an accountable executive right now seems to be an anonymous social media manager who's doing their best at something like investor and community relations.

It's an unenviable task. The account has been sparring with Justin Sun, for example, who was once World Liberty’s largest and most vocal backer. Now, Sun says World Liberty is being controlled by “anonymous actors,” and that its owners have been using the crypto community like a “personal ATM.”

Sun continues to be one of the top holders of WLFI — but only because a “backdoor blacklisting” prevents him from selling.

He’s suggested a name change: World Tyranny Financial.

A second memecoin lunch with $TRUMP

Another sign of the crypto-political times: the cost of VIP access to a lunch with the President is down roughly 90%.

VIP status at this year’s event required holding roughly $300,000 worth of the TRUMP memecoin. Last year, it was $3 million.

That’s only an estimate, however, because this time around token holders were also awarded 10 points for every $1 spent on Trump-branded merchandise:

At this point, the merch might have higher resale value than the token, so that could have been the way to do it. 

But even $300,000 of hats, watches, and fragrances does not definitely get you in the same room as the President. “In the event President Trump is unable to attend,” the terms and conditions state, “persons who are qualified for the 2026 event will receive a limited edition TRUMP NFT in lieu thereof.”

Either way, this year’s lunch likely adds a few million to the estimated $1 billion the President’s family has made from its various crypto adventures so far.

Nice work, if you can get it.

Underground banking

Professor Miles Kellerman writes that the “underground banking” networks that we typically associate with small-scale remittances (hawalas, for example) can now facilitate transactions as large as NYU tuition bills.

Underground banking dates back to the Silk Road, when long-distance trade was first facilitated by a “two-pot” system: funds credited in one place could be debited in another via trusted intermediaries. (The same system that Western Union has been using for money transfers since the advent of the telegraph.)

Today, underground banking networks are thought to facilitate as much as $488 billion of informal remittances per year. There’s probably a branch near you: “They often operate secretly out of mini-markets or mobile phone stores,” Kellerman says. 

The largest transfers likely run through the Chinese feiqian system.

Kellerman cites the example of Chinese students attending university in the US. China limits citizens’ transfers abroad to $50,000 per year, which will not cover a year of expenses at NYU ($100,000, these days).

So Chinese parents turn to the two-pot feiqian system, depositing yuan in China that their children can withdraw as dollars in the US. Sometimes that’s done in cash (“a practice that is allowed at many universities,” Kellerman says), and sometimes by moving the funds into a US bank account. 

Unfortunately, the reason feiqians always have enough cash on hand to pay for a year at NYU is the global trade in fentanyl.

“Every underground banker operating in the US has to receive US dollars before they can redistribute that money to their clients,” Kellerman explains, “Normally, those deposits would gradually accumulate from repeated business.” That can either be in fees for previous transfers or from, say, cash transactions at mini-markets or mobile phone stores. 

But a DOJ indictment from 2023 revealed that much of the cash Chinese students were receiving was coming from the Sinaloa drug cartel.

The cartel generates enormous profits selling fentanyl in the US, producing dollars that need to be laundered. Chinese students in the US needed dollars to pay tuition. So, from around 2019, the cartel started putting their cash into the underground banking system. 

When a Chinese student withdrew dollars in the US, the cartel would be credited with the same amount in yuan in China. Brokers in China then arranged for businesses to purchase products from Mexican companies controlled by the cartel, generating profits in Mexican pesos.

“Like magic,” Kellerman says, “dollars from the drug trade were transformed into yuan, only to be transformed once again into crystal-clean pesos.”

It’s not obvious why crypto hasn’t won more of this market, but Kellerman’s view is that “Whereas bitcoin is trustless, underground banking can be recordless.”

But blockchains are working on becoming recordless, too. So crypto may soon have a new use case: paying tuition at NYU.

Anthropic is worth nearly $1 trillion

Perpetual futures on Ventuals now value Anthropic at $960 billion — nearly triple the valuation when Anthropic raised capital two months ago.

This puts them well ahead of OpenAI, which is valued on Ventuals at a comparatively modest $835 billion.

Also, in an alternate timeline, it means that FTX has taken over global finance, buoyed by the 13.5% of Anthropic Sam Bankman-Fried bought in 2021 for just $500 million. 

If he had not participated in future rounds, that 13.5% would have been diluted down to something like 5.2%, which is now worth $50 billion — a 100x return in just five years.

In this timeline, however, FTX collapsed because of a missing $8 billion (such a small number!) and the bankruptcy estate sold SBF’s Anthropic for $1.2 billion (a tiny number!).

This timeline is probably better.

Saudi Arabia tightens its investment belt

In his market update for March, valuation guru Aswath Damodaran predicted that the war in Iran would make capital more scarce: “The capital flows from the oil rich countries which have flowed generously to everything from AI start ups to Premier League clubs will shrink, creating down-market effects.”

It's happening. Saudi Arabia’s sovereign wealth fund is reportedly withdrawing support from one of the Kingdom’s highest-profile projects: LIV Golf, the big-spending golf circuit that’s divided country-club locker rooms since its launch in 2022.

The Saudis also appear to have pulled out of a planned investment in Tom Brady’s flag football league. (Is nothing sacred???)

Damodaran expects more of this. “The funds that were set aside to build vanity projects, from ski resorts in the deserts to state-of-the-art cities will be redirected to building pipelines and securing the flow of oil.”

That might ultimately be for the best: oil pipelines are presumably more productive than desert ski resorts.

In the short run, though, funding anything from memecoins to datacenters will be a bit harder than it was just a few weeks ago.

— Byron Gilliam

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