Rig the Odds

College Rankings, Britney Spears, Binance, Crypto Gambling, and Diamond Heist

College Rankings

For the parents of any high school senior, choosing the right college is a big decision. Each year, US News publishes its US college ranking report, which some parents use to determine where to apply. The problem is how colleges treat the report, and how they model their institutions to juice their scores:

Only 20% of the score on its Best Colleges rankings comes from academic instruction and faculty resources.

Optimizing this 20% may still lead to negative outcomes for students. Paying faculty more can raise the sticker price of colleges. Optimizing class size to appease US News can lead to things like capping classes and thus limiting the number of large, efficient lectures, or constraining the ability of students to get into entry-level courses.

When the pandemic hit, colleges were faced with some tough decisions - but the rigidity of the rankings may have led them to value the wrong things:

When graduation and retention is 35% of their score, colleges simply could not afford to have students transfer out, or defer their graduation, or pause their enrollment, because that could have a disastrous impact on their completion rate.

These arbitrary metrics also affect applicants, because admissions departments feel pressure to accept students who are most likely to graduate:

The incentives are obvious, [Susan] Paterno says: If you have two applicants of equal academic merit, and one comes from difficult circumstances and the other is affluent, who is more likely to graduate in four years? With 35% of the university's score at stake, this isn't hypothetical.

This bias against the non-wealthy is made worse by debt load rankings:

Another 5% is a newer figure that discerns how much money graduates owe. Making this a factor is an excellent way to push universities into accepting more wealthy or affluent people who don't need to take loans.

"They don't really want to accept students with hardships that might cause them to drop out," Paterno said.

Applying to college is a source of serious stress for millions of kids and parents each year, and the US News rankings at times pits colleges against the students who want to attend their schools. The landscape of US college admissions has been dramatically alerted because a news magazine came up with a marketing gimmick in the 1980s and, for whatever reason, it stuck.

Britney Spears

Don’t worry, Britney isn’t up to anything shady. Unfortunately, the people in legal control of her are:

Spears, who is thirty-nine, has spent the past thirteen years living under a conservatorship, a legal structure in which a person’s personal, economic, and legal decision-making power is ceded to others. Called a guardianship in most states, the arrangement is intended for people who cannot take care of themselves. Since the establishment of Spears’s conservatorship, she has released four albums, headlined a global tour that grossed a hundred and thirty-one million dollars, and performed for four years in a hit Las Vegas residency. Yet her conservators, who include her father, Jamie Spears, have controlled her spending, communications, and personal decisions.

The story of how Spears came to be under conservatorship is very sad and disturbing, and we don’t need to talk about it here - the piece gives a thorough accounting. The story of how a small number of people have colluded to strip her of all her legal rights and agency sheds important light on the ways the system can be used to exploit the weak and helpless:

The next morning, with [Britney] Spears still at the hospital, Jamie, Lynne, and Butcher went to a small courtroom in downtown Los Angeles. Butcher had been told that she would be required to give more testimony and answer questions. Instead, according to Butcher, Lynne told her, “It’s taken care of.” The judge, Reva Goetz, who has since retired, arrived and announced that the conservatorship had been granted. “The whole process was maybe ten minutes,” Butcher said. “No one testified. No questions were asked.”

[…]

California requires that conservatees be given five days’ notice before a conservatorship takes effect, but this can be bypassed if a judge decides that they could suffer “immediate and substantial harm.” Goetz appointed a probate lawyer named Sam Ingham as Spears’s advocate, and then granted the conservators’ petition to waive the requirement to notify her that any of this was happening. Ingham remains in the role; Spears covers his annual salary of five hundred and twenty thousand dollars. (Her own living expenses in 2019 were $438,360.)

As the article notes - even confessed criminals are entitled to legal representation, but with the stroke of a pen, a judge took away Spears’s right to a lawyer, and gave her (estranged) father the power to do things like choose her manager, file restraining orders against anyone he didn’t like, and manage her finances.

Despite what Spears’s management team claims, there are plenty of options short of full conservatorship to help people who are struggling with mental illness or emotional turmoil:

Conservatorships can protect people who are elderly, or who live with profound disabilities or catastrophic mental illness. But there is also a wide range of alternatives to conservatorship that are less strict than what Spears has experienced, such as conditional powers of attorney or formal shared control of finances. As conservatorship law is written, the court is required to determine that a conservatorship is—and remains—necessary. “In practice,” Zoë Brennan-Krohn, a disability-rights attorney for the American Civil Liberties Union, said, “this is absolutely not the case. What should be happening is that a judge at a reevaluation hearing would ask, ‘What else have you tried? Why isn’t anything else working?’ And, if the conservator hasn’t shown that they’ve tried less restrictive options, the conservatorship should be suspended. But I’ve never heard of a judge asking that in any situation.”

At present, the conservatorship has been extended until later this year. Hopefully all the attention this case has received will lead to better laws and guidelines around the practice. Putting someone in charge of another person’s entire life should be a last resort, not a tool families can use to control the lives of wealthy pop stars.

Binance

I do not understand financial derivatives. I’ve read books on the subject - mostly dealing with the 2008 financial crisis - and still only sort of get how financial firms were able to do what they did, torching the global economy. So when I read about crypto derivative trading, I feel a bit lost. Here is Matt Levine explaining how Binance, the world’s largest crypto derivatives site, works:

The way it apparently works is that you put in $1,000, and if the price of Bitcoin goes up by 1% you make $1,000, and if the price of Bitcoin goes up by 20% you make $20,000 and think you’re the best trader in the world, but if the price of Bitcoin goes down by 1% you lose all your money.

Looking at a Bitcoin price chart for a single day makes me wonder how anyone makes money doing this - it has huge daily price swings. I guess that is part of the fun? What’s not fun is when you’ve got a whole bunch of money in Binance and the price of Bitcoin drops and the site freezes and you can’t trade in time to prevent big losses:

Binance, the world’s largest cryptocurrency exchange, froze for over an hour just as the price of bitcoin and other cryptocurrencies plunged. Mr. Singhal and others, who had made leveraged bets on their rise, were locked out.

[…]

As losses steepened, the exchange seized their margin collateral and liquidated their holdings.

Now, a bunch of the people who lost money during the freeze are trying to get their money back from Binance. But Binance doesn’t officially exist anywhere, so there’s no one to sue?

But unlike a more traditional investment platform, Binance is largely unregulated and has no headquarters, making it difficult, the traders say, to figure out whom to petition.

Mr. Singhal has joined a group of about 700 traders who are working with a lawyer in France to recoup their losses. In Italy, another group is petitioning Binance over the same issue. Lawyers representing the Italy group sent a letter to 11 Binance addresses they could find in Europe, and an email to the help desk.

It’s a little funny that the best plan these lawyers could come up with was to email whatever addresses they could find on Binance’s website? I’ve talked before about how there are specialty law firms who make their living suing companies for securities fraud or consumer fraud, etc. Are lawyers equipped to go after companies that essentially exist Online? I don’t know.

Binance claims it follows “local rules”:

In an open letter published July 7, Binance founder Changpeng Zhao said the exchange was committed to being compliant with appropriate local rules. But he has dismissed the idea of having a headquarters, saying it is an antiquated concept.

Binance’s terms say anyone seeking compensation has to file disputes for arbitration in Hong Kong, which is unlikely for someone in another country who’s lost a few thousand dollars due to a website malfunction.

Binance has been “banned” in a few countries, but that only prevents residents from transferring funds directly into Binance accounts - as with many things crypto, there are workarounds:

In the U.S., Binance doesn’t direct users to its main website. Instead, it has an affiliate, called Binance.US, which offers spot trading of cryptocurrencies. Because Binance.US doesn’t offer derivatives, it doesn’t need to be registered with the Commodity Futures Trading Commission.

This is a lot of words to say - if you are crypto gambling on websites run by companies without a physical headquarters, you should not expect the same legal protections you have if, say, your Robinhood app stops working.

Crypto Gambling

Speaking of crypto gambling, it’s apparently wildly popular on Twitch, the video game streaming platform:

[Tyler] Niknam, 30, is a top streamer on Twitch, where he’s better known as Trainwrecks to his 1.5 million followers. For hours on end, Niknam was hitting the slots on Stake.com, an online cryptocurrency casino and his most prominent Twitch sponsor, to live audiences of 25,000. He’d been winning big, sometimes as much as $400,000 in crypto in one fell swoop, and he never seemed to go broke.

The problem, of course, is that Stake is not legal in the US:

Though Stake doesn't possess a gambling license in any state, Niknam and other US gamblers easily circumvent this by using VPNs. Promoting gambling sites that cannot operate in the US and making money by referring US residents to them may constitute promoting illegal gambling, legal experts told WIRED.

Not great! Crypto gambling sites have blown up on Twitch, and now make up a huge portion of the streaming by top creators:

A WIRED review found that 64 of the top 1,000 most-trafficked Twitch streamers have streamed crypto slots or advertised sponsorship deals from crypto gambling websites, although the trend gained real traction in April and May of 2021. Some streams attract more than 100,000 live viewers.

Crypto casinos are throwing obscene amounts of money at streamers:

 And sites like Stake and Roobet are paying popular streamers to play the casino games on their channels, sometimes offering tens of thousands of dollars an hour, according to streamers and experts interviewed by WIRED. One gambling website, Duelbits, apparently offered top gambling streamer Adin Ross between $1.4 million and $1.6 million a month to stream slots on Twitch, according to a Discord DM between himself and Duelbits.

Which means they’re making massive amounts of money from the new users these high profile streamers generate. In some cases, the streamers aren’t playing with their own money:

“It wasn’t my money,” Matthew “Mizkif” Rinaudo said on his Twitch channel in June. Rinaudo, 26, says he was getting offers to do gambling streams for $35,000 an hour—double the price tag of his typical sponsorships—for 10 hour-long streams over the course of a month.

In the 2000s, online casinos and poker websites made huge profits in a largely unregulated online market - while technically illegal in the US, users could wire funds to front companies offshore, or exchange money elsewhere to fill their digital wallets and gamble. Now, with cryptocurrency easily accessible across most of the world, offshore crypto casinos like Stake and Duelbits can aggressively recruit on any platform that will allow it:

Twitch’s terms of service prohibit illegal activity on its website and ask users to comply with the Federal Trade Commission’s guidelines on advertising. That said, it does not specifically ban gambling streams. Crypto gambling is flourishing on Twitch, frankly, because it is allowed to. By contrast, livestreaming competitors YouTube and Facebook Gaming prohibit streaming online gambling sites that have not been previously reviewed. Twitch also has gambling-related categories, such as slots, which have no age limit to prevent younger viewers from watching. (Some stream titles say “18+.”)

Twitch is owned by Amazon, and clearly feels they are insulated from legal liability as things currently stand. The streamers, however, might not be so lucky:

The first Twitch streamer to reach 1 million, and later 2 million, followers was Tom “Syndicate” Cassell. Cassell drew in huge audiences gambling and winning big on the site CSGOLotto.com, but he also reached a settlement with the FTC in late 2017 for failing to disclose his status as vice president of CSGOLotto.com while promoting it.

If CS:GO looks familiar it’s because the game’s microtransactions were being used to launder money for worldwide fraud networks. I am sure that nothing like that is going on with these wildly profitable, unregulated crypto casinos.

Diamond Heist

Diamond Heist!

A woman stole diamonds worth £4.2m from a luxury London jewellers’ by posing as a gem expert and swapping them for garden pebbles in a highly sophisticated heist, a court has heard.

Lulu Lakatos allegedly posed as a gemologist and pretended to examine and value seven diamonds at the Boodles showroom on New Bond Street in Mayfair, central London.

The jewels were placed in a locked purse and were to be held in the jewellers’ vault awaiting payment. But when the bag was opened, after Boodles’ own diamond expert became suspicious, inside were seven small pebbles, Southwark crown court heard.

Lulu Lakatos is an excellent name for an international jewel thief. Boodles is an equally excellent name for a hapless British jeweler in Mayfair. The story of the heist is also excellent:

[Lakatos] was escorted by Wainwright into the jewellers’ basement meeting room along with the family firm’s own gemologist, Emma Barton. The court heard Lakatos examined and weighed the diamonds before individually wrapping them in pre-cut tissue paper and placing them inside opaque boxes, which were put into a zippable purse-like bag which was then padlocked shut.

It is alleged that Lakatos then placed the locked purse inside her own handbag when Wainwright went upstairs to take a phone call from the purported Russian buyer. Barton told her to put the bag back on the table.

“It seems what happened was it was swapped for an identical locked bag and that duplicate bag was placed back on the table,” said Stott.

Wainwright asked to examine the handbag and “reassured himself that the bag was relatively empty with nothing unusual in it,” the court was told, and Lakatos left the store.

Two other women, who had been waiting inside a nearby shop, walked alongside her as she was seen placing a purse-like object in one of their handbags, the court heard.

Stott said Lakatos, from the Saint-Brieuc region of north-western France, changed her clothes in a public toilet before leaving London on the Eurostar using her own passport.

The diamonds were worth over 4 million Euros, and two of Lakatos’s co-conspirators were already convicted of “conspiracy to steal” in classic British understatement.

Short Cons

Gizmodo - “When asked point-blank, most of these companies will tell you that their tech doesn’t touch unsavory parts of the web, and fueling this kind of content is the last thing they’d ever want to do. Not all of them are telling the truth.

NBC News - “Some anti-vaccination groups on Facebook are changing their names to euphemisms like “Dance Party” or “Dinner Party,” and using code words to fit those themes in order to skirt bans from Facebook, as the company attempts to crack down on misinformation about Covid-19 vaccines.”

WaPo - “Thomas J. Barrack, a billionaire businessman and longtime friend to former president Donald Trump, was arrested Tuesday in California and charged with violating foreign lobbying laws, obstructing justice and making false statements, officials said.

AARP - “[Viagra] also has the distinction of being one of the most counterfeited drugs in the world, says its marketer, Viatris, which estimates that 30 million men in the U.S. suffer from ED.

Tips, thoughts, or twenty carrot diamonds to scammerdarkly@gmail.com