Sunday, April 18, 2021

 

There is No Substitute for the Rank and File: Thoughts on Amazon Unionization

 

The Bessemer Amazon union was defeated by an almost 2-1 margin. This wasn’t just due to tactical mistakes. It’s due to a top-down, bureaucratic union model. To take on Amazon’s colossal strength, there is no substitute for the power of a combative rank-and-file movement.


Photo credit: Reuters.

The Bessemer Amazon unionization effort was full of potential. It held the promise of a union bringing together the Black Lives Matter movement and a struggle for labor rights in order to take on one of the biggest, most odious corporations in the country. Maybe a Southern state would set off a movement again, like West Virginia and Oklahoma kicked off the teachers’ spring. 

Alongside Left Voice comrades, I decided to go to Bessemer, Alabama the week before voting ended. As I prepared to go, I had a weird feeling. I kept looking at interviews and I saw just two Amazon workers, over and over and over. They were great spokespeople, no doubt. But where were the other 5,698 workers? 

I know what a dynamic workers struggle looks like. There are usually worker-led actions with tons of workers full of rage and willing to talk about their fight. That certainly was the case at some of the workers’ struggles I reported from over the past few years: the Hunts Point strike in New York City, the Oklahoma teachers’ strike, and the Hilton unionization effort before that. And when I lived in Brazil, I saw workers take more radicalized action: a bus drivers strike where the bus drivers broke the mirrors of the buses driven by scabs and blocked a major highway. Whether more radicalized or not, the air around all these struggles is the same: workers full of class hatred and conviction in their strength in the fight and in solidarity with each other. 

Left Voice is hosting a panel with Bessemer Amazon worker and Black liberation activist and Robin D.G. Kelly, author of Hammer and Hoe to Black struggle and the labor movement.  Sign up and RSVP to the Facebook event.

In the weeks prior to my arrival in Alabama, I emailed the Retail, Wholesale, and Department Store Union (RWDSU) to ask for an interview with a worker. No response. While the big press was getting interviews, independent media didn’t seem to. Even Jacobin didn’t have one. Where were the workers? And if the workers weren’t activated, this didn’t bode well for the union. 

Upon arrival, I went canvassing with DSA and Socialist Alternative members. I was impressed — it’s not everyday a union allows leftists to organize their canvassing. I saw tons of support in the community, especially the Black community. 

But I didn’t see any workers canvassing.

The next day, I went to the door of the Amazon warehouse. We stood outside and waved signs in solidarity with the union. I noticed how quickly the traffic lights changed, making it hard to cross the street and certainly to talk to workers. After all, Amazon had petitioned the city to change the timing of the traffic lights, an absurd example of the state “managing the common affairs of the whole bourgeoisie,” as Marx and Engels put it in The Communist Manifesto. By law, we were only allowed to stand three people to a curb. I noticed the cops circling the warehouse. The next day, some of my Left Voice comrades got harassed by the police for stepping on the grass in front of Amazon. Turns out Amazon hired off duty cops to patrol the facility. 

There is a lot of repression, I thought. What must it be like inside the warehouse? And also, where are the workers? Shouldn’t they be standing out here, in a show of strength? I asked one of the staffers who said it’s the explicit strategy of the RWDSU not to have very many workers in the forefront. After all, Amazon may fire someone or retaliate.

Maybe that’s true. Maybe organizers want to play closer to the chest. Sometimes you have to organize in secret, especially when there is so much repression. Maybe there were workers canvassing at every workers’ house. Maybe there are secret Zoom meetings by shift with hundreds, even thousands of workers. Maybe the rank and file is mobilized behind the scenes. But I remember my comrade who unionized his own workplace saying, “The most important thing before a union vote is for the anger at the bosses to be stronger than the fear.” The RWDSU was accepting the fear as natural and organizing around the fear. The union seemed to be organizing to just sneak by, not mobilize workers to stand up to the bosses together and fight together. In fact, the opposite from what the RWDSU staffer said is often true — the more public demonstrations, the less likely it is the boss can retaliate.

That’s especially true with all the national support, all the workers who traveled to Alabama — shouldn’t they be speaking to the Amazon workers? A comrade who is a nurse had traveled to Bessemer a few weeks prior to stand in solidarity. He wasn’t introduced to any workers. Why didn’t the union take an active role in making connections between essential workers? Why didn’t it create mobilizations of other RWDSU rank-and-file workers and Bessemer Amazon workers to stand together in solidarity, discuss and engage in actions together? It would strengthen the struggle to know that workers across the country are standing with them.

It was really difficult to find Amazon workers to speak to. 

I asked around for Amazon workers, and folks directed me to the union, and the union was giving us the runaround. And we didn’t want to hear just from the leaders. We wanted to hear from the rank and file of the movement as well. But we weren’t able to get in touch with either. 

Maybe we could go to the Waffle House near the Amazon warehouse and just camp out all day? Maybe that way we’ll meet workers. This plan almost happened. But a friend was able to put us in contact with a family member dating an Amazon worker. Success. And then an activist we met in Birmingham had a friend, an activist from the movement who works at Amazon — Frances Wallace. We scheduled the interviews.

Later, it was  announced that Bernie Sanders was coming to town. Part of me was surprised the event was in Birmingham, about 30 minutes away from the warehouse in Bessemer. But as everyone seems to have a car in Alabama, maybe it wasn’t a big deal. Surely there will be a lot of workers at this, my comrades and I think. 

But when we went to the event, there was a huge crowd of reporters, folks from Our Revolution, DSA, and Socialist Alternative. There were only about a dozen workers. After the speeches, we rushed to try to talk to some of the workers, who were quickly whisked away by union leaders for a meeting with Sanders. I got yelled at by a reporter who was talking to another worker. Apparently, she wanted an “exclusive.” My first competitive labor reporting experience. And it was competitive because there were way more reporters than workers. 

In fact, in the press, there seemed to be a normalization of the fact that the workers weren’t the faces of the movement. Staffers and even members of Our Revolution ended up on New York Times covers. Go back and check — most of the images of the Amazon unionization in Bessemer aren’t actually of Amazon workers. 

Finally, we spoke to two Amazon workers. Both voted yes on the union, but neither had any contact with the union other than text messages. Neither had a house visit or a face-to-face discussion with some of the core organizers. They didn’t know of any organizing the union did other than standing outside the warehouse.

We spoke with Frances, who is on medical leave and is an activist in the Black Lives Matter movement. They have been arrested almost a dozen times and is an activist and self-identified revolutionary. They are 20 years old and a born leader and organizer. Among the nearly 1,000 workers who did vote for the union, there must be a dozen workers like Frances that could have been engaged in a more militant campaign.

Our second interview was anonymous. They and their partner drove out to our Airbnb from Bessemer. Their partner is supportive of the union and of speaking out — that’s why they made the time. They watch the kids in the car while the Amazon worker sat with a few comrades and me to chat. The Amazon worker chose to be completely anonymous. Their partner balked and protested, but they say, “I got kids, you know. I can’t do just anything.” The fear of retribution is real.

I ask Frances and the anonymous Amazon worker if they can hook us up with co-workers. They don’t know their co-workers. Between Covid restrictions and the revolving door of employees, they don’t know their co-workers. It’s a stark difference with the miners that went on strike just a week later. One of the miners we interviewed said, “We had New Year’s Eve dinner underground, Christmas dinner underground, me and my friends, me and my brothers.” The brutal labor conditions in the mine bring them into physical proximity. In the past, that created a combative miners’ movement. The brutal labor conditions at Amazon keep them apart. 

And even on the last day of the vote, people were still far apart from each other. 

A Postmortem

After the union’s staggering defeat in the vote count, union president Stuart Applebaum is still painting the unionization effort with rose-colored glasses. He’s wrong. This was a defeat, and it’s a high-profile setback for the labor movement as a whole. That doesn’t mean the labor movement is crushed forever, or that Amazon will never be unionized. But let’s call a spade a spade. 

We shouldn’t, however, normalize or underestimate the kitchen sink of legal and illegal mechanisms thrown at the workers. After all, Amazon, like Walmart, has become one of the biggest and wealthiest corporations in the United States by having a revolving door of non-unionized labor. It’s a central part of their labor model, of the way they extract surplus value from workers. It’s what made them the wealthiest corporations in the world. 

It’s disgusting, really, that the wealthiest man in the world and the second-largest corporation in the United States have workers peeing in bottles, working in the Alabama heat without so much as fans, breaking their bodies for the profits of Jeff Bezos. It’s dystopian to hear Amazon say Black Lives Matter while Black workers destroy their bodies for Bezos’ profits; it’s the most repulsive gaslighting to hear the Wall Street Journal say that workers like their working conditions and just didn’t see the need for a union. 

It’s so hard to unionize as a result of incredibly restrictive labor laws. This is the direct result of decades of Democrats and Republicans passing and upholding anti-union laws. These laws are passed without resistance,and have undermined unions and unionization efforts for decades. This is the direct result of the fact that the union leaderships are tied to the Democratic Party. These laws came alongside a strong ideological offensive against unions that treats workers’ organizations as if they are little more than the sum of their bureaucratic leaderships and demonizes the collective organization of the labor force. This is in large part the result of tying labor to the state through the National Labor Relations Act. As James Hoff explains in Left Voice, the impact of the NLRA was “the creation of a legalistic framework that brought labor and labor unions into the fold of the maintenance of capitalist production … Because the continued existence of unions had been made into a largely legislative issue, union nationals and their bureaucratic leaderships began to pour untold amounts of energy, money, and ideological efforts into lobbying and supporting imperialist Democratic Party politicians to maintain and increase legal rights for unions.” The legalistic framework of the NLRA and the Taft-Hartley Act that amended it has resulted in a weakened labor movement, and by adding untold levels of bureaucratization to the process of unionization has ultimately made it harder for workers to form unions.

As Charlie Post put it, the NLRB has “overseen, and often facilitated, the near total collapse of private sector unionism, and state legislators across the country have launched a new offensive against the last bastion of unionism in the United States — the public sector.”

While Biden wants to act like the most pro-union president in history, he can’t hide from his neoliberal past or that of his party. In the past year, shit really hit the fan — people went out burning police stations and right-wingers tried to storm the Capitol. As unions have shrunk in size and influence, sectors of the working class have deserted the Democratic Party, either not voting or voting for Donald Trump. Neoliberalism created left and right polarization and Biden sees it as his job to create a new center. And what better way to do that than top-down unions that funnel people back into the Democratic Party and tame the most radical elements of the labor movement? Of course, unions don’t need to be that way, but they certainly have been over the past decades. 

There is No Substitute for the Working Class 

The truth is that Amazon workers were notably absent from the unionization struggle. The thousands of workers in the warehouse — or even a vanguard of hundreds — just weren’t mobilized in any noticeable way. Jane McAlevey has the much-shared postmortem in The Nation. But in her assessment it seems like a list of tactical problems — like the union just forgot to mobilize the workers. I think the problem is deeper.

Business unionism has become the model since the post-World War II era — creating unions focused on providing services for workers. Workers are, at best, clients. Unions, on the one hand, provide services, and on the other tell workers that their power is not in their ability to strike, but in their ability to vote for the Democrats. Unions have become a wing of the Democratic Party — using vast resources to tie the fate of the working class to the Democrats. This is what Mike Davis calls the “barren marriage of American labor and the Democratic Party.” In Prisoners of the American Dream he explains, “The harnessing of industrial unionism to renovate the vote-gathering machinery of the Democratic Party was an effective instrumental relationship in one direction only.” And we all know what direction that is. This comes with a radical shift away from almost any form of militant action — since the appeal is to the Democratic Party, militancy is off the table. 

The unions have built an army of staffers; many genuinely want to play a role in the labor movement and want to empower the rank and file. But instead, they end up overworked and stuck organizing workers to canvass for Democrats. One of my comrades told me that UNITE HERE union had much of its unionized workforce laid off during the pandemic. The union didn’t pour resources into fighting those layoffs. Instead, it flew workers to other states to campaign for Biden.

This barren marriage between labor and the Democratic Party is exemplified by this Amazon unionization campaign. It substituted the protagonism of rank-and-file workers with big-name Democrats. Again, the RWDSU attempted to teach workers the same lesson: that their power is with the Democrats, with Joe Biden or Stacey Abrams. It was explicit, with the countless signs of Stacey Abrams flexing her muscle telling workers to vote yes at a picket line with no workers. And this is a losing strategy for workers. It has been a losing strategy since the beginning. It isn’t a loss for Democrats, though, who now can pretend they are on the side of the working class in an immensely popular labor struggle. 

But of course, union leadership knows this. McAlevey’s article is a unionizing 101 manual. And yet, the RWDSU leadership didn’t organize that way. Perhaps it is because an organized, combative, Black workforce isn’t so easy to reign in. But what we do know is that this is a strategy that has lost over and over — and continuing to use it against Amazon’s sophisticated anti-union campaign just invites a loss. 

If you read Jacobin, with the exception of some articles you would think the solution isn’t to mobilize the rank and file more but that it’s the PRO Act. This is another problematic conclusion that is not based on developing class struggle or the self-organization of a combative working class. It doesn’t pose the perspective or organization to overcome the narrow confines of the NLRB that ties the labor movement to the state. Or worse, the DSA is calling to vote for progressive Democrats who support the PRO Act — more faith in the barren marriage of Democrats and labor. 

But to win, there is just no substitute for the working class. 

Now What? 

Jacobin article explains that there is a phenomena of “laborism without labor” — a phrase that perfectly embodies the Amazon unionization struggle. Hundreds of progressives all over the country held solidarity rallies. Even the capitalist media wrote favorably about this unionization effort. But it didn’t help advance the self-organization of workers. It didn’t leave behind a network of hundreds of Amazon workers in Bessemer connected to workers all over the country. It didn’t leave behind the bonds of hundreds of Amazon workers who know all of the workers on their shift, and who are thus ready to mobilize each other when needed. It didn’t leave behind the bonds of collective discussion and decision making.

And that’s the biggest loss in this Amazon unionization effort.

My comrades went back to Alabama to cover the miners strike — with an active rank and file at picket lines every day. While they were there, they attended the rally called by the RWDSU and several other unions. Again, about a dozen workers were in attendance. A few more than usual. The staffers spoke, and union leaders from other sectors spoke, along with two Amazon workers. The rank and file was missing — both from Amazon in Bessemer and from other sectors of workers. 

The RWDSU is contesting the results of the unionization effort with the NLRB. It is correct to do that — Amazon used legal and illegal mechanisms to try to crush this unionization effort. But it’s unlikely the union will win a second round, much less a good contract, if it doesn’t make a drastic change. 

Likely more than 1,000 workers stood strong in the face of all of Amazon’s anti-union bullying and voted yes on the union. These workers can be the vanguard of the struggle against Amazon and the foundation of a union. They can and could begin organizing house visits and shift-based assemblies of workers to share concerns and organize actions. And the outside support certainly can help — speaking out against any retaliation or even attempted retaliation. Frances said, “This is just round 1. We tried the easy way and they didn’t want it the easy way. So we gonna do it the hard way. They aren’t going to give it to you unless you take it from them. We need to show them we mean business, whether that means a strike or walkout.” 

They are right. But to organize for that, there needs to be — first and foremost — rank-and-file organization.

Even though defeated, the effort did have an impact. There is a national conversation — and indeed, national hatred towards Amazon and its horrendous working conditions. A 2018 survey named Amazon as the second-most trusted institution in the country — and that’s just not the case anymore, thanks in part to the national phenomena around this unionization campaign.  While it wasn’t just Bessemer, the unionization effort did help highlight these horrendous conditions. And already, workers around the country have reached out to unions, planning on organizing their own warehouses. The fight against Amazon is also rearing its head in Chicago, where workers walked out of a warehouse.

There is potential here. But potential is not enough. We must learn lessons from this loss. The old business-unionism model, the old begging at the table of the NLRB for a union — a strategy tied to union leaders tied to the Democratic Party — is a failed strategy. Even overwhelmingly good press can’t fix this broken strategy. 

But with an organized, combative, and militant rank and file connected to the wide networks of working-class solidarity, it is possible to defeat Amazon. It won’t be easy. A miner we interviewed said it best: “ When the [miners’ unions] was formed, it took blood. It took literally a war to start the united mine workers. It’s so hard to start a union … If [the working class] stands together, maybe we can start to change it.”

There are chapters of labor history yet to be written in which the united working class can and will do spectacular things, but only if workers are organized democratically at the rank-and-file level, independent of the capitalists and their parties, to fight for their own interests and the interests of their commun

Presidential historian lays out the reasons why George Floyd’s death sealed Trump’s fate as a one-term president

Alex Henderson, AlterNet
April 17, 2021

Donald Trump Jr., Donald Trump and Ivanka Trump stand together during the Republican National Convention. (Shutterstock)


Historian Jon Meacham is great at explaining how modern events fit into the big picture and how events of the past offer insights on the present, and he did exactly that when — during an April 16 appearance on MSNBC's "Morning Joe" — he weighed in on Derek Chauvin's trial and far-right evangelical Pat Robertson's response to it.

Chauvin is the Minneapolis police officer who has faced murder charges because of his role in the death of George Floyd on May 25, 2020. The defense rested its case in Chauvin's trial on April 15, and Robertson — the long-time host of "The 700 Club" and founder of the Christian Broadcasting Network — shocked viewers by being highly critical of Chauvin and citing him as a glaring example of someone who never should have been in police work. Robertson is a very divisive figure who is disliked by many liberals and progressives as well as right-wing libertarians, but his comments on Chauvin have been applauded by some of his most vehement critics.

Meacham, an Episcopalian, said of the 91-year-old Robertson, "If somebody does something right, you welcome him — and you welcome it." And Meacham stressed that the videos of Chauvin's knee on Floyd's neck were shocking even to Robertson.

Noting Robertson's influence on the Republican Party, Meacham explained, "Robertson was kind of the official embodiment of the rise of the Religious Right. I think it began with the school prayer decision in 1962. It was slow in developing. A lot of White evangelicals stayed out of politics in the mid-1960s because they were uncomfortable with civil rights, which was a space that was clearly associated with the Black church."

The historian told "Morning Joe" hosts Joe Scarborough and Mika Brzezinski that Floyd's death intensified a "conversation" that Americans have been having for generations — a "conversation on race" — and served as a painful reminder that "systemic racism exists" in the United States and "police reforming is necessary." And Meacham also argued that Floyd's death led to the end of Donald Trump's presidency.

A week after Floyd's death, on June 1, 2020, nonviolent protesters in Washington, D.C.'s Lafayette Square were demanding justice for him when they were violently removed by police so that Trump and his allies could walk from the White House to St. John's Episcopal Church — where Trump gave a speech and had his much maligned "Bible photo-op."

That day, Meacham argued, sealed Trump's fate in the 2020 presidential election and convinced millions of Americans and "a lot of White people" to vote against Trump and reject "a culture of White supremacy."

"The death of George Floyd, in many ways — if you look back on the year of 2020 — in a lot of ways, Lafayette Square, the events that unfolded in that terrible period really brought home to people…. that the Trump era had come to manifest many, many of our worst impulses," Meacham told Scarborough and Brzezinski. "I have a theory that in the national mind, to some extent, Joe Biden kind of became president-elect during Lafayette Square.


“It Felt Like War”: Tear Gas, Rubber Bullets, and 100 Arrests in Brooklyn Center Protest

The police and National Guard used tear gas and rubber bullets against protesters demanding justice for Daunte Wright. Over 100 people were arrested.


Image: ABC 57

On Sunday, the police brutally murdered 20-year-old Daunte Wright in Brooklyn Center, Minnesota. This is less than a 20 minute drive from Minneapolis, where Derek Chauvin murdered George Floyd. Now the cops are arresting, tear gassing and shooting rubber bullets at peaceful protesters. 

Minneapolis and the surrounding area was already highly militarized, as Chauvin has been on trial for the past several weeks. Protests calling for Justice for Daunte Wright have been ongoing since Sunday. A curfew has been imposed, and the National Guard was called in to repress protesters. 

Last night was the largest, and most repressive, night of protests so far. There was originally supposed to be no curfew on Friday night, but  in anticipation of the size of the crowd, the city issued a last-minute city curfew from 11 p.m. to 6 in the morning. 

Both the National Guard and police tear gassed a peaceful vigil and shot rubber bullets into the crowd. “It felt like war… We were in trenches and they were shooting at us” said Satura Dudley, leader of Cell A65, who was among the protesters in Brooklyn Center. Daunte Wright’s brother was also among the crowd, holding a prayer vigil for his brother. 

100 protesters were arrested and held overnight. Lawyers and friends were originally told they would be held for 36 hours, although some have already been released. No charges have been announced. One of those arrested was Frances Wallace, an Amazon worker from Bessemer Alabama. 

The murder of Daunte Wright has sparked protests all over the country. The cop who murdered him was a 26-year verteran of the force and a police union representative. She claims that she mistook her gun for her bright yellow taser and that she had supposedly meant to taser Wright. It’s an unlikely story. She is currently being charged with second degree manslaughter.

This is occurring only 20 minutes away from where Derek Chauvin is currently on trial. While some police have spoken out against Chauvin, this latest murder makes it clear: Chauvin wasn’t a bad apple. The role of the police in capitalist society is to terrorize and brutalize people of color and working class people. That’s what they did to Daunte Wright and to 13 year old Adam Toledo. That’s what they do to anyone who says Black Lives Matter. 

Dudley explains, “They didn’t give us a curfew warning. We didn’t get a message, it was not curfew… 15 cops tackled us… I was shot by a rubber bullet in the knee and it hurts.” 

“I have never experienced anything like this in my life,” she went on, “I’ve protested before. I’ve been arrested 13 times. This was not the same. They just attacked us.” 

We demand the immediate release of all protesters and for all charges against them to be dropped. We demand justice for Daunte Wright, Adam Toledo, and all other victims of the racist police. 

Minnesota governor expresses regret for mistreatment of journalists during Daunte Wright demonstrations


By Hollie Silverman and Andy Rose, CNN

Updated Sun April 18, 2021

Minnesota National Guard on alert amid tensions over police shooting of Daunte Wright, looming Chauvin trial verdict 00:53

(CNN)Minnesota's governor expressed regret Saturday after the alleged mistreatment of journalists covering demonstrations in Brooklyn Center by law enforcement, as attorneys representing news organizations released a letter calling out several examples throughout the week -- including the arrest of a CNN producer.

At least 100 demonstrators have been arrested during protests over the death of Daunte Wright, who was shot and killed on April 11 by a Brooklyn Center police officer during a traffic stop. Some journalists at the demonstrations, including those with credentials, were also detained and photographed by police before later being released.

During an hour-long phone conference with law enforcement officials and an attorney representing media outlets -- including CNN -- Minnesota Gov. Tim Walz said he was embarrassed about the treatment of reporters after police ordered the crowd to disperse, according to a participant in the meeting.

"A free press is foundational to our democracy. Reporters worked tirelessly during this tumultuous year to keep Minnesotans informed. I convened a meeting today with media and law enforcement to determine a better path forward to protect the journalists covering civil unrest," the governor said on Twitter Saturday.



At least 100 people arrested on tense sixth night of protests as Daunte Wright's loved ones mourn for his son

Attorney Leita Walker, writing on behalf of more than two dozen journalism and media outlets, sent a letter to Gov. Walz and public safety officials after the meeting. The letter alleges multiple instances of journalists being harassed, assaulted, or arrested by law enforcement officers while covering protests in Minnesota.

CNN producer Carolyn Sung was grabbed by her backpack and thrown to the ground by state troopers while trying to comply with a dispersal order, the letter said.

Her hands were zip-tied behind her back, she did not resist and repeatedly identified herself as a journalist working for CNN while showing her credentials, according to the letter. The male security agent hired to work with her was also detained but then released after he showed his credentials.

A trooper yelled at Sung, "Do you speak English?" despite her identifying herself several times as a journalist and telling the troopers that the zip-ties on her wrists were too tight. Sung was transported to Hennepin County Jail in a prisoner-transport bus where she was processed, the letter said.

"She was patted down and searched by a female officer who put her hands down Sung's pants and in her bra, fingerprinted, electronically body-scanned, and ordered to strip and put on an orange uniform before attorneys working on her behalf were able to locate her and secure her release, a process that took more than two hours," the letter said.


Law enforcement officers pepper spray freelance photographer Tim Evans (L) as he identifies himself a working journalist outside the Brooklyn Center police station on April 16.

In another instance, several media members, including one from the New York Times, were assaulted by police officers, according to the letter. The officers surrounded their car, banging on windows and doors with wooden sticks before dragging the driver out and arresting them. Officers allegedly hit the New York Times journalist repeatedly and tried to break his camera, the letter said.

The letter includes a photo of an unidentified law enforcement officer spraying chemical agents on journalists, clearly identifiable by their equipment and clothing.

In a press release after Saturday's meeting, the Minnesota State Patrol acknowledged that, in accordance with a federal judge's order, a dispersal order does not apply to members of the media covering the protest.

"MSP is prohibited from seizing equipment from or ordering someone to stop recording or observing who we know or have reason to know is a member of the media," the statement says.

The State Patrol also says it is instructing troopers not to threaten to arrest members of the media unless they are suspected of committing a crime.

CNN's Travis Caldwell contributed to this report.

Good Morning Britain correspondent shares dramatic moment crew was detained by police in Minnesota

 Kim Novak Saturday 17 Apr 2021 

Good Morning Britain’s US correspondent Noel Phillips has revealed he and the TV crew he was with were detained by police during the protests in Minnesota. Protests have been ongoing in Brooklyn Center for six days following the shooting of Daunte Wright by police around 10 miles from where George Floyd died last year.

 Wright, 20, was fatally shot by police officer Kim Potter – who has been charged with second-degree manslaughter – after she claimed to mistake her gun for a Taser.  

Phillips, who has been covering the protests, shared dramatic footage of the moment he and the crew were detained but later released by police.  He wrote alongside the clips: ‘Sixth day of protests in #Minnesota. This is the moment our crew were detained but later released.’ In the video clip, police can be heard instructing them: ‘Get down! Put your hands up. Take a knee.’ 

Phillps’s legs can just be seen in the clip as he kneels down, before the clip cuts to show protestors milling around with sounds that appear to be gunshots heard in the background. 

 Police in riot gear can also be seen standing by groups of protesters as lights from their vehicles flash in the background.  

The current protests come after similar scenes last year following the death of George Floyd after a police officer knelt on his neck for nine minutes during his arrest.  

The death of Wright also sparked protests outside the police department in Minnesota, with demonstrators throwing rocks and water bottles at cops, with Minnesota National Guard members and State Patrol troopers using tear gas and rubber bullets to control the crowd. 

VIDEO: https://metro.co.uk/2021/04/17/gmb-correspondent-reveals-tv-crew-were-detained-by-police-in-minnesota-14425658/?ito=newsnow-feed?ito=cbshare

 https://www.facebook.com/MetroUK/

SECURITY

Cybercriminals get bolder as impact from SolarWinds and ransomware grows


BY MARK ALBERTSON

UPDATED APRIL 15 2021

In 2006, then-U.S. Senator Barack Obama published a book, “The Audacity of Hope,” on his way to winning the White House in 2008. If the cybersecurity community were to write a similar treatise today, the appropriate title would most likely be “The Audacity of Hacks.”

FireEye Inc. held a series of sessions this month to offer a “state of cybersecurity” picture timed with the release of its Mandiant M-Trends 2021 report. One conclusion from the sessions and the report’s findings is that nation states and cybercriminals have become increasingly emboldened over the past year. Hacking has morphed from annoyance and inconvenience into extortion and social disruption on a global scale.

FireEye itself received confirmation of the perilous state of cybersecurity in December when the firm realized that hackers managed to steal its closely guarded Red Team assessment tools used to test customer security. The company’s analysis of how a portion of its crown jewels could be breached led to the discovery of what is now known as the SolarWinds exploit, a sophisticated malware campaign which allowed hackers to infiltrate systems involving at least 100 private companies and multiple U.S. government agencies.

The breach, which reflected extraordinary tradecraft and sophistication according to FireEye, is believed to have been led by the Russian government. The audacious hack has captured the attention of security analysts and government officials around the world, and it has set the stage for what may well be a rocky year ahead.

“What’s different now is the audacity that nation states are using, against a backdrop of a global pandemic,” Sandra Joyce, executive vice president and head of global intelligence at FireEye Mandiant, said during one of the company’s sessions this month. “For everything we see nation states do, the cybercriminals are carefully watching.”
Dwell times decrease

This year’s Mandiant report offered a mix of good news and bad. On the positive side, 59% of security incident investigations by the firm were initially detected by its customers, a 12% increase over the previous year.

In addition, global median dwell time or the duration between when a cybersecurity intrusion begins and when it is discovered, has declined significantly. Back in 2011, dwell time was documented at over a year and now stands at 24 days.

While the pace of detection and security awareness may be improving, the threats themselves have taken on a more ominous tone. Joyce noted that the global pandemic generated a cyber espionage response from nation states, with private patient data being breached in a number of health organizations. When a cyberattack disrupted emergency care at one German hospital last year, a patient died.

“We’ve seen some red lines crossed with attacks on hospitals,” said Joyce. “Now we’re moving into threats against the cloud.”

Vulnerabilities in cloud systems are not new. Yet, what the SolarWinds breach exposed was an ability for attackers to acquire privileged access to run software already installed across platforms, including on-premises servers and virtual machines in the cloud.

The threat actors used a technique that targeted the Security Assertion Markup Language or SAML authentication standard, commonly used to create a trustworthy link between cloud and on-premises systems.

“This is that golden SAML process, it’s basically a golden ticket that can have access throughout the system,” Joyce explained. “What happens now is that attackers grab credentials and start pivoting around in cloud environments. It’s an incredible tactic and not something we’re going to see the end of.”
Ransomware and extortion

Another exploit not likely to end anytime soon is ransomware. The latest M-Trends report documented how cybercriminals were escalating ransomware attacks, which grew from 14% of FireEye’s investigations to 25% in just one year.

The consequences of a successful ransomware attack are rising as well. FireEye believes that ransomware has evolved into multifaceted extortion where bad actors are using a variety of techniques to infiltrate systems, carefully identify the most valuable data assets and coerce payment for the release of encrypted files. Threats for nonpayment include posting stolen data on public websites or providing proprietary information to competitors.

“Ransomware extortion is the latest trend we are seeing right now,” said Yihao Lim, a cyberthreat intelligence analyst for Mandiant Threat Intelligence in Singapore. “This has proven to be very effective. The attacker will take time to study the victim, they are not in a rush.”

One of the key contributors to the rise in ransomware attacks has been that, as with a wide range of tech industry software, the malware is now widely obtainable as-a-service.

Like software-as-a service, RaaS represents the new business model for enterprising hackers. The exploits are often developed by professional programmers with legitimate jobs seeking money on the side, according to one group of security researchers.

Ransomware services are available for monthly or one-time license fees, or on an affiliate basis where the as-a-service provider will receive 25% of the ransom. Some RaaS platforms even offer troubleshooting help desks for support, according to Yihao.

“It reduces the barrier to entry for a lot of bad guys, you can just use the ransomware that’s already available on the platform,” he said. “It’s like a hosting company and you have clients who use the hosting company services. Each of them can hit a number of victims by themselves.”
On the brink

One of the last live technology conferences held in the U.S. in 2020, before the global pandemic closed everything down, was the annual RSA Cybersecurity gathering in San Francisco. Mandiant’s Joyce recalled a feeling at the event that the security industry was teetering on the brink, where the threats had become so serious and sophisticated, it would take a momentous coming together of the private and public sectors to marshal the kind of defense that was needed.

COVID-19 intervened and such a joint effort did not materialize. Joyce and the rest of the cybersecurity community are now left wondering if it ever will.

“It really truly has been unprecedented times,” Joyce said. “This industry is getting burned out. When are governments around the world going to make it harder for threat actors to carry out these missions?”
Image: Pixabay Commons

Earlier this week, FireEye publicly advised that a highly sophisticated state-sponsored actor had accessed their network and taken a copy of the FireEye Red Team tools. Red Team tools are often used by cyber security organisations to evaluate the security of networks. These same tools could be used to gain unauthorised access to victim networks.

The ACSC is working closely with FireEye and other cyber security partners to understand the risks facing Australian systems. To date there is no evidence these tools have been used against Australians.

FireEye has provided a repository of signatures to detect whether these tools may have been used against a network. Ensuring an effective patching strategy, focusing on internet-facing systems, is the most effective mitigation against these tools. We recommend organisations follow advice provided in existing ACSC publications such as Summary of Tactics, Techniques and Procedures Used to Target Australian Networks and ASD’s Essential Eight.



Did Someone at the Commerce Dept. Find a SolarWinds Backdoor in Aug. 2020?



April 16, 2021




On Aug. 13, 2020, someone uploaded a suspected malicious file to VirusTotal, a service that scans submitted files against more than five dozen antivirus and security products. Last month, Microsoft and FireEye identified that file as a newly-discovered fourth malware backdoor used in the sprawling SolarWinds supply chain hack. An analysis of the malicious file and other submissions by the same VirusTotal user suggest the account that initially flagged the backdoor as suspicious belongs to IT personnel at the National Telecommunications and Information Administration (NTIA), a division of the U.S. Commerce Department that handles telecommunications and Internet policy.

Both Microsoft and FireEye published blog posts on Mar. 4 concerning a new backdoor found on high-value targets that were compromised by the SolarWinds attackers. FireEye refers to the backdoor as “Sunshuttle,” whereas Microsoft calls it “GoldMax.” FireEye says the Sunshuttle backdoor was named “Lexicon.exe,” and had the unique file signatures or “hashes” of “9466c865f7498a35e4e1a8f48ef1dffd” (MD5) and b9a2c986b6ad1eb4cfb0303baede906936fe96396f3cf490b0984a4798d741d8 (SHA-1).

“In August 2020, a U.S.-based entity uploaded a new backdoor that we have named SUNSHUTTLE to a public malware repository,” FireEye wrote.


The “Sunshuttle” or “GoldMax” backdoor, as identified by FireEye and Microsoft, respectively. Image: VirusTotal.com.

A search in VirusTotal’s malware repository shows that on Aug. 13, 2020 someone uploaded a file with that same name and file hashes. It’s often not hard to look through VirusTotal and find files submitted by specific users over time, and several of those submitted by the same user over nearly two years include messages and files sent to email addresses for people currently working in NTIA’s information technology department.


An apparently internal email that got uploaded to VirusTotal in Feb. 2020 by the same account that uploaded the Sunshuttle backdoor malware to VirusTotal in August 2020.

The NTIA did not respond to requests for comment. But in December 2020, The Wall Street Journal reported the NTIA was among multiple federal agencies that had email and files plundered by the SolarWinds attackers. “The hackers broke into about three dozen email accounts since June at the NTIA, including accounts belonging to the agency’s senior leadership, according to a U.S. official familiar with the matter,” The Journal wrote.

It’s unclear what, if anything, NTIA’s IT staff did in response to scanning the backdoor file back in Aug. 2020. But the world would not find out about the SolarWinds debacle until early December 2020, when FireEye first disclosed the extent of its own compromise from the SolarWinds malware and published details about the tools and techniques used by the perpetrators.

The SolarWinds attack involved malicious code being surreptitiously inserted into updates shipped by SolarWinds for some 18,000 users of its Orion network management software. Beginning in March 2020, the attackers then used the access afforded by the compromised SolarWinds software to push additional backdoors and tools to targets when they wanted deeper access to email and network communications.

U.S. intelligence agencies have attributed the SolarWinds hack to an arm of the Russian state intelligence known as the SVR, which also was determined to have been involved in the hacking of the Democratic National Committee six years ago. On Thursday, the White House issued long-expected sanctions against Russia in response to the SolarWinds attack and other malicious cyber activity, leveling economic sanctions against 32 entities and individuals for disinformation efforts and for carrying out the Russian government’s interference in the 2020 presidential election.

The U.S. Treasury Department (which also was hit with second-stage malware that let the SolarWinds attackers read Treasury email communications) has posted a full list of those targeted, including six Russian companies for providing support to the cyber activities of the Russian intelligence service.

Also on Thursday, the FBI, National Security Agency (NSA), and the Cybersecurity Infrastructure Security Administration (CISA) issued a joint advisory on several vulnerabilities in widely-used software products that the same Russian intelligence units have been attacking to further their exploits in the SolarWinds hack. Among those is CVE-2020-4006, a security hole in VMWare Workspace One Access that VMware patched in December 2020 after hearing about it from the NSA.

On December 18, VMWare saw its stock price dip 5.5 percent after KrebsOnSecurity published a report linking the flaw to NSA reports about the Russian cyberspies behind the SolarWinds attack. At the time, VMWare was saying it had received “no notification or indication that CVE-2020-4006 was used in conjunction with the SolarWinds supply chain compromise.” As a result, a number of readers responded that making this connection was tenuous, circumstantial and speculative.

But the joint advisory makes clear the VMWare flaw was in fact used by SolarWinds attackers to further their exploits.

“Recent Russian SVR activities include compromising SolarWinds Orion software updates, targeting COVID-19 research facilities through deploying WellMess malware, and leveraging a VMware vulnerability that was a zero-day at the time for follow-on Security Assertion Markup Language (SAML) authentication abuse,” the NSA’s advisory (PDF) reads. “SVR cyber actors also used authentication abuse tactics following SolarWinds-based breaches.”

Officials within the Biden administration have told media outlets that a portion of the United States’ response to the SolarWinds hack would not be discussed publicly. But some security experts are concerned that Russian intelligence officials may still have access to networks that ran the backdoored SolarWinds software, and that the Russians could use that access to affect a destructive or disruptive network response of their own, The New York Times reports.

“Inside American intelligence agencies, there have been warnings that the SolarWinds attack — which enabled the SVR to place ‘back doors’ in the computer networks — could give Russia a pathway for malicious activity against government agencies and corporations,” The Times observed.

This entry was posted on Friday 16th of April 2021 08:57 AM



A Budding Issue in the NFT Space: Classifying and Taxing These Valuable Tokens


April 15, 2021 - By Victoria Hine


The last few weeks have seen a number of cryptoasset milestones reach the mainstream press. One subset of cryptoasset in particular – Non-Fungible Tokens or “NFTs” – has made the headlines on seemingly countless occasions, as Christie’s recently sold their first purely-digital artwork in the form of Beeple’s nearly $70 million-generating “First 500 Days” compilation), the first digital NFT home – Krista Kim Studio’s futuristic “Mars house” – sold for 288 Ether (the equivalent of $514,558), and British artist Damien Hirst announced a project with Palm, the new “environmentally-focused” digital marketplace created by Ethereum co-founder Joe Lubin, which will see him offer up a series of 10,000 unique oil paintings tied to corresponding NFTs.

Like a cryptocurrency “coin,” an NFT is a unique token that exists on a blockchain, such as Etherium, and is governed by a smart contract that records its origins and transaction history. One of the key elements is that, unlike cryptocurrencies – or normal currencies, for that matter – NFTs are non-fungible, hence, the name. This means two NFTs can use the same smart contract but have different values, depending on their particular characteristics. That uniqueness is recorded in the NFT’s metadata, and it is part of what makes NFTs attractive as a secure way of tracking the provenance of physical luxury goods, such as paintings, sculpture or diamonds, essentially replacing paper certificates of authenticity.

Despite the allure of NFTs from a provenance-tracing perspective for rare or otherwise unique physical goods, this budding technology is also increasingly used to reflect digital assets that have no physical existence at all. This is achieved by including a “token ID” within the NFT metadata that points to a specific digital resource – such as, in true internet form, virtual kittens. The Dapper Labs-created, blockchain-based game, Crypotkitties – which has been likened to “a digital version of Pokemon cards but based on the Ethereum blockchain” – was, of course, one of the first recreational uses of NFTs when it launched in November 2017.
What’s the problem?

It has already been established that cryptocurrencies are both difficult to define and challenging to shoehorn into pre-existing legislative regimes designed to deal with fundamentally different assets. With that in mind, NFTs present some of the same difficulties as cryptocurrencies. It is possible for holders to remain anonymous, for instance. The assets themselves are prone to hybridity and mutability and, more fundamentally, there is so far no consensus on how to classify NFTs: are they intangible assets, commodities, financial instruments – or something else entirely?

And there is yet another layer of complexity. Unlike cryptocurrencies, which are indistinguishable from the value they represent, NFTs represent the holder’s right to claim a separate, distinguishable asset. Put another way, a cryptocurrency holder might lose access to their cryptocurrency wallet, in which case HMRC may allow them to crystallize a loss, but an NFT holder may find themselves holding a token that points to nothing at all. The underlying asset could be moved, duplicated, swapped, or even destroyed. Whether the NFT holder has any enforceable rights in that situation – and therefore, whether they can crystallize a loss in the same way – depends on the specific terms of the smart contract.
What’s this got to do with tax?

So, what does this have to do with tax? Simply put, when it becomes difficult to determine what an asset is, where it is, and how much it is worth, it also becomes pretty difficult to tax that asset – and while the NFT boom seems to be subsiding for the time being, digital assets are not going away any time soon. In fact, these questions are starting to appear before the commercial courts. Recent cases have determined that cryptocurrencies are indeed property, that speculating on cryptocurrencies is not inherently a business activity, and (albeit only at first instance and placing significant reliance on academic texts) that the lex situs of cryptocurrencies is the place of domicile of the holder. It’s also clear from the cryptoassets manual that the tax treatment will depend heavily on the characteristics of the particular cryptoasset in question – potentially even the specific token.

As cryptoassets become more widespread and more varied (and if, as seems likely, guidance struggles to keep up) it surely will not take too long for issues of this nature to begin to crop up before the courts in various jurisdictions.

Of course, the other element that may be relevant to how we tax NFTs is the impact on the environment. With a number of governments and international organizations discussing how best to use tax – whether as a stick or a carrot – to incentivize progress towards carbon neutrality, the higher carbon footprint of an NFT over a physical asset is likely to have a real tax impact on the nascent NFT economy.

Victoria Hine is a tax associate at Slaughter and May with a particular interest in employment and incentives taxation, corporate responsibility, and legal technology.

 


Non-Fungible Tokens (NFTs) as Art Loan Collateral

Carlton Fields

[co-author: David Sofge, Holland & Knight]

April 16, 2021

Digital art represented by NFTs (non-fungible tokens) made a spectacular arrival in March with the $69.3 million (in Ether) auction sale by Christie’s of a collage by digital artist Beeple.[1] The buyer is founder of an NFT fund in Singapore. In the scramble to get up to speed on the phenomenon, NFTs have been denounced as a scam based on blockchain hype, advocated as a way to improve the economic standing of struggling non-celebrity artists[2], or heralded as a sign that the ‘Metaverse’ depicted in Neal Stephenson’s 1992 novel Snow Crash is fast becoming a reality. Regardless of the varied reactions to NFTs, it seems inevitable that financial institution lenders will be approached by customers seeking to put up newly minted NFT-linked art collections as collateral.

Real-world art loans most often take the form of revolving lines of credit using works of creative visual art as collateral. These loans use a number of techniques to mitigate the art world’s perennial issues with authentication, changes in market value, the need to obtain a first-priority security interest in the artwork, and the risk of theft or casualty loss. Historically, the default risks on these loans have been generally perceived to be relatively low in view of the affluent nature and often prominent identity of the borrowers under these credit facilities.

For institutional lenders to achieve a sufficient comfort level to consider making NFT-secured loans, a number of real-world techniques for evaluating requests for an extension of credit will need to be rethought and somehow accommodated. These considerations include ways to address risks related to provenance and authenticity, periodic appraisals to monitor changes in value, perfection of security interests, and insurance for theft or loss. 

First, as to authentication, real-world certifications will be of little use. An NFT is by definition a unique “crypto asset,” but this does not mean that each NFT represents a unique work of art – indeed, multiple NFTs may be sold based on a single work, just as a real-world artist may authorize and sign a limited number or prints of an original work.[3] To authenticate an NFT, the artist may include an e-signature in the software code that is the basis of the NFT.[4] It is also important to keep in mind that an NFT is not itself the digital artwork, but it is instead a crypto asset consisting of a “smart contract” based on a specified blockchain which “points to” the asset, which may be a JPEG or other image file or a video recording.  Many NFTs do not include any ownership interest in the underlying work, and do not transfer copyright, although they may include rights to non-commercial display on the web. In the case of Cristie’s Beeple sale, the artwork itself, in the form of a JPEG of the collage artwork, was transferred to the purchaser.[5] Tokens generally provide a kind of verifiable provenance only of the NFT itself, but not of the underlying artwork. An NFT may also impose licensing conditions on the NFT purchaser, such as a 10% royalty payable to the artist on any future resales of the NFT at a profit. The specific “bundle of rights” and obligations transferred by an NFT will have to be parsed by a lender with specificity.   

Second, appraisals of NFT assets will likely be a challenge, in view of the volatility of prices in the crypto environment. Offsetting this is the possibility that rapidly expanding secondary markets for trading NFTs may be useful in establishing a “market” price. 

Third, as to perfection of a security interest in NFT collateral, a lender may choose to perfect by treating an NFT as a “general intangible” under a local enactment of the Uniform Commercial Code (UCC) and filing a UCC-1 Financing Statement. Where a proposed borrower reaches out to a lender on the web or a blockchain, it may be challenging to identify a debtor’s precise location for purposes of a UCC filing. In addition, enforcement of a security interest perfected only by filing is less certain: Because an NFT lives only on a blockchain where the guiding principle is that “code is law,” an irreversible on-chain transfer by the borrower, even if done in violation of the terms of a security agreement, may put a crypto asset effectively beyond the reach of a conventional UCC foreclosure action on general intangibles. (Terms used here have their common meaning under most local enactments of UCC Articles 2, 8 and 9.) In addition, a security interest perfected only by filing will be inferior in priority to a security interest perfected by “control,” as discussed below.

Lenders do have other options under Articles 8 and 9 of the UCC for perfecting and enforcing a security interest in an NFT, drawing on techniques originally devised for investment securities and more recently applied to cryptocurrency and other digital assets. The lender could for instance have the crypto asset registered in the lender’s name under the terms of a security agreement, but this is often not acceptable to borrowers. 

A lender may wish to consider an approach currently in use for loans secured by cryptocurrency collateral. Looking to procedures originally devised for equity securities in the indirect holding system, a lender may require a proposed borrower to transfer the NFT or other digital asset to a “securities account” with a “securities intermediary,” generally a bank or trust company. Under a three-way account control agreement (ACA) between the lender, securities intermediary, and borrower, the securities intermediary agrees to treat the NFT as a “financial asset” under Article 8 (usefully, any property, including a real-world asset, may be a “financial asset” under Article 8 if the securities intermediary expressly so agrees). With an ACA in place, a security interest in the account and/or the financial assets held in it can be perfected in favor of the lender where the securities intermediary agrees that it will comply with orders (“entitlement orders”) from the lender “without further consent,” thus giving the lender “control” within the meaning of Articles 8 and 9. Perfection by “control” will generally provide a secured lender with priority over any other security interest perfected by filing. In addition, the risk of an irreversible transfer of the asset on-chain may be mitigated by undertakings from the securities intermediary in the tripartite agreement that it will not transfer the asset (in our example an NFT) except in strict accordance with the terms of the ACA.[6]

As for casualty loss, theft, and the other vicissitudes that may befall works of art, it may be noted that in the case of the $69.3 million Christies/Beeple sale, instead of being locked up in a museum vault, the “original” JPEG was stored on the blockchain-based Interplanetary File System (IPFS)The NFT itself resides on an Ethereum blockchain maintained by the platform that generated it for the creator of the work, and there are already reports that some other platforms have disappeared from the Web inexplicably.[7] There are also reports of NFT art heists on a popular platform[8], and a new industry of fraudsters has sprung up to form and sell NFTs based on works of art in which the NFT minters themselves have no ownership interest.[9] There will likely be a need for new and expanded types of cyber insurance to insure against such contingencies. The Metaverse may indeed be closer, but the hazards that attend the glamor and brilliance of the existing art world will find undoubtedly find new expression in the new one.

-----

[1] An NFT is a digital asset existing on a blockchain.  A blockchain is a digital ledger verified by the consent of its users without the need for a trusted authority.  Most digital assets, including cryptocurrencies like Bitcoin, are fungible in the sense that units representing equivalent value are widely accepted in exchange, just as five pennies may be exchanged for a nickel. By contrast, each NFT has unique characteristics and is marked by a specific digital signature from the originator which is embedded in its underlying code.  Please see, e.g., “Explainer: NFTs are hot.  So what are they?” and The Atlantic, “What Critics Don’t Understand About NFTs” (comparing valuations of NFT and traditional artwork).

[2] CNN, “NFTs have completely transformed these digital artists' lives.”

[3] “Digital asset,” “smart contract” (as defined on page 23), and other terms relating to blockchain-based assets are used as defined in the ABA Derivatives and Futures Law Committee Innovative Digital Products and Processes Subcommittee (IDDPS) Jurisdiction Working Group’s White Paper, as updated December 2020.

[4] The Christie’s Beeple NFT was “encrypted with the artist’s unforgeable signature and uniquely identified on the blockchain.”  See Beeple: A Visionary Digital Artist at the Forefront of NFTs | Christie's.

[5] Id.

[6] This article does not address a range of other issues that should be considered in connection with digital asset collateral. There are reports that tokens representing fractional interests in some art-linked NFTs are in some instances held by other persons. Such transactions raise, inter alia, a number of legal and compliance concerns relating to offers and sales of securities under US or foreign law, regulation of exchanges if traded assets are deemed be “securities,” investment company regulation, broker-dealer and investment adviser regulation, tax, and BSA/KYC/AML compliance.

[7] The Atlantic, “What Critics Don’t Understand About NFTs.

[8] The Verge, “Hackers stole NFTs from Nifty Gateway users.

[9] ArtNet, “A Collective Made NFTs of Masterpieces Without Telling the Museums That Owned the Originals. Was It a Digital Art Heist or Fair Game?



The cost of a single tulip bulb surged to the same price as 
a mansion 400 years ago: 
Are NFTs the ‘tulipmania’ of the 21st century?

Similarities between the new digital technology craze in the art world and the surge in value of tulips in 17th-century Holland suggest that it could all end in (real) tears


SCOTT REYBURN
16th April 2021
THE ART NEWSPAPER

At tulipmania’s peak in 17th-century Holland, specimens cost the same as a mansion Norton Simon Art Foundation

It is not often that the commercial churn of the art world produces a moment that feels truly seismic. Plenty of people thought that moment had come on 11 March when the digital artist Beeple’s non-fungible token (NFT) sold at Christie’s in an online auction for $69.3m, a price far higher than anything yet paid for works by canonical greats such as Georgia O’Keeffe, Eugene Delacroix, Francisco Goya, Jackson Pollock and Marcel Duchamp.

For the first time, Christie’s accepted payment in Ethereum cryptocurrency—including for its own fees. The work, which has no physical existence, was bought by Metakovan, a pseudonymous crypto investor who already owns numerous Beeple works, for 42,329.453 Ether, including Christie’s buyer’s premium.

“It’s like Duchamp. We’re dealing with the same kind of conceptual leap,” says Candace Worth, a New York-based art adviser. “Are we just the wrong generation?” adds an uncomprehending Worth, who wonders whether Beeple’s jpeg could turn out to be the 21st-century equivalent of Duchamp’s Fountain readymade, which proved equally baffling when first exhibited in 1917.

Beeple’s Everydays: The First 5000 Days was a digital collage of all the images he had posted online since 2007. NFTs are essentially digital files in which authenticity and ownership are certified, at considerable environmental expense, by blockchain computer networks. They can turn almost anything into a virtual collectible: cars, tweets, land, sneakers, music, even video clips of basketball shots. During the past few months, these tokens have been traded at heady prices on specialist platforms by speculators who have made digital fortunes from cryptocurrencies such as Bitcoin and Ethereum. The aggregate value of this virtual money has soared to more than $1trn after backing from Elon Musk’s Tesla group, hedge funds and other major investors.

As a stunned analogue art world is now realising, the crypto-wealthy are paying the headiest prices of all for NFT art. As well as tokens by Beeple, CryptoPunks, a collection of 10,000 algorithm-generated characters made since 2017 by Larva Labs, have also been selling at mind-altering levels. On 11 March, Punk no. 7804, one of only nine rare “alien” CryptoPunks, sold for 4,200 Ether, around $7.5m at the time.

That price, given for a computer file containing a Space Invader-like image comprising just 576 pixels, was way above the latest auction highs for works by in-demand analogue artists such as Amoako Boafo and Matthew Wong. Just three years earlier, Punk no. 7804 had sold for 12 Ether, or about $15,000.


Taking the pixel: Larva Labs’s Punk no. 7804 sold for around $7.5m last month Larva Labs

“In 30 years, I’ve never seen such a reaction in the art world. It’s nothing less than an earthquake,” says the New York-based writer, collector, dealer and NFT convert Kenny Schachter, who in recent months has himself become a successful digital token artist, selling more than $200,000 of works on Nifty Gateway, the online sales platform owned by the Bitcoin billionaire twins, Tyler and Cameron Winklevoss. “This is a whole new audience. They don’t know about the art world, and they don’t care about it,” Schachter says.

Do NFTs represent a truly significant cultural shift? Or is this just the speculative madness of the crypto-crowd, like the mania for tulips in the mid-1630s or South Sea Company stock in 1720?

Christine Bourron, the chief executive of the London-based art market analysts Pi-eX, has a simple explanation. “Ether has gone from $100 a year ago to $1,800. A group of people have become millionaires and billionaires in cryptocurrency,” Bourron says. “It’s very complicated to turn it back into dollars or another fiat currency, and they don’t have many options for spending their ether.” And NFTs are one of those few options.



Ether is the key

Bourron also points out that the Christie’s Beeple sale of one NFT grossed 44% more than the $48m the auction house had turned over from all its January and February auctions combined, comprising some 3,000 lots.

No wonder auction houses, along with others in the analogue art world, suddenly see NFTs as financial El Dorado. This is art that is made online, viewed online, bought online and owned online, incurring no transportation, storage, photography or insurance costs. And it makes huge prices. What’s not to like?

Well, the problem is that most NFT art, like Beeple’s Everydays is traded in Ether, a highly volatile cryptocurrency that is not widely accepted for consumer payments.

“Many cryptocurrency payment apps have been created in recent years to promote its use,” Chi Lo, an economist at BNP Paribas, recently pointed out in Investors’ Corner, the official blog of the French bank’s asset management division. “But none of them has made it to the core of the world’s daily transactions and payments, except for some underworld transactions.”

The value of an NFT work, having no physical existence, is umbilically dependent on the price of Ethereum. If Ether is on a high, then Ether art is on a high. It’s all about the digital money.

“Christie’s auction wouldn’t have been a success if it hadn’t accepted Ether,” Bourron says. “That was the key.”

For the moment at least, with the price of Ether having more than doubled since the beginning of the year, it is onwards and upwards for NFT art.

Sotheby’s collaborated with the digital artist Pak on an NFT sale this week that totalled $16.8m. In a statement, the auction house said that ultimately it is “looking to expand upon this first venture in the months to come with new ideas and concepts, such as introducing well-known contemporary artists into the digital art space”.


500 cubes from Pak's Fungible collection Courtesy of Sotheby's and Pak

Buy an NFT, get a painting free

The potential of using cryptocurrency to lever the price of analogue works of art has also been spotted by Mintable, a specialist online NFT marketplace. In March, Mintable held what it billed as the “greatest NFT auction ever”, consisting of Abstract Composition (around 1925) by the Russian avant-garde artist Wladimir Baranoff-Rossiné and an accompanying digital certificate to be purchased in Ether.

The choice of a work by Baranoff-Rossiné as the focus of this seven-day hybrid offering might have struck many in the mainstream art world as a bold move. Russian avant-garde art is a sector of the market notorious for the proliferation of fakes, many of which carry bogus provenance and certificates of authentication.

The possibilities of this kind of buy-an-NFT, get-real-art-free (Bangraf) offer are virtually endless, given the $1trn of digital cash looking for something to buy.

If, for instance, Christie’s had offered all of those 3,000 analogue lots it auctioned in January and February with accompanying digital tokens, purchasable in Ether, then maybe they might have sold for $4.8bn, rather than a paltry $48m. Admittedly the blockchain computing of that many NFT transactions would use energy equivalent to the average daily consumption of 6,000 American homes, but it would at least transform the auction house’s Covid-battered turnover figures.

It is surely this kind of combination and confusion of the crypto and analogue that represents the biggest threat to the equilibrium of the wider art economy.

Back in January 1637 in Holland, at the height of tulipmania, a single bulb of the most coveted Semper Augustus flower had an asking price of 10,000 guilders—the cost of a mansion in one of Amsterdam’s smartest districts. The market for the colourful flowers collapsed the following month, leading to prices falling by as much as 90%.

Five years later in Amsterdam, Rembrandt was paid about 1,600 guilders by a company of musketeers, the Kloveniersdoelen, to paint his monumental masterpiece, The Night Watch, now in the Rijksmuseum.

Though plenty of wonderful paintings of flowers were made and sold in Holland in the 17th century, the markets for flowers and art remained distinct. In the 21st century, societies are under enormous economic and cultural pressure to regard digital technology as the solution to everything. To be sure, new technology has brought us enormous benefits, but certain aspects, such as speculation in cryptocurrencies, also bring risk. The Nobel Prize-winning economist Paul Krugman, writing in the New York Times, has called Bitcoin “a bubble wrapped in techno-mysticism inside a cocoon of libertarian ideology”.

Selling tangible works of art in virtual currencies could well end in tears. And they won’t be digital.