It turns out that Amazon’s Alexa does indeed think something is funny.
After days of reports that users of the Amazon Echo and other devices with Amazon’s Alexa voice-activated assistant were experiencing random Alexa laughing fits, Amazon confirmed the problem Wednesday.
Reports of the laughing Alexas first surfaced last month when one Twitter user reported on an Echo Dot that randomly started laughing without being prompted. Others then tweeted about similar occurrences with their own Alexa devices. Another Twitter user said an Echo whistled without prompting.
So Alexa decided to laugh randomly while I was in the kitchen. Freaked @SnootyJuicer and I out. I thought a kid was laughing behind me. pic.twitter.com/6dblzkiQHp
Lying in bed about to fall asleep when Alexa on my Amazon Echo Dot lets out a very loud and creepy laugh… there’s a good chance I get murdered tonight.
Replying bc THIS creepy thing happened last night: we got home and, totally unprompted, our Amazon Echo/Alexa started talking. And then i realized it was listing off local cemeteries and funeral homes??? I'd rather it laugh at me tbh
Mine whistled up stairs in my bedroom. No one's home besides me and my dogs. And my upstairs dog, I call her that because 1 dog stays downstairs at night to sleep on the couch lol. The other comes to bed at night with us. Alexa is in the trash, I thought I was losing my mind.
The glitch came after Alexa temporarily “lost her voice” because of another issue. Amazon did not immediately respond to a request for comment from TIME, and it remains unclear how soon the glitch will be resolved.
The Google Doodle, which can be seen internationally, is an interactive featuring 12 female artists of varying backgrounds. Each element allows the women to share something that impacted their lives in some way for International Women’s Day. The women’s stories have also been translated in more than 80 languages, according to Google.
While Google approached the 12 featured women for the Google Doodle, the company is also encouraging other women across the world to share their own stories for International Women’s Day with the hashtag “#HerStoryOurStory.”
Women who achieve, do so because of the characteristics that define them. Which of these do you identify with and why? Tell us, using #HerStoryOurStorypic.twitter.com/5NiQb6YNxn
The Google Doodle highlights artists Anna Haifisch, Chihiro Takeuchi, Estelí Meza, Francesca Sanna, Isuri, Karabo Poppy Moletsane, Kaveri Gopalakrishnan, Laerte, Philippa Rice, Saffa Khan, Tillie Walden and Tunalaya Dunn. International Women’s Day 2018 falls on Thursday, March 8.
Barbie
Other companies have released their International Women’s Day 2018 plans, including Barbie, which announced it would release Barbie dolls of history-making women. The Barbie dolls include Olympic snowboarder Chloe Kim and Wonder Woman director Patty Jenkins.
Apple may have gotten a head start on virtual assistants when Siri arrived on the iPhone 4s back in 2011. But rivals Amazon and Google have a big lead when it comes to smart assistants for your home, thanks to their Amazon Echo and Google Home devices.
Not to be left out, Apple is entering the voice-activated home assistant arena with the HomePod, a Siri-enabled smart speaker that’s available now for $349. Apple is hoping to make the HomePod stand out by positioning it as high-end audio gear with artificial intelligence, rather than a simple home assistant. The HomePod largely succeeds in that regard, but it’s not without a few drawbacks.
Here’s what it’s been like to spend a month with the Apple HomePod.
Siri is a pretty good DJ
One of my favorite aspects of the HomePod was the way Siri was able to better understand my music preferences over time. Whenever I issued a command like, “Hey Siri, play some music I would like,” roughly three out of four times it would come back with a track by an artist new to me that I enjoyed. Only once did I have to ask three times before Siri pulled up a song I actually liked. Apple’s virtual assistant was also pretty good at selecting tracks from individual artist catalogues, which proved to be helpful for discovering new music.
Siri’s music choices are rooted in several factors, including Apple’s own algorithms (which have been influenced by human editors) and the music you choose to listen to in Apple Music across all of your devices — meaning the experience will likely vary for everyone. That should make using Siri’s DJ capabilities different than just listening to your tunes on shuffle. Apple focuses on breaking down an artists’ library into three different stages: the essentials, which includes an artist’s biggest blockbusters, their secondary hits, and finally the deep cuts, or songs that only super fans would likely know.
Siri generally provided a mix of hit songs and deep cuts whether I asked for music by artists that I already love or bands that I like but don’t follow very closely. But on one occasion, I was slightly disappointed when Siri played mostly well-known tracks from only one of five albums from a band I’m deeply familiar with.
That being said, the Google Assistant was skilled at curating music on the Google Home Max, too. Once I linked the speaker to my Google Play Music account, the Google Assistant began to play alternative and classic rock tunes that matched my listening habits. Siri generally felt more competent in this area, however, since the HomePod’s picks were usually more diverse across genres, whereas Google was mostly fixated on rock. Things may differ if you have a paid subscription to Google Play Music; I was only using the free version. A command like “Play some songs I would like,” also works on the Google Home if you’re using Spotify as your default music player, but in my experience that request worked much better when using Google Play Music.
Siri’s functionality on the HomePod is limited compared to AI assistants on rival devices. Apple’s virtual helper accomplishes basic tasks well, such as fetching weather forecasts and offering suggestions for nearby restaurants and shops. But it falls short in many other areas that Google and Amazon have thoroughly covered.
Siri can’t recall information from your calendar, pull up recipes, or set multiple timers at once. It’s also not as good at answering general knowledge questions, particularly if you’re asking for help with a common issue. When I asked Siri, “What’s the best way to clean a flat screen TV?,” it came up empty. Both Google and Amazon were able to at least suggest that I use a soft cloth or microfiber cloth.
Outside of music curation, Siri is far better on your iPhone than on the HomePod. It’s capable of a range of time-saving tasks on your phone, such as canceling multiple alarms at once, searching through your giant photo library to pull up that vacation photo from three years ago, finding your calendar appointments, and suggesting apps you may want to use. But Siri did manage to retain its humor when moving to the HomePod — if you ask a question like “What does Siri mean?” or “Are you a robot?” it’ll come back with a cheeky answer just like it would on your phone.
That Siri is more useful on the iPhone isn’t shocking when you consider it was created for smartphones in the first place. Amazon’s virtual helper — and even the Google Assistant (although it’s long been available on smartphones) — were developed with hands-free, voice-first products like the Echo and Google Home in mind.
Bloomberg—Bloomberg via Getty ImagesAn employee demonstrates the HomePod speaker on the first day of sales at an Apple Inc. store in New York, U.S., on Friday, Feb. 9, 2018. Photographer: Mark Kauzlarich/Bloomberg via Getty Images
It’s all about the sound
The HomePod is a music machine first and foremost, and that becomes immediately evident when listening to it alongside other smart speakers. Music sounded generally richer and more open on the HomePod compared to cheaper alternatives like the second-generation Amazon Echo or even the Echo Show, both of which sounded shallow alongside Apple’s speaker. The difference is harder to discern when comparing the HomePod against other premium speakers, like the Google Home Max and Sonos One, both of which also sound fantastic.
But there was one characteristic that seemed consistent no matter which device I listened to alongside the HomePod. Specific instruments were much more audible on the HomePod, making it easier to hear the individual layers of a song. While speakers like the Google Home Max and Sonos One were also better at isolating and highlighting specific elements of a song compared to their cheaper counterparts, the HomePod did a slightly better job at this.
Ultimately, the decision to purchase Apple’s HomePod should come down to whether you’re willing to spend considerably more money for great sound but inferior voice controls compared to an Amazon Echo or Google Home device. (There’s also a chance Siri could be improved with software updates down the road.) Plus, you’ll have to commit to Apple Music to get the most out of the HomePod, since other services like Spotify are only compatible via AirPlay.
As an alternative, it may be worth considering the Alexa-powered Sonos One, which also offers higher quality audio than the standard Echo, and costs $199 for one speaker and $350 for two. Still, the HomePod is a classic example of Apple focusing on doing one thing well rather than succeed at everything at once. The question is whether or not that will be enough to make the HomePod a hit.
(OLYMPIA, Wash.) — Washington became the first state Monday to set up its own net-neutrality requirements after U.S. regulators repealed Obama-era rules that banned internet providers from blocking content or interfering with online traffic.
“We know that when D.C. fails to act, Washington state has to do so,” Gov. Jay Inslee said before signing the measure that lawmakers passed with bipartisan support. “We know how important this is.”
The Federal Communications Commission voted in December to gut U.S. rules that meant to prevent broadband companies such as Comcast, AT&T and Verizon from exercising more control over what people watch and see on the internet. The regulations also prohibited providers from favoring some sites and apps over others.
Because the FCC prohibited state laws from contradicting its decision, opponents of the Washington law have said it would lead to lawsuits.
Inslee said he was confident of its legality, saying “the states have a full right to protect their citizens.”
The new law also requires internet providers to disclose information about their management practices, performance and commercial terms. Violations would be enforceable under the state’s Consumer Protection Act.
While several states introduced similar measures this year seeking to protect net neutrality, so far only Oregon and Washington have passed legislation. But Oregon’s measure wouldn’t put any new requirements on internet providers.
It would stop state agencies from buying internet service from any company that blocks or prioritizes specific content or apps, starting in 2019. It’s unclear when Oregon’s measure would be signed into law.
Washington state was among more than 20 states and the District of Columbia that sued in January to try and block the FCC’s action. There are also efforts by Democrats to undo the move in Congress.
Governors in five states — Hawaii, New Jersey, New York, Montana and Vermont — have signed executive orders related to net-neutrality issues, according to the National Conference of State Legislatures.
Montana’s order, for instance, bars telecommunications companies from receiving state contracts if they interfere with internet traffic or favor higher-paying sites or apps.
Big telecom companies have said net neutrality rules could undermine investment in broadband and introduce uncertainty about what are acceptable business practices. Net-neutrality advocates say the FCC decision harms innovation and make it harder for the government to crack down on internet providers who act against consumer interests.
The FCC’s new rules are not expected to go into effect until later this spring. Washington’s law will take effect in June.
Messages left Monday with the Broadband Communications Association of Washington, which opposed the bill, were not immediately returned.
But executive director Ron Main said last month that its member companies “have made legally enforceable public pledges that we do not take any action to block legal content; that we do not engage in throttling; that we do not discriminate; and that we will insure that our practices are transparent to all of our customers.”
Vero is the latest social-media platform to quickly rise to prominence. The image-sharing app, launched in 2015, has gone from fewer than 150,000 downloads to about 3 million users in a week, reportedly becoming the most downloaded social app in 18 countries for a time.
It seems to have lured in people who are annoyed by changes to Instagram’s algorithm. Unlike its Facebook-backed competitor, Vero’s stream is chronologically sorted and shows no ads. (Vero plans to eventually depend on paid subscriptions, but for now has extended an offer to provide “free for life” membership to new users.)
But not all is rosy for Vero. As it’s skyrocketed in popularity, the new app on the block has also faced swirling controversy and questions about its founder, funding, and draconian-sounding terms of service.
What does it all mean, and should you really be alarmed? The issues are complex, so we’ve broken down what you need to know about Vero’s background.
The troubling source of Vero’s funding
The mastermind behind Vero isn’t the typical Silicon Valley-based computer geek. Its cofounder and CEO Ayman Hariri is a Lebanese billionaire based in Riyadh, the capital of Saudi Arabia. The son of former Lebanese Prime Minister Rafik Hariri, who was assassinated, Ayman is tied to Saudi Oger — a now-defunct construction company that was run by his family and is the source of their massive wealth.
What’s concerning is that Saudi Oger was sued by 31,000 workers alleging unpaid wages, according to the Gulf Daily News. In 2017, a Saudi court reportedly forced the company to pay back wages. Oger’s collapse came as it dealt with billions of dollars in debt, as a result of falling oil prices and money owed to it by the government. Reuters reported that thousands of Oger workers, while awaiting pay, lived in desert camps that stopped receiving food, electricity, maintenance, and medical services from their employer. The situation raised humanitarian concerns about Oger’s actions.
People are now alarmed that the leader of Vero—and its funding—are associated with those inhumane conditions for Oger workers. Ayman Hariri sent documents to The Verge showing that he had divested from the firm in 2014. “At the end of the day, that stuff happened when I wasn’t at the company,” he told the publication. “I had left before that. I was pursuing my dream.”
A user agreement that seems scarier than it is
Hariri’s Oger connection isn’t the only thing worrying Vero users. Many people have pointed out a section in the terms of service. Users joining the app agree to this copyright licensing for Vero:
“a limited, royalty-free, sublicensable, transferable, perpetual, irrevocable, non-exclusive, worldwide license to use, reproduce, modify, publish, list information regarding, translate, distribute, syndicate, publicly perform, publicly display, make derivative works of, or otherwise use your User Content.”
Select All points out that the somewhat clumsy language may be what’s causing panic. Words like “irrevocable” and “perpetual” make it sound like you’re giving up potentially valuable content forever with no recourse. It may make you think, “What have I just done?”
But in fact, legalistic jargon aside, Vero’s agreement is more or less in line with what standard terms of service for similar social-media apps. Twitter and Facebook have similar agreements, which allow not just the platform to broadcast what users post, but also enable other users to share that content. Like Vero, Twitter includes references to a “royalty-free” “sublicense” that doesn’t end. But it clears up the meaning of its terms with a more understandable sentence: “This license authorizes us to make your Content available to the rest of the world and to let others do the same.”
“We typically include similar language to that of Vero in order to allow the subject website operator or social-media platform, as applicable, to use the content to serve the customer, run its business, and advertise to third-party online users,” said David O. Klein, an attorney for Klein Moynihan Turco LLP, a firm specializing in internet, data privacy, and intellectual property law.
Klein told us that Vero’s terms are actually less broad than others have been in the past. Vero gives itself a license to users’ content, but users maintain ownership of their work. Websites and social-media networks, however, “rarely, if ever, these days” employ agreements that transfer ownership of content, he added.
In other words, when it comes to copyright, Vero isn’t doing anything differently than Instagram or just about any other major online platform you use. If anything, if you’re thinking of signing up, Hariri’s involvement in another company with an alleged pattern of unfairly treating workers may give you more pause.
Apple Inc.’s AirPods earphones have been a surprise hit. Now, the company is planning a push into the high end of the market.
The Cupertino, California-based technology giant is working on noise-canceling, over-ear headphones that rival headsets from market leaders like Bose and even the company’s own Beats by Dre brand, according to people familiar with the product’s development. The company plans to launch the headphones as early as the end of this year, but has faced development challenges that might push back the release, the people said.
Work on the Apple headset has been on-and-off over the past year. The company encountered similar problems with the HomePod during its development, including multiple redesigns, according to the people. It’s possible Apple will redesign the headphones again before launch, or scrap the project altogether, they warned, asking not to be identified discussing private development work.
An Apple spokesman declined to comment.
The latest plans call for headphones targeting the high-end of the market, replicating Apple’s approach with the $349 HomePod speaker, released earlier this year. In addition to noise-canceling capabilities, Apple plans to include similar wireless pairing functionality to the AirPods, according to the people familiar with the product’s development.
This would be the latest in a long line of music-focused products and services from Apple. The iPod and the iTunes Store revolutionized how music was consumed — as digital downloads rather than physical CDs. The company’s largest ever acquisition was the $3 billion purchase of Beats in 2014 — a deal that got Apple into high-end headphones and music streaming. The HomePod’s sound won glowing reviews this year and Apple is already preparing other audio accessories like upgrades to AirPods that add water-resistance and a new wireless chip that enables “Hey Siri” voice activation.
So far, the AirPods have been a key driver of newfound success for Apple’s Other Products segment. The category, which includes AirPods, Beats headphones, the Apple Watch, Apple TV and iPad accessories, generated more than $5 billion in revenue for the first time in the company’s fiscal first quarter, representing 36 percent year-over-year growth. Within that category, wearable product sales, which include the Watch, AirPods, and Beats headphones, surged 70 percent last year, Apple said on a recent earnings call.
When the company acquired Beats Music and Beats Electronics in the 2014 deal, Apple executives said the successful Beats by Dre headphones business was one of the drivers.
Apple-branded headphones would seemingly cannibalize Beats headphones, although Beats also sells lower-priced wireless headphones that probably won’t directly compete with the new product. Athlete-oriented wireless Beats earphones still seem to be selling well despite the popularity of AirPods.
Apple previously discarded the Beats Music streaming name when it launched Apple Music in 2015. However, given the strength of the Beats headphone name, the company will likely keep that brand while developing a different new one for the new headphones.
Beats, Bose, Sennheiser, Sony and Skullcandy are the leading players in a headphone market that will generate $20 billion in annual revenue by 2023, nearly doubling this year’s projected sales, according to Research and Markets. Researcher NPD Group said last year that sales of AirPods and Beats headphones gave Apple 27 percent of the wireless headphone market and almost half the dollars spent on the category.
Pricing will be key for the new Apple headphones. The HomePod is priced more than $100 higher than its main voice-activated competition from Sonos, and $200 more than an Amazon Echo, but $50 less than a competing Google Home Max. Beats and Bose both charge $350 for their high-end wireless headphones, while Sennheiser prices range from $100 all the way to $500.
Apple’s cost for each $349 HomePod is $216, resulting in thinner profit margins than typical Apple hardware products, according to TechInsights. AirPods have been tricky to assemble and use unusual design tricks, likely making them expensive to produce. The Apple headphones will likely use similar audio technology, driving up costs.
Some Amazon Alexa users were met with deafening silence Friday, with the voice-controlled digital assistant going down across the U.S. According to Downdetector.com, a website that monitors technology outages and service interruptions, issues with Alexa began after 9:30 a.m. EST.
Users reported issues with Alexa’s voice recognition service on either Amazon Echo devices or third party electronics that run Alexa, reports The Verge. However, users were able to access the digital assistant through Alexa app, notes TechCrunch.
The outage appears to be impacting fewer people than earlier in the day, according to Downdetector.com. However, those with mute virtual assistants have been forced to perform mundane tasks like turn on lights, look up the weather, play music, or call friends the old-fashioned way.
The outage has evoked comparisons Amazon’s Super Bowl ad in which the digital assistant looses its voice and is replaced by less-than-helpful celebrities. But instead getting the voice of celebrity chef Gordon Ramsay, comedian Leslie Jones, or actress Rebel Wilson like in the ad, they have been treated to either silence or messages saying “I’m not sure what went wrong,” or “sorry, something went wrong.”
TIME reached out to Amazon for more information about the outage, and will update with more information as necessary.
Vero, a new social media network, is all the rage among the digitally-savvy crowd over the past few weeks. With an ad-free interface, a content feed built around chronological updates instead of an algorithm and more, Vero is on the rise just as frustration with Instagram’s recent changes are bubbling over among that app’s most passionate users.
But Vero’s sudden popularity has also put the company and its billionaire CEO, Ayman Hariri, under the microscope. High among the concerns shared by some would-be users: Several of Vero’s developers are Russian, a potentially distressing fact given Moscow’s recent use of social media to muck about in American politics.
Hariri, who spoke with TIME this week, argues his employees’ nationalities shouldn’t be a concern.
“At the end of the day, where people are from is really not how anybody should judge anyone,” Hariri says. “The people that I work with are incredibly talented, dedicated, honest people that really care about the user experience and developing something that has meaning and is well thought out. There’s a tremendous amount of care that pours into what we’re doing. And so it’s completely irrelevant where they’re from. What’s important is the work they do and their commitment to creating a real online social network and not an online network that takes advantage of the fact that people like to be social with one another.”
Hariri says his vision for Vero centers around an advertising- and algorithm-free user experience where users can “feel a connection” with one another and “mimic the real-world social network,” as he puts it.
“Our goal is really to see how we can take the nuance of real-world interaction between people and … to have a place online that is free of anything that gets in the way of that experience, which includes no advertising, no bots, no algorithms getting in the way of that experience,” says Hariri.
Of course, a number of would-be social media competitors have cropped up in recent years, only to be swiftly crushed by Facebook, the $500 billion-plus social media behemoth that also owns Instagram. Peach, Ello and Mastodon are just a few corpses on the trail of the dead that Facebook has left in its wake. Snapchat is the outlier, but even some of its most popular users, most notably Kylie Jenner, have admitted they’re using it less often these days.
“I don’t see much chance for success if we compare Vero to other social apps that have tried to rise up in the shadow of Facebook or other messaging apps, mainly due to the competitive forces in the market and how they and their users will react,” says Brian Blau, a technology analyst with research firm Gartner. With more than 800 million monthly active users, Instagram has a tremendous “network effect.” It’s tough to get people to move from a room where all their friends are hanging out to an empty one, especially when there’s no guarantee anyone will follow suit.
Still, Vero is undeniably seeing a growth spurt this week. It just passed the one million user mark, a milestone worth celebrating for any upstart social media firm. It’s also been sitting at the top of the App Store and Google Play charts, thanks largely to word of mouth among social media celebrities.
But questions remain regarding Vero’s business plan. Most social media companies make money from advertising — you sign up for free, then advertisers pay the social media company to try to sell you sneakers and travel deals and Coca-Cola. Vero’s plan had been to invite the first million users in for free, then start charging a subscription fee for people who sign up after the million mark. That way, says Hariri, the platform can remain free of the low-quality ads cropping up on rival social media platforms.
“What’s important to us is user experience, and user experience then triggers people wanting to recommend it to their friends,” says Hariri. “If a user experience isn’t that great, then the likelihood of them recommending it to others is going to be minimal.
“Today, we’re seeing incredible enthusiasm for the product that we built, for the community that we have, for the things that we stand for as a company,” he adds. “Hopefully when we turn on subscriptions and we announce our price, people are going to be satisfied on all angles.”
Subscription-based social media could have its advantages, potentially reducing the number of bots and trolls on a given app. (If bad actors have to pay money to access a platform, they may decide it’s not worth it.) But social media users have long been trained to expect free access to new platforms, making them likely to balk at the idea of an entry fee. Subscriptions could also make Vero unaccessible for low-income users, reducing the diversity of voices on the platform.
Vero is facing controversies besides the nationalities if its developers, too. Hariri, the son of a former Lebanese prime minister who was assassinated in 2005, has been criticized for the practices of his family’s Saudi Arabian construction company, Saudi Oger, where thousands of workers reportedly went unpaid for months and were kept in living facilities with inadequate food or water. A Vero spokesperson says Hariri, who was once deputy CEO and deputy chairman, left the company in 2013, before reports of those conditions surfaced. The firm shut down in 2017.
Other creators are taking issue with Vero’s terms of service. While a Vero spokesperson points out that Vero claims “no ownership rights over your user content,” the agreement does grant Vero a license to “use, reproduce, modify … your user content.” Other social media sites have similar language in their terms of service, but the language and other issues are scaring off some would-be users nonetheless:
All you guys praising Vero may wanna take a timeout.. here’s a great thread with some background. I’m also trying to delete my account but I don’t know if you can…. 😱😭https://t.co/VhQF5trUcU
After reviewing the TOS for Vero and reading some shady stuff about the CEO that I don't know is true of not, I decided to delete my account. Feeling a little uneasy with it.
If that trend continues, it could kill Vero in its cradle. “It creates a lot of fear and uncertainty for a lot of users,” says Jeff Hancock, professor and founding director of the Stanford’s Social Media Lab. Still, Hancock adds that Vero doesn’t necessarily need to grow to the size of a Facebook or Instagram to become a viable, if smaller, business. “If Vero can find itself a niche, it doesn’t have to be an Instagram-killer or a Facebook-killer,” he says.
For the moment, Vero is primarily serving as a way for frustrated Instagram users to vote with their feet — or their download buttons. If and when Instagram considers Vero a potential threat, it could implement changes that render Vero superfluous overnight. That’s in part why Hariri is trying to carve out a more specific niche for his app, working with creators on projects like short films and photography books. It’s unclear if that will be enough to take on the $500 billion gorilla in the room. But Hariri retains the kind of utopian optimism common among startup-running billionaires regardless.
“The thing that we’re counting on, frankly, is that the greatest social network is the one that exists between real people in the real world,” Hariri says. “As long as we stay true to understanding and wanting to represent real-world interaction online, then the possibilities are endless.”
“When I first got into this, I’d have to explain what it was because no one would have any idea,” says Jason Klein says as he sips tea at a cafe in the Ozarks on a cold winter day. “Now it seems like I could walk up to almost anyone in this room and they’d know.”
Klein, a small business owner who lives in Nixa, Mo., is talking about bitcoin, a sensational invention that recently turned his life upside down. His story — involving undercover federal agents, courtroom drama and a community’s outpouring of support — is one he hasn’t shared until now. The tale highlights how entrancing this new technology can be, as well as the legal confusion surrounding cryptocurrencies like bitcoin: digital tokens that are minted, essentially, by computers doing puzzles.
These days it seems like everyone has gone bananas about cryptocurrencies, which many refer to as crypto (despite the grumblings of prescriptivists). Investors in Silicon Valley are obsessing over the technology that underpins these tokens, known as blockchain; crypto-related startups and hedge funds are popping up one after the other; regulators around the world are on high alert, as cryptocurrencies become more interwoven with financial systems. As prices have soared (and plummeted) over the last year, the fever has spread to America’s living rooms too, where regular people are running up credit card debt to invest in something many of us don’t really understand.
“It’s been crazy,” Klein says of the hype and what happened to him after he got hooked on bitcoin. “When you see something like that explode, go from – when I got involved – $14 apiece to over $14,000 apiece, that’s going to show up on people’s radars, whether it’s a bubble or not.” That includes the radar of the U.S. Attorney’s Office in the Western District of Missouri.
It’s hard to imagine Klein behind bars. Sitting in this strip-mall coffee shop in Springfield, Mo., the 38-year-old gives off the vibe of a patient high school teacher. Hailing from a small Kansas town, Klein describes himself as a tinkerer who got into tech in high school, back in the dial-up Internet days. Educating himself in basements and garages, he built his first computer at age 14 and learned about programming alongside other local enthusiasts. At 21, he started his first tech company, which helped link the various locations of a non-profit fighting drug and alcohol abuse throughout the state. (Klein says he still has a plaque from the organization, thanking him for “launching them into the 21st century.”)
That company, Datility, is one of two small businesses that he currently owns. It continues to provide internet hosting services to clients in Kansas. The other, a firm called Logic Forte, helps restaurant owners with analytics and currently serves about 300 restaurants across 19 states.
Like many tech guys, Klein has a history of adopting promising innovations before the masses, and his curiosity is often piqued as he tries to spot the next big thing. So he paid attention when online circles started buzzing about bitcoin in the years following its launch in 2009. An anonymous coder known as Satoshi Nakamoto created software that slowly brings digital tokens into existence, through a process known as mining, and allows people to exchange them electronically. Harnessing cryptography and mathematics, the system provided a way for two strangers to trust each other in such transactions without requiring some middle man — like a bank — to oversee their dealings.
Technology known as a blockchain keeps a public account of how much bitcoin everyone has (though individuals’ identities are concealed behind long strings of numbers and letters), so people cannot spend bitcoin that they do not possess. The upshot is that, in theory, bitcoin could function like dollars or Euros, stores of value we all trade for goods and services, while cutting out governments and fee-charging financial institutions. Especially because Nakamoto capped the amount of bitcoin that could be created, the digital tokens are also able to function like stocks, assets that rise and fall in value depending on what the market is thinking. Today, bitcoin is just one of many digital “coins” in existence.
When he first read about the innovation, Klein had a common reaction: he thought the underlying tech was “genius” but saw the tokens as more of a concept than a currency because so few people were using them. Then, one day in early 2013, he came across an online TV guide-type service that was actually accepting bitcoin as a form of payment. That made the experiment feel real.
Klein decided to buy $100 worth. Poking around, he found few easy options for purchasing the tokens and ended up mailing off a money order to an exchange based in Atlanta. “It was play money as far as I was concerned,” says Klein, who had by this time moved to Missouri, married his wife, Pam, and adopted a daughter. “It was no different than saying ‘I’m going to take a hundred bucks to the casino.’” By mid-2013, that gamble looked pretty good: the seven bitcoins he had purchased had soared in value and were suddenly worth about $1,000. Seeing this as a “first wave of legitimacy,” Klein bought more, using the same means of plopping a money order in the mail and waiting for the exchange to turn his U.S. dollars into bitcoins that he kept in a virtual wallet.
Klein felt the process was inefficient and he started sniffing around for better ways to buy and sell, which is how he found a site called localbitcoins.com. The platform allowed him to locate nearby people who would meet up in person to do a trade. Klein posted an ad on the site, offering to sell bitcoins for cash plus a roughly 10% fee. Over the next couple years, Klein says he made a few trades a month, netting a few thousand dollars in fees each year. But he says he was at least as interested in the meet-ups as the profits, seeing each trade as an opportunity to act as a bitcoin evangelist, and to learn about what led others down the rabbit hole.
If you’ve ever met someone who is into crypto, you have probably found that they love nothing more than to talk about crypto, to debate its ability to upend financial systems and discuss which coins have more potential. Klein met students doing research papers and investors looking to make some dough in an increasingly hot market. One man wanted an easier way to hire and pay overseas software developers and had been drawn to bitcoin because it is borderless, unlike the U.S. dollar. “It was exciting,” Klein says, “because it felt like other people are starting to get involved.” A currency needs to be widely adopted in order to work, however revolutionary it might be in theory, and Klein felt like he was helping to usher along the adoption process, in a part of the country that was just starting to take notice.
One day in 2015, Klein met someone he would come to view as a “weird guy.” To some extent, being weird is par for the course when your universe is individuals who are really into bitcoin. “Sometimes they’re super nerdy. Sometimes they’re very anti-social. Sometimes they’re very anti-government,” says Klein, sitting in an armchair at the coffee shop and occasionally refilling his cup of tea. Yet this would prove to be uncharted territory.
Referenced in court documents only as “Undercover Agent #1,” the guy seemed normal enough at first, Klein says: He presented himself as a business person, someone fascinated with bitcoin and wanting to learn more. They met at an Einstein Bros. Bagels shop and Klein sold him $1,000 worth of bitcoin, making his usual commission of about 10%. Then the guy asked if he could bring in a business partner who also wanted to understand what this bitcoin business was all about. “Unbeknownst to me,” Klein says, that person was Undercover Agent #2.
The U.S. Attorney’s Office in Missouri’s Western District declined multiple requests to comment for this article, including answering questions about why Klein was targeted in an undercover operation. Court documents show that Klein met with these two federal agents on several occasions over the next year and a half. “I enjoyed meeting with them,” he says. “I loved talking about bitcoin.” But he says the agents also pushed him to do bigger trades, wondering if he could sell them up to $10,000 worth of bitcoin. “I said, ‘I’m not your guy. It’s a hobby for me,” Klein says, emphasizing that the money he earned from trades generated a small amount of his annual household income. (He estimates it at about 3%.)
Yet Klein continued to meet with them, and as the value of his bitcoin grew, he did do bigger trades. He also offered to introduce them to another seller he had met through the website. According to the documents, he conducted five trades with the agents in total. On his own, he sold them up to $7,640 worth of bitcoin, and in one trade conducted with a second seller who is unnamed in the official record, the two sold them $15,000 worth. Klein made $2,122.68 in fees from these trades, according to the documents.
Federal information filed by the U.S. Attorney in the Western District of Missouri.
During one meeting these contacts suggested they would use the bitcoin to buy “Girl Scout cookies,” a reference to drugs that Klein says he didn’t understand at the time. Then, one day in late 2015, he met them to do a trade and afterward the pair outright said they were going to use the digital tokens to buy cocaine, suggesting they were drug dealers.
Klein says he found the suggestion unbelievable and wondered if his contacts were trying to impress him. “I just would never peg them for drug dealers,” says Klein. “I never saw drugs. I never felt like I was in harm’s way. The only thing I saw that would have been a side effect of that was the cash.”
In hindsight, he says, he should have known better; he should have walked away and cut off contact. Klein says he did stay away for some months, feeling weirded out. But eventually he met with the undercover agents again and did another trade. It was summer 2016. “And the next Monday morning at 7 a.m., they were on my front doorstep with like seven or eight black SUVs,” says Klein, recalling how he agonized over what his neighbors must be thinking.
At first, Klein didn’t understand why agents wearing badges that identified them as part of the Internal Revenue Service’s Criminal Investigation division had showed up at his house. Then he saw the word bitcoin in the search warrant they handed him, and he put everything together. The weird guys. The trade he had done the week before. He says the agents were professional, waiting until his 9-year-old daughter was safely out of the house before they started sifting through the closets and taking tech equipment. “I honestly think that they expected to find hundreds of thousands of dollars or something,” he says, “like I was some bitcoin kingpin.”
Klein wasn’t arrested or immediately charged with any crimes, but in the wake of the search he says he was presented with a list of potential violations that the government might bring before a grand jury. It included serious offenses like money laundering, which alone can carry a sentence of 10 years or more in prison, according to Bureau of Justice Statistics. “With the family and business and everything, I couldn’t even comprehend that,” Klein says. “Obviously I erred in continuing to meet with those guys, but I never felt like I was doing anything wrong.”
Months of negotiating began. The Kleins refinanced their home and depleted their savings, anticipating that they would go to trial and be saddled with as much as $150,000 in legal fees. Klein also sold much of the bitcoin he was holding to foot the bills, he says. At the time, each token was worth about $642. By the end of 2017, those same tokens would fetch nearly $20,000 apiece. “So that sort of stinks,” he says.
Klein recalls agentscarrying around a picture of a device known as a hardware wallet when they searched his house. To him, that was a sign of how new they were to the world of bitcoin. In general, the case law regarding cryptocurrencies is “early and inconsistent,” says Angela Walch, an associate professor at St. Mary’s University School of Law in San Antonio, whose research focuses on the intersection of governance and emerging technologies.
Klein got caught in the crosshairs at a time when regulators, law enforcement and Congress are all scrambling to catch up with the implications of the cryptocurrency boom, including how officials might control digital tokens that have no physical existence and were designed to sidestep traditional financial institutions.
While criminals have turned to this hard-to-trace form of payment for nefarious reasons, investors are heralding the underlying technology as “the new Internet.” In court documents in Klein’s case, the government said that while bitcoin is not illegal in itself and has legitimate uses, it is also “ripe for use as a financial tool within criminal enterprise.” Klein’s lawyers, in turn, quoted legendary venture capitalist Marc Andreessen, who once wrote that, “Bitcoin at its most fundamental level is a breakthrough in computer science.”
Barrett Emke for TIME Jason Klein demonstrates how he would typically check for counterfeit bills during a cryptocurrency transaction, on Feb. 28, 2018. Klein typically did trades of bitcoin for cash in person, often chatting about bitcoin over a meal or coffee as both parties waited for the electronic transfer to complete. Klein would often keep the commission he made for the trade but use the bulk of the cash to purchase more bitcoin, thus replacing what he had just sold and keeping enough on hand to do more trades.
Regulators are increasingly focused on the risks that accompany this disruption. Today, cryptocurrencies are being traded on unstable exchanges; many believe that coins’ fast-rising values are part of a bubble that will eventually pop. The tokens could be stolen by hackers and thieves, and consumers have limited recourse when things go wrong. There are fears that terrorists, as well as drug traffickers, will fund their enterprises with digital coins.
All that puts the government in a tricky position, Walch says. On one hand, the government has an imperative to protect consumers and the financial system at large. On the other, regulators “want to let this innovation that could be important flourish,” she says, and have been loathe to stifle crypto with burdensome rules.
Experts say it is not clear how much authority the U.S. government has to regulate these stateless, decentralized financial instruments. Several federal agencies have released guidance, outlining legal views and concerns. But that guidance is “not necessarily an image of clarity,” says Andrew Hinkes, an attorney who is teaching a class about crypto at New York University. The likes of the Securities Exchange Commission and the Commodity Futures Trading Commission, which recently testified about cryptocurrencies before Congress, are still finding their footing.
Authorities are trying to figure out how to wield old laws and powers in this brave new world and identify gaps that might require Congress to pass fresh statutes, in a time when the language used to talk about the technology is still far from settled. “What you’re seeing right now is the attempt to implement the law as it exists,” Hinkes says, “and there will be areas where it doesn’t make sense or it’s impractical.” The nature of crypto makes consensus difficult: a circuit court judge in Florida, for instance, determined that an individual targeted in a sting similar to Klein’s couldn’t be convicted of money laundering, because, in her view, bitcoin wasn’t money. (Judges elsewhere have ruled that it is.)
David Yermack, a finance professor who is co-teaching with Hinkes at NYU, says that even if everyone agreed how much authority the government has to regulate cryptocurrencies, the practical challenges of enforcing the law would be enormous, since much of this activity is happening offshore and in the cloud. Yermack says it’s “almost comical” to see the Justice Department going after a relatively small fish like Klein when there are thefts and scams happening that potentially involve millions of dollars worth of crypto. Klein’s St. Louis-based lawyer, Mark Milton, believes prosecutors may have initially thought that pursuing his client was “going to lead to some bigger case.”
Klein starts to sound tearful as he describes the uncertainty that plagued his family as the negotiations wore on into early 2017. He knew he was in a developing legal landscape and wanted to take a stand. He also says he gave the Justice Department “a laundry list” of reasons he didn’t think he was really meeting with drug dealers. Whatever the government might have thought of those arguments, Klein says the prosecutors became more open to negotiation when it appeared that his side was willing to go to trial.
The U.S. Attorney’s office offered him a deal, he says: if he would plead guilty to charges of violating money transmitting laws, prosecutors would not pursue other potential violations. The government was suggesting that in exchanging bitcoin for cash, Klein was essentially operating a business that functioned like a Western Union or a foreign-currency exchange booth in an airport. Facing the prospect of an expensive trial that could go on for years, Klein started considering that option. Pro-crypto advocates have argued that these laws should not be applied to bitcoin sellers, but there is also precedent for prosecutors doing so successfully in court.
In the end, Klein agreed that, under the Justice Department’s interpretation of the law, he was guilty of failing to register as a money transmitting business with the federal government and to get a license from Missouri. In May 2017, he took the deal.
There remained the matter of sentencing. Ahead of Klein’s September 2017 hearing, the government planned to argue for 13 months of jail time. In court documents, prosecutors say that Klein showed “an eagerness to take advantage of bitcoin’s untraceable features and utilize the digital currency in facilitating criminal activity.” They also argue that a prison sentence would serve as a deterrent for others — and needs to — because digital currencies pose serious new risks, allowing criminals to “transfer funds across the globe at the click of a button.”
At the same time, Klein’s team tried to convince the judge he didn’t deserve to be locked up. His lawyers noted it would not be the best criminal strategy to advertise trades under the username of “jrklein.” They also mention that the likes of Expedia and Overstock.com are now accepting bitcoin as a form of payment and that Klein did not hide his involvement in crypto, becoming something of “a local expert” on the topic after he gave presentations to a local bar association and property rights council. He says he attached profits from trades to his 1040 tax form each year.
An excerpt from one of the letters sent to the judge in support of Klein
Klein’s lawyer was not the only one arguing that he was a good man who had made a bad mistake — and who also did not understand quite what he was getting into with bitcoin. More than 40 people sent letters to the court on Klein’s behalf, from coworkers to customers to the local mayor, all asking the judge to show leniency to a man who often donates his time and technological skill to help the community. Dozens of these authors showed up in court on the day of his sentencing in September.
It turned out they were there for the winning side. The federal district judge ruled that Klein should not be imprisoned. He was instead given five years probation, a $10,000 fine and 120 hours of community service (as well as a demand to pay the $2,122.68 he earned back to the IRS as restitution). “I was giving out hugs like candy,” Klein recalls. His friends had a beer waiting for him at a local bar after it was all over and clapped when he walked in. The Kleins were also able to recoup about half of the money they scraped together for a legal retainer by avoiding a trial.
Now that he has “a bitcoin crime” on his record, Klein says he has been blacklisted from major crypto exchanges. He has trouble finding anywhere to open an account and cannot do trades for cash like he used to as a condition of his probation. Yet he remains an adamant believer. The concept of digital currency, and the ledger-like blockchain technology that makes it work, will “transform” a slew of industries for the better, he says. He continues to promote the technology locally.
“There are going to be all these good, healthy byproducts of this grand experiment,” Klein says, even if he himself became something of a casualty. “Once this catches on and people start running with it, I feel like it’s going to snowball.”
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