From: Robert Hettinga <rah@shipwright.com>
Date: Thu, 17 Dec 1998 09:09:42 +0800
To: dbs@philodox.com>
Subject: Re: DigiCash Update, part II
In-Reply-To: <v04020a21b29d677d3898@[139.167.130.248]>
Message-ID: <v04020a2eb29dc7d8dfef@[139.167.130.248]>
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At 2:55 PM -0500 on 12/16/98, Tim May wrote:

> The bankruptcy laws simply don't work this way. At least not in the U.S.

Actually, Tim, they do. And, frankly, what an amazingly silly thing to say.


A day doesn't go by when debt-holders don't convert to common, or are asked
to do so, bankruptcy or not, and take over what's left of a corporation
like DigiCash. Frequently, debtholders are the people in the strongest
position to do so, and the trustee agrees. Almost all bank mergers happen
that way, for instance, and a patent's as good an asset as a bank deposit,
especially if it's earning revenue, like DigiCash's are, however small that
revenue might be.

Actually auctioning off a company's assets doesn't happen nearly much as
the Small Business Adminstration -- or whoever your sources are -- say they
do. Mergers are usually the rule. Look at PGP, if you want a pointer.
Cybercash will probably be sold, someday, debts and all, and probably for
the amount of their debt, which, by now, I bet, is as considerable as
DigiCash's.

So, indeed, if partners of the caliber Lucky is boasting he has went out
and bought up the debt of DigiCash, it would take about a heartbeat and a
half before Loftesness, or even the bankruptcy trustee, would offer them
stock, if not control, just to take the company out of Chapter 11. Or, more
likely, to merge it with a more solvent business.

To think otherwise, is, frankly, a complete betrayal of your cluelessness on
the subject, Tim, and I don't use that word lightly in your regard.

> If a company is ultimately liquidated the physical plant, furnishing,
> equipment, bank accounts (if any), patents, and (sometimes) "good will" are
> sold. Proceeds then go to the various debt holders according to their class
> of debt.

Right. If it gets that far. Usually, it doesn't. In the case of DigiCash, it
might, except for one rather obvious thing. They still have outstanding
revenue from the likes of DeutcheBank, Nomura, and a few other rather large
financial institutions. That means that the patents, at the very least, are
worth something on the books, and probably *won't* be sold at auction
unless everything else fails. Frankly, converting all the outstanding debt
to common would be the cheapest thing to do, and you could bet that if
Loftesness could do it, he would.

Finally, if all that doesn't work, there's still the possibility of buying
the patents at graveside, like you, and, frankly, I, were talking about,
but, given the capital market's thorough disfavor for internet transaction
protocols these days, the patents are probably not worth much to any of the
"players" Lucky says he has, especially in the modern world of hockey-stick
internet IPO's and VC-induced investment bubbles.

So, outside of their residual remaining royalties :-), the patents *might*
be worth something to some financial crypto labs, and to the internet
crypto community at large, but that's about it, which was why I'm trying to
put together a syndicate to backstop whatever Loftesness tries to do to get
DigiCash back on it's feet.

To be blunt, nobody has *proven* that they're worth anything else but
research curiosity, so far. And, until the debts on DigiCash are taken off
the books (by stock-for-debt swap, or outright buyout, or whatever), we're
not going to find out anytime soon.

> The debt holders _may_ have side deals, contractually arranged, which give
> them rights of first refusal on certain patents or assets. But not usually.

More properly, DigiCash's debts may, in fact, *be* secured by the patents
themselves. In which case, the debtholders *do* get the patents.  Given the
quality of the outstanding debtholders, (most of whom *are* VC folks, if I
remember what I've heard) I expect that if it were at all possible to
collateralize the debt with the patents, they would have done so.

Of course, we'll find out the real answers to all of this when the Chapter 11
filing is actually final. Right now, I hear that there's nothing there but
a placeholder filing, with no actual assets listed in detail, much less
whether they're secured by anything.

> So, buying the debt of a company facing liquidation guarantees almost
> nothing about gaining access to patents.

Nonsense. Utter, complete, absolute -- and, clueless -- nonsense. See above.

> Someone who has no debt interest
> in the company may well end up outbidding others for assets, including
> patents.

Sure. Except, of course, when the judge turns the debtholders into
controlling shareholders instead. Go read up on a few actual bankruptcy
cases, Tim. It might help you state your case better if you used actual
data.

> This is just basic business stuff. I'm an investor in

<and so forth...>

Yes, I know, Tim. You "know" <drop a name here>, and *I'm* no <dropped name
here>, and so on, and yes, we all know, you're a tycoon of massive renown.
A giant unsold position in Intel, which you have now retired early on, to a
fortress out in the thules somewhere, proves you must be such.


Of course, Tim, if you really were clueful about business as you say you
are (instead of just a commendably frugal case of being exactly the right
employee at the right time), *and* you cared about making blind signatures
ubiquitous, you, the man who taught us all how important they were to begin
with, could have probably *bought* the patent yourself, probably for a
song, at least once when they were up for grabs in the last few years. And
you might even made money on them, being so clueful in business, of course.
:-/.

I even expect that you could even buy those pantents now, all by yourself,
if you could remove yourself from your Barcolounger, except for the odd
trip to the shooting range, to buy a new stereo, or to wait for the
millenium. Yelling insults at the local gendarmarie as they drive by your
Y2K-proof stone-by-stone replica of Wolf's Lair, challenging them to come
and shoot you out, copper, doesn't exactly help, either, I suppose.

If you thought financial privacy was so important, you, personally, Tim,
could have done something about this, a long time ago. All by yourself,
without anyone else. And you didn't. Instead, you snipe.

Oh, well. Cypherpunks now ride Barcoloungers, I suppose.


Frankly -- if I may step aside the point of the thread, here -- since you
started this chicken-little, off-the-pig, shoot-the-"criminals",
Junior-Birdman militia kick, you're just plain boring, Tim. Tireder than
Wired, you are.

Which is a real drag to lots of folks who are still here, because you
really had a lot to say once. You taught everyone here most of the way they
think about the world, in fact. Double that for all the people who've left
the list already in the wake of your recent thermite infatuation.

Nowadays, though, I remember a very sad, but funny, Firesign Theater
takeoff on 'Desiderata' which seems to sum you up pretty well. It said
something like '...you're a fluke of the Universe, and, while you're
sitting there, looking stupid, the Universe is laughing behind your back'.

That is, you pop off with the occasional "kill the bastards", or the
occasional "pearl" of business wisdom like the above, and we'd laugh,
except that you're no funnier than any other incontinent old gentleman,
yelling at the local skatepunks trashing his flowerbeds. Or minefields. Or
whatever.

> About the wisdom of announcing a takeover publically I'll say nothing.

That's nice. Glad to hear such a well-founded opinion.

Except, of course, that that's the way it's usually done, Tim.  People
raise their money, they get their partners signed up into a legal
arrangement of some kind, they hoist the Jolly Roger if necessary, and they
make a tender offer. In public. No veiled intimations of a "Secret Santa",
somewhere in the wings, come to save the day.

Transactions, for the most part, are based on reputation, or have you
forgotten that as well?


And, yes, Tim, I actually do know how it's done. I've seen it. I've been
right there, albiet with an extremely junior clerk's-eye view, and almost
two decades of hindsight. :-). Certainly, close enough to know when someone
isn't blowing smoke, which is what I'm increasingly convinced I see, here,
so far.

And, sadly, what's really more important here, is that I now know you
*haven't* seen this kind of thing done, Tim, and you don't know any more
about what you've been saying about mergers, or bankruptcy, than what
you've read in the papers. If you read the papers at all anymore, that is.


So, to return to the point, here, if anyone's going to make a run at
DigiCash, they should do something, or, to fracture some scatology, get off
the pot. They should not go stomping around public mailing lists saying the
equivalent of, "I have secret partners and we have secret plans, and we're
going to free the blind signature patent for all to use".

So, please, give me a break. About the "secret santa" bit, anyway. It would
be very nice indeed to pry the blind signature patent out from the beached,
debt-ridden carcass that DigiCash has now become, :-), and I think that
it's going to happen sooner or later.

Whether a bunch of cypherpunks, with or without Timothy C. May, will ride
up in a cloud of dust and save the day remains, of course, to be seen.
Frankly, I'd rather expect that the financial crypto community will step up
to the plate, here, but we'll see.


And, so, with the above, -- and now final, as far as I'm concerned -- pile
of, well, clueless dreck, from you, Tim, I've reached an amazing decision.

Something I never thought would happen, even with all the excrement you've
heaped in my, and other people's, general direction over the years. To
paraphrase the joke about the optimist child at the Christmas tree, there
was usually a pony in mess somewhere.

But, with this, it has finally happened, Tim.

Welcome to *my* killfile.


Given the quality of your contributions to this cypherpunks lately, I
expect that I won't miss you very much, and that is a very sorry shame indeed.


Cheers,
Robert Hettinga

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-----------------
Robert A. Hettinga <mailto: rah@philodox.com>
Philodox Financial Technology Evangelism <http://www.philodox.com/>
44 Farquhar Street, Boston, MA 02131 USA
"... however it may deserve respect for its usefulness and antiquity,
[predicting the end of the world] has not been found agreeable to
experience." -- Edward Gibbon, 'Decline and Fall of the Roman Empire'