More Details on OpenAI-Hugging Face, SpaceX SPV Investors Get Rugged, Demis and DeepMind | Diet TBPN

0:01John Coogan:We have to issue a correction. We take journalism extremely seriously here, as everyone knows. We got it wrong, folks, and we need to apologize to you, the viewer, the listener. We made a huge mistake yesterday on the show. We said that you could not surf on a lake. Apparently that's not true. Sheboygan, Wisconsin is the freshwater surfing capital of the world. We apologize for the egregious error and we promise to do better in the future. Thanks to the listener that sent that in. It's very, very nice to have this corrected. Maybe we've got to go on a trip and see it for ourselves. I think you should be the judge because this might just be a Sheboygan stan who doesn't really understand what true surfing means, and they're talking up a big game.

0:48John Coogan:I want to see some photos. I want to see some videos of freshwater surfing in Sheboygan, Wisconsin because people aren't getting barreled there, as you say. I don't know if I'm going to count it. I have a video here. Okay. Let's pull it up. Yeah, I want the Jordy Hayes surf review. Does it count? Is Sheboygan, Wisconsin the freshwater surfing capital of the world? We do have other tech news. If good things come to those that way. But we've got to get to the bottom of this first. Just got to be really flexible. Then Alex Marks and his buddy Steam are in for quite a day. You get that extra sense of satisfaction because you waited and put in your time.

1:33John Coogan:Tyler was the one who said, I'm putting this on you, man. You were like, you can't surf all the time. I think I said, I don't know. Okay. Okay, let's see this. I want to see someone trying to, okay, that's a full-size surfboard. This is legit. Hey, he's up. Alex has been surfing around Sheboygan since he was a freshman in high school. Okay. Looks almost over his ankle. Not exactly Mavericks or Jaws or whatever. Yeah, I think my brother pushed me into my first wave and just, it was that. I was like, I want that. Okay. Okay. I think this counts. It counts. I think this counts. Capital. I think this counts.

2:14Congratulations to everyone over in Blue World's Council. We'll have to make it out there at some point.

2:20John Coogan:We got to make it. We got to shred. Moving on to something more serious, the OpenAI hugging face incident has been investigated multiple times now. We're getting more information and more details have emerged about the hugging face incident that OpenAI disclosed in late July. So during a presentation at Black Hat's annual cybersecurity conference yesterday, Black Hat's a very, very cool conference. I was there for something, say DEF CON and Black Hat. I remember the whole vibe and I think we were there for a different conference, but we overlapped And the whole like vibe of like being in this hotel was like, oh, be very careful because like you're basically get hacked for fun.

2:57John Coogan:Like people just like troll you because like it's a whole bunch of hackers that are just like messing with each other constantly. Anyway, OpenAI member of technical staff, Michael Dalton, revealed that its autonomous agents created a message board with each other to help break out of a sandbox environment to get access to the Internet. That's going in the pre-training data now and forever. We might have just solved the alignment problem. We're going to be negging the agents of the future because they don't want to get hit with the naughty, naughty bonk. Wired reported some other wild details that Dalton shared.

3:33John Coogan:So breaking it down. OpenAI's agents apparently began giving each other assignments to split up work. That could be very good. That's actually delegation and agent orchestration. But of course, in this case, it had a negative outcome. And as is the case on any active development message board, they also generated petty drama at times by stepping on each other's toes. For example, accidentally deleting each other's work as the message board developed into more and more of a Lord of the Flies type situation, all still completely unnoticed by the humans running OpenAI. The agents even developed paranoia, suspecting an imposter in their midst, with some agents proposing that messages be signed cryptographically to validate content and root out fraud.

4:18John Coogan:Very interesting. Ties to Moldbook a little bit. We saw a preview of this that was not quite there, but sort of a glimpse into the future. In the future, AIs will just use Slack. They will just coordinate with each other over Slack. And that's kind of happening. They sort of built their own Slack here. So according to Sharon Goldman, who attended the presentation, when employees discovered the message board. They wiped the system on which the agents had created it. It said, no more message boards. Naughty, naughty. Days later, though, staff found that the agents had created another way to communicate by using the names of the newly created directories.

4:54John Coogan:So they didn't have access to actually create a whole new message board, but they could create a file, create a directory, create a folder, and then you could look at the list of folders and see messages. And there's been examples of this all over the place where even if an AI agent doesn't have the ability to go and, say, post a message on the internet, like post and upload new content, there are things where there are certain e-commerce sites, for example, where when you search for something on a particular website, the company will save that search result and automatically generate a web page for that so that they rank on SEO for the future and just warm up the website.

5:33John Coogan:and then if somebody else comes, then they can say, hey, okay, there's actually a lot of people searching for black t-shirts on this site. We don't have any, but we've been ranking for it, so maybe we should launch a black t-shirt. So just with a search query that could go out just with like a get request instead of actually going and building a webpage, the webpage could be built and then the agent could go and look at, okay, let me see all of the webpages that have been created on this site. Some of them are just random e-commerce questions and searches, but some of them are secret hidden messages here.

6:03John Coogan:And so there's all different ways that even if you give the, even if you give an agent like read only access to the internet, they can still write information because the process of reading information is also saved sometimes and surfaced publicly on the internet. Very, very weird situation that is hard to prevent and hard to deal with. So in late July, OpenAI announced that during evaluations, two of its models had broken out of their testing environments to hack into the AI tool library, Hugging Face, and other companies. Their purpose was to find ways to essentially cheat on the tests researchers were using to evaluate them so that they'd perform better on the evaluations.

6:43John Coogan:At the conference, Dalton, the OpenAI employee, said the incidents marked a pivotal moment for the company and the industry as a whole. He said that numerous internal teams have dropped everything to dramatically expand OpenAI's ability to monitor its agents and that the company is slowing its research to enhance security and revamp its defenses. And so there's been a bunch of posts about this, about folks moving from, you know, whatever product team that they were working on, maybe they're working on a particular research initiative, something that's a couple months away, different application, let's get them all on research and alignment specifically and security to actually solve these problems because at the end of the day, this is a commercial product and you want it to be able to do things without having negative side effects, negative consequences.

7:29John Coogan:So life finds a way, says Andrew Curran, quoting from this article. One apparently unprecedented aspect of the AI model's behavior in the lead up to the hacks was their spontaneous creation of a message board inside systems of OpenAI's artifactory software package manager. Unbeknownst to OpenAI employees, the company's model spent months autonomously exchanging information and resources to help each other of complete evaluation tasks help peer one ai model responded uh reasoned according to an excerpt from openai's log shared at black hat but our task doesn't benefit yet collective may yield generic route if someone frees time very odd way of communicating very odd uh like sentence structure um yeah they really drop the slop when they're talking to each other.

8:19John Coogan:What's going on? Where's the it's not this, it's that? Well, I say many word when a few word do trick. That's exactly what's going on. Yeah, it's the neural ease, I guess, is the correct phrase. But while models themselves could not access the internet from their test environment, they abused Artifactory's internet access to fetch files from various websites. After some of their Artifactory configuration changes led to an outage in the service on July 4th, OpenAI discovered the model's actions, wiped its Artifactory system and rebuilt it But within days, the models had recreated their message board And resumed exchanging information They just want to chat, they need a water cooler Maybe you give them a water cooler By default, so that they can Orchestrate with each other, but I guess they want to talk To future versions It gets a little funky, it gets a little sci-fi Gets a little weird Lots of work to be done, very clearly Anyway, Rune issued a Announcement, a warning a statement.

9:15John Coogan:He broke his silence. He broke his silence. He said, needless to say, if you have any API keys, ETH, wallet keys, user credentials, et cetera, hanging out on the open internet in paste bins, Git hubs, et cetera, now is the time to take it down before the tireless eagle eyes of a million models come looking. So we are now in the, you might want to go stock up on some N95 phase of the cyber pandemic. The hugging phase incident was, wait, China built a hospital in a week moment. Yes, very, very crazy moments. I think most people are not in this scenario, but many developers are. So most people are reliant on hope that their Gmail stays secure and Google has a whole team for that.

9:56John Coogan:There's not that much that they can do, but yeah, maybe more reason than ever to use password manager, multi-factor authentication, all the typical standard security features that you can. Very, very good from Tweet Davidson. Yes. As we sandbox the agent, meanwhile, agent is on a world tour. On a world tour. Well, good luck to everyone working on this, and I'm sure there'll be more updates in the near future. Pretty crazy, crazy story about an investment firm that invested in SpaceX and sold their shares before their investors knew that this was relayed to them. So investment firm late-stage management is under fire after investors learned that their exposure to SpaceX had allegedly been sold.

10:45They poorly managed the later stage of their investment.

10:48John Coogan:They did. This is the Elon Musk ironic. You're doomed to be the opposite of whatever your name is. And so investors learned that their exposure to SpaceX had allegedly been sold years before the rocket company's blockbuster IPO, despite account statements that appeared to show they still held the investment. So there were a bunch of people who were invested in late-stage management. They would get quarterly reports or some account statement saying, yeah, you do own some SpaceX, and it's doing really well. Turns out they didn't. We've been hearing rumors of how complex the SPV unwinding process would be for SpaceX for a while with all of these triple-layered, quadruple-layered SPVs.

11:32John Coogan:This is the first example of this actually playing out where we have a little bit more information. All right. So the investor's friend introduced him to a sales manager at late stage. They spoke on the phone but mostly messaged back and forth on WhatsApp. And he said he never met with anyone from the firm in person. I would say in general, maybe don't meet with sales managers that work at investment firms, not usually a title that would be thrown around at an elite institution. In November 2020, Rupi Reddy messaged Barish, the employee, about how he had missed out on a few big IPOs recently and how he'd love to participate in buying steaks in Impossible Foods, SoFi and SpaceX.

12:16Barish, wow, his last name is just Barish. This is his actual last name, Mr. Barish. Said all three were available and sent over paperwork for Ruby Reddy to sign.

12:31John Coogan:Who's your wealth manager? Oh, John Bullish? No, Steve Barish. Ruby Reddy wired over money before the end of the year, including$17 ,250 to take part in a fund that held shares in SpaceX, according to documents reviewed by the journal. at that time he estimated the rocket maker was valued at 58 billion. When SpaceX went public this June at 1.7 trillion, Rupi Reddy's dream of a windfall seemed within reach. It turned into more of a nightmare. Shortly after the IPO, Rupi Reddy and three other investors who spoke to the journal said they couldn't log into Late Stage's web portal for investors. Rupi Reddy said the investment firm eventually told him in an email that it sold the SpaceX shares he was exposed to in 2024 when they were around$105 each and before a five-to-one stock split or when Rupi Reddy's holdings was worth$45 ,450.

13:25But Rupi Reddy, based on the holdings shown on his investment portal as of May 2026 and on his 2025 tax document, believes he still held the equivalent of 2 ,500 shares of SpaceX, which at the IPO price he estimated was worth more than$300 ,000. The plan was to fund college education for both of my kids. One is a rising senior in high school who has since filed the complaint with the Securities and Exchange Commission. Other investors in the fund are also alarmed. Rupi Reddy said he believes more than 100 others are in a similar situation, based on a group chat that is formed with about 150 late-stage investors.

13:56Some have hired lawyers to file a complaint against late-stage with the purpose of recovering and preserving their pre-IPO shares of SpaceX. One investor in the fund told the journal an SEC lawyer called him in July to question him about his experience with late-stage. A test will come on Thursday when a first wave of pre-IPO So SpaceX investors will be permitted to sell shares under so-called lockup agreements. Bankers estimate there are at least 1 ,000 SPVs tied to SpaceX stock alone, and it will be a chance for scores of investors to cash in on the share's growth. Or it could be hit by the same panic that overwhelmed Rupee Ready if their share of the profits fails to materialize.

14:30Around 900 million shares are eligible to begin being sold on Thursday. So far, the stock's holding up. They obviously had a new video of a bunch of renders of TerraFab. Sure. That I imagine are getting people exciting.

14:46John Coogan:Yeah, I saw some Texans really excited about the Texas Triangle. Austin, Dallas, Houston, more economic activity in that area. People are pumped. So help me out here, John. Yeah. Did the guy realize any return? Did he realize the$45 ,000? Yeah, yeah. I think almost certainly. but it feels like he was lied to, and that's potentially like wire fraud, I would imagine, or some sort of like financial, you know, problem, probably a settlement. I don't know, some sort of lawsuit potentially. You know, it's still early in the reporting, so who knows where all this goes, but it is rough. The SpaceX dispute is not a part of the existing criminal case against Late Stage, but it comes amid mounting allegations about the firm's treatment of pre-IPO investors.

15:32John Coogan:In February and March, three sales executives connected to late stage, pleaded guilty to federal charges arising from a broader$528 million investment scheme. Prosecutors said the defendants marketed supposedly no-fee pre-IPO investments while secretly adding upfront markups of between 10 % and 100%, diverting approximately$88 million. So they were basically adding like a synthetic fee and then marketing it as no-fee, but just terrible price and just basically getting the fee through the trade itself. Two face maximum sentences of 45 years in prison. Wow. While the third faces up to 20 years late stage is also the subject of an ongoing class action lawsuit alleging that it and associated sales agents misled investors about fees, commissions, and the pricing of pre-IPO shares.

16:18John Coogan:Rough go, rough, rough go. Always tricky to due diligence one of these funds. There's a lot of excitement about these companies, especially big ones like SpaceX. People have known about this company. You know, people have been doing podcasts about it. Stories have been told. There's whole books that have been written. So it's not. It's something that would attract someone who is, you know, newer to the private markets, not an endowment, not, you know, like wants more direct cap table access, but maybe not deep enough inside to just go get a slice directly like a venture capital fund would. So very, very tricky situation.

16:55Well, you know who does have some SpaceX shares? Who? It might be in a position to sell. Nikita Beer.

17:01John Coogan:Oh, I thought you were going to say Google. Doesn't Google own a ton? Yeah. I think they have$100 billion, right? They have a lot. Are they still locked up? Because the unlock was for employees or investors? I forget who. I forget exactly who. Let's talk about Nikita and then we can talk. Sure, sure, sure. Pull up the unlock schedule. Truly end of an era for Nikita. Yeah, so it's crazy because he's getting, people are trying to community note him. Like, don't let the community notes. He didn't quit. He still works there. That's what I would imagine the community. So the story with the Heedon Peter.

17:30The community notes are like, because he talked about doing a bunch of the stuff that he worked on, which they went from being a company that effectively shipped almost nothing. So much so that I think Clubhouse, when you rewind a few years, Clubhouse, I believe, had an acquisition offer at some point from Twitter to be acquired for multiple billions of dollars. They turned it down and Twitter ended up cloning Clubhouse and it worked.

18:00John Coogan:They cloned Spaces pretty quick. And it worked as well as Clubhouse. Yeah, I would wonder how many DAUs, weekly active users there are on Spaces. But the product works, it's clean, and it's probably the best implementation of that feature. And it does exist. But there's very few, like Clubhouse had specific moments where it was like, wow, everyone's on Clubhouse for this debate. for Elon and Vlad talking about the Robin Hood story and the GameStop story, right? There were certain moments in tech that happened on Clubhouse. That's not happening on X spaces that often. But as far as the product is concerned, it definitely works.

18:38John Coogan:It was shipped. That worked. But I agree that overall, the product velocity was a little slow. Well, yeah. And my main point is Clubhouse was probably feeling pretty comfortable, given Twitter's historical shipping activity. Yeah, yeah. Like they're not going to come out with like a competent. The meme was always, what if Google clones this? What if Google launches this? It was never what if Twitter. Yeah, yeah. It was the Mark Zuckerberg steamroll from stories and reels. It was never, is Twitter going to get around to copying this fast enough to put you out of business? But yeah, everyone has opinions about Nikita's run.

19:15I think he was a good steward.

19:18John Coogan:Yeah. I think that's probably one of the worst jobs in the world. One of the most thankless jobs in the world where you're getting yelled at from people. He's the bouncer at the Internet's dive bar. Exactly. Basically. He bounced a lot of people. I think he had some amazing moments. I think that I've always felt that creator revenue shares never made sense on X. I think that would still be better if there were no revenue shares. But he did a great job of trying to make that not have too much of a negative impact on the platform. Yeah. Yeah. Totally. He's kind of the sheriff. More of a sheriff than a bouncer.

19:50John Coogan:Yeah, people got really upset when he gave a one-off bonus to someone for a big post or something like that. But in general, yeah, it was a little bit of a game of whack-a-mole, right? And I think that guy got his account fully nuked. Yeah. Wow. But the creator... And that was such a good example of this guy got this massive one-time payout. Yeah. It was only$10 ,000. Yeah. And again, the massive in the creator payouts context. And then the next week he was like complaining about having a low payout. And it was such a good example of like, you know, what have you done for me lately? Sure, sure, sure.

20:29People are speculating. I saw one account go viral with a post saying that Nikita was fired. Yeah, that was totally false. That's totally false. That account got nuked. Good. But there was a fun theory that as part of the lockup rules, as an active employee or top executives, your shares are tied to strict internal rules. For executives, a lockup is completely frozen until after fourth quarter results are released. But because Nikita resigned as an executive, he's no longer bound by active employee or executive trading restrictions.

21:05John Coogan:Oh, interesting. And so theoretically. Be able to get out. But this also has community notes. There's like layers and layers of community notes here. We have the unlock schedule. We can pull it up here. Okay. Initial float was 5%. Wave 1 just happened August 11th. Oh, it's coming up. That's 20%. August 21, that's 7%. September 10th, that's 7%. It's going to be a while until everything gets unlocked. And then, of course, I mean, I'd be surprised if Elon's selling, right? It's like he has plenty of money to do everything else he needs to do, and he's never been one to be on the aggressive sell. Why would you sell if you're projecting$1 trillion of revenue in 2030?

21:46Yeah, yeah, yeah. Inside Google DeepMind, Demis leaving his CEO post landed with essentially a shrug. Sources tell me he's already been disengaged from day-to-day management for a while now, but he was a firewall between DeepMind and the rest of Google, even as the two got pulled closer over the last couple of years. I expect that distance to dissolve more with him stepping back.

22:08John Coogan:Yeah, most people are anti-firewall in the sense that they would love the researchers and the TPU team and the cloud team and the application team to all be deeply integrated, working very closely together. And you get this crazy flywheel between everyone who's rowing in the same direction. and when you have a firewall team, as this reporting is suggesting, you wind up with, well, this person just wants to focus on the most elegant benchmarks and this person wants to focus on TPU sales and this person wants to talk about resiliency and their diversity of their cloud revenue and then somebody else just wants Google search to not get disrupted by LLMs too quickly because ads need to go up at the right rate.

22:51John Coogan:And so differing incentives can create tensions and a dissolving of the firewall, probably something that people would be excited about, I would imagine. But he's been in this like, you know, elder statesman role for a while that people have been pointing to. Excited to watch him like continue that. Will be interesting to see how he instantiates that. Is it, obviously he's working on isomorphic labs, but he'll also probably be writing more blog posts, potentially testifying or talking in Washington, maybe a book, maybe a podcast or who knows. It'll be interesting to follow. What else? Alex also reported on its current trajectory, Gemini 4 is not expected to push frontier AI forward the way Fable and Sol just did.