Update: New whistleblower claims against Tesla allege drug trafficking, theft and phone hacking coverup

This post has been updated with a comment from Tesla and to indicate that a single employee was allegedly involved in the drug trafficking ring. 

Employees at Tesla’s Nevada gigafactory were allegedly involved in a massive drug ring, stole $37 million worth of precious metals and equipment and illegally spied on former employees at the behest of chief executive Elon Musk, according to a new whistleblower complaint filed against the company.

First reported by Jalopnik, the complaint is only the latest in a string of damaging news stories that have erased millions in value for Tesla shareholders and could cast the future of the company’s celebrity chief executive, Elon Musk, into doubt.

It’s also the second whistleblower claim filed against the company this summer.

This time the whistleblower is Karl Hansen, a former member of Tesla’s internal security department and investigations division.

The complaint from Hansen, a former special agent, member of the US Army’s Criminal Investigation Command, and senior investigator for the Federal Maritime Commission, reads like a weird mashup of Sons of Anarchy, Silicon Valley and Scandal.

Hansen claims that Tesla failed to disclose a recent internal investigation the company made into a tip it received from the U.S. Drug Enforcement Agency and Storey County Sheriff’s Office that one of its gigafactory employees were part of “a narcotics trafficking ring involving the sale of significant quantities of cocaine and possibly crystal methamphetamine at the Gigafactory on behalf of a Mexican drug cartel from Sonora Mexico.”

According to a statement from Hansen’s legal counsel (Meissner Associates — the firm also representing Tesla’s other whistleblower, Martin Tripp), Hansen claims that he corroborated connections between the named employees and alleged members of the Mexican drug cartel, but Tesla refused to investigate the matter further and said it would hire “outside vendors” to follow up. Hansen says the company never did.

For its part, the Drug Enforcement Agency issued a statement to BuzzFeed saying that it would not inform any “non-law enforcement entities” of ongoing or pending investigations.

Drug smuggling may not be the wildest allegation in Hansen’s complaint. According to the summary from Meissner, Hansen also claims that Tesla installed eavesdropping and wiretapping equipment at its facilities and was illegally listening to conversations and scanning messages from Tripp at the behest of the company’s chief executive, Elon Musk .

Here’s the relevant section from the complaint:

According to Mr. Hansen, following Tripp’s departure from Tesla, Tesla went so far as to install specialized router equipment within its Nevada Gigafactory designed to capture employee cell phone communications and/or retrieve employee cell phone data. The Meissner firm recently released police reports relating to this past June’s GigaGate incident indicating that Tesla security personnel may have unlawfully accessed Mr. Tripp’s cell phone long after he was fired by Tesla. Mr. Hansen states that he was told these tactics were specifically authorized by CEO Elon Musk and were implemented by members of Tesla’s internal investigations/security/IT units.”

Finally, Hansen has said that the company never disclosed the theft of $37 million in precious metals and materials used in making the company’s batteries.

The release today follows disclosures from Tripp, the original gigafactory whistleblower, of damaged Tesla batteries that allegedly made their way into actual vehicles.

These disclosures, coupled with allegations of erratic behavior from Tesla chief executive Elon Musk, and the (apparently fictitious) nebulous plans to take the company private, have caused Tesla’s share price to slide over roughly $40 over the last two weeks, erasing nearly $6 billion in value from the company.

The full text of Meissner’s summary of the complaints their client is making is below. Mr. Meissner said that Hansen would not be conducting interviews. The Storey County Sheriff’s Department said they would issue a statement on the Meissner report this evening.

“Mr. Hansen’s allegations were taken very seriously when he brought them forward. Some of his claims are outright false. Others could not be corroborated, so we suggested additional investigative steps to try and validate the information he had received second-hand from a single anonymous source,” a spokesperson for Tesla wrote in an email. “Because we wanted to be sure we got this right, we made numerous attempts to engage further with Mr. Hansen to understand more about what he was claiming and the work that he did in reaching his conclusions. He rejected each of those attempts, and to date has refused to speak with the company further. It seems strange that Mr. Hansen would claim that he is concerned about something happening within the company, but then refuse to engage with the company to discuss the information that he believes he has.”

Client Revised FinaL to Be Released UPDATED by Jonathan Shieber on Scribd

Coming to a theater near you: Amazon?

It looks like Amazon may be gearing up to make more moves in the brick-and-mortar world. Bloomberg reports that the e-commerce behemoth is putting itself in the running to acquire Landmark Theatres, which claims to be the United States’ largest chain of movie theaters focused on art house (indie and foreign) movies, with a network of 56 cinemas, covering 268 screens in 27 markets.

Bloomberg’s sources say that Amazon is going up against other potential acquirers in purchasing the business from Wagner/Cuban Cos., but that no final decisions have been made.

The companies aren’t publicly commenting on the reports, but it’s an interesting scenario to consider because of all the ways that it seems to fit into Amazon’s wider strategy. 

The company has done an incredible job of making it easy (and cheap) to buy virtually anything you want from it in the digital world, whether it’s necessities like toiletries, books, groceries, clothes and electronics, or digital products like movies, music and cloud storage space for your app or game, in as little as one click. Through its marketplace model — where it is both a middleman between consumers and sellers, and the seller itself of different goods and services — Amazon wants to be wherever people want to spend money.

But there are certain forms of retail that may never translate to the online world. Experiential retail — dining out at restaurants, going to a bar or event, picking a melon that you can smell before you pay for it, and of course going to the movies — requires that you get up and go somewhere to do it.

Amazon knows this, and so it’s slowly, quietly amassing selective assets that will let people engage in the more physical side of commerce. These have included book stores, and its own futuristic, checkout-free food shops. And of course it spent $13.7 billon to gobble up the natural food leviathan Whole Foods.

The latter of these is very instructive when you consider how a movie theater chain might fit into the Amazon pantheon. Amazon’s Prime Fresh grocery delivery service gives busy users the convenience of skipping the grocery store, but Whole Foods also gives Amazon a way of capturing buyers who might prefer to make trips to a grocery store.

But that’s not all it does. It’s added Whole Foods discounts as yet another sweetener for Prime subscribers; it’s extending its formidable logistics muscle to Whole Foods ordering and delivery (first for Prime subscribers, naturally); and of course it has put in pop-up shops selling its other products, like the Kindle and the Echo, in prime spots when you enter a store.

Amazon owning a chain of theatres spells out a lot of opportunities for it in terms of expanding its interests in film; in experiential, physical commerce; and in leveraging the rest of the pieces in its commercial empire.

The world of movie theaters has been hobbling for years, with droves of consumers these days foregoing increasingly expensive tickets and snacks and opting to watch a slightly smaller screen in the comfort of their own home. But to the disruptive eye, that ageing business model is catnip, and so unsurprisingly, MoviePass has come along, seeing that there was an opportunity to try to revive the cinema experience by offering subscriptions for a flat rate to get more bums on those seats.

Yes, MoviePass is bleeding money, and it looks like a mess for many other reasons, but it’s had an impact, so much so that AMC has taken notice and launched its own competitor.

The world’s largest theater chain almost certainly won’t experience the same sort of pains that MoviePass has, because it both controls the means of distribution and has a sizeable support infrastructure, and of course owns the cinemas.

But if AMC has a safety net, then Amazon — one of the world’s most valuable companies — has airbags, collision sensors, seatbelts, automatic braking and maybe even an Alexa-powered predictive voice to tell you what to do next. If Amazon ran a loss-making chain of cinemas, it would be but a little drop in the bucket for it.

Amazon already has one of the biggest digital subscription businesses in the world, with more than 100 million Prime members, as of April 2018. Tacking a subscription to cinemas on to that, which either made going free or discounted, is a no-brainer.

But wait! You get more for the price of the Landmark Theatres! Amazon, as we know, also has a budding media business, offering movies, TV and music to Prime users. Included in that is its own original content machine, Amazon Studios, responsible for shows like Transparent and movies like Manchester by the Sea.

A theater chain acquisition would further open the distribution channels for Amazon’s own films, and give Amazon a much tighter grip on the costs for that distribution. And with a position covering theatrical, DVD and digital distribution windows, you can bet that will give Amazon more leverage when negotiating screen rights to films that it hasn’t produced itself.

Controlling distribution could also prove useful during awards season — the timing of a film’s release goes a long ways toward determining nominees. (And yes, those screens also become one more place where Amazon can run ads, too, in its budding advertising empire.)

And don’t forget the fact that theatres are, at the end of the day, also retail real estate.

It’s a long-known fact that cinemas make most of their money on concessions, and they have accordingly built out large lobby areas where people can mill about and spend money before and after sitting down in the darkened screening rooms. In addition to selling all the usual concessions (both made by Amazon and its marketplace partners) Amazon could use those spaces as they have with Whole Foods, creating retail experiences for products that might have nothing at all to do with what you came to the cinema for in the first place, but then suddenly seem like interesting places to try out something new.

Is it any wonder that even without Amazon or Landmark responding to Bloomberg’s report, theater chain stocks dropped on word of the news?

DoorDash raises another $250M, nearly triples valuation to $4B

Food delivery startup DoorDash announced this afternoon that it has raised $250 million, just five months since the company announced a $535 million round.

Why raise more money so soon? CEO Tony Xu told Axios that he wasn’t actively looking for additional investment, but was open to investor interest because it could help the company expand more quickly. (Maybe he’ll have more to say about those plans at Disrupt SF next month.)

The new funding was led by Coatue Management and DST Global. It sounds like the terms were pretty appealing too, with the valuation growing from $1.4 billion to $4 billion.

In a blog post, the company said it’s had a good 2018, with deliveries increasing 250 percent year-over-year, restaurant chains like Chipotle and IHOP signing up and last week’s launch of the DashPass subscription service, where you can pay $9.99 per month to get unlimited free deliveries.

“As we grow, we will stay true to our values and our mission of connecting people with possibility  —  and, trust us, we’re just getting started,” DoorDash wrote.

Facebook awards $200K to Internet Defense Prize winners

Facebook announced today the winners of its annual Internet Defense Prize and awarded first-, second- and third-place winners a total of $200,000 for research papers that addressed topics of internet security and privacy. Combined with $800,000 in Secure the Internet Grants awarded to security and privacy researchers earlier this week, the company has now completed its 2018 goal to invest $1 million toward securing the internet.

The Internet Defense Prize first started in 2014, but this year the prize quadrupled from its original $50,000 award to $200,000 spread across three groups. In a statement announcing the winners, Facebook said that the increase of this year’s prize money reflected not just the company’s ongoing (and in light of the its privacy catastrophes this year, seemingly increased) interest in security and privacy, but also the quality of work submitted.

“Over the years we’ve gotten higher and higher quality of submissions,” Pete Voss, Facebook’s Security Communications Manager told TechCrunch. “[But] the criteria has always been the same, and that’s making practical research. Making this go beyond theory and making it so you can actually apply security in real life.”

The first prize, $100,000, was taken home by a team from Belgium for a paper entitled “Who Left Open the Cookie Jar? A Comprehensive Evaluation of Third-Party Cookie Policies” that proposed improvements to browser security that would make users less susceptible to having their internet trail tracked from site to site.

Second- and third-place prizes (for $60,000 and $40,000 each) were awarded to research teams in the U.S. and China, respectively, for papers focusing on proper use of cryptography for app development and for strengthening the algorithm behind single sign-on security systems.

Voss says the entries this year are a great example of the award’s mission to fund research that benefits not just Facebook’s interests in security and privacy, but the internet’s as a whole.

“We’re investing in not just Facebook security but in public security for the entire internet,” said Voss. “We want to keep the internet strong and the only way we can do that is by making it secure.”

As for the recipients of the Secure the Internet Grants, the $800,000 was divided between 10 teams whose research ranged from sociological approaches (like “Understanding the Use of Hijacked Facebook Accounts in the Wild” and “Enhancing Online & Offline Safety During Internet Disruptions in Times of War”) to more technical ones like improving the strength of encryption methods.

Voss told TechCrunch that Facebook has no plans to announce at this time regarding its next steps toward providing funding for researchers in this space (unlike last summer when the company laid out its $1 million goal), but says that the company is “always looking at incentivizing this kind of research” and providing support.