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Alex Ossola: Welcome to Tech News Briefing. It’s Friday, May 10th. I’m Alex Ossola for the Wall Street Journal. Coming up on today’s show: A new generation of gadgets is designed to put artificial intelligence front and center, and I’m not talking about smartphones. WSJ senior personal tech columnist, Joanna Stern, tried out the latest devices and tells us which ones are worth the hype. And then crypto exchange Binance has been under scrutiny from regulators, but when an internal investigation found a top client was manipulating markets, Binance kept the client and fired its lead investigator. WSJ reporter Angus Berwick tells us about the investigation and what it means for the company’s future.
But first, what do AI gadgets look like beyond the smartphone? Some companies are betting on a new crop of separate devices that contain an AI assistant, kind of like in the movie Her. WSJ senior personal tech columnist, Joanna Stern, tried out three devices to get a sense of how we might interact with AI in the future. There was the Humane AI Pin, which attaches to your clothes like a brooch and also has a laser projector for a touchscreen. There’s the Rabbit R1, a square gadget that has a touchscreen and scroll wheel. And she also tried Meta’s Ray-Ban smart glasses. For all three, the primary way to interact with them is to use your voice. Joanna is here now to talk about what she learned from her testing. Joanna, what do you actually use these gadgets for?

Joanna Stern: The idea is that this is an assistant and you can use it for various things. I’ll be honest, that doesn’t work very well, and I put it through a series of challenges, just some of the basic general knowledge stuff. One of my favorite instances was I kept asking the Rabbit, when was the last solar eclipse? And according to the Rabbit, the last solar eclipse was in 2017. Obviously not true. So these devices have these assistants that have all the same flaws as these generative AI assistants. They hallucinate, they don’t know knowledge about certain things.
One of the things that I did think was really appealing about these each is that they all do live translation, and that’s something that generative AI models are actually quite good at because they know the intricacies of different languages. So I did test these by bringing them to a Mandarin tutor in New York City. Specifically the Rabbit and the Humane do live translation out loud. So I could say, “Hello, my name is Joanna,” and then it should say in Mandarin, “Hello, my name is Joanna.” And so did this back and forth, or tried to. The Rabbit completely didn’t work in this testing scenario. I mean, it did work, it just would do the translation five minutes later, which the company says they have since fixed in the software update. But when I was there about a week ago, this thing would just not translate for five minutes, which is not ideal for a live translation. In fact, we did the sentence, “I have to go to the bathroom.” And I would say, I have to go to the bathroom in English, and then five minutes later in Mandarin it would say that sentence.

Speaker 3: (Mandarin).

Joanna Stern: What’d it say?

Michelle: It says, where’s the bathroom?

Joanna Stern: Where’s the bathroom?

Michelle: So it’s delayed.

Joanna Stern: Imagine if you had to wait five minutes to not only go to the bathroom, but to ask-

Michelle: Ask.

Joanna Stern: … where the bathroom is.
And so that was the deal with the Rabbit. The Humane actually did quite well once I figured out the sequence of taps I had to do on the touchpad. I was able to go back and forth with my tutor Michelle and say a couple of things in English, and then she’d say them in Mandarin, and we were able to completely converse. Where is the bathroom?

Speaker 3: (Mandarin). Oh, the toilet. The toilet is on the second floor. Take the elevator from the side, then go straight and turn left.

Joanna Stern: Then we went down the street to a Chinese restaurant and it got stuck in Spanish translation, and it just kept saying in Spanish, “Are there peanuts in the soup dumplings?” But about 10 minutes later, I had futzed with it enough, I had reset it and it worked. So this is all to say these are really early devices that are just not ready for prime time, but they do create some pretty funny situations.

Alex Ossola: Tell us about the Meta Ray-Ban smart glasses.

Joanna Stern: Meta has made an amazing product with the Ray-Bans, and not because of AI. It’s nice that it has AI. That’s a bonus here. What’s nice about the Meta Ray-Bans is that you actually have a camera on your eyes and you don’t need to look at the world through a screen. And so I love these for going on vacation with my kids, going skiing where I want to take photos, I want to take some video, but I don’t want to be holding up a phone. And so that’s use case one, which is great, justifies the cost at 299. But then you get this new AI feature which will get better in the future.
The other main point about the Meta glasses is that they connect to your smartphone. The Humane Pin and the Rabbit don’t connect to your smartphone. They have independent Wi-Fi, independent cellular in it. When we think about the future of AI and gadgets, it has to connect to the most important device in our life, and that is the smartphone.

Alex Ossola: That was our senior personal tech columnist, Joanna Stern. Coming up, why did the world’s largest digital currency exchange fire an internal investigator charged with helping the company clean up its act? That’s after the break.
Binance, the world’s largest digital currency exchange, has been under scrutiny from regulators for allegedly failing to prevent manipulative trading. To stay on the right side of regulators, Binance created a market surveillance team of internal investigators to clean up the digital currency exchange. But when investigators found a top client was manipulating markets, Binance kept the client and fired its lead investigator. The Wall Street Journal interviewed former and current Binance employees and reviewed key documents and emails. WSJ reporter Angus Berwick joins me now with more on the investigation. Angus, Binance has been under scrutiny for the past few years. Tell me why and by whom.

Angus Berwick: Binance has been under investigation by numerous agencies in the US and there was a Justice Department investigation focused on Binance’s anti-money laundering and sanctions compliance, which resulted in a $4.3 billion fine last November, and the sentencing of founder Changpeng Zhao last week. In addition to that, there’s also been cases that were led by the Securities and Exchange Commission, which was more focused on Binance’s… their risk controls to prevent market manipulation in addition to another case by the CFTC.

Alex Ossola: So Binance, knowing that it was under scrutiny, started hiring investigators from the traditional finance world. What was this team of investigators hired to do?

Angus Berwick: They were hired to carry out surveillance on the immense amount of trades that are moving through the Binance platform. In traditional finance, like on the New York Stock Exchange, there are frameworks of rules that’s going to regulate what sort of trading is permitted. On Binance, for a long time, there was a very freewheeling culture and customers could largely come trade in a way that they pleased. So there was a lot of manipulative practices. For instance, wash trading, which is where a trader will be on both sides of the transaction. So they’re just trading against themselves, which is a practice that’s used to give the illusion of an active market so that other traders will be lured into participating. And also to try to target pump and dump schemes where somebody will boost the price for token and then sell it at the top causing a collapse. So they were kind of brought on to try to bring some order to this kind of wild West trading world.

Alex Ossola: It sounds like these investigators found a fair amount of questionable behavior. What was actually wrong with that behavior?

Angus Berwick: So Binance’s terms of use prohibits manipulative trading practices. The SEC part of… Their case against Binance is that there was an absence of risk controls to prevent manipulative trading. And there’ve been many legal cases in the US in which people have been prosecuted for wash trading or other manipulative practices. Through 2023, this team of investigators were recommending that Binance off-board, quite large clients. These were so-called VIPs who were trading in very large volumes and generating quite significant fees for the exchange. And they were targeting progressively larger VIPs. There was another company called the Tron Foundation, which is actually run by a friend of CZ, the Binance founder. And the team found that the Tron Foundation had been wash trading, and they off-boarded them.

Alex Ossola: Some Binance customers were booted off the platform, but not all, right?

Angus Berwick: Yeah. As the team was targeting larger and larger customers, they eventually started looking at a customer called DWF Labs, which is a trading and investment firm registered in Singapore, and it’s run by a Russian crypto trader called Andrei Grachev, who used to work at a different crypto exchange called Huobi in Russia. And the surveillance team had been tipped off about DWF’s trading activities by another client, and they began an investigation in which they surveilled DWF’s trading on the platform. And the conclusions that they reached in a report in September of last year was that DWF had manipulated the price of at least six different cryptocurrencies, and that through that year they’d made over $300 million in wash trades.

Alex Ossola: So it seems like that’s a big catch for the surveillance team. What did Binance do about it?

Angus Berwick: Yeah, so afterwards, the surveillance team went through their standard protocol. They’ve submitted their report in which they recommended DWF Labs off-boarding, and they can sort input from Binance’s VIP department, which handles these high-rolling clients. However, this department, the VIP team, they then questioned the findings of the reports and escalated their complaint to Binance company leadership. A follow-up investigation was then launched by a separate division of Binance called the internal audit team. And this investigation was then looking at how the surveillance teams had carried out its investigation and they were re-evaluating that same evidence. They also kind of looked into the relationship between the head of the surveillance team and this other customer that had tipped off Binance. Ultimately, what this led to was that those Binance executives rejected the surveillance team’s request to off-board DWF and fired the team’s top investigator.

Alex Ossola: We should note DWF and Grachev didn’t respond to requests for comment. After the Journal’s investigation was published, DWF said on X that “allegations reported in the press are unfounded and distort the facts”, and that DWF operates with “the highest standards of integrity, transparency, and ethics”. What has Binance said about this?

Angus Berwick: Binance, they reject any assertion that they’ve ever enabled market manipulation on their platform. They say that they don’t favor any one trader over any other, and that they’re prioritizing the improvement of their compliance functions. At the same time, they also say that any decision to off-board a client requires a high bar of evidence. And we were told by one current executive that this follow-up investigation found that they believed that the surveillance team’s findings weren’t fully substantiated.

Alex Ossola: Zooming out a little bit, what does this incident tell us about Binance’s future as it continues to face regulatory scrutiny?

Angus Berwick: The SEC case is continuing, and probably at the moment, the largest legal risk that Binance continues to face given the DOJ action was resolved. Binance’s new management since CZ’s resignation, they want to move into a new era and present the exchange as having turned a page. Obviously, any reporting that suggests that Binance didn’t keep to pass promises could raise questions about its commitments.

Alex Ossola: That was our reporter, Angus Berwick. And that’s it for Tech News Briefing. Today’s show was produced by Julie Chang. I’m your host, Alex Ossola. Jessica Fenton and Michael LaValle wrote our theme music. Our supervising producer is Katherine Milsop. Our development producer is Aisha Al-Muslim. Scott Saloway and Chris Zinsli are the deputy editors, and Philana Patterson is the Wall Street Journal’s head of news audio. We’ll be back this afternoon with TNB Tech Minute. And our host Zoe Thomas will be back on Monday. Thanks for listening.

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