This week’s world-famous-news-haiku-competition™ is about how OpenAI made $20 billion less than it thought. Send me your entry — to haiku at cheddar dot com — by noon ET Thursday (today!) for consideration by your Cheddar peers.

Matt Davis — Need2Know Chedditor

Table of Contents

What’s the Stock Market Up To, Eh?

$SPX ( ▼ 1.11% )   $DJI ( ▼ 0.09% )   $NDX ( ▲ 1.59% )  

Companies Mentioned in Today’s Newsletter

$OPEAZZX ( ▲ 0.11% )   $ANTHZZX ( ▲ 0.28% )   $BAC ( ▼ 4.76% )  

FBI Makes Arrests in OpenAI Bug Caper

Corporate espionage usually invokes images of nation-state hackers or stolen source code. At OpenAI $OPEAZZX ( ▲ 0.11% ) , however, spycraft apparently looks like asking a chatbot for instructions on how to hide a microphone inside a roll of toilet paper. As a result, Abdulrahman Alfozan, a 35-year-old employee, was arrested by the FBI after a "sophisticated recording device" was found hidden inside the executive conference room.

According to the Department of Justice, Alfozan didn't exactly exhibit top-tier secret agent tradecraft. Prosecutors allege that a chatbot account linked to his spouse was used to ask prompts on "building, customizing, installing, audio recording, testing, obfuscating, and remote accessing a device.” FBI Director Kash Patel said in a press release that Alfozan "allegedly concealed a covert recording device inside his employer’s executive conference room to secretly capture sensitive communications about the company’s super intelligence technology." 

OpenAI terminated Alfozan and moved quickly to calm industry nerves. In an official post, the company said, "At this time, we have no indications of this individual inappropriately accessing or exfiltrating model weights, source code, or customer data." They added, "We take protecting our technology, data, and people seriously, and as a matter of national importance."

While the hidden bug featured encrypted contents, the broader operation suffered from sitcom-level blunders. Security officers located a forgotten bag on-site containing a second recorder alongside Alfozan's wallet and personal ID.

Super intelligent.

Anthropic Takes Its Pentagon Blacklist Fight Back to Court

When Anthropic $ANTHZZX ( ▲ 0.28% ) created Claude, the ultimate goal was an AI that was helpful, harmless, and honest. What the company probably didn't anticipate, however, was that refusing to power lethal autonomous weapons or enable mass civilian surveillance would get them designated a threat to national security. Indeed, it earned them a spot on the Defense Department's blacklist.

After a divided D.C. Circuit panel upheld the Pentagon's decision to slap Anthropic with a "supply chain risk" designation, the AI developer is taking its fight back to court, petitioning for a full rehearing. In a blistering legal filing, Anthropic’s attorneys argued that “The Secretary of War branded Anthropic — an American AI company whose models help defend the nation — a national-security ‘supply chain risk’ because it declined to permit its models to be used for mass surveillance of Americans or lethal autonomous warfare and publicly explained those AI-safety commitments.”

Anthropic’s legal team pressed further, noting that the court overlooked “straightforward evidence the designation was retaliation for Anthropic’s speech about AI safety.” In short: Refusing to help build autonomous warfare tools gets you placed in a government timeout. Notably, a California federal judge saw things quite differently in August, ruling that the Pentagon’s blacklisting violated Anthropic’s First Amendment rights.

When pressed for further insight, an Anthropic representative declined to comment beyond the filing, while a Pentagon spokesperson offered the classic bureaucrat response, telling CNBC that the agency “doesn’t comment on pending or ongoing litigation.”

I bet it doesn’t.

Quote of the Day

Bank Of America Fined $1.2B Over Money-Laundering

When Bank of America adopted its corporate mantra of "responsible growth," most people assumed it meant prudent investments and careful oversight. Apparently, it actually meant looking the other way while over $5 billion in suspicious transactions — including cash tied to narcotics trafficking, fraud, and Chinese money-laundering networks — slid through the system unnoticed. Allegedly.

Uncle Sam has now handed the nation’s second-largest bank a whopping $1.2 billion penalty. According to regulators, BofA basically outsourced its suspicious activity detection to police inquiries and outside tips, effectively deciding that actual internal compliance was too expensive. Treasury Secretary Scott Bessent was swift to point out that “Today’s actions send a clear message that even the biggest financial institutions are not above the law.”

The Office of the Comptroller of the Currency added its own record $750 million chunk to the total fine, with Comptroller Jonathan Gould saying, “The bank’s poor response to its BSA deficiencies is unacceptable. The second-largest bank’s egregious and continued BSA violations warrant the OCC imposing its largest [civil money penalty] ever assessed against a bank.”

Admitting it "willfully violated" anti-money-laundering regulations, the bank tried to assure investors that it is taking things seriously. Bank spokesperson Christa Robinson said, “Financial crime compliance is serious, and we are responsible for getting it right” — a comforting sentiment, even if "getting it right," in this case, took a 10-figure fine.

Song of the Day: FOLA, Davido, ‘2a.m. in Toronto’

In case you fancied a little late-night R&B and Afro-pop fusion.

Supreme Court Takes Up Fight Over Musk’s DOGE Records

Elon Musk pitched the Department of Government Efficiency (DOGE) as the ultimate Silicon Valley disruption of Washington’s bloated bureaucracy. Tens of billions in federal budget cuts were announced with typical tech-bro fanfare. But when government auditors at the GAO actually checked the receipts, they uncovered math errors, missing supporting evidence, and claims of "savings" from contract cancellations that were already underway before DOGE even existed. Whoops.

Now, the high-stakes legal battle over whether DOGE’s internal memos, group chats, and mass-firing blueprints must be made public under the Freedom of Information Act (FOIA) has officially reached the Supreme Court.

Government watchdog group CREW sued to shed light on DOGE's operations, arguing that the initiative wielded the real authority of a federal agency. The Trump administration insists DOGE was merely an informal advisory body — and thus strictly exempt from FOIA disclosure.

Nikhel Sus, chief legal counsel for CREW, made his team's position crystal clear: “We will continue to pursue transparency for the American people, who deserve to know the details of the Trump administration's efforts to unilaterally remake the federal government.”

Adding fuel to the fire, federal auditors probing DOGE's access to sensitive agency files warned last month that due to limited information, "Congress and the public lack assurance that systems and data were protected.”

Move fast and break things! It’s always been the unofficial motto of the U.S. government, after all.