One of the things that was a big selling point of cryptocurrency was that it was supported by blockchain technology which supposedly meant that all the transactions were transparent and publicly available. I had thought that this would mean that frauds would be difficult to pull off since there is supposed to be a digital trail of all transactions that can be checked by anyone. That shows just how much I know and why I should never go anywhere near these things because as John Cassidy writes, recently there have been a spate of scams involving cryptocurrencies.

Last week, federal prosecutors arrested a fifty-year-old Long Island man and accused him of defrauding hundreds of investors by offering them gains of five per cent per week—yes, per week—from a fictional crypto-trading platform. “Eddy Alexandre allegedly induced his clients to invest over $59 million with promises of huge passive income returns,” Damian Williams, the U.S. Attorney for the Southern District of New York, said, in announcing the indictment. “In reality, no such technology existed, as Alexandre is alleged to have invested very little of their money—most of which he lost—and transferred most of it to his own personal accounts to pay for luxury items for himself.”

The day before Alexandre’s arrest, Europol, the E.U.’s law-enforcement agency, placed Ruja Ignatova, the German inventor of the OneCoin cryptocurrency, on its most-wanted list, for “having induced investors all over the world to invest in this actually worthless ‘currency,’ ” which has produced a total loss that “probably amounts to several billion” dollars. Earlier this year, the F.B.I. arrested a New York couple and accused them of helping launder billions of dollars in stolen bitcoin.

Most crypto swindles, though, are on the smaller end of the spectrum. U.S. News & World Report recently ran an article about the “5 Top Crypto Scams to Watch in 2022.” The list includes some traditional tactics for illicitly relieving rubes of their money, such as pump-and-dump schemes and phishing for passwords. It also describes new, more novel schemes, including the “pig butchering” crypto scam, which often involves an attractive person approaching you online and offering you spectacularly lucrative crypto investments.

These exposures may have led investors to be more wary and that may account for the recent drop in their value.

Following gyrations last week of the TerraUSD stablecoin, and the evisceration of the Luna cryptocurrency that’s linked to it, investors’ willingness to swallow hot air appears to be diminishing. “Hyped and leveraged areas of crypto . . . are seeing mass liquidations, as it is becoming clearer that all the elevated prices were traded on speculation, with limited real user demand,” Morgan Stanley said, in a research report published late last week. N.F.T.s could be the next crypto asset to watch, the report added, noting that the only reason many investors bought these assets was because they thought prices were going higher.

That’s what happens in a speculative bubble: people follow the trend blindly. Only subsequently do they ask some of the questions they should have asked earlier, such as: What use does the object of speculation really serve?

I recently watched a Netflix documentary Trust No One: The Hunt for the Crypto King that described how the young owner of a cryptocurrency exchange, a place where people can exchange between cryptocurrencies and regular money, suddenly died on a trip in India at age 30. Nobody else had the passwords to the accounts which means that the $200 million in it supposedly got locked permanently. This fueled all manner of speculation that he had faked his death in order to escape with the money. It took a forensic accountant to figure out that he had likely embezzled the money by putting it into his own account, presumably to feed a gambling addiction. So much for the much touted transparency.

Here’s the trailer.

Apparently this year’s Super Bowl game had a large number of ads touting cryptocurrencies. Larry David’s ad has been widely praised. It features David as different characters who sneer at major innovations down the ages. It is funny but I thought it was too long because the joke wears thin. The ad ends with the narrator telling viewers, “Don’t be like Larry” and miss out on the cryptocurrency and NFT boom. Actually, I am like Larry. I refuse to get involved in something about which I know nothing.

Here’s the ad.


  1. consciousness razor says

    because as John Cassidy writes, recently there have been a spate of scams involving cryptocurrencies.

    Roughly like saying “a spate of infections involving COVID-19.” It’s more like the whole thing just is a big scam.

    Notice that people who merely possess some amount of an actual currency like the dollar are not for that very reason labeled “investors.” Sure, they could be. But with something like a dollar, you simply have it, typically as a result of some labor you performed, and the implication isn’t that you must be a capitalist hoping it will somehow generate a profit for you due to somebody else being deceived/robbed/exploited/etc.

  2. garnetstar says

    This seems an example of the argument against libertarianism (the kind that wants a government that only has criminal courts and settling contract disputes), in which strong regulation by government of markets is necessary to produce that utopia of a “free market”. That such a market is a construct of government regulation, and cannot establish itself without that.

    The market collapsing into rampant fraud without strong oversight and regulation was one of the dangers cited of libertarian government.

  3. mnb0 says

    “I had thought that this would mean that frauds would be difficult to pull off ….”
    You’re not cynical enough about the combination of human creativity and illwill. That speaks for you.

  4. says

    The most befuddling thing about crypocurrencies is how, for most people, they’s absolutely useless as an actual currency. It’s way too volatile to set prices for anything so buying groceries would be out of the question if your bread is 3 cryptobucks one day, 6 the next, 10 a week after that, then down to 4.

  5. lanir says

    From what I understand the only public part is that a transaction happened. It’d be like living far away from all your neighbors and never talking to them. When you see multiple vehicles show up at one of their houses and watch as the place is emptied out, you don’t know whether you just witnessed massive theft or if your neighbor is simply relocating. In the cryptocurrency world it’s even worse. You don’t know who your neighbor is so they may have been one of the people loading up vehicles with stuff.

    And would-be crooks know how this works, too. If they launder the money competently it just disappears. People getting caught probably took shortcuts.

  6. says

    “Don’t be like Larry” — as in, don’t be someone who can’t tell the difference between a thing that has a direct and easily-understood use, like wheels and airplanes, and cryptocurrency, which isn’t even really a thing.

  7. John Morales says

    I had to look that Larry thing up.
    At first, I thought maybe it referred to Leisure Suit Larry — famously in the Land of the Lounge Lizards. But no. Ah well.

    (And, sorry to break this to you, Raging Bee, but cryptocurrency really is a thing)

  8. says

    Actually, no, cryptocurrency isn’t really a thing, it’s just a medium of exchange that some people have agreed to use, for whatever reason, to buy and sell other things. Sort of like official government-supported currencies, without the government support. It’s not a thing, or a stake in any activity or thing, that might create or grow in value, like stock shares or bonds. That’s what makes it so utterly worthless as an investment: like gold, it doesn’t really do anything, it just sits there, so one can’t really expect it to grow in value and thus sell for a higher price than one paid for it. So once you’ve invested in it, the only way to make a profit from it is to hype it up to get people to think it’s a good idea to pay more for it than you did. Which most likely will mean convincing some other fool that they’ll get an even higher price later on.

  9. Holms says

    It’s a thing in the wholly trivial sense that there is a term ‘cryptocurrency’ which describes something. Just John being John in other words.

  10. lanir says

    I think I’ve decided on a new analogy to use for cryptocurrencies and NFTs. Feel free to steal it if you like it or ignore it if you don’t.

    I have pretend balloons for sale. Contact me if you’d like to make purchase arrangements. My pretend balloons make you happy (don’t ask how, don’t ask how…) and are always worth the amount of very real currency you spend on them. Other people are buying my pretend balloons. If you buy some I’ll give you a bill of sale so you can prove you have some of my pretend balloons. Then you can resell them later if you like, after even more people buy them. Right now I’m selling red pretend balloons but they might be blue later. Hurry and purchase some before they change!

    Cryptocurrencies are pretend balloons with the ironic twist that they can be stolen. NFTs are pretend balloons with the twist at the end about colors to add artificial scarcity and fear of missing out. It’s not a perfect analogy but it captures the heart of the problem really well: buying nothing in a literal way like this leaves you with a lot of nothing and potentially a lot less money. Oh also, don’t actually contact me about buying pretend balloons. I don’t want your money but feel free to take someone else’s if you copy this and someone wants to buy. 🙂

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