Retired now, eons ago I was a member of major commodity futures exchanges. (That was before us human "members" were replaced by server farms. ) My career was bookended by two of the biggest cons ever in the industry: The Great Salad Oil Swindle, and the Hunt Brothers' Silver Squeeze. I had a front row seat in a firm that was central to both and I knew some of the principals. Good entertaining books have been written about both.
So when crypto came on the scene, I recognized it for the con it was. Every good con begins with "the hook", and with the crypto "the hook" was right there in the name, "crypto". Esoteric, hidden, glamorous. It had the sweet cachet of private jets and yachts in the Bahamas and very smart nerdy young people and long-limbed suntanned beauties. And you too could be part of that glamorous crowd. Just deposit your life savings right here.
It took me a half-hour to analyze and debunk crypto. So whenever crypto came up, usually with young people enamored of it, I tried to explain to them how crypto was a con. But they just looked embarrassed for me, a dodderly old man who just didn't "get it".
as someone who's accused of being one of those doddering, clueless old men you've just discussed (for the record, an identity I happily embrace) thank you for this insider takedown. I've been waiting for it.
a few months back, a beautiful woman on FB was acting pretty friendly, so I gave her my number. she called back (from Toronto) and we stayed on the phone for about three hours talking about EVERYTHING yadda yadda yadda. toward s the end of the call, she told me about this amazing investment opportunity that I was lucky enough to be able to get educated about THE VERY NEXT DAY. I'd already decided to have nothing to do with crypto because it felt a lot less comprehensible than any other aspect of money affairs (which I've never understood much abou5t anyway). so I went on this webcast (there were supposed to be about thirty other people on it as well) and it was very slick...lots of moving cameras showing me the incredibly expensive, all-window dwellings I would never want to live in. after about ten minutes, it became very clear what was going on and I bailed. less than an hour later, she started messaging me and telling me I was rude. I agreed. she told me that I sounded like a rude asshole and I agreed, adding that she hadn't mentioned crypto on our call. she told me I was a closed-minded fool and of course, I agreed. when I told some friends the story, they were saying uh-oh before I got to the webcast part of the story.
it just always seems to me (and it's taken a few nasty events to get me here) that when someone is in such a hurry to make me a lot of money without me doing anything, it's gonna end up with me getting fucked. and not in a good way.
so I really do appreciate your take on all this.
naturally, my oft-mentioned friend upstairs sees this fiasco as being entirely a product of the "woke left" etc. he owns some bitcoin and is still talking up the stories of regular folks who are now billionaires, etc.
and in this case, "et cetera" is definitely meant to be sarcastic.
I’ve had something related to this happen to me. I received a friend request on Facebook from someone I knew but hadn’t seen for several years. I accepted the request and asked her, “What’s new with you?” ‘She’ replied to tell me about “a great new investment opportunity,” at which point I realized someone was impersonating this acquaintance to run a scam. I immediately unfriended the scammer. I’ve also received scam texts addressed to another person. They want me to reply ‘wrong number’ so they can then try to run their scam.
I'm pretty sure my particular scammer was who she claimed to be, but nobody likes to be considered an idiot by the rest of the world, so maybe I'm just lying to myself. god knows it wouldn't be the first time.
So, I am not a deep thinker, nor do I grasp anything to do with abstract numbers AT ALL (Speed limits I understand, bank statements are more confusing but I get the idea if not the details). Investments? I hire someone. When I first heard of Bitcoin and subsequently cryptocurrency, I thought there was just no way to make it work. Your reporting here leads me to believe I made the right call.
A casino where the casino lets you buy chips, bet them on the tables, but might not be able to let you cash in your chips is more like it.
Your legal remedy if that actually happened in a casino would be to sue, and maybe recover as a result of a bankruptcy process as one of the creditors. There's a regulatory system
and a legal structure in place to give each person their just due, in theory.
But for this crypto scam nonsense, there's only hope that some remedy can be hammered out in the courts, which seemingly can only involve seizing the really existing tangible assets in cash, bonds, stocks, and property owned by the scammers like Mr. Fried-Bankman, truly a fried banker! Because these guys don't even know "what happened" when they decided to issue the FTTs to the investors, according to them, anyway.
Classic Ponzi scheme as Lucian points out, with a few added features that still leave people without clear-cut remedies to make themselves whole.
Yes, and I extended and amplified the comparison a bit. It's not exactly a dissertation but it'll have to do, since the Iowa Hawkeyes are hosting the Wisconsin Badgers in the raucous confines of Carver-Hawkeye Arena in Iowa City in a tight B1G basketball game. Btw the Hawks have arguably the best player, man or woman, in the college ranks: Caitlin Clark. Wish I could legally gamble on these games.
My dad has been an international banker his entire adult life. His father, my paternal grandfather, was for most of his life a low-level functionary at a branch of the colloquially named “Hypo Bank” near Munich. (Bayerische Hypotheken u. Wechselbank, the Bavarian Securities and Exchange Bank).
Money is a very slippery subject, since money doesn’t really exist. It is an artifice. Generally speaking, I would say there are two types of real-world money: money you earn from work, and money you get for free, which is money derived from assets. Working class people (most people) who buy what they need at retail stores and have to pay the bills deal almost exclusively with wage-earned money. Rich people deal mostly, but perhaps not exclusively, with money that they get as earnings and distributions from investments, and as capital gains (think real estate appreciation).
That’s conventional, real-world money. Then there’s fake money, Monopoly money. Derivatives, and the economic crash that they caused earlier this century, is an example of fake money (a version of it). There are many ways that smart asses try to game the system and get money for nothing, and a lot of those people become very rich in money, although they are still very poor in all the ways that matter.
Cryptocurrency is fake money. It is a recent invention. It’s true that money is also not real, it is an artifice, but we have years and years of history of using money as a means of exchanging value. Cryptocurrency has no history, and no foundation in the real world.
Because cryptocurrency is a recent invention, its primary function has become money laundering. The main use and function of cryptocurrency is to get some kind of value for selling illegal things: drugs, weapons, human trafficking. Financial regulations do not cover cryptocurrency yet, so you can get paid in cryptocurrency for your illegal and immoral goods and services without any financial institution regulating and tracking what you are doing. If someone pays you in cryptocurrency for your sex slaves, or your stolen goods, the SEC, the IRS and the Treasury Department will never know. Not yet anyway, but eventually.
This guy is a con artist. Anyone can see that.
I would question Lucian’s statement about him running a Ponzi scheme. Imagine each individual cryptocurrency as a stock on the stock market. Stocks can swing wildly up and down. So think of each of those cryptocurrencies as a brand new stock that everybody is all excited about, like Facebook when it came out, driving the price up to stratospheric levels. But then when the bubble bursts, like when everyone figures out that Facebook has value in the form of a real income but a cryptocurrency does not, the price comes crashing down. While the bubble existed, this asshole was worth millions and billions. Once the bubble burst, he’s worth jack.
His brand new idea was a “stock market” for cryptocurrencies. So once the cryptocurrencies crashed, so did his market.
Thanks for the very clear explanation, Roland. On the theoretical level -- I wonder a lot about how adept our human minds are at dealing with things that have no material existence. Those of us who grew up going in and out of "brick-and-mortar" establishments (and/or do a fair amount of it now) can use that real-world experience to grasp what's going on with all our virtual transactions, but what happens when we start living entirely in the cloud? SBF sounds like he might be a proto-poster child for this. He seems unable to translate what he was doing into words. It's almost like he's trying to remember and communicate something that happened in a dream.
Yes, Susanna, I agree completely. Like you, I was also thinking about this turkey as a poster boy for the In The Clouds generation. Unfortunately for him, no matter how you spin fraud, it still results in criminal prosecution and jail time in the real world.
Condolences and sympathy in this time of your father's death. The death of one's father is, to me, like the snapping of a golden chain that links us to the past and who we are. And there are no more discussions or answered questions. May you and your family find peace and healing.
I'm really, really sorry to hear that. losing a father is utterly disorienting and it'll take a while, but I know everyone here is thinking about you...
Thanks for this post. From the beginning crypto seemed like a scam that only crazy people would "invest" in. I never understood where the profits would come from (obviously from the increasing "price" to bitcoins, but where does that come from.) It would be useful if you or Lucian would explain to the 'uninitiated' the relation of running enormous, complicated computing systems to this whole endeavor--doing what I recall is named "mining". The fact that this involves money, is completely unregulated, and is tied to nothing tangible is enough to send out red flags---and then you add the fact that fleecing money from people is an ancient human exercise in ingenuity -- wow.
Grover, I don’t have an answer as of yet. I agree, the name “mining” sounds like a great big bunch of crap, a huge smokescreen, and the activity itself seems suspicious as hell.
This Astounding world wide con game has run out of steam. I know a very big time financier. I asked him if this was worth consideration of an investment last year.
He laughed.
"Invest in Index Funds/ FDIC CDs and FDIC guaranteed Bank accounts".
When I was younger I used to squeeze out a bit of money from every paycheck to put into a savings and loan account. A more sophisticated cosmopolitan person talked about my grubby little passbook. That said, I've had several equivalents in later years of a grubby little passbook and I have some sense of security though I wouldn't mind having a bit more. You never know!
Everyone should have money going into savings. My first introduction to the financial system was a tiny savings account. It’s a metaphor for accruing value. The amount doesn’t matter, because you can’t take it with you when you’re gone and numbers don’t mean anything anyway (at least not in that arena). But the concept of accruing value, gaining good stuff, has beneficial qualities.
When I saw photos of huge computer systems which sucked energy to process and manage non tangible money, the vision cemented my common sense “NO” to cryptocurrency.
My finances are profitably managed by my long time trusted financial dudes and dudettes. Each fall they throw a family barbecue bluegrass party for their clients. Every Thanksgiving we get a pie choice from a local Amish bakery and for whatever faith’s December holiday a beautiful Maine made balsam wreath.
They treat their many many clients like family and our investments as their own.
So, trust beats energy sucking international computer system.
Trust beats suspicious and malevolent-looking energy suck. Very nice.
Hmm. I love your trusted dudes and dudettes. Care to name them for us? I use a green and socially responsible investment mgmt firm (small) in the SF Bay Area, but you got my attention with the pies and wreaths.
Back before COVID my mechanic told me that his son, a pretty good mechanic himself, was no longer working at the garage because he was "into crypto." My mechanic knows I'm pretty stupid about cars, but I didn't want him to think I was stupid about everything, so I said I was sorry and and went home to read up on crypto. I read and read -- and still didn't get it. OK, finance is not my thing -- it took me quite a while to understand "commodity futures" too -- so I figured it was just me. Lately I've learned that it wasn't "just me." Turns out crypto is "The Emperor's New Clothes" updated for the 21st century.
Lucian, this column cracked me up, partly because I never invested in crypto but mostly because you sure as hell know how to tell a story.
I read most crypto explainers I come across, but still the only thing I get is the mindnumbing amount of energy "mining" requires. It looks like a bailout for obsolete, about-to-close power plants. Now who would be driving that pollution-pushing scam?
Lucian: You completely overlooked crypto's utility as a means to surreptitiously pay bribes, pay ransoms, purchase illicit drugs, pay off politicians, buy illegal firearms, hide money from the IRS or other taxing authorities, and conduct business in a more or less under the table fashion. Shame on you!
Thank you so much for bringing up illegal activity, that’s key to understanding cryptocurrency.
If you would be so kind, take it easy on Lucian. He puts a lot of work into opening up these subjects and giving us a forum. One thing I’ve learned about these Substack sites, like Heather Cox Richardson and Greg Olear and Lucian: they are saturated with incredibly knowledgeable people. So readers like you and me fill in the gaps.
Long history of anarchism, and libertarianism, not sure you can simply wave your hands and declare that it is " utter bullshit, " and do any real logical work with that. It's not exactly a substantive rebuttal. Chomsky has stated he is a "libertarian socialist," distinguished from an anarcho-libertarian. A civil libertarian is pushing another ideology,
far more appealing --- my first job after law school was with the Minnesota branch of the ACLU. The legal director explained, or joked, that "everyone hates us based on some issue or other(even if they are members and donate)." There were bars on the windows - on W. Broadway, between Dupont and Emerson, they relocated years ago- due to anti-abortionists having a violent streak, and hating the MCLU for supporting abortion rights. MCLU also supported gun rights, you get the point. Huge amount of time on free speech and free expression cases.
But anarchists who would prefer (they say anyway) total anarchism, but think it's too utopian (sounds like Hobbesian hell to me! and would immediately generate a "body of armed men" to use Lenin's definition of the state) sometimes settle for anarcho-libertarianism, i.e. as little government or state regulations as possible, and if they also reject any ethical problems with (1) bribes to pay politicians or regulators or police to leave them alone, (2) paying ransoms (states do it, why not me?), (3) buying drugs that are illicit but should be legal --- including for health treatments (using hemp derivatives, for example), (4) buying firearms for self-defense, defense of others, defense from a totalitarian state, irrespective of laws forbidding it and (5) avoiding paying taxes to governments they consider illegitimate and war-mongering (?), they can make a more nuanced and even persuasive case for their goals, rather than just shouting about "freedom."
In fact, some of that looks very appealing under some circumstances!
I think the late professor Nozick's Philosophical Explanations is a better book, though. Won the Ralph Waldo Emerson Award of Phi Beta Kappa, and a great discussion of knowledge and skepticism, inter alia.
when I posted what I did about prefixes before "libertarian," I realize that I should have exempted old-school "civil libertarians," whose philosophy was one I've found altogether respectable. an old, much-lamented friend and unofficial mentor, Stanley Feingold, was a self-declared "civil libertarian for many years, which was also a way of not declaring his personal, very Left positions when he taught American Political Philosophy. people who studied with him in the fifties and early sixties were ceaselessly confounded by how impossible it was to figure out his own position, which was completely appropriate, given what he was teaching.
in the seventies, when I was taking a course with Alfred Kazin, he had the nasty habibtof causing female students to break down and cry. I was discussing this habit with a woman in the class, who'd gone to Radcliffe. she told me that the only one who was better at it than Kazin was Nozick. just saying. and having said this, I should add that my best friend became friendly with Nozick at Harvard and said that he was a very nice guy.
and yes, this new anarchist thing about total freedom does indeed sound like what you term "Hobbesian hell." this became absolutely clear when a young friend told me about loud Anarchist protests all over town protesting vaccine mandates OF ANY KIND. god luck with THAT. are they cool with a revival of Smallpox, Diphtheria et al?
for years, I liked to define myself as an "Anarchist," but realize that my beliefs have only ever been a lot closer to a more-or-less classic Social Democratic place. but hey....that's just me, attempting a little clarity (which can be on very short supply anywhere I might hang my hat).
Thanks for extending the statement! I defintely understand what you mean about a certain kind of libertarian going off the deep end, and just using some kind of prefix to obfuscate their politics, or dress it up as "dangerous and radical" as a kind of pose, too. Seems as if we all like the exercise of state power that helps us, and despise what we think is some kind of overreach, even though it might be a consistent application of the law.
Cryptocurrency is just the latest shiny new toy for those people with too much time and money on their hands to play with. It’s exciting and fun (in some weird way), not boring like investing in stocks or mutual funds. Like the gambling addicts in casinos in Vegas, it’s the rush, the dream that makes it worthwhile. But like all toys, the shine wears off and it gets discarded while the players go on to the next shiny new toy, but the losers get a life lesson, not that it will do them any good, namely that if it sounds too good to be true, it most likely is…
So there you have it. It was all bullshit from the git go. One giant ass fraud. Dollars(real ones) to doughnuts his lawyers will want thier fees up front in old fashioned 'greenback dollars'.
It seems like there should almost be an analogy between investing in crypto vs. real companies and believing internet nonsense vs. mainstream news sources.
Kleptocurrency. I haven't finished breakfast, and you've already exhausted me—between laughter and befuddlement at fools actually expecting to see their money again after entrusting it to cryptocrooks. If you lose your shirt at the track at least you get to watch some gorgeous animals. Picture SBF running … No! Don't!
Thanks, Lucian, for trying to explain that weird stuff. We're still trying to figure out how creating a cryptocurrency took so much electric power out of the grid. We were never tempted by what seemed to us a giant scam, which it was, but we did try to understand it, and failed. It's clear that even those who created it didn't understand it either.
My understanding, which is very limited, is that bitcoin is built on solving very complex math problems that take hundreds and thousands of hours with many computers working 24-7 to solve. There are a limited number of bitcoins and the math problem becomes increasingly more complex, whoever manages to solve it, and there is competition all over the world, is awarded a bitcoin, the server farms that are used to solve the problem use vast amounts of power, in some cases comparable to that of a mid size town, which puts them in competition with that town for the use of that power. Prior to the plague, the demand for servers was impacting the price and the availability said servers throughout the marketplace. It’s nuts I know, but I understand that some countries have banned the use of their power grids for bitcoin “mining”, which had forced the people with tons of money invested in mining operations to look for safe harbors that have enough power available to run their mining operations, it’s not a good thing if one lands near you.
Thank you for this excellent explanation. I just read it to my husband, and he said “That guy must have had a good time writing that!” I have also been skeptical of crypto since the beginning. There’s no there there. Also, it reminded me of Enron in that if I can’t understand it, that’s not a good thing to base an investment on, and there may be a good reason why I can’t understand it. A question, though. If I invested $10 in crypto and it then went up to $100, would I get $100 if I wanted to cash in or vice versa if I bought at $100 and it went to $10?
I know a few people that have bought bitcoins in the hope of getting “something for nothing”, none of whom could afford a total loss, like the heat you might get by burning hundred dollar bills. I believe the problem remains how do you spend money tied up in crypto? No one has ever offered me a bitcoin or even a portion of one, for one of my photos, and I would have no idea how to spend that bitcoin to buy something that I wanted. If you could put those two things together, a rise in valuation with the opportunity to take advantage of it, you might be among the lucky otherwise you are among the losers.
I appreciate your excruciating effort to explain the world of cryptocurrencies. Thankfully, the topic never comes up at my family dinner parties. But if it ever does, I can reassure the family by changing the subject to banks.
Retired now, eons ago I was a member of major commodity futures exchanges. (That was before us human "members" were replaced by server farms. ) My career was bookended by two of the biggest cons ever in the industry: The Great Salad Oil Swindle, and the Hunt Brothers' Silver Squeeze. I had a front row seat in a firm that was central to both and I knew some of the principals. Good entertaining books have been written about both.
So when crypto came on the scene, I recognized it for the con it was. Every good con begins with "the hook", and with the crypto "the hook" was right there in the name, "crypto". Esoteric, hidden, glamorous. It had the sweet cachet of private jets and yachts in the Bahamas and very smart nerdy young people and long-limbed suntanned beauties. And you too could be part of that glamorous crowd. Just deposit your life savings right here.
It took me a half-hour to analyze and debunk crypto. So whenever crypto came up, usually with young people enamored of it, I tried to explain to them how crypto was a con. But they just looked embarrassed for me, a dodderly old man who just didn't "get it".
as someone who's accused of being one of those doddering, clueless old men you've just discussed (for the record, an identity I happily embrace) thank you for this insider takedown. I've been waiting for it.
a few months back, a beautiful woman on FB was acting pretty friendly, so I gave her my number. she called back (from Toronto) and we stayed on the phone for about three hours talking about EVERYTHING yadda yadda yadda. toward s the end of the call, she told me about this amazing investment opportunity that I was lucky enough to be able to get educated about THE VERY NEXT DAY. I'd already decided to have nothing to do with crypto because it felt a lot less comprehensible than any other aspect of money affairs (which I've never understood much abou5t anyway). so I went on this webcast (there were supposed to be about thirty other people on it as well) and it was very slick...lots of moving cameras showing me the incredibly expensive, all-window dwellings I would never want to live in. after about ten minutes, it became very clear what was going on and I bailed. less than an hour later, she started messaging me and telling me I was rude. I agreed. she told me that I sounded like a rude asshole and I agreed, adding that she hadn't mentioned crypto on our call. she told me I was a closed-minded fool and of course, I agreed. when I told some friends the story, they were saying uh-oh before I got to the webcast part of the story.
it just always seems to me (and it's taken a few nasty events to get me here) that when someone is in such a hurry to make me a lot of money without me doing anything, it's gonna end up with me getting fucked. and not in a good way.
so I really do appreciate your take on all this.
naturally, my oft-mentioned friend upstairs sees this fiasco as being entirely a product of the "woke left" etc. he owns some bitcoin and is still talking up the stories of regular folks who are now billionaires, etc.
and in this case, "et cetera" is definitely meant to be sarcastic.
I’ve had something related to this happen to me. I received a friend request on Facebook from someone I knew but hadn’t seen for several years. I accepted the request and asked her, “What’s new with you?” ‘She’ replied to tell me about “a great new investment opportunity,” at which point I realized someone was impersonating this acquaintance to run a scam. I immediately unfriended the scammer. I’ve also received scam texts addressed to another person. They want me to reply ‘wrong number’ so they can then try to run their scam.
I'm pretty sure my particular scammer was who she claimed to be, but nobody likes to be considered an idiot by the rest of the world, so maybe I'm just lying to myself. god knows it wouldn't be the first time.
Oh, lucky you Bob! You got to watch these scum up close and personal while they were gaming the financial system. I don’t envy you.
So, I am not a deep thinker, nor do I grasp anything to do with abstract numbers AT ALL (Speed limits I understand, bank statements are more confusing but I get the idea if not the details). Investments? I hire someone. When I first heard of Bitcoin and subsequently cryptocurrency, I thought there was just no way to make it work. Your reporting here leads me to believe I made the right call.
Same. I just thought “ it’s tulips”.
A casino where the casino lets you buy chips, bet them on the tables, but might not be able to let you cash in your chips is more like it.
Your legal remedy if that actually happened in a casino would be to sue, and maybe recover as a result of a bankruptcy process as one of the creditors. There's a regulatory system
and a legal structure in place to give each person their just due, in theory.
But for this crypto scam nonsense, there's only hope that some remedy can be hammered out in the courts, which seemingly can only involve seizing the really existing tangible assets in cash, bonds, stocks, and property owned by the scammers like Mr. Fried-Bankman, truly a fried banker! Because these guys don't even know "what happened" when they decided to issue the FTTs to the investors, according to them, anyway.
Classic Ponzi scheme as Lucian points out, with a few added features that still leave people without clear-cut remedies to make themselves whole.
Yes, and I extended and amplified the comparison a bit. It's not exactly a dissertation but it'll have to do, since the Iowa Hawkeyes are hosting the Wisconsin Badgers in the raucous confines of Carver-Hawkeye Arena in Iowa City in a tight B1G basketball game. Btw the Hawks have arguably the best player, man or woman, in the college ranks: Caitlin Clark. Wish I could legally gamble on these games.
Yes, Ally and Doris.
My dad has been an international banker his entire adult life. His father, my paternal grandfather, was for most of his life a low-level functionary at a branch of the colloquially named “Hypo Bank” near Munich. (Bayerische Hypotheken u. Wechselbank, the Bavarian Securities and Exchange Bank).
Money is a very slippery subject, since money doesn’t really exist. It is an artifice. Generally speaking, I would say there are two types of real-world money: money you earn from work, and money you get for free, which is money derived from assets. Working class people (most people) who buy what they need at retail stores and have to pay the bills deal almost exclusively with wage-earned money. Rich people deal mostly, but perhaps not exclusively, with money that they get as earnings and distributions from investments, and as capital gains (think real estate appreciation).
That’s conventional, real-world money. Then there’s fake money, Monopoly money. Derivatives, and the economic crash that they caused earlier this century, is an example of fake money (a version of it). There are many ways that smart asses try to game the system and get money for nothing, and a lot of those people become very rich in money, although they are still very poor in all the ways that matter.
Cryptocurrency is fake money. It is a recent invention. It’s true that money is also not real, it is an artifice, but we have years and years of history of using money as a means of exchanging value. Cryptocurrency has no history, and no foundation in the real world.
Because cryptocurrency is a recent invention, its primary function has become money laundering. The main use and function of cryptocurrency is to get some kind of value for selling illegal things: drugs, weapons, human trafficking. Financial regulations do not cover cryptocurrency yet, so you can get paid in cryptocurrency for your illegal and immoral goods and services without any financial institution regulating and tracking what you are doing. If someone pays you in cryptocurrency for your sex slaves, or your stolen goods, the SEC, the IRS and the Treasury Department will never know. Not yet anyway, but eventually.
This guy is a con artist. Anyone can see that.
I would question Lucian’s statement about him running a Ponzi scheme. Imagine each individual cryptocurrency as a stock on the stock market. Stocks can swing wildly up and down. So think of each of those cryptocurrencies as a brand new stock that everybody is all excited about, like Facebook when it came out, driving the price up to stratospheric levels. But then when the bubble bursts, like when everyone figures out that Facebook has value in the form of a real income but a cryptocurrency does not, the price comes crashing down. While the bubble existed, this asshole was worth millions and billions. Once the bubble burst, he’s worth jack.
His brand new idea was a “stock market” for cryptocurrencies. So once the cryptocurrencies crashed, so did his market.
Remember what PT Barnum said.
Thanks for the very clear explanation, Roland. On the theoretical level -- I wonder a lot about how adept our human minds are at dealing with things that have no material existence. Those of us who grew up going in and out of "brick-and-mortar" establishments (and/or do a fair amount of it now) can use that real-world experience to grasp what's going on with all our virtual transactions, but what happens when we start living entirely in the cloud? SBF sounds like he might be a proto-poster child for this. He seems unable to translate what he was doing into words. It's almost like he's trying to remember and communicate something that happened in a dream.
Yes, Susanna, I agree completely. Like you, I was also thinking about this turkey as a poster boy for the In The Clouds generation. Unfortunately for him, no matter how you spin fraud, it still results in criminal prosecution and jail time in the real world.
Said father passed away yesterday evening at the ripe old age of 89.
Condolences and sympathy in this time of your father's death. The death of one's father is, to me, like the snapping of a golden chain that links us to the past and who we are. And there are no more discussions or answered questions. May you and your family find peace and healing.
I'm really, really sorry to hear that. losing a father is utterly disorienting and it'll take a while, but I know everyone here is thinking about you...
Thank you David. 🙏
Lucian writing about finance is really timely. And gave me an opening to write about my dad.
This year has been utterly disorienting. Perfect languaging.
May his memory be a blessing, Roland.
Wishing you peace on your loss.
I am so sorry for your loss, Roland.
Condolences to you and your family-but I bet your father would have approved of your post and information.
I'm sorry to hear that, Roland. Sincere condolences.
Thank you 🙏
My condolences to you and family members.
Thanks for this post. From the beginning crypto seemed like a scam that only crazy people would "invest" in. I never understood where the profits would come from (obviously from the increasing "price" to bitcoins, but where does that come from.) It would be useful if you or Lucian would explain to the 'uninitiated' the relation of running enormous, complicated computing systems to this whole endeavor--doing what I recall is named "mining". The fact that this involves money, is completely unregulated, and is tied to nothing tangible is enough to send out red flags---and then you add the fact that fleecing money from people is an ancient human exercise in ingenuity -- wow.
Grover, I don’t have an answer as of yet. I agree, the name “mining” sounds like a great big bunch of crap, a huge smokescreen, and the activity itself seems suspicious as hell.
Thanks for this additional tidbit of information. Numbers vex me. Imaginary numbers vex me to a whole new level.
Lol. Now I'm remembering how imaginary numbers vexed me too -- and I'm pretty good at other kinds of numbers, even negative ones.
This Astounding world wide con game has run out of steam. I know a very big time financier. I asked him if this was worth consideration of an investment last year.
He laughed.
"Invest in Index Funds/ FDIC CDs and FDIC guaranteed Bank accounts".
Great advice....!
“Invest in index funds, FDIC CDs and FDIC-guaranteed bank accounts” . . .
. . . and laddered T-Bills. And real estate and rare items.
Gold and silver that you keep at home in a safe works too.
See my long post further down.
Well, it used to be further down. Now it’s up above, if you have your algorithm setting at “Top First”
But that's BORING!
When I was younger I used to squeeze out a bit of money from every paycheck to put into a savings and loan account. A more sophisticated cosmopolitan person talked about my grubby little passbook. That said, I've had several equivalents in later years of a grubby little passbook and I have some sense of security though I wouldn't mind having a bit more. You never know!
Everyone should have money going into savings. My first introduction to the financial system was a tiny savings account. It’s a metaphor for accruing value. The amount doesn’t matter, because you can’t take it with you when you’re gone and numbers don’t mean anything anyway (at least not in that arena). But the concept of accruing value, gaining good stuff, has beneficial qualities.
When I saw photos of huge computer systems which sucked energy to process and manage non tangible money, the vision cemented my common sense “NO” to cryptocurrency.
My finances are profitably managed by my long time trusted financial dudes and dudettes. Each fall they throw a family barbecue bluegrass party for their clients. Every Thanksgiving we get a pie choice from a local Amish bakery and for whatever faith’s December holiday a beautiful Maine made balsam wreath.
They treat their many many clients like family and our investments as their own.
So, trust beats energy sucking international computer system.
Trust beats suspicious and malevolent-looking energy suck. Very nice.
Hmm. I love your trusted dudes and dudettes. Care to name them for us? I use a green and socially responsible investment mgmt firm (small) in the SF Bay Area, but you got my attention with the pies and wreaths.
Or as Michael Che explained it on SNL: If you can’t figure out how it works, it’s a hustle.
Very nice, Edward 🏆
Back before COVID my mechanic told me that his son, a pretty good mechanic himself, was no longer working at the garage because he was "into crypto." My mechanic knows I'm pretty stupid about cars, but I didn't want him to think I was stupid about everything, so I said I was sorry and and went home to read up on crypto. I read and read -- and still didn't get it. OK, finance is not my thing -- it took me quite a while to understand "commodity futures" too -- so I figured it was just me. Lately I've learned that it wasn't "just me." Turns out crypto is "The Emperor's New Clothes" updated for the 21st century.
Lucian, this column cracked me up, partly because I never invested in crypto but mostly because you sure as hell know how to tell a story.
It made me laugh too. Especially at the end! Another word that triggers me is "digital."
the phrase that puzzles me is
"digital vs. anal og"
As in "I am Og, the great and powerful"?
haha
that never occurred to me. on a far higher plane i gotta admit
Or possibly a far lower plane that you're well advised to avoid. ;-)
😂😂
I read most crypto explainers I come across, but still the only thing I get is the mindnumbing amount of energy "mining" requires. It looks like a bailout for obsolete, about-to-close power plants. Now who would be driving that pollution-pushing scam?
Lucian: You completely overlooked crypto's utility as a means to surreptitiously pay bribes, pay ransoms, purchase illicit drugs, pay off politicians, buy illegal firearms, hide money from the IRS or other taxing authorities, and conduct business in a more or less under the table fashion. Shame on you!
Thank you so much for bringing up illegal activity, that’s key to understanding cryptocurrency.
If you would be so kind, take it easy on Lucian. He puts a lot of work into opening up these subjects and giving us a forum. One thing I’ve learned about these Substack sites, like Heather Cox Richardson and Greg Olear and Lucian: they are saturated with incredibly knowledgeable people. So readers like you and me fill in the gaps.
Of course, and believe it or not there are some anarcho-libertarians who have no problem endorsing any of that, because freedom.
I've come to believe that any prefix before the word "libertarian" is utter bullshit.
Long history of anarchism, and libertarianism, not sure you can simply wave your hands and declare that it is " utter bullshit, " and do any real logical work with that. It's not exactly a substantive rebuttal. Chomsky has stated he is a "libertarian socialist," distinguished from an anarcho-libertarian. A civil libertarian is pushing another ideology,
far more appealing --- my first job after law school was with the Minnesota branch of the ACLU. The legal director explained, or joked, that "everyone hates us based on some issue or other(even if they are members and donate)." There were bars on the windows - on W. Broadway, between Dupont and Emerson, they relocated years ago- due to anti-abortionists having a violent streak, and hating the MCLU for supporting abortion rights. MCLU also supported gun rights, you get the point. Huge amount of time on free speech and free expression cases.
But anarchists who would prefer (they say anyway) total anarchism, but think it's too utopian (sounds like Hobbesian hell to me! and would immediately generate a "body of armed men" to use Lenin's definition of the state) sometimes settle for anarcho-libertarianism, i.e. as little government or state regulations as possible, and if they also reject any ethical problems with (1) bribes to pay politicians or regulators or police to leave them alone, (2) paying ransoms (states do it, why not me?), (3) buying drugs that are illicit but should be legal --- including for health treatments (using hemp derivatives, for example), (4) buying firearms for self-defense, defense of others, defense from a totalitarian state, irrespective of laws forbidding it and (5) avoiding paying taxes to governments they consider illegitimate and war-mongering (?), they can make a more nuanced and even persuasive case for their goals, rather than just shouting about "freedom."
In fact, some of that looks very appealing under some circumstances!
ndpr.nd.edu/reviews/the-cambridge-companion-to-nozick-s-anarchy-state-and-utopia/
I think the late professor Nozick's Philosophical Explanations is a better book, though. Won the Ralph Waldo Emerson Award of Phi Beta Kappa, and a great discussion of knowledge and skepticism, inter alia.
when I posted what I did about prefixes before "libertarian," I realize that I should have exempted old-school "civil libertarians," whose philosophy was one I've found altogether respectable. an old, much-lamented friend and unofficial mentor, Stanley Feingold, was a self-declared "civil libertarian for many years, which was also a way of not declaring his personal, very Left positions when he taught American Political Philosophy. people who studied with him in the fifties and early sixties were ceaselessly confounded by how impossible it was to figure out his own position, which was completely appropriate, given what he was teaching.
in the seventies, when I was taking a course with Alfred Kazin, he had the nasty habibtof causing female students to break down and cry. I was discussing this habit with a woman in the class, who'd gone to Radcliffe. she told me that the only one who was better at it than Kazin was Nozick. just saying. and having said this, I should add that my best friend became friendly with Nozick at Harvard and said that he was a very nice guy.
and yes, this new anarchist thing about total freedom does indeed sound like what you term "Hobbesian hell." this became absolutely clear when a young friend told me about loud Anarchist protests all over town protesting vaccine mandates OF ANY KIND. god luck with THAT. are they cool with a revival of Smallpox, Diphtheria et al?
for years, I liked to define myself as an "Anarchist," but realize that my beliefs have only ever been a lot closer to a more-or-less classic Social Democratic place. but hey....that's just me, attempting a little clarity (which can be on very short supply anywhere I might hang my hat).
Thanks for extending the statement! I defintely understand what you mean about a certain kind of libertarian going off the deep end, and just using some kind of prefix to obfuscate their politics, or dress it up as "dangerous and radical" as a kind of pose, too. Seems as if we all like the exercise of state power that helps us, and despise what we think is some kind of overreach, even though it might be a consistent application of the law.
Cryptocurrency is just the latest shiny new toy for those people with too much time and money on their hands to play with. It’s exciting and fun (in some weird way), not boring like investing in stocks or mutual funds. Like the gambling addicts in casinos in Vegas, it’s the rush, the dream that makes it worthwhile. But like all toys, the shine wears off and it gets discarded while the players go on to the next shiny new toy, but the losers get a life lesson, not that it will do them any good, namely that if it sounds too good to be true, it most likely is…
So there you have it. It was all bullshit from the git go. One giant ass fraud. Dollars(real ones) to doughnuts his lawyers will want thier fees up front in old fashioned 'greenback dollars'.
It seems like there should almost be an analogy between investing in crypto vs. real companies and believing internet nonsense vs. mainstream news sources.
hmmmm
There’s a thought!
well said! absolutely!
Kleptocurrency. I haven't finished breakfast, and you've already exhausted me—between laughter and befuddlement at fools actually expecting to see their money again after entrusting it to cryptocrooks. If you lose your shirt at the track at least you get to watch some gorgeous animals. Picture SBF running … No! Don't!
Kleptocurrency. Nice, D.
Thanks, Roland. ;)
Bravo Lucien. This is one of your best articles which describes my thoughts on digital money perfectly.
Thanks, Lucian, for trying to explain that weird stuff. We're still trying to figure out how creating a cryptocurrency took so much electric power out of the grid. We were never tempted by what seemed to us a giant scam, which it was, but we did try to understand it, and failed. It's clear that even those who created it didn't understand it either.
My understanding, which is very limited, is that bitcoin is built on solving very complex math problems that take hundreds and thousands of hours with many computers working 24-7 to solve. There are a limited number of bitcoins and the math problem becomes increasingly more complex, whoever manages to solve it, and there is competition all over the world, is awarded a bitcoin, the server farms that are used to solve the problem use vast amounts of power, in some cases comparable to that of a mid size town, which puts them in competition with that town for the use of that power. Prior to the plague, the demand for servers was impacting the price and the availability said servers throughout the marketplace. It’s nuts I know, but I understand that some countries have banned the use of their power grids for bitcoin “mining”, which had forced the people with tons of money invested in mining operations to look for safe harbors that have enough power available to run their mining operations, it’s not a good thing if one lands near you.
Thank you for this excellent explanation. I just read it to my husband, and he said “That guy must have had a good time writing that!” I have also been skeptical of crypto since the beginning. There’s no there there. Also, it reminded me of Enron in that if I can’t understand it, that’s not a good thing to base an investment on, and there may be a good reason why I can’t understand it. A question, though. If I invested $10 in crypto and it then went up to $100, would I get $100 if I wanted to cash in or vice versa if I bought at $100 and it went to $10?
I chortle all the way through it.
I know a few people that have bought bitcoins in the hope of getting “something for nothing”, none of whom could afford a total loss, like the heat you might get by burning hundred dollar bills. I believe the problem remains how do you spend money tied up in crypto? No one has ever offered me a bitcoin or even a portion of one, for one of my photos, and I would have no idea how to spend that bitcoin to buy something that I wanted. If you could put those two things together, a rise in valuation with the opportunity to take advantage of it, you might be among the lucky otherwise you are among the losers.
I appreciate your excruciating effort to explain the world of cryptocurrencies. Thankfully, the topic never comes up at my family dinner parties. But if it ever does, I can reassure the family by changing the subject to banks.