Come for the politics, stay for the snark.

Ron DeSantis, the grand wizard, oops, governor of FL.

Let’s delete this post and never speak of this again.

If you thought you’d already seen people saying the stupidest things possible on the internet, prepare yourselves.

Republican obstruction dressed up as bipartisanship. Again.

Happy indictment week to all who celebrate!

rich, arrogant assholes who equate luck with genius

“Joe Biden deserved better than he got from some folks in his own party.”

Let there be snark.

GOP baffled that ‘we don’t care if you die’ is not a winning slogan.

If marriage is the equivalent of selling yourself into slavery, women with self respect should reject the offer.

Never entrust democracy to any process that requires republicans to act in good faith.

Biden: Oh no. We’ve upset Big Pharma again.

They are lying in pursuit of an agenda.

‘Museums aren’t America’s attic for its racist shit.’

We cannot abandon the truth and remain a free nation.

… riddled with inexplicable and elementary errors of law and fact

fuckem (in honor of the late great efgoldman)

The poor and middle-class pay taxes, the rich pay accountants, the wealthy pay politicians.

Republicans want to make it harder to vote and easier for them to cheat.

Elections aren’t won by handwringing, cowering, and/or bashing your own candidates.

There are more Russians standing up to Putin than Republicans.

Good lord, these people are nuts.

Why is it so hard for them to condemn hate?

These days, even the boring Republicans are nuts.

You are here: Home / Economics / C.R.E.A.M. / Schadenfreude Read: That’s What I Call Ponzinomics!

Schadenfreude Read: That’s What I Call Ponzinomics!

by | 87 Comments

This post is in: , , ,

Mad props to Zeke Faux, at NYMag — “With Sam Bankman-Fried, Gisele, and a credulous Michael Lewis at the zenith of crypto hype”:

“Three years ago, nobody knew who you were. And now you’re sit­ting on the cover of magazines. And you’re a gazillionaire. And your business is, like, one of the fastest-growing businesses in the history of the planet.”

Sam Bankman-Fried giggled and nodded nervously, shaking his messy crown of curly hair, as the writer Michael Lewis lavished him with praise. They were onstage at a resort in the Bahamas for a conference put on by the 30-year-old billionaire to celebrate the success of his crypto exchange, FTX. It was April 2022, and pretty much everyone who mattered in the world of virtual currencies had flown in for the occasion — plus Bill Clinton, Katy Perry, and Tom Brady for good measure.

Bankman-Fried was dressed slovenly as usual, in gray shorts and a gray FTX T-shirt. Lewis looked like a prep-school headmaster, wearing a blue blazer with peak lapels and a white button-down with blue accents, his floppy hair parted perfectly to the side. The way he was talking about Bankman-Fried, he sounded as if he were presenting a prize to his star pupil. “You’re breaking land-speed records,” Lewis said. “And I don’t think people are really noticing what’s happened, just how dramatic the revolution has become.”

I’d heard that Bankman-Fried was going to be the subject of Lewis’s next book. But the author’s questions were so fawning they seemed inappropriate for a journalist. Listening from the packed auditorium, I started to question whether Lewis was really writing a work of nonfiction or if FTX had paid him to appear. (Lewis later told me that he was there as a reporter and that he was not compensated.)

I’d come to the Bahamas because I was about a year into an investigation of the crypto world. I wanted to understand why the prices of bitcoin and hundreds of lesser coins — with ridiculous names like dogecoin, solana, polkadot, and Smooth Love Potion — were going up and up. Crypto boosters claimed they were in the vanguard of a revolution that would democratize finance and create generational wealth for those who believed. The roar of the rising prices drowned out the skeptics. Incomprehensible jargon became inescapable. Blockchain. DeFi. Web3. The metaverse. What these terms meant was beside the point. Newspapers, TV, and social media bombarded readers with stories of regular people who invested and got rich virtually overnight.

Crypto seemed like a giant slot machine that had been rigged to pay out almost every time. Hundreds of millions of people around the world gave in to the temptation to pull the lever. Everybody knew somebody who’d hit it big. And the more people who bought in, the higher prices rose. By the time of the conference in the Bahamas, the total market value of all of crypto was $2 trillion.

From the beginning, I had thought that crypto was pretty dumb. And it turned out to be even dumber than I imagined. There was no mass movement to actually use crypto in the real world. The crypto apps hyped as the future of finance and art barely worked. As I crisscrossed the globe, from El Salvador to Switzerland to the Philippines, all I saw were scams, fraud, and half-baked schemes. By the end, I’d find myself in Cambodia, investigating how crypto fueled a vast human-trafficking scheme run by Chinese gangsters…

Bankman-Fried’s other turns onstage at the conference were similarly mindless. He stumbled through an interview with the former British prime minister Tony Blair and Clinton, who at one point extended a fatherly hand of support. He exchanged banalities about charity with Gisele Bündchen, with whom he’d posed for an FTX ad campaign that ran in Vogue and GQ, and platitudes about leadership with her husband, Tom Brady…

It was depressing to see that many people whom I had admired had been co-opted by Bankman-Fried to promote crypto gambling. I’d later learn Brady and Bündchen were paid about $50 million in stock for their en­dorsements. Clin­ton was reportedly paid at least $250,000 to appear at the conference.

The crowd there lacked the quasi-religious fervor I’d seen at more plebeian crypto gatherings. Instead, the attendees fell into three groups. There were the venture capitalists, who’d gotten in early, watched the tokens they bought climb to ludicrous heights, and now believed they could pre­dict the future. There were the founders of crypto start-ups, who’d raised so many millions of dollars that they seemed to believe their own far-fetched pitches about creating the next generation of finance. Then there were the programmers, who were so caught up with their clever ideas about new things to do inside the crypto world that they never paused to think about whether the technology did anything useful.

At a party for a project called Degenerate Trash Pandas, I asked one coder if crypto would ever be helpful for regular people. “Why is it that you think that is important?” he said to me, in total sincerity. “I really would like to know.”…

Another crypto executive showed me a digital image of a sneaker that he’d bought for $8 and that he said was now worth more than $1 million. He told me that recently, all owners of these imaginary sneakers had been issued an image of a box, which was it­self worth $30,000. When he opened the box, he found another pic­ture of sneakers and another box, each of them valuable in their own right. “It’s this never-ending Ponzi scheme,” he said happily. “That’s what I call Ponzinomics.”…

The next time I saw him was in November 2022, in the lobby beneath his $30 million apartment. It was eight days after FTX declared bankruptcy with $8 billion of his customers’ money gone missing. On the way over, I had imagined Bankman-Fried’s mood would be grim. I’d even worried that he might be suicidal. But when he greeted me, shoeless, in his familiar wrinkled uniform, he seemed surprisingly upbeat.

“It’s been an interesting few weeks,” Bankman-Fried said, and together we rode the elevator up to his penthouse.

I’d think that right now, among the myriad people looking to strangle SBF, Michael Lewis would not be in the rearguard.

Reader Interactions

87Comments

  3. 3.

    wjca

    Single best financial move I ever made was telling my financial advisor “No crypto.”  Not that he would have.  He’s a pretty bright guy.

  7. 7.

    Villago Delenda Est

    Lewis later told me that he was there as a reporter and that he was not compensated.

    Bullshit.

  9. 9.

    BlueGuitarist

    @Alison Rose:

    Classic description of crypto:

    ”imagine if idling your car all night produced solved sudokus that you could use to buy heroin”

    (alas, don’t recall whom to credit)

  11. 11.

    Ken

    There’s an interesting recent discussion of “Number Go Up” with Zeke Faux over at Crypto Critics’ Corner. You don’t need any knowledge of crypto to follow along — basically the theme is “why did anyone participate in such an obvious scam” (spoiler: those who got out early made money, as in every Ponzi).

    In related news, Molly White looks at Sam Bankman-Fried’s jail conditions on her blog. On the one hand, he’s not being treated any better than other prisoners; on the other hand, that’s pretty bad treatment.

  12. 12.

    Ukai

    @Omnes Omnibus: No kidding. Doesn’t take away from how good Liar’s Poker and Moneyball are, of course, but I’m sure he would rather not have had his name in the news like this.

  13. 13.

    Old Dan and Little Ann

    “Another crypto executive showed me a digital image of a sneaker that he’d bought for $8 and that he said was now worth more than $1 million.”

    This is so fucking dumb it makes my brain hurt.

  14. 14.

    MattF

    I’ve been reading chapters from the book for the past few days. It gets a bit repetitive, but still worth reading. I recommend Molly White’s web3 ‘news’ site for a running detailed narrative of the various scammy operations still going on.

  15. 15.

    The Pale Scot

    I need to apologize to ya’ll, a couple of days ago I wrote something so nasty that WaterGirl deleted. I don’t remember what it was because I was deep in my cups. I stopped drinking a few years ago (diabetes). But I lost a lot of weight and my blood sugar is ridiculously normal so I started up again. Obviously can’t hold it anymore ‘cause I woke up in my undies on the living room floor. I’ve pretty much left the internet other than BJ and LGM. Before I comment here I just wanted to Mea Culpa. Sorry guys,

    Have ao good night

  16. 16.

    Mr. Bemused Senior

    Like all speculative bubbles, those who get in early and have the sense to cash out before the crash can make money.

    Computer security folks knew from the beginning this is a scam. Krugman pointed that out too.

  22. 22.

    dmsilev

    The only thing of value created by crypto was a whole long set of object lessons on why financial regulations exist.

  23. 23.

    Tehanu

    @Alison Rose: ​
      Me too. And the bit about why would anyone care if crypto helped “regular people” is the heart of it for me. SBF & the like-minded cohorts are sociopaths.

  24. 24.

    RSA

    At a party for a project called Degenerate Trash Pandas, I asked one coder if crypto would ever be helpful for regular people. “Why is it that you think that is important?” he said to me, in total sincerity. “I really would like to know.”…

    Good God. I remember when I was young and naive and would argue with libertarians online. I especially remember one exchange, when I asked how some stupid libertarian policy would affect the less fortunate. “Why do you care so much about poor people?” they said. I could only dredge up a Mystery Science Theater 3000 riff: “It’s a human thing–you wouldn’t understand.”

  32. 32.

    Shalimar

    @frosty: The couple bad weeks expose horrible judgment and ethics over the last 2 decades.  I don’t think Lewis’ reputation will recover.

  34. 34.

    wjca

    @MattF: crypto makes tulipmania look like conservative financial management. Considering that the tulips actually exist.

    Not only that, you can always plant the bulbs and end up with something beautiful.  Nothing beautiful comes from crypto.

  35. 35.

    Chetan Murthy

    @Omnes Omnibus: I’m actually pretty disappointed to hear that he got taken in.  I mean, he’s been around the finance business long enough to understand that lots of people sling bullshit and use impenetrable jargon to ward off (let’s call it) invasive fisking.  I’d have thought that the minute he realized he was in over his head (which surely he did, or he’s a *moron*) he’d have called in an expert from the “opposing camp” (there are quite a few who are well-known) and had them take apart anything he’d been told …. at least, after each meeting with the crypto shitbirds.

    Something inside me wants him to surface with a bunch of date-stamped videos wherein he reveals that he was never taken in.  But somehow, I fear that the truth is much, much, much worse.

    Sigh.

  37. 37.

    Rusty

    Who would have guessed that something invented to allow criminals to have an untraceable way to buy and sell drugs, evade taxes and avoid any financial regulation, would turn out to be a scam.  I’m just shocked

  39. 39.

    Boris Rasputin (the evil twin)

    @The Pale Scot: I feel your pain. You can get back on the wagon, trust me.

    This may be one of the few instances where the Jackals can sincerely say “thoughts and prayers.”

  41. 41.

    Alison Rose

    My oldest friend Rachel (known her since we were 9, so 34 years!) is an opera singer and she’s amazing. This is from a few years ago (pre-pandemic), and she hasn’t been able to do much recently what with having a lot else going on, but the video came up in my FB memories today and I enjoyed watching it again and thought some of you might like it, too.

  51. 51.

    mrmoshpotato

    Bankman-Fried was dressed slovenly as usual, in gray shorts and a gray FTX T-shirt.

    But I thought this bitchass was a billionaire!

    Oh, wait, he can’t even afford a $20 haircut!

    Cellmates with the orange shitstain?

  54. 54.

    waspuppet

    Not only could no one tell me how crypto would actually make my life better, but I served on a federal grand jury for six months in 2021-22. If cryptocurrency is used for anything but sex trafficking, drugs, child pornography, illegal guns and hoping someone will pay you real money for it, someone’s gonna have to show me.

  55. 55.

    Chetan Murthy

    I’ve talked with a number of folks in the crypto world over the years.  One thing I’ve noticed about *all* of them, is that they always

    1. make outsize claims
    2. when you challenge those claims, they always admit that the claims were overblown
    3. and *immediately* move on to unrelated new claims
    4. lather, rinse, repeat

    That a guy like Lewis couldn’t see this is …. disappointing.

  59. 59.

    Soprano2

    It was obvious to anyone with common sense that crypto was a scam. I thought it was started by people who thought it could be used to avoid taxes. NFT’s are the dumbest thing I’ve ever heard of, but kudos to the people who used them to separate wealthy people from their money. If you’re dumb enough to think an internet picture of something is worth millions of dollars you deserve to get ripped off.

  60. 60.

    Brachiator

    @Soprano2:

    It was obvious to anyone with common sense that crypto was a scam.

    Cryptocurrency will be around for a while. The IRS is also introducing a new form, 1099-DA, to show information for transactions involving digital assets.

  63. 63.

    Frankensteinbeck

    I am completely not surprised that Bill Clinton was there.  Forget cryptocurrency.  People were schmoozing, and schmoozing is Bill Clinton’s passion.

    @waspuppet:

    hoping someone will pay you real money for it

    That was nine tenths of it.  A vast game of speculation, where people owned vast fortunes on paper that they would never be able to cash out.

  64. 64.

    Kelly

    @Soprano2: kudos to the people who used them to separate wealthy people from their money

    I have a cousin that sold a bunch of animated jelly bean NFTs. He and son netted a several 100k in a couple months. His original background was graphics. He’d recently retired from the computer game industry. His son put him up to it as a lark. Pleasant bump to the retirement nest egg.

  65. 65.

    Dangerman

    I lived in Tulare (CA) for a year (this is where I met Devin Nunes a couple of times, well before he was infamous; 2005ish).

    Anyway, Tulare is know for a few things. One is the smell of cows, i.e., I consider myself a bit of an expert on the smell of bullshit.

    Crypto was olfactorily offensive to the point how could anyone have been taken in by that bullshit?

    I did get a deal on same good Tulip futures, however.

  66. 66.

    Shalimar

    @Brachiator: As @waspuppet points out, the only real uses of cryptocurrencies are for illegal transactions you don’t want the IRS to know about.  I’m not sure that form is gonna get much use.

  68. 68.

    Chetan Murthy

    @Shalimar:

    the only real uses of cryptocurrencies are for illegal transactions

    This is something that has always bothered me.  I mean, this is certain knowledge: there’s no doubt about this.  And yet, so many otherwise normal people think nothing of participating in what is literally an anonymized chain of fences for laundering dirty money.  For facilitating all manner of crimes.  For facilitating our enemies as they try to destroy our Republic.

    I couldn’t do it.  But evidently, many millions have no objections at all.

  70. 70.

    mvr

    Did this Zeke F guy do an interview on Marketplace on NPR about a book related to this? I heard such an interview this summer with some guy who was skeptical and good.  I was driving back from fishing in Yellowstone so that would have put it in early to mid-July..

  71. 71.

    Embir

    NFTs are so much dumber than they appear. You don’t own an image, you have no copyright, there is zero intellectual property involved. You pay someone to “own” a URL that points to a digital image that anyone can see and use and copy a million times.  That URL is not guaranteed to exist even 5 minutes after you buy the right to say you “own” it. Also, 99% of the “art” involved is aggressively worthless dreck, and the other 1% is just plain ugly. But blockchain AI ooga booga alakazaam [waves a hand in your face while fishing for your wallet with the other].

  74. 74.

    JWR

    Scab of the week: Little Billy Maher. But he’s only doing it for the little people, natch. (From CNN)

    “The writers have important issues that I sympathize with, and hope they are addressed to their satisfaction, but they are not the only people with issues, problems, and concerns,” adding that his staff is still struggling despite his personal assistance.

    Maher himself is a member of the WGA, the Writers Guild of America West said on X, formerly known as Twitter, adding that his decision was “disappointing.”

    “It is difficult to imagine how (‘Real Time’) can go forward without a violation of WGA strike rules taking place. WGA will be picketing this show,” the union posted in a thread on X Wednesday.

    Maher said he is not willing “to lose an entire year and see so many below-the-line people suffer so much.”

    “Real Time with Bill Maher” is not the only show coming back on air. Drew Barrymore received intense pushback both from the guild and social media for bringing her daytime talk show back. Sherri Shepherd and Jennifer Hudson are set to return on air in September.

  75. 75.

    smike

    @NotMax:

    Excuse me for a few minutes, off to give my pet rock its monthly polish.

    At least pet rocks are real, in-hand things. And unique – not another on like it in the world.

  77. 77.

    Fled the US

    Many of the resources used to mine crypto are not focused on AI. It’s the same people just pivoting to their new grift.

  78. 78.

    ColoradoGuy

    That crypto was the only acceptable currency for data thieves and hostage-takers surely gave the game away. It was invented by criminals, for criminals, and relentlessly shilled by the Libertarian grifter community. Everything else was techno-bullshit.

  79. 79.

    lowtechcyclist

    @eclare: ​
     

    What a downfall from The Big Short.

    When I saw Lewis’ name above, I had to go check to make sure that was the same guy who wrote The Big Short, because it was hard for me to believe that someone who wrote that would be taken in by crypto.

    How bizarre.

  80. 80.

    lowtechcyclist

    @wjca:

    Not only that, you can always plant the bulbs and end up with something beautiful. Nothing beautiful comes from crypto.

    Even worse, astounding quantities of electricity are consumed in the ‘mining’ for bitcoin.  Not exactly helpful as global warming continues to heat up.

  81. 81.

    Anne Laurie

    @Shalimar: the only real uses of cryptocurrencies are for illegal transactions you don’t want the IRS to know about. I’m not sure that form is gonna get much use.

    I’ve seen it referred to as the Al Capone Form:  Now that the regulation exists, if you don’t declare your illicit profits, the government can bust you for tax evasion and *then* investigate what you’ve been doing that you didn’t want to see daylight.

  83. 83.

    Ken

    @lowtechcyclist:

    New crypto projects commonly offer a “no-risk X% return”, where X is 15, 20, or even higher.

    Other projects say that their business model is to accept crypto deposits and pay X% to their depositors, and will lend those assets to borrowers at a much lower — even 0 — rate.

    Now, even the most tyro of bankers or investment advisors will recognize that both of those are impossible. If Lewis did not, he’s not all that bright despite his earlier books. If he did recognize that but pushed crypto anyway, he was very likely part of one of the scams.

  84. 84.

    Ivan X

    Bought this the day it came out. Fantastic read so far. Well written, entertaining, and I keep admiring the author’s relentlessness and resourcefulness in trying to get an answer his one question, and just how far he’ll go to try.

  86. 86.

    azlib

    @Villago Delenda Est: AT least the Internet crash left useful stuff behind, like all the underseas fiberoptic cable with mind boggling bandwidth which form the backbone of our current global communications network.

    Crypto just burns electricity uselessly.

Comments are closed.