The great crypto scam

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Even seasoned financial commentators struggle to understand cryptocurrencies like Bitcoin, or why their value continues to rise. It appears to be a gold rush without any actual gold. As Jamie Dimon, JP Morgan’s CEO, put it last year, ‘Bitcoin is a hyped-up fraud’.

Yet there are still many who seem convinced it amounts to some sort of financial alchemy. You know the sort – they talk in non-sequiturs about the blockchain, digital currency and crypto investments. It’s enough to leave the uninitiated utterly bewildered.

Luckily, two books were released towards the end of last year that expose cryptocurrencies for what they are: an empty financial charade. There is journalist Zeke Faux’s Number Go Up, a deep dive into the world of cryptocurrencies. And then there is Michael Lewis’s Going Infinite, which charts the rise and fall of Sam Bankman-Fried. Otherwise known as SBF, the one-time billionaire founder of the FTX crypto exchange is now residing in a federal jail after being convicted of fraud last year. He is set to be sentenced later this week.

Bankman-Fried may appear to be exceptionally cynical, blithely gambling away billions of his customers’ funds. But as both books make clear, cynicism is the beating heart of the entire crypto project. Its advocates rhapsodise about a currency free of government and central banks. Yet they struggle to explain to Lewis how something like Bitcoin actually works or what useful function it serves. This is deeply revealing. As Lewis himself notes in a footnote: ‘What is curious is how elusive Bitcoin is, as a thing to understand… You nod along and think you are getting it but then wake up the next morning needing to hear the explanation all over again.’

Going Infinite is not without its flaws. Lewis spent a lot of time with Bankman-Fried and FTX for the book, a fact that has prompted Faux to accuse Lewis of getting too close to SBF. ‘The author’s questions were so fawning they seemed inappropriate for a journalist’, he wrote in an LA Times review.

Nevertheless, one of the best parts of Going Infinite is the front-seat view it gives us of Bankman-Fried’s moment in the sun. After all, there was a time little more than a year ago when the world’s great and good fell at his feet. Lewis was there when Tony Blair and Bill Clinton took to the stage with SBF at an FTX conference in the Bahamas in April 2022. The crypto boy wonder cut a curious figure, peacocking in his cargo shorts and tube socks, while the besuited former world leaders hung on his every word. Then there’s former Vogue editor Anna Wintour, who hoped that Bankman-Fried’s billions would bankroll the Met Gala. Lewis writes of him tetchily playing computer games while Wintour laid out her sales pitch.

Faux’s Number Go Up may have Bankman-Fried cast on a gold coin on its front cover, but its central character is Giancarlo Devasini. An Italian plastic surgeon, Devasini is also founder of a cryptocurrency called Tether, which is reportedly moored to the US dollar and marketed as a ‘stablecoin’. Like Bankman-Fried, Devasini is a troubling, intriguing, if much more elusive, figure.

Faux, a US reporter for financial news-site Bloomberg, spends much of Number Go Up trying to trace where the money is coming from to prop up the price of Tether. This leads him from the highs of partying on a superyacht to the wilds of Cambodia, where people are kidnapped by Chinese slavery gangs to work in ‘scam farms’. There, the beaten and tortured Cambodians work on harvesting unsuspecting Westerners’ monies through anonymous cash transfers facilitated by cryptocurrencies. Faux paints a damning picture of the criminal activity sustaining and supported by crypto.

Faux tirelessly pursues Davasini, including to El Salvador. In 2021, Nayib Bukele, its strongman president, made Bitcoin an official national currency. With the help of Davasini, Bukele is now apparently planning a volcano-powered ‘Bitcoin City’. It’s difficult to work out if El Salvador’s experiment has been a success or failure, however – largely because no public body tracks how much money the public spends with Bitcoin and the health of the government’s Bitcoin reserves is hidden from all public view.

Lewis and Faux take very different approaches to their subject. But both books come to the same conclusion that Bitcoin is little more than a mind-bending Ponzi scheme.

All in all, the real question goes unasked – namely, why is something so pointless still seducing so many wealthy and powerful people? Until we can answer that, we won’t be able to get to the bottom of the great crypto mystery.

Henry Williams is a writer based in London.