CHAPTER 1
MONEY AND LYING
This is a book about cryptocurrency and fraud: a parable of money and
lying, or rather a parable of fake money and lying for money. Thematically,
it bears striking resemblance to a popular folktale. Unlike that tale,
however, this story is true.
We begin during the wild speculative mania of the Trump years. It was
the fleeting era of meme stocks, NFTs, and land sales in the metaverse.
While the marketing may have been new, the economics were familiar:
These get-rich-quick speculative schemes were merely the latest iteration of
casino capitalism. Political economist Susan Strange populated the term in
the 1980s, but its roots stretch at least as far back as the 1930s. In The
General Theory of Employment, Interest, and Money, economist John
Maynard Keynes rebuked the boom-and-bust cycles of stocks, where long-
shot gambles in unregulated markets—particularly prior to the invention of
securities laws—created and destroyed fortunes overnight. Almost a
century later, the casino descriptor proves even more apt: Cryptocurrencies
and their assorted byproducts are generally regarded by economists as at
best zero-sum. One person’s gain is another’s loss.
You may have noticed something about cryptocurrencies: They don’t do
anything. Sure, you can trade them, betting that one will rise or fall, but
they aren’t used for anything productive. Cryptos aren’t tied to anything of
real value, unlike shares in a company or a commodities future. They’re
computer code uncorrelated with any actual asset. Even the most arcane
financial products have some relation to something of use in the material
world.
Because they don’t actually create any value in and of themselves,
investing in cryptocurrency is more akin to gambling—shuffling assets
among participants in a game of chance. It’s the digital equivalent of
playing poker at a casino; you might win, you might not, but there is no
increase in overall utility. Nothing of value has been created by playing.
Zero-sum games are strictly competitive: For you to win, another player
must lose. Much like in a regular casino, the players themselves are
required to pay a small amount each hand to keep the game going. In
crypto, this comes from the fees charged by the exchanges, as well as the
costs associated with validating the transactions. In Las Vegas, it’s called
the rake, the amount the house takes from every pot. This means that, given
enough time, the average gambler will lose. It’s how casinos keep the lights
on. Given a long enough time frame, the house always wins—it has to.
To state the obvious, gambling is not really a valid use case for crypto.
You can gamble on literally anything that hasn’t happened yet. For
example, I could bet that you will finish the sentence you are currently
reading. (I win.) Even licensed gambling is not a productive use of capital,
and we will delve into its myriad drawbacks throughout this book, but at
least when you go to Vegas you know the odds. There’s a long list of rules
and regulations a casino must follow. There’s also entertainment value in
the experience. Gamblers may win or lose money at the tables, but at least
they’re comped a few drinks, they can have a nice dinner and catch a show.
Crypto is Vegas without the drinks, the dinner, or the show. At times, I
suspected it was even worse than that.
That brings us to the Golden Age of Fraud. Jim Chanos, the legendary
short-seller who coined the phrase, knows the subject well. Betting against
fraudulent companies like Enron and the German payments company Wire-
card made him a fortune. These days, Chanos sees fraud—defined as
deception for personal, usually financial, gain—almost everywhere he
looks. When I first started paying attention to financial markets in the fall of
2020, I came to a similar conclusion, a troubling sense that graft and deceit
had penetrated all aspects of the economy, operating with political and legal
impunity. It made me want to scream in anger—and to make a wager of my
own.
In 2016, the United States of America elected a con man as president.
Millions of Americans from all walks of life cast their votes for Donald
Trump over Hillary Clinton. Although Clinton won the popular vote by
millions, it didn’t matter. Thanks to the peculiar framework of the Electoral
College, the world’s largest economy elected a man who will lie about
anything. Donald Trump wasn’t the first liar to occupy the White House,
but he may have been the first to exist in a world beyond reason. He helped
form a political culture in which truth—factual consensus reality—didn’t
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