Crypto is about a lot more than a former golden boy turned villain

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This week, we’ll dive into the results of a survey I conducted on the future of AI and what lies beyond the ChatGPT hype. And because you can’t always escape the hype, I also read a book about SBF — but not the one by Michael Lewis. Instead, I picked “Number Go Up: Inside Crypto’s Wild Rise and Staggering Fall” by investigative reporter Zeke Faux, and I am glad I did. — Anna

Ponzi everywhere

Although I just did, it’s not entirely fair to call Faux’s book “Number Go Up” an “SBF book.” Sure, it has several chapters on FTX’s founder, Sam Bankman-Fried, and the epilogue is mostly about his fate, which has been unfolding in court this week. But it’s also about crypto more broadly, and that’s a good thing.

It’s not that I don’t care about getting a better understanding of SBF’s personality. I listened to an entire podcast series about him, and my colleague Jacquelyn Melinek is also coming back from court each day with fascinating tidbits on his behavior. But just like the trial’s first witness was an alleged victim of FTX, I also want to hear from people whose lives have been affected by the rise and fall of crypto.

I haven’t yet read “Going Infinite,” the book that Michael Lewis just published on SBF. So I don’t know if it’s too lenient on its main character (though the interview the author gave to “60 Minutes” sure was). But Faux’s earlier profile of the FTX founder wasn’t exactly hard-hitting, either, because he focused more on whether he’d give up his wealth than on how legit it was in the first place. In his book, he recalls later asking him: “Did I go too easy on you?”

Where Faux excels, though, is in his skepticism about crypto. His view is that it’s not that complicated — “at least not the important parts.” And once you go past that supposed complexity, you are often left with numbers and reasonings that don’t add up — just like this weird mantra, “number go up,” that is supposed to encapsulate the nature of Bitcoin’s prices.

Faux is really good at expressing his genuine disbelief. When Celsius founder Alex Mashinsky tells Faux about the company’s business model, including paying high interest on deposits and lending money at low rates, the journalist can’t believe what he heard. “His plan, in other words, was to buy high and sell low. It sounded like a great way to lose money, or possibly a Ponzi scheme.”

Ponzi schemes are mentioned dozens of times in the book, and Faux asks several of the crypto people he encounters if they are involved in one. Some are comically bad at countering his question.

For instance, the co-founder of an app that rewards users for walking can only point out that his company is not acting as an intermediary. Once again, Faux is flummoxed by what he’s been told. “Essentially,” he rephrases, “he was arguing that by downloading the Stepn app and walking to earn tokens, crypto bros were Ponzi’ing themselves.”

Faux also adds historical perspective on crypto with his takes on what it does and doesn’t compare to. “Some compared crypto’s credit crisis to the 2008 financial crisis, when many U.S. banks had bet big on risky mortgage securities. But,” he writes in the aftermath of the Three Arrows Capital debacle, “I felt like that was giving crypto too much credit. It reminded me more of the network of ’feeder funds’ that collected money from investors and pushed it into Bernie Madoff’s Ponzi scheme, skimming off fees for themselves.”

Looking way further back than 2008, Faux sees similarities between dubious crypto practices and much older financial scams, such as wildcat banks and “the Big Store con,” a tactic from the 1900s in which swindlers encouraged their victims to make big gambles in fake betting parlors.

It would be easy to dismiss most people Faux talks to as a motley crew of (former) scammers and weirdos. But to quote SBF, “Nothing’s ever as black and white as it looks.” He was saying this in his own defense, but it also applies to the protagonists of some of the most poignant chapters in Faux’s book.

These chapters are the ones that take Faux all the way to Cambodia, where he meets fellow investigative journalists reporting on human trafficking. Together, they confirm that workers are held captive and forced to run online scams made possible by crypto. “I had thought Tether might be a giant scam. But I never could have imagined the money trail would lead to somewhere like this,” Faux writes after visiting Sihanoukville’s Chinatown.

The money trail also takes Faux to Miami, the Bahamas, Switzerland and El Salvador. Ironically, his focus on Tether doesn’t reward him with the collapse story he was expecting. “Back in 2021, I could have picked a company to investigate by tossing a dart at a wall full of crypto logos, and whichever one I’d hit would have probably blown up by now. Instead, I’d spent more than a year investigating one of the few that hadn’t.”

Narratively, though, the Tether thread pays off. The former plastic surgeon behind the stablecoin makes a great nemesis for Faux, who doesn’t have to say much to be hilarious about the CFO’s artist girlfriend and her Bitcoin art. And yes, if it wasn’t clear yet, the book is very funny, too. Special mention for Manhattan’s Bored Ape festival: It was well worth what it cost Faux to attend.

But while funny, “Number Go Up” is also deeply empathetic, and not just with those who are clearly victims. When Bitcoin bros and Bored Ape owners are wiping away tears about their virtual coins and avatars, Faux sounds perplexed, not hateful. His book is not about technology; it’s about people, because crypto is about a lot more than a former golden boy turned villain, and that story needed to be told — as it will hopefully be told in court, too.

Beyond ChatGPT

Have you been accused of being an AI? Unfortunately, this is happening to more and more students, content writing freelancers and customer support workers. This week, it was my turn: When I asked investors when artificial general intelligence could become a reality, if ever, one of them jokingly replied: “How do we know this wasn’t written by AGI?”

Well done, Karin Klein at Bloomberg Beta, that cracked me up. But jokes aside, I really enjoyed hearing from her and other VCs on where they think AI is headed. This is the first part of a three-part series that had me and my colleagues gather insights from investors on the various parts of the AI puzzle, looking well beyond the hype.