The Fraudulent Design Language of Cryptocurrency

Having served for almost 20 years in the SEC Division of Enforcement, including 11 years as Chief of the SEC's Office of Internet Enforcement, my take is that the design language of the current global crypto-Ponzi scheme is a multi-faceted grift.?

Based on my extensive research , crypto-fraud is perpetrated on multiple levels, comprised of a broad range of falsehoods and misrepresentations, all meticulously calculated to dupe consumers, customers and investors.

Catalogued (briefly) in this article are 12 of the more egregious examples.

A Crypto-Dirty Dozen: A Sampling of Crypto's Fabrications and Falsehoods

Crypto is a revolutionary equalizer for the unbanked and will cure historical issues of financial inclusion.?False . Crypto is just another exemplar of “Predatory Inclusion” and affinity fraud, orchestrated shamelessly to dupe the disadvantaged and disaffected.?

At its heart, crypto facilitates a uniquely innovative means to restore freedom and liberty to individuals.?False . Unable to displace legitimate currencies, crypto has become a perilous and vacuous asset without critical and traditional guardrails, oversight and protections.

Crypto offers an amazing opportunity to reap the extraordinary benefits of modern decentralization.?False . Wealth and power in DeFi are more concentrated than in traditional finance, and the resultant centralization creates conflicts of interest and affords easy opportunities for exploitation.?

Crypto allows investors to profit from blockchain, an exciting high-tech break-through and once-in-a-lifetime game-changer.?False . A mere record on a glorified limited-writer, append-only database linked to the solution of a very complex yet entirely meaningless and irrelevant mathematical problem is not, and will never be, a financial and societal panacea. It's nothing more than mathematical computative blather.?

Crypto works brilliantly as a currency.?False . Crypto fails as a "currency" because the price is too volatile; fees too high; taxes too burdensome; and risks too infinite. How can anyone accept crypto as payment when it could be worth a lot less the next day?

Crypto works brilliantly as an investment.?False . Crypto fails as an "investment" because there's no regulatory oversight, transparency, consumer protections, insurance, licensure, net capital requirements, and the crypto rug-pull bazaar is so rife with market manipulation, insider trading and fraud, investors stand no chance from the get-go.??

Investing in crypto provides an ideal hedge against inflation.?False . The value of the crypto market overall has plummeted alongside dramatically rising inflation, with bitcoin, for example, losing half of its value since January, 2022.?

Crypto is a brilliant store of value.?False . Crypto fails as a store of value because it lacks utility and intrinsic benefit, the measure of what an asset is actually worth. Crypto has no value to store and crypto's price is solely dependent upon the greater-fool-theory.

Given its immutable/permanent blockchain record, criminals using crypto are easier to catch.?False . The stark reality is that given crypto's pseudonymity, most criminals using crypto will never get caught and their crypto gains will never be recovered. This is axiomatic. Hence, the lengthy laundry list of crypto's dire externalities.

Crypto is a scourge but bitcoin is different, so don’t mistakenly conflate bitcoin with crypto.?False . Like all crypto, bitcoin is not at all decentralized — not only do miners group together to form mining pools but bitcoin wealth and volume is also hugely concentrated. Bitcoin maximalists want to separate bitcoin from the rest of crypto to create the illusion of scarcity in a world where there is none.

Crypto marketplace trading and pricing data is reliable and trustworthy. False . Crypto market-capitalization numbers and other traditional data points are significantly distorted by misleading trades, double counting, lost coins and an array of other inherently imperfect information.

Crimes committed with fiat currency are far worse than crimes committed with crypto. False . Yes, legions of criminals have committed crimes using fiat currency, that is true. But crypto has evolved into the killer app for criminals, ushering in a crypto-crime wave of epic proportions. The scale of crime in crypto is orders of magnitude greater than what it is in traditional finance.

Final Thoughts

Some argue that the victims of crypto-frauds like Voyager , Terra , Celsius , BlockFi , FTX and so many others deserve little sympathy, asserting that crypto-investors assumed the risk of such a dangerous and unregulated investment. But I disagree.

Having spent the entirety of my professional life interacting with victims of cyber-crimes and securities frauds, I can appreciate that it's not always easy to rebuff:

• The relentless social media crypto-hype and bluster of FOMO and diamond hands pitched by an endless parade of celebrities and professional athletes ;
• The extraordinary breadth, precision and allure of false promises of a transformative get-rich-quick technological revolution ;
• The exponentially growing cadre of crypto-victims who become crypto-victimizers ; and
• The sinister legion of slick, professional crypto-charlatans and blockchain con-artists .

Because the cult of crypto turns victims into victimizers, vulnerable and desperate investors stand little chance against the relentless barrage of crypto chicanery, fraud and hocus-pocus. P.T. Barnum was spot-on when he declared that there's a sucker born every minute . This is why, From tulips to tokens , Ponzi schemes like crypto have thrived for centuries. My take: It's time to stop the hustle.