Mudsock Heights

Mudsock Heights

Credit: Timothy R. Butler/Stable Diffusion

Getting Nothing for Something

By Dennis E. Powell | Posted at 8:21 PM

Once per generation, it seems, those who have any money at all go berserk and, soon thereafter, bankrupt. It happened in 2000, plus or minus about three years, and it’s happening again now.

At the turn of the millennium people who should have known better willingly divested themselves of all the money they had or could borrow in what came to be known as the dot-com bubble. Investors and would-be investors fell all over themselves in a rush to purchase stakes in companies that were or claimed they were involved in the internet. Many of these companies had never made a dime and could not tell you how or even if they would ever make a dime. It didn’t matter, people were desperate to give them money. There were a few big winners, but these were companies who did have a stated path forward. There were many, many big losers, some of whom meant well and a lot of whom were swindles from the start. There was even an online joke about it. This predated “memes,” “emojis,” and suchlike, so it was in the form of a list:

  1. Idea

  2. ???

  3. $$$!

But at least some of the investors had some idea of what they believed the companies to which they’d given money intended to do. Yes, there were lots of obfuscatory buzzwords invented by people, some of whom may have actually believed them, which were confidently repeated by persons whose grift was trying to seem in the know when they were actually as confused as everyone else. (These characters are always around, as common as ticks in the summertime, and they are sadly amusing. They seem to believe that if they pretend to understand what others don’t, perhaps people will throw money at them. They often call themselves “consultants,” and it seems to well work enough that they are able to reproduce.) Still, the idea of internet business was not entirely divorced from reality.

In due course the dot-com bubble burst and investors crawled away to lick their wounds while those who had swindled them slithered off to plan their next big thing. When that bubble popped, it took the prices of shares in even very good tech companies down by three-quarters or more. Shares worth $100 earlier were now worth $25 or less. A lot of wealth just up and disappeared.

That’s child’s play compared to what’s going on now. We — individuals, companies, our country, the world — are in the midst of scams unprecedented in human history. And the contagion extends far beyond the idiots who are falling for these absurd get-poor-quick schemes. The futures of ordinary people who would never have anything to do with them are being jeopardized by them.

They are related but not the same, except that in both of them investors are expected to purchase things that do not exist by any reasonable definition of existence. They are nutty on their face, but fear of missing out — one of the sillier forms of greed — has led people who ought to know better to gamble enormous amounts of their own and other people’s money on them. Actually, it’s not right to call it gambling — when you gamble, long though the odds may be there’s some chance of winning.

The first is something called “NFTs” or non-fungible tokens. They are, really, nothing. Even sensible commentators have fallen for the idea that when you purchase an NFT you have bought something. You haven’t, in many cases.

Here’s an example. You go out and pay $1000 for an NFT representing a work of what is purported to be art. Do you ever receive the artwork? Well, no. Do you receive exclusive access to the item? Nope, anyone can look at it online, download it, print it out, frame it if they want. Yeah, but you own the copyright. No, in most cases, you do not. You have purchased a few lines of code that lead you to the item. Except you don’t even really have that — the “artwork” can always be deleted, moved to a different server. So all you’ve bought is what amounts to a receipt that says you paid $1000 for something that is or at least was located at an address on the web. That’s it.

The whole idea is that the receipt is kept very safe, or so it is said, on something called the blockchain. Great. The fact that you got swindled is memorialized forever. What you bought — and you don’t even really understand what it is — has a value of whatever someone else is willing to pay for it. There’s a finite number of idiots and investors’ access to money is finite, too.

The number of con artists willing to float NFTs not because they are good but because they’re not illegal yet seems infinite. Not everyone who has sold NFTs is a crook, but the “industry” is a broad and wide field for crooks, particularly in that a legitimate NFT is in important ways effectively indistinguishable from one cranked out by a swindler.

The second is the close relative of the NFT, something called “cryptocurrency.” Let’s look at the definitions of this compound word. “Crypto” means “secret.”

“Currency” means a medium of exchange generally accepted for payment. This requires that it have an agreed-upon value. (Even real currency fluctuates in value somewhat. During our current time of inflation, for instance, the value of the dollar has dropped. There are widespread union strikes underway in the West now because employers and unions do not agree as to how many dollars, pounds, whatever, are appropriate compensation for an hour of a person’s life.) But at least there is a general consensus as to the value of currencies in common circulation, constantly adjusted but usually in small increments. There was a time when currency was backed up by precious metals. Many of us might remember seeing U.S. dollar bills that until 1964 were emblazoned across the top with “Silver Certificate,” where now they say “Federal Reserve Note.” I have somewhere a $5 bill, found in an old book I bought, labeled “Gold Certificate.” The idea was that you could, at least theoretically, redeem that folding money for an equivalent amount of silver or gold. In fact, dollars, half-dollars and other coins down to the dime were made of that precious metal until 1964. Now instead of being backed by precious metals U.S. currency is pinned to “the full faith and credit” of the United States. This can be cause for concern, and often is, but it mostly works.

The concern I mentioned has from time to time led to unusual but understandable behavior. I remember my girlfriend’s father in 1980 showing me his stack of Krugerrands. These are South African gold coins. They were popular during times — such as 1980 — of high inflation. The dollar was no longer pinned to the value of gold, so a gold coin increased in value as the dollar’s value declined. They’re seen by economists as a “store of wealth” rather than an investment, in that they are inert and cannot produce value but instead are subject to the behavior of the world around them.

All this led to something called a “bitcoin,” invented in 2008. Its proponents call it a good, safe, fair, valuable alternative to “fiat” currencies — money systems under control of their respective governments. I think that it is, or at least has come to be, smoke and mirrors employed chiefly by swindlers to relieve the gullible and the greedy of their real money. Among “major” currencies — bitcoin plus the actual currencies in circulation — it alone has experienced wild swings in value in just the last year. Last March 30, a single bitcoin would cost a purchaser $47,457. As I write this Wednesday afternoon you can get a bitcoin for $17, 524. So this “currency” has lost two-thirds of its value in less than 10 months. That’s equivalent to inflation on a scale found only in South America. And that’s the “respectable” cryptocurrency. Cryptocurrencies are worth only what people will pay for them, just like NFTs. They have no fixed value and are backed by nothing.

There are many cryptocurrencies that are even dodgier — doge-ier, if you will. You can’t swing a cat without hitting three glib-tongued guys peddling the next big thing, the cryptocurrency they invented right after breakfast this morning. The embarrassing thing is that they and the others of their ilk are taken seriously. We’ve entered the era when full-on swindles are covered as legitimate businesses. Mark Twain and Charles Dudley Warner would be impressed.

Weirdly, the phenomenon is big on places like YouTube, where sometimes it seems half the “influencers” (as in “influenca epidemic”) seem to be hawking highly questionable NFT and cryptocurrency schemes, while the other half are investigating them and pronouncing them crooks. The site has been alive in recent weeks with the reports by a YouTuber calling himself “Coffeezilla,” who seems to have done very good reporting on what is apparently a scam orchestrated and promoted by a heretofore unflushable blob of protoplasmic waste called Logan Paul. That’s just the one that has floated to the top of the bowl. There are many, many more. To some extent the many well-documented crypto/NFT swindles present on the site can be seen as an efficient natural culling, the separation of money from people stupid enough to invest based on something they saw on YouTube.

But that doesn’t explain the influence of the one guy who has done much to bring the whole cryptocurrency fantasy crashing down.

When you hear Sam Bankman-Fried speak, you might wonder where he got the helium. It is tempting to think of him as one of the most devious and successful con artists of all time, but that would be wrong on two counts: It was obvious he was a swindler, but people with money were desperate to believe him, so he needed no special grifting skills. And he got caught, which runs counter to any notion of success.

For a time, he was the wonderboy of trendy leftist investment gurus. He appeared on stage with Bill Clinton. He lectured a congressional committee on investment transparency. He appeared on the covers of major financial magazines.

SBF, as he was adoringly called and is now just called, founded a cryptocurrency hedge fund called Alameda Research. He also founded FTX, a cryptocurrency exchange. This is where people could deposit their fundamentally valueless cryptocurrencies purchased for real money, or they could go there with real money to purchase fundamentally valueless cryptocurrencies. FTX even created its own cryptocurrency, called FTT. It might be argued that it never had value, but that’s not an issue anymore. He strapped the two companies together, so Alameda was able to lose pretty much all the money and money-substitutes held by FTX.

There is a kind of cryptocurrency/NFT scam called a “rug pull,” where investors get the metaphorical rug pulled out from under them and are left with nothing. SBF and his pals — two of whom have already entered guilty pleas to serious federal fraud charges and are said to be cooperating with investigators in hope of reduced sentences — didn’t do rug pulls. They took out the wall-to-wall carpet of the entire cryptocurrency industry, which is currently in the process of collapsing. It would have done that anyway, just as did the dot-com bubble of 20 years ago, not because people got wiser but because lies ultimately can’t bear their own weight.

Bankman-hyphen-Fried got arrested in the Bahamas and has been charged with various flavors of fraud and violation of election finance laws (!), and it could well be that it’s just the beginning. He has pleaded not guilty, which based on the accuracy of his previous statements on all subjects means nothing much. It’s likely he’ll think up his next swindle while living in public housing and wearing publicly supplied clothing, orange in color.

It’s all fun to watch, a kind of screwball morality play, except . . . real people are losing real money. For instance, the Ontario Teachers Pension Plan seems to have lost $95 million, so teachers there may face a choice between delaying retirement or visiting the trendy Canadian suicide booths. Everybody’s favorite couple turned nobody’s favorite couple, Tom Brady and Gisele Bundchen, seem to have had many millions of dollars in the care of SBF. There are many others. One hopes that at least they had a sense that they were buying smoke and mirrors ahead of time, but those hopes are probably in vain.

An old friend of mine, a savvy investor and father of one of my best friends, long ago gave me some advice: buy what you know and like. Which is to say if you can’t understand it, don’t buy it. Someone who knows nothing about horse racing and looking at the potential payoff from the long odds would bet on a three-legged horse. And lose.

We’re in an era in which people are buying things without the slightest idea what they’ve bought, which often is nothing.

Fearing the shakiness of the full faith and credit of the United States, they bet on the full faith and credit of the likes of Sam Bankman-Fried.

Dennis E. Powell is crackpot-at-large at Open for Business. Powell was a reporter in New York and elsewhere before moving to Ohio, where he has (mostly) recovered. You can reach him at

Share on:
Follow On:

Join the Conversation

1 comments posted so far.

Re: Getting Nothing for Something

sir your article is very helpful for all user . I liked your article

Posted by sanam gupta - Jan 23, 2023 | 11:45 PM

You need to be logged in if you wish to comment on this article. Sign in or sign up here.