The collapse of FTX was truly astounding. It was, I hope, the final capitulation moment for a crypto market that had essentially gone straight down for 12 consecutive months with very little reprieve. But I’d argue it was more than just a catalyst for simple paper losses, it was a soul-crushing collapse when market sentiment was actually improving after so many failures earlier in the year.
I privately messaged my BCR subs and several other crypto advocates who I try to engage with and the opinions on crypto as an industry following that event varied between disappointment, shock, and emphatic disgust. I even started to sense permanent exhaustion from crypto as an idea. And that was just within the community. The outside world had thoughts as well.
The disgraced CEO of FTX became a household name. We later learned Sam Bankman-Fried was comingling funds and loaning customer assets to his degenerate gambler friends at a ‘separate’ business that Bankman-Fried happened to also own. Reaction to FTX and SBF has truly transcended crypto over the last couple months but there is another crypto-villain who is much less known but arguably just as bad - if not worse if you take the view that SBF has been a useful idiot all along. That other villain?
Celsius was a centralized crypto business that offered high yields on crypto deposits. Those yields beat the yield of US treasuries and produced a real yield even with high CPI. I’ve written about Celsius, and by extension the CEL token a handful of times on this blog and you can read the receipts here, here, and here.
TLDR: I had an account with Celsius and at one point even shared my promo link so anyone else who wanted to use the platform for yield could do so as well. Thankfully, that link was never utilized. As time went on, I started to see flaws in the model and in the key metrics. I pulled funds and advised that readers did the same if they had accounts long before the company paused withdrawals.
Since then, Celsius has filed for bankruptcy, account holders have been publicly doxxed, and earlier this week we learned just how bad it actually was internally. According to court documents, Mashinsky was using customer funds to buy CEL token on the open market to keep the price elevated. That’s bad. What could make it worse?
In that time, co-founders Alex Mashinsky, Daniel Leon, and Nuke Goldstein sold millions of dollars worth of that token each over the last few years, up until the point the company declared bankruptcy. Mashinsky made at least $68.7 million in sales
Yup, that’s worse. As Portnoy used to say, I just spit out the coffee that I’m not even drinking. I’m going to flat out say if all of this is true and Mashinsky doesn’t end up in prison after all this, the whole justice system needs to be burnt to the ground.
Maybe everything needs to be burnt to the ground anyway.
Power of the Grift.
It's an energy field created by all living things. It surrounds us and penetrates us; it binds the galaxy together. - Kenobi
There are varying levels of grift. Some might even argue what I do is a grift. I certainly disagree but I can understand why there may be people who feel that way. I believe there are much better examples of grift. For instance, numerous large established institutions that have outlived their usefulness are essentially now just grifter operations. You can probably guess a few of them.
Offering ‘security’ after throwing a brick through a window = grift
Taxing the unborn to fund current consumption = grift
Expecting a license transfer to fund a retirement = grift
“Artificial Intelligence” that has political or lifestyle bias = grift
Drugs that alleviate the side effect of the side effect = grift
There are numerous others. You get the idea. At a base level I think it’s safe to assume if you’re selling solutions to problems that you’ve caused, you’re probably a grifter…
But Alex Mashinsky didn’t create grift. He simply thrived in a system that is built on grift. He didn’t create monetary inflation or negative yielding bonds. He didn’t write the accredited investor laws that have made investment-related wealth building more difficult for a financially brilliant Uber driver than it is for a dumb money surgeon. He didn’t create a monetary system that requires exponential growth through constant debasement of currency that erodes in purchasing power by design.
Celsius as an idea shouldn’t be criminal. The idea that people might be able to protect purchasing power through a yield earning dollar derivative at a time when inflation was almost double figures, shouldn’t be criminal. Alex Mashinsky was only able to allegedly steal from people because there was a real marketable opportunity in the product he was offering. Namely, a financial custodian that actually pays a meaningful rate for deposits. Obviously, his model didn’t work and he ultimately went too far.
Alex is a criminal, and a despicable one at that. But Sam might still be worse. Sam is the one who lobbied regulators to destroy his decentralized competitors. Sam is the one who wanted to criminalize competitive products with financial transparency built into the code. Sam was attempting to pull off an epic grift by using a system that is completely built on and greased by grift.
Mashinsky sucks. But he’s small potatoes compared to SBF in my view. Bankman-Fried tried to be a Kingpin and he almost pulled it off by using the regulators who are supposed to protect people from guys like him. This is a system that is incomprehensibly rotten. And it’s exactly why we shouldn’t lose sight of what public blockchain technology enables.
Blockchain is Inevitable
The citizens of the world are opting out of the grifter system. It is an entirely new system being built outside of the old one. It is a system where code is law, truth is evident, and permission isn’t required. And it’s going to happen with or without the grifter system’s stamp of approval. The grifters are not going to tell the people how the technology can be used. It will be precisely the opposite.
Voting, receipts, grants - the future is on-chain. This new era will require transparency at the governance level with the option for privacy at the individual level. This is the only way forward. And it is absolutely inevitable. The grifter system can’t stop it. The only option is to integrate with it or face certain extinction.