Crypto frauds

Crypto promised finance without trusted middlemen. Yet its biggest losses came from middlemen.

Tokyo, early twenty-tens. Mt Gox is the largest bitcoin exchange in the world.

In February two thousand fourteen, it froze withdrawals, then went bankrupt. About eight hundred and fifty thousand bitcoins had vanished.

Years of hacking and accounting chaos, without anyone seeing. Part was found, but repayments only began in two thousand twenty-four.

First lesson: on an exchange, you do not really hold bitcoins. You hold a promise from the exchange.

May two thousand twenty-two. UST is a stablecoin meant to be worth one dollar. But it has no real dollar reserves.

Its peg rests on an algorithm and a twin token, LUNA. You can always swap one UST for one dollar of LUNA, created for the occasion.

An associated platform promises nearly twenty per cent a year on UST. Money pours in.

Say ten thousand dollars invested: two thousand dollars of interest a year. As long as everyone stays, it holds.

In the app, this chapter is animated and narrated, card by card. Start free trial.

Download on theApp Store

Then big withdrawals knock UST off its peg. To defend it, the system creates LUNA by the billion. Its price collapses, and UST with it.

In a few days, about forty billion dollars of value evaporate. The ten thousand dollars are worth only a few hundred.

November two thousand twenty-two. FTX, one of the biggest exchanges in the world, had been valued at thirty-two billion dollars at the start of the year.

An article reveals that its sister company, Alameda, mainly holds FTX's own token. Clients panic and withdraw.

About six billion dollars are requested in three days. FTX cannot pay: clients' money had been used by Alameda.

On the eleventh of November, bankruptcy. Its founder, Sam Bankman-Fried, would be sentenced to twenty-five years in prison.

Last scam, the simplest: the rug pull. The rug is pulled from under the buyers' feet.

Unknown people launch a token, push the price up with great fanfare, then leave with the money deposited. The project evaporates.

In late two thousand twenty-one, a token inspired by a hit series climbed above two thousand dollars. But its buyers could not sell.

Within minutes, it fell almost to zero. Its creators disappeared with more than three million dollars.

Four cases, four faces: the badly run exchange, the yield with no reserves, client money diverted, the ghost project.

And always the same spring: trusting a promise you cannot check.

If you touch crypto, only leave on an exchange what you can afford to lose. And run from a yield nobody can explain.