One of the things I’ve learned over ~15 years investigating technology and investment fraud is this: Fraud is mostly committed by people too incompetent to succeed without it.
“
I wonder what is “fraud,” “mostly,” “incompetent,” and “succeed.”
Let's start with “fraud.” Fraud isn't always illegal in some senses of the word. In some senses it is just immoral gain. It's not even clear what it is meant to gain: money, property, or some other thing of “value.” But the method to gaining seems to always involves deception, lying, or otherwise misrepresentation.
Basically “fraud” seems to simply mean lying to gain, likely financially, likely illegally.
Then there is “mostly.” Mostly in both the grandiose and pedestrian sense? Because pedestrian fraud might be often, but it could also be fairly inconsequential. Someone lies that a product is on sale, but the 10 cent discount is actually the same price it was before. Enough times and by enough people and pedestrian fraud may aggregate into being important. But pedestrian fraud doesn't make the news, because, well, it's pedestrian. And likely not as impactful as, say, the fraud committed by billionaires who deal with inconceivable amounts of money. And when frequency is weighted by importance/impact, is it still “mostly?”
“Incompetent” kind of depends on the type of fraud. Because I could see a pedestrian, street con of fake speakers in a trunk being easier, but also not very sustainable. Those conmen very well may not be competent in many areas. But the grandiose frauds and fraudsters, those are never one transaction or one person deceived. That takes a kind of competence in deception that frankly would be surprising to suggest all other competence completely lacking. It requires a skill set, not just a single skill.
“Succeed” also is ambiguous. Perhaps success is just contained in what is gained directly from the deception. But that means the fraud pretty much has to be a success, as if it failed, there would be arguably no harm, which I think is generally needed to be demonstrable in criminal or civil cases. And presumably if a fraudster lost such a case that might undo their success. But if they didn't lose, or are never tried, then they theoretically keep their narrow definition of success. Essentially, fraud always succeeds, except it sometimes then loses. But if it doesn’t first succeed, then it's not fraud, it is merely be an attempt at fraud.
So the narrow definition doesn't help much.
I think most would agree that to succeed in fraud doesn't necessarily make one a success in a more broad sense. Or, for that matter, to fail (or rather have their success undone) in fraud wouldn't make one a failure in a broad sense. Certain not a complete failure. Even the most unsuccessful-at-fraud fraudster in the world has probably succeeded in something, like tying their shoes, at least once (SBF certainly must have managed it at least once).
So what about the broad sense? If you look at fraud as just lying to gain, and just one fraud makes one a fraudster, and success in the broad sense as power/money, well let me just gesture generally to all the rich and powerful people running things right now. And you tell me if fraudsters are successful.
However, I do not think they are all morons. I think instead they were all born privileged. And I think for that reason alone they would probably still be a “success,” even without fraud, based on our Western ideals (though I doubt fetishized capitalism has really been contained to a geographical area, that seems even more Western to assume exotic Eastern sensibilities) . Would they have succeeded /as much/ without fraud? Maybe it depends on cultural climate. At this exact moment in history, it looks like anyone who isn't a fraudster is seen as a threat to try to neutralize. I hope I, and everyone else, lives to see a day when that's not the case.
But I just don't know. I don't know for a fact how fraudulent it is or has been in other times and places. I don't know about the pedestrian fraud not considered worth reporting. Nor much about the grandiose fraud unknown and thus unreported. I don't know what kind of fraud we are considering mostly. I don't know if incompetence is about just the fraud act or beyond. I don't know if success is just the fraud act or beyond. I don't know if DZM has exact meanings for these words where his statement is definitely and definitively true. But I wouldn't be surprised if he could come up with them if he hasn't already. I could probably come up with definitions that would make it a fairly robust statement. But ultimately, I don't know what the definitions are, so I don't know what to think about that.
–
“
In early 2023, I wrote, produced, and directed a 4-part documentary podcast on the fraud called “Lunacy” for CoinDesk, and I think it’s still very worth a listen.
“
What I can personally attest to, is it is worth a read. As a read, it is insanely entertaining and informative. I don't listen to anything crypto, and I definitely don't watch videos about it. I think fraud is easier when you can manipulate emotions, and emotions are easier to manipulate through video and sound.
Look at the debate between Trump and Biden. A transcript would clearly make Trump look completely “incompetent.” But he is very competent at seeming confident while spouting complete gibberish. A decline is not very steep when it's already pretty close to the ground, so he's had his entire life to practice being confident while spouting nonsense. Further one could consider that a moral or mental ground, either way one is spouting nonsense. Any decline by Biden would be far more sudden and unfamiliar. Thus it may be forgivable that he was perhaps slow to realize or, more importantly, adapt. Further, the time leading up to the debate could very well have been much harder on him. He might have spent it cramming on actual facts, and late night cramming is definitely a young man's game. His opponent has never seemingly needed those. Thus, whatever crackpot anecdote he might have heard on a recent flight he could end up misremembering and spouting at the debate. Sadly, confident and incompetent seemingly trumps timid and inconsequential. Seemingly, as we'll never really know had he not dropped out. But of course, maybe none of that matters as much as voter suppression. https://www.gregpalast.com/trump-lost-vote-suppression-won/
I have definitely digressed.
Anyway, I believe that avoiding emotional manipulation is necessary for critical thinking. Which means relying on reading icky books by irrelevants like Shakespeare. If this means I miss out on good audio-visual content by those I /do/ trust to not be a fraud, like DZM, then so be it.
totally transparent about building a perpetual motion machine that anyone with a single functioning financial brain cell should have instantly recognized wouldn’t work
“
Way too generous to call Do Kwon totally transparent about anything.
1. Never revealed his involvement with Basis Cash, which I think we can definitively say he was involved with before. Basis Cash, on the other hand, was actually, seemingly, transparent despite being pseudonymous. And crashed quickly.
2. Part of what made it transparent was Basis was /only/ the perpetual motion machine. With Luna it was supposedly going to tie in with the Chia payment system (which is not Chia the crypto DePIN, but some Korean digital financial/e-commerce network or something). But it didn't really.
If some crackpot said he created a perpetual motion machine that he decided to add an orange juicer to, and it actually lost energy, but not a lot, and made pretty good orange juice, you might buy it. Similarly Chia is a big thing in Korea, supposedly, so that might have been a good enough reason to invest–if you were willing to believe Do Kwon (as, again, Luna never in any significant way was integrated with Chia).
And then there's this: “scheming behind the scenes with Jump, Galaxy, and probably others to pump up the pyramid”. That is kind of like a hidden juicer (pun intended). Chia was like we added an orange juicer, trust us, there is /so much/ juice right now. Jump particularly was like there is nothing on this contraption to explain all this juice, but it's there, people are drinking it (getting Anchor rewards, peg being stable, well after it seems sentiment was ready for death spiral).
That is obviously not transparent and more importantly could lead to people jumping on the bandwagon even if they think it's BS, even if they don't understand it. Rewards are rewards. Every other time: death spiral. Something is going on. Of course, the vast majority of people shouldn't. As the vast majority can't exit in the microseconds needed when something that shouldn't work, seems to work, and then doesn't work.
Further, if something is working that shouldn't, it could be: a) you don't understand it (possible but doubtful in this case), b) it's working temporarily by taking money away from old investors unknowingly a la ponzi (likely, and frankly not something you want to try to time longing or shorting), or c) is not temporary money shifting but instead fulfilling a robust / more-long-term “need” that nonetheless cannot be openly revealed to most investors (e.g. money laundering). I wouldn't be surprised if some people thought Do Kwon was just doing for Koreans what a certain crypto personality is/was likely/possibly doing for the Chinese with a technology that was basically a copy/paste of a better established and more supported technology (Ethereum). Maybe they thought even though he was South Korean, he was laundering for Lazarus, and that's how Anchor was affording the returns. Who would know? And you know what they say about Lazarus, biblically that is. In which case, what death spiral, right?
We can say that with SBF, Do Kwon, it's b. Simply misappropriating funds. But then you got Tether, Tron. Which may be c. Doing something that is desired, and profitable, but explicitly unknown, likely because it can't be done openly. Because Tether has many times lost credibility regarding actual asset backing and Tron has many times lost credibility regarding decentralization and innovation. That suggests it has gotta be “something else.” They certainly are doing whatever it is pretty well, and have for a pretty long time, and of course the greatest supply of USDT is /on/ Tron, so it suggests whatever they are doing they are essentially doing together. Criminal investigations surround both. The leader of Tron only getting his SEC case dropped once the president of Cantor Fitzgerald, which “handles” assets for Tether, started working for a felon also known as the President of the United States, also known as the person “associated” with a crypto “project” that the leader of Tron “invested” in.
One has to wonder, between b and c, is it only b that collapses spectacularly? In TradFi, you got Enron and Credit Suisse, the former is gone, but the latter survives.
When it's in the shadows, it could be either. At least it's understandable that an investor (scrupulous or not) might think even if it makes no sense, it's something that might keep making money and not go away any time soon.
–
“
All of this is not exactly, like, a crime, I guess?
“
Shouldn't astroturfing be illegal? These “promoters” are not human, I presume, or at the very least they are definitely not presenting themselves as paid sponsors. That seems clearly like misrepresentation. That seems like fraud to me. Can you tie it back to Milton? Maybe not, if the “advertisement” was a service by another company. One that had too good to be true prices for, say, x number of promotions online (that conveniently leaves out mentions of whether the promotions are paid). But stopping the companies offering those services would be a great starting point, if nothing else. Because the more difficult it is made to astroturf, the less plausible deniability astroturfers, from clients to contractors, will have going forward. Certainly our current regulatory environment will be conducive to stopping it, right?
“
One of the things I’ve learned over ~15 years investigating technology and investment fraud is this: Fraud is mostly committed by people too incompetent to succeed without it.
“
I wonder what is “fraud,” “mostly,” “incompetent,” and “succeed.”
Let's start with “fraud.” Fraud isn't always illegal in some senses of the word. In some senses it is just immoral gain. It's not even clear what it is meant to gain: money, property, or some other thing of “value.” But the method to gaining seems to always involves deception, lying, or otherwise misrepresentation.
Basically “fraud” seems to simply mean lying to gain, likely financially, likely illegally.
Then there is “mostly.” Mostly in both the grandiose and pedestrian sense? Because pedestrian fraud might be often, but it could also be fairly inconsequential. Someone lies that a product is on sale, but the 10 cent discount is actually the same price it was before. Enough times and by enough people and pedestrian fraud may aggregate into being important. But pedestrian fraud doesn't make the news, because, well, it's pedestrian. And likely not as impactful as, say, the fraud committed by billionaires who deal with inconceivable amounts of money. And when frequency is weighted by importance/impact, is it still “mostly?”
“Incompetent” kind of depends on the type of fraud. Because I could see a pedestrian, street con of fake speakers in a trunk being easier, but also not very sustainable. Those conmen very well may not be competent in many areas. But the grandiose frauds and fraudsters, those are never one transaction or one person deceived. That takes a kind of competence in deception that frankly would be surprising to suggest all other competence completely lacking. It requires a skill set, not just a single skill.
“Succeed” also is ambiguous. Perhaps success is just contained in what is gained directly from the deception. But that means the fraud pretty much has to be a success, as if it failed, there would be arguably no harm, which I think is generally needed to be demonstrable in criminal or civil cases. And presumably if a fraudster lost such a case that might undo their success. But if they didn't lose, or are never tried, then they theoretically keep their narrow definition of success. Essentially, fraud always succeeds, except it sometimes then loses. But if it doesn’t first succeed, then it's not fraud, it is merely be an attempt at fraud.
So the narrow definition doesn't help much.
I think most would agree that to succeed in fraud doesn't necessarily make one a success in a more broad sense. Or, for that matter, to fail (or rather have their success undone) in fraud wouldn't make one a failure in a broad sense. Certain not a complete failure. Even the most unsuccessful-at-fraud fraudster in the world has probably succeeded in something, like tying their shoes, at least once (SBF certainly must have managed it at least once).
So what about the broad sense? If you look at fraud as just lying to gain, and just one fraud makes one a fraudster, and success in the broad sense as power/money, well let me just gesture generally to all the rich and powerful people running things right now. And you tell me if fraudsters are successful.
However, I do not think they are all morons. I think instead they were all born privileged. And I think for that reason alone they would probably still be a “success,” even without fraud, based on our Western ideals (though I doubt fetishized capitalism has really been contained to a geographical area, that seems even more Western to assume exotic Eastern sensibilities) . Would they have succeeded /as much/ without fraud? Maybe it depends on cultural climate. At this exact moment in history, it looks like anyone who isn't a fraudster is seen as a threat to try to neutralize. I hope I, and everyone else, lives to see a day when that's not the case.
But I just don't know. I don't know for a fact how fraudulent it is or has been in other times and places. I don't know about the pedestrian fraud not considered worth reporting. Nor much about the grandiose fraud unknown and thus unreported. I don't know what kind of fraud we are considering mostly. I don't know if incompetence is about just the fraud act or beyond. I don't know if success is just the fraud act or beyond. I don't know if DZM has exact meanings for these words where his statement is definitely and definitively true. But I wouldn't be surprised if he could come up with them if he hasn't already. I could probably come up with definitions that would make it a fairly robust statement. But ultimately, I don't know what the definitions are, so I don't know what to think about that.
–
“
In early 2023, I wrote, produced, and directed a 4-part documentary podcast on the fraud called “Lunacy” for CoinDesk, and I think it’s still very worth a listen.
“
What I can personally attest to, is it is worth a read. As a read, it is insanely entertaining and informative. I don't listen to anything crypto, and I definitely don't watch videos about it. I think fraud is easier when you can manipulate emotions, and emotions are easier to manipulate through video and sound.
Look at the debate between Trump and Biden. A transcript would clearly make Trump look completely “incompetent.” But he is very competent at seeming confident while spouting complete gibberish. A decline is not very steep when it's already pretty close to the ground, so he's had his entire life to practice being confident while spouting nonsense. Further one could consider that a moral or mental ground, either way one is spouting nonsense. Any decline by Biden would be far more sudden and unfamiliar. Thus it may be forgivable that he was perhaps slow to realize or, more importantly, adapt. Further, the time leading up to the debate could very well have been much harder on him. He might have spent it cramming on actual facts, and late night cramming is definitely a young man's game. His opponent has never seemingly needed those. Thus, whatever crackpot anecdote he might have heard on a recent flight he could end up misremembering and spouting at the debate. Sadly, confident and incompetent seemingly trumps timid and inconsequential. Seemingly, as we'll never really know had he not dropped out. But of course, maybe none of that matters as much as voter suppression. https://www.gregpalast.com/trump-lost-vote-suppression-won/
I have definitely digressed.
Anyway, I believe that avoiding emotional manipulation is necessary for critical thinking. Which means relying on reading icky books by irrelevants like Shakespeare. If this means I miss out on good audio-visual content by those I /do/ trust to not be a fraud, like DZM, then so be it.
–
“
totally transparent about building a perpetual motion machine that anyone with a single functioning financial brain cell should have instantly recognized wouldn’t work
“
Way too generous to call Do Kwon totally transparent about anything.
1. Never revealed his involvement with Basis Cash, which I think we can definitively say he was involved with before. Basis Cash, on the other hand, was actually, seemingly, transparent despite being pseudonymous. And crashed quickly.
2. Part of what made it transparent was Basis was /only/ the perpetual motion machine. With Luna it was supposedly going to tie in with the Chia payment system (which is not Chia the crypto DePIN, but some Korean digital financial/e-commerce network or something). But it didn't really.
If some crackpot said he created a perpetual motion machine that he decided to add an orange juicer to, and it actually lost energy, but not a lot, and made pretty good orange juice, you might buy it. Similarly Chia is a big thing in Korea, supposedly, so that might have been a good enough reason to invest–if you were willing to believe Do Kwon (as, again, Luna never in any significant way was integrated with Chia).
And then there's this: “scheming behind the scenes with Jump, Galaxy, and probably others to pump up the pyramid”. That is kind of like a hidden juicer (pun intended). Chia was like we added an orange juicer, trust us, there is /so much/ juice right now. Jump particularly was like there is nothing on this contraption to explain all this juice, but it's there, people are drinking it (getting Anchor rewards, peg being stable, well after it seems sentiment was ready for death spiral).
That is obviously not transparent and more importantly could lead to people jumping on the bandwagon even if they think it's BS, even if they don't understand it. Rewards are rewards. Every other time: death spiral. Something is going on. Of course, the vast majority of people shouldn't. As the vast majority can't exit in the microseconds needed when something that shouldn't work, seems to work, and then doesn't work.
Further, if something is working that shouldn't, it could be: a) you don't understand it (possible but doubtful in this case), b) it's working temporarily by taking money away from old investors unknowingly a la ponzi (likely, and frankly not something you want to try to time longing or shorting), or c) is not temporary money shifting but instead fulfilling a robust / more-long-term “need” that nonetheless cannot be openly revealed to most investors (e.g. money laundering). I wouldn't be surprised if some people thought Do Kwon was just doing for Koreans what a certain crypto personality is/was likely/possibly doing for the Chinese with a technology that was basically a copy/paste of a better established and more supported technology (Ethereum). Maybe they thought even though he was South Korean, he was laundering for Lazarus, and that's how Anchor was affording the returns. Who would know? And you know what they say about Lazarus, biblically that is. In which case, what death spiral, right?
We can say that with SBF, Do Kwon, it's b. Simply misappropriating funds. But then you got Tether, Tron. Which may be c. Doing something that is desired, and profitable, but explicitly unknown, likely because it can't be done openly. Because Tether has many times lost credibility regarding actual asset backing and Tron has many times lost credibility regarding decentralization and innovation. That suggests it has gotta be “something else.” They certainly are doing whatever it is pretty well, and have for a pretty long time, and of course the greatest supply of USDT is /on/ Tron, so it suggests whatever they are doing they are essentially doing together. Criminal investigations surround both. The leader of Tron only getting his SEC case dropped once the president of Cantor Fitzgerald, which “handles” assets for Tether, started working for a felon also known as the President of the United States, also known as the person “associated” with a crypto “project” that the leader of Tron “invested” in.
One has to wonder, between b and c, is it only b that collapses spectacularly? In TradFi, you got Enron and Credit Suisse, the former is gone, but the latter survives.
When it's in the shadows, it could be either. At least it's understandable that an investor (scrupulous or not) might think even if it makes no sense, it's something that might keep making money and not go away any time soon.
–
“
All of this is not exactly, like, a crime, I guess?
“
Shouldn't astroturfing be illegal? These “promoters” are not human, I presume, or at the very least they are definitely not presenting themselves as paid sponsors. That seems clearly like misrepresentation. That seems like fraud to me. Can you tie it back to Milton? Maybe not, if the “advertisement” was a service by another company. One that had too good to be true prices for, say, x number of promotions online (that conveniently leaves out mentions of whether the promotions are paid). But stopping the companies offering those services would be a great starting point, if nothing else. Because the more difficult it is made to astroturf, the less plausible deniability astroturfers, from clients to contractors, will have going forward. Certainly our current regulatory environment will be conducive to stopping it, right?