My former local community went all in on a bitcoin scam, they made commissions on new entrants so I never heard the end of it. I only talked about it when asked but my warnings not only fell on deaf ears I was effectively ostracized as people were worried that I would talk new entrants out of it. “Don’t talk to that guy, he’s a no-coiner who doesn’t want you to be rich, he’s ngmi”. It was worse than Amway. Even after the crash many of them still avoided me, I guess now out of embarrassment, or worry that I would shove it in their faces like they did to me. I would never. It destroyed the community and many local businesses.
Edit: just found out which one it was, it was USI Tech. It failed 4 years ago so it’s not even part of the latest crop. Just sad that it keeps happening.
The biggest rewards come from crossing the line and avoiding regulation/enforcement, either by legitimate or illegitimate means (including bribing enforcement officials).
Next biggest are rewards for crossing the line and delaying enforcement until you can launder your rewards to a safe haven.
If you're arrested and jailed - only likely in cases where you inconvenience certain very rich and powerful people, not ordinary folk - it isn't usually for long. And you can afford the best representation to minimise the risk.
So the risk profile is very much slanted towards rewarding the unscrupulous.
Example: Even after all the confusion around the $400m or so "missing" from Mt Gox, Mark Karpelès only received suspended sentences and spent no time in jail. Even after the recent crash, that's still more $1.5bn at 2022 values.
He was in jail from August 2015 to July 2016, if his wikipedia article is correct. The suspended sentence came after that.
I would happily spend a year in jail for $1bn+
For example, some fintech companies aren't groundbreaking from a tech perspective, but they make big strides on efficiencies from legacy systems. As long as you deliver value and are capturing some of that value, a business can be made.
Fintech - in any of its forms, as you note - takes the maxim to its conclusions and seeks rent over transactions themselves, which gradually inclines it towards zero-sum "find a mark to dump my toxic assets on" shenanigans. So the industry perpetually leverages itself into fragility on the backs of "rip to them but i'm different" leadership and whomever they can convince to come along. At the nation-state level this creates nasty entanglements of regulatory capture and debt that let market leaders who play the game well make rules for themselves and pay off enforcing bodies, which contributes to macro-scale misalignments in who is getting funded or regulated for what, and therefore many "ills of the market".
The tech of crypto assets themselves, on the other hand, is antifragile in construction: Winning at the trading game does not result in regulatory capture or bailouts, since the settlement ultimately takes place on-chain, and on-chain is an automated consensus, one relatively hostile to political machination. Rent-seeking doesn't scale up well with this kind of asset. You can pull a small-time scam, but it doesn't lead to an empire lasting for generations. And if your asset becomes too hard to trade in because you've come up with some crafty way of polluting it or gatekeeping it, it's substitutable in a way that state-backed instruments are not. Price survival over a crypto bear market is a pretty strong signal for a project, and as the market gets bigger it attracts bigger players trying to remake the rules with a slant so that they can win. It's escalated every cycle, and really is a phenomenon beyond retail now.
What this past cycle entailed was an attempt by larger fintech players to muscle in on the crypto game and apply various strategies to capture it by adding obfuscating instruments in the name of liquidity and yield. The ones who survived made an early exit or successfully derisked, but many of them committed to their strategy in a way that ensured they would lose. And from here on, the only remaining escalations of that game involve some of the largest amounts of capital on the planet - the biggest banks, or actual governments.
But to buy a Lamborghini? Only with an excellent, satisfying reason.[1] Like anything. Are you a man who wants to have sex with a girl who is underage? You can, if you marry her. But she's not an adult, so there's no possibility of a prenuptial agreement, you can marry her if you can accept that.
"Half."
--Eddie Murphy
[1] And not in the way people imagine it, like the hedonism of the noughts, showing off like that horrible show "MTV Cribs." Yeah they're literally cribs, not masochists like a real man ie fasting and running track and field. That's exactly what they are, cribs for babies. And then, on a recurring reddit post, they tell you all those cribs you saw were fake, when really many of them were real--telling you on blogs that "only Red Man's crib was his true living conditions"--just pulling the rug under you. They filmed actual places, they were all different, they didn't have the tech to fuck with that back then. Yeah they rented some houses for a week, but those houses were still meant to be cribs for babies. And it's a demonic show--a demonic channel--yeah it looks like MTV is beautiful but...no yeah suppose they're beautiful, that's the fastest way to learn what's up.
Because if some rando tells you to join Amway or invest in AmCOIN™ you will tell them to get bent, but if it's a trusted friend, you're much more likely to be open.
It's disgusting, but it happens. And in a small town, likely everyone goes to the same church or two, hangs out at the same bar, etc. It can spread like wildfire, though usually after the first few scams it becomes known and starts to die out a bit.
Sometimes you recognize the situation and decide to "participate" (read: lose some small amount of money in the scam) to stay in the community.
Thankfully no one in the group is dumb enough to go all in on this hyper risky investments but I can see how it would be easy to be talked into something if you're in an echo chamber.
Before anyone gets too worried I'm talking about spending a few hundred dollars each on stupid investsments over the course of a few years.
In case anyone has any illusions about how bad financial scamming can get, pyramid schemes famously led to civil war in Albania not that long ago.
Around 1999, my hometown (pop. ~600) fell for a conman. Like, the actual Town government, and almost everyone in it.
Pudgy, balding, middle-aged white dude breezed into town and seduced the owner of one of the motels. She kicks her husband out and starts taking Conman to town board meetings, etc. Eventually divorced husband.
Guy claims to be Hollywood connected, a wealthy promoter or agent, scouting locations for future filming, etc.
This goes on all summer, and the town manager and county administrator, and the whole board and chamber of commerce totally buy it, lock, stock, and barrel. Conman claims he can bring in some big country music star he knows. I don't remember who. I can't stand country, so why would I remember? Big star. Not Dolly big, but Boot Scooting Boogie big.
He convinced the town to foot the bill, that he would pay for everything once they had the final bill... and this podunk nowheresville town 60 miles from the nearest traffic light pays to fly this star in on a private jet, sets up a huge stage for her, and all like 50 of us that show up get a private concert. It sucked.
This whole time... Everyone in town is talking about this guy, right? And nobody is asking if he's legit. I mean, I did, but I had long hair and was a nobody, so...
Spoiler: he wasn't. Not even a month after the big concert, he disappeared with motel lady's (and her husband's) life savings, and obviously skipped on the million-odd bill for Peggy Rae or whoever TF it was.
Everyone looked like a moron. Motel lady declared bankruptcy and left town. I gloated mercilessly.
Idiots. They all voted Trump, too. Some people never learn.
> pays to fly this star in on a private jet, sets up a huge stage for her, and all like 50 of us that show up get a private concert. It sucked.
The concert actually happened? That's the craziest part of all of it.
Written by Conan OBrien. Had a Catchy song and had Leonard Nimoy cameo.
What tends to happen is that the first person who picks up some new scam does fairly well because there's no exact competition for whatever they're selling. They tell their friends, who are likely to join because they made an enviable amount of money, but returns drop off rapidly because most of the people who want whatever that company is selling already bought it from the first person (whose social network overlaps considerably) and at some point most of the money is coming from the people buying the initial inventory which will mostly sit in their garage.
The social dynamic also means that _nobody_ will ever admit that they lost money or made the equivalent of $2/hour even as they're giving away that unsold merchandise at baby showers for the next 5 years.
Cryptocurrencies have largely been the brilliant idea of capturing this dynamic for a different demographic (libertarian men).
https://www.theguardian.com/film/2021/may/30/against-all-odd...
Yes! It's not just crypto, either, this problem seems to be endemic in our political and economic power structures.
Exactly this. Can you imagine what regulatory capture by the NFT crowd would look like?
The amount of human capital spent on the thousands of hedge funds and financial products the last 30 years is staggering and we basically have nothing to show for it other than unproductive pooling of capital. Given the incentives though it is borderline individually foolish to build anything in the physical world.
I don't even think political corruption is near the worst part. It is the complete distortion of risk preferences and the distortion of what is even meant by "investing".
At least the financial swindlers of old actually laid down thousands of miles of rail in their process of swindling. Now in the name of market efficiency we have a systemic process of trading options on options on options on options in an endless chain to the point the underlie has practically vanished.
At least crypto is honest and doesn't even pretend there is an underlie, just a call option on nothing straight up. Everyone knows that is most of the financial system outside crypto too but with an accompanied financial theatrical performance by the participants. Even complete with Shakespearean bullshit language to make it sound more real.
"I am not trading options on thin air. This is an arbitrage opportunity on a derivatives price that will help to facilitate market efficiency. It is almost like the way a physical bridge facilitates people getting across a river but we don't have to waste years actually building a bridge, take a fraction of the risk of bridge building and the return is 100X better."
I am sure some future Edward Gibbon will come up with a name for this process while writing their historical masterpiece on why the West imploded.
Reminds me of an interview I watched with some hedge fund asshole talking about how they were "creating value" by raising the rent of old people in trailer parks. As if raising the rent of old people in trailer parks is basically like building a bridge across a river.
https://www.cnbc.com/2022/05/31/uk-plans-new-safeguards-for-...
London’s talking about regulating and ringfencing them. Not backstopping.
Same thing with Archegos (Bill Hwang) and their rapid failure. It’s the hubris that makes it fun to poke fun, the sun blastin’ Icarus’ wings clean off.
(no crypto exposure)
Those people make me sad. They got fleeced. Maybe they got lured in by the promise of easy money and should have known better, but that doesn't make it pleasant to watch lambs driven to the slaughter.
The other kind, the ringleaders and the ones gloating "HFSP" during more bullish times. That's comedic gold.
I mean there's a streamer I follow and generally like, but that interviewed Do Kwon on their stream, just a few weeks before it depegged. I wonder how many of their followers were the ones that lost the game of musical chairs. The halo effect is real.
And that's not even getting into the craven scumbags leveraging influencer marketing, like Stake.
The people with the hubris understand deep down that they are involved in a ponzi scheme, and the only way up and out is to herd the unsophisticated investor. Not that there's explicit malice here (though, sometimes it is), but there's the understanding that driving demand is what drives up the price.
There's a reason that so many fad "investments" follow this exact same path, time and time again.
I think this is overlooking why people are engaging in these types of investments to begin with: they're greedy speculators who got caught up in a get rich quick scheme. They don't know what this tech is, why it is or isn't useful, or how it works. They don't know what the investment risks are and don't make any attempt at mitigating risk. They don't seek expert assistance. Instead of doing basic research to make informed decisions, they see dollar signs and yolo with their life savings. I don't feel bad for them in the same way that I don't feel bad for people who fall for 419 scams. If you participate in get rich quick schemes that you don't understand, there is a high probability of getting owned. This exact same collapse in value happened only 5 years ago, how could people be caught flat footed twice?
Hypothetically speaking, if I really did warn someone, and they told me to "have fun staying poor!" or I pointed out the potential for a catastrophic collapse and the founder dismissed it as "r_tarded" and comparable events came to pass...
I say bring on the memes for those people.
This isn't a bunch of kind old grandmothers getting suckered in by Madoff.
On the one hand, there's a certain satisfaction or Schadenfreude in the sense of vindication. And it's pleasant to feel like my own wisdom or self-control has been validated.
OTOH, I know that everyone has limited wisdom / self-control / intelligence, including me. So it seems hypocritical to mock someone who trips, knowing that I'm just lucky to sometimes avoid the hazards that would trip me up.
In the end, about the only conclusions I'm really confident in is that trouble besets us all, and usually it's good to default to kindness and sympathy.
EDIT FOR CLARIFICATION: I'm not saying that I want swindlers to succeed. I want such predation crushed into dust. My comment is about the people who don't intend harm to others.