Number Go Up: Inside Crypto's Wild Rise and Staggering Fall

by Zeke Faux

The coins were transparently useless, and people were buying them anyway. A journalist composing a painstaking exposé of a crypto scam seemed like a restaurant critic writing a takedown of Taco Bell.

What they explained to me was that for all the talk of peer-to-peer currency, and the ingenuity of a way to transfer value without an intermediary, most people weren’t using cryptocurrencies to buy stuff. Instead, they were sending regular money to exchanges, where they could then bet on coin prices. The crypto exchanges, like Bankman-Fried’s FTX, were essentially giant casinos. And many of them, especially in the early days of crypto and outside the United States, couldn’t handle dollars because banks wouldn’t open accounts for them, wary of inadvertently facilitating money laundering. This was where Tether came in. When customers wanted to place a bet, they first bought some Tethers. It was as if all the poker rooms in Monte Carlo and the mahjong parlors in Macau sent gamblers to one central cashier to buy chips. The biggest traders made their money by facilitating countless smaller bets, like Jay’s envy-inducing Dogecoin win. They needed to move big sums of money from exchange to exchange, and they did it with Tether. They said they routinely bought and sold hundreds of millions of Tethers and viewed the currency as an industry standard. Even so, many had their own conspiracy theories about Tether. It’s controlled by the Chinese mafia; the CIA uses it to move money; the government has allowed it to get huge so it can track the criminals who use it. It wasn’t that they trusted Tether, I realized. It was that they needed Tether to trade and they were making a lot of money...

But running a stock scam is a lot of work. It requires crooked lawyers, brokers, and bankers to draft reams of securities paperwork, even if all the information in them is false. And that leaves a paper trail that pretty much inevitably leads to the scammers getting busted. Crypto didn’t require any of that. All it takes is some rudimentary programming, which can be done by freelancers hired online, and some posts by a social media influencer.

The returns didn’t strike the Filipinos I talked to as unreasonable. But a more sophisticated investor would have realized the daily rate of return was 8 percent—way, way too good to be true. At that rate, with earnings continually reinvested for ten months, Lapina and everyone else who bought a single set of Axies would be trillionaires.

QUIGAN MIGHT NOT have been angry, but I was. Crypto bros and Silicon Valley venture capitalists gave Filipinos false hope by promoting an unsustainable bubble based on a Pokémon knockoff as the future of work. And making matters worse, in March 2022, North Korean hackers broke into a sort-of crypto exchange affiliated with the game and made off with $600 million worth of stablecoins and Ether. The heist helped Kim Jong Un pay for test launches of ballistic missiles, according to U.S. officials. Instead of providing a new way for poor people to earn cash, Axie Infinity funneled their savings to a dictator’s weapons program.

It struck me that almost any of the companies I’d heard about would be good fodder for an investigative story. But the thought of methodically gathering facts to disprove their ridiculous promises was exhausting. It reminded me of a maxim called the “bullshit asymmetry principle,” coined by an Italian programmer. He was describing the challenge of debunking falsehoods in the internet age. “The amount of energy needed to refute bullshit is an order of magnitude bigger than to produce it,” the programmer, Alberto Brandolini, wrote in 2013.

A COMMON MISCONCEPTION about NFTs is that the buyer owns a unique, verifiable digital image. That’s not the case. There’s nothing stopping anyone from simply right-clicking Justin Bieber’s ape and downloading the image file to their computer. The replica is indistinguishable from the $1.3 million original, and perfectly usable for a profile picture. What a Bored Ape buyer pays hundreds of thousands of dollars for is not a digital ape cartoon—it’s the ability to prove they are the one who paid hundreds of thousands of dollars for a digital ape cartoon.

Comedian John Oliver later summarized Do Kwon’s nonsensical business plan: “One blorp is always worth one dollar. And the reason I can guarantee that is I’ll sell as many fleezels as it takes to make that happen. Also, I make the fleezels.”

“Money makes people lose their humanity.”

From what I had learned, it seemed that this scam slave complex would not be able to operate without crypto. And the benefits of crypto to the rest of the world seemed to be limited to enabling a zero-sum gambling mania. Crypto bros routinely claimed that anonymous, untraceable payments on the blockchain would somehow help the world’s poor. But it seemed like none of them had bothered to look into what their technology was actually being used for. Tricking Filipinos into going into debt for a pipe dream based on Smooth Love Potions was bad enough. But aiding and abetting enslavement?

Sometimes I couldn’t help but imagine she was sending a message about Tether itself, like one piece that had a red sign that read, Sorry You’re FUCKED, and a blue one that said, Sorry we’re NOT FEDERAL and have NO RESERVE.

To be clear, if that’s what he was thinking, it was the logic of a megalomaniac, not a martyr. The money wasn’t his to gamble with, and “the ends justify the means” is a cliché of bad ethics.

“I was comfortable taking the risk that, like, I may end up kind of falling flat,” he said, staring at his computer screen, where he was leading an army of cartoon knights and fairies into battle. “But what actually happened was disastrously bad and, like, no significant chance of that happening would’ve made sense to risk, and that was a fuckup. Like, that was a mass miscalculation in downside.”

“FTX was a legitimate, profitable, thriving business. And I fucked up by, like, allowing a margin position to get too big on it. One that endangered the platform. It was a completely unnecessary and unforced error, which like maybe I got super unlucky on, but, like, that was my bad.” “It fucking sucks,” he added. “But it wasn’t inherent to what the business was. It was just a fuckup. A huge fuckup.”

To me, it didn’t really seem like a fuckup. Even if I believed that he misplaced and accidentally spent $8 billion, he had already told me that Alameda had been allowed to violate FTX’s margin rules. This wasn’t some little technical thing. He was so proud of FTX’s margining system that he’d been lobbying regulators for it to be used on U.S. exchanges instead of traditional safeguards. Bankman-Fried himself had said that exchanges should never extend credit to a fund and put other customers’ assets at risk. He wrote on Twitter that the idea an exchange would even have that discretion was “scary.” I read him the tweets and asked: “Isn’t that, like, exactly what you did, right around that time?” “Yeah, I guess that’s kind of fair,” he said. Then he seemed to claim that this was evidence the rules he was lobbying for were a good idea. “I think this is one of the things that would have stopped.” “You had a rule on your platform. You didn’t follow it,” I said.

But his biggest complaint was the lack of internet access. He couldn’t read the latest stories about FTX, or occupy his mind with games like Storybook Brawl. He felt like he was going crazy. He would give his visitors lists of information he was looking for, and instructions about where to find it online, and then expect them to return to the jail with printouts the next day. “I was trying to pretend that I had an internet connection with a latency of one day,” Bankman-Fried later told a reporter.

The idea of an instantaneous way of transferring money around the world was still appealing. But I’d tried out the fox-head icon, and the idea everyone would one day store their cash in some version of it was preposterous. Traveling around the world investigating crypto had given me a new appreciation for my Visa card. It worked instantly, with just a tap, charged no fees, and never asked me to memorize long strings of numbers, or to bury codes in my backyard. It even gave me airline miles. When my wife’s account was hacked and used to book an Airbnb, we were given a full refund with just a phone call.

I didn’t think the prices of all of the cryptocurrencies were about to go to zero, or that we’d never see another hot new coin mint overnight billionaires. On the stock market, pump-and-dump scams have persisted for hundreds of years, and yet there are still new suckers willing to buy shares in some shell company that claims to have struck gold. The one coin I especially wouldn’t bet against is Bitcoin. It’s not that it’s useful—if anything, it’s more unwieldy than the others. But Bitcoin’s true believers are so convinced that it’s hard to imagine anything will change their minds. To them, whatever the question, the answer is “buy Bitcoin.” Everything they see is evidence Bitcoin will rise, like the members of a cult certain that the apocalypse—and their salvation—is just around the corner. —

And it said that it would use 15 percent of its profits to buy Bitcoins. Tether had once scoffed at critics who claimed its coins were being used to prop up the price of Bitcoin. Now the company was making that part of its business plan.