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

by Zeke Faux

Shares—or in the case of crypto, coins—are distributed at low prices to insiders, who trade them back and forth at higher and higher prices to create the appearance of demand. An aggressive sales pitch coupled with the rising share price brings in new investors. Some of the people who buy in are gullible. But most think they understand the game: Buy early, ride the wave, and sell before the inevitable crash. As the poet Alexander Pope, a South Sea investor, explained to his stockbroker in a letter in 1720: “Let but Fortune favor us, & the World will be sure to admire our Prudence. If we fail, let’s e’en keep the mishap to ourselves: But tis Ignominious (in this Age of Hope and Golden Mountains) not to Venture.” Or, put more simply by Mike Novogratz, an ex–Wall Street fund manager turned crypto investor: “This is going to be the largest bubble of our lifetimes. You can make a whole lot of money on the way up, and we plan on it.” Pump-and-dump scams were particularly popular in the 1980s and ’90s when discount brokers brought a new group of unsophisticated investors to the stock market. In that era, depicted in the movie The Wolf of Wall Street, annual losses to the schemes were as high as $2 billion a year. Of course, that’s $2 billion in gains, if you were the one doing the scamming. The money was so good that the Mafia even muscled in on the action. Gangsters would hand brokers paper bags of cash as bribes for pushing shares of their worthless companies to retirees. New Y...