Commit to the Bit

Easy Money: Cryptocurrency, Casino Capitalism, and the Golden Age of Fraud by Ben McKenzie and Jacob Silverman. New York: Abrams. 304 pages. $28.

The cover of Easy Money: Cryptocurrency, Casino Capitalism, and the Golden Age of Fraud

CRYPTOCURRENCY’S BLEND OF OPAQUE TECHNICAL JARGON, obtuse regulatory schema, and flagrant gambling has, since its inception, made it a magnet for characters you could generously call “colorful.” This was the case in 1992 when a squad of anarcho-libertarian Neal Stephenson fans first started gossiping about the idea on the cryptography listserv “Cypherpunks.” It was likewise true in 2008 when someone (or multiple people) using the moniker Satoshi Nakamoto sicced Bitcoin on the internet. Nakamoto—speculated, at various points, to be a Rhodesian cartel boss, a Palm Beach County detective who died gruesomely in 2013, and a libertarian model-train collector with the misfortune of actually being named “Satoshi Nakamoto”—has kept their actual identity unknown to this day. That the Bitcoin creator, who spawned an industry that later claimed a $3 trillion market cap, had no evident interest in becoming its messiah did not deter others from trying to assume the role.

When I first started paying attention in the spring of 2018, crypto was emerging from one of many crashes, and the survivors resembled something out of slapstick. Consider Australian businessman Craig Wright, who toured conferences as Nakamoto like some crypto mall Santa, as industry peers openly called him “a fraud” (or, in one incident, “pumpkin-man Craig”); Wright later sued a number of them, including an anonymous Twitter account with a cat astronaut avatar, for libel. Or Mighty Ducks actor Brock Pierce, whose first foray into digital entrepreneurship was marred by sex-trafficking allegations against his boss; he rebounded to digital-arms dealing in online games before cofounding the controversial stablecoin Tether. And who could forget the TRON blockchain’s Justin Sun, the onetime Grenadian rep to the World Trade Organization who very publicly paid $4.5 million for a dinner date with Warren Buffett in 2019, only to back out days before the meeting. Sun claimed a sudden case of kidney stones, though various outlets reported that he was under investigation by Chinese authorities and had been quietly “on the lam” for much of the year.

The field’s affinity for cinematic weirdos did not die, even as mainstream coverage and ballooning profits invited more tedious emissaries into the fold. In 2021, a new such oddity appeared, albeit one with a slightly different sales pitch; former teen heartthrob Ben McKenzie became the industry’s “first celebrity anti-promoter.” Like many crypto personalities, he had a backstory that’s hard to fit into one sentence. Born to a family of multiple Wikipedia pages—a Pulitzer Prize–winning uncle, a grandfather who grandfathered the Public Broadcasting Act—McKenzie earned his own page at the age of twenty-four after crashing on the couch of voice actor Ernie Sabella, who played Pumbaa in The Lion King. In 2003, McKenzie scored a role on Hollywood’s turn-of-the-century teen drama The O.C. playing Ryan Atwood, a brooding but gifted bad boy who gets adopted by a rich family in Newport Beach. Atwood’s rapid class ascension made him the consummate mole—an outsider on the inside of an affluent clique—and an apt conduit for the show’s implied critique: a prescient concern, as writer David Klion once observed, with “the enormous sums of money then fueling a speculative housing bubble across sunbelt suburbs like Orange County, California.”

The show made McKenzie very famous. Over the next four years, he would earn six Teen Choice Award nominations and land on Teen People’s “25 Sexiest Stars Under 25,” Independent Online’s “100 Sexiest Men Alive,” and OK! magazine’s list of “Hollywood’s Hottest Bachelors.” His talents were also noted outside teen-mag foldouts; in 2005, he played the surly, humiliated kid brother in Phil Morrison’s Junebug, an indie Oscar nominee about the class anxieties of a North Carolina family when their eldest son returns with a posh wife in tow. In later years, McKenzie was drawn to law-enforcement roles. Since 2009, he has played a rookie cop on Southland, a rookie cop on Gotham, and an ensemble member in a staged reading of the Mueller Report. And in 2021, he would become crypto’s leading celebrity skeptic.

By this point, McKenzie’s conversion to crypto naysayer has taken on the tidiness of an anecdote told many times. The pandemic had put acting on pause, along with everything else. An injection of federal funds had overheated the stock market. A subreddit had conspired to short squeeze the stock of an aging game retailer (GameStop) and then an aging theater chain (AMC); the forum’s users sent share prices so high that the trading app Robinhood stopped letting people buy these stocks. Exchanges had been flooded with “special purpose acquisition companies,” or “SPACs”: shell entities that raised money to buy private corporations, giving the latter a shortcut to go public. DeFi—or “decentralized finance” applications built onto blockchains—had introduced myriad new ways to lend and leverage tokens, while “nonfungible tokens,” or NFTs, allowed traders to pay millions for DeviantArt-style jpegs with names like “CryptoDickButt #1462.” When an old friend encouraged him to invest in crypto, McKenzie was skeptical (this friend’s financial advice had, in prior years, led him to lose nearly $10,000 on a medical-tech company that claimed to have developed “synthetic blood”). The actor had studied economics in college, but his expertise was out of date. To catch up, he took a twenty-four-part online course at MIT from now-SEC Chair Gary Gensler, then got stoned and decided to write a book. He messaged a journalist named Jacob Silverman on Twitter.

Silverman, an established writer and contributor to the New Republic, had recently run a piece that aligned with McKenzie’s outlook (“Even Donald Trump Knows Bitcoin Is a Scam”). The two met at a Brooklyn bar, bonded over baseball and fatherhood, and agreed to team up. At the time, Silverman seemed more like a collaborator than McKenzie’s ghostwriter or guide. They began publishing articles and touring conferences together; early last year, a New York Times reporter profiled their visit to a Bitcoin mining complex in Texas. The duo planned to turn their research into “some sort of Hollywood production,” the piece noted, perhaps an O.C. reboot in which a “cryptocurrency billionaire” moves to Newport Beach and “takes control of the local real estate market.”

Somewhere along the way, the relationship seems to have changed. In June, Silverman posted that he “was not involved in the promo/media for Easy Money.” If the actor still plans to produce a documentary or television adaptation, Silverman does not seem to be involved (he has tweeted that he “does not own or have access to the footage”), though he did put out an excellent podcast exploring similar themes. Over the summer, McKenzie’s appearances were mostly solo acts. At the Brooklyn book launch in July, Silverman’s name was not on the bill. Silverman did do some promo for the book, writing on social media: “I’m proud of the work I did on this book and continue to do as an independent journalist. I learned a lot about money, lying, and trust.”

The result of that partnership is Easy Money: Cryptocurrency, Casino Capitalism, and the Golden Age of Fraud, which came out from Abrams in July. McKenzie’s latest role finds him again bearing witness to a speculative bubble—now not in real estate but in highly volatile assets built wholecloth from code. Again, he plays an outsider, this time not for moving between classes but for criticizing members of his own. Silverman and McKenzie’s first shared byline was a Slate article called “Celebrity Crypto Shilling Is a Moral Disaster.” The piece took aim at a slew of celebrities—Lindsay Lohan, Tom Brady, Kim Kardashian—who’d started pushing various crypto and NFT projects, at times without disclosing their personal stake. The book continues that crusade, expanding beyond Hollywood hype generators to the insiders and executives pumping a market McKenzie sees as a Ponzi-like fraud. It’s an investigation into his hunch that cryptocurrency, despite its “liberatory rhetoric,” merely amplifies “the worst qualities of our existing capitalist system”—that without extensive oversight, it would only repeat that system’s mistakes.

Kim Kardashian's deleted Instagram post promoting EMAX tokens, June 2021.
Kim Kardashian's deleted Instagram post promoting EMAX tokens, June 2021.

MCKENZIE ORIGINALLY BILLED Easy Money, in classic Hollywood pitch-speak, as “The Big Short for crypto”—a comparison that makes sense in broad strokes. When the actor started out two years ago, crypto was on a historic upswing. Bitcoin, worth just $5,000 in March 2020, swelled by 700 percent the next spring. McKenzie saw parallels to the subprime mortgage crisis Michael Lewis chronicled in his 2010 bestseller: record-setting speculation, a dearth of regulation, excessive leverage, and impossible percentage yields, all centered around potentially toxic financial products that few seemed to understand. Like Lewis’s protagonists, McKenzie responded by trying to short the market. He bet his crypto friend a dinner that Bitcoin would end the year under $10,000. But Bitcoin peaked that November at a per-coin price of over $68,000; McKenzie paid for the meal.

Easy Money is McKenzie’s bigger bet. And it diverges from The Big Short on key points, not just because the latter set a comically high standard. The book is foremost a polemic. McKenzie not only argues that crypto is overvalued, under-regulated, and rife with fraud; he makes the case that the entire ecosystem is itself a pyramid scheme—a “naturally occurring” Ponzi “predicated on getting more regular folks to gamble” their savings in a zero-sum game beyond the reach of federal safeguards. Crypto had re-created the housing bubble’s combo of risk, leverage, and complex financial vehicles. Only this time, McKenzie predicts, the burst would be even more disastrous in that it would fall “more heavily on average folks.” It’s a bold claim, which McKenzie rationalizes like this: “At least in the years leading up to the GFC [Global Financial Crisis], some people got to live in houses. . . . After a major crypto crash, regular people would be left with nothing. Vapor.”

While Lewis merely haunts his text with an intermittent first person, McKenzie is Easy Money’s protagonist. It is, inevitably, a celebrity memoir, if one that distinguishes itself through McKenzie’s sense of humor (or Silverman’s; the extent to which this book was ghostwritten remains unclear). The book is aware that stars’ excursions outside their expertise often end in humiliation. McKenzie’s solution is constant self-effacement, appealing to the reader not from authority but from his general lack of it. “I’m an actor with a barely used undergraduate degree in economics,” he admits, “a bored, mildly depressed, forty-something-year-old man in desperate need of adventure.” McKenzie can exaggerate his handicaps—as when he admires his publisher’s “bravery” for buying a book effectively destined for bestseller lists (indeed, it immediately became one). But the actor’s blunt sense of his own shortcomings lends him a candid charm and a convenient framing device. He uses his own entrée into the crypto community to steer the reader through its biggest scandals of the past two years.

McKenzie’s friendship with Silverman shapes the first two chapters of the book, and their investigation into crypto’s underside then takes them to the popular stablecoin Tether. A “stablecoin” is one that, in theory at least, is always equal to one dollar. The company has claimed its coin supply is fully backed, meaning that for every Tether in circulation, it has one dollar or equivalent in reserves. But its founders have avoided any full financial audit and, according to the authors, sport a range of red flags: Tether has just twelve known employees on LinkedIn, some of whom may not exist. One of the real execs once paid a $65,000 counterfeiting settlement to Microsoft; another worked for an infamous online poker company that was exposed for having a “secret ‘god mode’ that allowed insiders to see the other players’ cards.”

From there, the authors meet some fellow doubters: the anonymous Twitter poster Bitfinex’ed (named after Bitfinex, the cryptocurrency exchange with ties to Tether), as well the hosts of the podcast Crypto Critics’ Corner. They visit havens for crypto’s most eager boosters—South by Southwest (SXSW) in Austin, the Bitcoin Conference in Miami, the Whinstone Bitcoin mine in Rockdale, Texas, and El Salvador, where dictator Nayib Bukele has made Bitcoin a national currency and planned a “Bitcoin City” powered by hydrothermal energy from a nearby volcano. Along the way, they dive into crypto’s major “casinos”: the mammoth exchange Binance, the “algorithmic stablecoin” Terra/LUNA, the lending company Celsius, the hedge fund Three Arrows Capital, and the trading company Alameda Research and its sister exchange FTX.

While Lewis took pains to simplify the Wall Street processes that produced the subprime crisis (an achievement memorialized by Margot Robbie’s famous monologue in the 2015 film adaptation), McKenzie, perhaps graciously, doesn’t dwell on crypto’s arcane mechanics. He focuses instead on those “casinos” and the characters who run them. In pursuing the latter, McKenzie’s star power pays off— not only does he land interviews with some of crypto’s most colorful executives but he also convinces them to talk on camera.

The authors spoke to Alex Mashinsky, the Celsius CEO who claimed to have invented the voice-over tech underlying Skype and Zoom (he also says he thought up Uber, DeFi, and a Bitcoin precursor four years before Nakamoto brought it to the masses). Mashinsky readily tells McKenzie that, of crypto’s then-$1.8 trillion market cap, just “10 to 15 percent” was “real money.” Everything else, he says, “is just a bubble.” The actor also talks to Brock Pierce, the Tether cofounder who left to start a crypto paradise in Puerto Rico and whom the book memorably describes as “a little man in a red, white, and blue Bitcoin trucker hat whose legs were pumping almost as fast as his mouth.” Pierce’s mouth slows notably during their interview. While explaining why Tether struggled to find an auditor, he invokes Arthur Andersen—the accounting firm that shuttered over its role in the Enron scandal—as one reason its peers were cautious of the crypto sector. It was seen as too “high risk.” McKenzie catches the comparison: “You are saying ‘high risk,’” he interjects, but “Enron was a fraud.”

And at SXSW, McKenzie and Silverman get courted by a group of self-professed CIA agents, each allegedly attending on intelligence business (they claim to surveil crypto, but also use it to pay informants). Two of the agents invite the authors to dinner for a night of binge drinking and insinuating stories about secret projects. The surreal sequence involves an attempt to recruit McKenzie, one agent’s drunken mission to sexually harass a nearby publicist, and three souvenir coins embossed with the slogan: “In God We Trust, All Others We Monitor.” McKenzie surely benefited from celebrity access, but he was also blessed with Silverman’s journalistic bonafides. In June 2022, Sam Bankman-Fried started DMing him on Twitter; Silverman requested an interview. Weeks later, the pair landed an on-camera conversation with the FTX founder, four months before his company’s collapse.

IN MANY RESPECTS, McKenzie picked an auspicious time to start reporting. Though he lost his Bitcoin bet (it has still not fallen below $10,000), his prediction would prove mostly right. Last May, the crypto market cratered. A top-ten currency called TerraUSD—an algorithmic stablecoin whose “peg” to the US dollar relied entirely on its sister token, Luna—entered what’s known as a “death spiral.” Both tokens raced toward zero, wiping out an estimated $45 billion from the crypto market in a week. Terra’s founder Do Kwon fled to Singapore, then Serbia. But the industry couldn’t outrun contagion. Alex Mashinsky’s Celsius froze withdrawals, then filed for bankruptcy. Crypto hedge fund Three Arrows Capital (3AC) saw its stake in Luna—once estimated to be a half-billion dollars—plunge “to just $604.” In July, 3AC filed for bankruptcy, as its founders also  reportedly fled abroad. One of its creditors, Voyager Digital, filed for bankruptcy the same week. The Winklevoss twins’ Genesis Global Capital, another creditor, was out $2.3 billion. Crypto’s self-appointed savior Sam Bankman-Fried tried to bail out survivors. But just months later, his own exchange imploded in perhaps the most spectacular crypto failure the industry has so far seen. The bubble burst in real time, and each rupture brought new revelations of malfeasance by the colorful personalities in charge.

McKenzie’s timely book research gave him a front-row seat to the fiasco and in-person interviews with its main architects before their lawyers told them to pipe down. A Bankman-Fried interview is hardly brag-worthy on its own—until recently, the crypto thought leader was doling out on-record comments like candy. But that McKenzie grilled him while the media was still fawning speaks to the actor’s instinct—which, in at least this respect, was stronger than Michael Lewis’s. The latter had also been following Bankman-Fried since before FTX’s bankruptcy but with a different angle. Before SBF’s public downfall, McKenzie notes, Lewis had been “in thrall with the boy wonder.” (Lewis has likely changed his mind but his book on SBF doesn’t arrive until October.) To that end, McKenzie’s timing has only gotten better. The book’s rollout coincided with the Securities and Exchange Commission’s first major charges against Binance and Coinbase, the last twin bastions of crypto-world respectability.

But in another sense, crypto’s cartoonish collapse has dulled the impact of McKenzie’s thesis. It seems obvious now that crypto consists mostly of scams, though it’s not clear to me that anyone was especially surprised. Even before the crypto winter, traders would readily admit that the industry was full of Ponzis and rug pulls and outright theft. McKenzie receives that attitude with amazement: “I’m not kidding,” he writes, “practically everyone I spoke to at crypto conferences and other public events both admitted to being scammed and accepted it as if it was almost obligatory.” To him, this “shared understanding” was evidence that crypto resembled a “cult.” But perhaps it’s evidence that McKenzie and crypto loyalists have been on something like the same page. They both know it’s gambling, and that the house always wins.

One of crypto’s peculiarities is an unusual consensus among its pundits; skeptics and boosters may draw wildly different conclusions, but they agree on many particulars. One man’s unregulated casino is another man’s unregulated casino, and this can undercut a clean gotcha. Toward the end of the book, for example, McKenzie ties crypto’s rise to the online poker boom of the early aughts, when virtual blackjack or Texas hold’em rooms had grown into a multibillion-dollar business. A congressional bill in 2006 took out most of the domestic poker companies, and a crackdown in April 2011—known in the poker community as “Black Friday”—shuttered the offshore stragglers. Nakamoto published the Bitcoin white paper two years into that demise, and the original code, McKenzie observes, included a “poker lobby, a framework from which a virtual poker game could be built.” It’s a great detail and one not widely reported. But it’s not exactly a departure from what anyone already knew. “One day we may find out Satoshi’s true motivations,” McKenzie concludes. “For now, all we know is that they were initially interested in poker.” You don’t say.

It’s clear that, as of now, the crypto impact crater was much smaller than McKenzie anticipated. The subprime mortgage crash cost millions their homes and triggered a global recession that stretched on for years. Crypto’s collapse was, in many ways, “faster and dumber and more complete” than the global financial crisis, as Matt Levine wrote in Bloomberg last year. “But it did much less harm, because the damage was confined mostly to crypto.” There were real, devastating losses—losses that, a JPMorgan Chase study found, hit low-income traders harder, as they bought later and at higher prices. But those same traders tended to invest in small amounts precisely because of crypto’s known risks. The bigger players, per that same study, had higher incomes. They also had more crypto—of which, as Mashinsky himself said, just “ten to fifteen percent” was real. The gamblers had been playing with house money, and that’s what many of them lost.

There’s always a chance that McKenzie’s prediction, like his early bet against Bitcoin, has again come too soon. The problem of the subprime mortgage crisis was not just that the assets were risky; it was that banks and savers thought they were safe. The credit-rating agencies had become complicit, doling out good grades on bundles of bad loans. They “performed that alchemy that converted the securities from F-rated to A-rated,” Nobel laureate Joseph Stiglitz told Bloomberg in 2008. Few would accuse crypto of seeming too safe. But now, after standing at the sidelines for years, the SEC has finally entered the arena. Its twin lawsuits allege that Coinbase and Binance have each been operating as a securities broker, exchange, and clearinghouse without registering as any of them and that, as a result, they have avoided the disclosure regimens that have governed such industries for years. If the SEC wins, it could effectively wipe out the domestic crypto trade, moving the business offshore. But it could also alchemize a new era of regulated tokens—an outcome that may stabilize crypto or lend it a veneer of respectability. It raises the question of what crypto might look like absent overt scams and colorful characters, and whether we can live with what’s left.

Tarpley Hitt is a writer in New York and an editor of The Drift. Her history of Barbie will be published by Simon & Schuster in 2024.