Two Nerds Stole 2022 and Laughed All the Way to the Crypto Bank

Two nerds made a fool of media and high-stake venture capitalists and the average Joe. They created a modern-day Ponzi scheme and committed fraud and manipulated the crypto market, embezzled billions, and bought real estate with customer funds. They laughed all the way to the bank. 2022 has been a crazy year. What can we learn from the story of the two nerds?

KEY TAKEAWAYS

• Reality beats fiction in crypto. Two guys in crypto played us perfectly and crypto investors are left to pick up the bill. The biggest scams of 2022 will go down in history and its philosophical lessons are important. Deceit sleeps with greed.

The cocky nerd, Do Kwon, created the yield-bearing decentralized stablecoin UST. Basically, UST was a stablecoin that is designed to always be worth 1 dollar. The value of UST was supported by another digital coin called Terra Luna that Do Kwon also invented. What attracted people to buy and hold UST was the chance to get 20 percent yield each year from staking it. Imagine getting 20 percent interest from the bank… The financial world was at awe and Terra Luna increased by 135 percent in the first two months alone. Average Joe jumped on board and initially made some serious dough. Do Kwon laughed all the way to the bank.

The problem was that UST was not fully backed by fiat money, gold or Bitcoin and was in essence a Ponzi scheme. When $2 billion worth of UST was taken off the protocol in May 2022 the stable coin was not able to keep its 1-dollar value. The value dropped quickly, and people got spooked and started selling their UST. Both UST and Luna crashed and $60 billion were wiped-out in a matter of days.

The cocky nerd eluded regulators with a run-of-the-mill attempt to salvage the situation. Then disastrous stories of thousands of people who lost their life-time savings started to emerge and he fled. That’s when the dominos of 2022 started to fall in the crypto currency space. Voyager and Celsius as well as Three Arrows Capital filed for bankruptcy because they were large holders of Terra Luna and UST.

“I am here. Come get me…” said Do Kwon and laughed while being on the run.

To this day he is wanted by Interpol and continues to make fun of police by saying that he is not on the run. Rumor has it that he cashed out US$2.7 billion before the crash and is hiding in summer paradise Croatia. I bet he has a cocktail in one hand and Margaritha in the other…

The harsh crypto winter continued, and more people lost their life savings.

Meanwhile a nerd with a funny hairdo, took center stage. Sam Bankman-Fried was the wonderkid who started his own crypto exchange FTX as well as the FTT token. He invested heavily in different crypto businesses. He portrayed himself as a genuine soft-hearted billionaire who wasn’t in it for the money.

“I do not want a yacht or luxury…” said Sam to media.

On photos he wore a simple T-shirt and said that he slept on a bean bag at the office. He even pledged to give away 99 percent of his money to philanthropic initiatives. Sam was one of the biggest donors to the Democratic Party and things seemed kosher.

However, when the curtain closed, he lived in a luxury estate in the Bahamas and have been claimed to have orgies and enjoyed recreational drugs. He secretly also donated to the Republican Party to make sure he had powerful friends on both side of the aisle. Hell, he also had close ties with the chair of the Securities and Exchange Commission that regulate the crypto market.

One day big-time investors started to question his business as they realized that $1 billion in customer funds had disappeared. People called his bluff and his empire collapsed in one day.

In the eye of the public, he lost approximately 15 billion USD and his net worth decreased by 94 percent. But, in fact he funneled billions of customer funds to different shell companies and bought real estate for his supporters, himself, and his family. The only good part of this story is that he is spending his days and nights in a rat-infested jail in the Bahamas and is charged with 8 criminal charges including fraud and by conspiracy by misusing customer funds.

History tells us that greed never gets old. If greed was to bare a child, it would be a Ponzi-scheme and Do Kwon created a modern-day version to satisfy this cardinal sin.

When it comes to Sam Bankman-Fried he gave us a clue how he had been thinking. In an interview he said, “I wasn’t even trying to manage risk”. He was clearly consumed by greed.

The moral of the story is important. There is no end in greed. The feeling of greed is sly and powerful, and we fall easy prey for its feelings of inadequacy. To avoid the feeling of lack we reach for more, instead of finding acceptance and gratitude in what is.