As the fate of cryptocurrencies and NFTs becomes clearer — the latter have mostly died and the former is not looking too good either — there is a specific topic I would like to address: how should those who went into crypto be judged, whether they regret it or not?
I will set out in this article my answer to this, which is that in most cases, such people should be judged — to put it mildly — as some of society’s worst people.
Table of contents
· Why does this matter?
· Those we should not judge: the victims of cryptocurrency and NFTs
∘ Loan sharks and predatory inclusion
∘ Investment fraud and confidence tricksters
· Those we should judge: investors who are neither poor nor vulnerable, crypto influencers, and large players
∘ Due diligence
∘ Financial conflicts of interest
∘ No mitigating factors
· Conclusions
Why does this matter?
You might wonder how it could be constructive or helpful to apportion blame. It is, in this instance, very helpful indeed, because we are dealing with malicious actions rather than incompetent actions. Imagine, for a moment, that a team of engineers is building a bridge, but the bridge collapses because of badly designed supports. What would we do in such a situation?
Our primary action is to investigate why the bad design decision for the supports was made, and who was responsible for that decision. Not to punish that person or group, but to explain to them why the decision was bad and what the better decision would be; how we could build the supports correctly next time. This only works, however, in situations where we can assume that nobody on the team has malice: i.e. that nobody on the team intentionally pushed for a non-solution.
This does not apply to cryptocurrencies and NFTs, where those who have created cryptocurrency and NFT ‘solutions’ know very well that they do not work, something which is not difficult to prove and is examined later in the article. In a normal situation, we would try to explain to this group that this ‘solution’ does not work, and that it should be avoided; but the definition of malice is that they already know the ‘solution’ does not work. They will therefore pay no attention to anything that is said to them, as their reason for pushing the ‘solution’ in the first place was not a genuine belief that it worked, but a conflict of interests: the desire to make money from a non-solution.
As a result, it is in fact both constructive and helpful to apportion blame to such people, expose their malicious actions for what they are, and inform the public of the false nature of the ‘solution’ that these groups offer.
Before delving into why that is, however, let us first examine who shouldn’t be judged this way, because that’s just as important if not more so: the victims.
Those we should not judge: the victims of cryptocurrency and NFTs
The victims share a common trait with all financial scams, such as loan sharks, pyramid schemes, email scams, confidence tricks and so forth:
- Poor people in precarious financial situations, who are vulnerable due to desperately needing the money
- Predominantly people without sound knowledge of finance or the scheme in question, or so desperate that it is easier to ignore that
- For some scams, elderly people in vulnerable situations, often living alone or widowed
- A disproportionately high number of people who belong to ethnic minorities, often due to the fact they are also disproportionately poor due to historical and present racism in many countries
Cryptocurrency and NFTs themselves are a pyramid scheme; the only way you can make money is if other people put money into it after you, thus raising its total value.
To support the claims I have made above, let’s look into these types of fraud further.
Loan sharks and predatory inclusion
Here is a 2019 report on the victims of loan sharks from Stop Loan Sharks, who prosecute loan sparks and remove victims from their influence.
As the report states, 46% of victims were suffering from long term health conditions and 61% had an income smaller than the minimum wage, making them ripe targets for loan sharks.
As prominent cryptocurrency critic Molly White astutely pointed out on Twitter, strong evidence exists showing that similar practices are used against marginalised groups in particular — the offering of financial services on highly unfavourable and exploitative terms, known as predatory inclusion:
The research paper itself makes for damning reading, and clearly demonstrates that such practices are not a case of “making money off of anyone”, but specifically a case of making money off of the most disadvantaged and marginalised people in society.
As a side note, predatory inclusion exists in a range of fields — from housing to wealth and even to academia, but here we are examining it in the context of financial services.
Investment fraud and confidence tricksters
These types of fraud generally prey on the old and the unknowledgeable. An analysis by the UK’s Financial Conduct Authority shows that there is a direct correlation between age and likelihood of being defrauded; older people, with the least knowledge of new technologies and methods, are most likely to be scammed in this way.
This report from the Victims Commissioner, who work with the UK Ministry of Justice, separates out categories of vulnerability like so:
As we can see, the highest risk groups were more likely to be either elderly and vulnerable, or young and more likely to be Black or Asian. This study additionally concludes that older people are more likely to fall victim to scams.
The evidence above, and the arguments about who these scams target, is to demonstrate the kind of malice that these scams have — and why those who are poor and/or vulnerable, who invested in cryptocurrency because of desperation or deceit, should not be judged and should be helped to deal with the fallout of their ‘investments’.
With that being said, there are plenty of people who can and should be judged.
Those we should judge: investors who are neither poor nor vulnerable, crypto influencers, and large players
First of all, I think it should be obvious that the large players, such as big companies going into crypto for profit and founders of cryptocurrencies, should be judged as bad examples of humanity by any sane person. That doesn’t need any further justification.
However, what about regular investors and influencers — people who are not mega-rich, or particularly powerful, but who went into cryptocurrencies or NFTs? How should we judge them?
I argue that they deserve neither compassion nor respect, and our reaction to them should be only marginally better than it is for big companies. There are several reasons why I argue this.
Due diligence
A basic part of any investment, no matter what it is, is doing your due diligence on what you are investing in; that means doing your research properly. For example, before buying shares in a company, you should know what company does, how it makes its money, what risks it has, and so forth.
The history of absolutely any investment that seems to produce masses of money in very little time, seemingly from nowhere, has been one of disaster: every such scheme has always turned out to be either fraudulent, or malicious. Ponzi schemes achieve their eye-watering returns by taking money from new investors to pay old investors, a system that eventually collapses when you don’t have enough new investors to keep paying the growing number of old investors. Malicious schemes and businesses become obvious once you research them in the vast majority of cases.
Imagine a person who invests in, for example, British American Tobacco or Philip Morris International (the two biggest tobacco companies in the world). For context, these companies are known as ‘safe havens’ of investment, for having very good returns on investment and dividend payments. Tobacco is a very lucrative — and deadly — business, especially in the developing world where the aversion to tobacco from modern health has not yet arrived, and where both companies are well known for bribing local officials in both developed and developing countries to keep it that way.
A person is free to invest in these companies, but imagine investing in them, and later claiming that you had no idea they were unethical businesses. How hard would you have to work to not realise what these businesses were, or what they were doing? Not only would you have to fail to do your research, you would have to actively avoid finding out anything about these companies.
This is, in fact, a well-known practice known as wilful ignorance or wilful blindness. By working hard to avoid becoming aware of the unethical or illegal nature of a practice, you can claim ignorance when you are found participating in it; this is often done by corporate CEOs, who actively avoid learning about illegal actions taking place within their company. Once they know the actions are happening, they are complicit if they fail to stop the actions — but until then, they are free to let them continue, safe in the protection of “not knowing it was going on”.
Indeed, this was demonstrated in the popular British political comedy Yes Minister:
The chief whip points out to the Minister that the government knows full well that illegal arms trades are going on; but if the Prime Minister is informed, he will then be deemed to be aware of it, and would have to start an inquiry or face being accused of being complicit in these illegal trades. If the Prime Minister is never told, however, the trades can carry on. In other words, while the Prime Minister already knows these trades are going on, he is desperate to make sure that he is never officially informed — the moment he is deemed to know officially, he can be held liable if he doesn’t act on the information.
This is very much what unethical CEOs, influencers and crypto traders, much like unethical traders in stocks and other financial instruments before them, do: claim ignorance of crypto’s fatal and dangerous faults, or outright deny them, and pretend they didn’t know the truth until later when confronted on it.
One could argue that it is possible a person simply didn’t know what they were getting into. This is a false, and misleading, argument; it is not necessary to know, because it doesn’t matter. We need only know that a person not only totally failed to do their due diligence, but had every incentive not to do it — in order to profit from the scheme they entered.
In addition, a person who “accidentally” invested in what they thought was a massively profitable get-rich-quick scheme did not have an “accident”; they chose not to look into it, despite its “too good to be true” nature.
Financial conflicts of interest
It is one of the primary defining features of any scam that a person who endorses or advocates for the scam has an unresolvable conflict of interest. This may seem like a statement of the obvious, but it is more insidious than that.
When proponents of cryptocurrency talk about cryptocurrency being good, many of them know very well that it is not good — but their profits depend on pretending that it is not. A person who has decided to put significant time and money into advocating for a scam cannot “accidentally” be unaware that it is a scam.
Influencers, and large crypto investors, are very much aware of their ability to conduct market manipulation by hyping up a particular coin or NFT. That they miraculously hype up a product, then sell it, is further evidence that they are not ignorant, but complicit; they know that they can make sizable profits by effectively stealing money from their audience.
As a result, I see no reason why we should have even the slightest respect or compassion for a person who willingly, and knowingly, chooses to enter into such an activity.
No mitigating factors
The victims of cryptocurrencies, NFTs and other scams, have mitigating factors: their vulnerability led to their being misled and deceived into these scams, and they are usually the ones from whom larger players will steal their money.
There are no such mitigating factors for ‘regular’ investors and influencers. They didn’t need the money enough to be classified as vulnerable; they could easily have invested in something that isn’t a scam or a pyramid scheme (which is a very low bar to meet — nobody’s asking them to invest in super-ethical businesses), but chose not to. They didn’t choose this out of necessity, but out of greed and a desire for a quick profit, even at the expense of others.
Conclusions
There are three groups of people we should think about:
- Large corporations and cryptocurrency founders, NFT website founders and so on, who deserve zero sympathy, zero respect, and our utmost contempt and dislike;
- Crypto ‘investors’ and influencers, who also deserve zero sympathy, zero respect, and a lot of contempt and dislike;
- Victims of cryptocurrency and NFT scams, who deserve a level of sympathy and support.
Personally, I still feel somewhat less sympathy for victims of cryptocurrency scams than I do for victims of some other scams. Even so, I feel it is very important to say that I do not hold contempt for those crypto investors who were desperate and vulnerable whether they gained money or lost it, as that would be deeply unfair, and I do not think anyone else should either.
I reserve my contempt and disrespect for those who didn’t need the money but went into crypto anyway —knowingly stepping over the bones of others to make a profit.
