Thinking about Ponzi schemes

In late 2022, some people started shouting that Crypto was a Ponzi scheme following earlier statements by Bill Gates, Warren Buffett, and Charlie Munger.

Others, especially those in the crypto industry, said a version of “Well, FTX might look like a Ponzi scheme, but crypto is legit and not a Ponzi scheme” . But then someone else in the crypto industry, on the same website, wrote Crypto Ponzi Schemes: How to identify and protect yourself from these scams. Okay. How confusing.

What should an investor believe? The SEC has an official publication, Ponzi schemes using virtual currencies. It's...not helpful...and implies that almost everything in crypto is a Ponzi scheme. At least there are phone numbers you can call if you have questions. Yeah, still not useful.

Yesterday I watched MADOFF: Wall Street Monster. I was tired, so I sat down and absorbed four hours of a 20-year, $65 billion Ponzi scheme. It's worth looking at the historical context.

Although longer and less dramatic, it is more informative than The Wizard of Lies, which stars Robert De Niro and Michelle Pfeiffer as Bernie and Ruth Madoff. However, De Niro completely nails the role of the monster of Wall Street.

As crypto continues to evolve, it is worth remembering the role that human nature and greed play in all of this. Every time an economic bubble bursts, Ponzi and fraud come to light. And there are plenty of them, especially human nature and greed, all the time, everywhere, in finance.

Amy and I watch The Big Short every other year to stay grounded.

Pro Tip: As soon as you see the phrase "returns guaranteed", close your browser tab.