It is no secret that traditional establishments resist change, but it is also true that progress finds a way. One of the biggest innovations today is the blockchain industry, which is seriously challenging the status quo and taunting The Powers That Be: Wall Street wolves, banking, and government elites.
The resistance comes in many forms: from direct bans on cryptocurrencies like in China, to the efforts of prominent media sources to portray the industry as a criminal enterprise. In this light, one might find the article Pumpers, Dumpers, and Shills: The Skycoin Saga written for the New Yorker by Morgen Peck to be especially entertaining. It tells a thrilling story about an alleged employee of one of the crypto companies, Skycoin, who attempts to make his way through the newly-born, blockchain-related Wild West.
The piece has all elements of a good detective story. For example, at the center of the narrative, there is a perfect crime with juicy details including the representatives of the world’s oldest profession, which, of course, takes place in Vegas. Also, there is a wrongly accused suspect in the form of a protagonist who did his best to overcome temptation and resist the evils of the crypto world, before leaving to become a mild-mannered employee in SalesForce.
One thing that is probably missing is the unexpected denouement, or, actually, any element of surprise at all. While we all love a good old Sherlock Holmes inspired detective story, we also ought to see through the motivations behind it. Was it designed to take down a single company or the whole industry? At the end of the day, a good boxing match requires two people in opposite corners. Let’s follow the match with 5 Tales that arise from the article.
1) A Tale Of A Corrupted Industry And Shinto Shrine
The story of the protagonist, Bradford Stephens, is almost a story of divine intervention. In December of 2017, in Kyoto, the hero visited “a shrine to Inari, the Shinto god of rice” with his wife, reads the New Yorker article. There, his wife wished for the health of a family member, and he wished for “wealth and adventure” before getting involved in the crypto industry. At the end of his path, he returns to Japan and follows the wisdom of his wife. This seems to be the moral of the story. After all the “dungeons and dragons” of the crypto world, his wishes are much more modest: all our hero wants is good health. Now, working as a simple wage earner in SalesForce, a traditional IT company, he concluded:
“My personality is not well suited to fraud, and mafioso, and everything that crypto is.”
The developers, marketing specialists, lawyers, and many other professionals that are still actively involved in the blockchain industry might have laughed at this statement. But, basically, even if we take everything written in the article at face value, we would be doing a false extrapolation of cognitive bias if we were to believe that a single person’s experience can represent a whole industry.
Yet, the article simply does everything it can to make the reader distrust the blockchain industry. The arguments are the following.
At first, it argues that blockchain offers no guarantees, ironically, compared to governments, which are well known for changing monetary policies at ease. “Bitcoin abolished government backing, but its scarcity is regulated through algorithms. (Even so, a tweet or statement from a high-profile coinholder like Elon Musk can raise or crash its price). Coins that are manually distributed in token sales provide even fewer assurances,” reads the article.
It is absolutely true that manual distribution is not a fair and open process, yet it does not at all strengthen the argument that blockchain projects can not offer assurances. Again, ironically, it is the opposite: if deals behind closed doors do not work for the greater common good, wouldn’t it be great to have some sort of a fair, impartial, and transparent algorithm? Oh, wait, that’s called decentralization, which is indeed in opposition to government-based centralization. No objection here at all.
Secondly, the author cites blockchain researcher Matt Chwierut, who said that during the ICO bubble “it was not uncommon for founders to spend as much as thirty per cent of their budgets on ad campaigns.” This sentence is supposed to make us believe that a fraudulent industry just spends a ton of money luring innocent people into the next scam project.
Let’s analyze it a bit deeper and actually see if 30% is a lot. While in professional circles it is not advised to think of marketing expenses in terms of the share of the revenue, journalists from another prominent journal named Forbes cite PR specialist Christing Wetzler, who says that “dedicating between 10% and 20% of gross revenue is a good starting point.” Actually, a very traditional company, Procter & Gamble, reported that their marketing expenses amount to 30% of total costs. Of course, no one is arguing that there were a lot of scam projects in the crypto industry, especially in the famous winter of 2018. Spending 30% of their budgets to attract new clients would actually be in line with the startup industry in general, and sometimes with traditional markets.
The third example in the New Yorker article quotes a lawyer named David Silver, who states that “yesterday’s crypto heroes” become today’s “crypto felons.” Interestingly enough, here we stumble a bit upon the fundamental presumption of innocence. It is very hard to imagine a lawyer actually making such a mistake. By law, one may not simply call someone a criminal without a court decision. The law exists for a very simple reason: people noticed that wording indeed matters. If the crypto industry was all fraud, the author of the article might as well be called a criminal chronicles journalist because she has been covering the industry since 2012. Follow her other articles and find out for yourself that not many are concerned with the legal side of things at all.
Such small attempts at manipulation populate the whole narrative, making it a very interesting read. But the real treasure in the article is the following:
“In an industry where everyone is a coinholder, there is no one left to pull the alarm. Should investors realize that their coin is a sham, it would be an act of self-sabotage to raise concerns. Better to become evangelists, wooing others in order to boost the price.”
Blockchain is a revolutionary technology. Just as any revolutionary technology, it indeed challenges the status quo. But not everyone holds bitcoins. Instead, the world’s monetary system is connected to the US dollar. Without context, this logic can easily be used to support a statement that there is “no one left to pull the alarm” on the endless printing of dollars, and that it would, indeed, be an “act of self-sabotage” for bankers and governments to raise concerns.
Another example includes a sentence stating that “not registering can facilitate further rule-breaking,” implying that Skycoin was operating illegally since it was not registered with the SEC. As an experienced reader already knows, SEC registration is needed only when the assets are seen as securities. But even if we forget the Howey Test, and follow the author in her line of thought, we might arrive at the conclusion that registration with the SEC would be a guarantee that the project is free from criminal activities. But wait, in May 2021, blockchain-based trading platform operator INX Ltd. actually registered their Initial Coin offering with the SEC… Seems the author only proved that the crypto industry can operate legally.
In reality, everything is not black and white. Life is not as simple as that. No matter what the intention behind the article was, no sane person would believe that the crypto industry is on the dark side and the tech corporation SalesForce is a Garden of Eden where our hero could rest in peace after his fights with blockchain-induced demons. But let’s move on to the next tale because it gets even more interesting.
2) A Tale of Las Vegas Demons and Magical Business Expenses
The story is told with a bit of a delay in regards to the actual events. This can happen when journalists have to dive deep into their endeavours of investigative journalism. Indeed, it can take years. Yet the above-mentioned article is written almost entirely from a single-sided point of view: a contractor who had a dispute with the company and went public. We will take a different approach: in one corner there will be the protagonist and, in the other, the alleged villain of The New Yorker story.
At the other end of the world…. Ok, jokes aside. The story starts with the first financial transaction between the protagonist and Skycoin’s founder – IT guru Brandon Smietana. In one corner, our hero, Stephens receives $50,000 in bitcoin and starts his employment. In the other corner, is Skycoin’s founder, who claims that Stephen’s company Smolder LLC, not him, was hired in January of 2018.
While Stephens claims that his first job was to entertain Binance executives to increase Skycoin’s chances of being listed during the 2018 CoinAgenda conference in Las Vegas, in an interview for the Crypto Tonight podcast, Smietana stated that this simply cannot be true since the team had been informed four or five days in advance “that Binance would not be at CoinAgenda.” Smietana added that all the main events at the conference were organised by the head of the company’s event team, Daken, while Stephens’ tasks were “to assist Daken and work the crowd”. Moreover, Daken claims that he knew a week in advance that Binance’s representatives wouldn’t be at the Las Vegas conference at all.
Like far too many stories about conferences in Las Vegas, this one also includes such key cliches as an “exclusive VIP party,” plenty of alcohol, and, of course, prostitutes in a hotel suite, and a somewhat overextended expense account. In this case, Stephens spent approximately $80,000 on what he called Smietana’s “explicit instructions,” but what the other party called a prostitute party for Stephens. The total bill for the alleged expenses amounted to as much as $225,000, but this bill did not sit right with the Skycoin team. Smietana asked the contractor to prove that all this was “for the promotion of Skycoin” and asked “who went to this party?” – at least the names. Stephens’ response was: “I had a party, but no one showed up.”
Moreover, the organizer of CoinAgenda 2018 Las Vegas, world renown crypto investor Michael Terpin, stated that even he wasn’t aware of an exclusive VIP party organized one of his attending companies in this case Skycoin.
Since neither Skycoin’s management nor event head were informed about the party, the company asked people that they knew had been at the conference whether they had been invited to attend the “VIP party.” Since the answer was negative, the company did not approve Stephens’ expenses, as Smietana said that they were “clearly personal ‘entertainment costs,’” not business expenses.”
To make a long story short: the story is as old as the first corporate story. Someone ordered the prostitutes, no one wanted to pay for them. In the 21st century, an experienced reader of traditional media will not be surprised to see yet another scandal of such scale. “City bankers ‘regularly offer prostitutes to clients,’” reads a Guardian article.
And, as in all stories like this, the party whose expenses are not covered is not happy with the result. Skycoin’s IT manager said that, in his opinion, Stephens “wanted revenge against the company for not paying him the money for whatever happened in Vegas.” And Smietana claims that this incident was not “just a one time thing” and that the protagonist “kept billing… for ‘entertainment costs’ even after his company had ceased to work with us.” A proverb goes as follows: “what happens in Vegas, stays in Vegas.”
3) A Tale of Big Impact and a Hero Charged with a World-Changing Task
When you read the article, you get the impression that the protagonist was with Skycoin for so long that he knew all of its ins and outs. At some point, when he starts to develop certain suspicions, he even asks to see the accounting books of the company to see if everything is correct. The article even goes further and explains that the accounting books were never presented, from which we might arrive at the conclusion that our hero had the right to ask for the documents, like an independent auditor or other person who deals with such matters. Stephens questions the CEO’s actions and contacts Skycoin’s investors in an attempt to shed light on the true story of how the company is being run. It is, indeed, the tale of a person who could have saved us all and tries to overcome all of the challenges he is faced with.
Surprisingly, in the corner, there is Skycoin’s founder who maintains that the company, in fact, only worked with Stephens’ company Smolder for 6 weeks back in 2018 – not even for a year, but only for a short period of less than 2 months. Smietana stated that he conducted an internal investigation to identify who in the company had actually talked with Stephens personally and arrived at the conclusion that Stephens “had no operational responsibility and was only responsible for his own external marketing team.”
“This is a ten-year old company, and this guy was only there for four or six weeks… He really didn’t do anything. He just came and he left… A lot of people remember the drama that he caused, but almost no one actually met him or talked to him.”
Yet, he made a big impact and the memory of this hire remains vivid in the company even after 2 winters and 3 summers. Smietana made no effort to hide the contractor’s impact, but it was hardly as grand as presented in The New Yorker story:
“Even if it was only six weeks, I don’t know if we handled the situation as quickly as we should have. It’s crazy how much damage one person can do. We were not the only victims. It happened to almost everyone in the industry. When you are growing rapidly in the middle of an ICO craze like we had in 2018, among every hundred new people, someone like this will turn up.”
4) A Tale of a Cuckoo Meeting and a Wise Council Of Elders
Skycoin’s whole advisory board gathered to hold their annual all-hands meetings in February of 2018. The protagonist arrived in China “determined to bring some order to Skycoin,” the article says, without mentioning the board itself. Further, Stephens described a scene where Smietana “launched into a rambling diatribe of conspiracy theories” to the point that he allegedly proposed to “feminize the peasant population to make them more docile.”
Consequently, Smietana requested a recording of this alleged encounter, which Stephens claimed to have. Needless to say, it was not produced, otherwise, this article would include such words as facts, not mere opinions.
The other corner’s tale is a whole different story, which, at this point, won’t come as a surprise to you at all. Stephens and his business partner Harrison Gevirtz invited Skycoin’s founder to a hotel room in Shanghai to get acquainted with a secret but very influential marketer in a Zoom call. At this point, one might ask why the founder of the project would even agree to such a meeting, but some details will always remain behind the scenes.
Anyways, Smietana would not accept the proposed terms, since it required an upfront payment of no less than 30 million dollars worth of bitcoin, and no referrals from previous customers could be provided. In light of such a sum, the expenses from Las Vegas pale in comparison. In any case, the marketing guru never submitted a written proposal, so there is no proof whatsoever.
The matter might have been forgotten, but it came up again at the annual board meeting. When the board, or the Council of Elders, as one might joke, learned about the meeting, they immediately raised concerns and threatened to resign if all contact with Stephens’ company wasn’t terminated.
In their opinion, it was not wise at all to be associated with Stephens’ partner Gevirtz, aka HaRRo, who was known to be a prominent figure in the black PR marketing underworld. They also suspected that the marketing guru was Ryan Eagle, who had already been named in a US Government FTC action regarding illegal marketing practices in 2014 and 2016. If this was true, it was indeed wise not to be associated with a “demon” whose affiliate marketing schemes are described in detail on the US Federal Trade Commission’s website.
And, like any Board of Directors, or, in our magical world, any Council of Elders, Skycoin’s board was risk-averse. They, indeed, wanted to mitigate risks and terminate all contact with the black PR gurus at once – they might promise gold mines, but they came with a dodgy background and close to no actual references. And so, the Council of Elders decided to bar all doors to our hero in his quest to accompany Skycoin on its path.
5) A Tale of Delivering on Promises and Mossad Assassins
But all this pales in comparison with a much more dangerous tale. In this story, we will see the colours of true crime and unintended consequences. According to The New Yorker’s article, Stephens was fired from Skycoin, although his own correspondence with the crypto company proves that all relations between them were terminated on February 24, 2018, under pressure from Skycoin’s board.
Black PR followed: The New Yorker article, written three years after the described events, still created a lot of controversy and drama. The manipulated facts in the one-sided story raised a lot of questions about how such an article could be published. For example, even Stephens’ associate ‘Sudo’, who was asked to provide a statement for the article, publicly acknowledged in a public chat room called Euclid’s Coin Window that the article was wrong in almost every detail.
Though, it’s not like the New Yorker didn’t do any fact-checking. Smietana revealed that he had received a list of almost two hundred questions to which he answered with concrete facts. Little proof of that made it into the article.
Yet, the story did not stop at prostitutes, but ventured into dangerous territory with allegations of criminal activities involving Mossad assassins, a whole new layer of evil. Those allegations were later removed from the article, but the setting and consequences remain.
When the article’s author, Morgen Peck, met Skycoin’s founder in New York, the assassin’ question was brought up. Stephens “says you tried to have him killed by the Mossad,” repeated the journalist. Smietana called such serious allegations “ridiculous,” saying that he had created the blockchain company and had no “death squads.” Such serious life-and-death accusations should indeed be printed with very careful consideration. And maybe that is exactly why it was very quickly deleted.
Yet, as often happens with literally everything ever published on the World Wide Web, someone quickly made a print screen and a new player came onto the scene, adding a new layer of complications to the story: a neo-Nazi website, The Daily Stormer, republished the allegations concerning the “Mossad assassins” after they had been removed from the New Yorker article.
Long story short: removed or not, the New Yorker article leaves a bad aftertaste. The crypto industry was portrayed not only as a place full of all sorts of sins like Las Vegas, but as an actual crime scene. The final injection of fear was made with a sure-fire ingredient: the threat of terrorism.
Yet, in the other corner is the founder of the crypto company saying that the story “is still haunting” the company, people are still asking about the notorious events of 2018, and, while a lot of facts are still to be uncovered and maybe a good investigation is needed, one thing is clear: the consequences are still there.
When the Saga ends…
Now that you’ve read the five tales, you might ask a very fair question. Where does it lead us? Where is the company now? In The New Yorker article, we read that our hero is employed at a respectable company and visits a Shinto Shrine, but what about the villain of the story?
Despite all the drama and accusations, Skycoin’s price is trading at the same level it traded at prior to the above-mentioned craze of 2018. Maybe it’s not the hot commodity it once was, but it seems that investors did not believe the accusations of centralization and continue to hold their assets.
One crypto winter after another, with an occasional hot flash, our villain has weathered the circumstances and still stands serving Skycoin’s community after 10 years of operation. It seems that the community of over 10,000 members, which includes industry experts and famous developers, still believes that Skycoin is decentralized and secure.
Of course, there will be a place for good detective stories in the relatively new blockchain industry. We will see how some projects will be revealed as a scam, no doubt. But, with or without our hero’s approval, the blockchain industry is here to stay. Humanity could not forget about electricity once it was invented even though it rubbed some groups of people the wrong way. Neither will society forget about the idea that made decentralization possible. Progress is inevitable.
Skycoin’s founder promises his audience that the company, which has survived its first 10-years, will be here in the next decade as well. Whether that’s true, we will have to wait and see, but his sentiments about the industry itself are hard to argue against:
“It’s going to take another thirty years to see blockchain replace legacy applications. We are at the start of the technology adoption cycle, not the end. I think about where we are going with blockchain over the next ten, twenty, thirty years. I don’t really care what happens this month or what coin is being pumped this week. We are looking at how this technology is going to transform human society.”