Ben McKenzie is an unlikely anti-crypto crusader. The actor is best known for his role as a teen heartthrob on The O.C., which is not exactly a harbinger of technological or economic rigor.
But McKenzie also has an economics Bachelor’s degree from the University of Virginia, and has studied the long history of financial frauds around the world. Based on that foundation of knowledge, McKenzie became obsessed with crypto’s rise in 2021, convinced that it was little more than a house of cards that would inevitably topple.
That August, McKenzie reached out to the journalist Jacob Silverman and proposed collaborating together on crypto journalism that would expose its potential dangers and seedy underbelly. McKenzie believed he could wield his public profile to add some nuance to a crypto discourse that mostly surfed high on optimism and euphoria.
“I told Jacob: ‘If I have a superpower, it’s as a mid-level celebrity and econ dork,'” McKenzie recounted in an interview over the phone with TIME. “Those two skills don’t often overlap. But they seemed to be potentially particularly powerful here, because crypto had gathered up so much momentum with the help of lots of people pouring money into it, that it was drowning out other voices. If there’s one thing I felt like I knew how to do, it was to make a little splash—quite frankly because I’m a public person—but also explain economic concepts relatively simply.”
McKenzie and Silverman co-published several articles together, including in the Washington Post. This week, they released the book Easy Money, a culmination of their reporting which traces crypto’s stunning recent rise and fall. McKenzie interrogated leaders of crypto who have since been arrested—including FTX’s Sam Bankman-Fried and Celsius’s Alex Mashinsky—and traveled to El Salvador to monitor their mostly disastrous Bitcoin experiment. Many crypto enthusiasts argue that the current lull in prices is temporary, and that Bitcoin rises upwards in a cyclical pattern. McKenzie and Silverman, in contrast, make that case that crypto’s downfall last year was inevitable, and that its markets rest on unsustainable economic models. “The system was so fragile, and based on such faulty economics, that mass liquidations and bank runs and all manner of contagion were practically expected,” they write in the book.
McKenzie spoke to TIME about Hollywood’s embrace of crypto, his strange encounter with Bankman-Fried and his response to pro-crypto critics of the book.
This interview has been condensed and edited for clarity.
How does crypto’s rise and fall in the last few years mirror a long history of financial bubbles?
The title of the book is Easy Money. When people can get money easily—either directly, in the case of COVID stimulus payments or in the form of credit—they have incentives to gamble with it. It’s basically free money, so you might as well try to see if you can get a return.
The line between investing and gambling is quite fuzzy. Some of the things people invest in, or gamble on, are truly innovative technologies that actually do change things. And those people make a lot of money. But some of them are fraud. Charles Kindleberger is an economic historian who studied this extensively.
Once I understood that essential element—that this followed a long history of bubbles—it made a lot more sense why crypto took off like wildfire in a particular time period: during the easy money time period after the global financial crisis, and then after COVID hit and the government pumped trillions of dollars into the economy. There was just so much money flooding around looking for a home that it was pretty natural that people would gamble with it.
Crypto advocates often argue that crypto will help developing nations. During your reporting, you traveled to El Salvador, the first country to make Bitcoin legal tender. What did you learn about crypto’s impact on the people it was supposed to be helping?
That was a real eye opener. The pro-crypto argument I was most sympathetic to was that there are other countries where their currencies are much more unstable, and there are people who lack access to banking. Potentially, cryptocurrency could provide a bridge for those people.
But the things I had been told in the abstract were not true, at least in El Salvador. The day that the law went into effect, the price of Bitcoin crashed 10% in hours. The Chivo wallet system didn’t work: Every citizen was given $30, but a lot of people were immediately defrauded. Someone took a picture of their dog still got $30, so the system was not exactly tightly run.
By the time I’d gotten there around 9 months later, it was basically being ignored. Less than 2% of remittances were using Chivo wallets, according to their Central Bank’s own figures.
Unfortunately, it seems like crypto was being used as a vehicle of corruption for a quasi-authoritarian state. El Salvador has the highest incarceration rate in the world. And so it’s deeply ironic to me that the only place where this quote-unquote currency—that was supposed to be democratizing and decentralizing—was also a place that was locking people up on meaningless charges. That felt deeply ironic.
Having been part of entertainment industry for so long, why do you think Hollywood was so susceptible to the crypto and NFT boom?
The easy money was very appealing to Hollywood. Also, crypto is just a story, of how these things are going to do all this amazing stuff they don’t actually do. Where better to sell that story than the land of storytelling, and tell it through the most famous people on earth?
Economically, it’s a good fit for the parties involved. But it’s not such a good fit for the people that end up buying these worthless links to JPEGs.
You were able to score a one-on-one interview with FTX CEO Sam Bankman-Fried, who has since been criminally charged with fraud among other allegations. In your interview, did you sense an aura or a charisma that Sam seemed to captivate the rest of the world?
I think what Sam did brilliantly was cut against what we think of as the profile of a fraudster. We think of older, tough men who project an aura of uber-confidence and slickness.
Sam cut the other way. He’s this kid who always wore a t-shirt and cargo shorts. If you didn’t know who he was, you’d think, ‘He’s a kid who’s coming in to fix my computer, or like, is hanging out on message boards.’ And so it forces you to go, ‘Well, he must be brilliant because he clearly doesn’t care about the way he looks. He’s not fitting into some Wall Street stereotype of a really wealthy person.’
But as soon as we started talking, I found the actual substance of his answers, or lack thereof, really quite shocking. I really had a hard time getting to anything that resembled true conversations of the merits of crypto that he could articulate in a real way.
I asked him, ‘Show me one company that does anything that’s useful here.’ He initially said remittances, but I had just come back from El Salvador. So I called bull on that. We went around again, and he named Solana. But he happened to own a lot of that currency–and Solana breaks down all the time. He was advocating for it while potentially just pumping his bags.
Answers like that really left me aghast. It’s one thing for Joe Schmo on the floor of the Miami Bitcoin conference to say stuff like that. But for Sam, it was shocking, because he’s supposedly the titan. I left not knowing what to feel, but feeling very unsettled.
Journalists more sympathetic to crypto have unsurprisingly criticized the book in the last few weeks. Brady Dale wrote in an Axios newsletter: “It’s a book where the two writers knew their conclusion before they did any reporting.” Would you like to respond?
We knew that it was one of the biggest frauds in history. Then we did 2 years of reporting and found out that was true. If that’s your ‘gotcha,’ okay. I guess we’re pretty smart, then. We certainly found a lot of fraud.
CoinDesk’s Daniel Kuhn called you a “hypocrite” for writing this book after placing a $250,000 bet against crypto, arguing that your crusade against crypto is “essentially the same type of arrangement that McKenzie often criticized others [including Kim Kardashian] for.”
I put my money where my mouth was. I was trying to warn people there was a lot of fraud, and that I suspected it was a bubble. Whether people heard that or not is really not up to me. But I wasn’t out there potentially selling unregistered, unlicensed securities. I was warning people it would go belly up, I thought—and sure enough, it did.
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