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Tuesday, May 21, 2024

The year in crypto—collapses, failures, and straight-up fraudsters

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As I write this Sam Bankman-Fried, once a crypto darling and the man in charge of FTX, has been extradited to the US to face charges over the crypto exchange’s collapse. The byword for corporate scandal in America has for decades now been Enron and, funnily enough, the same lawyer who handled that bankruptcy is now in charge of FTX: and says he’s “never seen such a complete failure“.

Cryptocurrency remains a nascent industry but, now that certain tokens like Bitcoin and Ethereum are well-established, it feels like the wider landscape has become fraught with little more than grifters and endless variants on the classic “pump n’ dump” scam: and this year, a lot of chickens came home to roost. There’s even a collective noun for the many smaller cryptocurrencies that launch every month in the vain hope of attracting naïve cash: shitcoins.

PC Gamer is not a crypto website but, as the technologies continue to intersect with gaming and the wider PC ecosystem, it feels increasingly essential to keep a weather eye on what the hell’s going on over there. I’m going to take you through the things that hit our radar in 2022, but don’t take this as a comprehensive guide to crypto’s 2022, so much as a selective highlights reel of one of the grimiest, weirdest and most speculative areas of tech.


The year began with one eyebrow-raising note: turns out North Korea stole an absolute boatload of crypto in 2021. The US government in particular is concerned about this trend because cyber warfare generally is one of the big concerns about this regime, and it’s going after anyone seen as helping it, including jailing a former Ethereum employee who gave a talk there.

The year would quickly bring an example of North Korean capabilities, with the FBI blaming the country’s ‘Lazarus Group’ of hackers for a $617 million heist on blockchain game Axie Infinity. Later in the year it would emerge that, while this was ongoing, the CEO withdrew funds before the feature was disabled for users.

In February hackers found a flaw in the code of cryptocurrency platform Wormhole, and magicked away over $300 million worth of user crypto.

Crypto hacks do risk seeming a bit abstract: a few million here, the collapse of some derivative product you’ve never heard of there. But June brought a shocking example of where this can end up, as the Costa Rican healthcare system was hacked and held to ransom for $5 million in cryptocurrency, forcing the country to shut down essential medical infrastructure.

August saw an exploit found on Solana, which a hacker used to drain $5.2 million out of over 8,000 crypto wallets. At almost the same time Nomad, a crypto bridge that was sold on its security, suffered a “frenzied free-for-all” hack that claimed over $200 million of crypto.

September? Wintermute. A crypto ‘market maker’ that provided liquidity, it got done for $160 million.


July saw a first in the authorities’ approach to crypto fraud. A former Coinbase employee and associates became the first people to be charged by the SEC with insider trading in cryptocurrencies: expect to see a lot more of these cases in the future. As the suits in this case said, “Fraud is fraud is fraud, whether it occurs on the blockchain or on Wall Street.”

In that regard, it’s time to talk Turkey. Last year an exchange called Thorex collapsed, costing investors $2.5 billion, and founder Faruk Fatih Özer went on the run. In August Albanian police arrested him, Turkish authorities began seeking his extradition, and he’s going to be facing charges with a penalty of 40,564 years in prison.

Some of the fraudsters remain out there, for now. Dr. Ruja Ignatova, known as the “Missing Cryptoqueen” since 2017, this year made the FBI’s Ten Most Wanted list.

TerraUSD founder Do Kwon was the subject of an Interpol red notice in September, and is currently believed to be in Serbia by South Korean authorities.

The crash

Perhaps ‘the’ crash is a misnomer, because what 2022 represented for crypto was an ongoing series of crashes where products previously thought to be reliable were found to be not quite so solid.

Everything really kicked off in May with a dive in value across the ecosystem that even affected Bitcoin, and at this point the big villain was being seen as TerraUSD. This is a so-called stablecoin, meaning that its value should remain consistently pegged to the US dollar, and it turned out to be anything but a stable coin: its collapse was so big that the fear was it could spread contagion among other stablecoins, including the poster boy for these products, Tether.

July saw the collapse of the Celsius Network with an astonishing $1.19 billion black hole in the middle of its balance sheet.

The knock-on effects were everywhere. Crypto-based game Untamed Isles lost so much money over this period that it basically cost the game its funding, and it shut down without offering refunds, because there was no money left.

The biggie was, of course, FTX. This was an enormous crypto exchange estimated to handle over $700 billion of trades a year, and it looks like someone was cooking the books. It collapsed into bankruptcy, and former employees now seem to have flipped on CEO Sam Bankman-Fried.

Amusingly enough FTX sponsored Riot, among many other companies: the League of Legends developer is now doing everything it can to cut ties.

The serious stuff

Joe Biden isn’t having any of that crypto malarkey: The President says he wants to know a lot more before committing to something like a digital dollar.

Meta aka Facebook once had big plans for cryptocurrency, including releasing its own crypto wallet, which this year it quietly backed away from. Yep, crypto’s too dicey even for the company that’s betting it all on the metaverse. You can, at least, console yourself with a GameStop NFT wallet.

In terms of actual good news, one highlight of the year was Ethereum finally moving to a proof-of-stake model: basically, the world’s second-biggest cryptocurrency making itself more environmentally sustainable. Not a moment too soon either.

Oh, on which note: this trend has seen large-scale mining outfits unable to pay back crypto lenders. Doesn’t your heart just bleed?

To 2023 and beyond

There is one crypto story of the year I’d like to end on, though it hasn’t made any headlines. I’d always been a fan of the now sadly defunct podcast ReplyAll, which in its heyday was a wonderful mix of weird tech stories and investigative deep-dives into the internet’s oddest corners. One of the hosts, PJ Voght, left the show and earlier this year launched a standalone podcast: Crypto Island.

PJ Voght is a great podcaster and the pitch here was very much a curious outsider exploring the world of cryptocurrencies: trying to work out what substance there actually is beneath all the buzzwords and hype. The show is named after a bizarre project to establish a crypto commune, told in the first episode, but Voght then went on to do things like investigate an attempt to buy a copy of the US Constitution by a crypto collective, attend a crypto conference to talk with attendees, and interview both evangelists and sceptics alike.

Something interesting happened though. Voght began the show as a crypto agnostic. In interviews he’d ask exactly the questions you should, but my sense was that he wanted to be persuaded: that if only he got the right person to explain it, the blockchain and the billions and frankly the fervour might finally make sense. It couldn’t just all be scams, could it?

The show began with a quick flurry of episodes across March and April, and then in May, the Luna collapse happened. Voght quickly produced an episode, “The lunatic who crashed crypto”, which explored the personality of Do Kwon and exactly what lay behind what was all happening. Then, the podcast had one more episode at the end of May, one in June about an NFT heist, and one in in September where Voght announced the imminent end of the project.

The final episode, ‘The End’, was released just before Christmas. It’s a slightly meandering account of a trip to Greenland that hovers around the environmental impact of crypto but is really about climate change (with a rather excellent Coolio anecdote en route). Global warming is a problem of such existential consequence that in this context crypto, and jawing about proof-of-work versus proof-of-stake models, feels like some sort of carnival sideshow.

My point is not that someone started a podcast and got bored of the topic. Because I don’t think Voght did get bored. Crypto Island feels like an idea that came along at exactly the wrong time and, as it tried to explain crypto and make some of this make sense, the ‘certainties’ of the crypto world began to collapse around it. You can feel Voght almost getting tenser towards the end, and a sense that maybe the project had given too much credence to crypto, been too quick to believe or at least air some of the bullshit that accumulates around this phenomenon.

Crypto Island’s a great listen, even if it did peter out. But that in itself summed-up the year in cryptocurrency for me, another curious outsider who looks on in fascination at this world of gamblers and grifters who claim these products represent the future of global economies. The space remains wrapped in obfuscatory language designed to give the appearance of solidity to pure wind (“mint”, “land”, “token”) and if 2022 showed anything it’s that the frauds are not confined to smaller players, but look endemic. The use cases for crypto remain fringe, while the products become harder to trust with each new collapse.

2022 is a year where cryptocurrencies and the emerging industry around them lost a lot of credibility, and began to look awfully like a space that doesn’t just need regulation but demands it. The vision behind Bitcoin, which ultimately boils down to removing middlemen and giving individuals more control over their money, feels completely bastardised. And the saddest thing about all of these stories is that, while some of the villains may eventually face justice, the people who’ve trusted the jargon and lost serious money to crypto are too numerous to count.

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