2023 in crypto and web3: Scams, collapses, and finally some consequences

28 December 2023

in Mining

Reading Time: 5 mins read

2022 was the year where cryptocurrencies and the industry around them lost a lot of credibility, thanks to the collapse of enormous exchanges like FTX and the overnight failure of major cryptocurrencies like LunaUSD. 2023 has been the year where we started to see the consequences for some of this stuff, alongside a whole host of more familiar malfeasance.

The year got started with the announcement of Cryptoblast: Nope, not another shitcoin, but the first crypto-backed energy drink. What does that mean? Who cares but we made Jorge drink that garbage anyway, and he says it tastes “like it was secreted on the blockchain.” Nummy!

No, Russia did not just lift its ban on domestic crypto use

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More consequentially, March saw Nvidia announce it was kicking crypto to the kerb because it “doesn’t bring anything useful for society. AI does.” And with that, it’s the moment you’ve been waiting for: let’s get onto the crooks.

It’s the Feds!

Sam Bankman-Fried in TSM FTX jersey

(Image credit: Sam Bankman-Fried (Twitter))

It’s always nice to start with a smile, so here’s one of my favourites: a Turkish crypto baron behind a $2.5B rug-pull declared “I am smart enough to lead any institution on Earth” just before a court sentenced him to 11,196 years in jail.

The year’s biggest story in this regard, however, was the trial of the “king of crypto”, the former billionaire and founder of FTX Sam Bankman-Fried. Several of his FTX ex-colleagues testified against Bankman-Fried, who pleaded not guilty to seven counts of money laundering and fraud. In November he was found guilty on all counts, and will be sentenced on March 28 next year: He is likely to face decades in prison.

With Bankman-Fried in the slammer, all eyes now turn to fugitive Do Kwon. The self-described “Lunatic” behind Luna and TerraUSD, Do Kwon fled to Montenegro after the more-or-less overnight collapse of both caused a loss of around $40 billion on crypto markets and was the major factor behind the 2022 catastrophe-slash-contagion. He’s currently in custody in a court battle to avoid extradition to either South Korea or the US.

The US Department of Justice has been busy elsewhere, targeting dark web crypto-drug traffickers in a May bust that saw 288 arrested. US Attorney General Merrick Garland then channelled his best secret agent voice and warned cyber-criminals: “you can try to hide in the furthest reaches of the internet, but the Justice Department will find you and hold you accountable for your crimes.”

The various US enforcement agencies are paying plenty of attention to crypto these days, and in June the huge exchange Coinbase was slammed as it was charged by the Security and Exchange Commission. The SEC made a very stark point in its complaint: ‘You simply can’t ignore the rules because you don’t like them.’

Over in the EU, meanwhile, the bureaucrats were busy passing the world’s first regulatory framework for the crypto industry: good luck with that.

As ever, various smaller hacks and scams were all around. A bean-obsessed crypto-weeb community got harvested for $2.74m in cryptocurrency & NFTs, the latter including a whole zoo’s worth of animal jpegs. Mutant Ape Planet was another $2.9 billion rug pull. Et Tu, Mutant Ape Planet?

Influencer Logan Paul threatened to sue a journalist who called his CryptoZoo project a scam, before backing down, and promising refunds (which ain’t gonna happen).

To focus on the games industry for a minute, Sega’s infatuation with the blockchain is over, news which arrived with the incredible quote “what’s the point if the games are no fun?” CCP announced plans for a blockchain game set in the EVE universe, which had fans in open revolt, while GameStop abandoned its plans for a crypto wallet.

Mined Out

The year overall saw a drop in value for the crypto market, though the scale of this thing is still astonishing: Earlier this year came the news that crypto mining in the US used more electricity than every single computer in the country. The US government estimates such operations used between 30 and 60 billion kWh and, yes, that range of estimate is scary in itself.

And what might these mines be like? Why not ask the residents of Elk County, Pennsylvania, which sounds like a lovely place to live: Or it would be, if it wasn’t for that gas well that’s been turned into a crypto mine driving the residents crazy with noise. At least that one’s easy enough to spot: Massachusetts police were blown-away to find a crypto mining setup squirrelled-away in a school, which had been operating for around six months and used $17,500 of electricity.

Joe Biden’s had enough of this malarkey anyway: The president wants to tax crypto miners for “the harms they impose on society.”

OpenAI’s Sam Altman, when he wasn’t getting fired-then-rehired, launched something straight out of dystopian science fiction: the Worldcoin cryptocurrency-adjacent iris scanning project. The goal? To connect (and collect the data of) would-be crypto investors, so that they can be inducted into the totally anonymous crypto-bro ingroup that Worldcoin is offering. All hail the orb, or something.

If you thought things couldn’t get dumber, think again. In the year of our Lord 2023, an actual human being held a CO2 reader up to a PC to prove “bitcoin mining has zero carbon emissions”.

Finally, some festive cheer. Interpol capped-off the year by arresting over 3500 alleged crypto-scammers, seizing $300 million, and warning nations worldwide to watch out for NFT “rug pulls”, which it illustrated with pictures of pixel art cats.

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