Ponzi Schemes. Pyramid Schemes. That thing where a coyote paints a fake tunnel and then the roadrunner goes through it like it’s actually there.

There are all sorts of pitfalls to avoid when you’re navigating the complex world of finance. Now, after a manic 2022 and a Super Bowl freshly scrubbed of crypto ads, some seem convinced that crypto is one of those pitfalls.

So today, we’re going to answer the question on the tip of everyone’s uncle’s tongue: Is crypto a Ponzi scheme?

Espresso Shots

☕️ Fraudulent FTX Debt Tokens Circulating 😱 🪙

The team overseeing the FTX bankruptcy proceedings warned investors to be on the look out for fake “FTX debt tokens.”

There have been no debt tokens issued by FTX or any of the entities involved with picking over the bones of the dead company, but fraudulent FTX debt tokens have begun appearing in the crypto space.

The restructuring team tweeted out an official statement to notify the public that:

 “The FTX Debtor reminds stakeholders to be on alert for scams from entities claiming to be affiliated with FTX. The FTX Debtors have not issued any debt token, and any such offers are unauthorized.”

But being fully unauthorized didn’t stop one of these tokens, “FTX User’s Debt (FUD),” from reaching $80 and trading $1.8 million in a 24 hour period.

The token name FUD is a play on the popular acronym that stands for "Fear, Uncertainty, and Doubt." Which are deadly to a financial investment.

The value of the token has since dropped significantly as it’s become increasingly clear that the token has nothing to do with FTX.

The FTX debt collection team also took the time to warn the public that those callers aren’t really interested in your car’s limited warranty.

☕️ Yuga Lab's Branding Whoopsie 🦍 💀

An embarrassing branding mishap for Yuga Labs, the company behind Bored Ape Yacht Club, as it appears their new logo was lifted directly from a children’s drawing guide.

The new Yuga Labs logo is a cartoon rendering of a wolf or coyote skull. We’re not sure. It’s up to you.

What we are sure about, and as Twitter user, COLOMBO, was eager to point out. It’s the exact skull image from “Easy Drawing Guides.”

That’s egg on their face. Or skull. Whatever.

But apparently a stolen cartoon skull was only Yuga Lab’s second choice after a blue version of the Starbucks mermaid.

☕️ Kansas to Cap Crypto Donations ❌ 🚜

Fraudulent FTX Debt Tokens Circulating

The team overseeing the FTX bankruptcy proceedings warned investors to be on the look out for fake “FTX debt tokens.”

There have been no debt tokens issued by FTX or any of the entities involved with picking over the bones of the dead company, but fraudulent FTX debt tokens have begun appearing in the crypto space.

The restructuring team tweeted out an official statement to notify the public that:

 “The FTX Debtor reminds stakeholders to be on alert for scams from entities claiming to be affiliated with FTX. The FTX Debtors have not issued any debt token, and any such offers are unauthorized.”

But being fully unauthorized didn’t stop one of these tokens, “FTX User’s Debt (FUD),” from reaching $80 and trading $1.8 million in a 24 hour period.

The value of FUD has since dropped significantly as it’s become increasingly clear that the token has nothing to do with FTX.

The FTX debt collection team also took the time to warn the public that those callers aren’t really interested in your car’s limited warranty.

A new bill introduced by Kansas lawmakers would enforce a $100 maximum on crypto donations in primary or general elections.

But rather than just cap political donations, the bill would require further diligence from political entities on how they process their political donations.

The bill also states that crypto donation could only be processed if the address could be proven to be processed in the U.S. and the identity of the donor could be proven within “reasonable belief.”

Despite the potential crackdown on crypto in Kansas politics, cows still make up the majority of constituents and are allowed to vote.

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Spilling the Beans

America: Home of the Grift. 💰

In some ways, ripping people off is as American as apple pie or baseball.

In the land of opportunity, there are going to be winners and there are going to be losers. As famous snake-oil salesman and all around circus guy, P.T. Barnum, once said, “there’s a sucker born every minute.”

Unfortunately, there are always going to be suckers. We’d like to think that we’re smarter and our skeptical all-seeing gaze cuts through the bullshit, but whom among us didn’t once believe in Kony 2012 or Lance Armstrong’s athleticism?

Somebody’s gotta fall for something for this country to keep on trucking, and no grift has suckered more Americans over the years than the Great White Shark of shitty schemes.

We’re referring, of course, to the Ponzi Scheme.

The name comes from Charles Ponzi, who didn’t actually invent the scheme, but did it so well and so famously that the man and the scam are now inexorably linked.

Charles Ponzi, an Italian immigrant whose full name was, listen to this, Carlo Pietro Giovanni Guglielmo Tebaldo Ponzi.

Aka Charles Ponzi. But Ponzi, like any good swindler, also had a couple aliases. As he carved a bloody financial swathe through the United States, he also went by Charles Ponci, Charlie Bianchi, and at times, simply Carlo.

Now, Ponzi’s move typified what we would come to know as the classic Ponzi scheme.

A Ponzi Scheme consists of paying earlier investors with the money from later investors.

Ponzi’s take on this was built around postal coupons. He made $20 million before his lies caught up with him. And in the 20s, when Ponzi was wheelin’ and dealin’, $20 million was like a lot more money.

Though a Ponzi scheme certainly looks appealing in the short run, and that’s one of its strengths, it’s entirely unfeasible in the long run.

Everyone but the person running the scheme is going to get burned, because there’s no actual value being created, it’s all just investors being paid with money from different investors.

And of course, with crypto arriving on the scene and a lot of people making a lot of money, nervous investors were eager to cry, “Ponzi!”

But, no, crypto is not a Ponzi scheme.

A Ponzi scheme derives value usually as a form of passive income for investors before it inevitably runs out. Crypto on the other hand still carries underlying value: that value being whatever the market values it at.

The existence of a public trackable market for crypto prices makes it completely devoid of any of the qualities of a Ponzi scheme.

Cryptocurrencies are a new form of digital tech that not only function as currency but function as an entire decentralized financial ecosystem.

Many cryptocurrencies are built on their own proprietary languages that support this technology. This is all real, actual value.

But crypto is a young industry and clearly, it’s going to have some growing pains.

There have been Ponzi-like schemes in crypto. FTX is the obvious example, in that there was clear and wrongful usage of investors’ funds, often to purchase something flashy like stadium rights.

Now just because crypto itself isn’t a Ponzi scheme, that isn’t to say there aren’t schemes in crypto. New ways to make money will always be taken advantage of.

But the best way to avoid being burned? Be smart. Or, DYOR (Do Your Own Research) as crypto investors are so fond of saying.

New tokens are being created every day and not all tokens are created equal. It’s very possible for bad actors to promote a new token that has absolutely no inherent value and get it trading high enough to make a pretty penny.

Like we were just discussing earlier in the newsletter with FTX User’s Debt coin. Not a real thing. Not tied to FTX. No inherent value. Scam.

Just be smart. Be cautious. Be curious. Really, give crypto the same attention and consideration that you’d apply to any important investment.

There are grifters in crypto, just like there are grifters in traditional finance.

Yes, some berries are poisonous, but are you going to stop eating berries altogether? What kind of a life would that be without the occasional blueberry pancake?

Meme of the Day

Watch out for that crypto stuff, it's a scheme.

Crypto 101

Fungible: This is a big, simple one that you may have been too afraid to ask.

When we’re discussing NFTs, we’re referring to Non Fungible Tokens. But what does “fungible” actually mean? Fungible means that an item can be replaced by another identical item.

Like your socks, they’re special to you, but you wouldn’t know and it wouldn’t matter if they were replaced with an identical pair.

In the context of NFTs, Non-fungible refers to their unique, digital codes which makes them irreplaceable and therefore valuable.

The Last Sip

Discarded New Illegal Logos for Yuga Labs:

• The Nashville Wings, white girls taking photos included.

• The snake-eating eagle on top of a cactus from the Mexican flag.

• Mickey Mouse ears.

Stay Caffeinated,

Coffee & Crypto Team

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DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.