The O.C.’s Ben McKenzie goes deep down the crypto rabbit hole

Ben McKenzie had just embarked on his Gonzo-style investigation into the murky world of cryptocurrency when he sat down to watch his beloved Los Angeles Dodgers take on the Atlanta Braves in the World Series in late 2021.

Perched in a Brooklyn bar drinking cold beers and eating bad nachos with his collaborator and fellow Dodgers fan Jacob Silverman, McKenzie – best known for playing heartthrob Ryan Atwood on The O.C. – could scarcely believe his eyes when one of his acting heroes suddenly appeared on the television promoting the Crypto.com exchange.

“F***ing Matt Damon comes on the screen,” the 44-year-old actor-turned-investigative journalist tells The Independent.

“I didn’t know what to make of it, it was very confusing. The pitch was ‘fortune favours the brave’. It was pretty depressing. My reaction was to order another beer.”

Damon was far from alone. Celebrities from Kim Kardashian to Reese Witherspoon, Gwyneth Paltrow to LeBron James went all-in on encouraging investors to stump up their cash in what struck McKenzie as nothing more than an unregulated online casino.

For McKenzie, the sight of his fellow celebrities rushing to cash in on the craze was confirmation that the crypto bubble had veered into dangerous territory.

Jerry Schaffer, the director of a cringeworthy commercial for Sam Bankman-Fried’s failed crypto exchange FTX featuring Larry David, would later admit to knowing “zilch” about crypto when he made the ad.

“Then why are you selling something that you don’t understand? Give me a break,” McKenzie tells The Independent.

“The tagline of the ad for FTX was ‘a safer way to invest’. Well that obviously wasn’t true was it?”

In May 2021, Elon Musk was given star billing on Saturday Night Live where he hawked Dogecoin, an essentially worthless cryptocurrency known as a s***coin that spiked in value around the same time.

In a sketch with Michael Che and Colin Jost, Musk played a fake crypto expert who jokingly admits that it’s all one big hustle.

“I think that’s a clear example that something is very rotten in Denmark,” McKenzie says.

Calling out high-profile stars who took a quick buck to push crypto on to the masses before the industry-wide meltdown of late 2022 is nothing personal, McKenzie says.

“I don’t know anyone personally very well who was shilling it, but this is about us owning our side of the street. Every profession has to have certain standards, this fell through the cracks in many ways.”

He would like to see celebrities who had been taken in by crypto’s excesses come forward and tell their stories, but so far few have.

“At the end of the day crypto’s just a story, it’s an economic narrative. So it’s fitting that Hollywood, which is an industry built off the power of stories, would ultimately end up having strong ties to it. Just because it’s a story, doesn’t mean it’s a true story.”

As the Dodgers game gets underway, McKenzie notices the logo of FTX emblazoned prominently on uniforms.

“They literally bought off the umps,” he says.

‘Casino capitalism’ infection

In 2003, McKenzie shot to stardom on The O.C. in the leading role of Ryan Atwood, the brooding teenager from the wrong side of the tracks. He would go on to star in gritty leading roles in the Batman prequel Gotham and crime drama Southland.

When the pandemic hit and productions were shut down, McKenzie was out of work for the first time in nearly two decades. He retreated to the Brooklyn home he shares with his wife, the actor Morena Baccarin, and their three children.

Then in early 2021, an old friend got in touch with some financial advice: Get in on crypto now before it’s too late.

McKenzie, an armchair investor with a degree in economics, decided to investigate the phenomenon.

As governments around the world injected billions of stimulus dollars to keep economies afloat, investors were pouring billions into speculative investments like stocks and crypto.

Flush with cash, an estimated 40 million Americans, including around 42 per cent of men aged between 18 and 29, jumped on the crypto bandwagon.

McKenzie says the hype surrounding it immediately set off his Ponzi antenna.

He made a $250,000 bet that crypto prices would plunge by short selling stocks related to digital currencies.

He candidly admits that he lost nearly all of it, as crypto prices fuelled by cheap money, misinformation, social media and celebrity endorsements soared.

Despite the losses, he put in another $135,000 when an investment matured.

Speaking to The Independent, McKenzie says he decided to be transparent about his losses to illustrate how “casino capitalism” — the desire to make fast money — had infected every strand of society.

“I did what you should never do, and I doubled down, and it was an awkward conversation with my spouse but, I did still feel like it was right,” he says.

Here, McKenzie quotes the Great Depression-era economist John Maynard Keynes: “Markets can remain irrational longer than you can remain solvent.”

McKenzie had played poker with friends when he was 20-something and new to Hollywood, and used to think “ah, gambling is not so bad”.

“But it’s become too much,” he says. “Sports gambling ads are everywhere. Crypto’s similar but worse. It’s doing real social harm but we don’t talk about it.

“It’s strictly targeting men and men have a hard time being honest. It’s very embarrassing to lose money so I wanted to talk about that and say ‘here’s what happened’.”

One night, while reading his daughter The Emperor’s New Clothes at bedtime, it dawned on him that the fairytale was an apt parable for crypto.

The so-called experts and celebrity boosters appealed to investors’ ego and status, just like the emperor’s tailor had.

And it took the honesty of one person to point out the emperor was in fact naked, and try to pierce the bubble.

After getting high on legal marijuana, McKenzie decided he would write a crypto book.

Entering the rabbit hole

McKenzie connected with Mr Silverman, a fellow Brooklynite, after reading an article in June 2021 he had written for New Republic headlined “Even Donald Trump Knows Bitcoin Is a Scam”.

The result of two years down the crypto “rabbit hole”, Easy Money: Cryptocurrency, Casino Capitalism, and the Golden Age of Fraud, was released this month.

The entertaining and meticulously-sourced book took its authors deep into the strange world of crypto, and shed light on the febrile economic, political and cultural currents that enabled it.

The pair journeyed to El Salvador to see firsthand the effects of president Nayib Bukele’s decision to make Bitcoin legal tender.

They travelled to Texas to visit the largest Bitcoin mining factory in the US, which involved some clever sleight of hand to avoid signing a compulsory non-disclosure agreement.

At the April 2022 Bitcoin Conference, an annual meeting of 50,000 devotees in Miami, they met shady crypto-bros and watched PayPal founder and GOP megadonor Peter Thiel hurl $100 bills into the audience in an attempt to show their lack of value.

Tucker Carlson, Jordan Peterson, Miami mayor and GOP presidential candidate Francis Suarez were all in attendance.

McKenzie interviewed Brock Pierce, a former child actor and onetime Vermont Senate candidate who seemed to have his fingers in every area of crypto, describing him in Easy Money as the strangest person he came across in the industry.

The story takes several surreal turns. While holding a crypto-skeptic discussion panel at the SXSW festival in Austin in early 2022, McKenzie is tapped by two CIA operatives who try to recruit him to an interagency task force over the course of a booze-fuelled night out.

The next day back at SXSW, McKenzie interviews Alex Mashinsky, the CEO of crypto lending company Celsius.

Mr Mashinsky admits with his trademark bluster that there was only about 10-15 per cent “real money” in the crypto system, McKenzie writes.

Within months, Celsius would declare bankruptcy and Mr Mashinsky would be charged by the Federal Trade Commission with duping consumers into transferring funds to his platform and squandering billions in user deposits. Mr Mashinsky was arrested on fraud charges earlier this month. He denies any wrongdoing.

McKenzie tells The Independent that his background in acting helped him to be quick on his feet and disarm suspect characters during these chance encounters.

“At a fundamental level I am a storyteller, and I’m also a professional liar in the sense that I act,” he says.

“In improv it’s called ‘yes and’. You never say ‘no’, you always say ‘yes and’. People want to talk to you because you’re on TV. That’s the truth of the matter.”

A trend of trustless money

Delving deeper into the project, McKenzie began reading the works of historians and economists as he tried to deconstruct the nature of money, and what drives greed and hype.

To understand crypto, McKenzie argues you have to go back to the previous market bubbles such as the Tulipmania craze in Holland in the 17th Century, the stock market excesses in the 1920s, and the 2008 subprime mortgage crisis.

After the stock market crash of 1929 and subsequent Great Depression, the US government passed federal security laws to protect investor’s assets.

Nearly a century on, Mckenzie saw similar unregulated dangers in crypto.

And when millions of Americans lost their homes and life savings in the global financial crisis in the late aughts, the titans of Wall Street who profited from risky home loans emerged relatively unscathed, with only a solitary Credit Suisse executive seeing jail time.

Crypto flourished under similar laissez-faire regulation, as an army of young men trapped at home during the pandemic developed a sense of nihilism that the chips would always be stacked against them.

The greatest trick that crypto ever pulled, according to McKenzie, was that it offered a way for everyday investors to beat the powerful forces that dominate central currencies and money markets.

“The aspiration to create a trustless money, the aspiration that we shouldn’t trust each other, is f***ed up,” he says.

“We already live in an era of rampant misinformation and outright lying, and so the notion that we should aim for less trust seems completely wrong-headed.”

The book is filled with easy-to-understand economic theories, explainers that place crypto in the context of those bygone bubbles.

McKenzie explains terms like Defi (decentralised finance, a key goal of crypto enthusiasts), wash trading (the practice of selling an asset between accounts controlled by one person to give the appearance of demand), whales (owners of large amounts of crypto) to help to prise open the seemingly impenetrable jargon.

The project was strange and isolating at first, McKenzie says, until he fell in with a community of fellow cryptic-skeptics.

This nerdy crew of software engineers, cryptographers, professors of economics, pseudonymous Twitter users and bloggers, fellow self-taught sleuths and journalists had long been sounding the alarm, and reassured McKenzie he was on the right track.

“It was a cool group and a fun group, and we found a community where you’re challenging each other and trying to get to the truth.”

The ‘very toxic’ crypto subculture

In October 2021, the authors published a piece for Slate titled “Celebrity Crypto Shilling Is a Moral Disaster” which took aim at Kim Kardashian and Floyd Mayweather, who were paid handsomely to promote a new crypto currency called EthereumMax.

Kardashian would later be fined $1.3m by the Securities and Exchange Commission promoting EthereumMax, another so-called s***coin which is now essentially worthless.

McKenzie spoke to several crypto investors who found that when they tried to cash in their winnings, exchanges such as Binance refuse to pay them, citing technical problems.

One watched $150,000 vanish from his crypto coffer in the time it took for Binance to correct the fault, and was later offered vouchers and trading credit to make good.

McKenzie wanted to understand what had created the culture of crypto, with its own lexicon of jokes, memes and acronyms, and more than a tinge of misogyny and racism.

He says the vast majority of the tens of millions who bought in were regular people intoxicated by the bubble of quick money.

Then there was a subculture that could get “very, very toxic”, he explains.

“There are many different ways to make money in the era of social media, and for conmen and fraudsters there are many different tactics, and one of them is to say that ‘I’m on your side’.

“The story of crypto gaining so much is, if you’ll excuse the pun currency, because it was told as this was a reaction against the bad guys in our financial system. ‘You don’t like this about the banks, you don’t like this about inequality, crypto fixes it’.

“It got people’s attention because the first part is true. Our system is messed up, there are clearly things that we need to address. The truth is that crypto doesn’t solve them, it makes them worse.”

Meeting Sam Bankman-Fried

In early 2022, the financial landscape was shifting and the era of free money was coming to an end.

In the face of rampant inflation, the Federal Reserve began rapidly increasing interest rates.

In April, the crypto bubble began to pop. It began when TerraUSD, a so-called stablecoin tied in value to the US dollar, crashed, taking down its related cryptocurrency Luna with it.

The contagion spread, ensnaring several finance companies who had committed billions of dollars in investor funds to Luna. Some $2 trillion in value was wiped out.

Amid the chaos, Sam Bankman-Fried stepped forward as a potential saviour.

The boyish founder of FTX rose to prominence after founding cryptocurrency trading firm Alameda Research in 2017 at the age of 25.

Mr Bankman-Fried worked out how to exploit an unusual quirk in crypto values — that the price of Bitcoin was higher in South Korea and Japan than in the US.

Alameda quickly became a major player in crypto, and boasted of having more than $90m in digital assets while trading between $300m to $1bn daily.

In May 2022, McKenzie issued a deliberately provocative challenge on Twitter: “Anyone in the crypto industry wants to come at me, feel free. Fwiw, I have spent 20 years in showbiz, I can take a punch. Just a couple words of advice: don’t miss.”

To his surprise, Mr Bankman-Fried responded, the start of an on-off conversation over several months. He then agreed to an on-camera interview.

In July, McKenzie arrived at a Manhattan hotel to find Mr Bankman-Fried in conversation with a journalist from Fortune magazine. The interview would lead to an infamous cover story headed “Next Warren Buffet?”

McKenzie tells The Independent that he wasn’t impressed with the man hailed as the next financial messiah.

SBF, as Mr Bankman-Fried is known, squirmed nervously with a Fidget Spinner as he offered up a defence of crypto and tried to assure the author that its present woes were merely a minor blip.

The awkward, hour-long encounter was videotaped and its most interesting tidbits are included verbatim in the book.

What happens when the interview concludes and Mr Bankman-Fried takes off his mic, was revealing for McKenzie.

He tells McKenzie there’s a lot more he could say off the record — with no such prior agreement in place — and proceeds to dish dirt on others in the crypto industry.

Unbeknownst to the public at that time, Mr Bankman-Fried had been the second largest donor to Joe Biden’s election campaign in 2020 with $40m in donations. It would emerge later that FTX was playing both sides, his partner Ryan Salome gave $23m to Republicans.

The day after the interview, McKenzie and Mr Silverman went to Washington DC to interview lawmakers.

“The ‘vibe’ was well-intentioned people who were open to our argument, but basically saying ‘Sam’s throwing too much money around to do anything about it this year, so it will have to wait’. And then Sam’s empire fell apart.”

On the day of the midterm elections, FTX’s balance sheet leaked, the first domino that would eventually expose a collection of companies controlled by Mr Bankman-Fried as an alleged Ponzi scheme that dwarfed Enron.

McKenzie testified before a Senate enquiry into the collapse of FTX in December, telling lawmakers that investors had been lied to “in ways both big and small”.

In January, Mr Bankman-Fried was arrested in the Bahamas and extradited to the US where he has been charged with misappropriating billions of dollars in customer and investor money from FTX.

He denies the charges. This week, prosecutors argued he should be locked up until trial for violating his bail terms by using the media to harass a key witness.

Heroes do emerge from McKenzie’s gripping tale. The sceptics, regulators, law enforcement officials, truth tellers in general, pseudonymous bloggers, and probing reporters.

On the government side there are not a lot of heroes, he says, as politicians were taking money from the same people they’re supposed to be regulating.

“Both parties took the money, whether knowingly or not. It’s a symptom of a bigger problem which is capitalism can overwhelm democracy.”

“One of the things I hope when people read the book is they can see how close we may have come to crypto getting further into our banking system and regulated financial system which would have been an absolute disaster in my opinion,” McKenzie tells The Independent.

* Easy Money: Cryptocurrency, Casino Capitalism, and the Golden Age of Fraud is available now.