Crypto's boom ran on trust no audit ever checked

1

The load-bearing stablecoin

Faux treats Tether's one-dollar-per-token claim as the wall holding up the entire speculative structure; if it was false, everything built on it was false too.

By the time he starts asking, more than $80 billion in USDT is already circulating as the dollar substitute on nearly every exchange, including venues that cannot legally touch real banks. Tether insists every token is backed one-to-one by cash and safe assets, yet it has never submitted to a full audit from a major accounting firm. It publishes attestations from smaller firms—snapshots that confirm numbers add up on a single day without verifying where the money actually sits.

That audit-versus-attestation distinction becomes the spine of the book. In 2019 the New York Attorney General accused Tether and sister exchange Bitfinex of using $850 million in client funds to cover a shortfall; they settled in 2021 for $18.5 million without admitting wrongdoing. Faux reads the episode as an open warning, not a closed case.

He refuses to treat the issue as a niche accounting dispute. Traders move in and out of Bitcoin, Ethereum, and thousands of tokens using USDT as the stable resting place; exchanges rely on it to settle instantly across borders and outside banking hours. If that resting place does not hold what it claims, the risk runs through every wallet and market that touches it.

Everything that follows—the games, the national experiments, the collapses—sits downstream of this one unanswered question about the industry's basic unit of account.

In practice: The New York case over an $850 million shortfall, settled for $18.5 million with no admission of wrongdoing, is the early red flag Faux refuses to treat as resolved.

2

Opacity as the business model

Tether's refusal of ordinary scrutiny is, in Faux's account, a deliberate choice by people who profit enormously from staying unaudited.

He tracks key figure Giancarlo Devasini, a former plastic surgeon turned crypto financier, to Milan and finds a small circle controlling a company registered in offshore jurisdictions such as the British Virgin Islands. By some estimates it makes hundreds of millions of dollars a year in interest on the reserves it holds while avoiding the regulatory apparatus that governs banks or money-market funds.

The sit-down interview never happens. Executives dodge, lawyers intervene, and public statements stay vague. Faux pieces the structure together from court filings, former employees, and intermediaries, learning that money has moved through small obscure banks including Deltec in the Bahamas—an institution most Americans have never heard of yet holding billions for a global settlement layer.

The real argument is incentive. A full audit could reveal gaps between liabilities and reserves or expose how much of the 'cash equivalents' are actually loans to other crypto firms, some of them insiders. Staying unaudited protects the profit engine.

He compares it to a bank whose customers have implicitly agreed never to ask for the books. The Bahamas cluster of offshore crypto firms, FTX included, appears as the geographic version of the same preference for light touch.

In practice: Reserves sitting at little-known Deltec Bank in the Bahamas show how systemically important balances lived outside familiar oversight.

3

Charisma instead of controls

Bankman-Fried's success depended less on trading skill than on a carefully built image of altruistic genius that discouraged the scrutiny FTX needed.

By 2021 he had built FTX into an exchange valued at $32 billion and Alameda Research into one of crypto's most active trading firms. He cultivated a specific persona: disheveled, awkward, Corolla-driving, beanbag-sleeping, promising to give away his fortune under the banner of effective altruism.

Faux interviews him more than once and comes away struck by how effectively the image substituted for due diligence. Celebrities, mainstream investors, and regulators treated FTX as the responsible, adult-supervised alternative partly because SBF talked fluently about risk management and consumer protection while giving large sums to campaigns and charities.

Reporting shows the gap: Alameda had privileged access to FTX customer funds, a relationship the public did not understand and that SBF did not volunteer. Faux frames the genius as reputational engineering—a recurring crypto pattern in which trust replaces verification and charisma replaces audits.

He notes his own uneasy position, flying on SBF's plane and interviewing in the Bahamas, aware that access carried the risk of becoming a validating prop. The Tether lesson reappears in human form in the person the industry cast as its most trustworthy adult.

In practice: Alameda's privileged draw on FTX customer funds stayed opaque to the public even while effective-altruism branding invited broad trust.

4

Play-to-earn sharecropping

Axie Infinity extracted real income and real debt from poor communities by dressing a pyramid scheme up as economic empowerment.

In the Philippines, Sky Mavis's game let players breed and battle NFT creatures called Axies to earn Smooth Love Potion that could be cashed out for real money. During the pandemic, thousands became 'scholars,' playing for hours on Axies they did not own, borrowed from managers who took a cut—an arrangement Faux likens more to sharecropping than any digital-ownership revolution.

For a stretch in 2021 some scholars genuinely earned more than local jobs; families bought motorbikes and paid down debt with SLP income. The economics only worked while new players kept buying Axies and supporting the token's price, the classic widening base of a pyramid.

When SLP crashed more than 99 percent in 2022 and the Ronin Bridge was hacked for $625 million that March, scholars were left with worthless tokens and, in some cases, debt taken on to buy starter Axies. Faux uses the case to show that crypto's damage was not confined to sophisticated traders who understood the risk.

It reached subsistence-level workers who had been told, credibly, that a video game could be their way out of poverty, and who bore the loss when a token never backed by anything but continued enthusiasm stopped going up.

In practice: Families who bought motorbikes with SLP earnings later faced debt on starter Axies after the token's more than 99 percent crash and the $625 million Ronin hack.

5

A country's branding bet

El Salvador's Bitcoin legal-tender law served President Bukele's brand and leverage against the IMF far more than it served ordinary Salvadorans.

In 2021 Bukele made the country the first to adopt Bitcoin as legal tender and floated a geothermal Bitcoin City funded by volcano energy and Bitcoin-backed bonds. The government built the Chivo wallet and gave citizens $30 in Bitcoin to drive sign-ups.

On the ground Faux finds low adoption. Most people continued using cash and dollars—the actual currency since 2001—distrusting or simply not understanding the new system. Businesses were technically required to accept Bitcoin yet often lacked working terminals or staff who knew how. Volatility made it a poor tool for groceries.

Meanwhile the state's Bitcoin holdings lost significant paper value as prices fell through 2022, and the IMF repeatedly criticized the policy as risky, complicating loan negotiations. Faux reads the move as branding: it drew foreign crypto attention and cast an increasingly authoritarian figure who had suspended parts of the constitution as a bold innovator rather than a strongman consolidating power.

A national government, he argues, can be pulled into the same number-go-up logic that drives individual speculators, betting public resources on a price continuing to rise.

In practice: Citizens got $30 in Bitcoin for installing Chivo, yet most kept spending dollars while government holdings lost paper value and the IMF raised alarms.

6

Irreversible scam rails

Crypto's instant, borderless, irreversible transfers did not merely fail to prevent fraud; they built the infrastructure that made industrial-scale scam compounds possible.

In Cambodia Faux investigates compounds often disguised as casinos or office parks in cities like Sihanoukville that run pig-butchering scams—fattening a victim's trust before slaughtering the savings. Workers, many trafficked from China, Vietnam, and other parts of Southeast Asia under false job offers, are held against their will and forced to run scripts on dating apps and messaging platforms worldwide.

They build fake romantic or business relationships over weeks, then steer victims toward bogus crypto trading platforms that show fabricated gains and urge larger deposits, sometimes emptying retirement savings, before vanishing. Workers who miss quotas describe beatings or being sold between compounds; U.S. victims recount losses of hundreds of thousands to people they never met in person.

None of this scales without crypto, specifically USDT, which lets operators receive funds instantly, move them across borders without banks asking questions, and cash out through unregulated exchanges. Researchers estimate billions of dollars a year moving through Southeast Asian scam compounds alone.

Irreversibility, marketed as protection from government interference, is functionally identical to the feature that makes theft permanent. Tether reappears here not as abstraction but as the settlement layer for trafficking and fraud.

In practice: Trafficked workers beaten for missed quotas and U.S. victims who lost hundreds of thousands both depended on USDT moving money without bank friction.

7

The hidden-leverage cascade

Terra's May 2022 collapse proved crypto's supposed diversification was an illusion because everything was quietly leveraged against everything else.

TerraUSD was an algorithmic stablecoin created by Do Kwon that held its dollar peg not through reserves but through a linked token, Luna, and the Anchor lending protocol's unsustainable 20 percent yields meant to attract deposits. In May 2022 UST lost its peg; the mechanism designed to defend it instead hyperinflated Luna and destroyed roughly $40 billion in value within days.

Faux treats the failure as a stress test that exposed interconnection. Hedge funds and lending platforms that had chased yield across protocols, often borrowing against crypto collateral to amplify returns, found themselves holding worthless assets and unable to meet withdrawals. Three Arrows Capital, Voyager Digital, and Celsius Network collapsed in the following weeks, each having quietly lent to or borrowed from the others so one failure cascaded through the rest.

During the panic USDT itself briefly wobbled below its dollar peg, then met a wave of redemptions—evidence defenders call solvency and skeptics call one survived test. The industry, Faux argues, should have woken to hidden leverage; instead it treated still-standing FTX as proof of its own stability and set up the larger collapse to come.

Interconnection, not isolation, was the real architecture of the boom.

In practice: Anchor's 20 percent yields helped pull deposits into a design that wiped roughly $40 billion when the UST peg broke and Luna hyperinflated.

8

The trusted adult was hollow

FTX's failure showed the exchange treated as crypto's most trustworthy institution was running the same trust-without-verification scheme as everyone else, only at greater scale.

In November 2022 a CoinDesk report revealed that Alameda's balance sheet was heavily weighted in FTT, a token created by FTX itself—essentially an asset Alameda had conjured rather than earned. The revelation triggered a bank run; within days FTX admitted it could not cover withdrawals, exposing an estimated $8 billion hole between customer deposits and available assets.

Faux, who had interviewed SBF extensively and flown on his plane, reconstructs how customer funds deposited on FTX had been funneled to Alameda for trading bets, venture investments, political donations, and lavish Bahamas real estate while FTX publicly promised customer assets were segregated and safe. SBF was arrested in the Bahamas in December 2022.

He argues the collapse was not a departure from crypto norms but their fullest expression: an institution built almost entirely on the founder's reputation, operating with minimal internal controls, in a jurisdiction chosen partly for light regulation, holding customer money that outsiders assumed was verified but never was. Effective-altruism branding had inoculated SBF from scrutiny a traditional firm of similar size would have faced years earlier.

Writing before the criminal trial finished, Faux is careful about what bankruptcy filings already established—the movement of customer funds without consent to cover losses—versus what remained for the courts.

In practice: The Alameda balance-sheet revelation that it was stuffed with FTX's own FTT token triggered the run that uncovered the estimated $8 billion gap.

9

Function without proof

Tether's survival and growth after every 2022 crash suggests the market cared more about a workable dollar substitute than about ever verifying it.

After Terra, Three Arrows, Celsius, and FTX all collapsed, Faux checks back on the company he started with. Tether not only survived; its market capitalization grew, exceeding $80 billion and later climbing higher, as traders fled failed platforms and consolidated around USDT as the least-bad option for parking money.

It continued publishing attestations rather than full audits, continued declining detailed questions about reserve composition, and continued to profit from interest on assets it says it holds—likely well over a billion dollars a year at prevailing rates on tens of billions in reserves. The entity whose backing he could never verify became, in the market's eyes, the safe haven amid wreckage that had claimed far more transparency.

Faux calls this the book's most unsettling finding: proof was never really the point. What the market needed was a stable, liquid dollar substitute that worked when called upon, and Tether had demonstrated through the Terra panic and the FTX collapse that it could function as one, at least so far. Functional reliability, not verified solvency, kept it central.

He closes still not knowing, and by his own account possibly never knowing, whether the reserves are exactly what the company claims. The unresolved status of the industry's most important financial institution after everything else burned down is the uncomfortable fact he leaves on the table.

In practice: Tether met redemption pressure during both the Terra panic and the FTX collapse, then grew past $80 billion while still skipping a full major-firm audit.

10

The chart was the product

Crypto's actual product, Faux concludes, was never a technology but the psychological pleasure of watching a number rise—strong enough to make smart people ignore fraud evidence.

In the closing chapter he steps back from individual scandals to name the mechanism running through all of them. Bitcoin, Ethereum, Axie Infinity's SLP, Terra's Luna, FTX's FTT: each asset's primary appeal was not a use case but a chart, and the emotional reward of watching a number climb reliably overrode caution even among people who understood the underlying mechanics were shaky.

He revisits his own early skepticism and admits the pull was real even for him, watching friends and sources make and lose fortunes on paper gains that felt, while they lasted, like proof of something. This psychology explains why so much of the industry tolerated, even welcomed, opacity: verified boring assets do not produce the same dopamine as a token that might multiply by next month, and asking too many questions risked ending the ride.

Tolerance for unanswered financial questions ran from individual meme coins all the way up to the reserves backing the dollar substitute everyone used. Faux does not claim every blockchain application is worthless, but he argues the dominant wealth-generating activity of the 2020–2022 boom was speculation dressed as innovation.

The human costs documented throughout—trafficked scam workers, indebted Filipino gamers, a country's public finances, customers who lost savings—were the predictable result of an industry whose central promise was simply that the number would keep going up.

In practice: Friends and sources Faux watched ride paper gains show how the rising-chart feeling substituted for proof even among people who knew better.