Unless you’ve been living in a cave, you know that Elon Musk, the founder and CEO of Tesla and SpaceX – who recently generated a lot of publicity for backing dogecoin – hosted NBC’s Saturday Night Live on May 8. The consensus is that Musk wasn’t very funny. But what is noteworthy is that Musk’s appearance on the show was accompanied by a disruption of the cryptocurrency market.
First, no sooner had he left the stage after the opening sequence the price of dogecoin dropped a whopping 29.5% to a mere 49 cents. Half-way through the show it recovered, rising to 57 cents. That was a significant jolt to the market, since even though it began as a joke, dogecoin wound up outperforming every other altcoin over the past year, even bitcoin. Until Musk took center stage on SNL, that is.
But that was hardly the end of it.
At the same time, a spate of deliberately timed clips on YouTube was spreading fake news that Musk was giving away free dogecoins. As many as half-a-billion of them. All you had to do was send him real crypto (presumably bitcoin) in whatever amount you wanted, and he would reimburse you with twice as much in dogecoin.
The Big Crypto Giveaway Re-Run
What’s amazing is that the same stunt that has been used countless times before. So much so that you would have assumed that everyone had heard of it by now and would have known to ignore it.
The Big Crypto Giveaway scam, like Musk himself, has generated a lot of publicity. Its most notable permutation was the Great Twitter Password Hack of 2020, which netted scammers the bitcoin equivalent of what was then $121,000. Among those whose Twitter accounts were hacked to publicize the scam were Barack Obama and Joe Biden, Bill Gates, Warren Buffet, Kanye West, and of course Elon Musk. Apple, CashApp, Wendy’s and Uber were among the firms whose accounts were successfully targeted.
This time, however, the Big Crypto Giveaway did much better. Estimates are that that the scammers may have walked away with the equivalent of $5 million.
Would You Buy the Brooklyn Bridge?
Typically, a scam runs out of steam once a critical mass of potential victims hears about it. Remember those Nigerian emails everyone was receiving a few decades back? When was the last time one popped into your inbox? The same with every other famous scam trope. Once upon a time an innovative con man named George C. Parker was selling the Brooklyn Bridge several times a day to gullible tourists and immigrants right off the boat. Eventually, enough tourists and aspiring immigrants heard about it and stopped buying it. It’s proof of Newton’s First Law of Motion: something that is in motion will remain in motion unless acted upon by an outside force. Publicity is an outside force.
Nonetheless, there is something about cryptocurrency that suspends the laws of physics that otherwise govern scams (and the rest of the universe). And what explains it is not something mysterious like dark energy. It’s just that criminals always prey off of human vulnerabilities.
According to the U.S. Federal Trade Commission, Americans lost more than $80 million in cryptocurrency investment scams between October 2020 and May 2021. That represents a humongous 1,000% increase in comparison to the same period just one year earlier.
So, here’s the bottom line: If it’s too good to be true then it probably is. If people don’t learn that simple lesson, this same scam will continue to be recycled for some time to come.