{"id":20642,"date":"2021-09-23T15:39:14","date_gmt":"2021-09-23T15:39:14","guid":{"rendered":"https:\/\/davidgerard.co.uk\/blockchain\/?p=20642"},"modified":"2021-09-23T21:10:53","modified_gmt":"2021-09-23T21:10:53","slug":"dan-davies-lying-for-money-not-a-book-about-crypto-except-it-totally-is","status":"publish","type":"post","link":"https:\/\/davidgerard.co.uk\/blockchain\/2021\/09\/23\/dan-davies-lying-for-money-not-a-book-about-crypto-except-it-totally-is\/","title":{"rendered":"Dan Davies: Lying for Money \u2014 not a book about crypto, except it really is"},"content":{"rendered":"<ul>\n<li>Dan Davies: <i>Lying for Money: How Legendary Frauds Reveal the Workings of Our World<\/i> (<a href=\"https:\/\/amzn.to\/2Zk4BW1\">Profile UK<\/a>, 2018; <a href=\"https:\/\/amzn.to\/3ABKrVo\">Scribner US<\/a>, 2021)<\/li>\n<\/ul>\n<p>Well, I didn\u2019t get part 2 of <a href=\"https:\/\/davidgerard.co.uk\/blockchain\/2021\/07\/22\/summer-reading-for-the-cryptocurrency-skeptic-pt-1\/\">my summer reading suggestions<\/a> done before summer ended. But what better to warm your heart through the autumn evenings than tales of fraud, fraud, <i>fraud!<\/i><\/p>\n<p>Dan Davies\u2019 <i>Lying for Money<\/i> is another of those books I recommend to everyone, all the time. Only Chapter 2, on darknet markets, is directly about crypto \u2014 but the rest of the book\u2019s totally about crypto. Also, you need both editions.<\/p>\n<p>&nbsp;<\/p>\n<p><a href=\"https:\/\/davidgerard.co.uk\/blockchain\/dan-davies-lying-for-money\/\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/davidgerard.co.uk\/blockchain\/wp-content\/uploads\/2021\/09\/dan-davies-lying-for-money.jpg\" alt=\"\" width=\"400\" height=\"300\" class=\"aligncenter size-full wp-image-20649\" \/><\/a><\/p>\n<p>&nbsp;<\/p>\n<p>Davies outlines a taxonomy of frauds:<\/p>\n<ul>\n<li aria-level=\"1\">long firms, when you set up a company and just don\u2019t pay the bills;<\/li>\n<li aria-level=\"1\">counterfeiting;<\/li>\n<li aria-level=\"1\">control frauds, when a manager steals from the company, and distributed control frauds \u2014 the latter is close to what we see in <a href=\"https:\/\/davidgerard.co.uk\/blockchain\/icos-magic-beans-and-bubble-machines\/\">ICOs<\/a>, for instance;<\/li>\n<li aria-level=\"1\">market crimes \u2014 when you lie to milk money from an entire market, <i>e.g.<\/i> dumping unregistered securities on retail, or the <a href=\"https:\/\/en.wikipedia.org\/wiki\/Libor_scandal\">LIBOR scandal.<\/a><\/li>\n<\/ul>\n<p>Per Davies:<\/p>\n<blockquote><p>A long firm makes you question whether you can trust anyone. A counterfeit makes you question the evidence of your eyes. A control fraud makes you question your trust in the institutions of society and a market crime makes you question society itself.<\/p><\/blockquote>\n<p>Fraud works by slipping between the cracks of normal inspection. When you first find something amiss, it will likely appear to just be an error. It can be very hard to tell deliberate fraud from mere incompetence or bad luck \u2014 which is why prosecuting fraud is so hard.<\/p>\n<p>But frauds tend to grow and spiral outward, as the fraudster tries to cover the hole in the books with more fraud.<\/p>\n<p>Fraudsters also tend to be serial fraudsters \u2014 \u201cit is really quite rare to find a major commercial fraud which was the fraudster\u2019s first attempt.\u201d<\/p>\n<p>Most fraudsters in crypto have left a trail of destruction behind them, if you go looking \u2014 like how the Quadriga CX crypto exchange <a href=\"https:\/\/davidgerard.co.uk\/blockchain\/2019\/02\/04\/quadrigacx-collapse-what-we-know-so-far\/\">collapsed with $200 million missing<\/a> after owner Gerry Cotten\u2019s <a href=\"https:\/\/davidgerard.co.uk\/blockchain\/2021\/03\/23\/quadriga-documentary-dead-mans-switch-the-trailer-is-out\/\">apparent death<\/a>, and Cotten turned out to have been <a href=\"https:\/\/davidgerard.co.uk\/blockchain\/2019\/04\/25\/news-quadriga-ponzis-exchange-volumes-no-institutional-investors-petro-on-sale-and-the-football\/\">running Ponzi schemes<\/a> since he was fifteen.<\/p>\n<p>Davies has a Golden Rule for detecting fraud:<\/p>\n<blockquote><p>Anything which is growing unusually quickly needs to be checked out, and it needs to be checked out in a way that it hasn\u2019t been checked before. Nearly all of the frauds in this book could have been stopped a lot earlier if people had been a bit more cynical about growth.<\/p><\/blockquote>\n<p>(Dan doesn\u2019t look forward to the day he has to write up Tether; enough people ask him about it.)<\/p>\n<p>Market frauds \u2014 such as the LIBOR scandal, or Tether, or most of crypto \u2014 ultimately steal from retail. \u201cRetail investors have one hugely attractive property when considered by a professional \u2014 they\u2019re dumb money.\u201d<\/p>\n<p>Crypto is suffused with fraud because it operates almost entirely outside any effective regulation. This attracts sincere libertarians who are morally offended by government regulation and are sure that a free market can work it out for itself \u2014 despite the evidence of all history \u2014 but it\u2019s also catnip for fraudsters, keen to prey on rubes foolish enough to believe such fairy tales:<\/p>\n<blockquote><p>If a fraud is operating outside the regulated sphere, it can only be dealt with by the authorities as a fraud (rather than merely as a lousy or Mittyish investment scheme), and unless the scheme is blatant, it is usually difficult to assemble this kind of proof until after it has collapsed.<\/p><\/blockquote>\n<p>Regulation tends to come in only when an entire market is seen as having gone bad:<\/p>\n<blockquote><p>The normal state of the political economy of fraud is one of constant pressure toward laxity and deregulation, and this tends only to be reversed when things have got so bad that the whole system is under imminent threat of losing its legitimacy.<\/p><\/blockquote>\n<p>The UK edition came out in 2018. The US edition, published 2021, has the same structure, but makes its points with stories from the US instead, because nobody in America knows who the <a href=\"https:\/\/en.wikipedia.org\/wiki\/Kray_twins\">Kray twins<\/a> were \u2014 which is a pity, \u2018cos the tales from their accountant, Leslie Payne, are marvellous:<\/p>\n<blockquote><p>Payne wasn\u2019t the Krays\u2019 accountant in the sense of keeping books for their crime syndicate \u2014 Reggie did that himself, writing \u2018Protection from club in Walthamstow \u2014 \u00a330\u2019 and \u2018Bribe to Dalston Police \u2014 \u00a340\u2019 in expensive ledgers that he had purchased despite Leslie begging him not to.<\/p><\/blockquote>\n<p>Davies likes the US edition better \u2014 he thinks he makes his points more clearly \u2014 but really, I\u2019d like to see an omnibus edition with all the stories from both.<\/p>\n<p>In the meantime, you just need to buy both editions. If you\u2019re in the UK or US, getting the other edition will be fraught; I ended up getting the US edition from a popular book <s>piracy<\/s> cultural preservation site. Find a gambling charity to send some money to. And tell everyone else about the book.<\/p>\n<p>&nbsp;<\/p>\n<br><br><div align=\"center\"><p><a href=\"https:\/\/www.patreon.com\/bePatron?u=8420236\"><img src=\"https:\/\/davidgerard.co.uk\/blockchain\/wp-content\/uploads\/2021\/10\/become_a_patron_button.svg\" alt=\"Become a Patron!\" title=\"Become a Patron!\" width=217 height=51><\/a><br><p style=\"align:center;\" class=\"patreon-badge\"><i>Your subscriptions keep this site going. <a href=\"https:\/\/www.patreon.com\/bePatron?u=8420236\">Sign up today!<\/a><\/i><\/p><\/div>","protected":false},"excerpt":{"rendered":"<p>If you&#8217;re Reggie Kray, you can take notes on a criminal conspiracy.<\/p>\n","protected":false},"author":1,"featured_media":20643,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"inline_featured_image":false,"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[1],"tags":[152,2104,2466],"class_list":["post-20642","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uncategorised","tag-book","tag-dan-davies","tag-lying-for-money"],"jetpack_featured_media_url":"https:\/\/davidgerard.co.uk\/blockchain\/wp-content\/uploads\/2021\/09\/dan-davies-header.jpg","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/posts\/20642","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/comments?post=20642"}],"version-history":[{"count":25,"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/posts\/20642\/revisions"}],"predecessor-version":[{"id":20673,"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/posts\/20642\/revisions\/20673"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/media\/20643"}],"wp:attachment":[{"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/media?parent=20642"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/categories?post=20642"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/tags?post=20642"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}