Lori Falce: Is crypto the MLM of dudes?

My friends and I were talking about the collapse of FTX — the cryptocurrency trading firm that suddenly declared bankruptcy last week.

It was a scandal that might have been of epic proportions if not overshadowed by things like the U.S. election vote counting and developments in the war in Ukraine.

Even with those, it was a solidly reported story as “bankruptcy” became an admission of “unauthorized access” to accounts. There were at least $447 million in missing funds plus $186 million moved around, all of that on top of billions the company was short before the revelations. CEO and founder Sam Bankman-Fried — named in May to Time’s list of 100 most influential people and on a short list to dethrone Elon Musk as world’s richest man— resigned in disgrace.

How does this happen, my friends and I mused. How does a cutting-edge financial company with its name on an NBA arena and UC Berkley’s athletic department, with a foundation giving millions to causes like covid research, shatter into a trillion virtual pieces?

“Because,” one friend said, “crypto is the LuLaRoe of dude bros.”

Dude bros, for the uninitiated, are a particular kind of guy. Invested in being cool and aspiring to be great, he is a party guy who is somehow sure that he will one day be wealthy without much work on his part. Dude bros are the embodiment of prosperity gospel — the idea that if you think you deserve success, success will appear.

And, yes, this is very much like the multilevel marketing schemes that tend to prey on women. These “direct sales opportunities” promise stay-at-home moms that they can be their own bosses and make six- or seven-figure salaries through online networking and selling makeup or yoga pants to their friends and family at home parties.

You can see it in the statistics when it comes to crypto. In December 2021, industry firm Crypto Head looked at the leading crypto companies. Of 121, only five — 4.13% — had women founders. Women are also less likely than men to simply own cryptocurrency. Worldwide, the leading cryptocurrency, Bitcoin, has only about 15% female ownership. (Full disclosure: I had about $65 worth of bitcoin but sold it last year.)

Conversely, men participate in multilevel marketing less than women, about 26% overall.

Yet at their core, the two business models — some might call them schemes — have a lot in common. Crypto enthusiasts and MLM marketers can both speak with the zeal of a convert. They explain the often incomprehensible way you are supposed to make money in jargon and buzzwords that have a glossy sheen of credibility but little depth of understanding.

I’m going to admit right now that I have investigated the world of MLMs and quickly found it to reek of chain letters and pyramid schemes. But crypto? Perhaps it is all the math — definitely not my field — but I find it to be a financial Wonderland, all looking glasses and rabbit holes and mad tea parties.

I don’t understand what happened at FTX and I don’t feel bad about that. Right now, it doesn’t seem like anyone does, but investigations by the Department of Justice and the Securities and Exchange Commission could change that. Bankman-Fried is potentially on the hook for civil suits and even criminal charges.

But whether a money-for-nothing opportunity looks like guilting your Facebook friends into coming to a candle party or waxing poetic about getting into blockchain mining, if something sounds too good to be true, it probably is.