A glance at the rise plus fall of Skycoin, a cryptocurrency that will had a ~$5B complete value in 2018, ran a group of social media ” shills”, and has been plagued by scandals (Morgen Peck/New Yorker)

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Illustration by Nata Metlukh

On an April afternoon in 2011, a twenty-seven-year-old tech entrepreneur named Bradford Stephens arrived at a stucco bungalow near the canals of Venice, California. He had recently started a new data-analytics company, and had come to speak with a coder named Brandon Smietana, whom he hoped would get involved. Stephens had already met Smietana online, where he uses the handle Synth, and where he often debated minute points about math and programming. When Stephens and Ryan Rawson, an employee who tagged along, arrived, Smietana invited them into a carpeted den. A computer sat on a table, its casings removed to reveal a tangle of circuits; a sleeping bag lay on a sofa. Smietana was in his early twenties, with dark hair and a youthful face. Rawson told me, “He had the air of this mad scientist couch surfing.” Stephens pitched his new company, but got no traction. Smietana had turned his attention to a new technology: cryptocurrency. “The only people who have to work for money are the people who cannot create it or print it out of thin air,” he told them.

The first cryptocurrency, Bitcoin—released in 2009 by an anonymous programmer (or a group of them) called Satoshi Nakamoto—was a feat of computational brilliance. A bitcoin is an abstract unit of value that people track and spend with digital wallets. When someone contributes her computer’s power to process Bitcoin transactions, the computer also races to solve an equation, a process called “mining.” Each solution that meets certain criteria mints new coins. The number created decreases by half every four years or so—an event known as the Halvening—which keeps the supply limited, guarding against inflation. The whole economy is maintained on a blockchain, a shared ledger that keeps a tally of every Bitcoin transaction. As miners add transactions, the Bitcoin software coördinates and finalizes their contributions, making the ledger transparent and unchangeable and the system nearly impossible for governments to shut down.

But the technology has a flaw: as more people use it, transactions become slower and more expensive. The average transaction fee fluctuates wildly; one day last week, it was two dollars and thirty-three cents, making it more expensive than any major credit card for everyday purchases. The pursuit of a better Bitcoin quickly became a full-blown academic field, with its own conferences, university courses, and peer-reviewed journals. But, as Smietana explained over the next few years to anyone who would listen, he had the solution. He was designing a cryptocurrency that could be sent around the world instantaneously, for next to nothing. He called it Skycoin.

He was going to use this currency, he said, to create a decentralized version of the Internet, called Skywire. He planned to build a large mesh network, a system that allows people to use special Internet routers to share bandwidth with their neighbors. With enough members, a network can bypass service providers, making it harder for corporations and governments to surveil Internet use. But it’s difficult to retain volunteers. “A community network really needs density before it is useful,” Brian Hall, of NYC Mesh, the largest community network in the U.S., wrote in a blog post. “It can be a chicken and egg problem.” Smietana’s project proposed a different way to attract people: pay them. His customers would share bandwidth using routers called Skyminers, and get paid for their service in Skycoin. He envisioned a new cryptocurrency spent over a community-owned Internet, calling it “the last step to fulfilling Satoshi’s mission.”

Stephens left his first meeting with Smietana believing that he could be destined for greatness. Skycoin launched publicly two years later, in 2013. The following year, Stephens attended a party at Smietana’s new place, an unrenovated warehouse just south of L.A. Someone had painted the walls with images of horned monsters. “It was very Burning Man meets H. P. Lovecraft,” Stephens told me. Stephens’s friend Baron Chat, a photographer who attended, said, of Smietana, “He seemed to be receiving his signal from a different station than everyone else.” According to Stephens, Smietana asked him to join the fledgling project, but he demurred. (Smietana said he doesn’t remember seeing Stephens at the party.)

The first cryptocurrency boom arrived in 2017. “Several investors I knew, and a lot of my friends, started pivoting from angel investing to putting money in crypto and seeing insane returns,” Stephens told me. Skycoin had a “token sale”—a sort of I.P.O. for cryptocurrencies—and was listed on two small exchanges. By the end of 2017, its price had gone from a little more than a dollar per coin to about fifty dollars per coin. That December, while Stephens was on vacation with his wife in Japan, Smietana messaged him with another chance to get involved. It seemed like an opportunity to work on something revolutionary. But he also thought, Everybody else is getting rich off crypto, so why not me? He said that he later told Smietana, “I’m going to need 50K up front and I gotta hire a team.” After a couple days, he checked his Bitcoin wallet and found fifty thousand dollars sitting in it. “I’m, like, ‘I guess I’m hired,’ ” he said. (Smietana denies sending the money, though he had said he would do so in texts, and there’s a record of such a transaction on the Bitcoin ledger.) Before leaving Kyoto, he and his wife had visited a shrine to Inari, the Shinto god of rice, where they left offerings and made wishes. His wife wished for the health of her father, who was battling cancer. “I asked for wealth and adventure,” Stephens told me. “And I got one of those.”

In the past decade, a shift has occurred in the way that cryptocurrencies are distributed. Satoshi put bitcoins into circulation through a reward system: the more computing power you contribute, the more coins you can mint. Some early adopters paid their rent simply through mining. Around 2012, though, people began devising blockchains that could be used for more ambitious applications: supply chains with real-time geolocation, for example, or patient-controlled medical records. Such projects required capital, compelling founders to experiment with less democratic ways to distribute coins. In 2013, J. R. Willett, the founder of Mastercoin, invented the “initial coin offering,” or I.C.O., the first token sale: developers partially pre-mined their tokens and then sold them off to raise money. Michael Terpin, who has managed two hundred such token sales, and who handled public relations for Skycoin, told me that the scheme empowers entrepreneurs. “Somebody who had an innovative product could sell directly, prior to it being built, to an audience of enthusiasts,” he said, without having to “give up a third of the company.”

A frenzy followed a few years later. Since 2017, hundreds of projects have announced token sales. One of the most lucrative, EOS, raised about three and a half billion dollars in a yearlong I.C.O. Many projects amassed funds even before their blockchains or applications existed; some prepared assiduously, but others merely threw together a Web site, a list of advisers (sometimes without their knowledge), and some semblance of a technical paper (sometimes plagiarized). “A playbook really emerged for how to set up a legitimate-looking I.C.O.,” Matt Chwierut, the head of research at Smith & Crown, a blockchain research firm, told me.

In 2018, I attended the North American Bitcoin Conference, in Miami. On the main stage, representatives from companies with unpronounceable names riled up the crowds. Downstairs, an arcade of booths hawked every kind of blockchain project: smart glasses, cargo robots, refugee-identity documents. At a booth for a group claiming to build a volunteer emergency-services network, I asked why the endeavor required a coin. The attendant told me to come back later when someone more technical would be arriving.

Because bitcoin mining is regulated by algorithms, everyone, in theory, has a fair chance of getting new coins. But, to receive pre-mined coins in a token sale, you often have to buy publicly at the sale price or else negotiate a deal behind the scenes. “A lot of coins were being sold on the side and in secret,” Josh, a major cryptocurrency investor—who eventually bought into Skycoin, and requested that I use only his first name, out of concern for his safety regarding another matter—told me. “You’ll do special deals with people if they give you three or four or five million dollars up front.” This created a sense that making your fortune required being in the right room to get the right tip.

On the second night of the conference, I went to a strip club for an after-party, where flashing your badge got you a crypto-inspired cocktail. (I ordered a Satoshi Sour.) Guests exchanged advice, sure that they were getting the best inside information. But a few hours later a friend whisked me off to a more exclusive party, thrown at a beachside bar by Patrick Byrne, the former C.E.O. of Overstock. (Byrne stepped down in 2019, after it was revealed that he had had an affair with the Russian agent Maria Butina.) The attendees were celebrating the hundred-million-dollar token sale of Byrne’s trading platform, TZero, which he said was going to “drag Wall Street behind the barn, kill it with an axe, and re-create it on blockchain.” There were giant platters of sushi and oysters; the rapper Flo Rida pulled Byrne up onto the bar for a sing-along. Guests exchanged invites to exclusive chat rooms on Telegram, an app favored by coin enthusiasts. I turned to a man next to me and asked what had brought him to the party. He rubbed his thumb and forefinger together and shouted, “Making money.”

The employment structure at Skycoin was loose, and Stephens joined without a contract. “Here I was, a guy used to wrangling hundred-page venture-capital contracts, and I’m joining a company with no last names and barely any first names,” Stephens said. Smietana, who by then was living in Shanghai, had pre-mined a hundred million coins, which were scheduled for circulation. Skyminer routers were just starting to ship, but sales had already outstripped production. Smietana estimated that operators who used Skyminers could make between fifteen thousand and forty-five thousand dollars a month. Most coinholders I spoke to were young men around the world—medical students, craftsmen, 3-D animators—who believed in the project. In chat rooms, Smietana’s followers addressed him with reverence. “We all are in honor to speak with synth,” a user called Anosis wrote. “It’s like having a chance to talk to Satoshi.”

Although Stephens studied computer science in college, he admitted that, when he started working with Skycoin, he “hardly knew anything about crypto.” He was told to handle marketing, and assembled a team composed mostly of friends and former associates. (Smietana now claims that he contracted a marketing company that Stephens ran, not Stephens himself.) But he soon realized that word about the project was already spreading. Large investors recruited in their own circles, and smaller coinholders hyped Skycoin on social media. At one point, Skycoin advertised a bounty program that promised users coins in exchange for promotional activities, such as writing blog posts and creating YouTube videos. One user-made video, titled “Skycoin – To the Moon,” featured footage of a shuttle blasting off next to a chart of Skycoin’s market value, interspersed with a closeup of glossy lips and the words “YOU COMIN’?” People who proved their worth on Telegram often got pulled up the ranks. “I started to spend 90 hours a week in the chat room,” a user called Sudo, who became one of Skycoin’s Telegram channel moderators, and who refused to tell me his name, messaged me. “They seen how active I was and offered me a job.”

By early January, 2018, the total estimated value of pre-mined Skycoins had reached almost five billion dollars. Smietana sent representatives to conferences in New York, Lisbon, San Francisco, and Singapore, and arranged a retreat in Mauritius. A former marketing contractor, who requested anonymity out of fear of harassment, recalled that Smietana could spend lavishly on the people who worked with Skycoin, in one case paying for cryotherapy, vitamin injections, thousand-dollar steak dinners, and a twelve-thousand-dollar trip to the Esalen Institute. “Dude was very liberal with his spending and could be very generous,” the marketing contractor said. The team posted a video of a yacht party, and thundered around in Ferraris. In New York, Skycoin reps cruised in a helicopter to grab footage of a Skyminer held over Manhattan’s skyline.

That month, Stephens flew to Las Vegas to speak on a panel at the CoinAgenda summit. He wasn’t up to speed on the technical aspects of Skycoin yet, but he held a Skyminer over his head and said, “You all are the first to see the new Internet!” On the first day of the conference, Smietana sent Stephens a voice memo with an urgent request. He was hoping to get Skycoin listed on Binance, one of the world’s largest cryptocurrency exchanges, which could help secure its legitimacy. During the I.C.O. boom, it was common for projects to pay a “listing fee” in order to be included on an exchange. (Binance claims that it chooses projects based solely on “strict security, legal, and regulatory compliance standards.” In 2018, facing pressure, it announced that it would donate its listing fees to charity.) Smietana said that he had paid Binance executives seven and a half million dollars but that they hadn’t followed through. (Binance confirmed that Skycoin paid it a hundred and fifty thousand Skycoins to spend on “promotion,” which were worth seven and a half million at the coin’s peak.) Smietana told Stephens to entertain the executives, to sweeten the deal. Stephens planned a party in a penthouse suite at the Bellagio. Smietana gave explicit instructions via voice messages: “You have to buy prostitutes for the people at Binance,” he said. “Get them, like, three girls each.” (Smietana denies any involvement in the party, and claims that his voice messages about it were “either a joke or a deep fake but probably a deep fake.”)

That night, Stephens and Baron Chat, who had also started working on Skycoin’s marketing, along with Catherine Byerly, another member of the team, sat in the hotel suite, with champagne on ice. Six escorts arrived at nine, and the employees instructed them to make the Binance executives feel like “rock stars.” “To them, I was this, like, stereotypical businesswoman in an Ann Taylor dress,” Byerly said. “But inside I’m thinking, How did my decisions lead me here?” Chat said, “It felt almost like you were in the process of living out some bizarre reality that sometimes you see in the movies. The weird excess . . . Crazy shit happens when you have a corporate account and a green light.” By ten o’clock, the executives hadn’t shown up, and Stephens began to worry that he’d lost the deal. He couldn’t reach Smietana, so he frantically called the event organizers. They explained that not only had no Binance reps showed up at the conference—they weren’t even on the registration list. (A spokesperson at Binance told me that the company neither requested nor knew about the party.) “That’s when I started taking anything Brandon said with a grain of salt,” Stephens told me. Still, he decided that, “if this is going to be weird, I’m going to make it memorable weird.” Some of the escorts took their pay and left; the rest drank champagne and played Cards Against Humanity with the group into the morning.

When Stephens returned from Las Vegas, he set about mapping Skycoin’s progress. One of the company’s main selling points was Obelisk, an algorithm that allowed it to send coins cheaply and quickly. On Telegram, Smietana insisted that everything that came before was “obsolete and primitive.” He boasted that Obelisk was written by Houwu Chen, a developer who had worked on Ethereum, the second-most popular cryptocurrency platform. He posted an academic paper written by Chen on the Skycoin Web site, claiming that it was a Skycoin white paper. But when Stephens reached out to Chen, he got no response. “We kept trying to chase people down to ask details, and it was slowly revealed it just . . . didn’t exist,” he told me. In a later discussion about technical details, a Skycoin “community manager” told coinholders that “it’s too advanced to share” and that the company “can’t trust the public with it.” When pressed, Smietana wrote, of Chen, “He is a recluse, I doubt anyone can contact him or he would respond.” Smietana eventually told me that Chen had taken a payment of a million Skycoins for his work on the white paper and then left the project. (Chen declined to comment, saying, “Just don’t put my name in the article. That’s my statement.”) Stephens discovered that Obelisk had never been implemented. (Smietana now acknowledges this, but claims that the project has published some of Obelisk’s code and used it in simulations.)

Skycoin’s payments were fast, but only because transactions were processed on a single server, rather than on a decentralized network of computers. The server sat in the Shanghai office of Scott Freeman, the C.E.O. of the C2CX cryptocurrency exchange. This also meant that, if Smietana wanted to, he could freeze transactions. “The big thing about a blockchain is it’s supposed to be decentralized, and no single entity is supposed to be able to change it,” Freeman told me. He added, of Skycoin’s setup, “In a way, it makes you into a fraud.” (Smietana claims that his power to freeze transactions was designed as a security measure.) Freeman said that he nagged Smietana about implementing Obelisk but that Smietana told him, “People don’t really care. It’s not worth it. We should spend our resources on other things.” (Smietana denies this.)

Skycoin’s Web site claimed that multiple payments were scrambled together to provide extra privacy, but this feature was never implemented in the Skycoin wallet. The pre-mined coins sat in virtual wallets under Smietana’s sole control. (When pressed, Smietana claimed that he shared control of the coins with a secret group of advisers, but refused to give me their names.) When Stephens asked to see Skycoin’s accounting books, Smietana explained that his girlfriend, Sarah, was in charge. Sarah told Stephens that the accounting was a work in progress. (Smietana denies directing Stephens to Sarah, and she denies being in charge of the project’s accounting.) Everything seemed haphazard. Stephens was once paid from a bank account in Mauritius registered under a different name; many employees were paid in bitcoin or Skycoin.

In early February, 2018, a month after the CoinAgenda conference, Stephens booked a trip to Shanghai to see Smietana, determined to bring some order to Skycoin. One night, he had dinner with Smietana and members of a Chinese marketing team that Smietana had hired, at a steak house in Xuhui. As the dinner began, Smietana rose from his chair and launched into a rambling diatribe of conspiracy theories. For hours, he catalogued the hidden crimes of a class of global élites who controlled citizens through virtual reality, medical marijuana, and pornography. At some point, Stephens started recording Smietana on his phone. “We want to feminize the peasant population to make them more docile,” Smietana says. “It’s so they don’t revolt.”

Stephens told me, “I just became shell-shocked. What the fuck have I gotten myself into?” He had seen Smietana post conspiracy theories on Telegram before, but he figured it was a joke. In the weeks after the dinner, Stephens tried to warn some investors, but felt that they brushed him off: “They would be, like, ‘Brandon is just doing his thing, and the value of the coin keeps going up.’ ”

Shortly after Stephens returned from Shanghai, a reporter named Tristan Greene published a scathing article about Skycoin on the Next Web, a technology-news Web site, condemning the company for pre-mining its coins. The Skyminer router was being sold for one bitcoin—worth about ten thousand dollars at the time—but Greene highlighted the fact that it was constructed from components worth about six hundred dollars. Customers got back the ninety-four-hundred-dollar difference, but it came in Skycoin, which still sold only on small exchanges, making it difficult to trade in quantity. (The software for the miners was also incomplete; users connecting to Skywire had no way to pay for the service. Smietana claims that this feature is still under development.) Stephens granted Greene an interview but couldn’t persuade him of the project’s legitimacy. Greene wrote, “Is it a scam? I’m 99 percent sure of it.”

Skycoin went into full damage-control mode. The project had been running a black-ops marketing unit sometimes referred to as Shill Team Six, composed of users plucked from Telegram who specialized in manipulating attention on the Internet. The “shills” occasionally flooded 4chan and Reddit, keeping engagement up with memes and bots. A former member of Skycoin’s inner circle, who also requested anonymity, told me that if someone spoke ill of Skycoin the shills could be sent in to “make their life difficult,” by digging up embarrassing information. (Smietana denied directing the group, saying it was “completely out of control.”) The shills found that even bad publicity could be good for Skycoin. In a chat with investors, Smietana said that they sometimes spread negative rumors about Skycoin, in order to attract attention. “Direct promotion does not get to front page and has low click rate,” he wrote. “If they create contraversy, then it directs attention and clicks to skycoin.” (Smietana claimed that these messages were taken out of context.)

Stephens knew that Smietana pored over texts about crowd psychology and even solicited advice from DJ Hives, an anonymous online personality who at one point used a Hitler avatar, on controlling public opinion. In voice messages, DJ Hives referred to Skycoin customers as “fish,” a poker term for easily exploited players, and encouraged Smietana to cultivate an aura of infallibility: “We want to put you on the level of deity as far as the masses are concerned.” (When contacted on Telegram, DJ Hives said, “None of this is correct,” and declined to comment further.)

The team gamed search algorithms into ignoring Greene’s article. “We helped bury that page for a while,” Sudo, the anonymous user, who claimed to be part of Shill Team Six, messaged me on Telegram. (Smietana claimed that Skycoin ignored the article.) But word was already spreading. Skeptics showed up in Skycoin’s social-media channels to ask questions, and Skycoin moderators started blocking them. “After banning enough losers, everyone left will be winners,” Smietana wrote. Skycoin enthusiasts smeared Greene on Telegram, accusing him of writing a paid hit piece. When Greene showed up in the channel to address their concerns, moderators kicked him out. Someone claiming to be a Skycoin investor e-mailed Greene and threatened to “visit” him, his wife, and their son if he didn’t stop “messing” with Skycoin, writing, “nothing is really impossible in the world for people like us that grew theire wealth on crypto.”

Stephens contacted Michael Terpin, the adviser, to voice his worries, but, he said, “It turns out Terpin didn’t give a shit.” (Terpin told me that, by this time, his company was phasing out its involvement with Skycoin. “Brandon’s got a flair for the dramatic,” he said. “Honestly, that’s one reason I found it difficult to keep working with Skycoin.”) Stephens came up with a plan to strip Smietana of power and transfer management of the company to a foundation; he still believed that Skycoin could become a reality if reasonable people were in charge. But, by late February, 2018, six weeks after he joined the project, he found that he was locked out of both the Skycoin Telegram and his work e-mail. Members of his team were locked out, too. “The whole thing was so terrible,” Chat, from the marketing team, told me. Smietana sent an e-mail to the Next Web denying that Stephens represented Skycoin. “The person you interviewed has nothing to do with Skycoin and is a known scammer,” Smietana wrote. “Please update the article.” Stephens heard from Smietana again in June, 2018, when Smietana sent him a mysterious Facebook message in which he claimed that he had acted out of concern for Stephens’s safety. “I saved your life. You do not even know,” Smietana wrote. “I will tell you in a few years.”

In July, 2018, a recording leaked of Li Xiaolai, a Chinese billionaire and the founder of a coin that launched with an eighty-two-million-dollar token sale, giving his unfiltered perspective on the industry. “From the start, I knew one thing,” he said. “The main power to compete here is the traffic.” Successful coins accrue value, in other words, not because of technical sophistication but because they get people’s attention. This requires having a founder who can capture the imagination. “All the successful 100X, 1000X projects—you go and look at the founder, they will definitely be a spin doctor,” he said. What matters with a coin is that people are talking about it. “The consensus of idiots is still consensus,” he said.

To some extent, this is true of most modern currencies: they have no value apart from what we collectively assign them. But the U.S. dollar is supported by government guarantees and controlled through monetary policies. Bitcoin abolished government backing, but its scarcity is regulated through algorithms. (Even so, a tweet or statement from a high-profile coinholder like Elon Musk can raise or crash its price.) Coins that are manually distributed in token sales provide even fewer assurances. It is often impossible to know how many are in circulation. Their value is built on a promise that some feature, often still in development, will make them more useful than other currencies. Until that promise is fulfilled, it is largely a matter of faith. “Money is a social construct,” Smietana wrote, on Telegram. “It is based upon CONFIDENCE . . . Confidence is a religion and is built upon perception and not reality.”

Founders that control perception control the price of their coin. According to Chwierut, the blockchain researcher, during the I.C.O. bubble, it was not uncommon for founders to spend as much as thirty per cent of their budget on ad campaigns. Some of the effort went to gaming the attention economy, requesting mentions from influencers or using bots to create an illusion of broad support. Traders can even use these metrics to manage their portfolios: IntoTheBlock, a “crypto-intelligence” firm, tracks Twitter mentions and Telegram-member counts and sells the information to investors; a data platform called Santiment alerts users when chatter about their coins surges. Recommendation algorithms can encourage the spread of incendiary content, and coins promoted with controversy and falsehood often perform well. Some coin promoters use stunts or scandals to keep users engaged. After closing a fifty-million-dollar token sale, the founder of a cryptocurrency called Savedroid posted a picture of himself at what looked like an airport with a caption reading “Thanks guys! Over and out,” which was taken as a confession that he was running off with the funds. A day later, he revealed that he was trolling about escaping with the money, but only after several articles had been written about the scandal. The firm ASKfm hired mountaineers to climb Mt. Everest and film themselves leaving a cryptocurrency wallet on its peak. (The company released a statement saying, “On a market where launching a blockchain endeavor is not really a newsbreak, companies have to stand out.”) A sherpa died in the process.

Market manipulation is rampant. In schemes called “pump and dumps,” traders meet in exclusive chat rooms where they coördinate to purchase a coin, causing the trading volume to go up and others to take interest. When the price is at its highest, the pump-and-dumpers sell, leaving faithful users holding the bag. In an industry where everyone is a coinholder, there is no one left to pull the alarm. Should investors realize that their coin is a sham, it would be an act of self-sabotage to raise concerns. Better to become evangelists, wooing others in order to boost the price.

U.S. law generally requires projects to register with the S.E.C., forcing them to make financial disclosures that investors could then inspect before buying. Almost none do, giving convoluted rationales that John Reed Stark, the founder of the S.E.C.’s Internet-enforcement office, told me are “poppycock.” Not registering can facilitate further rule-breaking, as when, say, influencers promote coins without disclosing their investment, or projects pump coins with fraudulent claims. Stark said, of I.C.O.s, “Every single one I ever saw was unlawful on multiple levels.” The S.E.C. began cracking down in 2017, but prosecution often requires “extraordinary resources from an alphabet soup of federal and state law-enforcement agencies,” Stark said. As a result, few projects face consequences.

In the spring of 2018, Skycoin climbed into the list of the top hundred coins, and appeared on a Nasdaq Web cast. That May, Binance announced that it would list Skycoin on its trading platform. Around the time of the listing, the price jumped thirty-eight per cent. Then, suddenly, it came crashing down. According to several people involved, Skycoin privately sold to investors at a steep discount—in at least one case, coins worth millions of dollars—inadvertently giving them an incentive to dump it on the market as soon as they could. (Smietana denied being involved in such sales.) Smietana had claimed on Telegram that the investors were restricted from selling. But, as soon as Binance listed Skycoin, the market flooded with sell orders. Freeman, from the C2CX exchange, had been acting as the project’s primary “market maker,” using a pool of reserves to provide market liquidity and stabilize prices. “I tried to hold at about twenty,” he told me. But the sell-off was too much to contain. Coinholders shared their misery on Telegram. “Its been fun guys, i’m gonns hang myself in 2 hours,” a user named Willy Jr. wrote. “Bought 20K at 20 dollars.” A user named Dante wrote, “synth told me this shit would moon,” adding, “i took a mortage on my house.”

A few weeks into the sell-off, a voice message from Smietana emerged on Telegram that seemed to imply that the biggest Skycoin investors were coördinating their moves in a secret chat room. Smietana said in the message, of the investors, “Everyone was basically doing the exact opposite of whatever the public was doing.” (Smietana acknowledged being in the chat room at one point but claimed that he was barely involved.) Rumor spread that the S.E.C. would investigate Skycoin as a result, and that Binance was considering delisting it. In the public chat, coinholders prepared for a death spiral. A user called Opaque wrote, “I want to say calm down guys, but its really doesnt look good.”

Then, out of nowhere, Smietana announced that he had big news to share once “all the staff are safe.” In the coming days, he accused members of the Chinese marketing team of breaking into his house with five gang members, holding him and his girlfriend hostage for six hours, beating him until one of his ribs broke, and stealing a small quantity of cryptocurrency. Members of the Chinese marketing team denied this. In a letter to investors, they claimed that Smietana and his girlfriend had pushed them out, refused to pay them, and frozen their Skycoin wallets, which contained coins that were then worth somewhere between four and nine million dollars. This was the first apparent instance of Smietana’s using his power to freeze Skycoin transactions. (Smietana claims that the wallets contained embezzled company funds.) In their letter, the marketing-team members claimed that they had been invited to Smietana’s apartment to find a resolution, and a small scuffle broke out in which he got a bruised wrist. Afterward, Smietana’s girlfriend filed a police report, and four defendants spent a few months in detention, after admitting to detaining Smietana and his girlfriend in an incident that left them “lightly” injured.

Smietana blitzed Telegram with messages about the alleged “kidnapping.” “This is the best thing that has ever happened to Skycoin. Ever…As long as we can keep this drama going, we can get [the trading volume] even higher.” He amused himself by plotting new distractions: “Quick, someone photoshop video of me being beheaded by ISIS and see if you can get them to write an article about it.” But coinholders seemed not to buy it. When he did a live YouTube interview, shortly after the incident, someone commented, “I dont see one bruise on his face. beaten the shit out of me, what with ? a piece of toast.?” As the sell-off continued, Smietana blamed it on the “kidnappers” for dumping their stolen coins. “They have been surpressing the price the whole time,” he wrote.

In November, 2018, Smietana, apparently growing desperate, enlisted John McAfee to promote the coin. McAfee, once famous for the antivirus software that he developed in the eighties, had earned a reputation as a kind of cyber outlaw: he was a “person of interest” in a murder in Belize, in 2012, and subsequently fled the country, later posting images of himself cruising the Caribbean in his yacht, brandishing guns. He was a sought-after crypto promoter. McAfee tweeted a video that seemed to show him with the Skycoin logo freshly tattooed on his back and the message, “Why Skycoin? If you have to ask, you’ve been living in a fucking closet.” (Smietana admitted to paying McAfee during this period but insisted that it was a gift to help with “yacht repairs.”) Smietana urged people to buy: “If you put in a million dollars now, and we have a run just as large as the last one, you’re going to be at fifty million dollars,” he said, in a video. Then, in March, 2019, McAfee publicly broke ties with Skycoin. (Smietana told me that McAfee began demanding large fees that he refused to pay.) When asked on Twitter what he would do about the tattoo, McAfee replied, “I’ll keep it as a reminder that no matter how old I get, I still get scammed by unscrupulous people with pie in the sky plans. They almost drove me to violence.”

Stephens, watching from afar, felt that he had been spared the worst. He hadn’t behaved perfectly: he had been taken in by Skycoin’s promise, but he also promoted a coin that he knew little about. After being cut off, he took Skycoin’s social-media accounts hostage, and unsuccessfully demanded a severance payment. In the end, he told me, he sold his holdings for thirty thousand dollars. The internal drama and crashing prices prompted a broader exodus from the project. In 2019, Freeman’s exchange announced that it was delisting Skycoin. Michael Terpin’s name still appears on the Skycoin Web site, but he told me that he no longer has anything to do with it. Josh, the cryptocurrency investor, lost faith after visiting Smietana in China, last year. “Crypto is a bunch of con artists conning each other,” he said. “Obelisk was always a week away, and it still is.” He sold his holdings and told me that he lost ninety-nine per cent of his investment.

Investors who sold at the peak would have made large profits, but many average coinholders suffered. (Smietana claimed that he urged restraint: “I told people not to put money into the market that they were not prepared to lose.”) Armon Koochek, a recent college graduate in Santa Barbara, California, invested in Skycoin in 2018, lured by the promise of a new Internet and excited by the “memes and content on Reddit and Twitter.” He lost some fifteen thousand dollars. He tried to warn others away from the project in the Telegram chat room, and was soon banned. “I hope I saved a lot of investors,” he told me. Dael Lithgow, a forty-five-year-old bootmaker in Pietermaritzburg, South Africa, invested most of his savings in Skycoin in 2017, and convinced his mother and girlfriend to invest, as well. Had they sold during the boom, the profits would have been “life-changing,” but they held on. “I really believed in what they were trying to do,” he told me. Today their coins are nearly worthless.

In the summer of 2019, I met Smietana at a mozzarella bar in Manhattan. He was wearing all black, and his hair was starting to gray. As we sat, he warned me, unprompted, “Honestly, like, ninety-eight per cent of the people are scammers in blockchain.” Then, preëmpting my questions, he visited every bit of Skycoin intrigue. The “gang members” who kidnapped him in China had demanded “sixty million dollars.” The technology for Skywire, the decentralized Internet service, was already “working” and Obelisk was just “a few months” out. His girlfriend, Sarah, called several times while we were speaking. He showed me frantic messages from her, and said that he was blowing off an important meeting, but he kept talking, telling me about his coin’s promise. He seemed to regard me as the next potential pump.

Almost four hours into my lunch, I made an excuse to leave, saying that I needed to walk to my bank. Smietana followed along for almost thirty blocks, ranting about his court case in China. Eventually, I brought him to Times Square, where his girlfriend was waiting. She must have seen something in my eyes, and said, “He’s a mad scientist.” After New York, they were headed to the Caribbean, where they would see Terpin and check out the crypto scene. They invited me to join. In the months that followed, Skycoin’s price dropped below a dollar a coin, but Smietana remained optimistic. He told me, on Telegram, that he had a new hardware lab where he was developing antennae for the Skyminer, and said that Skycoin was moving into the medical industry, agricultural automation, and underground mining.

When I confronted Smietana about Skycoin’s history, he began sending me dozens of voice messages a day, spinning elaborate stories that often contradicted one another. Many could be corroborated only by people whom he swore existed but who couldn’t talk because they had government security clearance, or were in hiding, or because he didn’t know their real names. He attacked those who spoke ill of Skycoin, calling them criminals, junkies, and blackmailers. He claimed at first that he didn’t know Stephens (“I contacted advisor board and no one involved in Skycoin has heard of Bradford”), then that he was a “con artist,” then that he was a “federal informant/agent” trying to entrap him. At one point, Smietana even suggested that he wasn’t the real founder of Skycoin. I began to feel dizzy reporting this story, trying to sort through the layers of deception and to figure out whom I could trust. Everyone seemed to think that they could spin what I wrote to their advantage.

Smietana continues to post in the Telegram chat room, assuring loyal coinholders that the features they’ve waited years for are almost complete. “In that Telegram group, he is king,” the former member of Skycoin’s inner circle told me. Former employees remain divided about Smietana’s motives. “It’s almost as if he viewed Skycoin as a money printer,” the former marketing contractor told me. “Everything that happened was a distraction or ruse to keep people in the dark while he kept his shit-coin casino operating.” It’s impossible to know how much Smietana made on the currency. (“Overall, I would say, I did ok,” Smietana wrote to me.) But other founders have pulled “exit scams,” dumping all of their coins at the market’s height and disappearing entirely, which Smietana never did. One of Skycoin’s lead software developers—who was also Smietana’s friend from college, and who requested anonymity out of fear of harassment—doesn’t think Smietana was in it to get rich: “Being a figurehead in blockchain is like being a cult leader and I think he enjoyed that more than the money.” At one point, Smietana sent me a voice message, asking, “Why didn’t I just take the seventy million and just, like, run off?”

In the past several years, the S.E.C. has charged multiple I.C.O. operators with offering unregistered securities and committing fraud, and the cases have resulted in settlements that have ordered hundreds of millions of dollars returned to coinholders. Last July, Jack Abramoff, who became famous, in 2006, for his role in a political-lobbying scheme, pleaded guilty to committing securities fraud with a token sale. The project, called AML BitCoin, published a white paper in 2017 that listed Smietana as one of its software developers. (Smietana claims that he was included without his consent.) In October, Spanish authorities arrested McAfee on an extradition request from the U.S., where he faced charges of tax evasion and illegally promoting cryptocurrencies. (In June, he was found dead in his jail cell, in an apparent suicide.) In the past few years, cryptocurrency founders have tweaked their strategies; instead of I.C.O.s, they now hold “initial exchange offerings” and “initial decentralized exchange offerings.” Stark, the former S.E.C. official, told me that the new terminology is “designed to create confusion and avoid S.E.C. scrutiny, but all of it is the same.” David Silver, a lawyer who represents victims of cryptocurrency fraud, hopes that, as the S.E.C. enforces securities laws, fraud in the market will decrease. “Yesterday’s crypto heroes are tomorrow’s crypto felons,” he said. “The statute of limitations is very long.”

This past January, a Telegram channel named after WallStreetBets, the Reddit forum that supercharged GameStop’s stock price, targeted Skycoin with a pumping campaign. As the pump spread to other social-media platforms, the price punched up above five dollars per coin. The mood in the chat was ecstatic. “I’m frantically moving funds around to buy more,” a user named Krzys P wrote. Smietana wrote, “MOON MOON LAMBO MOON.” Stephens is now a software developer at Salesforce, and insists that he is done with cryptocurrency: “My personality is not well suited to fraud, and mafioso, and everything that crypto is.” He recently returned with his wife to Japan and sought out a new Shinto shrine where, he said, he wished for good health.


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