An interesting series of events over the past week have me thinking, yet again, about the tricky line between bad business and bad ethics. It’s a question recently exemplified in the story of Theranos, whose young founder appears to have believed so intensely in her own transformative talent that she wouldn’t let something as trivial as a total lack of results stop her.
Last week, WeWork CEO Adam Neumann stepped down under conditions with shades of Theranos. There were accusations of self-dealing, including his $6 million licensing of the We trademark to his own company. This wasn’t the kind of outright fraud Theranos was allegedly involved in, but as Scott Galloway has passionately argued, “the lines between vision, bullshit, and fraud are pretty narrow.” Neumann’s nearly religious belief in the We Company’s world-striding potential seems to have distracted everyone near him from scrutiny of the company’s real-world prospects.
Neumann’s passion may have been misplaced. And it appears to have led him, as it did Theranos CEO Elizabeth Holmes, to stop caring whether his actions would be seen as ethical by others. But at the very least, they both seem to have sincerely believed in their missions, on some level.
The same can’t be said for the masterminds of OneCoin, a pyramid scheme of historic proportions that’s the subject of a fascinating new podcast series called The Missing Cryptoqueen from the BBC. OneCoin, which according to the podcast is still in operation, markets itself as a ‘bitcoin killer,’ a transformative cryptocurrency system that will make its early buyers rich. It isn’t any of those things – it has no blockchain, and its ‘coin’ isn’t tradeable – but it has collected what U.S. prosecutors have said is about $4 billion from would-be ‘investors’ worldwide.
OneCoin appears to have been consciously designed as a cult-like fraud for the 21st century, and its explicit model was the tech startup. The frenzy around cryptocurrency that peaked in late 2017 attracted attention from people who didn’t know much about blockchain technology, but hoped to get rich. Into that void walked Dr. Ruja Ignatova, the supposed inventor of OneCoin, and a figure with just as much passion and vision as Neumann or Holmes.
OneCoin’s genius was realizing that the techno-hype and worshipful attitude towards founders that dominates the tech sector can be used to prevent investors from asking too many questions. For OneCoin, it was often working people or residents of the developing world getting wowed into uncritical acceptance – but much the same shutdown of mental faculties seems to have afflicted private investors in both Theranos and WeWork.
From that perspective, WeWork’s incredibly rough September, which ended with the cancellation of its IPO, is a vindication of the transparency required in public markets. Investors who weren’t in the room to be wowed by Neumann’s personal charm looked at the cold, hard facts and didn’t like what they saw.
That’s relevant in light of a final piece of news. The SEC announced Monday that it would issue a $24 million fine to Block.one, the entity behind the EOS blockchain. EOS (in a strictly coincidental parallel to OneCoin) claims to have raised a stunning $4 billion in its worldwide “initial coin offering” in 2017 and 2018 – before it had a working product. The SEC says this was an unregistered security, though Block.one admitted no wrongdoing in the settlement.
EOS has now delivered a functioning blockchain, and though it’s not without problems, the company seems to actually want to succeed. But, without standard reporting requirements, it’s undeniable that its massive raise was based more on hype than any results. And critics think the puny settlement is a whiff by the SEC.
I think we’re detecting a theme: No amount of regulation or financial restructuring can short-circuit some people’s impulse to give money to a supposed genius who will make them rich. Tech’s growing mysticism and cult of personality – and whether they’re doing more harm than good – might be worth attention from the Silicon Valley execs reportedly gathering this week to rethink how IPOs work.
Oh, and those $4 billion worth of EOS tokens, which come with no claim on Block.one as a company? They’re now worth $2.7 billion.
So at least they’re doing better than WeWork.
David Morris | @davidzmorris | david.morris@fortune.com
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DECENTRALIZED NEWS
To the Moon… A coalition of crypto exchanges including Coinbase will decide for themselves which digital assets are securities. Online bank Revolut will hire 3500 new staff. Venezuela has a bitcoin stockpile. Bitcoin trading in Hong Kong spikes alongside unrest.
Rekt… Leaked transcripts show Mark Zuckerberg predicted Libra's rough start. Affirm wants you (or at least somebody) to buy sneakers on an installment plan. Automation is going to wipe out 200,000 banking jobs. Goldman Sachs has a consumer banking headache. Crypto news stalwart CoinDesk ousts longtime editor Pete Rizzo as it pivots, reportedly, to focus on catering to investors under ex-Wall Street Journal reporter Michael Casey.
BALANCING THE LEDGER
State Street is one of the world's largest financial custodians, holding more than $30 trillion, or 10% of the world's assets. Now it's getting ready for cryptocurrency. Of the coming world of digital assets, State Street's Jay Biancamano tells us: "Trickle, trickle, trickle—and then we believe there will be a flood." View the interview here.
FOMO NO MO'
"He was catastrophising, imagining worst case outcomes including prosecution, loss of his wealth and reputation . . . He kept on thinking back over all the thousands of emails he had sent over the years. He knew how lawyers can twist things round."
From David Enrich’s Dark Towers, an expose of Deutsche Bank and Donald Trump due out in early 2020. It’ll be an utterly searing takedown of one of the world's most troubled banks, if some of the details in a new excerpt in the New York Times is any indication. They include Enrich’s reporting that Deutsche Bank representatives squelched information, including the reports quoted above, linking a former top executive’s suicide to alleged corruption within the bank.
BUBBLE-O-METER
$3,976,000,000
The amount of EOS's allegedly unregistered security sale the SEC didn't take away. To more than one skeptic, the lesson was clear: Don't ask for permission. Hire good lawyers, then ask for forgiveness.
This edition of The Ledger was curated by David Z. Morris. Find past editions here, and sign up for other Fortune newsletters here. Question, suggestion, or feedback? Drop us a line.
