Short cons, long cons: crypto currencies, NFTs and making money off of the war in Ukraine

While it’s hard to fault the Ukrainian government for fundraising by whatever means necessary during a terrible time of crisis, the adoption of crypto for fundraising in this way is worrying.

Image Credit: Reuters

When I first started to hear and read about Bitcoin and the blockchain technology that underpins it, the concept of a currency outside of the control of governments and limited in the amount that would be created to ensure its value would increase over time intrigued me. Soon after, reading about the enormous amounts of energy required to ‘mine’ a non-existent thing, much of it happening in poorer countries still reliant on the most polluting fuels to produce the necessary processing power used in the creation of it, I was horrified.

It became clear to me over time that the majority of those talking about cryprWeb3 is Going Just Greato-currency’s utopian potential were right leaning libertarians, most of them much younger than the ones obsessed with gold and silver as true measures of ‘value’ over ‘fiat’ currencies who came before them.

For many of those who bought in early enough, Bitcoin and some of its imitators have created great fortunes (some just as quickly lost due to volatility in an unregulated market), especially if they sold some or all of it at the right time.

Speaking of Bitcoin imitators, the most successful of these is the Ethereum platform and its currency, Ether. A recent profile of its founder, 28 year old Canadian Vitalik Buterin put the utopian vision of much of the crypto community front and center, with the author of the piece in Time magazine writing, “Buterin hopes Ethereum will become the launchpad for all sorts of sociopolitical experimentation: fairer voting systems, urban planning, universal basic income, public-works projects. Above all, he wants the platform to be a counterweight to authoritarian governments and to upend Silicon Valley’s stranglehold over our digital lives.” Somewhat ironically, many of those who hold and have increased the value of Ether are the same Silicon Valley types it was designed to get around. Over the last year or so it’s become more mainstream as it’s also the platform used to trade ‘non-fungible tokens’ or NFTs, arguably the biggest scam created in the crypto sphere yet.

In a nutshell, NFTs allow people to buy access to a gif, photo or work of art through a URL accessible to all on the internet, works that the buyer would have no real ownership of, the asset basically being a receipt for their purchase that they can theoretically sell.

The claim is made that NFTs will create wealth for starving artists, who are supposed to receive a piece of the action every time they’re sold. This may be enforceable for someone like ‘Obey’ creator Shpard Fairey but less so for those with less celebrity. The space is already rife with claims of outright theft of others’ work on the OpenSea platform where the majority of them are sold. 

Celebrities like Jimmy Fallon and Paris Hilton have jumped on board the trend arguably inflating the value of works like the ‘Bored Ape Yacht Club’, repetitive images one of which has sold for $2.3 million

Contrary to the purported hopes of Buterin and other crypto ‘visionaries’, alongside the introduction of NFTs, more and more coins have proliferated with little seeming motive beyond enriching their creators and promoters with hundreds of meme or ‘sh*t’ coins produced using yet more energy for tokens with dodgy prospects. Some with greater technical knowledge than this writer have also argued that most of these tokens are created by amateurs and aren’t as secure as Bitcoin or Ether.

Some of these ‘sh*t’ coins have been outright ‘pump and dump’ scams, with basically no protections provided for investors, even in comparison to the most speculative assets available in traditional markets like penny stocks. Others like EthereumMax, which has no connection to Ethereum itself, court fraud.

One recent example of the former shows how internet ‘influencers’ can leverWeb3 is Going Just Greatage their often very young fans to make large amounts of money for themselves while ‘pulling the rug out’ from those who believe in their schemes.

Paul Denino, who goes by the name Ice Poseidon and was one of the most popular streamers on Twitch before he was banned, continued his ‘IRL’ (in real life) streams on Youtube where he recently pushed his own CXcoin on his young followers, promising that he and they would all get rich together. Shortly after the coin’s launch, Denino removed $500,000 from CX, tanking its value and leaving investors holding the bag. He was said to have kept $300,000 for himself and paid the coin’s developers with the remainder.

Commenting on the rug pull while showing no regret, Deninotold streamer Coffeezilla, who is at the forefront investigating these influencer scams, “Part of the responsibility is on them [the fans] as well, for putting too much emotion into it.”

He went on to say after the streamer pressed him about his ability to return the money, “If you want the answer, yeah I could give the money back, it is within my power, but I am going to look out for myself and not do that.”

Ice Poseidon has faced no consequences thus far for this activity, although he hopefully lost some of his fan base for this unethical scheme.

While Denino’s actions and those of many others like him are terrible, including some in the Youtube collective called the “Faze Clan” who engaged in an even larger rug pull earlier using a token called “Save the Children” that did no such thing,  the inroads that crypto has made into charitable and humanitarian giving are even more troubling, which brings us to their use in raising money for those suffering from the ongoing war in Ukraine.

Like almost every article not detailing a specific allegation of some kind of fraud or illegal activity that I found in researching this, most of the coverage of the use of crypto currencies in aid of besieged Ukrainians has been overly positive, ignoring any possible problems and putting a positive spin on them in ways that would do a public relations firm proud.

After about 3 weeks of violent conflict, Mykailo Federov, Ukraine’s Vice Prime Minister and Minister of Digital Transformation made an interesting announcement in terms of the country’s crypto fundraising, “With the beginning of the war, cryptocurrencies became a powerful tool for attracting additional funding to support the Armed Forces of Ukraine. In more than three weeks of war, the Crypto Fund of Ukraine has raised more than $54 million in cryptocurrencies.”

Leaving aside how problematic fundraising for military purposes is on its face, a number of less well known coins quickly angled to have their tokens join Bitcoin, Ether, Solana and the original meme currency, Dogecoin, in being accepted as part of the country’s official fundraising effort through the web-site Aid for Ukraine

These crypto entrepreneurs made this happen by promising to donate large sums of their own tokens. Gavin Wood, founder of the currency Polkadot got the ball rolling with the promise of $5 million if Ukraine’s government adopted the currency, which they did soon after. Polkadot tokens have since gained 13% in value.

Perhaps the most telling thing to happen so far in terms of Ukraine’s foray into crypto fundraising is the ‘air drop’ cancelled on March 3rdWeb3 is Going Just GreatWeb3 is Going Just Great An airdrop is most often when tokens or NFTs are given away to promote the adoption of new crypto currencies.

What Ukraine’s government had planned was a commemorative token with no value as a thankyou for those who donated money in the form of crypto to their fundraising efforts. Almost immediately after the announcement, donations flooded in and it was clear that some were looking at the airdrop as a speculative opportunity. Unfortunately for their plans, just before the airdrop was to take place, scammers were already circulating a fake token and making money off it from unsuspecting buyers. Outrage followed by some donors who clearly had plans for whatever token came out of the cancelled airdrop.

To make up for the cancellation, Ukraine’s government has promised to create NFTs as a thank you for at least some donors.

While it’s hard to fault the Ukrainian government for fundraising by whatever means necessary during a terrible time of crisis, the adoption of crypto for fundraising in this way is worrying. Rather than the revolution promised as part of ‘Web 3.0’ that would come out of blockchain technology, not much more has been done beyond creating an anonymous digital ledger and empowering some of the worst cons so far this century.

*In researching this article I relied heavily on two other sources besides Coffeezilla, who is cited above. The Youtube show and podcast Scam Economy, which covered the use of crypto by Ukraine in a recent episode  and the web-site Web3 is Going Just Great  by Molly White which aggregates stories of the many scams coming from the crypto world on a daily basis.


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