WEBVTT - The Financial Mania Behind Crypto

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<v Speaker 1>This is Bloomberg Business Week with Carol Messer and Tim

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<v Speaker 1>Stenebeck on Bloomberg Radio.

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<v Speaker 2>Well, Tim, as you know. In twenty twenty one, crypto

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<v Speaker 2>went mainstream, with the likes of celebrities from Tom Brady

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<v Speaker 2>to Matt Damon endorsing it. Investment funds were buying it.

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<v Speaker 2>TV ads hailed it as the future of money, and

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<v Speaker 2>retail traders were making fortune off of dogecoin, which was

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<v Speaker 2>originally created as a joke in twenty thirteen. So was

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<v Speaker 2>it all just a game of epic proportions? While a

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<v Speaker 2>new book by Bloomberg's own Zeke Fox dives deep into this,

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<v Speaker 2>it's called Number Go Up. Inside Crypto's wild rise and

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<v Speaker 2>staggering Fall. He went on a quest spanning across the

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<v Speaker 2>world to understand what's behind the crypto bubble. He brings

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<v Speaker 2>readers inside Sam Bankman Freed's penthouse as the fallen Crypto

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<v Speaker 2>King faced imminent arrest, but he also discovered the crypto

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<v Speaker 2>hell on the other side of his spam text, where

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<v Speaker 2>he uncovers a crypto powered human trafficking ring in camb Bodia.

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<v Speaker 2>It's really fascinating. Zeke's I were very plas pleased to

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<v Speaker 2>have Zeke Fox here Financial Investigations and reporter here at

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<v Speaker 2>Bloomberg News. He's here with us in the Bloomberg Interactive

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<v Speaker 2>Broker Studio. So it's hard to figure out where exactly

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<v Speaker 2>to start off. But what was the motivation obviously of

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<v Speaker 2>going into this and how long it took you to

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<v Speaker 2>sort of span across the world to write this book.

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<v Speaker 3>So Ever, since I was like a kid, I wanted

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<v Speaker 3>to write like a crazy nonfiction story like I loved

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<v Speaker 3>like John Krackauers Into Thin Air or Ben Mezrich's Bringing

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<v Speaker 3>down the House about the Mt. Blackjack kids. But I

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<v Speaker 3>never found a story crazy enough to turn into a

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<v Speaker 3>whole book, because the last thing I want to do

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<v Speaker 3>is bore anyone. And I got once. I was kind

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<v Speaker 3>of resistant to crypto, but as once I jumped in,

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<v Speaker 3>I started meeting all these like wild billionaires and hustlers

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<v Speaker 3>and con men and scammers and like at some point

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<v Speaker 3>maybe when I found myself on one crypto crazy crypto

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<v Speaker 3>billionaire's yacht off the Bahamas, I was like, wait, this

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<v Speaker 3>is the adventure, Like you're on it right now, this

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<v Speaker 3>is what you got to write about. And I've ended

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<v Speaker 3>up spending two years going down this rabbit hole. And yeah,

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<v Speaker 3>I don't know that the world will ever see a

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<v Speaker 3>financial mania like this like ever again.

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<v Speaker 1>And we're still in the midst of it too. I mean,

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<v Speaker 1>we see big moves in crypto, not like we saw

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<v Speaker 1>a couple of years ago, zeeke. But you know we're

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<v Speaker 1>not We're not done talking about crypto at this point.

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<v Speaker 1>There's a lot that that sticks out to me from

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<v Speaker 1>the book, but there's this one quote that I want

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<v Speaker 1>to read to our audience. From the beginning, I had

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<v Speaker 1>thought that crypto was pretty dumb, and it turned out

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<v Speaker 1>to be even dumber than I imagined. So even after spending

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<v Speaker 1>years working on this book, talking to crypto billionaires, diving

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<v Speaker 1>into these cryptocurrencies, you still think crypto's dumb.

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<v Speaker 3>I think that if you anyone who's lived through like

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<v Speaker 3>these last couple of years, I don't think we can

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<v Speaker 3>just like memory hole that like all. I went to

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<v Speaker 3>the one of the first places I went was Bitcoin twenty,

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<v Speaker 3>this big conference in me at Miami, right after COVID restrictions.

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<v Speaker 1>When where everybody got COVID.

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<v Speaker 3>Yes not me. I became convinced after that that I

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<v Speaker 3>was immune to COVID and I would never get COVID,

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<v Speaker 3>but pretty soon after that I did get COVID. But

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<v Speaker 3>like I'm meeting, some of these guys were really legit

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<v Speaker 3>at the time. Like I met Celsius's Alex Mathschinski. He

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<v Speaker 3>was like talking to everybody and he was promising eighteen

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<v Speaker 3>percent yields if you deposited your savings with his company.

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<v Speaker 3>And he told me when we met, somebody's lying. Either

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<v Speaker 3>the banks are lying that they can only pay zero

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<v Speaker 3>percent or Celsius is lying that we can safely deliver

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<v Speaker 3>eighteen percent. And like a couple of weeks ago, he

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<v Speaker 3>got arrested. Just like a huge number of the founders

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<v Speaker 3>that I met have are now facing lawsuits or bankruptcy

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<v Speaker 3>or criminal charges. So well, I do think they're probably

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<v Speaker 3>is some good cryptocurrency company out there. I'm not going

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<v Speaker 3>to be the one to spend the effort to sift

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<v Speaker 3>through like another giant pile of scammers to find it.

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<v Speaker 2>Something that struck me too, because you did travel to

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<v Speaker 2>all these different hotspots, from you're in Manhattan to Miami,

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<v Speaker 2>you're in Bahamas, like you mentioned earlier, El Salvador, to

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<v Speaker 2>the Philippines, and so you were talking about how that

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<v Speaker 2>you did see a lot of empty hype and a

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<v Speaker 2>lot of scams. And what struck me was this new

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<v Speaker 2>kind of investment fraud that you found where it often

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<v Speaker 2>started with a text, and it was a scam called

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<v Speaker 2>pig butchering. Explain what that is and how that actually

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<v Speaker 2>ended up happening to you.

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<v Speaker 3>So, pig butchering is when someone approaches you with the

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<v Speaker 3>spam text, like we all get them, and it's like, hey, Dave,

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<v Speaker 3>did you get the milk for the cat on your

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<v Speaker 3>way home? Like they don't, they're like a little off right,

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<v Speaker 3>but if you write back, they'll try to make friends

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<v Speaker 3>with you, and they'll often the person at the other

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<v Speaker 3>end will pretend to be like an attractive young Asian

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<v Speaker 3>woman and they'll start dropping hints about they didn't have

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<v Speaker 3>a rich uncle who's able to make these really profitable

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<v Speaker 3>crypto trades. And I started I got one of these

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<v Speaker 3>texts and started playing along and developed a penpal friendship

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<v Speaker 3>with this person who was saying their name was Vicky

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<v Speaker 3>Ho And she eventually told me, hey, by one hundred tethers,

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<v Speaker 3>which are like a mainstream stable coin you can get

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<v Speaker 3>on coinbase or crypto dot com or any of the

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<v Speaker 3>like normal crypto apps and send them to this other

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<v Speaker 3>crypto app called zbxs, And Vicky promised me that if

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<v Speaker 3>I did that, she was going to introduce me to

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<v Speaker 3>profitable short term node trades that would generate reliable thirty

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<v Speaker 3>percent returns. And like, we all know this is nonsense,

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<v Speaker 3>but in this like crypto world, like where for a

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<v Speaker 3>couple years it seemed like anything was possible. A lot

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<v Speaker 3>of people were falling for this. People sent in hundreds

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<v Speaker 3>of thousands, millions of dollars. One expert that I spoke

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<v Speaker 3>to estimated that ten billion dollars have been lost to

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<v Speaker 3>these crypto romance scams. And the crypto plays two roles

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<v Speaker 3>in it. One is it's like it's the story that

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<v Speaker 3>gets people to send their money. And the other thing

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<v Speaker 3>is that you can go on crypto exchanges, acquire these

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<v Speaker 3>tether tokens very easily, and then zap them over and

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<v Speaker 3>you'll never get them back. It's anonymous, there's no way

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<v Speaker 3>for the authorities to trace them.

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<v Speaker 1>This portion of the book that Jessica it just is

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<v Speaker 1>referring to is from was in the book, but we

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<v Speaker 1>also were able to get you to talk to us

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<v Speaker 1>about it. A couple of weeks ago, Zeke was featured

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<v Speaker 1>in the August twenty first issue of Bloomberg Business Week.

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<v Speaker 1>Excerpted in there you also you know, I got to

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<v Speaker 1>tell you. After our conversation and reading that excerpt, Zeke

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<v Speaker 1>I stopped. I started thinking about those spam texts in

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<v Speaker 1>a completely different way because it's really ugly the truth there.

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<v Speaker 1>I mean, you spoke to somebody who had escaped from

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<v Speaker 1>essentially prison or slavery indentured servitude by cobbling together an iPhone,

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<v Speaker 1>making an iPhone work by essentially hot wiring it.

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<v Speaker 3>Yeah, so that is the really dark part is that

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<v Speaker 3>the people on the other end of these texts are often.

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<v Speaker 1>It's not VICKI.

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<v Speaker 3>Yeah, they're like Vicky disappeared, never never found out who

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<v Speaker 3>she was. But what I did find out is that

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<v Speaker 3>a lot of the people sending these messages there are

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<v Speaker 3>people from Southeast Asia who've been tricked into traveling to

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<v Speaker 3>Cambodia and then trapped and like, legitimately sounds like a

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<v Speaker 3>conspiracy theory, but I've seen it with my own eyes,

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<v Speaker 3>huge like office towers filled with floor after a floor

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<v Speaker 3>of people who are sending these spam text messages around

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<v Speaker 3>the clock. So that the person that sent you that

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<v Speaker 3>kind of nonsense text, like it's not a bot, it

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<v Speaker 3>could be someone who is being threatened with beatings of

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<v Speaker 3>the torture, who would have who can't leave this job

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<v Speaker 3>without paying a ransom, And like you said, yeah, well,

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<v Speaker 3>I spoke to Twee, who was victimized in this way

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<v Speaker 3>and had raised money for the ransom from a YouTuber.

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<v Speaker 3>And when I spoke to him, he returned to Ho

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<v Speaker 3>Chi Minh City and Vietnam, and he told this crazy

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<v Speaker 3>yeah mcguy verage story about how he was able to

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<v Speaker 3>get an iPhone and charge it using no tools and

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<v Speaker 3>a fluorescent.

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<v Speaker 1>Lamp, and he had to smuggle the iPhone in.

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<v Speaker 3>So his story was that he had stolen it from

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<v Speaker 3>the guards, but not the charger. He had secreted it

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<v Speaker 3>inside himself, a trick that he learned in prison, and

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<v Speaker 3>that he when he was alone, he took this iPhone

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<v Speaker 3>apart and peeled out the battery and then hot wired

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<v Speaker 3>it to a fluorescent lamp. And so very respectfully, when

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<v Speaker 3>we were together in Vietnam, I was like, tweet, I

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<v Speaker 3>don't think you can do that. Like you're like, I'm

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<v Speaker 3>very sorry for what you went through, but like are

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<v Speaker 3>you shit, is that really true? And he was like,

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<v Speaker 3>I'll show you right now. We bought an iPhone. He

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<v Speaker 3>took it apart with no tools, took apart a led

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<v Speaker 3>lamp in my hotel room, wired the battery to this lamp,

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<v Speaker 3>charged it and turned it right on. Uh yeah, I was.

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<v Speaker 3>I was floored.

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<v Speaker 2>Wow.

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<v Speaker 1>We're very pleased to continue our conversation right now with

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<v Speaker 1>Zeke Fox. He's financial investigation reporter for Bloomberg News. He's

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<v Speaker 1>with us in the Bloomberg Interactive at Broker's studio. He's

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<v Speaker 1>got a brand new book out. It's out today. You've

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<v Speaker 1>seen the excerpts everywhere, including in Bloomberg BusinessWeek magazine. It's

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<v Speaker 1>called Number Go Up. Inside Crypto's Wild Rise and Staggering Falls.

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<v Speaker 1>Zeke's right here with us in the Bloomberg Interactive Broker's studio.

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<v Speaker 1>Zeke the board Ape yacht club. Everybody was doing this

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<v Speaker 1>a few years ago. And by everybody, I mean if

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<v Speaker 1>you had like tens of millions or hundreds of millions

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<v Speaker 1>of dollars, you were a celebrity. Maybe you went on

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<v Speaker 1>Jimmy Fallon and talked about a board ape, what are

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<v Speaker 1>these things? And you actually bought.

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<v Speaker 3>One yeah, I mean so much of this crypto boom

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<v Speaker 3>was just like pretty silly. And one of the silliest

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<v Speaker 3>parts that I really liked was the board Ape Yacht Club.

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<v Speaker 3>And these are like cartoon images of monkeys, and it's

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<v Speaker 3>like a jpeg. You can see it, you can you

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<v Speaker 3>can download it, you can have it on your computer.

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<v Speaker 3>But if you want to have the right to say

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<v Speaker 3>that you own this particular cartoon image of a monkey

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<v Speaker 3>on the blockchain, you got to pay five hundred thousand

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<v Speaker 3>dollars something like that. And for a while a lot

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<v Speaker 3>of celebrities were doing it like great question. Well, basically

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<v Speaker 3>if you were a celebrity. First of all, there's some

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<v Speaker 3>accusations that celebrities may not have paid. I think they

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<v Speaker 3>mostly deny it, but there's some accusations that there were

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<v Speaker 3>discounts to be had, but set that aside. Basically for

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<v Speaker 3>a while, it's hard to imagine now this was only

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<v Speaker 3>like a year ago. It was cool to be like

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<v Speaker 3>with it and to change your name to like like

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<v Speaker 3>Jimmy Fallon on Twitter became Jimmy maybe like Jimmy Fallon

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<v Speaker 3>dot ether and then he picked yes to show that

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<v Speaker 3>you're like, you're with it. You know about the future

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<v Speaker 3>of finance, and you make your profile picture one of

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<v Speaker 3>these monkeys, and like I I yeah, we all laugh at.

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<v Speaker 1>It and see a lot of those these days. I'll

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<v Speaker 1>tell you that that's true.

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<v Speaker 3>Yeah, a lot the celebrities have mostly taken them off.

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<v Speaker 3>But I got a lot of people were giving me

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<v Speaker 3>a lot of a hard time in crypto world. I

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<v Speaker 3>go to these conferences and a lot of people would

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<v Speaker 3>ask me, what do you got? What's in your portfolio?

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<v Speaker 3>And you know, at first I tried to explain, like, hey,

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<v Speaker 3>the you know, presidential biographers, they're never the president. Sports

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<v Speaker 3>writers can't hit a fastball. But they didn't like this answer,

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<v Speaker 3>and I was like, you know what, maybe there's something

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<v Speaker 3>I am missing. I gotta try this out for myself.

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<v Speaker 3>And if I'm going to try it, I want to

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<v Speaker 3>go straight for the top. I want to join the

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<v Speaker 3>bard Ape Yacht Club. And luckily, even though the good

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<v Speaker 3>ones cost five hundred grand, there was sort of a

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<v Speaker 3>bored ape derivative called a mutant ape. Now these were

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<v Speaker 3>same idea little jpeg picture of a monkey, but sort

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<v Speaker 3>of melted because it had drunk some sort of vile

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<v Speaker 3>potion or something. Yeah, so it's like an even uglier picture,

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<v Speaker 3>and I was able. I sat down with my wife

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<v Speaker 3>and I was like, Nikki, for the book, is there

0:12:09.840 --> 0:12:12.120
<v Speaker 3>something important I got to talk with you about? Like

0:12:14.800 --> 0:12:17.400
<v Speaker 3>my research has taken me to a weird place. And

0:12:17.480 --> 0:12:19.959
<v Speaker 3>it turns out that in order to go to this

0:12:20.000 --> 0:12:22.800
<v Speaker 3>party is a week long party headlined by Snoop and

0:12:22.840 --> 0:12:25.920
<v Speaker 3>Eminem where I would get to meet elite crypto traders,

0:12:26.320 --> 0:12:28.920
<v Speaker 3>join letter like Inner Synctum and see what's really going on.

0:12:29.679 --> 0:12:31.240
<v Speaker 3>You had to have a board, ay to go to

0:12:31.320 --> 0:12:34.480
<v Speaker 3>the party, and I'd really like to buy one. And

0:12:34.520 --> 0:12:37.160
<v Speaker 3>then like, okay, I'm like, so how much do you

0:12:37.440 --> 0:12:39.120
<v Speaker 3>how much do you think I'm about to ask you for?

0:12:39.200 --> 0:12:41.240
<v Speaker 3>Because I kind of was curious. She's like, well, like

0:12:41.280 --> 0:12:43.560
<v Speaker 3>you sat me down, it's probably like at least five grand,

0:12:43.960 --> 0:12:48.040
<v Speaker 3>and I'm like it's forty thousand dollars and I was

0:12:48.080 --> 0:12:52.160
<v Speaker 3>just trying not to laugh. And the way book publishing works,

0:12:52.160 --> 0:12:54.560
<v Speaker 3>you get paid in advance, so I had this money,

0:12:54.760 --> 0:12:57.640
<v Speaker 3>but like, like, we this is a lot of money.

0:12:57.880 --> 0:13:00.240
<v Speaker 3>Just pay for a year of college. Now couple of

0:13:00.240 --> 0:13:09.040
<v Speaker 3>weeks like college you so like Nikki's face contorted into

0:13:09.080 --> 0:13:12.000
<v Speaker 3>this look of horror, but she's really supported of the project.

0:13:12.080 --> 0:13:14.240
<v Speaker 3>She saw that this was important and that it would

0:13:14.320 --> 0:13:16.160
<v Speaker 3>be the reader would want me to do it, And

0:13:16.200 --> 0:13:19.480
<v Speaker 3>so I bought this uh mute and ape and it

0:13:19.520 --> 0:13:23.079
<v Speaker 3>was it was actually I named him doctor Scum. He

0:13:23.160 --> 0:13:25.959
<v Speaker 3>had a sweater made of maggots. And there's a lot

0:13:25.960 --> 0:13:28.480
<v Speaker 3>of in this NFT world. There's a lot of like

0:13:28.640 --> 0:13:31.320
<v Speaker 3>talk of community, and so I was all, I'm like,

0:13:31.400 --> 0:13:33.440
<v Speaker 3>I'm gonna go for it. I'm joining the community. I

0:13:33.480 --> 0:13:36.400
<v Speaker 3>came up with it. I named him doctor Scum, and

0:13:36.440 --> 0:13:39.760
<v Speaker 3>I said that he would get superpowers by smoking weed.

0:13:40.200 --> 0:13:42.760
<v Speaker 3>But there were a lot of problems with this plan

0:13:42.840 --> 0:13:45.800
<v Speaker 3>which I learned, which first of all, you have to

0:13:45.800 --> 0:13:47.920
<v Speaker 3>to buy the n f T. You have to use

0:13:48.000 --> 0:13:51.240
<v Speaker 3>like you have to actually do crypto. This means like

0:13:51.240 --> 0:13:53.520
<v Speaker 3>when you go on coin base or Robinhood that's not

0:13:53.559 --> 0:13:56.200
<v Speaker 3>really doing crypto. You need to like buy these coins

0:13:56.240 --> 0:13:58.559
<v Speaker 3>and send them to meta mask like a crypto wallet.

0:13:58.840 --> 0:14:01.199
<v Speaker 3>And I like, it's a owunce real legit right now,

0:14:01.240 --> 0:14:03.679
<v Speaker 3>maybe you've heard about it. What this means in practice

0:14:03.840 --> 0:14:09.080
<v Speaker 3>is that your money lives Like in Google Chrome, there's

0:14:09.120 --> 0:14:11.559
<v Speaker 3>like a red icon where you have the ad block

0:14:11.920 --> 0:14:15.120
<v Speaker 3>near the URL. Then that you install another icon that's

0:14:15.160 --> 0:14:18.280
<v Speaker 3>a picture of a fox and when you install this icon,

0:14:18.679 --> 0:14:21.120
<v Speaker 3>it makes you watch a video they say this this

0:14:21.240 --> 0:14:23.600
<v Speaker 3>I'm not making this up. They they're like, if you

0:14:23.640 --> 0:14:26.640
<v Speaker 3>lose this password, your money will be gone, and they

0:14:26.680 --> 0:14:29.960
<v Speaker 3>make it in the video. They're like, engrave this password

0:14:30.040 --> 0:14:32.400
<v Speaker 3>on a metal disk and bury it in your backyard.

0:14:32.840 --> 0:14:34.280
<v Speaker 3>And I'm like, okay, I'm not.

0:14:34.200 --> 0:14:37.560
<v Speaker 1>Doing that New York's backyard.

0:14:37.640 --> 0:14:42.440
<v Speaker 3>Yeah sure, but like it was so terrifying to send

0:14:42.480 --> 0:14:44.480
<v Speaker 3>my By the time I bought it, the price had

0:14:44.480 --> 0:14:47.160
<v Speaker 3>crashed to twenty thousand, which was kind of good but

0:14:47.280 --> 0:14:50.200
<v Speaker 3>also scary. So I had to send my twenty thousand

0:14:50.640 --> 0:14:54.800
<v Speaker 3>from Bank of America to the Foxhead icon and like

0:14:55.160 --> 0:14:57.720
<v Speaker 3>Bank of America called me. They're like, we think you're

0:14:57.720 --> 0:14:59.280
<v Speaker 3>being scammed. Are you sure you want to do this?

0:14:59.360 --> 0:15:03.040
<v Speaker 3>And I was like, I've never appreciated the banking system more. Yes,

0:15:03.120 --> 0:15:10.160
<v Speaker 3>I am being scammed and I want to do it.

0:15:11.080 --> 0:15:13.600
<v Speaker 3>So when I when I got to the to the

0:15:14.000 --> 0:15:17.440
<v Speaker 3>eight Fest, it was a bunch of drunk dudes. There

0:15:17.480 --> 0:15:19.240
<v Speaker 3>were it was I mean, it's a good party. Snoop

0:15:19.280 --> 0:15:23.000
<v Speaker 3>and Eminem were really there, but like everyone's wasted. Everybody stoned.

0:15:23.880 --> 0:15:25.800
<v Speaker 3>Nobody wants to hear about doctor Scum.

0:15:26.280 --> 0:15:26.520
<v Speaker 2>Uh.

0:15:26.600 --> 0:15:28.880
<v Speaker 3>People act like I'm not cool because my ape sucks.

0:15:29.040 --> 0:15:33.800
<v Speaker 3>It's the cheapest one, even like pimply teenagers have way

0:15:33.800 --> 0:15:37.080
<v Speaker 3>better apes, like million dollar apes. And I did. But

0:15:37.760 --> 0:15:41.200
<v Speaker 3>I did see Jimmy fallon there, and since the prices

0:15:41.200 --> 0:15:43.760
<v Speaker 3>had crashed recently, I wanted to talk with him, so

0:15:43.800 --> 0:15:47.440
<v Speaker 3>I went he went behind like the velvet rope and

0:15:47.560 --> 0:15:50.400
<v Speaker 3>was like, hey, Jimmy, check out doctor Scum. He was like,

0:15:51.440 --> 0:15:54.480
<v Speaker 3>gave me like a pretend interested look, and then I

0:15:54.520 --> 0:15:56.520
<v Speaker 3>was like, hey, man, like you had a whole segment

0:15:56.560 --> 0:16:01.200
<v Speaker 3>on your show promoting these with like Paris Hiltan. You know,

0:16:01.320 --> 0:16:04.400
<v Speaker 3>now everyone's lost, like real money. And he was, what

0:16:04.440 --> 0:16:05.840
<v Speaker 3>do you say? He was just like, oh, I did

0:16:05.840 --> 0:16:06.640
<v Speaker 3>it for the community.

0:16:07.120 --> 0:16:09.560
<v Speaker 1>I was like, all right, all right, and you know, no,

0:16:09.640 --> 0:16:10.800
<v Speaker 1>you don't have doctor Scum anymore.

0:16:10.880 --> 0:16:14.200
<v Speaker 3>Zeke unloaded him at a two thousand dollars loss. Never

0:16:14.240 --> 0:16:14.880
<v Speaker 3>been so happy.

0:16:15.200 --> 0:16:18.280
<v Speaker 1>All right, Hey, this and more in Zeke's brand new book,

0:16:18.400 --> 0:16:21.920
<v Speaker 1>Number Go Up. Inside Crypto's Wild Rise and Stagger and Fall.

0:16:22.240 --> 0:16:26.560
<v Speaker 1>Zeke Fox's financial investigations reporter for Bloomberg News. His new

0:16:26.560 --> 0:16:28.720
<v Speaker 1>book Number Go Up It is out today. You can

0:16:28.760 --> 0:16:31.400
<v Speaker 1>buy it anywhere you get your books. You're listening and

0:16:31.400 --> 0:16:32.920
<v Speaker 1>watching Bloomberg BusinessWeek