In a year of disaster, bankruptcy, theft and fraud, there was also time for smaller, more intimate scandals and feuds crypto is known for, as well threats and pettiness.
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In a year in which Bitcoin is down about 75% off its November 2021 all-time high and millions have lost funds to incompetence and outright theft, the capacity for controversy is endless.
The collapse of the Terra/LUNA stablecoin ecosystem, the demise of Celsius and hedge fund Three Arrows Capital and subsequent domino effect on crypto lenders, the $3 billion-plus hack from DeFi — much of it from cross-chain bridges like the $625 million Ronin Network theft — all have big controversies, but by and large, this article isn't for the big disasters.
Instead, we're looking largely at the industry fights, foibles and prat falls that came between the big catastrophes of the crypto winter.
One big exception is our collection of the best of Sam Bankman-Fried's quotes over the six weeks between the collapse of FTX and Alameda Research... and his arrest in December. However, this isn't the story of his empire's collapse, but rather the teeth-gnashing explanations he gave for why he wasn't to blame for the $8 billion hole in FTX customer accounts on what we at CoinMarketCap like to call his "I'm an idiot, not a crook" media tour.
With that in mind here are 20 crypto controversies of 2022 — counting down to the most scandalous:
20. Mark Zuckerberg Thumbs Nose at Metaverse Critics
To be fair this is a little off-target for crypto, but the metaverse, in whatever shape it may take, is likely to have a big blockchain and NFT component.
For the first three quarters of 2022, Meta CEO Mark Zuckerberg has been announcing huge investments in the virtual reality division that he sees as the future of the company and social media — and even work and entertainment broadly.
With $9.5 billion already dumped into the Reality Labs division, Zuckerberg admits he won't have a true metaverse up and running for a decade, and the company is on track to spend at least $12 billion by the year's end. Its stock is down 66% this year and 75% from its 2021 all-time high — and META saw $250 billion erased on a single day, Feb. 3. So how is he still CEO? Simple. Through super-voting shares, he controls about 55% of the company.
19. Elon Musk Flails at Twitter
For someone who has made himself the richest man in the world via a reputation as an industrial leader who can do the impossible — bring the U.S. auto industry out of the gasoline era and space travel out of the military-industrial complex — Elon Musk is doing a fine job of trashing his reputation as a visionary management genius at the social media company he clearly regrets buying for far too high a price.
Culling the senior leadership within days and half the staff within weeks, jumping back and forth on what speech a "free speech absolutist" will tolerate, and threatening advertisers who pulled back out of concern that the loss of moderation would put them next to abhorrent content has not exactly inspired confidence. Even DOGE is far off its 2022 high and down more than a third in December alone.
18. Green Opposition
Ethereum's September switch to a clean Proof-of-Stake blockchain solved crypto's biggest problem — from a blockchain project perspective only as Bitcoin still pollutes badly — but whether that solves the problem faced by crypto and NFT projects remains to be seen.
At the beginning of the year, the World Wildlife Fund canceled an NFT project on PoS blockchain Polygon because it's an Ethereum Layer 2 network. Wikimedia and Firefox developer Mozilla stopped taking Bitcoin and crypto donations — but the environment was only half the cause, as the petitions also called crypto valueless pyramid schemes. Greenpeace called for Bitcoin to follow Ethereum's PoS precedent.
Bitcoin remains a problem, with the European Parliament beating back an effort to ban Bitcoin outright as part of its Markets in Crypto Assets (MiCA) regulatory legislation, and governments around the world — including the U.S. — citing its country-size power bill. And the industry's claim that nearly 60% of Bitcoin mining uses renewable energy was challenged, with 37.5% called more accurate by one group.
17. Fidelity's 401(k) Push Angers Washington, D.C.
Even before FTX went down in flames, Fidelity faced harsh criticism from regulators and elected officials over a plan to allow companies to allow 401(k) participants to invest up to 20% in Bitcoin. Said Sens. Elizabeth Warren, Dick Durbin and Tina Smith:
"It seems ill-advised for one of the leading names in the world of finance to endorse the use of such a volatile, illiquid, and speculative asset in 401(k) plans — which are supposed to be retirement savings vehicles defined by consistent contributions and steady returns over time."
The Department of Labor, which oversees 401(k) plans, said it has "grave concerns" and was fairly threatening when it warned investment managers that they "should expect to be questioned about how they can square their actions with their duties of prudence and loyalty in light of the risks."
16. The All-Stars Game
Crypto's sports sponsorship spending exploded, with Bloomberg saying recently that more than $2 billion has been spent. Which is a lot of money crypto firms committed to just as crypto winter was approaching and trading volume was dropping hard and fast.
While no one threw money at famous athletes like FTX's Sam Bankman-Fried — Tom Brady, Steph Curry, Naomi Osaka, Shohei Ohtani, the $135 million Miami Heat arena naming deal — plenty of other exchanges went big.
Crypto.com spent an eye-watering $700 million to name the L.A. Lakers stadium for 20 years, inked a partnership with F1, and had its name on the sideline of the World Cup championship game.
Tezos has football (soccer) giant Manchester United, while OKX has cross-town rival Manchester City and the McLaren F1 racing team. About 80% of the F1 racing teams have a crypto sponsor. eToro has a swath of European football clubs, and the list goes on.
15. El Salvador's Bitcoin Experiment on Its Knees
In September, the Central American country's one-year anniversary of Bitcoin as legal tender didn't look good.
Its Bitcoin investments had lost a fortune on paper, actual use of Bitcoin on the street was minimal, less than 2% of remittances came in BTC, 77% of the populace wanted the experiment ended, and its sovereign debt rating has crashed to the point where the markets mostly expect a default.
Nor was its much-ballyhooed Bitcoin bond any closer to launch, and the Bitcoin City was still an architect's model. However, the hugely popular president, Nayib Bukele, remained steadfast and the crypto community considers it the future.
Only the tiny, war-torn Central African Republic followed suit, although even tinier St. Kitts and Nevis is considering opting for Bitcoin Cash.
14. Craig Wright's Libel Suits Fizzle
Self-proclaimed Bitcoin creator Satoshi Nakamoto Craig Wright took a one-two punch. First, he was awarded just £1 in damages in his lawsuit against What Bitcoin Did podcaster Peter McCormack for denying Wright is Bitcoin's creator. The judge in that case said Wright had submitted some evidence that was "straightforwardly false in almost every material aspect."
In a second trial in Norway, Magnus Granath, who goes by "Hodlonaut" on Twitter, won outright in a case about his calling Wright a "fraud" and "scammer." Wright said it was "incredibly difficult" to provide absolute cryptographic proof he is Nakamoto because he had "stomped on the hard drive" that gave access to the private keys to the 1.1 million Bitcoin that Nakamoto had mined in Bitcoin's early days.
Wright's claim is widely disbelieved, as shown by Hodlonaut's ability to crowdfund a defense fund as well as widespread outpourings of support after the victory.
13. Tornado Cash Sanctions
Another row about freedom and privacy that expanded beyond crypto's libertarian roots was over the sanctioning of Tornado Cash, a mixing service that obscured crypto, making transactions impossible to trace.
Always seen as an enemy like privacy coins by law enforcement, Tornado Cash was said to be heavily used by North Korean state hackers who stole $625 million from the Ronin Bridge and $100 million from the Horizon Bridge. That connection led the Treasury Department to sanction it, threatening penalties like the five-year prison term Virgil Griffith received.
However, as a fully decentralized DAO, it was the first-ever sanction applied to computer code rather than a person or legal person — a business — which set mainstream groups like EFF against it. Coin Center sued and Coinbase announced it would fund the legal bills. At the same time, Dutch authorities arrested one of its developers, Alexey Pertsev — who'd long since given up any control — on money laundering charges. That is seen as an even bigger threat to DeFi, which has long believed that once a project is truly decentralized, there's no person who can be held responsible for its actions.
Arguing that mixers help people to do things like support causes privately — as transaction tracing is getting more sophisticated on public blockchains like Ethereum, Coin Center pointed to Ukraine donations, saying:
"Subjecting these transactions to public scrutiny would not only chill the protected activities of donors, it would put those donors and activists in real danger of Russian reprisals."
12. Freedom Convoy
In January and February, a trucker protest against vaccine mandates at the U.S. border led a group of drivers to occupy and shut down central Ottawa, a movement that gained broader support among anti-vaxxers.
After the government forced fundraising sites like GoFundMe to shut off $9 million in donations, they turned to crypto, raising 22 BTC worth about $975,000. The government invoked the Emergencies Act for the first time and extended the ban to crypto — and the Royal Canadian Mounted Police warned crypto exchanges to report any transactions to Convoy-linked addresses.
That led both Armstrong and Powell to warn Convoy participants to get their funds off centralized exchanges, with the latter saying "100% yes" they would freeze wallets if ordered to, and Armstong tweeting "Self-custodial wallets are important!"
11. Crypto Culture Wars
Before he stepped down in September, Kraken exchange CEO Jesse Powell joined Coinbase's Armstrong in inviting employees to quit.
In June, the New York Times reported that he'd questioned (and later banned) employees' use of preferred pronouns and said that questions about women's intelligence were "not as settled as one might have thought."
The article, which described "a corporate culture war stoked by a crypto CEO," led to employees accusing him of damaging their mental health and cultivating a hateful workplace, and threatening to quit. That prompted a 31-page document describing Kraken's "libertarian philosophical values" and offering anyone not onboard four months of severance pay.
10. Blocking Russian Customers
This became an issue when Ukraine called on crypto exchanges to freeze funds of all Russian customers, not just sanctioned oligarchs and politicians. While siding with Ukraine, most saw this as a step too far, with Coinbase saying:
"Our mission is to increase economic freedom in the world. A unilateral and total ban would punish ordinary Russian citizens who are enduring historic currency destabilization as a result of their government's aggression against a democratic neighbor."
Binance (which owns CoinMarketCap) added:
"We are not going to unilaterally freeze millions of innocent users' accounts. Crypto is meant to provide greater financial freedom for people across the globe. To unilaterally decide to ban people's access to their crypto would fly in the face of the reason why crypto exists."
One crypto firm that did was blockchain game developer Animoca Brands, maker of The Sandbox metaverse. Citing "legal advice" it said "we might ourselves become financially excluded from the financial system." It was noted that it may have been influenced by intellectual property licenses from both Disney and F1, both of which were cutting off Russia.
9. Flushing the Crypto Bowl Ads
Spending millions on Super Bowl ads wasn't a very good strategy 22 years ago when dot-com firms did it in — the word "curse" has been thrown around — and it didn't work out very well for the five crypto firms who spent $7 million per 30 seconds this year.
Bitbuy and eToro's ads were boring. Crypto.com retreaded the tagline "fortune favors the brave" from its much-scorned Matt Damon ad for LeBron James, and then only ran the company name for a couple of seconds. And Coinbase had a good, $14 million ad that used a bouncing QR code to bring viewers directly to its website — which promptly crashed under the crush of potential customers looking for a free $15 in crypto.
The best of the bunch was FTX's "Don't Be Like Larry" David, in which the curmudgeonly skeptic passes on the wheel, fork, light bulb and Walkman before being introduced to FTX's crypto platform as "a safe and easy way into crypto." He replied:
"Yeahhhhh…. I don't think so. And I'm never wrong about this stuff. Never."
That wasn't controversial at all until David turned out to be prophetic nine months later.
8. Endorsing Securities Gets Costly
Kim Kardashian can tell you that, following a $1.26 million fine for endorsing Ethereum Max on Instagram.
While it had the hashtag #ad, that's not enough for securities, where endorsers have to reveal how much they've been paid. A lawsuit over the same thing was tossed, however.
The Texas State Securities Board is investigating the Golden State Warriors' Steph Curry and Tampa Bay Buccaneers' quarterback Tom Brady. It's all based on the Securities and Exchange Commission's (SEC) argument that Bitcoin is the only crypto that's not a security.
7. Loose Lips Sink Ships
Law firm Roche Freedman has made a mini industry of class action suits against crypto firms, including stablecoin issuer Tether and sister exchange Bitfinex, the Tron Foundation, and BitMEX.
But in September, partner Kyle Roche was caught on video calling jurors "10 idiots" and boasting that he "sues half the companies in the industry."
He then claimed he'd been deliberately intoxicated, said the video took comments out of context, and resigned first from the case and then from his law firm.
The judge called him "uniquely stupid" and partner Vevel Freedman's newly renamed firm was ousted from the Tether case.
Meanwhile, the firm has been accused of making a "secret pact" with Avalanche blockchain developer Ava Labs to go after its enemies in exchange for "a massive quantity" of stock and hundreds of millions of dollars worth of AVAX tokens.
6. Fire Our Bosses!
In 2020, dozens of Coinbase employees quit after CEO Brian Armstrong banned political and social movement discussions at work, saying they diverted focus. This June, Coinbase employees circulated an anonymous petition to fire three C-level executives citing a "toxic workplace culture," creating a "lack of focus," and having a "generally apathetic and sometimes condescending attitude" that had led to "low morale."
Armstrong wasn't moved or amused, calling it "really dumb on multiple levels." He said any employee with a lack of confidence should "quit and find a company to work at that you do believe in."
5. Projects Suffer Scandals
What's acceptable to say became a big topic early this year, with NFT marketplace Superrare's senior community manager Ashni Christensen and Ethereum Name Service (ENS) director of operations Brantly Millegan both booted in February over past tweets — hers using racist language (for which she apologized) and his for a 2016 tweet that said "Homosexual acts are evil. Transgenderism doesn't exist. Abortion is murder." — remarks he defended.
Millegan was also accused of having directed transphobic abuse directly at one individual that was at best graphic, personal and cruel — and paid $7.16 in gas fees to send it on the Ethereum blockchain.
By and large there was wide community support for their removal, with Web3 values widely cited. "Web3 should be inclusive and welcoming," said DeFi protocol Uniswap inventor Hayden Adams. "You represent a core Web3 protocol and your public statements don't reflect these values, so people are understandably upset." At the same time, accusations of cancel culture and "woke" behavior targeting someone for their Catholic beliefs showed the divide that exists.
4. Exploit or Smart Strategy?
One of the many outbursts of crypto community anger this year was targeted at Avraham Eisenberg, who drained the Solana-based trading and lending market's liquidity pools with what he called a legal and "highly profitable trading strategy" made possible because Mango Markets' developers "did not fully anticipate all the consequences of setting parameters the way they are."
Crypto risk-monitoring firm Solidus Labs — among many others — called it an exploit that was "a textbook example of cross-market manipulation" although others agreed it was likely legal, or at the very least not criminal. Which is moot as Eisenberg's group returned $67 million of the $114 million it made in exchange for an agreement not to pursue criminal charges or freeze tokens.
3. Coinbase Withdraws Job Offers
In February, Coinbase was loudly announcing plans to hire 2,000 people in 2022. In mid-June it laid off 1,100. Which is sad but not controversial in a deep crypto winter.
However, it also withdrew a slew of accepted job offers. It's hard to imagine that the layoff decision was made so quickly that Coinbase wasn't still recruiting while contemplating an 18% workforce reduction. Chung Wook Ahn, who turned down Amazon and Oracle to make Coinbase his first job after obtaining a software engineering degree, found himself with 90 days to get a job or lose his visa. He said:
"I am left speechless of the irresponsibility Coinbase has shown in managing hires and helpless about my current situation."
2. Celsius Execs Cash Out Before Bankruptcy
How and why Celsius collapsed is covered elsewhere, but one of the mast galling parts of the story was the revelation that CEO Alex Mashinsky, chief strategy officer Daniel Leon and chief technology officer Nuke Goldstein withdrew a combined $56 million in the weeks before the crypto lender suspended withdrawals, leaving some 300,000 customers $1.2 billion in the hole. Mashinsky reportedly accounted for $10 million he said was used to pay taxes (and that he had deposited earlier in the year for that purpose) adding that he had $44 million locked in the company.
1. Sam Bankman-Fried's Top 10 Most Controversial Moments
It seems a bit unfair to include the comments of Sam Bankman-Fried, the former CEO of the now-bankrupt crypto exchange FTX and trading firm Alameda Research, in a list controversial moments — especially after more than a month of tweets and interviews in which he denied any wrongdoing and essentially argued that he was guilty of incompetence not malfeasance.
Here's the best of SBF's "I'm an idiot, not a crook" media tour comments:
10. It's not really fair to judge a lawyer by their clients, but when you've just been accused of ripping off literally one million people, maybe don't hire the guy who just defended Ghislaine Maxwell for trafficking underage girls for Jeffrey Epstein. Although, she did get 20 years, so maybe some of the former FTX exchange CEO's clients are okay with that.
9. "At the end of the day, I was CEO, which means that *I* was responsible for making sure that things went well. *I*, ultimately, should have been on top of everything. I clearly failed in that. I'm sorry."
8. He tweeted five days before bankruptcy: "FTX has enough to cover all client holdings. We don't invest client assets (even in treasuries.) We have been processing all withdrawals, and will continue to be."
7. "F*** regulators, they make everything worse. They don't protect customers at all."
6. "I ask myself a lot how I made a series of mistakes that seem — they don't just seem dumb — they seem like the type of mistakes I could see myself having ridiculed someone else for having made."
5. "Well played; you won." A Twitter comment to an unnamed person who's clearly intended to be Binance CEO Changpeng "CZ" Zhao, essentially accusing him of driving FTX under (as opposed to the missing $8 billion in customers' funds.)
4. "I don't have any hidden funds" and my net worth is "$100,000 or something like that."
3. Q — "[Y]ou were really good at talking about ethics, for someone who kind of saw it all as a game with winners and losers?"
A — "Ya. Hehe. I had to be. It's what reputations are made of, to some extent. I feel bad for those who get f***** by it. By this dumb game we woke westerners play where we say all the right shibboleths and so everyone likes us."
2. Q — "A lot of people look to you and see Bernie Madoff."
A — "I don't think that's who I am at all at all. But I understand why they're saying that. People lost money, and people lost a lot of money. When you look at the classic Bernie Madoff story, there is no real business there… it was just one big Ponzi scheme, right? FTX, that was a real business."
1. In first place, a tie between the New York Times interview's "I didn't ever try to commit fraud on anyone" and the Good Morning America interview's "I did not know that there was any improper use of customer funds."
