The VC Crypto Swindle
Last week in the Senate Banking Committee on Housing and Urban Affairs, Senator Warren made a very poignant and directed statement about the entanglement of prominent institutional money actors with crypto: “Crypto is an industry that is built to favor scammers, and some of the biggest players in our financial system are in on the con.” This statement is entirely accurate; however, what is not widely discussed is the inside baseball of what Senator Warren is referring to here and how a small number of unscrupulous venture capital funds are making boatloads of money running predatory investment schemes that prey on the American public and circumvent our laws.
The exact nature of the VC crypto swindle is generally outside the lived experience of most of the public, so wrapping one’s head around the precise nature of the grift takes a bit of time and explanation. The essence of the problem is that a number (albeit small) of venture funds are using crypto assets to circumvent an essential piece of legislation that the United States, known as the Securities Act of 1933. The Securities Act and the regulatory framework and institutions built around it are responsible for safeguarding the public and overseeing the issuance and disclosures involved with the sale of investment contracts. These rules form the fundamental basis of the United States and its market economy.
