Crypto Crime: Media Sensation And The Illusion Of Control
In January of 2018, MIT Technology Review suggested that 978 million people worldwide lost $172 billion to cybercrime in 2017. That’s $22.84 for every man, woman, and child on the planet.
A study by Hiscox found that $50 billion a year disappears from retail coffers in the USA… primarily from light-fingered employees.
The New York Times (in an opinion piece) quotes a figure from The Commission on the Theft of American Intellectual Property, that puts US losses from IP theft at $600 billion a year.
Experian says that credit card fraud added $905 million to the tally… and suggests that 25% of all ‘consumer charge-offs’ during the mortgage crisis may have been fraudulent.
And although the Federal Reserve says that there is $1.4 trillion in legal tender circulating… they don’t know where 85% of it actually is. Some economists estimate that 10% of it circulates through the shadow economy. It’s suggested that $80 billion of it now resides in Russia.
As we noted last week, Goldman Sachs bankers embezzled $6 billion from the Malaysian development fund, leading chairman Lloyd Blankfein to declare “stuff like that is going to happen“.
Thieves seldom prosper?
Theft is an economic truth.
I don’t like thieves, and I don’t condone their actions. In fact, earlier this year, I personally spent hours looking at photos of Egyptian beaches in order to dox the founder of Savedroid when it appeared he had exit-scammed with $50M of his investors’ money. (It was later declared a PR stunt.)
But we do not live in a utopian economy, anymore than we live in a perfect world.
I’m not an apologist for crime: but research indicates that as recently as 2009, shadow economies account for over 22% of world GDP. It is a simple fact of life that the black market exists, and that it is more substantial than most of us imagine.
Whether due to greed or necessity, theft and economic exploitation are facts of life.
You see the effects of crime all around you, every day. Your home insurance costs more when you live in an area with high property crime rates. Keyless car systems may seem a terrific boon to security, but in fact auto theft is on the rise… because we leave our key fobs in our cars.
Banks have been fined hundreds of billions (yes, billions) of dollars over the last few years, because they are – quite literally in many cases – stealing your money.
So why aren’t we panicking about losing our cars and cash?
Because we live in world defined by our illusion of control.
We trade the convenience of keyless entry for the inconvenience of a stolen car, weighing the odds on an emotional level and deciding that we can live with them. When we hear the blip of a car security system as we walk away, we believe we have control.
We entrust the banks, because… well, because they’re there. Big buildings! Alarms! Someone has to look after our money! And we never really see the thefts, because we don’t generally define usurious interest rates and fees as theft.
Banks make profits that are beyond the imagination of regular people – ten U.S. banks made a combined $30 billion in profits in just three months last year – and their revenue is so astronomical that a few billion here or there for playing fast and loose with customers’ money is simply a cost of doing business. And if we wanted, we could just switch banks – we have control.
Meanwhile, Americans are more afraid of ‘Islamic Extremists’ than they are afraid of being mugged. Islamic extremism accounted for one attack in the USA in 2017, leading to eight deaths. Other homicides accounted for 17,284 deaths, and the number of robberies is even charted by choice of weapon: 292,136 altogether. But because we avoid dark alleys in Gotham, we believe we control the odds.
Fear is clearly irrational – but that doesn’t mean it’s inconsistent.
Why crypto crime is such a flashpoint
Terrorism is frightening because we have no control. It could be anytime, anywhere, anyone… and all we have is a little racial profiling and an underpaid TSA agent between us and potential disaster. No control.
Right now, crypto can also be terrifying. The technology behind cryptocurrency is well beyond the understanding of most of us, and yet we are supposed to comprehend cybersecurity well enough to know the difference between cold storage and a hot wallet, between our private keys and our public keys, and between a shady criminal armed with a convincing whitepaper… and the real thing.
If someone steals our funds, we are utterly clueless victims. What did we do wrong? How did they get in? Where is my control?
Crypto crime doesn’t just leave its victims poor: it leaves them confused. Like terrorists, hackers have vague faces, stolen from Hollywood movies – granite-jawed East Europeans, perhaps, or Donald Trump’s 300lb nerd-next-door. But we don’t really know. We don’t know who hit us. Or how they found us. Or what they did with the money.
In addition, crypto crime appears to represent a larger portion of its entire market than, say, automobile theft. 773,139 vehicles were stolen in the US in 2017, but over 276 million were registered. In crypto, however, as numerous studies have illustrated, the ICO boom in particular resulted in highly-inflated rates of fraud and theft – studies in January suggested that over 10% of ICO funds were misappropriated – and that, of course, is a proportionally-higher rate of theft than autos, or even JPMorgan can manage.
And beyond that, there is a sense that criminals will eventually be caught and hauled off to face justice. The bankers will be prosecu… wait, no, not a single banker was charged following the biggest heist in history, the bank bailout of 2008 – but sure, car thieves will eventually slip up. Someone will be held accountable.
In crypto? Not so much. Hard to catch the bad guys when the bad guys use Zcash or Monero. (Note: lots of people use Zcash and Monero. Not just bad guys. But let’s face it, bad guys are motivated to avoid Bitcoin.)
Fear and loathing in Los Cryptos
But it all comes down to control. Some commentators have suggested that The New York Times‘ entire business model depends on Donald Trump, in fact: that its success, in the face of of declining newspaper sales, is predicated on its drip-drip feed of handy hints for its Democratic base to survive the presidency. Readers who seek some form of understanding, some share of control in a country they believe they have lost.
And that’s why the media loves a good crypto crime. We specialize in explaining the inexplicable; in trying to give meaning to the meaningless; in finding a pattern, or a solution, or a fix that will somehow hand the illusion of control back to our readers.
Never mind that there are trillions of dollars of crypto transactions that are NOT co-opted by men in Armani and Aviators. Or that simple personal responsibility can go a long way to preventing cybercrime. Never mind that the peddlers of the worst media coverage, with the most cataclysmic headlines, are deeply entrenched members of the corpocracy like Bloomberg and the Wall St Journal.
The fear will be stoked for some time to come. The loathing of the mainstream media will persist awhile.
But just as the media doesn’t report a lot of planes missed because of long security lines, or stolen cars because the owner left the key in the glovebox, eventually the threat level / audience equation will level off and we’ll find something new to strike terror into our hearts.
Plague, or asteroids, or Colin Kaepernick.
A new normal.
The author is invested in Bitcoin, which is mentioned in this article.