How Crypto Leaves Black Investors in the Red

It’s a veritable iron law of investing: When an asset bubble collapses, the ensuing fallout shows that financial markets are anything but race neutral. As bubbles seek to absorb the last tributaries of liquid cash, Black Americans become, in vastly disproportionate numbers, the last buyers-in—and the last holders of worthless paper after the market insiders bail out. This was the story of the 2008 subprime meltdown, which demolished Black wealth on a ruinous scale, and it’s now the saga of the great collapse in cryptocurrency.

On November 11, FTX, a cryptocurrency trading platform once valued at $32 billion, filed for Chapter 11 bankruptcy protection. Sam Bankman-Fried, founder of FTX and its hedge-fund arm, Alameda Research, who had a net worth of $16 billion on Monday, November 7, lost his entire fortune by November 11.

The fatal sell-off of FTX’s holdings came about after CoinDesk, a news site focused on digital currencies, published a leaked balance sheet from Alameda Research on November 2. The balance sheet revealed that more than $5 billion of Alameda’s $14 billion in assets were in “unlocked FTT” and “FTT collateral.” FTX created the exchange token FTT for users to purchase to receive discounts on trading fees in the FTX marketplace. After the revelation that Alameda’s solvency depended on the fabricated wealth of FTT, investors tried to take their money out of FTX, triggering a bank run of an estimated $6 billion, which FTX could not process. By December, Bankman-Fried was behind bars in the Bahamas, where he and FTX were headquartered. Now extradited to the United States, he faces an eight-count indictment on charges of fraud, money laundering, and campaign finance violations.

The Bankman-Fried saga calls to mind the downside of the “hustle” as chronicled by Jay Z—himself an ardent crypto grifter—in his 1996 song “Dead Presidents.” “One day you’re cruising in your 7,” Jay-Z rapped. “Next day you’re sweating, forgetting your lies / Alibis aren’t matching up, bullshit catching up, hit with the RICO, they repo your vehicle / Everything was all good just a week ago.”

But the parallels here run deeper than you’d expect in a standard fall-from-grace narrative. As it turns out, the title of Jay-Z’s song is rooted in the racial fissures of financial capitalism. The chorus in Jay-Z’s “Dead Presidents”—“I’m out for presidents to represent me (Get money!)”—vividly captures the anti-Black nature of chasing a currency emblazoned with the visage of white men, many of whom were enslavers who held Blacks as chattel property to build wealth. The pillaging of Black communities in pursuit of the Black dollar is part of the premise of building wealth in America. Taking part in the plunder is truly to shore up the legacies of dead presidents.

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