Updated: Jun 26, 2021
Celebrities, influencers, con-artists. They're out in full force right now trying to take your money. How? Pumping their shitcoins, NFTs and SPACs. But fear not, I'm here to guide you through this cesspool that we call the internet and teach you how to avoid the scams.
Let's start with the basics. A shitcoin is a term of endearment for a cryptocurrency that is most likely a scam. Now, I'm sure I'll get some smartass saying "well, all cryptos are scams so then they're all shitcoins." Hardy har har. One - have fun being poor. Two - you're wrong. There is a clear delineation and I'll get into that a little bit later.
NFTs stand for non-fungitible tokens. I know, doesn't really help the explanation. The best way I can explain it is like this: Let's say you have a $20 bill. Four of your friends also have $20 bills. You all put your money into a hat, shake it up, and each take a $20 bill back. It doesn't have to be your original $20, but it will have the same value regardless. This is what makes money fungible.
Now let's say you had the original Mona Lisa painting. Your friends all have fakes. You put the paintings in a room, someone moves them around, you take a painting at random. You may not get the original back. This makes it non-fungible, or unique.
NFTs are essentially unique digital artworks that can be bought with cryptocurrency. Full disclosure - I believe NFTs have tremendous potential in the future, but scammers flooded the market recently, so I would stay away.
Lastly, we have SPACs; special purpose acquisition companies. Essentially, a company is formed to raise money through an IPO (initial public offering). Once money is raised, this company has two years to complete an acquisition.
Alright, now that you know the basics, let's dive into how you're being scammed. If you still watch tv, platforms like CNBC and Bloomberg keep putting on these so called pundits pumping their SPACs or celebrities telling you how valuable their NFTs are. Or if you have been on social media lately, the scams are everywhere. Elon Musk tweeting memes about Dogecoin, IG stories saying "SafeMoon to the moon" with rockets and moon emojis, TikToks showing a rocket blasting off with "CumRocket" on it... it's scammer overload.
Yes, that last one, "CumRocket", is a real cryptocurrency. It's aimed at the porn industry, or should I say the world of adult entertainment. The crypto can be used to purchase NFTs, aka digital porn. So you're paying for porn that can easily be found for free on the Internet... makes total sense. Oh, did I mention that CumRocket's trading symbol is CUMMIES? Yup, that's real too. And many porn stars are pumping that token, fast and hard, including hall of fame actress Sophie Dee:
Now, I understand if you need to stop reading and do some more research on her. I'll still be here when you're done.
Welcome back! Don't worry, no judgement here. Back to the blog.
CumRocket is just a glimpse into the world of crypto and NFT scams. You have Kim Kardashian promoting EthereumMax on Instagram, Lindsay Lohan selling NFTs and even Dave Portnoy pumping SafeMoon, jokingly saying "if it is a Ponzi scheme, get in on the ground floor."
Here are the charts for the three, with the crosshairs representing the day they posted and the chart showing how much you would have lost if you listened to them.
But the boldest of them all is Soulja Boy. He tweeted about a new coin called "Safermars", but he forgot to remove the part about being a clear pump of a shitcoin:
He was clearly get paid to pump the coin so the creators could make $240,000. If he got it to pump enough, he would get $24k. It's right there in the tweet. And best of all, as of June 25th, this coin no longer exists. So if you bought into this scam, you lost all of your money. And will Soulja be held accountable? Not even a little.
Let's move on to some SPACs. The most famous of all is probably Nikola Motors. Its founder and former CEO, Trevor Milton, went on a PR tour after his company went public with a SPAC. He was promising that the company had vehicles road ready and deals with companies for their hydrogen semi-trucks. They even had a marketing video that showed one of their semi-trucks driving down a road. The word "down" plays a big role here. The truck was not in operation, it was simply rolling down a hill. Now, of course, the marketing video made no mention of this little tidbit; it only came out after the fact.
All this hype and fake data caused the stock to rise from $10 all the way up to $94, before crashing back down to reality after a scathing report from Hindenburg Research. Had you invested at the top, you would have lost a lot of money. Oh, and Trevor Milton, forced to step down as CEO, but no criminal charges against him. Here is the stock chart:
Nikola is not the only SPAC with questionable financials. More recently, Lordstown Motors was caught lying about vehicle orders. Similar to Nikola, the CEO promised that they had "thousands of orders" and financials were in order. Last week though, they announced that was not the case and warning investors that they may not have enough cash on hand to survive the next 12 months. Conveniently, before the announcement, the CEO and CFO sold millions of dollars worth of stock. Of course, they were forced to leave the company, but the money is still gone.
Oh, by the way, this all came about thanks to another report by Hindenburg Research. Here's the chart:
Now, these are just two examples of SPACs taking retail's money. There are plenty more out there. If you would have talked to me last year, I would have told you they were all scams then. It was insane how many companies were going this route. And there was a reason; it circumvents the IPO process. So, either they need cash now or their financials aren't in order. Either way, not a good reason.
Luckily for retail investors, the SEC has begun cracking down on SPACs. You can now see the slowdown in companies using the SPAC route:
Of course, like with anything, there are probable some good SPACs out there. Just like there are probably even some good NFTs. But it's going to take some time to figure out which ones aren't scams. The bubbles are slowly deflating, so I would just recommend staying away for now.
Cryptocurrencies have already had this bubble pop once in 2017. Every scammer and their mother tried creating a token to take your money. Many failed, but some good cryptocurrencies remain; Bitcoin, Ethereum, IOTA, etc. There's also been some great cryptos that have been developed since then that I believe have great potential, like Cardano Chainlink, and Vechain. But no one knows what the future will hold, so don't listen to me, do your own research. But whatever you do - stay away from Tether. That's a whole other blog.
I guess the moral here is don't listen to anyone. If a celebrity, influencer or some other schmuck tells you they have the next big thing and you can get rich quick, avoid it like the plague. There is no such thing as getting rich quick. These people are playing on your emotions; fear of missing out, greed, envy. It's all psychological. Do your own research and be careful out there.
For a book that touches on this, I recommend The Psychology of Money by Morgan Housel. Great read.
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