9 Reasons 'The O.C.' And 'Gotham' Actor Ben McKenzie Tells The Senate Banking Committee Crypto Is A Sham

Sam Bankman-Fried may have disappointed his audience once more by being arrested shortly before he was scheduled to virtually appear before the U.S. Congress to discuss the FTX FTT/USD collapse.

Ben McKenzie Schenkkan, actor and producer best known for his roles in “The OC” and "Gotham" (who goes by Ben McKenzie as an actor) and has a degree in foreign affairs and economics from the University of Virginia, was ready to step in.

McKenzie Schenkkan testified before the Senate Banking Committee concerning fraud in crypto community and, indeed, the legitimacy of cryptocurrency overall.

McKenzie Schenkkan challenged the legitimacy of cryptocurrency, the intentions of its founder and the centralization of wealth and power within the industry. His statement amounted to a repudiation of all crypto and the underlying principles on which it operates.

“Cryptocurrency is, in fact, only a story, or rather a constellation of stories that form an economic narrative. The economic narrative surrounding cryptocurrency is untrue. In fact, it is a story meant to deceive,” McKenzie Schenkkan said.

Here are nine of his most damning observations:

1. Crypto Isn’t Money

McKenzie Schenkkan: “Cryptocurrencies” are not currencies by any reasonable economic definition, as they are unable to fulfill any of the three functions of money. They are a poor medium of exchange, unit of account and store of value.

2. Bitcoin Uses Too Much Energy

McKenzie Schenkkan: In 2021, Bitcoin consumed 134 TWh in total, comparable to the electrical energy consumed by the country of Argentina. Bitcoin simply cannot ever work at scale as a medium of exchange.

3. Blockchain Isn’t Really Impressive

McKenzie Schenkkan: I’ve never seen a legitimate use case for blockchain. I’ve never seen any system where blockchain provides security in a way that is impossible to provide in any other way. Blockchain technology is at least 30 years old, not some new invention with a still-promising future.

4. Crypto Is An Attempt To Make Private Money

McKenzie Schenkkan: What cryptocurrency wants to be is private money, unencumbered by interference from a nation-state issuer. We have tried private money before, during the Free-Banking Era, 1837-1864, when banks were allowed to issue their own notes. It did not work very well.

(Writer's Note: According to Wikipedia, the Free-Banking Era, 1837 to 1864, was a period before the Civil War when state banking systems used “free banking” laws that allowed small banks to spring up with state permission and rely heavily on state bonds for collateral. Bond depreciation led to a huge number of bank failures.)

5. A Trustless Economy Is Nonsense

McKenzie Schenkkan: You cannot create "trustless" money because money is trust. We made it up; it’s a social construct. Like all social constructs, money relies on trust forged through social consensus. You can no more create "trustless" money than you can a governmentless government or a religionless religion. The applicable words are anarchy and cult.

6. El Salvador’s Use Of Bitcoin Is A Failure

McKenzie Schenkkan: Alongside my colleague, journalist Jacob Silverman, I visited the only country in the world trying to use cryptocurrency as money: El Salvador.

It is not working.

The Chivo wallet system set up by the government is largely ignored. According to the government’s own figures, less than 2% of remittances use Chivo. El Salvador’s president, Nayib Bukele, has reportedly gambled some of his government’s money — meaning his people’s money — on Bitcoin. Bukele has lost money on his wager.

7. There Is Next To No Actual Money in the System

McKenzie Schenkkan: There are many reasons so many customers cannot get their money back, but the simplest one is that much of it was never there to begin with. The prices of these speculative so-called "digital assets" were bid up, manipulated far beyond the actual real money backing them.

When I asked Sam Bankman-Fried the question in July of this year, he broadly concurred with [Celsius founder and ex-CEO Alex] Mashinsky, estimating around $200 billion was left in crypto. There is no denying that the amount of nominal value of crypto far exceeds the actual dollars in the crypto "ecosystem.

8. Crypto Blames The Customer

McKenzie Schenkkan: If you lose money in cryptocurrency, advocates proudly state the only person you have to blame is yourself. DYOR (“Do Your Own Research”) is their motto. The system cannot fail; you can only fail the system.

9. Crypto Is A Ponzi Scheme

McKenzie Schenkkan: Securities that have no underlying value are often described as Ponzi schemes. I submit to you today that the entire cryptocurrency industry resembles nothing more than a massive speculative bubble built on a foundation of fraud.

In my opinion, it is the largest Ponzi scheme in history by an order of magnitude.

Cover image: Ben McKenzie photo is during filming for "Gotham" (2014)  via Wiki Commons Images.