Santa’s Crypto ‘Naughty’ List 2022

The cryptocurrency industry has seen more than its fair share of controversy, fraud, and questionable decisions this year.

From the downfall of the ambitious Terra blockchain helmed by tall-talking Do Kwon to its domino effect on now-bankrupt firms and the stunning collapse of FTX, a new crop of controversial figures emerged—and they’re on Santa’s naughty list. (Click here for this year’s Nice List.)

Sam Bankman-Fried

Once a mainstream media darling, former FTX CEO Sam Bankman-Fried turned from hero to villain when FTX collapsed this year. FTX’s bankruptcy and the subsequent unraveling of SBF’s “effective altruism” routine, allegations of fraud and misusing customer funds, secret political donations, and reports of a racy Bahamas “polycule” land SBF at the top of Decrypt’s naughty list. (As the biggest newsmaker of the year by far, he’s also our Person of the Year.)

Just months before FTX’s bankruptcy, SBF had positioned himself as a crypto savior of sorts, offering to bail out companies like Voyager Digital and BlockFi, which had become insolvent due to exposure to Do Kwon’s Terra—which itself collapsed in May.

SBF had said he had billions to spare—but all that money quickly vanished when FTX experienced a bank run following revelations that its sister company, Alameda Research, was essentially broke. Alameda, as it turned out, mostly held illiquid tokens on its balance sheet, and much of that was in FTT—FTX’s own token.

As reports began to surface about SBF allegedly misusing customer funds and funneling assets through Alameda, SBF revealed that he was never the regulation-friendly corporate Democrat he had positioned himself to be. In reality, SBF made an equal amount of “dark” donations to the Republican party, and admitted to a Vox reporter that his interest in “effective altruism” was largely a sham.

Caroline Ellison

Caroline Ellison is the former CEO of Alameda Research, FTX’s sister company which has been accused of mishandling FTX customer funds to participate in high-risk leveraged trades in the billions of dollars. In addition to her high-risk trades, a Tumblr blog linked to Ellison also suggests an interest in Nazi-adjacent philosophies such as race science. The account also advocated for “imperial Chinese harem” polyamory and sported the username “Fake Charity Nerd Girl.”

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Do Kwon

Do Kwon is the CEO of Terraform Labs and founder of the Terra blockchain and its failed algorithmic stablecoin TerraUSD, or UST, which destabilized from its peg in May of this year, causing the prices of both UST and LUNA to crash. This was a major economic shock to the crypto industry, and third party exposure to Terraform Labs, UST, and LUNA created a ripple effect and sent BlockFi, Voyager Digital, Three Arrows Capital, and other firms into deep financial trouble.

But not only was Kwon the CEO behind the now-collapsed project and its associated tokens, but he was also well-known for his overconfident attitude on Crypto Twitter. He later said that he developed the persona for “entertainment value” and regretted “shitposting” so much on the social media platform.

Now, Kwon is on Interpol’s Red Notice list, no longer allowed to have a South Korean passport, and is facing a $57 million class-action lawsuit in Singapore, among other concerns. His current location remains unknown, though he denies being “on the run” from authorities.

Elon Musk

Oh, Elon. The Tesla, SpaceX, and Boring Company CEO also became (reluctantly) the CEO of Twitter this year. After trying to back out from a $44 billion acquisition deal, Musk bought Twitter and immediately shook things up—dramatically.

He began firing the majority of Twitter’s workforce, put Twitter’s crypto products on hold, told employees to become “extremely hardcore” or leave, eliminated employee benefits, and started putting beds inside Twitter’s headquarters.

While he’s yet to solve Twitter’s persistent bot problem, he did allow anyone to buy a blue checkmark for a few days—causing advertisers to pull out en masse and major confusion as seemingly “verified” users impersonated brands.

And when it comes to crypto, Musk has paper hands. Tesla sold 75% of its Bitcoin in July this year because it said “Bitcoin impairment” affected the company’s overall profitability. Tesla dumped roughly $936 million of Bitcoin back onto the market despite Musk’s promise in 2021 that Tesla would not sell “any Bitcoin” that it owned.

Jesse Powell

While Jesse Powell’s San Francisco-based crypto exchange Kraken remains afloat, Powell hasn’t exactly played the “nice guy” this year. He announced that he’s stepping back from his CEO role. And Kraken has faced multiple waves of staff layoffs despite the company asserting back in June that it was going to have a “global hiring push,” had not changed its “hiring plan” and would not layoff staff, instead claiming it still had “over 500 roles to fill” in 2022.

Powell has also taken issue with anyone who wishes to discuss “pronouns,” called American women “brainwashed,” and previously said that the N-word, in his view, wasn’t a slur if used affectionately. Yikes.

Changpeng “CZ” Zhao

Binance CEO Changpeng “CZ” Zhao makes our “Naughty” and our “Nice” list this year, largely for the same reason: the tweet that brought down FTX (whether CZ chooses to see it this way or not).

Some quick background: As an early investor in FTX, Binance gained a large share of FTT tokens—5% of the entire supply—when FTX bought out Binance’s equity in the company last year.

When it came out that most of the assets on Alameda’s balance sheet were FTT tokens, CZ tweeted that he planned to begin selling off Binance’s holdings of FTT, “due to recent revelations that have came to light.”

That tweet evidently inspired other FTT holders to follow suit, and the selloff collapsed the price of the token. This, in turn, led to a bank run on FTX, and the liquidity crunch then quickly forced the exchange to shut down and subsequently file for bankruptcy.

Zhao rejects the idea that his tweets may have led to or accelerated FTX’s bankruptcy, writing in December that “no healthy business can be destroyed by a tweet.” That may be true, but there’s no denying what CZ’s tweet did for market sentiment.

And while there’s an argument to be made that helping to expose the FTX fraud for what it was is a net positive for crypto long-term (which is why CZ also makes the “Nice” list), FTX customers who still have funds trapped on the exchange probably wish things had worked out differently.

Avraham Eisenberg, Mango Markets hacker

What’s a crypto naughty list without hackers? In October, the Solana DeFi platform Mango Markets suffered a massive $100 million hack. Mango Markets said that the attack occurred through price manipulation of an oracle. The platform’s liquidity was drained, and it had to halt deposits. Thankfully, some of the funds were eventually recovered.

Avraham Eisenberg later identified himself as a part of the team that hacked the protocol, behavior he said was legal. He later tried another exploit on the Aave protocol, but failed and lost millions.

BNB bridge hacker

Binance’s Smart Chain Bridge was hacked for a staggering $570 million in October. But Binance CEO Changpeng “CZ” Zhao said that nearly 90% of the swiped tokens were successfully frozen on the blockchain, and the Binance Smart Chain was brought to a halt.

Shortly after, Binance burned roughly 2 billion BNB tokens in its 21st quarterly token burn, a move which helped make up for the losses incurred as a result of the hack.

Lazarus

It should go without saying that any group of North Korean crypto hackers easily qualify for Santa’s naughty list. Lazarus is a North Korea-backed hacker group that has attacked crypto firms in Japan and was blamed for the massive $622 million Ronin bridge hack earlier this year. It’s also been accused of being behind the $100 million Harmony Protocol hack.

What’s their strategy? The group often uses phishing scams, posing as companies or other entities with links and attachments that contain malware. In fact, Lazarus was so destructive this year that the U.S. government said Lazarus’ repeated use of Tornado Cash was a main reason that the Treasury Department sanctioned the privacy mixing protocol this year.

“Monkey Drainer”

All your Apes gone? It might have been the notorious “Monkey Drainer” hacker. The NFT “drainer” tool has netted thieves an estimated $4.3 million or more this year. While Monkey Drainer is likely one person—as blockchain examiner ZachXBT previously told Decrypt—its creator is also likely selling their malware drainer tool as a service to other aspiring attackers, with its creator taking a percentage of the ill-gotten gains.

Pixelmon founder “Syberer”

Would you pay $8,000 for an ugly stock rendering of a pixelated creature? Neither would we. But back in February, the NFT market saw unprecedented speculation—and collections launched at sky-high prices left and right. The Pixelmon Ethereum NFTs were designed to be characters for an upcoming Pokemon-esque Web3 game. At a pricy 3 ETH mint ($8,100 at the time), expectations were high.

When the NFT artwork was revealed, holders felt cheated by the low quality of the assets, and the collection became the laughing stock of Crypto Twitter for weeks.

But one particular Pixelmon—a green, Frankenstein-like creature—became an internet sensation precisely because he was so ugly. Crypto Twitter named him Kevin. Kevin’s shockingly ugly mug inspired NFT degens the world over to spawn derivative collections using his name and visage.

Pixelmon founder Syberer, also known as Syber, admitted the first round of NFT artwork—which garnered them $70 million—was a “horrible mistake.” The project took months to revamp the collection’s artwork and improve upon the original designs, which were partly derived from stock models. It also got a new CEO. Either way, Pixelmon’s hilariously painful $70 million debut definitely qualifies the NFT collection for this year’s naughty list.