The recent collapse of FTX got me thinking about the ways that crypto is similar (and dissimilar) to classic get-rich-quick schemes. There’s the suggestion that Sam Bankman Fried was running a ponzi scheme. The full details will I am sure emerge in time.

But crypto, and the way it was marketed, seem in some ways as much like the old chain letter as the pyramid scheme. Crypto marketing also used celebrities to promote the exchanges, and some involved are being sued. The ads featuring Tom Brady presented the idea of being part of a phone tree with celebrities, who were letting their friends in on the great deal of buying crypto through FTX.

The exponential growth model (on which FTX relied) is precisely like the basic chain letter scam. Various versions of this have existed probably as long as affordable mail systems, and the one you might recall required recipients to send something to the top addressee, add their own details to the bottom of the list, and send it on to further recipients.

The classic version required sending the person at the top of the list a small amount of money (a dime, or a postage stamp), with the promise that YOU would receive thousands yourself by passing it on. This format, sometimes called the “prosperity letter” flourished between the wars, and had great appeal during the Depression.

andrew chen ❄️ on Twitter: "A fun example from the past - Prosperity Club chain letter (mid 1800s) - you filled in 5 names and sent it to friends It worked so

Many of the images of these letters available online show this kind of printed form, but one assumes most participants would have handwritten or typed their own. With the arrival of the photocopier, chain letters got a new lease of life in the 1980s.

Some chain letters didn’t ask for money but suggested good fortune would follow the sender (or implied a threat or curse on those who “broke the chain”).

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Chain letters vary in their legality (those that demand money are usually illegal; the “good fortune” kind are a bit of a grey area).

The familiarity of the chain letter format also made it ripe for jokes and parodies, like this email version:

This chain letter was started in hopes of bringing relief to other tired and discouraged women. Unlike most chain letters, this one does not cost anything. Just send a copy of this letter to five of your friends who are equally tired and discontented. Then bundle up your husband or boyfriend and send him to the woman whose name appears at the top of the list, and add your name to the bottom of the list. When your turn comes, you will receive 5,625 men. One of them is bound to be better than the one you already have.

But chain letters were not always bad. In the 1990s, one society matron decided to help raise money for Sloane-Kettering hospital by sending a chain letter to her friends. Her connections meant it was received (and forwarded on) by some pretty famous names, including Elizabeth Taylor, Carrie Fisher and Lauren Bacall. This was a real celebrity phone tree, and it worked. (The hospital were annoyed by this renegade fundraising effort: although through it they received $250,000).

Chain letters today seem like a weird item of cultural history: I doubt anyone has sent one in decades. But the willingness of strangers to participate shows how easy it is to sweep people up into even a vague promise of a fortune. Sam Bankman Fried knew this too.

What else I’ve been up to:

For Law & Liberty today I reviewed Malcom Gaskill’s The Ruin of All Witches

Notes from the Field

Never break the chain