On a frigid night in January, blue and purple lights strobed onto hundreds of amped-up faces in a dark club in downtown Miami. As an EDM version of "Don't Stop Believin'" pulsated from the speakers at E11even, burlesque dancers in flapper costumes shimmied on two stages. Men dressed in tailored suits and hoodies — and at least two wearing $100 bills on lanyards around their necks — hobnobbed with women in sensible flats and thick scarves. A giant screen at the back of the club announced the occasion: NORTH AMERICAN BITCOIN CONFERENCE.
Bartenders poured Bitcoin-aritas and Satoshi Sours, named for Bitcoin's mysterious creator, Satoshi Nakamoto. The first drink came free for conference attendees, who shelled out $500 to $2,500 per ticket.
It was the gathering's fifth anniversary, and the previous year had been the best yet for cryptocurrency investors. As attendees popped bottles at E11even that night, the price of one Bitcoin fluctuated around the $11,000 mark, down from an all-time high of $19,783 in December, but remarkable nonetheless. Only a year earlier, a single Bitcoin was worth just $880.
Lured by the promise of insane profits, some 5,000 people came to Miami for the 2018 event, more than ten times the attendance just a couple of years ago, according to 29-year-old conference founder Moe Levin.
"It was a lot more people that were chasing the hype," he says. "We sold 350 tickets in 2016. We were really begging people to come."
As crypto reaches peak fervor, there's a palpable energy about Bitcoin and its underlying technology, the blockchain. In barely a decade, a movement that began with utopian dreams of restoring power to the people is seeing real returns. Governments such as Canada are using the blockchain to add transparency to public funding, while retailers like Walmart have used the tech to help customers trace their food from farms to shelves. The U.S. Department of Homeland Security is even testing blockchain technology to keep records safe from hackers.
Thanks to lax state oversight and an influx of foreign cash, Miami has quickly become one of the hottest American cities for crypto — for better or worse. In South Florida, real-estate agents are listing million-dollar condos in Bitcoin, lawyers are establishing new case law, and business owners are installing special ATMs that turn cash into cryptocurrency.
"It's looking a lot more like Wall Street than any sort of social movement."
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But a growing number of critics argue that crypto's flashy new culture of Lambos and "shitcoins" — imitators that are either worthless or scams — is stalling the future of that progressive movement. Last year's price surge has brought in billions from venture capitalists and speculators interested in little more than expanding their net worth. Worse, there's a new crop of swindlers and con men looking to take advantage, and many have set up shop in South Florida, giving a whole new relevance to long-earned local nicknames like "Scam-iami" and "Fort Fraud-erdale."
Nowhere was the tension over the future of cryptocurrency more apparent than the final day of the Miami conference. After a presenter named Joel Dietz deployed two flashing robots and a dry-ice machine for a five-minute speech "from the future," 25-year-old Bitcoin millionaire Jeremy Gardner took the stage and subtly eviscerated such theatrics. The Lamborghinis parked out front, the trash-talking on Reddit — it was all just noise, he said.
"The development of the past year has really appalled me," Gardner told the audience. "It's looking a lot more like Wall Street than any sort of social movement, any sort of radical revolutionary change that can make the world better.... What I worry is that we're beginning to resemble — and I'm sorry for the Baby Boomers out there, but — our parents' generation, who traded in their tie-dye shirts and peace signs for corporate suits and pension plans. What could be worse than that?"
One floor below the main stage, Chris DeRose made his way through a maze of booths where promoters hawked new coins and handed out free swag. With a cameraman following, DeRose — the host of a YouTube channel and podcast called Bitcoin Uncensored — approached conference attendees one-by-one, starting with a guy inexplicably holding a teddy bear.
"Sir, can I ask you a quick question?" DeRose inquired. "Lemme ask you: What is a blockchain?"
"No idea," the man said. "I am here to be educated."
DeRose tapped a second guy on the shoulder and got the same response.
"I have no idea," a man in a leather jacket answered.
A third person described blockchain as "an Excel file with the ID and some volume." Another answered that blockchain is "opportunity." A Kardashian-looking "booth babe" — one of the beautiful women used to sell coins at conferences — laughed nervously and began blushing when DeRose posed the question.
"Why are you doing this to us?" she whined. She couldn't answer either.
The stunt was both low-hanging fruit and quintessential content for DeRose, a South Florida software developer who found his niche trolling crypto scammers, idealists, and hype men. But his video speaks to a larger point about Bitcoin in 2018: Almost no one knows what they're talking about.
"The truth is everybody there is too ashamed to tell you what they think blockchain is," DeRose says. "In my mind, that is a mania."
Over the past decade, Bitcoin has evolved from an idea backed by fringe libertarians to the preferred currency of drug dealers to a moneymaking vehicle for speculators. Its prominence has helped move money out of crisis-torn countries, spawned more than 1,500 other cryptocurrencies, and made a lot of people rich. Unsurprisingly, Florida has played a key role in that story, popping up on the timeline from the early days of the first Bitcoin transaction to the heady world of the Silk Road to the recent boom in crypto fundraising.
Bitcoin, the grandfather of cryptocurrency, will turn ten years old this fall. Using the pseudonym Satoshi Nakamoto, its creator published a white paper about the "peer-to-peer electronic cash system" in October 2008, and his open-source software publicly launched the following January. The new currency was based on technology Nakamoto called the "block chain," which operated as an anonymous yet public ledger that permanently recorded all transactions. At its core, it allowed anyone with an internet connection to transmit money to someone else without the use of a middleman, making it possible to verify a currency exchange without a bank or wire transfer service. In October 2009, traders determined Bitcoin's value for the first time, finding that one coin was worth $.00076.
It wasn't until 2010 that anyone actually used the digital currency. A Jacksonville programmer named Laszlo Hanyecz changed that when he traded another user 10,000 bitcoins for two Papa John's pizzas that May. The transaction, now celebrated each year as "Bitcoin Pizza Day," is thought to be the first time the new coin was used as actual money in a real-world scenario.
By 2011, the internet had found new uses for Bitcoin with the launch of the Silk Road, a dark-web Amazon where anyone could buy drugs anonymously. That year, Bitcoin reached parity with the U.S. dollar, with one bitcoin trading for $1 and then quickly surpassing that amount.
Soon, Latin Americans looking for a way to protect their money from inflation and avoid international transfer fees began taking an interest. By 2013, Bitcoin meetup groups and exchanges sprang up in Argentina, Brazil, and Chile. Tomas Alvarez, the founder of a Mexican exchange called Coincove, noted that Bitcoin had a different appeal for Latin Americans than it did for people in the States.
"The allure of Bitcoin mainly rests on its potential to protect us from governments that mismanage their economies," he told Insight Sur, a political blog.
In January 2014, the North American Bitcoin Conference popped up in Miami Beach with just two dozen speakers. But that modest inaugural event led to two defining moments in Bitcoin's history: Charlie Shrem, a would-be presenter from Brooklyn, was arrested for money laundering on his way to the conference, and a 19-year-old Canadian college student named Vitalik Buterin unveiled a project that would create new uses for the blockchain and eventually spur thousands of other cryptocurrencies.
Shrem's arrest was among the first times the feds got involved in policing crypto. Prosecutors accused Shrem, then 24, and his co-conspirator — Robert Faiella, a 52-year-old licensed plumber from Cape Coral — of facilitating drug trafficking by helping Silk Road users buy Bitcoin. Shrem, who became known as Bitcoin's first felon, was sentenced to two years in prison, while Faiella got twice as much time.
The conference's biggest takeaway, though, was the introduction of Ethereum. Buterin's creation took the technology behind Bitcoin and birthed a new blockchain capable of automatically enforcing contracts between parties. And with open-source code, Ethereum made it easy for almost anyone to start their own currency or platform on the blockchain.
"It was a tectonic shift in the industry," Levin, the conference founder, says. "What it allowed for was the creation of new tokens doing new things. The industry shifted a lot more from Bitcoin to Ethereum tokens, and new businesses were created on the back of that."
That single development gave rise to the huge surge of ICOs, or initial coin offerings. Unlike initial public offerings on the stock market, where companies sell shares of established businesses, crypto startups began raising money by selling "tokens" without having any kind of platform or actual product. The Cayman Islands company Block.one, for instance, recently raised more than $1.5 billion by selling a token called EOS, which critics say has no obvious purpose.
But despite those risks, there are plenty of people clamoring to get in on the ground level of the next big thing. When the price of Bitcoin hit an all-time high last December, ticket sales to the Miami conference skyrocketed, Levin says. And blockchain companies have taken advantage of the fervor: This year, more than 30 startups raised millions of dollars pitching their ICOs on the conference main stage.
The crypto world has now become so buzzy that Reuters in February found that companies could triple the price of their stocks simply by adding the word "blockchain" to their names.
DeRose says that trend is one reason he wandered the floor of the Miami conference asking something that has now become a trick question.
"At this point, I don't know what blockchain means," he says in reflection. "As interests have grown and people have attached themselves to the perceived virtue of Bitcoin, they've expanded the definition more and more until the word is meaningless. As far as I can tell, it just means 'virtuous.'"
At a confidential location in Wynwood, a 25-year-old crypto trader named Eryka hunches over a desk and picks up her phone. A friend coming to visit the secret headquarters asks for directions.
"It's a house that has a blinking light in front of it," Eryka says, tossing her long black hair over a pink cardigan. "We have a rule that we can't send the address out."
The underground group of roughly 15 blockchain enthusiasts and crypto investors formed last November through a mutual friend, a Miami-area law school grad who posts online as Jake the Crypto King. Neither Wi-Fi nor last names — both of which are deemed security risks — are provided to visitors.
"We're all trading a good amount of money, and we don't necessarily want people to know exactly who we are," says Jake, who is 27, bald, and built like a personal trainer.
The group meets several times a week in a small one-room house, which has one large conference table, a beat-up couch, and a desk. And because the crypto markets never close, the house often serves as a caffeine-fueled crash pad where members can pull all-nighters.
"What's interesting about this is it's a 24/7 operation," says Eryka, a self-described libertarian who works in the aviation industry. "When it comes to stock trading, it closes at 5 p.m., which is nice because you can go home and chill. Here, I'm eating dinner checking my portfolio, like, what's going on?"
"It's looking a lot more like Wall Street than any sort of social movement."
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The emergence of groups like the one in Wynwood is one of the surest signs that crypto is gaining traction in Miami. And it's not just individuals who are profiting from the boom. Businesses offering everything from currency exchange to blockchain certifications are capitalizing on the explosive growth and carving out a new sector of the local economy.
"Trillions of dollars are up for grabs," says Drew Barnard, cofounder of Bitstop, a Miami-based Bitcoin ATM company. "We think we can build a billion-dollar business just here in Florida."
Barnard and one of his cofounders, Doug Carrillo, were in their late 20s when they got involved in the local crypto community in early 2013. At the time, the online exchanges took up to 30 days to process transactions, so the two hooked up with someone who said he'd sell them some Bitcoin in person.
"We had to meet some random guy at a Starbucks," Barnard recalls. "It felt like a drug deal."
But the transaction made them curious about how to make it easier to get Bitcoin. In October of that year, they heard about a coffee shop in Vancouver with the world's first Bitcoin ATM and tracked down the phone number for the manufacturer. They incorporated Bitstop with a third cofounder, Dan Vera, and got state and federal licenses, the first Bitcoin company to do so in Florida. The Palmetto Bay-based company now has more than 50 Bitcoin ATMs in Florida and California and is expanding to other states.
"Our goal is to make the experience as easy as possible, where you can buy it from a licensed, regulated company; where you can get a refund if you need a refund; where you can call and ask questions," Barnard says. "We wanted our grandmothers or mothers to feel like they could buy Bitcoin from it."
No longer a fringe movement, Bitcoin has even created a whole new market for education. In 2016, George Levy helped start the Blockchain Institute of Technology (BIT), an online training academy, in downtown Miami to teach people more about cryptocurrency and the technology behind it. With students in 166 countries, Levy now travels the world delivering in-person lectures and instruction. Most recently, he partnered with the engineering department at the University of Curaçao.
"We're seeing innovation coming out of Latin America, as well strong developers based in Argentina," he says. "The fact that I'm here in Miami gives me a very close spot to be able to engage that. It's a great hub."
And BIT's timing couldn't have been better — in less than two years, the school has already trained close to 30,000 students.
"There was a huge growth curve that really started kicking up in 2017," Levy says. "There's a huge hunger for learning about blockchain."
Businesses are capitalizing on the explosive growth.
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The underground Wynwood group sees education as a core mission as well. Because each member has a different specialty — trading, macroeconomics, trend-spotting — the collective serves as a place to swap thoughts and theories on the week's best picks. But teaching newbies about the basics of blockchain is just as central to the ethos of the group, whose members believe in the world-changing promises of the technology.
"I really wanted to teach people about not only blockchain, but how to trade," Jake says. "This works very similarly to a stock market: There are trends, there are patterns, but the percentages you can make are astronomical in comparison."
Because of its volatility, cryptocurrency trading can be stressful, but there's never a boring day. Eryka, Jake, and the others each have anywhere from $20,000 to $250,000 invested, meaning even minor fluctuations can be the difference between striking it rich and going home broke, at least on paper.
"I lost 35 percent this week," Jake reveals one day in January. "Losing 35 percent of a six-figure portfolio is a huge amount of money to just be gone in three days."
Since December, Jake has spent an average of six hours a day building his brand as the "Crypto King," even formally trademarking the phrase in December. On Reddit, he posts near-daily trading picks, predicting which coins he think will turn the best investment. But his audience has been fickle: In market downturns, when his followers and everyone else has lost money, he becomes an easy target.
"I get the brunt of everything because I'm the public figure on this," he says. "Because people are very short-minded, especially in investing, they want the Lambo tomorrow. They don't want to wait the year for it. You can turn $1,000 into $10,000 over the course of a year, but people look at that as too long."
Filming the screen of his Samsung laptop, Craig Grant zoomed in on a shocking number: $400,474.15.
"I started promoting Bitconnect five months ago," he said, referring to a U.K.-based lending platform that promised users 40 percent monthly investment returns. "Earned $400,000 in the last five months."
Just a few months earlier, Grant had scraped out a living renting out bounce houses for children's parties. Now the Miami Beach influencer had 18,000 Twitter followers who hung on his advice and watched videos hinting at his luxury lifestyle: drinking rosé on a yacht with his buxom wife, feasting on sushi platters, and floating in resort swimming pools.
With short dreads and a goatee, the boyish-looking 43-year-old gave off an air of unstoppable optimism and naive ambition. "It is really, a really, really great long-term plan," Grant insisted in an October 2017 video. "On average, it should take up to six weeks to convert someone from being a student to an avid lender."
But less than a year into his reign as a Bitconnect mogul, Grant uploaded a video to YouTube explaining he was essentially broke. A class-action lawsuit filed in late January by South Florida attorney David Silver accused Bitconnect of running a Ponzi scheme using "an army of social media mercenaries," including Grant, who was named as a defendant. When the exchange abruptly shut down January 17, its investors lost a collective $2 billion.
Grant, who didn't respond to phone messages from New Times and hasn't filed a response in court yet, insisted in one of his last YouTube videos that he too was a victim.
"This is a hard topic for me because it forces me to face what I've lost," he told viewers in a since-deleted clip. "I don't have an attorney; I can't afford one."
Grant's quick downfall highlighted a major ongoing problem in the crypto world: Because the currency is unregulated, bad actors can run all kinds of schemes, from Ponzis to pump-and-dumps to straight-up theft. And with almost no oversight at the state level, Florida has been ground zero for crypto fraud.
Bad actors can run all kinds of schemes, from Ponzis to pump-and-dumps.
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In fact, Bitconnect is one of at least seven cryptocurrency startups that have been sued in Florida since 2016 for defrauding investors, and Silver says he's investigating even more. Since filing a class-action suit against the fraudulent Delray Beach-based exchange Cryptsy two years ago, Silver has become one of the state's most prominent legal figures in crypto, and he continues to lead the charge for more regulation.
"At the moment, Florida has a lot of room to grow," he says. "If Florida had better money transmitter laws and consumer protection laws, Cryptsy wouldn't have happened."
Overall, the state has done little to protect investors who aren't savvy enough to sniff out scams. Texas and New Jersey have recently hit crypto companies with cease-and-desist letters for selling unregistered securities, and New York legislators have introduced a bill to protect consumers from scams. But Florida has been slow to act. This year, only a single bill addressing cryptocurrency and the blockchain has been introduced in Tallahassee, and it died before reaching the floor.
State officials acknowledge a problem is brewing. In January, Florida's Office of Financial Regulation issued a consumer alert about ICOs, cautioning crypto users "there may be no recourse should the cryptocurrency disappear." But the state neither regulates cryptocurrency nor tracks fraud within the industry. Neither the Attorney General's Office nor the Office of Financial Regulation monitors cryptocurrency complaints as their own category, making it difficult to identify the scope of the problem.
For years, DeRose and his former podcast cohost, Joshua Unseth, have argued that the community should police itself, and the two have become well known for exposing scammers and warning users about Ponzi schemes and exit scams. But over time, DeRose has grown increasingly frustrated with the lack of help from the top. Last May, he wrote an open letter to the Securities and Exchange Commission saying companies would continue to exploit investors if no regulations were enacted.
"I wrote that basically out of a bit of desperation," he says. "It was like, look, we tried to do this ourselves and we failed miserably — it's on you now."
A perfect example played out in the ballroom of a Coral Gables Holiday Inn in July 2016. After seeing a newspaper ad for a free dinner seminar hosted by a company called OneCoin, DeRose and Unseth decided to do recon. Sure enough, when they arrived, a promoter was promising a crowd of retirement-aged Miamians that they could double their initial investment if they kept their money in for at least a year.
"If you've got 401(k) money, IRA money that's stagnant, we can talk through some tax implications and get creative and savvy with it," the man told the audience, "$500, $1,200, $3,000, $5,000, whatever it is, but I promise you by Christmas, you'll be happy you did."
DeRose and Unseth posted covert video footage of the seminar on YouTube and tried to sound the alarm online, but it wasn't until 2017 when widespread skepticism set in. This past January, the Bulgarian media reported that authorities had raided the company's Sofia headquarters to seize evidence for investigators in the United States, Canada, England, Ireland, Italy, and several other European countries. OneCoin's founder, Ruja Ignatova, has reportedly been in hiding since last year, though she hasn't been criminally charged. Nevertheless, the Italian and Indian governments have reportedly branded the company a Ponzi scheme, and its representatives have been charged with crimes in India and Kazakhstan.
In true Florida fashion, it now appears OneCoin might actually be linked to Bitconnect, the company that used social media influencers. Silver says he is investigating ties between the two after some of Bitconnect's scorned users dredged up information suggesting one of OneCoin's directors was involved in operations at Bitconnect. A second promoter from Indonesia also appears in videos for both companies.
"I have seen a lot of circumstantial evidence suggesting OneCoin and Bitconnect have a relationship," Silver says. "What the depth of that relationship is, we are still investigating."
But DeRose says it's no surprise both companies heavily recruited investors from the Sunshine State.
"Florida is, in fact, the sort of breeding ground for scams," he says. "My honest and candid feeling is that we are good at that sales channel. There are established networks here... We have this infrastructure, for better or worse, in Florida."
On a Monday night in late January, Eryka and two women in their early 30s crowd around a desktop computer at the secret Wynwood trading post. Dressed in cuffed jeans, white Keds, and a slouchy gray cardigan, Eryka pulls up a presentation she wrote called "Cryptocurrency, the Blockchain, and You." The faces of other group members glow in front of their laptops at the conference table, and a tangible air of positive energy buzzes in the room.
"Tonight everything is going up, up!" Eryka says. "For the past two weeks, it's kind of been flat, especially today — superflat. But I expect after tonight, things are going to start going up again, so I am excited."
As the PowerPoint presentation unfolds, Eryka's two students interrupt her with a series of questions: How come, after nine years, Bitcoin is finally gaining mainstream acceptance? What's the best exchange to trade cryptocurrency? Is it possible for blockchain transactions to be falsified?
One of the women explains that her husband has been trying to get her into crypto forever. The second says she already has $18,000 invested but wants to learn "how to make it to $18 million."
"I'm 32 now, but I'm hoping to be fully retired by 40," she says.
Though the future of crypto remains uncertain, there's little indication state lawmakers have the desire or know-how to stop the frenzy. And despite better calls for regulation, it's clear many South Floridians and businesses are bullish on what's to come. As an increasing number of newcomers jump into the Wild West of Bitcoin, many diehard supporters hope cryptocurrency and the blockchain will soon reach mass adoption.
"On the first marketing materials in 2012, I said I wanted to bring this technology from the fringe to the mainstream," Levin, the conference organizer, says. "To that extent, we accomplished it, but that it happened so quickly and with such velocity was surprising."
Despite the positive buzz, though, this year's event was dogged by criticism about the conference's official networking party at E11even, which has nude dancers. After a number of women complained that the choice of venue furthered the narrative of crypto as an aggressively male-dominated and sometimes misogynistic environment, Levin was forced to apologize.
"Having the networking party at E11even was a misstep," he told Bloomberg. "We always aim to be as inclusive as possible and create a safe environment."
"Are we a banking center or are we a party center? Or can we be both?"
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The incident is perhaps the best illustration of Miami's identity crisis as it tries to find its niche in the crypto space. While some envision South Florida as a trade hub and possible home for tech startups, others believe it should embrace its reputation as a playground for the wealthy.
"Negotiated identity is a complex process," DeRose says. "We have to decide, are we a banking center or are we a party center? Or can we be both, and does that require compromise?"
At the same time, the crypto world is roiling with its own internal fight about what it should be. What began as a currency for tech nerds, drug users, and libertarians has evolved into a flashy new-money culture. DeRose, who calls himself "an agnostic member of the community," says that progression has made it difficult for any real innovators to be heard over outlandish claims of things like "rocket ships powered by blockchain."
"It's to the point where you can't run a decent project anymore with mundane development," he says. "The truly virtuous stuff is just comparably unimpressive."
But not everyone sees last year's wave of Bitcoin bros in luxury cars as crypto's shark-jumping moment. Levin says that though the conference audience was different this year, he's seen firsthand how quickly speculators can get the blockchain bug.
"What's good about the Lambos is something about it encourages others to get involved," he says. "People get into it thinking, I want to get that Lambo, and by the time they start learning about [crypto], they realize what it can do."
Jake, the Wynwood group's self-proclaimed "Crypto King," is one example: After graduating from law school in 2016, he got into Bitcoin hoping to turn a profit but soon fell in love with the technology behind it.
"Now that I've made the money, I'm able to show other people how to make money," he says. "This whole thing I've started is because I wanted to educate."
At the secret location in Wynwood, Eryka is halfway through her presentation when she goes off on an enthusiastic tangent about what she's learned since 2012 when she first jumped in.
"I could learn about traditional markets, and I could learn about stocks and bonds, but I have no interest. But this is like, let's learn, let's do this," she says.
For now, cryptocurrency still feels like an escape hatch, one that's a relative secret — but not for much longer.
"It's incredible because you're allowing millennials, allowing people without a lot of money, to get involved in stock market wealth creation," she says. "I'm really, really thankful."
