The name Dirty Bubble was taken from one of the antagonists in the SpongeBob TV show. Block says he chose it because he knew he was destined to be a bad guy in the eyes of the crypto faithful, and he was right. They’ve accused him of everything from outright lies to working for Wall Street’s big banks in an effort to derail digital assets. (“If that’s true, I wish they would send me a check,” he says.)

Exactly how correct he is about the legality and integrity of the digital-asset space is up for debate. While Bankman-Fried was convicted of one of the biggest-ever financial frauds following the fall of FTX and Alameda, and other high-profile crypto firms like Celsius Network have failed, advocates see these as inevitable growing pains for a nascent industry.

In this view, the arrival of spot Bitcoin ETFs — so long delayed by financial watchdogs in part because of concerns about market manipulation — signals a growing regulatory acceptance and shift into the mainstream. Almost a dozen such products started trading earlier this month, with some $4.6 billion of shares changing hands in their first session — a huge level of activity for debut funds.

‘Pyramids and Ponzis’
Block says he started betting against Signature personally with “pocket change” in 2022 based on its exposure to crypto and his own view of the precariousness of the digital-asset ecosystem. Ultimately, the lender failed not directly because of its cryptocurrency deals but because panicked depositors began withdrawing billions following the demise of SVB and Silvergate Bank — two similarly crypto-friendly institutions.

It’s impossible to say how many others spotted the growing risks. Plenty of professional short sellers never publicize their positions or research, and hedge funds typically don’t disclose their bets.

Meanwhile, measuring each call by the calendar year can be a flawed process, since many can take months or years to play out. And gauging success by the share decline is imperfect, since in reality other factors would influence short selling returns, such as cost to borrow stock.

Still, Block’s was the top call from 129 tracked by Breakout Point in 2023, the analytics firm said. Dirty Bubble was one of almost a dozen new short activists it counted last year.

Other calls by Block have fared less well so far. In March, Dirty Bubble published a report describing Coinbase Global, Inc. as a “cash-burning regulatory nightmare.” In April, the blog explored problems underlying the business model of the Charles Schwab Corp. Though the shares of both companies are off to a miserable start in 2024, they’re up more than 85% and 20%, respectively, since the posts appeared.

Block, now a second-year resident in psychiatry at the University of Michigan hospital, considers the collapse of the whole crypto edifice — what he views as little more than a collection of “pyramids and ponzis” — inevitable. In the meantime, faced with the current resurgence, he now views his role as chronicling the madness rather than curing it.

“It sounds kind of depressing, but I recognize how impotent facts are in these kind of scenarios,” he says. “It really doesn’t matter what’s true and what’s not true to people. They only care about what will make them money.”

This article was provided by Bloomberg News.

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