But its greatest strength was also its greatest weakness. The dizzying rise in popularity made Dogecoin a target. Its strong sense of community made it vulnerable.
For a predator, Dogecoin was simply irresistible.
Now, a little more than a year after the alternative cryptocurrency exploded onto the market, a man accused of stealing as much as
Dogecoin was born out of a joke by Jackson Palmer, a product manager at Adobe. Poking fun at the abundance of altcoins (cryptocurrencies other than Bitcoin) erupting in the wake of Bitcoin’s popularity, Palmer cheekily tweeted back in November 2013 that he was investing in a fictitious new currency called Dogecoin.
“Pretty sure it’s the next big thing,” he joked.
Then, on a lark (and with some help from Billy Markus, a software developer at IBM), Palmer turned the idea into a real currency, branded with the gentle face of the shiba inu and lots and lots of Comic Sans. With the help of Reddit, the “joke currency” exploded. After just a few months, the market was worth $60 million, according to theSydney Morning Herald. But over the course of the next year, thousands of dollars worth of dogecoin (and millions of dollars in other cryptocurrencies) would be lost, with users blaming a man who went by the name of Alex Green.
“The people who got into it were goofballs, whereas the previous cryptocurrencies had attracted people who just wanted to get rich,” he said.
Unlike Bitcoin, which currently costs about $277 for a single coin, Dogecoin is affordable: 100 dogecoins cost about two cents. This makes playing with the currency easier—users tip fellow Redditors (where the Dogecoin community largely lives) for funny comments, sharing important news, or just for the hell of it. And they can easily rally funds for good causes, because even those who are tight on money can afford to purchase some dogecoin to toss into the pot.
And the Dogecoin community rallied around lots of charitable causes. They raised the money needed to send the Jamaican bobsled team to the winter Olympics. They donated $25,000 to a UK service dog charity. They collected $30,000 to help people in Kenya get access to clean drinking water.
“Those were some of the coolest things we did,” Doernberg told me.
“Moolah’s sales pitch involved projected Doge dividends over the course of a couple years. They also claimed that the company was rapidly expanding and that their development team was working on a prototype Doge ATM,” one of Moolah’s investors, who asked to be identified by his Reddit username, Rubbyrubbytumtum, told me. “Because the Dogecoin community was based so wholly on generosity, we were like sheep to the slaughter.”
By July, sitting on a reported hundreds of thousands of dollars in investments in Moolah, Green approached two outside parties—Michael Chu and a user who only goes by the name Ferdous—to join him and his employee Chelsea Hopkins in purchasing MintPal, a popular, slick-looking exchange site for digital currencies.
“Me and Michael would front the cash necessary to acquire MintPal, and Moolah would create a more secure backend for MintPal and be in charge of running and managing the site,” Ferdous told me of their original arrangement.
Green got to work on the update to fix some of the security concerns with MintPal; the platform had suffered a hack before the new owners purchased the site. But he kept missing deadlines and pushing back the launch date. When the update was finally completed, it was rife with problems, Ferdous said.
“It was terrible, full of bugs, had an inferior user interface, and was even missing a lot of user accounts,” Ferdous, who is currently pursuing litigation against Green, said. “This was obviously a failure of epic proportions.”
Within a week, Green took MintPal offline, citing a “critical bug.” The same day, he suddenly announced Moolah was filing for bankruptcy, saying the company had burned through its investments and was not profitable.
Users started having trouble withdrawing their coins from both MintPal and Moolah.
“I kept trying to recover my password, or reset it, and the Moolah admins simply gave me the runaround when I asked them to help me with the issue,” Siddharth Ramshankar, who had stored $400 worth of dogecoin with Moolah, told me. Ramshankar said he never really had an interest in cryptocurrency before Dogecoin, but the playful community drew him in.
“I made support tickets from late September all the way through to a final attempt in December asking for help resetting my password and letting me back into my account," he said. "After the fourth ticket made in so many weeks, I think I figured I wasn't getting anything out of there. I basically gave up, and considered it a $400 lesson for me.”
Other users told me similar stories. Though nobody seemed to have lost a crippling amount of money, they were disappointed that a community they had fully trusted was suddenly turning shady.
“It's not so much that I lost money on the project—the Doge community isn't really about making money—it was that someone had taken advantage of so many kindhearted people,” Rubbyrubbytumtum, who never saw a return on his investment in Moolah, said. “Unfortunately, the whole ordeal really deflated my enthusiasm for cryptocurrencies. I experimented, I got burned, and I'm moving on to less gimmicky enterprises.”
Someone had created an entire entry on Encyclopedia Dramatica—an open, satirical wiki with an emphasis on internet drama—listing all of the accusations lobbed against him, from selling phony web hosting deals to spying on women’s changing rooms at an anime convention. Doernberg and Palmer collected the information and shared it with the Dogecoin community. Members reacted with shock in some cases and denial in others. Tensions were high in the once carefree subreddit.
The next day, Green stepped down as head of Moolah, without indicating who would be taking over the company. Three days later, he confirmed he had been using an alias and that his real name was Ryan Kennedy.
“I will not be commenting on the majority of the allegations surrounding me, other than to say that some of the latest ones are getting rather ridiculous, and I deny the vast majority of them. My name was legally changed from Ryan Kennedy to Alex Green, in an attempt to start my life over and have some peace,” he wrote. (Kennedy’s public accounts are now inactive or disabled. I reached out to him but my messages bounced back).
In his last blog post, Kennedy/Green wrote that bugs had led to his platforms “bleeding money,” and that he was trying to make things right.
“And yes, I know sorry isn’t good enough. I know I have fucked up on a catastrophic level. There should have been better procedures in place,” Kennedy wrote.
He then disappeared, ceasing all contact with investors, customers, and business partners. Ferdous estimates between $2 million and $4 million in coins disappeared with him.
“The domain MintPal.com is still in Ryan's control. I have ongoing legal proceedings to gain control of MintPal,” Ferdous said. “I managed to recover the wallet backups and a copy of the database from prior to the migration from the old MintPal servers. Most of the wallets, including BTC and all major altcoins, were already emptied out by the time I gained access. There were some altcoins with balances intact, so I've started a withdrawal process for these coins by contacting the customers directly by email.”
Few people have had conduits for trying to locate Kennedy, with the exception of the team at Syscoin, another altcoin. In its heyday, Moolah held 750 bitcoins (about $200,000) in escrow from Syscoin. When the shit started to hit the fan, Syscoin lawyered up, securing Selachii LLP, a law firm in London, to sue Moolah over its lost funds. The Syscoin team even got an injunction against Moolah from the High Court of Justice.
At the end of February, Syscoin provided an update to the case, stating that Kennedy had been arrested.
“We are permitted to disclose that both Ryan Kennedy and Chelsea Hopkins were arrested by UK authorities,” Syscoin wrote.
“All we are saying at the moment is: ‘We have arrested a man and a woman—both in their 20s—from the south west area of England on suspicion of fraud and money laundering offences,’” corporate communications officer Wayne Baker said to me in an email. “We will not make any further comments at the moment.”
It’s standard for police in Britain not to name people who have been arrested until after charges have been laid, and Baker confirmed the two individuals in question have not been charged. However, he could not say if the two people who were arrested were Ryan Kennedy and Chelsea Hopkins.
For the past few months, the Dogecoin community has been left picking up the pieces. Many have abandoned the currency altogether, others are more suspicious and less generous with their coins. They chased their tails trying to figure out who or what was to blame. The whole structure of the community was naturally vulnerable: based on trust and kindness, and hosted on an anonymous platform.
“Bitcoin has this well-earned paranoia about strangers on the internet, but Doge, the meme, is this hopeful, optimistic world view. It turns out, that’s very attractive to predators,” Doernberg told me.
Still, Dogecoin is one of the top 10 coins on the market (as of publication, it had the sixth-biggest market value). There are pressures facing the entire cryptocurrency market, yet Dogecoin has endured with the best of them.
This week, a user re-posted a letter by Dogecoin co-founder Billy Markus from early last year, when the currency was enjoying its height of popularity.
“Dogecoin is meant to be a fun cryptocurrency, one that encourages people to tip and to learn and teach this technology. It also, like every cryptocurrency, can have a maddeningly capricious nature. The novelty will not last forever, but if you want the community to last, that is where you come in,” Markus wrote.
“Stay positive. Keep doing awesome things. Lead by example. No matter what happens, never lose sight of the things that make Dogecoin worthwhile for you.”