"Rat Poison Squared": How Buffett and Munger's Bitcoin Warnings Were Vindicated by the Epstein Files
"I don't welcome a currency that's so useful to kidnappers and extortionists and so forth."
— Charlie Munger, 2021
"In terms of cryptocurrencies, generally, I can say with almost certainty that they will come to a bad ending."
— Warren Buffett, 2018
The Oracle's Warning That Everyone Ignored
When Warren Buffett called Bitcoin "probably rat poison squared" at the 2018 Berkshire Hathaway annual shareholder meeting, the crypto world erupted in mockery. Charlie Munger went even further, describing cryptocurrency trading as "just dementia" and calling Bitcoin "disgusting and contrary to the interests of civilization."
At the time, Bitcoin was trading around $9,700. Crypto enthusiasts dismissed the pair as "old men" who "didn't understand technology." They pointed to Bitcoin's meteoric rise as proof that Buffett and Munger were wrong. But these legendary investors weren't making a prediction about Bitcoin's price—they were making a moral and practical observation about its utility in criminal activity.
In February 2026, newly released Department of Justice files revealed something that should chill every investor: Jeffrey Epstein, the convicted sex offender and financier, was deeply involved in Bitcoin's early development and infrastructure, using his vast wealth to fund core developers, invest in foundational crypto companies, and attempt to steer the technology's direction.
Buffett and Munger were right. Not about the price. About the poison.
The Two Critiques: Price vs. Purpose
Before we examine Epstein's crypto empire, we need to separate two distinct arguments that Buffett and Munger made:
The Value Investor's Critique (Why Bitcoin Is a Bad Investment)
Buffett famously said in 2022: "If you told me you own all of the Bitcoin in the world and you offered it to me for $25, I wouldn't take it because what would I do with it?"
His reasoning is pure value investing orthodoxy:
No Cash Flow: Bitcoin doesn't produce earnings, dividends, or rent. It just sits there.
No Intrinsic Value: Unlike farmland (which produces food) or apartment buildings (which generate rental income), Bitcoin creates nothing.
Pure Speculation: The only way to profit is to find a "greater fool" willing to pay more than you did.
From Buffett's DCF (Discounted Cash Flow) framework—the bedrock of value investing—Bitcoin is worthless. You can't calculate Fair Value for an asset that generates zero cash flows. It's not a business; it's a digital token whose price is determined entirely by sentiment.
The Moralist's Critique (Why Bitcoin Is Dangerous to Society)
Charlie Munger took a different, more damning angle. He wasn't arguing Bitcoin was overpriced—he was arguing it was "disgusting" because of its criminal utility.
"I don't welcome a currency that's so useful to kidnappers and extortionists and so forth, nor do I like just shuffling out of your extra billions of billions of dollars to somebody who just invented a new financial product out of thin air," Munger said at the 2021 Berkshire shareholder meeting.
He wasn't speculating. He was observing a fact: Bitcoin's pseudonymous, decentralized structure makes it ideal for moving money across borders without government oversight. This is marketed as "financial freedom." In practice, it's also perfect for criminals.
The Epstein Files: A Case Study in Criminal Use
For years, crypto advocates dismissed Munger's criminal-utility critique as fearmongering. "The U.S. dollar is used for crimes too!" they'd retort. "Cash is anonymous!"
But the January 2026 release of three million Department of Justice files related to Jeffrey Epstein revealed the scale of his involvement in Bitcoin's foundational infrastructure—and vindicated Munger's warnings in spectacular fashion.
Epstein's Crypto Empire: The Timeline
Here's what the DOJ files revealed:
2011 – Early Contact with Bitcoin Developers
Epstein attempted to meet with Gavin Andresen, Bitcoin's lead maintainer after Satoshi Nakamoto disappeared, as early as June 2011. In an email, Epstein wrote: "The idea is great, the execution as you are now aware has some serious risks."
Epstein understood Bitcoin's potential—not as an investment, but as infrastructure for moving money beyond regulatory oversight.
2014 – Investing in Coinbase
Epstein invested $3 million in Coinbase's Series C funding round in 2014, when the company was valued at $400 million. The introduction came through Brock Pierce, a former child actor turned crypto entrepreneur and Tether co-founder.
By 2018, when Coinbase's valuation hit $3 billion, Epstein sold half his stake back to Blockchain Capital for $15 million—a 5x return. Coinbase is now worth over $44 billion.
2014 – Funding Bitcoin Core Development
On September 9, 2014, Southern Financial LLC—a fund with ties to Epstein—made a $500,001 payment to MIT Media Lab Director Joichi "Joi" Ito. The wire details read: "subcr to Kyara Investments III, LLC to fund Blockstream Investment."
Epstein indirectly funded Bitcoin Core developers in 2015 through MIT's Digital Currency Initiative, which received $850,000 from Epstein between 2002 and 2017. This money supported the salaries of developers working on Bitcoin's source code.
2014 – Invitations to "The Island"
Epstein invited Blockstream co-founders Adam Back and Austin Hill to visit his Caribbean island after investing in their Bitcoin infrastructure company. In an email, Hill wrote: "Fri/Saturday on the Island are still possible," to which Epstein replied: "great. you will need to fly to st thomas. just let me know times. looking foward to it."
What Epstein Was Building
The files paint a clear picture: Epstein was attempting to steer Bitcoin's early development, not out of ideological commitment to "decentralization," but because he recognized its utility for moving vast sums of money without oversight.
As one email from Epstein to MIT's Joi Ito reveals, Epstein warned about competitors: "Their deal is to pump the currency, it is dangerous." He wasn't worried about speculation—he was worried about losing control over the infrastructure he was funding.
Why This Matters: The Criminal Infrastructure Problem
Crypto advocates will rush to say: "Epstein investing in Bitcoin doesn't mean Bitcoin is bad!" And technically, they're right. A technology is morally neutral.
But here's the uncomfortable truth: The same features that make Bitcoin attractive to libertarians make it attractive to criminals.
The Three Features That Enable Crime
Pseudonymity: Bitcoin addresses aren't tied to real names. While transactions are public on the blockchain, tracing them to individuals requires sophisticated analysis.
No Chargebacks: Once Bitcoin is sent, it's gone. There's no bank to call, no government to petition. This is marketed as "freedom from intermediaries." For criminals, it means victims have zero recourse.
Cross-Border Transfers: You can move a billion dollars in Bitcoin across the world in minutes with no permission from banks or governments. For someone like Epstein—operating a global criminal enterprise—this is invaluable.
Munger Was Right: "Good for Kidnappers"
In 2022, after the collapse of FTX, Munger told CNBC: "This is a very, very bad thing. The country did not need a currency that was good for kidnappers."
He continued: "There are people who think they've got to be on every deal that's hot. I think that's totally crazy. They don't care whether it's child prostitution or bitcoin."
The Epstein files prove Munger wasn't exaggerating. A convicted sex offender who trafficked minors saw Bitcoin as critical infrastructure worth millions of dollars in funding.
The Investment Argument: Why Buffett Was Also Right
Let's return to Buffett's value investing critique. Even if you dismiss the moral concerns, Bitcoin still fails every test of sound investment:
No Productive Asset
Buffett compared Bitcoin to farmland: "If you said, for a 1% interest in all the farmland in the United States, pay our group $25 billion, I'll write you a check this afternoon."
Why? Because farmland produces food. It generates cash flow every single year. Bitcoin generates nothing.
Speculation, Not Investment
Buffett warned in 2018: "In terms of cryptocurrencies, generally, I can say with almost certainty that they will come to a bad ending."
Notice he didn't say "the price will go to zero." He said "bad ending." What's a bad ending? When the music stops and you realize you've been playing musical chairs with a worthless token.
As of February 2026, Bitcoin has rallied and crashed multiple times since Buffett's 2018 warning. But the fundamental problem remains: Bitcoin "isn't going to do anything," as Buffett put it. It doesn't produce earnings. It doesn't pay dividends. It just sits there, hoping someone will pay more for it tomorrow than you paid today.
The Counterargument: "But Bitcoin Is Up 13x Since Buffett's Warning!"
Yes, Bitcoin traded between $9,695 and $9,964 on May 5, 2018—the day of Buffett's "rat poison squared" comment. As of early 2025, Bitcoin had risen to around $34,000, representing a 246% return.
Crypto advocates love to point this out as "proof" that Buffett was wrong. But this misses the point entirely.
Price ≠ Value
Buffett never denied Bitcoin's price could go up. He denied it had intrinsic value. Those are two different statements.
The Beanie Baby bubble of the 1990s saw some toys sell for $5,000. Tulip bulbs sold for the price of a house during the Dutch Tulip Mania of 1637. Both bubbles eventually popped. Price is what you pay; value is what you get. Bitcoin's price can rise indefinitely as long as new buyers enter. But if it stops producing cash flows (which it never started doing), eventually the music stops.
Buffett's Track Record vs. Bitcoin
Let's do the math:
Bitcoin (May 2018 to Feb 2025): +246%
Berkshire Hathaway (same period): +76%
S&P 500 (same period): +57%
So yes, Bitcoin outperformed. But consider this: Berkshire achieved its 76% return by owning real businesses—Apple, Coca-Cola, American Express—that generate billions in actual cash flow every year. Bitcoin's 246% came from pure speculation.
What happens when the speculation stops?
The Ultimate Lesson: Speculation vs. Investment
This is where the Epstein connection becomes darkly instructive. Criminals don't invest in Bitcoin because they believe in its "technology." They invest because it's useful infrastructure for crime.
For Epstein, Bitcoin wasn't a get-rich-quick scheme. It was a tool:
To move money across borders without banks asking questions
To fund projects (like MIT's Digital Currency Initiative) that would build the infrastructure he needed
To gain influence over the developers controlling the code
Munger's Final Warning
Munger said in 2021: "I think I should say modestly that I think the whole damned development is disgusting and contrary to the interests of civilization."
He wasn't talking about Bitcoin's volatility or its "lack of intrinsic value." He was talking about what Bitcoin enables: a parallel financial system where criminals, dictators, and traffickers can operate with impunity.
The Epstein files prove Munger's instinct was correct. Bitcoin's "killer app" wasn't "banking the unbanked" or "financial freedom." It was evading oversight.
The Pragmatic Position: What Intelligent Investors Should Do
So what's the takeaway for investors?
1. Separate Speculation from Investment
If you want to speculate on Bitcoin's price, go ahead. Just understand you're gambling, not investing. You're betting that someone will pay more tomorrow than you paid today. That's not a DCF model—it's a Ponzi scheme waiting for the music to stop.
2. Understand What You Own
Charlie Munger used to say: "In my life, I avoid things that are stupid, evil, or make me look bad in comparison with someone else."
Owning Bitcoin doesn't make you stupid. But if you can't explain how it generates value (not price, but actual economic value), you're speculating on something you don't understand.
3. Recognize the Criminal Utility Problem
The Epstein files are a wake-up call. Bitcoin's pseudonymity and lack of oversight aren't bugs—they're features. And those features attract bad actors.
As Munger put it: "The country did not need a currency that was good for kidnappers."
The Data: Bitcoin's Use in Crime
Let's be empirical. How much Bitcoin is actually used for crime?
According to blockchain analytics firm Chainalysis, in 2023, approximately 0.34% of all cryptocurrency transaction volume was associated with illicit activity—roughly $24.2 billion. That's down from 2019's peak of 3.37%.
Crypto advocates point to this and say: "See! Crime is a tiny fraction!"
But here's the context: $24.2 billion in annual illicit transactions is more than the GDP of 60 countries. That's not a rounding error. That's a functional criminal economy.
And remember: these are just the transactions we can trace. Bitcoin's pseudonymity means the real number is likely higher.
The Bottom Line: Buffett and Munger Were Right (Just Not About the Price)
The crypto world loves to dunk on Buffett and Munger because Bitcoin's price went up after their warnings. But that's missing the forest for the trees.
Buffett's critique was about intrinsic value. He said Bitcoin "isn't going to do anything"—meaning it doesn't produce cash flows. That's still true.
Munger's critique was about societal harm. He said Bitcoin was "disgusting and contrary to the interests of civilization" because of its criminal utility. The Epstein files prove he was right.
The Epstein Files Change Nothing (And Everything)
The revelation that Jeffrey Epstein funded Bitcoin developers, invested in Coinbase and Blockstream, and invited core contributors to his island doesn't change Bitcoin's code. It doesn't alter the blockchain.
But it does reveal what intelligent observers like Buffett and Munger saw from the beginning: Bitcoin's appeal to criminals isn't a bug—it's a feature.
For investors who care about more than just price charts, that matters.
What We Learned from the "Rat Poison" Debate
Price ≠ Value: Bitcoin's price can rise while remaining fundamentally worthless from a cash flow perspective.
Criminal Utility Is Real: Epstein's involvement proves Munger's warnings about "kidnappers and extortionists" weren't hyperbole.
Speculation ≠ Investment: Buffett and Munger build wealth by owning productive assets. Bitcoin produces nothing.
The OGs Know: Buffett and Munger have spent 60+ years studying how money moves and who uses it. Their moral instincts about Bitcoin's criminal appeal were validated.
Your Next Steps: A Framework for Crypto Decisions
If you're considering Bitcoin or cryptocurrency investments, ask yourself these three questions:
Question 1: Can I Explain How This Asset Generates Value?
Not price—value. If the answer is "because someone will pay more later," you're speculating.
Question 2: Would I Be Comfortable Owning This If I Knew a Convicted Criminal Funded Its Development?
The Epstein files force this question. Technologies are neutral, but their funding sources matter.
Question 3: Does This Pass the "Sleep Well at Night" Test?
Munger said: "In my life, I avoid things that are stupid, evil, or make me look bad in comparison with someone else."
Can you hold Bitcoin and feel good about it? Or are you just hoping to get out before the music stops?
The Final Word: Poison Comes in Many Forms
When Buffett called Bitcoin "rat poison squared," he wasn't making a price prediction. He was making an observation about incentives.
Rat poison works because rats are attracted to it. Bitcoin works (for criminals) because they're attracted to pseudonymity, irreversibility, and the ability to move money beyond government oversight.
For Epstein, that attraction was worth millions in funding. For Munger, it was "disgusting and contrary to the interests of civilization."
The price of Bitcoin may go up. It may go down. But the fundamental question remains:
Are you investing in productive assets that make the world better? Or are you speculating on digital tokens that criminals find useful?
Buffett and Munger already know the answer.
"I don't welcome a currency that's so useful to kidnappers and extortionists and so forth."
— Charlie Munger
The Epstein files proved Charlie Munger right.
