Bitcoin Billionaires

by Ben Mezrich

  It wasn’t hard to catch people’s interest when talking about Bitcoin. And Tyler and his brother didn’t have trouble getting just about anyone to meet with them; people were willing to sit down with them out of curiosity alone. But that didn’t mean the businessmen they met with were willing or ready to invest in bitcoin. Bitcoin still seemed too speculative for people who worked at conventional banks and funds. Even managers of hedge funds, the types who had no problem plunking down tens of millions of dollars on modern art, odd commodities, gold, or sketchy mining outfits in undeveloped third world countries were afraid of a virtual currency created by a mysterious computer programmer.

  Still, Tyler saw the cavalcade of meetings as a success. His immediate goal wasn’t to convince anyone to buy bitcoin, it was to simply educate them on the new virtual currency, to act as an ambassador to what he believed, more and more, was the future of money. Success right now meant getting the conversation started and planting the seeds of the idea of decentralized virtual currency in the minds of some of the most influential business leaders in the world.

  Still, it was a grueling schedule of meetings, and this was the perfect change of scenery. Ultra, in its fifteenth year in Miami, had grown from a few thousand attendees in 1999 to over 300,000 rabid electronic music fans. All in all, the Ultra stages, in combination with parties thrown all through the day and night at pretty much every hotel pool and club between downtown and South Beach, made for one big outdoor rave. The Delano, where Tyler and Cameron had booked a penthouse suite, was an art deco hotel located on Collins Avenue and was famous for its celebrity guests. Everything was white, from the minimalist furniture, to the walls, to the light fixtures. A wave of white, washing all the way from the hotel lobby, past the giant chessboard on the terraced lawn, to the candles in the candelabra sitting on a metal table that stood in the shallow end of the pool. The hotel had DJs stationed by the breakfast buffet, the pool, and the beach. Whether he liked it or not, Tyler knew he would be hearing trance-like, rising and falling electric tones in his sleep for days to come.

  Their group reached the VIP entrance right behind a small crowd that had come off of one of the similar yachts crowding the waterway. Tyler recognized a few of the faces: Snoop Dogg, Michael Bay, Rob Gronkowski. All of a sudden, flashy plastic wristbands were slapped on their wrists, and they were whisked through the entrance—led through a break in the crowd—more of a tunnel weaving past arms and legs and bodies held back by steel barricades and security guards—toward a blocked-off area of tables for celebrities and people who were willing to spend like celebrities. Even though they were nonpaying guests, Tyler couldn’t help but wince at the fact that these tables went for more than $20,000 for the night, and that most of the groups would be spending five times that on alcohol, served by women in skin-baring uniforms shuttling back and forth from a private bar tucked right next to the stage.

  As they entered the table area, Tyler felt the ground shaking beneath his feet. The beat had gotten so loud that it was hard even to think, but that didn’t stop him from noticing a smaller vibration in the pocket of his shirt. He realized it was his smartphone going off. As he reached for it, he saw that Cameron had also paused at the edge of the VIP area and was also reaching for his own smartphone. The fact that they were both getting blown-up messages at the same time—6:00 P.M. on a Saturday evening—meant that something important was going on.

  Cameron got to his phone first. Sticking white earbuds in both ears, he tried to listen to a voice mail amid the ambient wall of sound, but he quickly gave up, looking at his screen instead. Tyler went straight to his own screen and saw text after text. Most were from the people they had met in the Bitcoin world, including Charlie, a variety of bankers they’d given presentations to in the past few days, and even their father. All the texts centered on the same topic, and many ended in multiple exclamation marks.

  As Tyler read, then googled, then read more, the immense arena, the eardrum-shattering music, and the beautiful people receded around him. He could have been standing alone on a beach. All he could think about was what he was reading. He looked up and locked eyes with Cameron.

  Cyprus.

  At that moment, they both knew that this little island country on the other side of the world, which many of the three hundred thousand dancing people around them had never even heard of, was about to change everything.

  Cyprus, according to some, was named for its rich natural veins of copper. Copper—once used for money by the Romans, still used by the United States in its pennies—was of little comfort to them now. Its banks had been swimming naked, amassing tons of bad debt, and the tide had just gone out.

  The EU finance ministers—the central authority of this system—had agreed to help, but under one condition. The EU would lend Cyprus money, but only if Cyprus agreed to chip in itself by taking money directly from its people—a “bailout” predicated on a “bail-in.” With the stroke of a pen, Cypriot banks had been ordered to confiscate all customer bank deposits in excess of €100,000 and send them to the Bank of Cyprus. In other words, if you held €500,000 in a Cyprus bank, you would lose €400,000 and be left with €100,000. And just like that, the government of Cyprus had agreed to pass the buck to its citizens—almost none of whom had anything to do with making the decisions that had gotten the country into financial ruin in the first place.

  It wasn’t the sheer size of the theft perpetrated by the Cyprian government against its people that had sent shock waves through the world—it was the fact that something like that could even happen. It was the exact thing that people like Voorhees and Ver prophesized: the capricious whim of government intervention.

  The girl with the tarantula eyelashes leaned close to Tyler, glitter on her cheeks flashing from the lights of the stage and the glow of his phone.

  “What’s going on?” she asked, lips almost touching his ear so that he could hear over the music.

  Tyler waved Cameron over.

  “A whole country just got robbed by their own government,” he shouted.

  “That can happen?” the girl asked.

  “It just did, in the EU,” Tyler said. “And it can happen here too.”

  He and his brother were both thinking the same thing. What could happen in Cyprus could conceivably happen here. The U.S. government stepped in during economic crises all the time. Less than five years earlier, the United States had used billions of dollars of taxpayer money to bail out Wall Street banks during the 2008 financial crisis. During the Great Depression the government had prohibited U.S. citizens from owning gold: in 1933, President Roosevelt had signed executive order 6102, requiring citizens to turn in their gold for cash. It wasn’t until 1975, when President Ford repealed this order, that it was again legal for Americans to own gold that wasn’t jewelry or coins. And all bank deposits were only insured to the tune of $250,000.

  “More than twenty thousand account holders at Laika, the second largest bank in Cyprus, are going to have half of their savings taken away,” Tyler said. “The Bank of Cyprus, the largest bank, is going to take almost fifty percent of all deposits over a hundred thousand.”

  “They’re calling it a tax, or levy,” Cameron said. “They’re closing all the banks to keep it from turning into a bank run.”

  “Look at this picture,” Tyler said. “This is a mob outside one of the banks. A bunch of people got hold of a bulldozer. It looks like they’re going to try to get inside.”

  “Nobody is going to feel safe keeping their money in an EU bank after this. No one is going to feel safe keeping money in any bank, period.”

  Tyler looked at him. The entire arena seemed to lurch under his feet as the DJ on the stage hit keys on his computer, launching off an artillery battalion of synthetic drumbeats.

  If this could happen in an EU country, what prevented it from happening anywhere else? This was precedent.

  Tyler was too young to remember the savings and loan crisis in 1987, but they had lived through the dot-co
m bubble in 1999, and the recent credit crisis, just four years earlier, in 2008. He believed that what was happening in Cyprus was exactly the sort of financial trauma that would open people’s eyes to just how safe their money actually was—or wasn’t.

  Cyprus would scare the world straight. It was exactly what Bitcoin needed—the catalyst that would propel Bitcoin into the world’s consciousness.

  “If you don’t keep your money in a bank, where can you keep it?” Tiffany asked.

  Tyler felt his pulse rising in tune with the music, level after level after level, until it was a thunder in his ears.

  Why keep any money, when there was something much better that was now available? Something that was about to get much easier to promote.

  And much, much more valuable.

  14

  ON THE ROAD AGAIN

  Charlie clung to the dashboard in front of him for dear life as the Mexico-blue Porsche 911 took the turn at sixty miles per hour, its tires hugging the asphalt as its entire chassis forcibly leaned onto one side, sending the two Korean girls sitting on Charlie’s lap—bare legs, miniskirts, tube tops, and all—flying toward the passenger-side door. He felt skin and leather and nails as the girls laughed and struggled to right themselves. On the other side of him, Roger Ver, the “Bitcoin Jesus,” who was behind the Porsche’s steering wheel, was laughing too.

  “Keep it together, guys,” Ver shouted over the loud K-Pop that was blaring out of the Porsche’s speakers. “Don’t want anyone breaking any laws before we make it to the restaurant. I’ve already seen the inside of a California prison, and I don’t intend to see another one. At least not before Charlie tries the ‘meat jun’ at Omogari. It will blow his already blown mind.”

  Charlie helped the girls back on top of each other; it was a good thing that both of them were small—even smaller than Charlie—because when Ver had first told him they were stopping to pick up a couple of friends on the way to Omogari, he had thought the guy was joking. No way four people could fit in the front of a Porsche 911, and there was no backseat. When he and Ver had pulled up to the girls’ apartment on the edge of Santa Clara’s Koreatown—a stretch of the El Camino Real roadway dubbed “Soon Dubu Row” after the famous tofu stew in Korean cuisine and lined with Korean restaurants, supermarkets, dry cleaners, and other Korean businesses—Charlie had been relieved to see that neither of the girls was over five feet. Both were decked out in silk skirts and midriff-baring tops. The girls seemed perfectly happy sitting on Charlie’s lap for the short ride over to the restaurant in nearby San Jose’s Japantown—a historic, eight-block section of downtown, and one of only three remaining Japantowns in the country. Which put Charlie right in the middle, both knees jammed against the dashboard, and his left thigh pressing tightly against the gearshift.

  “Sorry,” one of the girls said, her voice heavy with a Korean accent, her bright red lips swollen beneath cliff-like cheekbones. “I hope I didn’t crush anything important.”

  “Careful.” Ver coughed. “Charlie is a nice Jewish boy. I should never have tried to mix him up with girls like you two.”

  The girls laughed again, and Charlie felt his cheeks growing red. Maybe it was the motion of the car, maybe the strong perfume the girls were wearing, or the bare legs next to him, but he was experiencing an uncharacteristic lack of words. Usually both he and Ver were fast talkers; when he and Ver spoke on the phone, it was a battle to see who could get more words in before the final bell. But tonight Charlie was definitely off his game. He’d always been a bit socially awkward around girls, but this was something different. Besides the car and the perfume and all that skin, he could think of a couple of reasons why that might be.

  Things hadn’t been going great at home in Brooklyn, which was part of why he had jumped at the chance to go west, to San Jose, for a series of BitInstant pitch meetings, all of which had been arranged by the Winklevoss twins, followed by a Bitcoin conference nearby, which they’d all agreed to attend. Ver, Bitcoin Jesus himself, had flown in to the conference from Japan, his home base.

  Although Charlie had never met Ver in person when Ver had first invested in BitInstant, over the past few months they’d grown much closer—and had been face-to-face a handful of times. Still, he was thrilled at the opportunity to catch up. Charlie had begun to see Ver as more than just a business colleague and investor, but as a real friend, an adviser not just in the world of Bitcoin, but also in life. Life, for Charlie, was getting more complicated by the day.

  “The operative word is ‘Jewish,’ ” Charlie finally said. “Not Catholic. Our guilt has nothing to do with sex. It’s all about our mothers.”

  Charlie’s joke had more truth to it than he’d like to have admitted. At home, things between Charlie and his mother had been going downhill for months, coinciding with his company’s rise. He was still living in the basement, but he’d stopped going to temple with his family every Saturday, and when he was out, usually at dinner with Voorhees or Ira or one of his other employees, he certainly wasn’t keeping kosher.

  Maybe it was all the time he’d spent hanging out with Voorhees or Skyping with Ver, or maybe it was his getting out of the basement more and more, but he had begun questioning everything that he had taken for granted growing up. People didn’t think of Orthodox Jews the way they thought about other fundamentalist religious groups, but to Charlie, his mother’s views and his Brooklyn community had begun to feel more and more suffocating, more and more like a cult.

  It was back in college when he’d started to see travel as an escape from that life. Because of the relationships he’d made online, he’d had the opportunity to visit different areas of the world—and whenever he was in a different city or country, he’d reinvent himself as someone living without the restrictions of his religion. But as soon as he got back to New York, he would bend back to his upbringing. Lately, however, the invented Charlie was seeming more like the real Charlie.

  “Here we go,” Ver said, pulling the Porsche up to the curb and hitting the brakes hard enough to send the girls sliding off of Charlie’s lap. “You think the valet takes bitcoin?”

  It was something Ver asked before every transaction he made anywhere: Do you take bitcoin? Restaurants, supermarkets, convenience stores. So far, the answer was almost always … no.

  “I’m kidding,” Ver added as he opened the door and stepped out onto the sidewalk. “There’s no valet. This place is real casual. They let in all the riffraff. I like to keep it simple, no pretensions. I’ll let the twins wine and dine you at the Ritz.”

  Charlie couldn’t see Ver’s face because Ver was already coming around the car to let the girls out. But usually, when he mentioned Cameron and Tyler, it was followed by an eye roll.

  And that was the second reason Charlie felt off that evening; when he’d left the twins earlier that afternoon, after their last meeting of the day, it was obvious that they weren’t thrilled that he was heading to dinner with Ver. They’d warned Charlie about getting too close to Ver, about giving too much credence to what he had to say. They’d tried to be measured about it; they were well aware that Charlie and Ver were friends, and that a part of Charlie looked up to him—but they had made it clear they were starting to worry about the potential influence Ver could have, not just on BitInstant, but also on Charlie himself.

  Ver started talking to the girls in Korean as he led them toward the restaurant’s entrance. Charlie followed, uncurling himself from the front seat of the car and dusting himself off under the red awning. He wasn’t surprised by Ver’s fluency in Korean; Ver was obsessed with all things Asian, an observation confirmed by the fact that he was shuttling The Fast and the Furious: Tokyo Drift–style between Asia-town neighborhoods, only a few hours after stepping off a plane from Tokyo.

  Ver was one of the smartest people Charlie had ever met, maybe the smartest, even if his views could be a little extreme. Lately Charlie had begun to think of him as his new “rabbi,” to the twins’ dismay.

  Charlie di
dn’t think the twins had anything to worry about. If anything, the meetings the three of them had that day should have put them at ease. Charlie had been on his game. Moreover, at that moment, life was good for all of them. After Cyprus, the price of a single bitcoin had skyrocketed to more than a $100, which had made the twins a whole lot richer than they already were. They had started their bulk purchase of bitcoin when it was below $10, which meant their investment had already appreciated by a factor of ten, a fantastic multiple by any measure; all the conversations they had had in the Bakery had been validated, and all of their predictions were coming true. The fact that Wall Street, and most of Silicon Valley, were still skeptical and dismissive of Bitcoin made everything even sweeter. When Wall Street and Silicon Valley discovered the massive bet the twins had made in the new currency, god only knew how they would react; the twins were building their new empire without anyone realizing they were doing it. Certainly the twins had to be pleased with how things were going, and especially with Charlie.… But were they?

  As Charlie followed Ver and the girls into the half-full restaurant, watching them take one of the wooden tables by the window overlooking the street lined with Japanese groceries, magazine shops, and clothing stores, he realized what was really bothering him, even more than his troubles at home.

  Something deep in him wanted to impress Cameron and Tyler. And he felt that just by hanging out with Ver, he was falling short in their eyes.

  “You want beer? Sake? Whiskey?” Ver asked as he ushered Charlie to a seat between the girls.

  Ver himself didn’t drink. He didn’t do drugs, or smoke. He was athletic, sported a near crew cut, and was built like a wrestler; he was actually a master at jujitsu who trained at a dojo right near his apartment in Tokyo. When you thought about it, he and the twins seemed to have a lot in common. The twins should have taken to him on sight; but the opposite had happened, as Charlie had seen, just twenty-four hours ago.