Bitcoin Billionaires

by Ben Mezrich

  Ver, on the other hand, thought Erik’s and Ira’s side hustles were none of the twins’ business—whatever they were building would only further the overall ecosystem and BitInstant along with it; but it was obvious, Ver’s disagreement with the twins went much deeper than business. As Bitcoin had grown, Ver had become more and more vocal about his beliefs—you either agreed with them, or you were the enemy.

  Charlie started to write a reply to one of the angry emails, then paused, because he wasn’t sure there was anything he could write that would make things better, or calm Cameron and Tyler down. He knew they needed to try and work this out face-to-face. And that was part of the reason he had fled to Panama. He had known an especially difficult encounter with the twins was on the horizon.

  “Can’t you see where this is heading?” Ver said. “They just want to get you in bed with the bankers and regulators.”

  “They want Bitcoin to succeed,” Charlie said. “They just have a different view of how we’re going to get there.”

  “If you say so,” Ver said. “Sometimes it’s hard to know who are the barbarians, and who are guarding the gates.”

  Philosophical battles aside, the more successful BitInstant was becoming, the unhappier the twins were getting with how Charlie was running the company. They’d told him he needed to stop traveling, stop partying, be in New York tending to the business. But what they didn’t appreciate was that BitInstant was his ticket out into the wide, wide world and all of its parties; he wasn’t going to be chained to a desk in New York. Sure, the company had its issues, but it was still doing massive business. They just needed to let him continue doing what he was doing. No need to fix what was already working.

  Charlie knew he needed to sit down with the twins and offer up a new strategy going forward. One thing that was important to discuss was BitInstant’s relationship with the payment software that Voorhees and Ira had been developing, and which BitInstant was currently using to process its transactions. Something the twins didn’t yet know but that Charlie needed to figure out a way to tell them was that, well, the software was actually not the intellectual property of BitInstant—but was instead owned, outright, by Voorhees and Ira, because they had developed it, apart from their duties at BitInstant. In light of that fact, maybe from the twins’ point of view it wouldn’t be ideal, but Charlie had come up with a plan to pay Voorhees and Ira with some of his BitInstant shares, so that BitInstant could continue to use their software—problem solved. All the twins had to do was sign off on it. Voorhees had even written up a business plan explaining everything, something he called the “United Front.”

  Once they were all in one room together, they could come to an understanding, a meeting of the minds, and together grow BitInstant into the behemoth they had all imagined from the beginning.

  Ver had another idea of the way things should be. He felt BitInstant should relocate here, in Panama. “In Panama, they aren’t locking anyone up for being adults and making adult decisions for themselves” was his refrain. It was a view shared increasingly by Voorhees and also expounded by another friend who had joined them in Panana City, a budding Bitcoin mogul named Trace Mayer, as much of an anarcho-capitalist as any of them. Mayer had been involved in crypto from the early days and believed, like Ver, that government wasn’t necessary in finance, that financial incentives alone were enough to help guide and govern human nature toward positive outcomes.

  The three of them had made some good points; the constant barrage of philosophy had maybe even caused a shift in Charlie’s own thinking. For example, the continuing issue involving BTCKing, still one of the company’s biggest customers: after initially banishing and admonishing the bitcoin reseller, Charlie had privately assured him he was welcome back. And since then, BTCKing had returned in full force. Over the past year he had done an enormous amount of volume; looking at his list of transactions, Charlie could see that the anonymous customer had turned over about $900,000 already, buying bitcoin at a steady clip—but strategizing his purchases in a way that seemed to obscure the volume of his trades. Gareth, usually silent on matters like this, had grown concerned from Wales, believing that such huge volumes from the reseller meant only one thing: BTCKing was buying bitcoin to sell to people wanting to shop on places like Silk Road.

  “He has not broken any law and Silk Road itself is not illegal,” Charlie had emailed Gareth. “We also don’t have any rules against resellers. We make good profit from him.”

  Obviously, this email had not been enough to assuage Gareth’s concerns. Right there on the balcony Charlie saw in his in-box another missive from his business partner, worrying that BTCKing was pushing the boundaries of what was legal.

  “So many of his transactions smell like fraud or money laundering,” Gareth’s email read.

  Sitting on the balcony, with the smell of empanadas in the air, Ver and Voorhees going on about how the world should work, the twins emailing him how the world actually did work, the imagery of barbarians at the gates and girls in miniskirts dancing in his head, Charlie reached down and shot off a single, succinct answer to Gareth.

  “Cool.”

  And then he closed his laptop and tried to forget his problems, if only for a night. Running off to Panama felt good, and liberating, but he knew the feelings couldn’t last. Soon he’d have to head back to New York, face the twins, and offer them Voorhees’s United Front. He had to find a way to keep everyone happy.

  Either that, or he’d be right back in Panama, looking for a permanent place to stay.

  No matter what happened, one thing was for sure. There was one place where Charlie Shrem wasn’t going to end up: back in his mother’s basement.

  20

  THE UNITED FRONT

  It wasn’t a glass tiger cage surrounded by lawyers. Nobody was handcuffed to a watercooler, and this time around it was both of them entering the arena, not just Cameron. But as Tyler followed Charlie Shrem, Erik Voorhees, BitInstant’s outside lawyer, and his brother into the conference room at BitInstant’s headquarters, where multiple copies of the proposal labeled United Front were already laid out around a rectangular conference table, pages still warm from the printer—Tyler got the uncanny feeling that he was walking into an ambush. Someone was about to try to “fuck him in the ear.”

  Once the door was closed, Charlie moved to the front of the room and got the ball rolling. He didn’t exactly apologize for running off to Panama, or the recent problems the site was again having, which he only paid lip service to, as if they were ultimately meaningless. And he didn’t exactly address the growing issues with Obopay, which, just a few months in, was already threatening to end its agreement with BitInstant, putting the company’s legal standing as a money transmitter in jeopardy. But he did acknowledge that it was time for an updated strategy, to put BitInstant on a new footing. To that end, he said, pointing to the United Front printout, he had a plan to officially merge Voorhees and Ira’s payment software into the BitInstant company, and make them all one big happy family.

  And from there, the meeting went right off the rails. To Tyler’s surprise, it was his usually more laid-back brother who took the United Front document off the table, glanced at it—though they’d already read through the thing when Charlie had sent it to them, via email, days earlier—and then tossed it at Charlie, hitting him right in the chest.

  “Are you kidding?” Cameron said. “Nobody in here is your family. In this room, in this office, Erik and Ira aren’t your friends, they’re your employees. This isn’t a lifestyle business, it’s a business business. There shouldn’t be any discussion about their software being a part of BitInstant, because it’s always been a part of BitInstant—our dollars paid for its development. But more importantly, this meeting has nothing to do with software. It’s about you, and how you’re running this company.”

  Tyler wanted to jump in right next to his brother but knew things were going to escalate too quickly if he did. Maybe Charlie really didn’t realize it, but
to the twins, this meeting had nothing to do with some software Voorhees and Ira had written, which in their minds BitInstant already owned; nor was it really about the unannounced jaunt to Panama, as unprofessional as that had been. To the twins, this was going to be a corrective meeting. They had been out there meeting with the biggest names in the financial world while Charlie partied, showed up to meetings bent out of shape, and sponged up whatever crazy bullshit Ver and Voorhees threw his way.

  At this point, it was their money that kept the doors open and the lights on, not Roger Ver’s. And that gave them the right—the duty—to try and keep Charlie in check and rein him in. Charlie had to understand: BitInstant wasn’t his personal piggy bank, and it wasn’t a bankroll for his journey of self-discovery.

  Tyler signaled his brother to slow down and then asked for a minute alone with Charlie. Cameron took a seat by one of the windows overlooking Twenty-Third Street, boiling. He had a lot to be angry about. BitInstant had burned through a lot of their money in a very short time, and Charlie kept running around without a care, almost delusional. Now he was trying to change the stock structure to account for some software that his own employees had developed in BitInstant offices, on the company (and the twins’) dime. As far as the twins were concerned, that software was part of what they’d funded.

  Tyler moved Charlie to the back of the room; he knew that Voorhees and the rest could probably still hear him, but he didn’t really care.

  “As the CEO of BitInstant, you need to think about what’s best for the company, not for your friends. You need to separate the two.”

  Tyler tried to speak calmly, precisely.

  Charlie said, “Well, they’re employees, but they’re also family.”

  “No. Erik and Ira work for you. Roger Ver owns a percentage of the company. We own a bigger percentage of the company. And none of us are family. If we happen to all be friends as a result of working together then that’s great, but friendship is not the goal, it’s a by-product. We aren’t on a bowling team together, we’re in business together.”

  “It’s the same thing.”

  “It’s not. You need to create professional boundaries.”

  Charlie glanced toward Voorhees, who was pretending to chat with the lawyer, and Cameron, who was pretending to look out the window. Tyler put a hand on Charlie’s arm.

  “It’s time for you and BitInstant to grow up.”

  “This is about Roger, isn’t it.”

  “No, it’s absolutely not about Roger, or Erik, or anyone else for that matter—it’s about you. Look at the way you’re running this place. You’re your own chief compliance officer. You aren’t protecting your licenses. You have no relationships with your banks. You’re out at your club every night, out with the cocktail waitresses, out in goddam Panama. At what point are you going to check in with reality? After it’s too late?”

  Charlie’s shoulders were hunched, but he was defiant.

  “I’m out networking. It’s important for me to be visible in the community.”

  “Charlie, you smoke and drink at the conferences until you can barely see straight. You think that’s what Bitcoin needs right now? We’re here trying to make people see it as something legit.”

  Charlie looked like he was about to say something, then stopped himself. Tyler could guess what the kid CEO was thinking: What would Roger Ver say?

  “If you keep this up,” Tyler said, louder than he wanted but he couldn’t help himself, “you’re going to end up like Roger.”

  “I’d be happy to end up like Roger,” Charlie responded, almost under his breath. “I’d be happy to end up—”

  “A felon.”

  Tyler rejoined the group but Charlie remained at the back of the room, in his own world.

  Then Voorhees spoke. “This might be the right time for me to hand in my resignation. Rather than cause any more problems, Ira and I can leave.”

  Although Tyler and Cameron had previously discussed the possibility of losing Voorhees and Ira if they weren’t willing to join BitInstant full-time, he didn’t expect that to come to a head right here, right now, during this meeting.

  On the other hand, it made sense. Voorhees never had both feet in to begin with, and these days he had good reason to have both feet out. He was smart, maybe too smart to be a marketing guy working for Charlie Shrem. But more importantly, his side project, SatoshiDice, was already gaining so much traction in the Bitcoin community that it represented a meaningful percentage of overall Bitcoin transactions. It didn’t make sense for him to stick around as an employee when he was already the founder of his own fast-growing startup.

  “Nobody needs to leave,” Charlie sputtered, clearly dismayed by the turn of events. Then he turned to Tyler and Cameron: “Maybe Roger can buy you guys out.”

  Whether Charlie was picking a side, or just reacting with emotion, it was hard to tell.

  “Roger isn’t buying anybody out,” Cameron said, angrily.

  In fact, Ver had offered to buy them out at a valuation 10 percent higher than when they’d bought in; alternatively, Ver had offered to let them buy him out, at a two-million-dollar valuation. It was in keeping with Ver’s personality to explore all options. But they were never going to make any deal with Ver.

  “Guys,” Charlie said, but Tyler was already heading toward the door.

  Cameron followed his brother out. Charlie hurried behind, still talking, rambling about how things didn’t need to go this far, that nobody needed to quit, that they could work this out. As he bargained, Charlie looked even smaller than usual, deflated. Maybe he’d really thought that things could be patched up with some handshakes and smiles.

  “In rowing,” Tyler said, “sometimes there’s one guy in your boat who slows the whole thing down. He might mean well. He might be trying as hard, or even harder, than anyone else, but it doesn’t matter, he’s weighing everyone down. We call that guy an anchor.”

  And with that, the twins left the building.

  * * *

  On the street, Tyler and his brother began the two-minute walk back to their own offices. Neither of them spoke for the first minute. Tyler hadn’t expected the meeting to end on such a note, but he wasn’t entirely displeased. Maybe the harsh words, maybe the prospect of losing Erik and Ira, would be exactly what Charlie needed to knock sense into him and get him to start acting like a real CEO.

  He felt the proverbial buzzing in his pocket. He expected some sort of missive from Charlie, maybe a last gasp attempt to keep the “family” intact. Instead he looked down to see an email from an unknown address. Curious, he opened it.

  And then he stopped in the middle of a crosswalk.

  Cameron continued walking a few paces forward before realizing that he had lost his brother.

  “What are you doing? You’re going to get yourself killed.”

  Tyler waved him over, then handed him the phone.

  “What is this?”

  “It’s an invite. Something in San Francisco.”

  Cameron stared at the mysterious email on Tyler’s phone.

  The email was short, from someone they didn’t know. Probably someone who worked for someone else. But that wasn’t the only mysterious part. The invite was for May 16 in San Francisco at 6:00 P.M., the night before their keynote address at Bitcoin 2013. Other than the date, time, and location, there were no other details. The message read only:

  Look for the Genesis Block at 631 Folsom … photo attached.

  Tyler looked up from the phone.

  “The Genesis Block,” he said.

  That was the name used in the community to describe the first block of the Bitcoin blockchain. It was mined by Satoshi himself back in 2009.

  Charlie, BitInstant, the chaos of the meeting they’d just left, were suddenly put into perspective by that strange little email. Whether Erik and Ira really left the company or not, Tyler believed that they had succeeded in at least putting Charlie on notice. He would fix things and become the CEO he needed
to be, or the twins would find a way to fix it themselves, without him.

  But eclipsing those thoughts, the odd email reminded Tyler of that first moment in Ibiza, when he’d felt like they’d just peered down a rabbit hole toward something the rest of the world had somehow missed.

  The honk of a taxicab coming around the corner broke through his contemplation, and he pulled his brother toward the curb.

  “We’re going to need to book an earlier flight to California.”

  21

  BEHIND THE DOOR

  May 16, 2013.

  Six P.M. on the dot.

  Rincon Hill, south of Market Street, San Francisco.

  A mostly residential area of wildly priced condos. Their destination appeared to be a skyscraper with a nondescript lobby and a bored-looking concierge behind a desk, who had no idea what Cameron and Tyler were looking for. It wasn’t until they were back out on the street, scanning the building’s facade, that they found it—right out in the open for anybody walking by to see: a single door, with a small sign taped to it, which read THE GENESIS BLOCK.

  “I wish Naval had given us a little bit of a clue about what we’re walking into,” Tyler whispered to Cameron.

  The whispering was probably overkill, but something about the mysteriousness of the moment, the energy, made it feel right. Bitcoin 2013—which would begin the next day—had been hurtling toward them with much fanfare, publicity, and preinterviews. More than a thousand people would partake in the assault on the San Jose convention center, a rather large increase from the eighty attendees who had taken part the year before. Even some major news outlets would be there. Ever since Cyprus, which had sent the price of bitcoin skyrocketing, people were paying attention. But this—the Genesis Block—whatever it was, it was something else.