Is The Digital Currency Group's Move A Shill Game For Stamford?

Barry Silbert, DCG founder

This Year's Sema4
Fresh on the heels of 2020's conflict-of-interest between Governor Lamont's $17 million coronavirus testing contract with Sema4 and his wife's financial ties with the same 2019 start-up (1), last November's introduction of the Digital Currency Group to Connecticut also enjoyed "legacy investment" backing from Annie Lamont's firm, Oak HC/FT. Not until April 2021--fully four months after relocation negotiations began between New York City-based DCG and David Lehman of the state's Department of Economic and Community Development--did Oak HC/FT sell its stake in the cryptocurrency/blockchain hedge fund.

While DCG received around $1 million upon its founding in 2015 from Mrs. Lamont's health care and financial technology investment firm (2), it did not disclose what the sale price was of its holding in a company valued at a hefty $10 billion as of November 2021, six years on. Nevertheless, this time around, it's the company soon to be operating in-state that could prove a bigger problem than the repeated  congruence of the Lamonts' public/private interests.

Premature Euphoria

Oak HC/FT's Annie Lamont

Beating out bids by sites in New York state and New Jersey, the move to Connecticut by a company with more than $50 billion in assets under management (AUM) is celebrated with general uniformity in the mainstream media and by Stamford's Mayor Caroline Simmons (3), who enthuses about making the city the "crypto capital of the world" (an aspiration also shared by the administrations of Miami and New York City [4]). Beginning with its relocation, along with several subsidiaries late in 2022 to the Shippan Landing office complex, at least 300 new jobs are promised over the next five years in exchange for $5 million in financial incentives from the DECD (5).

Given, however, the ongoing unpredictability of this still-evolving industry, typified by last June's dramatic sell-offs by prominent crypto business like Celsius Network and Dubai-based Three Arrows Capital (6), U.S. Representative Jim Himes' (D-CT) expectation in 2023 of a House proposal for a badly needed regulatory framework calls to mind nothing more appropriate than the ill-timed closing of barn doors for Connecticut (7).

Especially considering the questionable background of DCG and the actions of its boyish millionaire founder/CEO, 46-year-old Barry Silbert: in consequence, according to Charles Chancellor-Mackay (pseudonym for a group of industry advocates/investors and investigators), the crypto mogul has come to be known as "The Shillbert" among his peers (8).

From Houlihan Lokey, To WEF, To Stamford

Silbert's WEF profile

An Emory University graduate and former investment banker with Houlihan Lokey (a poorly-rated boutique investment bank whose co-president was sued last year for passing information to an equity fund seeking to take private the software company for which he also served as independent director [9]), Silbert moved on in 2004 to found what would be known four years later as SecondMarket, trading in illiquid assets, including bankruptcy claims and restricted stocks.

The year before his company was anointed at the World Economic Forum of 2010 as a Technology Pioneer, Silbert was singled out as an Ernst & Young Entrepreneur of the Year, among other accolades from the financial world. Excited by crypto's promise, Silbert established Grayscale Investments in 2013, whose major component remains the Bitcoin Investment Trust, facilitating the then-novel opportunity for speculators to invest in Bitcoin like precious metals, without buying or storing it, themselves.

DCG followed in 2015, along with what would become a comprehensive suite of specialized subsidiaries covering real estate, Bitcoin mining and smartphone-accessible retail exchange activities (10).

Of particular interest, though, is Silbert's reliance on the aforementioned Grayscale, offering numerous other cryptocurrencies to choose from (Zcash, litecoin, XRP, etc.), attaining a total AUM of $5.9 billion as of September 2020, Genesis Global Trading (inherited from his SecondMarket days), a digital currency trading desk for institutional investors, as well as the industry news outlet CoinDesk, purchased in 2016 from Spotify backer Shakil Khan.

Keeping It In the Family--and In-House
Projecting an aggressive evangelical presence on Twitter, Silbert and his family members have a history of using the platform to "pump" what he is personally invested in--further boosting excitement in the last decade over Ethereum Classic (while shorting the competing Ethereum) via CoinDesk's reportage, facilitating transactions via Genesis and operating Grayscale, the go-to source for investment management of Bitcoin and other cryptocurrencies. In flagrant disregard of federal regulations, this was done without clear disclosure to unsuspecting investors of each business' affiliation with the same parent organization (11). Silbert's unscrupulous oversight of BIT and SecondMarket, according to a 2016 SEC cease-and-desist order "broke rules that were designed to prevent manipulation of a security before an offering (12)."

Such behavior, of a piece with the weight of the field's backroom deals, inherent volatility, poor international regulation (enabling the disappearance of millions in Bitcoin in 2014 from Tokyo's MT.Gox registry [14]) no more serves to reverse what Chancellor-Mackay refers to as "Bitcoin's malfeasance culture" than to advance either Stamford's, or Connecticut's, economic/financial positions. It is difficult to understand how Thomas Madden, Executive Director of Stamford's Urban Redevelopment Commission (who first brought DCG to the attention of David Lehman of the DECD in October 2020), Lehman, himself, Mayor Simmons and the Lamonts could have all learned of this young man's meteoric prominence on the crypto scene without also learning of his unflattering nickname and how he earned it. 

 (this article will also appear in a forthcoming issue of the Connecticut Sentinel)

References:
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 1. https://www.myrecordjournal.com/News/State/Company-backed-by-Conn-first-lady-to-exit-COVID-testing.html

2. https://www.ctpublic.org/news/2021-12-01/heres-what-we-know-about-the-timeline-for-digital-currency-groups-move-to-stamford

3. https://portal.ct.gov/Office-of-the-Governor/News/Press-Releases/2021/11-2021/Governor-Lamont-Announces-Digital-Currency-Group-Relocating-Headquarters

4. https://www.ctpublic.org/news/2021-11-30/stamfords-newest-crypto-company-had-ties-to-annie-lamont

5. https://www.nbcconnecticut.com/news/local/qa-cryptocurrency-and-how-the-business-fits-in-connecticut

/2661809/ 

6. https://www.zerohedge.com/markets/major-crypto-hedge-fund-3ac-may-become-latest-casualty-ongoing-bloodbath

7. https://www.ctpost.com/opinion/article/Editorial-Hope-caution-greet-burgeoning-16669585.php

8. https://medium.com/@charlescmackay/barry-silbert-and-the-cost-of-bitcoins-malfeasance-culture-f83d15ad07d1

9. https://reportscamonline.com/list-of-unauthorized-cloned-firms/houlihan-lokey-review-report-a-scam-today/

https://nypost.com/2021/09/27/houlihan-lokey-co-president-accused-of-leaking-information-in-takeover-deal/

10. https://www.coinbureau.com/analysis/who-is-barry-silbert/

11. https://medium.com/@charlescmackay/barry-silbert-and-the-cost-of-bitcoins-malfeasance-culture-f83d15ad07d1

12. https://www.bizjournals.com/newyork/news/2016/07/13/sec-to-bitcoin-investment-trust-cease-and-desist.html

13. Mutton, Karen; „Blockchain: A Tool to Enslave Us?“, p. 27; Nexus, November-December, 2017