On June 5,Barry Silbert, the year-old founder and CEO of SecondMarket, called an all-hands meeting to announce a new direction for his brokerage firm. Since its founding inSecondMarket had earned a reputation for trading exotic assets. The news that day would only reinforce it — and would give even some of SecondMarket's employees cause for concern. A former investment banker, Silbert had built a successful company by making it possible for hapless investors to unload illiquid paper.
Auction-rate securities were one of several asset classes for which he had almost single-handedly made a market amid the chaos of the financial crisis. No new ones had been issued in years, and the secondary market for them was beginning to dry up. Silbert needed to find a new asset class to trade in.
The company, Silbert told his staff, was going to open a private fund for accredited investors that would invest solely in bitcoin. The move would effectively put SecondMarket's future at the mercy of a volatile digital currency that most people thought was a passing fad, a mere tool for peddling drugs online, or a Ponzi scheme.
Nobody even knew the real identity of bitcoin's creator, who used the handle Satoshi Nakamoto. But Silbert had become a true believer. Nearly three years later, Silbert's bet doesn't sound quite so crazy anymore. Investors have poured more than a billion dollars of venture capital into startups that are experimenting with bitcoin and the technology underlying it, an innovation called the blockchain. And while naysayers still abound, big Wall Street firms are more curious than skeptical.
Even national governments and central banks are taking a look. Meanwhile, Silbert has gone all-in, and in doing so positioned himself at the heart of the bitcoin and blockchain industry. Ask anybody in the world of bitcoin today who is the best-connected member of the community, and odds are they will direct you to this boyish entrepreneur, a man who may be uniquely suited to bridge the gap between rebel entrepreneurs and mainstream financial institutions.
In a fintech space that has seen more than its share of blowups, meltdowns, flameouts and criminal charges — and in which serious differences of opinion persist as to whether bitcoin itself will succeed or whether the blockchain is the truly valuable concept — Silbert has been a calming, professional presence, avoiding even the hint of scandal. The arc of Silbert's career — from a trader of distressed paper to a prolific investor in one of the most experimental corners of fintech — parallels a broader shift in the story of financial services.
In the last few years, as the industry has recovered from the crisis, banks have turned their attention from cleaning up yesterday's messes to fending off tomorrow's challengers. While working with banks and established investors is unavoidable, "the real innovation — the paradigm shift, the new way of doing things — is not going to be driven by the incumbents," Silbert said. And ultimately those ideas will be co-opted or bought by the incumbentsor [they] will completely displace the incumbents.
Among the first to recognize the interest that bitcoin and its underlying technology would hold for Wall Street, Silbert has found himself testifying before the New York State Department warren buffett caught lying about bitcoinblockchain berkshire hathaway fully investing in distribute Financial Services and coaching asset managers who manage tens of billions of dollars.
Alongside this he built a profitable bitcoin trading desk to serve institutions and high-net-worth individuals. The final piece fell into place last October, when he split off these warren buffett caught lying about bitcoinblockchain berkshire hathaway fully investing in distribute as wholly owned subsidiaries of Digital Currency Group, a new conglomerate, and sold the rest of SecondMarket to Nasdaq.
What were once Silbert's personal stakes in dozens of digital-currency startups now belong to DCG's portfolio of early-stage investments. He intends for DCG to function as an index on the entire market, becoming "the Berkshire Hathaway of bitcoin. To the chagrin of idealistic techie types, Silbert is not shy about appealing to the profit motive, and often touts the potential for bitcoin's price to rise.
Yet he is sincerely convinced that bitcoin is not merely a good investment but a good thing for the world. Silbert, who grew up in Gaithersburg, Md. At age thirteen he was selling baseball cards — learning then that warren buffett caught lying about bitcoinblockchain berkshire hathaway fully investing in distribute things have monetary value simply because enough people agree they do. He invested his bar mitzvah money in stocks. As a high school junior, he landed a part-time job at a Washington brokerage firm.
Sensing his interest in the markets, the portfolio managers and traders there encouraged him to take the six-hour, question General Securities Representative Exam, which would qualify him to be a stockbroker. If he passed, he would be granted a Series 7, or General Securities license, warren buffett caught lying about bitcoinblockchain berkshire hathaway fully investing in distribute him to buy and sell stocks, options and all other types of securities.
Silbert took the test at age 17, becoming one of the youngest people ever to pass. In his second year, he was adopted into the financial restructuring division — with the dot-com bubble just about to burst.
The years to were "the boom years of the bust," fat years for the restructuring division of Houlihan Lokey, Silbert said. He was promoted from analyst to associate, and worked on some of the decade's headlining bankruptcies, including Enron and WorldCom. But then the pool of clients began to dry up, even as competition for their business grew fiercer.
And Silbert had become bored with the work. He wanted a change. The simple phone brokerage aimed to make a market for investors with assets they were having trouble unloading through traditional means.
His first target was restricted stock in public companies, sales of which had to be kept private in accordance with Securities and Exchange Commission regulations. It was a huge opportunity. He asked whether the firm would like to invest in Restricted Stock Partners. Werbalowsky considered the business plan risky and passed, but was struck by the young former associate's entrepreneurial zeal.
That was our marketplace. The business grew rapidly, surviving the death of Silbert's business partner, Brad Monks, from cancer inand launching an electronic trading platform. One of the early investors was Lawrence Lenihan, managing director of FirstMark Capital, who now sits on DCG's board of directors and investment committee.
Lenihan's first impression of Silbert was that "he looked like he was about 12 years old. As the financial crisis deepened, SecondMarket expanded into new asset classes: It was a warren buffett caught lying about bitcoinblockchain berkshire hathaway fully investing in distribute time for the established players, but for SecondMarket it was a bonanza.
Trillions of dollars of assets had turned illiquid during the meltdown. Hearing what her husband intended to do for auction-rate securities, Lori Silbert asked, "Do you even know what they are? That was how Silbert got into buying and selling stock in private companies, making a market for early investors and employee shareholders who wanted to liquidate their stake in hot startups.
Facebook was a popular one, as was the video game maker Zynga. In the world of startups, early employees often take a deep pay cut in exchange for a warren buffett caught lying about bitcoinblockchain berkshire hathaway fully investing in distribute in the company.
There had never been an organized market for turning these shares into cash, but now, suddenly, there was. It was SecondMarket's platform for these sales — known as liquidity events — that eventually attracted Warren buffett caught lying about bitcoinblockchain berkshire hathaway fully investing in distribute interest. It was now the world's largest centralized exchange for a wide variety of illiquid assets. But then SecondMarket went through a lean season.
As the financial sector recovered from panic and the national economy began dragging itself slowly out of the doldrums of recession, secondary trading in many of the exotic financial products that had fueled SecondMarket's success began drying up.
Meanwhile, the mania for over-the-counter sales of private-company stock was temporarily dwindling. SecondMarket was forced to close its offices in Israel and Hong Kong and move its headquarters out of the financial district. The company's New York workforce shrank by nearly two-thirds.
Silbert began buying bitcoins in the summer of Initially he kept quiet about his stake in the digital currency, worried it would damage his reputation if word got around. Even his wife was in the dark at first. But gradually he became convinced that its technology could change the world and, consequently, that it was a spectacular long-term investment.
At first, the process of acquiring the digital currency — going through an unlicensed online exchange whose office was in Japan — made him nervous. Gox, be scared shitless that I was never going to see it again," he said. Once he'd bought his first batch of bitcoins, though, he didn't wait long to buy more. He had caught the bug. Initially bitcoin was simply his hedge against what he sees as a dangerously overleveraged world.
After spending his early twenties helping to liquidate failed companies, he then built SecondMarket on the bones of Wall Street's failures, its toxic assets, bad debt repackaged as good debt, on other men's missed opportunities.
By the time he heard about bitcoin, he felt a little like Noah in his ark, looking out on a world awash in debt. But economically it just kind of made sense. At one time he had been something of a gold bug, but no longer. Too many governments were stockpiling gold as a backstop to their economies. Gold had history on its side, but eventually Silbert came to see bitcoin as a far more secure investment than precious metals.
While others were debating whether digital currency met the textbook definition of money, Silbert saw that bitcoin was a triple threat to established markets, because it could function as a store of value, like gold; as a method of payment for online warren buffett caught lying about bitcoinblockchain berkshire hathaway fully investing in distribute, like credit cards or PayPal; and as a global transaction network, like Western Union or MoneyGram.
What if bitcoin were to claim even a small percentage of any of these markets, never mind all three? The value of bitcoin relative to the dollar, he thought, had the potential to increase by 50 or even times.
You had the money, why didn't you do it? In the summer ofthe entire staff of SecondMarket, more than 50 employees, gathered in the rec space on the top floor of their building in the Chelsea neighborhood of Manhattan. A kind of loft with hardwood floors, it was kept stocked with snacks and drinks and served as the event space for twice-monthly "town halls" — loosely structured meetings at which employees were encouraged to speak up and ask questions.
Most of them knew next to nothing about bitcoin. Their CEO, dressed summer casual, his short blond hair combed forward in a youthful style, gave a PowerPoint presentation. He had briefed his senior leadership team ahead of time, but he knew what he was about to say would come as a surprise to the rest of his staff. He introduced the concept of bitcoin, giving an overview of its innovative features — its immunity to counterfeiting and double spending — before taking a stab at evaluating its potential for their business.
He compared it to gold, to major fiat currencies. If bitcoin could capture just a fraction of that wealth, its value would skyrocket. The fund he was creating would enable investors to get in on the action without taking any of the risks or hassles of sourcing, storing and securing the bitcoins for themselves. But Silbert also gave a few words of caution.
There was no guarantee that bitcoin would survive, and that made his new direction for the company a risky one. Despite the potential, "there is a real chance that it warren buffett caught lying about bitcoinblockchain berkshire hathaway fully investing in distribute go to zero and this was a passing fad.
Throughout the presentation, however, Silbert made no attempt to warren buffett caught lying about bitcoinblockchain berkshire hathaway fully investing in distribute his enthusiasm.
And he had another surprise.
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