Goldman Alumni Still Think They Can Fix Wall Street With Crypto
This is a big crypto pledge from someone with no track record of his own in digital money.
(Bloomberg) -- Inside Manhattan’s Harvard Club, across the room from a mounted elephant head, sitting beneath a chandelier, with lions on his tie, Arya Bolurfrushan was giddy about his plan for a new digital-coin fund.
It was June and crypto markets were getting massacred. But Bolurfrushan was unbothered.
Describing his new Accrete Capital Technologies, he laid out a plan to run what’s essentially a hedge fund that sells stakes in itself through digital tokens. Just about anyone, he said, could eventually buy. Looking like a banker but sounding like a crypto radical, he said Accrete could upend both Wall Street and virtual currencies by creating something with lower fees than asset managers and less volatility than Bitcoin.
It’s a big pledge from someone with no track record of his own in digital money. What Bolurfrushan has to offer instead is the kind of impeccable credentials -- fancy relatives, a two-year starter job at Goldman Sachs Group Inc. until 2008, Harvard Business School, and a plum role at an oil company -- that some die-hard digital-coin fanatics despise.
By the end of August, his recruits included five other Goldman alumni, mostly 30-something men, plus a real estate heir he happened to meet at an upscale sushi bar this year. They were plowing ahead with a plan to sell $150 million of tokens this month, even though Bitcoin was languishing and legions of other projects were dying. Since then, crypto has turned out to be tougher than they thought.
Digital currency’s disruption dreams have proved so tantalizing that they’re tempting not just those left behind by Wall Street, but also bankers who thrived in it, even as crypto skeptics warn of total implosion. In this case, a 34-year-old and his colleagues are betting their elite pedigrees can give them an edge. They’re marching in as outsiders, after the bubble has already deflated, with a strategy that’s legally foggy -- but their ambition is as vast as ever.
Bolurfrushan promised Accrete will offer “the same access to deals that you’d have if you lived in New York City, and went to Harvard, and worked for Goldman Sachs.” The idea, in other words, was that he can make investors into insiders.
‘Extremely Treacherous’
He’ll face skepticism from both sides.
“This space is extremely treacherous -- I’ve compared it to ‘Game of Thrones,’” said Bruce Fenton, a Bitcoin Foundation board member. “You don’t know who is a good actor or bad actor. They may not even know.”
Bolurfrushan comes from a line of Iranian businessmen who specialized in crystal, private banking and insurance. He was raised in Dubai and went to Carnegie Mellon. On an early date with the woman he’d marry, the two took tea at Manhattan’s Mandarin Oriental hotel and discussed good and evil. He bites his nails and listens to Luciano Pavarotti and David Guetta, even though the French DJ is “not cool now.” His most prominent attribute is a perpetually pressed style that stands out even among other strivers.
“He’s a guy that shows up to a class in a three-piece suit and everyone else is wearing jeans,” said Josh Hix, a friend from Harvard Business School who co-founded meal-kit delivery company Plated, which counted Bolurfrushan as an investor. “Some of our friends would steal his pocket squares, which annoys him greatly.”
Bitcoin Nightmare
By his own account, Bolurfrushan’s first foray into Bitcoin was the stuff of nightmares. About five years ago, he bought a mining machine. He told a childhood friend to handle it, offering to split the profits. When Bitcoin prices surged to almost $20,000 last year, he called his friend. “Dude,” Bolurfrushan asked, “how rich are we?” The friend, who confirmed the story, told him he never figured out how to turn it on. They estimate they lost out on millions of dollars.
Accrete’s management team came together through a series of coincidences. Jonathan Moinian, the son of a real estate investor, overheard Bolurfrushan speaking Farsi on the phone at Kurumazushi in Midtown Manhattan. He’s now chief operating officer. Maja Vujinovic, who worked on emerging technologies for General Electric Co., met him on a Croatian sailing trip. Austin Hulbert, one of the other Goldman Sachs alumni, bumped into him in the Harvard Club.
“A lot of his time is dedicated to learning from shakers,” said another Harvard friend, Bjoern von Siemens. “He does it very systematically.” Bolurfrushan recommended von Siemens, whose family founded the namesake German conglomerate, for the Young Presidents’ Organization, a kind of Davos for globetrotting comers.
A white paper that lays out Accrete’s plans is a mishmash of Wall Street and crypto strategies whose promises are giant and contradictory. It advertises the revolutionary benefits of decentralized money without the famously volatile downside, on top of lucrative and elite Wall Street investments without the secrecy, high fees or lock-ups. The idea is to raise funds by selling the tokens, then to invest in stocks, bonds, private equity, real estate and venture capital. The token value would rise or fall with the portfolio -- though Accrete aims to take about a quarter of the profits for itself.
Dead Coins
There are tall roadblocks standing between Bolurfrushan and a jackpot. For starters, the plan’s esoteric charts and thick jargon could turn off the regular investors he hopes to lure. There’s also the U.S. government, which has been cracking down on crypto investments and has strict rules that keep hedge funds from selling stakes to Americans who aren’t rich.
And there’s competition from a bevy of similar projects, plus a sea of ventures that include former Goldman partner Mike Novogratz’s digital bank. Institutional investors are dipping toes slowly into an industry where, by one count, there already are 600 defunct coins and scores of scams.
On the Harvard Club roof in September, Bolurfrushan seemed calm. “We’re building a 100-year company,” he said. “We know that we will be around.”
First he has to worry about the rest of the year. As October arrived, faced with engineering complications and potential investors struggling to understand what he’s doing, he decided to push back the fundraising until at least November.
“We realized,” he said a few days later, “that actually making this product isn’t as simple as we thought.”
To contact the reporters on this story: Max Abelson in New York at mabelson@bloomberg.net;Lily Katz in New York at lkatz31@bloomberg.net
To contact the editors responsible for this story: Michael J. Moore at mmoore55@bloomberg.net, David Scheer, Dan Reichl
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