Crypto Coin Founder Joins Skeptics While Investigation Heats Up
Crypto Coin Founder Joins Skeptics While Investigation Heats Up
(Bloomberg) -- Brock Pierce is unsure whether the cryptocurrency Tether that he helped co-found will weather the latest assault from regulators and government officials.
Tether, a so-called stablecoin that serves as one of the main conduits for trading in much of crypto market, came under increased scrutiny Thursday after a New York court allowed the state’s attorney general to pursue a claim that Bitfinex, an affiliated company, hid the loss of over $800 million in commingled funds. Two days earlier, international regulators recommended that stablecoins take greater steps to prevent money laundering and the financing of terrorism.
“Tether is, I think, one of the most important innovations in currency, but it also seemed like one of the higher risk businesses,” Pierce said in a telephone interview July 8 from Los Angeles. Pierce said he stopped being involved with Tether in 2015.
“We will work with and listen to the FATF (Financial Action Task Force) in order to continually improve our compliance function as these markets develop,” said Stu Hoegner, general counsel for the Bitfinex crypto exchange. Existing compliance practices are already the best in the industry, he said.
Hoegner said Bitfinex “respects” the court’s order. He declined to comment further.
Pierce, 39, is no stranger to controversy. A former child film star, the fedora hat-wearing entrepreneur has been involved in the first initial coin offering (ICO), the largest ICO and the creation of first crypto-friendly bank. U.S. regulators cracked down on ICOs and one of his projects later reached a settlement with the U.S. Securities and Exchange Commission. That hasn’t stopped him from recently announcing a run for president of the U.S.
“I enjoy doing things that have never been done before, it’s the concept of impossible,” Pierce said.
In 2013, Pierce co-founded a crypto-focused venture fund, Blockchain Capital, which currently holds investments in more than 80 crypto-related companies including some of the most valuable ones, such as Block.one, Ripple, Coinbase and Kraken. In 2017, the firm became the first venture fund to raise money partly by issuing its own digital tokens. Pierce is no longer involved with it.
The same year -- 2013 -- Pierce helped shepherd the ICO of Mastercoin, the first time a startup raised money by issuing its own cryptocurrency to the public. That kicked off a worldwide ICO craze, with hundreds of startups raising billions of dollars. But the lion’s share of the ICOs ended up being scams, didn’t produce any products they promised, and their investors lost money.
In 2017, Pierce co-founded Block.one, which ran the world’s biggest ICO, netting $4 billion. Some of the money has been used to build out the EOS blockchain -- but much of that money was simply invested in assets such as government bonds. Block.one reached a $24 million settlement with the SEC for holding an unregistered ICO. Pierce is still an investor, and hasn’t sold any of his stake in Block.one, he said.
In recent years, Pierce moved to Puerto Rico, where many crypto millionaires have flocked because of tax and capital gain benefits. Two years ago, the New York Times reported he was heading the movement to build a crypto utopia there -- something Pierce says he never headed or worked on.
He’s chairman of a nonprofit that helped raise money to provide masks to health workers, and is involved in preserving species like the Puerto Rican parrot. A local building he paid for is being turned into an art experience due to open in the fall.
Pierce said he plans to unite the divided nation, and will host a series of online conversations to develop his platform. He also expects much scrutiny over everything he’s ever done.
“All of us have made mistakes, and very few of us are willing to face the music,” he said. “It’s essentially like walking into an inferno.”
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