Digital Gold : Bitcoin and the Inside Story of the Misfits and Millionaires Trying to Reinvent Money (9780062362513) by Popper Nathaniel

Author:Popper, Nathaniel
Language: eng
Format: epub
Publisher: HarperCollins
Published: 2015-04-07T16:00:00+00:00

CHARLIE HAD KEPT BitInstant ahead of the regulatory curve. Back in 2012 he had registered the company with FinCen as a money transmitter. In March, though, the company was still trying to bounce back from the departure of Erik Voorhees and his friend Ira Miller, who had moved to Panama to develop their own company after the falling-out with the Winklevoss twins.

The new team Charlie brought on immediately spotted significant flaws in the way the company was being run. For starters, Charlie was the only one with access to the company’s bank accounts. Many day-to-day operations required Charlie to manually intervene. The new lead developer called for the entire site to be taken down and rebuilt. But there wasn’t time as new customers were pouring money into the site. The new staff members were jammed into every corner of the small offices Charlie and Erik had moved into the previous summer.

On top of the internal problems, Charlie was also having trouble finding a reliable bank account, even as a registered money transmitter. Since the end of 2012, Charlie had opened accounts with KeyBank, PNC, Wells Fargo, and JPMorgan Chase—and all of them had been shut down. It became apparent to others in the company that Charlie had not been entirely up-front with the banks about the nature of his business. Charlie had generally opened the accounts without explaining that BitInstant customers would be depositing and withdrawing money on a daily basis. When the banks saw the thousands of transactions every day—a strain on their compliance officers—they decided the BitInstant business wasn’t worth it.

This pointed to a broader issue with Charlie that was frustrating the Winklevoss twins and was clearly an outgrowth of his childhood desire for acceptance. Charlie loved telling people what they wanted to hear. He would always give the twins optimistic predictions for projects and would fail to alert them to impending problems until the last moment, in the hope that the problems would go away. This optimistic approach was great for a salesman, and Charlie had been a great salesman. But it was not such a great habit for a manager, who needed to find a way to deal with problems, not ignore them.

Given the issues at Mt. Gox and BitInstant—the two longtime giants of the Bitcoin world—investors and entrepreneurs in Silicon Valley were looking for alternatives. As an alternative to Mt. Gox, people saw some promise in Bitstamp, an exchange that had been founded by a Slovenian college student and a family friend back in 2011 and that had been growing slowly ever since. Wences and Micky sent one of Micky’s deputies to Slovenia to scope out the operations. The youngsters running Bitstamp looked like an Eastern European boy band, with their long hair and penchant for Adidas track suits. But their evident competence—particularly when they were compared with Mt. Gox—generated so much confidence that Wences and Micky began moving their trading to Bitstamp. Mt. Gox still had 80 percent of all Bitcoin trading, but Bitstamp’s market share began to creep up.

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