Prophets OF Boom

THE CRA­ZI­EST BUB­BLE EVER HAS CRE­ATED BIL­LION-DOL­LAR FOR­TUNES. MEET THE FREAKS, GEEKS AND MES­SIANIC VI­SION­AR­IES WHO HAVE SCORED CRYP­TOCUR­RENCY RICHES.

Forbes - - CONTENTS - re­ported By pamela am­Bler, an­gel au-ye­ung, grace chung, jeff kau­flin, alex kon­rad, laura shin and nathan Vardi

The cra­zi­est bub­ble ever has cre­ated bil­lion-dol­lar for­tunes, al­most overnight. Meet the freaks, geeks and mes­sianic vi­sion­ar­ies who have scored cryp­tocur­rency riches.

In the world of cryp­tocur­rency, where bil­lion-dol­lar for­tunes can be made overnight, speed is ev­ery­thing— and CZ is the fastest of them all. From closet-size of­fices in Tokyo—“I would touch four peo­ple if I turned around in a cir­cle”—the 41-year-old Chi­nese-Cana­dian coder runs Bi­nance, a cryp­tocur­rency ex­change that has gone from a stand­ing start to the largest on the planet in just un­der 180 days. CZ (born Chang­peng Zhao) cut his teeth mak­ing high-fre­quency trad­ing sys­tems for Wall Street’s flash boys, and he built Bi­nance to be a Fer­rari. His ex­change can process a blaz­ing 1.4 mil­lion trans­ac­tions a sec­ond and on a peak trad­ing day in Jan­uary pro­cessed 3.5 bil­lion new or­ders, can­cels and trades. Spec­u­la­tors (some 25% of them from the U.S.) use Bi­nance to trade 120 dif­fer­ent coins, gen­er­at­ing $200 mil­lion in prof­its for CZ’s ex­change last quar­ter. BNB, the vir­tual coin CZ cre­ated in Au­gust that gives hold­ers a 50% dis­count on trad­ing fees, has a mar­ket cap of $1.3 bil­lion. His stake in Bi­nance and his coins give CZ a per­sonal for­tune worth as much as $2 bil­lion.

He is hardly alone in be­com­ing in­sanely and in­stantly rich from crypto. Chris Larsen, a long­time tech exec known for co­found­ing a string of fin­tech apps, saw his net worth flirt with $20 bil­lion at the height of cryp­to­ma­nia in early Jan­uary, based on his own­er­ship of 5.2 bil­lion XRP, the to­kens of Rip­ple, the com­pany he founded. XRP has since crashed 65%, but Larsen still tops Forbes’ first crypto rich list, our (nec­es­sar­ily in­ex­act) ac­count­ing of the 20 wealth­i­est peo­ple in crypto.

There are now nearly 1,500 cryp­toas­sets in ex­is­tence, val­ued at an ag­gre­gate of $550 bil­lion, up 31 times since the be­gin­ning of 2017. While the prices of in­di­vid­ual cryp­to­coins con­tinue to swing wildly—Bit­coin is down al­most 50% from its peak—it’s clear that blockchain-based cur­rency is here to stay and that these vir­tual as­sets have real, al­beit volatile and spec­u­la­tive, value. Black­mar­ket trans­ac­tions, tax avoid­ance by in­di­vid­u­als and sanc­tions-dodg­ing by coun­tries like North Korea fuel part of the de­mand, but so does a wide­spread ex­cite­ment over the tech­nol­ogy and an ide­o­log­i­cal de­sire for money to be free from the whim­sies of nation-states.

The win­ners of this dig­i­tal lot­tery dif­fer from those in pre­vi­ous ma­nias. The shad­owy begin­nings, at once an­ar­chis­tic, utopian and lib­er­tar­ian, drew an odd lot of pioneers who ranged from anti­estab­lish­ment cypher­punks and elec­tric­ity-guz­zling “min­ers” to pre­scient Sil­i­con Val­ley fi­nanciers and a larger-than-usual as­sort­ment of the just plain lucky “hodlers” (the typo-in­spired crypto jar­gon for “buy and hold” in­vestors). As in any gold rush, sell­ing the pans and pick­axes—in this case run­ning ex­changes—is prov­ing a more re­li­able path to riches than spec­u­la­tion. And, of course, easy money—es­pe­cially if it’s viewed as a bearer as­set—at­tracts scam artists and thieves.

Bank­ing heir Matthew Mel­lon, whose $2 mil­lion in­vest­ment in XRP blos­somed into some $1 bil­lion, learned that first­hand in Jan­uary. The morn­ing af­ter a big bash, the 54-year-old re­cent di­vorcé says he dis­cov­ered four peo­ple root­ing around his $150,000-a-month Los An­ge­les party pad. (He didn’t re­port it to the po­lice.) The un­wanted guests were prob­a­bly af­ter his XRP and they stole four lap­tops and two cell­phones. They didn’t get Mel­lon’s crypto-for­tune—any­one with enough as­sets to make our list long ago fig­ured out how to se­cure it. (Sorry, thugs.) In Mel­lon’s case, the pri­vate keys are di­vided up and safely scat­tered in cold stor­age around the coun­try in other peo­ple’s names. But the in­ci­dent un­der­scores the weird­ness that sep­a­rates cryp­to­ma­nia from bub­bles past.

Iden­ti­fy­ing the big­gest crypto win­ners and es­ti­mat­ing the scale of their wealth is no sim­ple task. The vir­tual cur­ren­cies ex­ist al­most en­tirely out­side the global fi­nan­cial sys­tem, and the newly minted crypto rich live in a strange mi­lieu that blends para­noid se­crecy with os­ten­ta­tious dis­play. Take CZ’s Bi­nance ex­change. It has no real head­quar­ters: Em­ploy­ees are scat­tered across sev­eral coun­tries, and CZ him­self seems to change lo­cales the way oth­ers change clothes. “We dont want to be in one place right now be­cause of reg­u­la­tory un­cer­tainty,” says CZ. Last we heard, CZ and his trade­mark black hoodie had just popped up in Tai­wan.

And CZ is down­right nor­mal by crypto-bil­lion­aire stan­dards. For­mer child ac­tor Brock Pierce (The Mighty Ducks, First Kid) dresses like a cut-rate Johnny Depp in Pi­rates of the Carib-

bean and is given to mak­ing grandiose state­ments from the bal­cony of his pent­house in Santa Mon­ica, Cal­i­for­nia. “This is an op­por­tu­nity to be a tril­lion­aire— some­one who is pos­i­tively im­pact­ing a tril­lion living things on this planet,” he tells Forbes. Pierce once raised $60 mil­lion from Gold­man Sachs with the help of Stephen Ban­non, Pres­i­dent Trump’s for­mer chief strate­gist, to fund a com­pany that sold vir­tual swords, chain mail and horses to role-play­ing videogamers. He also once got into trou­ble with his part­ners in a 1990s-era dot-com startup af­ter they were ac­cused, in civil law­suits, of sex­ual abuse of un­der­aged boys. (Pierce has al­ways de­nied the ac­cu­sa­tions and was never charged; one of his busi­ness part­ners, how­ever, pleaded guilty to trans­port­ing mi­nors across state lines for the pur­pose of sex.)

Pierce was early into the crypto game, first min­ing Bit­coin and then fi­nanc­ing blockchain star­tups and in­vest­ing in dozens of ini­tial coin of­fer­ings. Although he pub­licly pro­claims he is pledg­ing a bil­lion dol­lars to char­ity, he re­fuses to pro­vide doc­u­men­ta­tion that proves he has any­where near that much money.

Given this opaque­ness and crypto’s hy­per-volatil­ity, we are pre­sent­ing our net-worth es­ti­mates in ranges. We based our numbers on es­ti­mated hold­ings of cryp­tocur­ren­cies (a few pro­vided proof), post-tax prof­its from trad­ing crypto-as­sets and stakes in crypto-re­lated busi­nesses. We’ve also cat­e­go­rized our crypto rich list into five groups: ide­al­ists, builders, op­por­tunists, in­fra­struc­ture play­ers and es­tab­lish­ment in­vestors. Many fit into more than one cat­e­gory.

It’s a near cer­tainty that we’ve missed some peo­ple and that some of our es­ti­mates are wide of the mark. But this was equally true when we launched the first Forbes 400 list of Amer­ica’s rich­est peo­ple in 1982. At the time, many peo­ple said we couldn’t— or shouldn’t—pub­lish it. We did so any­way. And we firmly be­lieve we made the world a bet­ter place by shin­ing a light on the in­vis­i­ble rich. Just as crypto has evolved from the days of the Silk Road drug site and the Mt. Gox dig­i­tal hi­jack­ing, for­tunes of this mag­ni­tude should never be al­lowed to lurk in the shad­ows.

BRoCK pIeRCe

cover pho­to­graph by vir­gile Si­mon ber­trand for forbeS

MaTTheW MeL­Lon

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