Bitcoin Billionaires

by Ben Mezrich

  Dividing them up between them, Cameron and Tyler had set off across the country, creating what they believed was the most secure storage system in the history of Bitcoin. USB sticks and computer hard drives could be stolen or hacked. Private keys on paper in a vault could be photographed or taken. But shards spread out all over the country, in a dozen different safety-deposit boxes—that was different. Only the twins themselves knew where the shards were, or how the shards went back together. Only they could retrieve their private key and get to their bitcoin.

  It was like a bank heist in reverse. Instead of robbing a dozen banks, they’d filled them up. At some point in the future, what was once sitting on Cameron’s coffee table, and now resting in those safety-deposit boxes, was going to be worth more than the entire balance sheets of those banks. Maybe.

  All that was left were the loose ends. The hardware that had enabled them to pull off the reverse heist. And now it was time to eliminate the evidence. Erase any kind of digital exhaust, fingerprint, or traces of their private key, and destroy any surface area that a hacker could try and cling onto or digitally swab for DNA.

  Cameron hefted the sledgehammer high over his head, and with a primal shout, brought it down as hard as he could on one of the laptops. The keyboard shattered into a thousand pieces, daggers of plastic ricocheting in every direction, clattering off of the cement walls. He lifted the hammer again, aiming at the printer. When the hammer hit, the crack of the plastic reverberated through his shoulders.

  It felt so damn good. The rational portion of his brain knew that he was simply securing their investment, making it impossible for anyone or any technology to find or steal their bitcoin. But the rest of him was living in the moment. All the frustration of his past, of what they had been through with Zuckerberg and the lawyers and everything else, dissipating with each stroke of that hammer, with each implosion of plastic, metal, and glass.

  The past was gone. Bitcoin was the future.

  And Cameron and his brother had leaped headlong into that future. All told, they had spent a little over two million dollars so far, and they would eventually pour in over eleven million dollars to complete their goal. It was, perhaps, the largest bet anyone in the world had made on virtual currency. Maybe only Satoshi, if he was real, and still alive, had more bitcoin.

  Either way, the Winklevoss twins were on their way to owning 1 percent of all bitcoin in existence.

  All there was, and all there ever would be.

  And that stash, that fortune—put them at the dead center of the crypto revolution.

  ACT TWO

  Life is a storm. You will bask in the sunlight one moment, be shattered on the rocks the next. What makes you a man is what you do when that storm comes.

  —ALEXANDRE DUMAS,

  The Count of Monte Cristo

  12

  THE SPARK

  March 16, 2013.

  A little after seven in the morning.

  Cyprus.

  A European island in the eastern Mediterranean, barely a hundred and fifty miles long, sixty miles wide, and fifty miles off the coast of Turkey.

  The resort town of Larnaca on the southern coast, Cyprus’s third largest city. A magnificent, stone-paved promenade running along Finikoudes Beach, embraced on either side by palm trees. A tourist haven, swarming with beach cafés, coffee shops, outdoor restaurants, and souvenir outposts. Crowded even on a humid Saturday morning; groups of Brits in bright-colored football jerseys intermingling with French couples holding hands, American teenagers escaping their tour groups for a latte and a walk along the sand, and, of course, Russians, gregarious and loud and breakfasting in the restaurants and smoking cigarettes beneath the weeping palms.

  Marina Korsokov brushed the last remnants of a deep sleep out of her almond eyes as she turned off the promenade and strolled down a side street leading toward the town’s center, a steaming cup of Greek coffee in one hand. She had a bag of croissants in the other, enough for her family of four, although she was sure that at least two of the pastries would be gone before either her husband, Nikita, or her daughter and son, Alexa and Mikhael, crawled out of their beds. It had been a late night the evening before; three neighboring families had been over for dinner, and the conversation had lasted well past even the adults’ bedtimes. The discussion had been about politics and money, as usual; lately, every conversation in Cyprus seemed to revolve around politics and money. Marina figured that was to be expected when your country was on the verge of declaring bankruptcy.

  Marina had slept soundly when she’d finally gotten to her bed; life was exhausting, not just raising two children under the age of nine, but also dealing with her husband’s daily woes. Although most Cypriots had a view of the local Russian community as being dominated by oligarchs and gangsters, most were like the Korsokovs—working people who had scraped enough together to immigrate to Cyprus because it was safer than Moscow, warmer than Russia, and part of the European Union (EU)—a potential winning lottery ticket for their children, who would grow up far away from the hardships Marina and Nikita had lived through in the 1980s and 1990s.

  Despite her new country’s problems, she trusted that everything would work out. This wasn’t Russia, this was a modern European country, a meeting place of many ethnicities, religions, and ideologies—a melting pot that was also a beachfront idyll. She liked to leave the worrying about politics and money to her husband and his friends. She was too busy building their life.

  As Marina reached the end of the alley leading off the promenade and caught sight of a large crowd on a corner across the street, she was suddenly reminded of an old Russian proverb: The less you know, the more soundly you sleep.

  Even from a distance, she could tell that the crowd was agitated and growing by the minute. It was made up mostly of men. Some she recognized from her nearby neighborhood, others were wearing aprons that marked them as workers from a café, or suits, which meant they spent their time in the office buildings or banks that spotted the narrow streets.

  At first, she thought about avoiding the group, but then she recognized someone, one of the few women in the crowd, a fellow Russian named Natalya who with her husband ran a small clothing boutique next door to Marina’s favorite bakery on the promenade.

  Crossing the street, she waved to catch Natalya’s attention, spilling some of her coffee on her sleeve. Cursing at herself in Russian, she reached the other side of the street just as her friend stepped to meet her.

  “This is crazy,” Natalya said. “I can’t believe they are doing it. It’s just not right.”

  Marina realized that the crowd was in front of one of the many bank branches that speckled the beachside town; she immediately recognized the bright red signs of LAIKA BANK, the country’s second largest. Most of the storefront was brick, with large glass windows, a double wooden door, and three ATM machines perched on the stone sidewalk out front. Marina counted at least thirty people lined up at the machines, not pushing and shoving yet but clearly restless.

  “What is this?” Marina said.

  “It’s the bank run before the bank run.”

  Marina realized she probably should have been paying more attention during the protracted conversation the night before. She knew that things were bad, that Cyprus, like many of the more economically challenged nations of the EU, was in major debt—and that the continent’s financial leaders had been meeting in Brussels to figure out how to handle the situation. But beyond that, she was no expert; Cyprus was out of money, but its economy hadn’t totally cratered like nearby Greece, which was in the process of being bailed out by the EU through an austerity package—lowered salaries and entitlements across the board, fired government employees, shuttered businesses—that had led to riots in the streets of Athens. Cyprus wasn’t Greece; it was a small community of barely a million people. And besides, Cyprus had lived through troubled times before; they’d even survived a civil war between the Greek-dominated south and the Turkish-dominated north, which had re
sulted in the island being divided in two.

  Marina’s husband, Russian that he was, had a habit of shouting that the sky was falling; but they weren’t in Moscow anymore, they were part of the EU, the civilized world. In the civilized world, the sky didn’t fall. Did it?

  Suddenly a kind of groan went up from the front of the line by the ATMs, and word quickly trickled back to the edge of the crowd.

  “They’ve just run out,” a man in a cream linen suit shouted. “The ATMs are empty. It’s not even eight o’clock. This is a disaster.”

  “Can’t you try another branch?” Marina asked.

  The man looked at her like she was crazy.

  “They’re all empty. Not just the ATMs. The banks. It’s all gone.”

  “He’s exaggerating,” another man said. “They aren’t going to take all of it. Just a haircut. That’s what they are calling it. A haircut.”

  “You’re a fool,” the first man shouted back. “They’ve already announced that the banks will be closed on Monday, and probably for the week. A banking holiday. Our money is gone!”

  Marina felt the fear rising inside of her as she listened to the two men. Her family wasn’t rich, not by a long shot. Her husband worked for his uncle’s ceramics business, which was run out of Limassol, another resort town farther up the coast, where so many Russians lived that it was sometimes referred to as Limassolgrad. They had always been good at saving their money, a lesson they had learned growing up in Moscow, where things could turn ugly, and usually did, at the drop of a hat. They had put together a nest egg of a little over 120,000 euros.

  Which, she now realized with a sinking feeling, was all in their account at Laika.

  She grabbed Natalya by the arm and pulled her close.

  “What’s happening?” she hissed.

  “The banks lost everything. And the EU won’t bail them out. So instead, they made a deal. They put up some of the money, but the banks have to come up with the rest. They are going to take it from our accounts. From everyone’s accounts.”

  “Just take it?” Marina said. “They can’t do that. Can they? Just take your money like that?”

  “Apparently they can. Not all of it, but it’s not clear how much. Right now, they say six percent if you have under a hundred thousand euros, and ten percent if you have more. My husband says those numbers are lies. He heard that if your money is in Laika, you lose fifty percent.”

  She pointed to the crowd amassed in front of the ATM machines.

  “ATMs are empty. They are going to keep the banks closed so nobody can pull their money out. They are calling it a one-time tax.”

  “But this is theft!”

  “In Brussels, they call it ‘burden sharing.’ They are blaming the banks.”

  Marina’s face blanched. As much as half her money—gone? Snatched right out of her bank account by the government? Could they really do that? Cyprus wasn’t Greece, Cyprus hadn’t gone bankrupt. Cyprus wasn’t poor—but it was … different. It was well known that the banks in Cyprus were out of control; that between them, they held eight times the size of the entire GDP of the small island country. She also knew that a large portion of that was Russian money. Cyprus had turned itself into a tax haven, charging zero taxes, inviting money from everywhere, and had become the stomping ground of Russian oligarchs, and mobsters who were looking for a safe place to put their ill-gotten wealth. Supposedly, more than thirty billion dollars’ worth of Russian money had found its way into Cyprus’s banks. A full two-thirds of all deposits over a hundred thousand euros were Russian.

  Apparently, the EU had decided to give that Russian money a “haircut,” and along with the oligarchs and the mobsters, innocent bystanders like Marina and the crowd on the street around her were going to suffer as well.

  “How could this happen?” Marina gasped.

  She was still clutching the bag of croissants and the coffee, so she couldn’t look in her wallet. But she doubted she had more than fifty euros. At home, maybe her husband had another hundred, two hundred at most. How were they going to eat?

  What do you do when you wake up one day to discover that the money in your bank account is gone? That all you have is whatever’s in your pocket? How do you survive?

  “I have to get home,” Marina said, pushing past her friend and the crowd, which had now grown twice as large. The coffee spilled again at the motion, but she barely noticed. She needed to wake up her husband, to tell him that for once, he was right.

  The sky really was falling.

  13

  BAYFRONT PARK, DOWNTOWN MIAMI

  One hour later, five time zones west.

  Splashes of fire flashed overhead in a Technicolor arc, painting the night like neon graffiti, illuminating the bay and the dozens of luxury motor yachts jockeying for position along the floating dock. A throbbing, electric beat from the nearby outdoor “arena”—a massive, open pit, jammed with nearly 100,000 people, sprawled out in front of a huge, raised stage—reverberated through the air, so loud that, even from the dock behind the mainstage, each note threatened to crack the very air.

  Now this is how you make an entrance, Tyler thought to himself as he stepped off the edge of a London gray, eighty-eight-foot Riva motor yacht and onto the dock. The humid breeze pulled at his white slacks and shirt, but he had no trouble navigating the short hop from the water onto land; the excessively tall girl in terrifyingly high heels next to him, holding on to his hand for balance, had it a little more difficult. When she too touched down, she let out what could only be described as a squeal, and Tyler laughed, because, given the moment, it was as appropriate a sound as any.

  Tyler steadied the girl on the dock and started forward, toward the music. Along with his slacks and shirt, his shoes were also white, because it was Miami, it was eighty-five degrees at night, and why the hell not. He had just spent the early part of the afternoon on the super yacht he had just disembarked from, a floating kingdom with tan leather interiors, a wet bar, a hot tub, and the woman next to him. Her name was Tiffany, and she was at least six feet tall in her bare feet, with hair streaked in purple and gold, eyelashes as long as a tarantula’s legs, wearing a bikini top and white jean short shorts. She looked like a model and indeed had walked her fair share of runways. But she was a nursing student by day and could hold her own with any of Tyler’s contemporaries.

  Cameron was a few feet ahead of them, already on the dock, also wearing white, parenthesized by a Dutch supermodel with a name neither of them could pronounce and her famous DJ husband, both of whom were decked out in black leather despite the heat.

  “Hold up,” Tyler called to his brother, as he himself nearly tripped on one of the wooden slots beneath his feet. “I don’t want to break an ankle before we even get inside.”

  The path that snaked out ahead of them toward the VIP entrance to the “arena” was really more runway than dock; held up by bright blue pontoons floating in the bay, it circumnavigated the waterfront, normally a jag of prime Miami real estate that bordered the Financial District, a good twenty-minute drive over the bridge from South Beach, where everyone who could afford to was actually staying—and ended at that covered entrance, which would assumedly spit them out so close to the stage that their ears would bleed.

  Each step was a preview of the shattering volume and incredible energy that Tyler knew was coming; he could already see the top part of the stage, the hollowed-out half shell rising up beneath the fireworks engulfing the sky, a honey-combed, crisscrossed, metal monstrosity bristling with lights and speakers. He wasn’t a huge EDM fan; he couldn’t identify the DJ who was already onstage by the pounding music so loud now that it threatened to knock him right into the bay, but it was assuredly someone famous. He’d seen the lineup on the boat ride over: Calvin Harris, David Guetta, Deadmau5, Tiësto, Avicci, Swedish House Mafia—the list went on and on, every name more famous in the EDM community than the last.

  “Welcome to Ultra,” the Dutch model next to Cameron said over her shoul
der as Tyler finally caught up. “Even if you broke your ankle the music would keep you dancing until five A.M.”

  It was the kind of thing someone married to a DJ might say, but Tyler doubted he would be dancing—or awake—at five in the morning. It had been a long month already, but Ultra was definitely something he and Cameron had to see. They had to be in Miami that second week of March anyway, part of a seven-city road trip down the southeastern seaboard of the country, pushing Bitcoin, and there seemed to be no better way to cap off two days of meetings in suits than a stop at one of the premier music festivals in the world.

  Though tiring, the meetings had been extremely promising. In the past few months since they’d made their huge investment in the virtual currency, bitcoin had steadily risen in price and was hovering around the $40 mark. That meant their growing investment was now worth close to $40 million, and the entire market cap of bitcoin had gone from around $100 million in value to close to half a billion.