Bitcoin Billionaires

by Ben Mezrich

  No matter what the results of the eventual trial might be, the site was finished, and the news was going to reverberate through the Bitcoin economy.

  “It’s already dropping,” Tyler said as he reached past Cameron to the mouse next to his computer. “It’s dropping fast.”

  The price of a single bitcoin had started the morning at around $145 a coin, but since the news of Ulbricht’s arrest, the price had begun to spiral downward. Now it was approaching $110 per coin. That meant the economy had shed more than $700 million in value in just a matter of hours. The twins themselves had lost millions of dollars on paper; but Cameron kept his mind on the bigger picture.

  The twins’ own research had shown that Silk Road did not dominate the Bitcoin market, as some breathless observers in the press had proclaimed. Silk Road was in truth a small fraction of the Bitcoin economy, even though it was the fodder for many juicy headlines. The brothers’ thesis was any drop in the price of bitcoin due to the Silk Road closure was sure to correct. And, of course, as far as the twins were concerned, the death of Silk Road was very good news for Bitcoin’s future legitimacy.

  “There’s only one thing to do,” Cameron said.

  “Buy!”

  Cameron opened his computer and started to type furiously. Even though it was risky, he always kept cash—dry powder—on Mt. Gox and some newer exchanges that had popped up in anticipation of buying opportunities such as this one.

  His phone began to ring.

  “It’s Charlie again.”

  Over the past few weeks, Charlie Shrem had been calling them both nonstop, but he’d been particularly persistent with Cameron, who had always had more of a soft spot for him, sometimes leaving Cameron three messages in a day.

  It was only days after he and Tyler had received the email from Charlie promising a new start (and failing to mention any clouds on the horizon) that BitInstant had suddenly shut down. The loss of BitInstant’s licenses, which designated the company as a legal money transmitter, had been insurmountable, and Charlie had done the only thing he could, shuttering BitInstant’s doors. But he had kept the twins in the dark until the last moment, and that’s what they couldn’t forgive. He had posted some nonsense online, that it was just a temporary suspension of business to revamp and refit, that BitInstant would soon return better than before. But Cameron knew that Charlie’s message to customers was as untrue as his previous email had been. BitInstant wasn’t coming back.

  To actually revamp, he’d need new money transmission licenses, he’d need a new banking partner, and most of all, he’d need cash, lots of it, because he’d burned through everything the twins had given him, including the $500,000 bridge “loan” that had still never been paid back.

  Cameron and Tyler had begun the process of mentally separating themselves from Charlie. If he treated his partners that way, withholding the shutdown of the site, what else wasn’t he telling them and how else was he behaving? Failure was okay, it was part of the game they signed up for and the odds they chose to play. One in twenty startup investments succeeded, according to the numbers. But Charlie’s behavior, in their minds, bordered on bad faith and a dereliction of duty—he had checked out, run the other way instead of diving headlong into fixing BitInstant. Traveling more, partying more, drinking and smoking day and night. Instead of warning the twins that bad news was coming, he had kept looking for a lifeline, asking them to chase bad money with good.

  No doubt, that’s why he had been calling now. But the spigot was dry: they were finally ready to write BitInstant off as a learning experience and walk away.

  Cameron would likely have ignored this call too, but with the news of Silk Road still open on his computer, he decided to give Charlie a few minutes—if only to feed his own curiosity. After all, Charlie was close to Ver, and Cameron wanted to know what Ver thought about the death of Silk Road.

  “He thinks it’s a travesty,” Charlie said. He sounded out of breath, like he was running in place. “He thinks Ulbricht is being railroaded.”

  Cameron should have suspected as much. Of course Ver was going to join the other ultraradical libertarians on the internet and try to turn Ulbricht into a martyr. In fact years later, in March of 2016, after Ulbricht’s sentencing and imprisonment for double life in prison plus forty years, Ver would go even further in an open letter to the former “Dread Pirate Roberts”:

  I suspect you will go down in history in a similar spot to Harriet Tubman for helping slaves escape their slave masters. By creating the Silk Road you have helped millions of peaceful drug users escape their violent oppressors in the form of the police, DEA, FBI, and judges who lock peaceful people in prison like yourself.…

  “I don’t know what’s scarier, Ver’s views, or the fact that you consider him a mentor,” Cameron said.

  As often, his brother took a harder line with Charlie. “And look where he’s gotten you. BitInstant is closed because you never really gave a damn about licensing and you were too busy buying into Ver’s bullshit.”

  “I believe in compliance,” Charlie said over the phone. “Guys, we can fix this!”

  “We aren’t interested in your circus anymore,” Tyler continued. “We’re interested in minimizing the damage at this point. Starting with our five hundred thousand dollars.”

  There was a pause on the other end of the line. Cameron wasn’t sure how Charlie thought this conversation was going to go, but it was obvious he’d put the money out of his mind long ago.

  “It’s … tied up, it’s not possible.”

  “Tied up? What do you mean? That loan was earmarked for working capital, not operating expenses.”

  “Three out of every ten people who own bitcoin bought it through me,” Charlie said, trying to divert the conversation. “BitInstant can come back. We just need a new license. We still have thousands of people who want to buy through us.”

  “Nobody is going to give you a license. This isn’t a game anymore. It’s fine to sit in Panama and gripe about the evil government, but in the U.S., if you don’t play by the rules, you end up in handcuffs. That’s the way this works. And that’s the way it’s supposed to work.”

  The conference room phone started lighting up. Cameron put Charlie on hold and answered it.

  It was their chief of staff, Beth Kurteson. Beth was a midwestern transplant who had come to New York City from Illinois for college and then later Columbia Business School for her master’s in business administration. She was the first person the twins had ever hired. She was smart, hardworking, and had extremely high integrity and emotional IQ. She had quickly become one of the twins’ most trusted and relied-upon team members.

  “I’ve got the WSJ on three. Bloomberg on four. The Financial Times on five.”

  Cameron felt his cheeks growing cold. Could they all be calling to ask about Silk Road? That didn’t seem likely; the twins had no connection to the site.

  “Put us into the Journal,” Cameron finally said. “Might as well start at the top.”

  The reporter didn’t waste much time with pleasantries. “Guys, do you have any comment about the subpoena?”

  The question was completely out of left field. Cameron pressed the mute button, looking at Tyler.

  “What the hell is he talking about?”

  Tyler unmuted the line.

  “What subpoena?” he asked into the phone. “Who’s being subpoenaed?”

  There was a brief pause on the other end of the line.

  “You are.”

  Cameron’s heart pounded in his chest as he stared at the conference room phone, lit up like the Christmas tree in Rockefeller Center. He had completely forgotten that Charlie was still on hold on his cell phone lying on the table.

  Cameron and Tyler Winklevoss had just been subpoenaed by the superintendent of the New York State Department of Financial Services, New York State’s bank and insurance regulator.

  Their dance with Charlies Shrem might be over, but the battle for Bitcoin had just begun.
r />   26

  THE FALL

  JFK International Airport.

  A little after 7:00 P.M. on a cold and gray Sunday night in January.

  A light dusting of snow coated the curves of an Icelandair Boeing 737, engines still warm from the landing twenty minutes earlier and the typically long taxiing to the gate.

  A horde of passengers slowly moving up the Jetway toward Customs and Immigration.

  “It’s called a liminal state,” Charlie said as he led Courtney at the back of the moving crowd. “It’s when you’ve exited one of society’s structures, but you haven’t yet entered another. Liminality. I read about it in college.”

  Courtney squeezed his hand as she walked, a backpack slung over her right shoulder. Charlie trailed a carry-on with one wonky wheel, the sort of bag that had seen one too many overhead compartments.

  “It sounds like the kind of thing you come up with when you’re stoned,” Courtney said. “Although, to be fair, when are you not stoned?”

  Charlie laughed, returning the squeeze back to her hand as they followed the crowd. Charlie noticed that most of the group was doing more shambling than walking; it wasn’t only because they had all just spent seven hours in an aluminum tube filled with recycled oxygen, it was also the time difference. Checking his watch, he calculated that it was two in the morning in Amsterdam; not that he would have been in bed if he’d remained another night in that permissive city. He’d spent most of the two-day e-commerce conference hitting the “coffee shops” that dotted the city’s historic Red Light District, taking advantage of the Netherlands’ progressive marijuana laws. Even so, he’d knocked his speech out of the park; he could still hear the applause that had come from the audience of hundreds of European Bitcoin enthusiasts.

  And Amsterdam had just been one stop on what he’d begun to think of as his Comeback Tour: a multiweek, globe-trotting excursion, filled with speaking gigs, meet-ups, and sit-downs. Everyone wanted to talk about Bitcoin. Contrary to conventional wisdom, the price had skyrocketed since Silk Road had gone down, actually reaching $1,000 a coin within one month of Ross Ulbricht’s arrest. The tenfold rise was incredible to fathom: the Winklevoss twins alone were now sitting on $200 million in Bitcoin. And though BitInstant might have been down—temporarily closed, momentarily shuttered—Charlie certainly wasn’t; he was still one of the main faces of Bitcoin. Even if the twins weren’t taking his calls, even if they were really trying to move past him, even if his site was technically down, he would return, bigger and brasher than ever. He might have stumbled, but he was the real deal, a real OG, and still just as popular as ever, as evidenced by the reception from the Amsterdam fanboys.

  “Truly,” he said, pulling Courtney closer to him as they moved, “it’s a thing. I think it was from Anthropology 101. Society is made up of structures. That’s how we cope with all of the things we can’t control—life, death, illness, love, the fucking weather. We make structures and we live in them. But when we cross out of those structures, we enter a weird, strange, odd state.”

  “A liminal state,” Courtney repeated. Only a few people separated them from the double doors now; they were nearly out of the Jetway and into Customs and Immigration.

  “Yeah. And when you’re in a liminal state, everything just feels off. Like your feet aren’t entirely on the ground.”

  His carry-on caught on a seam in the Jetway floor, and he had to give it a yank to keep the wheels going forward. Courtney laughed again, pulling him along.

  “And you think the walk to Customs at JFK is a liminal state?”

  “Isn’t it? Look at all these people. Coming off a plane, which is about as unnatural and inhuman as any place can be. And we haven’t entered the next structure yet, we’re not in New York, but we’re not in Europe. We’re in this place that doesn’t really exist on a map. We’ve gone liminal.”

  They stepped into the vast room they were well used to by now, full of various lines of travelers waiting to exit the liminal statelessness of the airport. They chose what appeared to be the shortest line—leading to a window managed by a bored-looking agent with a ring of curly blond hair and narrow eyes. Beyond the agent, Charlie could see a second set of double doors that led out into the airport proper, into the morass of JFK.

  “Until we go through those doors.” He pointed. “Then we’re in New York. We’re back in our lives, our structures, and we can feel normal again.”

  “So maybe we should enjoy the right now. Embrace the liminal.”

  He leaned over and kissed Courtney—and then the line was moving, faster than usual, because it was a Sunday, and maybe because it was late enough that the Customs agent didn’t want to spend any more time dealing with tired passengers than they wanted to spend with him. Ten minutes, maybe fifteen, and Charlie and Courtney were at the front of the line, and the man waved them forward.

  Their turn.

  As Charlie reached the window where the man sat, those narrow eyes barely looked up; just a hand held out, a wave of fingers, the universal sign for “passport please.” Charlie had gone through this routine so many times in the past months, it had truly become rote. He handed over his and Courtney’s passports, then leaned back against his carry-on, waiting for the man to check his computer, issue the stamp, and get them on their way.

  But to Charlie’s surprise, the man did none of those things. Instead, he just sat there, looking at Charlie’s passport.

  “Is there some sort of problem?” Charlie asked.

  The man didn’t answer. Then Charlie felt Courtney’s fingernails digging into his palm.

  “Charlie.”

  He turned—and saw another man in uniform approaching from behind Courtney, and he realized it wasn’t a Customs uniform, it was something else, something he didn’t recognize. More like a suit, but with a badge attached to the lapel.

  And handcuffs, hanging from his belt.

  Charlie turned back toward the Customs window—and saw another uniform approaching from the other side. Before he could register what was going on, he was boxed in.

  The man in front of him stepped past Courtney and looked him square in the eyes.

  “Are you Charlie Shrem?”

  Charlie looked from him to Courtney, real fear on her face. Then he turned back to the man.

  “You’ve got my passport,” he said uselessly to the man behind the desk.

  “We need to ask you a few questions.”

  And suddenly they had him by the arm and were leading him out of the line. Courtney was still next to him, rushing to keep up, and the second man moved alongside her. Charlie could see that she was shaking, that there were tears forming in the corners of her eyes, and he wanted to tell her not to worry, that this was obviously some sort of mistake. But he was too terrified to think of any words. As they moved he could also see people watching from all sides, some he recognized from their flight from Amsterdam, some from different planes. All those eyes, watching as he was led through the Customs area, an atmosphere of silent attention that felt so strange, so—

  Then suddenly they’d reached a door at the back of the Customs area, a door Charlie must have walked by many times before but had certainly never noticed. Charlie was alone—where had they taken Courtney?—in a room with a long metal table in the center. The door was shut behind him with a metallic click.

  “Where are we?” Charlie finally gasped.

  “A secondary screening room,” the man still holding his arm said. “My name is Officer Gary Alford. I’m a special agent for the IRS.”

  And suddenly, in one swift motion that pair of handcuffs came off of the man’s belt and flashed toward Charlie’s wrists.

  “Wait,” Charlie said, panic tearing through him. “What’s happening?”

  “Mr. Shrem, you’re under arrest.”

  The words hit Charlie like bullets and he actually swooned, his knees buckling, but the man was holding him up by his arm. His wrists burned where the cold metal of the handcuffs touched him.
>
  “For what?”

  Before the man could answer, the door clicked open and more officers poured into the room, in twos and threes. There must have been fifteen of them. Some of the badges he recognized, others looked foreign. He saw NYPD, FBI, DEA. JFK Security, customs agents, more IRS.

  Jesus Christ.

  “This is a combined arrest,” Officer Alford said. “Multiple agencies have been involved for some time.”

  Involved. Charlie realized, this wasn’t just happening now—this had been happening for a while, maybe weeks, months—years? His arrest was the culmination of an investigation involving what appeared to be dozens of people. They had been following him. God only knew for how long. But what had he done? What could this be about? Aside from smoking a little pot here and there, what crimes had he committed?

  “We’re going to move out now,” the officer said, not a request, a statement, and Charlie was being moved again. Out the door and down more hallways, a parade of law enforcement trailing behind him. For a moment, he could hear Courtney crying somewhere down the hall. Then they took him through another door—and into a much smaller room, what was really a concrete cell. The door shut behind him—and for a brief moment he was all alone.