by Dan Conway
That morning, I received an email from Sean, a friend of ours who owned a midsize financial advisory firm. Our sons were friends. Eileen and I adored the whole family.
I’d previously confided in him about our investment in ETH. Since then, he’d boned up on crypto. I’d made the decision to have our money managed at his firm at some point in the future. I said I’d be in touch to schedule a meeting. Now he’d beaten me to the punch.
The subject of his email was Financial Emergency. He said he’d clear his calendar to meet with us that day if we could make it. Eileen looked relieved when I told her about the meeting. Sean’s the kind of guy you want to have custody of your children if you are killed in a head-on collision. His good judgment and maturity might be just what we needed.
“Hi Dan, hi Eileen!” Sean was looking bright and cheery. “There are coffee and muffins in the conference room. I’ll be there in a minute.”
I wouldn’t have minded a muffin. I knew Sean wouldn’t have one. Whenever we went out to dinner with him and his wife Cathy, I noticed he never ate too much. When depressed, I could consume a dozen Krispy Kremes and two containers of whole milk.
We settled into the conference room and waited for Sean and his director of wealth management. It was a crisp spring morning, and the view from the window looking over the San Francisco Bay was beautiful.
I looked over at Eileen, who was looking at the big screen. The title of the first page of the presentation was Conway Wealth Management Plan. That had a nice ring to it. Eileen looked dazed, and I think this was the first time she realized that our lives might be changing.
Pleasantries dispensed, Sean got to the point.
“Dan, I want to compliment you on identifying ETH and having the guts to invest in it. It’s up six hundred percent in the last three months. I’ve never seen anything like this in my twenty years in finance.”
I nodded and took a slug of coffee, which was still piping hot. “The good news is that it still has a lot of room to run,” I said.
“I won’t presume to tell you about ETH, because you know way more about it than me, Dan. But what I can tell you is that no matter what the asset is, after a rise like this, the price could drop precipitously, simply because it has gone up too fast. I’ve worked with many people over the years who got half of a trade right—buying low—but then blew the second half by not selling because they didn’t want to miss the top.”
I leaned forward and laced my fingers in front of me on the table. I wanted Sean and Eileen to know he had my full respectful attention. While Sean was speaking, I remembered the famous quote from Bernard Baruch, the Wall Street financier, who said, “I made my money by selling too soon.” That made sense in theory, but he didn’t own any ETH.
Each of Sean’s data points and anecdotes were making the case that selling at least a big chunk, maybe half or more, was the prudent thing to do. “Early in my career, during the dot com bust, I saw a couple in their forties watch the value of their Cisco stock decline from $7 million to $900,000,” he said. “They were going to retire, but they ended up having to keep working.”
Eileen was nodding. I didn’t blame her. He was making a lot of sense. This was actually what I wanted to happen in that meeting, a little cold water dumped on my burning-hot euphoria. Selling a big chunk seemed like the smart thing to do. But while I had been looking forward to this meeting, it had been like looking forward to exercise. Now I didn’t feel like going to the gym.
“I’m willing to sell some. I think that would be smart. But, honestly, things are just getting started. The biggest conference of the year, Consensus, in New York, is happening in a couple of weeks.”
Regardless of trading patterns and financial psychology, in spite of economic history, my reasoning told me that ETH was going much higher, and soon. I noticed my voice speeding up. I tried to slow it back down and verbalize my thoughts in crisp bullet points. “Everything’s coming together. Mainstream interest is starting to pick up. Consensus could spark an even bigger rally.”
But I was here to be reasonable, to a point. I leaned back in my chair and asked Eileen a question. “How about we sell enough to get our entire investment out and to pay the taxes if ETH crosses $125? If ETH falls to $30, we’ll do the same thing. That will cost us more ETH, but either way, we can’t lose.” I wasn’t worried in the least about ETH dropping to $30, because I was confident it was still going up.
Sean jumped in. “Eileen, you said paying for the kids’ college education is a priority. Dan, are you sure you don’t want to sell more now to lock that up?”
“Yeah, maybe we should do that, Dan?” Eileen was deferring to me. A right I felt I had earned, considering the performance of this investment so far. That felt good.
“Guys, I’ve been watching this so closely, I have a good sense of what is going to happen next. I’m up for taking more out if it goes beyond $125, but I’m positive we should just focus on a plan for getting our initial investment out right now.”
Of course, no one knows what’s going to happen next with an investment, but I didn’t care, because I felt I did. I had raised my voice a little bit and was trying to contain the emotion I was feeling.
“Sean, we made this investment because we wanted to become financially independent. The goal is to not have to work anymore, not just to make a chunk of money for our nest egg.”
I’d tried to discuss this with Eileen before, but she never seemed to hear me. But now she knew that I meant it. Everyone in the room knew I meant it. I wasn’t going to go full-rational when this moment required us to continue going rogue.
“Eileen, are you ok with this?” I asked.
I thought she might be mad, but she wasn’t. She seemed satisfied to have a plan that meant we wouldn’t end up any worse than when we started. “Ok, as long as we stick to our plan to get our money out if it starts dropping.”
“Absolutely.”
We turned back towards Sean and the team, who’d been watching this marital moment play out in front of them. “OK, we have a plan,” Sean said. He started gathering his papers together. He looked satisfied. After a few minutes of small talk in the lobby, we thanked everyone and headed for the elevators.
We had a plan that would protect the upside of what I considered the greatest investment opportunity of a generation, perhaps in the history of the world.
***
At Sean’s recommendation, we engaged a new CPA based down the road in San Jose. He knew a lot about stock options and things like that, so I assumed crypto taxes would be more in his wheelhouse.
He greeted us as we walked through his office door.
“Hello, Conways!” He was of African descent, and his voice sounded like God’s. We liked him immediately.
For thirty minutes, we told him our story and explained our financial picture. He seemed to be a really great guy and shared our values. We exchanged stories about our kids. Then he got to his punch line.
“Well, Sean briefed me. And I’ve been doing my own research. I can tell you that crypto is mainly used for money laundering. I’d recommend that you get out of this investment at your earliest opportunity.”
Oh, boy, he was one of those. Eileen looked shaken, but this was music to my ears. It was another proof point that most people still had no idea about what crypto was. There was still room for crypto to run up in price while the mainstream caught up. Crypto was for real. Ethereum was going to change the world. Maybe not tomorrow, but someday.
Chapter Twenty-Two
Summer Dreams and ICO Madness
In the spring of 2017, Blockchain was becoming a big deal, and I saw a business opportunity. I decided to put Zealot Communications on steroids, hire a full team, rent an office space and prepare to take on a bunch of new clients. The goal was to become the number-one crypto/blockchain PR firm in the world. We’d be a big platform and help the industry’s most important projects.
My LinkedIn profile would be gloriously reborn with some Jedi-sounding crypto skills a
nd knowledge. People at Acme had been looking at my profile. I wished I could be there when they read my new career headline: Prophet of Decentralization.
In this new mega-firm, I’d primarily manage the employees, since Eileen preferred to continue working from our kitchen table. I’d start by finding some post-collegiate millennials and teach them the ropes. An image of me addressing a couple of new employees entered my mind. I’d make a joke, then insist, “JUST KIDDING!”
I wondered how long it would take until those little fuckers made fun of me behind my back. I pictured me leading a study session on cryptocurrency and blockchain. How many times would I say the same thing a different way while still not properly explaining the concept before they tuned me out?
Would they earn their keep? I’d have to create some systems and weekly reports to track their productivity. Would they try to start their own shop and steal my clients? I’d keep an eye on them and guard my relationships. Would I have to throw a holiday party and invite their partners for an evening together when I’d rather be at home eating some cornbread and chili? I’d be the boss, so I’d better dust off the Santa outfit.
There were reminders in the real world that I might not be cut out to be a big shot PR consultant. I’d had the opportunity months earlier to meet with the marketing team at a16z, a leading venture capital firm headed by Marc Andreessen. I’d gotten the meeting by reaching out to Cindy, a colleague at a past job. At the time, I was one of the few PR people pitching myself as dedicated to crypto/blockchain.
The meeting went well, and now with crypto popping and the media paying attention, a16z recommended me to someone in their network. His name was Olaf Carson Wee, the first Coinbase employee. Olaf had left Coinbase to start Polychain Capital, one of the first and most-prominent crypto hedge funds. Olaf was a super sharp guy. I admired him for his broad and mature perspective on the future of crypto. He’d soon be on the cover of Fortune. He emailed me and wanted to talk. I was totally thrilled—this was the type of client that could make our business.
The conversation started off well, and I believe he could tell that I knew this space and had a passion for it. He explained that a number of crypto projects his fund had invested in, many built on the Ethereum blockchain, would need help with marketing and communications. Could he send them my way? Umm, yes. That’s what I should have said and then gotten off the phone. But during our final minutes of small talk before we said goodbye, he mentioned Cindy and said how much he had enjoyed working with her. My nervous energy and perhaps disbelief that I was going to be a big player in crypto sent words to my mouth that completely surprised me. “Yes, Cindy and I have done great work together.”
No, we hadn’t. I’d never worked on a project with her. There seemed to be a pause on the line, and then we finally said goodbye.
I imagine that before calling me, he’d gotten the skinny from a16z, which was probably something like, “He seems like he knows what he’s talking about. He and Cindy worked at the same firm many years ago, but we haven’t worked with him, so see what you think.”
I never heard from Olaf again.
I also met with the folks at Dfinity Labs. They were getting ready to launch a new blockchain that was complementary and somewhat competitive to Ethereum. These guys were the real deal, with serious computer science and crypto credentials. Especially Dominic Williams, who was in the Vitalik-echelon of original blockchain thinkers and made sure I knew it. While I believed Ethereum would dominate the smart contract space, I also believed there was room for other breakthroughs, and if anyone was going to pull it off, these guys were contenders.
I met them at a house in Palo Alto that they were using as an office. We talked for an hour, half in the kitchen while coffee was being made, half on bean bags in the living room. An assistant took detailed notes as I talked, which was flattering but a little unnerving, because I didn’t want them to steal my approach and do it themselves. Following the meeting, I sent them a proposal that included the two bolded lines below that will go down in infamy:
One area of focus that I think should start now is advancing Dominic himself as one of the blockchain visionaries beyond the crypto sphere. My brain is still ringing after our discussion in the kitchen on Friday. I recall that scene from Good Will Hunting where that professor says he is one of a handful of people who knows the difference between himself and Will.
The fact is that no one outside of a handful of people knows the difference between the charlatans, posers and average minds in this space and the scientists like Dominic who are coming up with original work and breaking new ground. To keep things real—I’m sure Dominic has his faults—and I’m not trying to say nice things just to get this business. But I believe this is an asset that needs to be used in this crazy Wild West environment where big personalities and big ideas are grabbing the headlines, regardless of whether they are worthy.
Was I trying to be this guy’s best pal or PR consultant? Telling someone you barely know that they are a transcendent genius and then telling them they “have their faults” was not normal communication for engineers—or anyone, really. I didn’t hear from them at all, which pissed me off. I followed up about six weeks later, and they said they were still considering their options. I never heard from them again. Dfinity would go on to raise $190 million in private equity over the next year.
Flip Side always seemed to rise up and slap me in the face whenever I was supposed to show my competence. I had to wonder if this problem would somehow magically disappear. I talked to Eileen, and we decided to put our mega-firm on hold. We’d keep it small but hopefully lucrative and only take on as much work as the two of us could handle.
Despite my uneven business-development track record, there was no lack of other prospective clients.
A new phenomenon had sprung up, and it had crypto by the throat: Initial Coin Offerings (ICOs). ICOs, like Initial Public Offerings (IPOs) for traditional stocks, are mechanisms for funding new projects. Anyone with ETH or bitcoin could contribute to the development of a project and, in return, receive ownership in the form of tokens, which could be bought and sold like any other crypto asset.
It was a gold rush. Ethereum competitor Tezos raised $232 million in two weeks. Another competitor, EOS, started a year-long ICO that would eventually raise $4 billion. Yes, billion. Status, an open-source messaging platform and mobile browser for dApps on the Ethereum network, raised $100 million in less than twenty-four hours. Aragon, an Ethereum-based toolset for creating and maintaining decentralized organizations on the Ethereum blockchain, raised $25 million in twenty-six minutes.
The funding for projects like these at the early stages of development would be considered seed rounds in traditional venture funding. Seed rounds usually raise between $50,000 and $2 million. These ICOs suddenly had more money than they would ever need at the earliest stage of their development, before it was clear that their projects were even technically feasible.
We started receiving dozens of requests per week from people wanting PR help for their ICOs. Some of these were get-rich-quick schemes backed by nothing more than a white paper and a pitch. Others were of unknown or questionable provenance. Still others were potentially credible but would require immense, groundbreaking software engineering and blockchain development before coming to fruition.
Alleged scammer LandCoin sent a note with grammatical errors and addressed it to another firm—a cut-and-paste job gone wrong in their frantic effort to blast out the details of their token sale.
Bitconnect is the notorious alleged Ponzi scheme which became a cautionary crypto meme and is the subject of an FBI investigation. They asked if we’d like to advertise on their website.
LevelNet eventually shut itself down after regulators in Vermont took action against them for allegedly making unrealistic claims to investors.
Arthereium was planning an ICO for art collectors. They said cryptocurrency would democratize access to fine art by utilizing blockchain technology, artifici
al intelligence, and virtual reality.
Paragon, which was founded by a Russian multi-millionaire tech mogul and his wife, a former Miss Iowa, was launching a token for cannabis. The rapper The Game was on their advisory board.
Skedaddle was planning an ICO to launch “Uber for buses.”
Fishweight.net created an app “by fisherman for fisherman,” which would track the size and weight of the fish they catch.
Heads Up 7 (“By Millennials—For Millennials” … strike one) wanted to create “a live-streaming platform where everybody can make money.”
A service that shamelessly stated they grab expired domains, called dropcatching, wanted to pump it up with some ICO money. They concluded their note by stating, “I hope this will seduce you.”
Agents on behalf of the descendants of Nikola Tesla wanted our help for a project involving hydroelectricity.
Pomegranate Value Chain needed ICO funds to create a channel to connect pomegranate farmers and pomegranate buyers.
And among the least promising was a note from a gentleman who, through cursory research, turned out to be a freelance writer with many complaints for not completing his projects and not refunding fees. He directed us to lay out our ICO launch strategy in detail, soup to nuts, and he’d get back to us.
It is not my intention to denigrate every project that pitched us. Some of their goals were noble, and I can imagine blockchain solving some of the problems they identified. But it was next to impossible to pick the winners from the losers, the honorable from the crooked. We also received pitches from undeniably legit and promising projects and firms like Sia Coin, Medici Ventures and Airswap.
In one sense, it felt great that there was suddenly so much energy in crypto. But it was unnerving. Every naive overachiever, criminal, and legitimate entrepreneur was trying to squeeze through the narrow ICO passage and raise millions of dollars before this mania ended. The SEC and other regulators around the world, while expressing caution, hadn’t fully wrapped their arms around what was happening. ICOs at this time were still in a glorious gray zone. And so the founders of these projects crushed each other and all of us with their emails, Reddit posts, tweets, YouTube videos, and meetups, all intended to shill their particular coin before the gray zone turned red.