Headline: Why are all the executives fleeing from the cryptocurrency firms?
Date:10/26/2022
Why are all of the cryptocurrency executives suddenly stepping down?
Body: Remember that old trick from college? Just after dessert, just before the check arrives, you develop the sudden need to use the bathroom? Then (ostensibly after washing your hands) you return to the table, and like magic, the check has been paid. It seemed to always work (until you got a job.) Well, something similar seems to be happening in the C-suite within cryptocurrency firms. Like rats escaping a ship, they all seem to be jumping at the same time. In my brief research, I found 6 of them leaving within a few months. The question as to why has to be asked.
Is this REALLY a big problem?
It appears to be a real problem, because at about the same time as executives parachute out, the cryptocurrency seems to lose all value. And this sequence of events is repeated. Don’t believe me? A few examples:
| Name of Executive | Name of Cryptocurrency Concern | Details |
| Brett Harrison | FTX | Various M&A activity |
| Alex Mashinsky | Celsius | Filed for Bankruptcy, consequent to a $1.2 Billion shortfall on their balance sheet. |
| Michael Moro | Genesis | Various M&A activity |
| Jesse Powell | Kraken | He claims that he needs more time for “personal stuff.” Timing is consequent to the firm being accused of traffic with Iran. |
| Michael Saylor | Microstrategy | This was related to bankruptcy of Three Arrows Capital. |
| Sam Trabucco | Alameda Research | “to prioritize other things.” |
| Changpeng Zhao | Binance |
These are just a few of the cryptocurrency executives who have quit their jobs in recent days. Given that the industry is so new, this gusher of governance leaving is a major concern. The question we have to answer is , “Why?” Particularly interesting would be, “Why now?”
To answer this conundrum, I might offer a few observations that come to bear on these questions.
Laissez-le-bon-temps-roulez!!
Apologies to anybody reading this who knows French. But, the good times will roll, until they don’t. When these CEOs took over 1-2 years ago, cryptocurrency was on a tear, and these CEO were raking it in, hand over fist. Well, the good times have stopped for now, and the piano player is demanding to be paid. Welcome to reality, indeed, as cryptocurrency values have almost universally tumbled. Bitcoin, for example, lost 60% of its value. This first major slap in their faces, could go a good way toward explaining the exodus of cryptocurrency executives. But wait, there’s more. In the last decade or so, cryptocurrency has had to deal with attempts to regulate it. Said one expert, “If there is a firm in complete crisis and meltdown, you need an adult in the room, and you need that adult in the room to understand regulation and compliance.” This same professional seems to think that the shifting is not yet over.
Inflation
Yes, another mention of the “I” word, and I don’t mean, I-phone. During the pandemic, the U.S. government was forced to make decisions in monetary and fiscal policy that made inflation a very serious threat. Doubtless, you are aware that that particular bird has come home to roost. Badly. The resulting inflation is beginning to erode the confidence that buoyed valuations of cryptocurrencies.
Investors
The new regulatory environment is not the only headwind to this industry. Investors in these companies (or projects) are beginning to demand that they see profits. These entities are not used to shareholder pressure, and this too is forcing top executives to consider stepping down.
The Verdict
The cryptocurrency firms are very new, and it’s logical that the leadership is too young to have much relevant experience. But, that certainly makes it no less important that experienced people also be involved. In an open bay with a light breeze and fair weather, almost anybody can handle the tiller. But, it’s when the storm clouds roll in (and, they will) that you want an experienced hand on that tiller, and an experienced one in the bow too.
I did notice one thing that didn’t seem relevant to the discussion above, but seemed a salient point nonetheless. Many of these cryptocurrency CEOs who are stepping down are often stepping into other roles. Many are stepping into new CEO roles representing a different cryptocurrency. This is important to your research efforts, because as you identify the management team, it is now very important to identify whether this team represented other cryptocurrencies before. Would this be good or bad? Good question: I would say it could be either: It would be good if they made all of their learning mistakes with the former cryptocurrency and now had the requisite experience to enable their considered judgement. On the other hand, a series of cryptocurrency projects in the past could denote a very poor management ethos for that team. I guess the important thing to do is look at their behavior and ask if you would trust your money to a banker behaving in this manner. Once again, it is a very individual decision.
REFERENCES
Crypto CEOs are leaving their jobs. Here’s why – MarketWatch
Crypto shakeout engulfs the C-suite as CEOs start stepping down | Pittsburgh Post-Gazette
Kraken’s Jesse Powell to Step Down as CEO of Crypto Exchange (coindesk.com)
Celsius CEO steps down amid bankruptcy proceedings | Reuters
Kraken CEO Jesse Powell steps down | Fortune
Editor’s Note: Please note that the information contained herein is meant only for general education: This should not be construed as Tax Advice. Personal attributes could make a material difference in the advice given, so, before taking action, please consult your tax advisor or CPA.