Blockchain redemptions and Bitmain’s IPO

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[header date=”28 March 2019″]An disgraced energy exec weighs a blockchain comeback, and Bitmain shelves its plan to go public.[/header]

The blockchain renaissance

Jeffrey Skilling knows a thing or two about blocks and chains. A few weeks ago, the former CEO of Enron was released from prison, having served 12 years for his role in the energy giant’s collapse. Now a free man, Skilling is preparing for a new energy venture, one which is rumored to use blockchain technology, according to the Wall Street Journal.

Skilling’s pivot has been mocked for being inauthentic and exploitative, but his attempted rehabilitation under the banner of blockchain is hardly unique. Blockchain has become a popular avenue to personal—and corporate—renaissance. It’s given exiled executives a last gasp at relevance and granted floundering startups unexpected cash injections.

John McAfee, famous for his eponymous anti-viral software before a turn toward bizarre behavior and run-ins with the law,  experienced a career revival through his association with MGT Capital, a company which focuses on bitcoin mining. Another executive who went full crypto is Mike Novogratz, who launched a crypto hedge fund after Fortress Investment Group removed him as a partner. Blythe Masters, the JP Morgan executive credited—or blamed—for inventing the financial instruments that helped bring about the Great Recession, found new life as CEO of Digital Asset Holdings.

The record-keeping system pioneered by bitcoin has been celebrated for enabling digital transactions without intermediaries, but blockchain’s capabilities have been distorted and magnified by hundreds of entrepreneurs, who claim the accounting system is useful in other disciplines as well, producing head-scratching projects like Dentacoin, a “blockchain solution for the global dentistry industry.” To date, few projects have proved useful outside the realm of currency. Still, as consumers have grown increasingly cost-conscious and concerned about privacy, low-cost, crypto-based systems have been hailed as the future of finance.

Fortunately for individuals with a sullied reputation, like Skilling, the bar for raising capital is a lot lower in the blockchain universe. “In the cryptocurrency space, no one is going to care too much about Enron,” Peter Henning, a former prosecutor for the  Justice Department, told the Journal. Many bitcoin investors are too young to remember the gravity of Enron’s demise or the subsequent collapse of Arthur Anderson, a “big five” accounting firms that signed off on Enron’s books.

The crypto universe, with its rule-bending ethos and tolerance for outlandish schemes, is a soft landing spot for tarnished executives looking for a comeback. It helps that crypto investors—primarily young men—are an easy mark, guided by a desire for easy money, and a willingness to ignore obvious red flags. Near the peak of the bitcoin boom, some blockchain projects even managed to raise money while faking their founding teams. Greedy buyers just clamored for trading returns, paying almost no attention to whether an underlying project was viable, or even existed.

For Skilling, a blockchain rebirth makes legal sense, too. Although he’s permanently prohibited from being a director or officer for a public company, some blockchain-based organizations exist in a regulatory grey area. While making his new venture available to the investing public would be ill-advised, Skilling could solicit private investors, without facing sanctions from the Securities and Exchange Commission. Skilling’s attorney did not return a request for comment.

For executives fallen on hard times, blockchain has given them a chance to reclaim their former glory. There’s nothing more American than a second act but you might be wise to let them reach for stars again with someone else’s money, not your own.

What you need to know—and why

Crypto mining IPO lapses. Bitmain, a Chinese company that manufactures bitcoin mining equipment, allowed its IPO application with the Hong Kong Stock Exchange to lapse Tuesday (March 26). The company, which is responsible for producing as much as 80% of the world’s crypto mining hardware, was seeking an $18 billion valuation from public markets.

[takeaway]As crypto prices skyrocketed and then cratered, so too did demand for mining equipment. Bitmain enjoyed approximately $1.2 billion in net profit in 2017 and $1.1 billion in profit during in the first quarter of 2018. However, the company reportedly lost $500 million in the third quarter of 2018, due to a drawback in crypto prices and tapering demand for bitcoin miners. Although Bitmain may revisit an IPO in the future, it seems unlikely to find favor with investors as long as its financial health depends so heavily on the volatile crypto markets. ↗️[/takeaway]

Please send news, tips, and energy titans to Today’s Private Key was written by Matthew De Silva, and edited by Oliver Staley. Go forth, and set the world aflame.