Whether cryptocurrencies and the technology that powers them will reshape the financial system remains to be seen. What’s not in doubt is their ability to transform the career paths of bright young minds on Wall Street.
Adrian Xinli Zhang was climbing the ranks at Deutsche Bank AG in New York when he discovered Bitcoin. The 29-year-old made enough money trading digital currencies in his spare time to leave the German bank in March, the same month he was promoted to director, people familiar with the matter said.
At Goldman Sachs Group Inc., Jonathan Cheesman, 36, and Justin Saslaw, 28, are among at least three front-office employees in New York who quit the bank this year after making personal profits from cryptocurrencies, said people with knowledge of the situation, asking not to be identified. In London, Asim Ahmad pocketed enough from investing his savings in Ether to walk away from BlackRock Inc.
“I’m in a position where it doesn’t make sense to work at BlackRock anymore,” said Ahmad, who advised pension funds on investments in alternative assets and hedge funds while at the world’s largest asset manager. “The one-day volatility of my portfolio is higher than my salary, so if I get a few investments right then I’ll have made the same as my yearly wage and everything else on top is a bonus.”
Officials for BlackRock, Deutsche Bank and Goldman Sachs declined to comment on their employees’ investments or their departures.
While the Wall Street establishment debates whether cryptocurrencies will become a profit center or a legal liability, some employees have gotten wealthy enough from personal investments in digital assets to turn their backs on promising jobs at top firms. A small but growing group of finance professionals has built up a big enough financial cushion to eschew the safety net of a monthly salary.
Instead of heading to the beach or squandering their trading proceeds on luxurious living, some of the new digitally-moneyed have become such ardent believers in the power of blockchain, the technology behind Bitcoin and other digital assets, that they’re starting their own businesses. Ahmad says he now helps run a fund that invests in blockchain ventures with a positive social or environmental impact. Zhang is working on a trading platform for digital assets, according to a person familiar with the matter.
Zhang, formerly a trader on the centralized risk desk at Deutsche Bank, started investing in cryptocurrencies in his spare time last year and has traded more than $1 million worth of the assets, the person familiar said. He exchanged tips and trading ideas with colleagues, including Yao King, head of program trading and exchange-traded fund trading for the Americas, who also made sizable personal profits from crypto trading, said people familiar.
Aside from just buying and selling coins, some seek to profit from inefficiencies in the market, such as the variance in the price of Bitcoin on different exchanges and the difference in pricing for futures contracts of varying expiration dates. When the first Bitcoin futures started trading on a Sunday evening in December, King stayed up all night and at one point his trades accounted for a third of all open interest in the March Bitcoin future, according to people familiar with the matter.
When Ahmad first came across Ether in 2016, the same year he joined BlackRock in London, he invested all the savings he had available from six years working for an investment consultancy in Northern England, or 10,000 pounds ($13,250). While declining to say how much money he made from his investments, which included participation in initial coin offerings, he said Ether cost about $10 when he invested. It now trades above $500 and cost more than $1,400 earlier in the year.
“If you start mentally spending this money it will hurt you when it falls,” said Ahmad, who quit BlackRock in March. “If you enjoyed the volatility on the way up you have to accept it falls as hard if not harder at times.”
It’s not only financial professionals who saw the extreme volatility and immature market infrastructure of cryptocurrencies as a money-making opportunity. Scammers and criminals have also targeted the market, prompting regulators from China to the U.S. to scrutinize digital assets.
Authorities worry virtual currencies are susceptible to fraud because exchanges are not actively pursuing cheaters, wild price swings make it easy to push valuations around and digital assets aren’t currently subject to regulations like those that govern stocks and bonds. The Justice Department has opened a criminal probe into whether traders are manipulating prices, while the Securities and Exchange Commission is investigating initial coin offerings.
The whipsaw ride in cryptocurrencies in the past six months, which saw Bitcoin trade between around $6,000 and $20,000, has fueled debate among laymen and Wall Street luminaries alike over whether financial institutions should seek to make money from digital assets or avoid them like the plague. Whether they embrace it or not, the rise of crypto has forced the biggest banks and money managers to acknowledge an asset class that could previously be dismissed as a side-project for libertarians or a playground for criminals.
While many on Wall Street preach the virtues of blockchain, opinion is divided on the benefits and longevity of cryptocurrencies. Digital assets have even proven divisive within firms, with managers often at odds with subordinates, said Adam Grimsley, a former BlackRock fixed-income specialist who co-founded a crypto hedge fund in London called Prime Factor Capital.
“You’ve seen a bifurcation internally at many larger houses where senior managers are very skeptical about crypto, while graduates and younger team members are very positive,” said Grimsley. “The youngsters may have less intellectual baggage and may be more open-minded, but they also have less responsibility for managing risk and working out the practicalities of bolting on crypto to the existing business.”
And while their seniors work out the institutional stance, the juniors are leaving.
“Crypto is certainly a market that’s pulling away real talent from financial services,” said Chris Matta, 28, who left Goldman Sachs’s money management unit last year to co-found an investment firm for digital currencies called Crescent Crypto Asset Management.