Page 101 - Forbes - Asia (July - August 2018)

CRYPTOCURRENCIES
fect crypto prices. For example, when the CME ner Richard Liu of Tron CEO Justin Sun. Sun’s
Group announced it would launch bitcoin fu- 450,000-follower Twitter feed is filled with pro-
tures contracts last December, Zhou went long motional messages, like a recent tweet featuring
on the bitcoin uptick. When news broke that Tron’s logo on Times Square’s Nasdaq Jumbo-
the Japanese exchange Coincheck had been tron with the caption “#TRON hits #NAS-
hacked earlier this year, he quickly went short. DAQ once again! We’re going to change block-
In 2017, FBG says it quadrupled its money in chain, the internet, and the world! We’re going
trading, although the company declines to dis- full speed. Don’t get left behind.” Sun has hyped
close any details. Tron to a $18.9 billion peak market value, de-
Not all of FBG tactics seem completely spite no meaningful revenues.
aboveboard. One little-publicized investing dy- FBG also has a reputation for getting in and
namic that FBG’s executives gloss over is its re- out of investments quickly. “They’re flippers,”
lationships with cryptocurrency exchanges, the says Yubo Ruan, founder of Palo Alto-based
crypto equivalent of the NYSE or Nasdaq. Typ- 8 Decimal Capital, a rival crypto hedge fund.
ically, when a new token announces its listing “Their reputation is pump and dump.”
on a top exchange, the price jumps because the Liu, a former investment banker who joined
new liquidity is perceived as an endorsement. FBG in June 2017, vehemently denies the accu-
Zhou has cozy relationships with the three sation. The firm doesn’t disclose its ICO trad-
most active crypto exchanges: OKEx, Binance ing history and is reluctant to reveal specific
and Huobi, each processing $500 million to $1
billion or more in crypto trades a day. Using
these connections, FBG has helped ICOs it has One little-publicized investing
invested in, like Zilliqa, obtain listings on the dynamic that FBG’s executives
exchanges.
Many crypto hedge funds try to influence gloss over is its relationships with
exchange listings, but FBG has a compelling ad- cryptocurrency exchanges, the crypto
vantage: trading volume. Since FBG is an active
market maker—it says it does $10 billion worth equivalent of the NYSE or Nasdaq.
of trades a month—it can direct orders toward
any given trading platform, bringing more rev-
enue to an exchange. holdings. One exception: Aeternity, which com-
Zhou says he doesn’t have any “special petes with Ethereum, the second-largest cryp-
rights” to influence which coins get listed on to platform. Founded by Yanislav Malahov, the
any exchange. He can only make recommen- self-anointed Godfather of Ethereum, Aeternity
dations, and exchanges make their own deci- offers so-called off-chain features.
sions. Even if that’s the case, one problem with So far in 2018, bitcoin has dropped more
these arrangements is that they’re not all dis- than 50%. Liu claims FBG’s trading has been
closed. Singapore-based Huobi, for example, profitable each month, even though he also
has a committee of outside partners who make says its ICO investments are down about 30%
token-listing recommendations, which are pub- in the current bear market.
lished on its website. FBG is on the committee. Like most big crypto investors, FBG worries
But Binance makes no such disclosures. about regulation. Zhou’s biggest concern is that
Hyping its investments is another strate- the SEC could say, “All these tokens are illegal.”
gic priority in FBG’s business model. In China, Dark clouds be damned, FBG is pushing ahead,
FBG connects ICOs with media agencies that soliciting investors for its new Cayman Islands-
pay bloggers to write positive reviews of their registered Volatility Token Fund. It has already
tokens, apparently a common practice in Asia. raised $100 million, with fees of “1.5 and 20.”
Last year FBG invested in Tron, a crypto plat- Besides Sequoia and Polychain, Beijing’s Bit-
form that says it’s creating “a global free con- main, the biggest bitcoin mining operation in
tent entertainment system, utilizing blockchain the world, has committed to FBG’s new fund.
technology.” Tron originated in China and has “We want to be an institution rather than
been widely criticized for allegedly copying just people making money,” Liu says from a
pieces of its research documentation directly restaurant in San Francisco. Who knows? In
from another crypto project, Filecoin. a market where being antiestablishment is re-
Why did FBG buy into Tron? “We thought warded, FBG’s fuzzy money management ap-
he was a very good marketer,” says FBG part- proach may be just right. F

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