Speaker 1: This is Bloomberg Crypto, a daily Bloomberg i Hood podcast
Speaker 1: and Humble Donna hiarch In Today for Stacy Marie Ishmael.
Speaker 1: It's Thursday, February second. The digital asset industry is reeling
Speaker 1: from challenges. Many blame on a handful of so called
Speaker 1: crypto bad actors and wayward CEOs. Of course, we're talking
Speaker 1: about the do Quans, the Alex Maschinskis, the Sioux Zoos,
Speaker 1: and of course the same bank Win Freeds. How could
Speaker 1: we forget? But while some industry leaders say they're upset
Speaker 1: by the allegedly illegal actions of some of their peers,
Speaker 1: they still have hope that the digital asset industry will
Speaker 1: thrive and the crypto market will recover. Mike Novergrats is
Speaker 1: a prime example. He's the CEO of Galaxy Digital, one
Speaker 1: of the top investment firms in crypto. The fifty eight
Speaker 1: year old is known for his ubiquitous presence in the
Speaker 1: crypto sphere and his assertive demeanor, which aligns well with
Speaker 1: many in the crypto crowd. Novograts made it through the
Speaker 1: chaos of but that does not mean he and his
Speaker 1: firm were left unscathed. My colleagues Shannali Basik recently sat
Speaker 1: down with him and she joins us now to discuss
Speaker 1: what's next for him. Shinali, welcome to the show. Hi.
Speaker 1: So maybe just to lay out for listeners who might
Speaker 1: not know who my Canvograts is. Who is he, what's
Speaker 1: his background and how has he become this influential figure
Speaker 1: in the crypto space. So he's a very colorful person
Speaker 1: on Wall Street, on crypto, in the philanthropy world. I've
Speaker 1: covered him myself since he spent time at Goldman Sachs.
Speaker 1: He was an early member of Fortress, which is a
Speaker 1: huge private asset firm, and through his time at Fortress
Speaker 1: he got into bitcoin along with his friend Pete Brigger,
Speaker 1: who is another Fortress founder. And again they got in
Speaker 1: in the early when it comes to bitcoins and made
Speaker 1: a lot of wealth early on. Even after some spectacular
Speaker 1: hiccups on Wall Street, no Regrats remained a billionaire after
Speaker 1: having to shut his fund and Fortress that he had
Speaker 1: really headed up and lost a lot of money. Yet
Speaker 1: so this is his third big act. It is a
Speaker 1: time for redemption. But again, like I said, you know,
Speaker 1: it's funny when you ask him about kind of his
Speaker 1: ups and downs on Wall Street, spectacular ups and downs.
Speaker 1: He says, you know, at the end of the day,
Speaker 1: he's made more money than lost. He's still a billionaire,
Speaker 1: and the same is true for the last couple of
Speaker 1: years in Crypto, and Crypto is known for giving people
Speaker 1: maybe second, third, fourth, whatever tries and comebacks. And we'll
Speaker 1: get to that. But can you tell us a bit
Speaker 1: more about his background? Who is he? Because he's known
Speaker 1: for being a wrestler who went to Princeton. I think
Speaker 1: he was actually roommates with a bunch of other people
Speaker 1: who are well known on Wall Street or in the
Speaker 1: crypto space. So tell us a bit more about the
Speaker 1: man himself. He's known for his wrestling background and it's
Speaker 1: something that still permeates through a lot of what he does.
Speaker 1: He makes wrestling anecdotes a lot of time. He grew
Speaker 1: up in a big family, a military family, and his
Speaker 1: dad also wrestled. Mike himself was a Princeton wrestler. From
Speaker 1: what I understand, he was a close to winning a
Speaker 1: state champion as a ship as well so serious wrestler.
Speaker 1: He also, you know, his whole family is kind of famous. Actually,
Speaker 1: his sister Jacqueline Novergrads is a famous venture capitalist known
Speaker 1: for impact investing. One of his brother's works at a
Speaker 1: one of the biggest hedge funds in the world. So
Speaker 1: the family that kind of grew up with humble roots
Speaker 1: ended up becoming this pretty famous family and investing, and
Speaker 1: like I was saying, in philanthropy and even in political circles.
Speaker 1: He was kind of in a group with Stacy Abrams
Speaker 1: when it came to knocking door to door in Georgia
Speaker 1: during some of the most difficult political fights. He works
Speaker 1: closely with the Robin Hood Foundation also, which works to
Speaker 1: get people out of poverty. So he's very well known,
Speaker 1: like I said on Wall Street, but also you know,
Speaker 1: just not even just himself, coming from this amazingly colorful family.
Speaker 1: And by the way, it was so funny because in December,
Speaker 1: when I was in his office, one of the things
Speaker 1: he had on his desk was a New York Post
Speaker 1: story about his entire family, with a post it note
Speaker 1: on the New York Post story saying from his former
Speaker 1: pr chief saying, thanks for betting on me. So he's
Speaker 1: kind of had this insane influence on kind of just
Speaker 1: a lot of people who have worked for him in
Speaker 1: his life, and even with all the ups and downs
Speaker 1: of the past maybe five six, seven years of his life,
Speaker 1: he's also well known for wild parties or maybe a
Speaker 1: sort of like a party boy demeanor. So what's interesting
Speaker 1: is early, I want to say, seen so around seen.
Speaker 1: Remember he left Wall Street after his hedge fun at
Speaker 1: Fortress kind of blew up. They had to shut it
Speaker 1: down return money, and he spent a lot of years
Speaker 1: investing just through his family office. It was this kind
Speaker 1: of trendy little outfit in like the Soho area of Manhattan,
Speaker 1: and he was investing bit coin, making a ton the
Speaker 1: money off a bitcoin at that time. This is pre
Speaker 1: two thousand seventeen, pre the Mount Cox blow up, and
Speaker 1: he realized he was making so much money for it
Speaker 1: that he should start an investment firm. But he was
Speaker 1: having though was so much of the New York crypto
Speaker 1: community was coalescing inside of Mike Novegrass's family office. Every
Speaker 1: single Wednesday night they would have a party. I used
Speaker 1: to go almost everywhere where the fun. They were fun.
Speaker 1: It was funny about it, as Mike was. Sometimes they
Speaker 1: are sometimes not. And it reminds me a lot of
Speaker 1: last year following him around as well, because there were
Speaker 1: a lot of parties, but it was a stressful year.
Speaker 1: So Mike was actually outside of those parties on the
Speaker 1: phone most of the time. When I was following him
Speaker 1: around last year. He's a He's a blast to be around,
Speaker 1: don't get me wrong. In fact, it was lifestyle choices
Speaker 1: that it led to his departure Goldman many an years
Speaker 1: ago is something that has been why they reported on.
Speaker 1: But get a big bar in his office, a little like,
Speaker 1: you know, one of those kind of bar cards. And
Speaker 1: I was asking about him. I'm not fancy enough to
Speaker 1: know all the fancy liquers. I haven't written down. I'm wire,
Speaker 1: but he had a ton of fancy lackers. I asked him.
Speaker 1: I was like, you know, what is this bar for
Speaker 1: in your office? And he goes, you know, I don't
Speaker 1: really drink in the office. My traders do, though they
Speaker 1: raid my bar routine late. So that's really funny. Let's
Speaker 1: go back to the end of because that's when you
Speaker 1: were meeting with him. So what was going on in crypto?
Speaker 1: What was the mood like when you were sitting down
Speaker 1: with him at his office, Like, what were the things
Speaker 1: that were top of mind for him? What did he
Speaker 1: want to talk about well, one of the first things
Speaker 1: I said as I sat down to him was, this
Speaker 1: is probably one of the hardest stories and went to
Speaker 1: write with you because we haven't had a market this
Speaker 1: toppy in a long time. I think that there's a
Speaker 1: lot of soul searching about his place, about Galaxy's place
Speaker 1: in this industry as so much of a shakeout is happening.
Speaker 1: He sat back with his arms crossed. He's interesting and
Speaker 1: how he answers questions when he's not on TV because
Speaker 1: he waits a second and he thinks, he scratches his
Speaker 1: head and then he tells you what he thinks, and
Speaker 1: he's pretty again for journalists, a bit of a journ
Speaker 1: his dream because he tells you where he thinks he
Speaker 1: could have done something differently, and I think something that
Speaker 1: was important and interesting. We're talking about Luna, we're talking
Speaker 1: about Do Kwan. They weren't invested in all parts of
Speaker 1: the empire. But I asked him as like, would you
Speaker 1: do anything different when it came to your exposure to
Speaker 1: Lunin Do Kwan? And he goes, I only met do twice,
Speaker 1: and he goes, I've got to say, now, I would
Speaker 1: want to meet people much more than that. I wouldn't
Speaker 1: want to have to maybe work out of my office.
Speaker 1: I would have done lunches, dinners, coffee. He's like, He's like,
Speaker 1: I already do that a lot. But he goes, knowing
Speaker 1: somebody more is a big lesson coming out of twenty two.
Speaker 1: So it was a very big lessons learned kind of
Speaker 1: moment at the end of last year. Right, And in
Speaker 1: your story you say that he actually had somebody warn
Speaker 1: him about SPF and f t X. Yeah, I would
Speaker 1: die to know who, because interestingly, do you guys remember
Speaker 1: so there was a Friday that that bankruptcy filing was filed,
Speaker 1: the ft X on the fts bankruptcy, So remember, so
Speaker 1: Mike told me that they actually passed on the ability
Speaker 1: to invest in f t X on the unch around. Why.
Speaker 1: I asked why. It was a due diligence. He goes,
Speaker 1: it's actually just a matter of valuation. We thought it
Speaker 1: was too expensive. They passed on the bench around, but
Speaker 1: it was one of many counterparties for them in the
Speaker 1: scope of digital, a Galaxy Digital. It's not a ton
Speaker 1: of exposure, but they did lose seventy seven million dollars.
Speaker 1: So his friend called him on Monday morning. This is
Speaker 1: the weekend, Like the Monday after that weekend, if you remember,
Speaker 1: uh cz over Finance was tweeting about selling his ft
Speaker 1: T tokens and Sam BigMan Freed was tweeting about their
Speaker 1: own kind of financial health before everything crashed. So the
Speaker 1: Monday morning, Mike Negret's got a call gets a called
Speaker 1: from one of his billionaire friends who got a call
Speaker 1: from Sam. Sam at that point was looking for money
Speaker 1: and it was becoming clear that there was a large
Speaker 1: hole in f tx's balance sheet. That's when Mike started
Speaker 1: selling and reducing his exposure dramatically. Remember the one thing
Speaker 1: and again, like I said, this is really a make
Speaker 1: or break moment for Mike. But the one thing he
Speaker 1: has in the benefit of hindsight that a lot of
Speaker 1: people don't have in crypto, especially if you're say thirty
Speaker 1: years old, like Sam Bigmannfried, the what it's like to
Speaker 1: have lost money in the past is an important lesson
Speaker 1: in risk management. There's a lot of people who trust
Speaker 1: Mike because of how much money he's lost. So he
Speaker 1: started selling, selling, selling, They got it out until the
Speaker 1: exposure was just seventy seven million dollars and yeah, that
Speaker 1: that was that, And you know, I think that's an
Speaker 1: important kind of aspect of markets, this intimacy that people
Speaker 1: have and what's going on and how they find information.
Speaker 1: I think, whether you're Mike or anybody, I think access
Speaker 1: to information in the crypto community, you know, it doesn't
Speaker 1: work the same way as it does in other financial markets.
Speaker 1: Sometimes I can't believe we've gone this far without mentioning
Speaker 1: the headline of your story, which is maybe one of
Speaker 1: the most provocative headlines I've ever seen, at least for Bloomberg.
Speaker 1: So it's Mike Nograds wants to punch disgrace cryptotitans in
Speaker 1: the face. Tell us who who he's angry with? Yeah,
Speaker 1: you know, it's funny. An earlier version of this story,
Speaker 1: my first line was Mike nova Grass is frustrated because
Speaker 1: I asked him. I was trying to get a sense
Speaker 1: of his mindset, and frustrated is the best possible the
Speaker 1: way to put it. And you know, the two people
Speaker 1: who wanted to punch in the face were Barry Silbert
Speaker 1: and who was the Digital Currency Group head, who's a
Speaker 1: unit of Genesis Capital is now going under a bankruptcy process,
Speaker 1: and Sam BigMan freed. You know, you think about last year.
Speaker 1: The whole thing started with Luna Three Arrows, but things
Speaker 1: exacerbated so dramatically with Three Arrows, leading to more issues
Speaker 1: over at Genesis, and then concerns about DCG and Barry
Speaker 1: Silver's handling of the whole situation, and Sam BigMan Freed
Speaker 1: of course, and and ft X is exposure and how
Speaker 1: that got wilder after the Luna collapse as well. And
Speaker 1: so the anger was very very very much directed less
Speaker 1: at Dough and more at Barry and Sam BigMan Freed
Speaker 1: want to punch them in the face. This is where
Speaker 1: I say, you know, as a reporter, you're sitting here,
Speaker 1: we asked the questions, right, so it's kind of like
Speaker 1: I can ever do what Mike's personality is like justice, right,
Speaker 1: But you know, we started this conversation talking about how
Speaker 1: he's a wrestler, and the last line of the story
Speaker 1: kind of talks about how, you know, he's gearing up
Speaker 1: for his next big fight. He's going to fight the
Speaker 1: institutions and the regulators and just really win back trust
Speaker 1: in this industry. Listen the rest of this this malarkey
Speaker 1: that we've had with between Three Arrows and and you know,
Speaker 1: Block five and Celsius and all these companies that were
Speaker 1: either poorly run or fraudulently run. Certainly is hurting the
Speaker 1: overall confidence in crypto. But this too shall pass. They
Speaker 1: will be brushed off into the dustbin of history, and
Speaker 1: the industry itself is going to emerge, having learned lessons, stronger,
Speaker 1: and you're going to see the price take back off,
Speaker 1: which is why his place in this industry is so important. Yes,
Speaker 1: he's lots of money, but I talked to some of
Speaker 1: his billionaire friends as well, who are maybe exposed to
Speaker 1: crypto or maybe thinking about being exposed to crypto. One
Speaker 1: of the most important ones with Stan druck and Miller,
Speaker 1: legendary investor who worked for George Soros, now invest on
Speaker 1: his own at Duquesne. And I asked Danna, was like,
Speaker 1: would you give Mike money after all this? And he said, yeah,
Speaker 1: he consider it. I mean, that's the thing that's interesting
Speaker 1: about all this, Mike, depending on who you are, depending
Speaker 1: on all the losses at Galaxy, even the stop. Remember
Speaker 1: Mike's own wealth. He lost more than three billion dollars
Speaker 1: on paper and a lot of that was Galaxy stock decline.
Speaker 1: So now it's a question of how is he going
Speaker 1: to raise money again and really get back to being
Speaker 1: on I mean he is, I mean they're will in
Speaker 1: this industry. Let's be very clear about this. How is
Speaker 1: he gonna win back trust not just for Galaxy but
Speaker 1: for the industry after what happened last year? And I
Speaker 1: think that that's the pivotal question as Galaxy reorganizes. By
Speaker 1: the way, remember they laid off almost fifteen percent of
Speaker 1: their staff last year. But in a television interview, he
Speaker 1: told me that he actually thinks he'd count is going
Speaker 1: to get back to above where they cut because now
Speaker 1: they're buying the assets out of bankruptcy. So he's trying
Speaker 1: to play offense. And I think that this will be
Speaker 1: a really interesting year coming up more with Bloomberg reporters
Speaker 1: Shinali Bastic on how one of the industry's top CEO
Speaker 1: is still pretty bullish on crypto. We'll be right back
Speaker 1: at the same time. You have this paragraph in the story.
Speaker 1: It says time is short, Galaxy no regards tells you
Speaker 1: can withstand eighteen more months of this pain four years.
Speaker 1: He's doubtful that his employees would be able to roll
Speaker 1: with it for that long. For somebody so like I said,
Speaker 1: I've covered him since there's another little story i'll give
Speaker 1: you about after this, but you know, well, well let
Speaker 1: me answer the question first, because I think that is
Speaker 1: a critical part of the story because at the beginning
Speaker 1: I said this was a matter of Mike's reputation, and
Speaker 1: to the extent Crypto is kind of you know, Mike
Speaker 1: never got like a cat, like the guy's got nine
Speaker 1: lives and he makes it through, right, but you know,
Speaker 1: and Wall Street works that way, you know, but eighteen
Speaker 1: months feels like there's a clock that's taking a little bit.
Speaker 1: He doesn't say he's gonna throw in the towel, he
Speaker 1: doesn't go that far, but he does say it'll be
Speaker 1: hard to keep him employee morale high, Like it's harder.
Speaker 1: It gets really harder after eighteen months to go through
Speaker 1: a market slump. Now back to when he first planned
Speaker 1: to start investing other people's money into Crypto after making
Speaker 1: a lot of money on his own. He had a
Speaker 1: plan to start a hedge fund, and we wrote about
Speaker 1: it here atom I called Eric Shaska wrote about it
Speaker 1: very soon within like immediately, he decided he's not doing
Speaker 1: that anymore because the market conditions were bad. The market
Speaker 1: was crashing. So Mike again, even a bitcoin has been
Speaker 1: through historic ups and downs. The last crasheen Mount cox
Speaker 1: Era lost a lot of money, hundreds of millions of dollars,
Speaker 1: I'm told, and then he turns around and said goes bigger.
Speaker 1: He goes, I am not gonna do hedge fund. I'm
Speaker 1: gonna build a merchant peg. I'm gonna build something that's
Speaker 1: gonn become the Golden Sacks of crypto. Can you imagine
Speaker 1: losing hundreds of millions of dollars, having a plan to
Speaker 1: do something, scraping plan, and then having a bigger plan
Speaker 1: the next day, which, by the way, he's then taking
Speaker 1: public on the Canadian Stock Exchange. He's trying to take
Speaker 1: a public in the United States. There's still a lot
Speaker 1: of concerns that the SEC has about crypto in general.
Speaker 1: But if he gets listed in the US this year,
Speaker 1: what if? What a coup after all that? If you
Speaker 1: think about it, and especially when you think back to
Speaker 1: that initial story where the ambitions were just to have
Speaker 1: a crypto hedge fund. No, he wants to build a
Speaker 1: crypto empire. And as he restructures. One thing that's interesting
Speaker 1: that's happening is they're kind of merging different units, venture
Speaker 1: and asset management units, and it's very possible that they
Speaker 1: go back to market and raise money from third party
Speaker 1: investors again. And that kind of dream about being like
Speaker 1: he's used a few different anecdotes Goldman of Crypto or
Speaker 1: Berkshire Hath the way of crypto to kind of invest
Speaker 1: in all of those fledgling companies. I think it's the
Speaker 1: venture part of it is harder to get a handle
Speaker 1: of because it's not like buying a token that goes
Speaker 1: up and down and you see how it does in
Speaker 1: a year. A venture investment often takes multiple years before
Speaker 1: you see how it actually does in the end. So
Speaker 1: to end on a more positive note, so it's crypto,
Speaker 1: as we mentioned, is known for its second and third
Speaker 1: and fourth comebacks, comeback stories. We even have some recently,
Speaker 1: and then we've had some headlines of um, maybe we
Speaker 1: can call them disgraced crypto people who are trying to
Speaker 1: make a comeback. Still, So can you just talk about
Speaker 1: that aspect and what it is about crypto itself where
Speaker 1: there's this sort of never ending prospect of hope. Listen,
Speaker 1: this is what makes it so fun to cover. I
Speaker 1: think it's the multifaceted angles. If you think about all
Speaker 1: the reasons um Crypto failed last year, a lot of
Speaker 1: it was risk management, a lot of it was Think
Speaker 1: about all of the way these companies were structured with
Speaker 1: the inter company loan, in the double triple quadruple bailouts,
Speaker 1: throwing a lot of bad money after good Think about
Speaker 1: what Mike did in that time. He sold, he largely sold,
Speaker 1: and again he's by now. But it's also become a
Speaker 1: better year already for something like bitcoin. When I talked
Speaker 1: to his other investors as well, the reality for them,
Speaker 1: which is fascinating is that they, like a lot of
Speaker 1: people out there, believe Bitcoin itself hadn't failed in the
Speaker 1: middle of all of that, In the middle of what
Speaker 1: people were worried about being a systemic crash never happened.
Speaker 1: Even the genesis matter now so far is fairly contained.
Speaker 1: Could get worse, could always get worse. But at the
Speaker 1: end of the day, you know, there are a number
Speaker 1: of very influential people in finance, let alone crypto, who
Speaker 1: have become more sold on the story after last year,
Speaker 1: more compelled to buy assets now that they're cheaper, right,
Speaker 1: more than a fourth cheaper than they were at their peak.
Speaker 1: So it all this is such a Pavoli year because
Speaker 1: do people by the story of Bitcoin Crypto. You were
Speaker 1: saying college college friends. Joe Lubin is friends with Mike.
Speaker 1: You went to Princeton with Mike, um Dan Moore head
Speaker 1: over at Pantara, friend of Mike. So you let's see
Speaker 1: how these folks navigate through. They have made it largely
Speaker 1: away from a lot of those big disgraces as you've
Speaker 1: been talking about. But can they win back the hearts
Speaker 1: and minds of the people that are putting money behind
Speaker 1: this industry. We'll see. Thank you, guys, Basonale. That was
Speaker 1: Bloomberg reporter Shonali bask You can find more of her
Speaker 1: work on the Bloomberg terminal and on Bloomberg dot com.
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Speaker 1: Our senior producer is Janet Babin. Our producers are Mohammed
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Speaker 1: Original music by Leo Sidrn. I'm Stacy Marie Schmal. We'll
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