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Crypto Venture Capital

The People With Power at Coinbase

Over the last 12 months, Coinbase, Silicon Valley’s most high-profile cryptocurrency company, has been recruiting aggressively from Wall Street, attracting top deal makers and prominent lawyers as it seeks to become the premier conduit for institutional cryptocurrency trading.

Jeff Horowitz, Coinbase’s chief compliance officer, came to the company two months ago from BNY Mellon subsidiary Pershing. Brian Brooks, the chief legal officer, came from the federal mortgage agency Fannie Mae. Asiff Hirji, the COO and president, joined last December after holding senior positions at brokerage TD Ameritrade and private equity firm TPG Capital. The latest batch of hires, shown in this org chart compiled by The Information, are expected to play a pivotal role in Coinbase’s next phase of growth.

The Takeaway
Most of the leadership team at Coinbase has joined in the last two years, led by a spate of recent hires from Wall Street as the cryptocurrency firm sets its sights on institutional business. Our exclusive organizational chart and article tell the story behind the firm’s recent evolution.

Yet the landscape in which Coinbase is expanding looks very different than it did a year ago. The price of bitcoin, the most widely held digital currency, has failed to recover any meaningful ground since plunging from its peak of almost $20,000 to below $7,000, depriving Coinbase of revenue from trading fees. New entrants to the exchange landscape, including a spin-off company by Fidelity Investments, and Bakkt, a joint effort by some of the world’s largest corporations, threaten Coinbase’s dominance as a trading platform.

In addition to trading fees, Coinbase earns revenue from its custody and investment products. The company reportedly earned $1 billion in profit in 2017, before the slump in crypto prices slowed trading activity.

Asked about the growing competition among crypto exchanges for institutional investors, Katie Haun, a Coinbase board member and general partner at Andreessen Horowitz, told The Information’s Subscriber Summit in San Francisco last week that competition was a boon for the industry as a whole. “It’s growing the pie,” Ms. Haun said, “not fighting over the pie.”

There already are signs that the finance industry might be more difficult to crack than the company previously anticipated. Weeks after announcing plans to hire 100 employees in New York as part of a growing emphasis on institutional business, the person overseeing that business, Adam White, Coinbase’s fifth employee, left the company. A week later, it was reported that Coinbase was shutting down its index fund business aimed at institutions after seeing lackluster demand. Coinbase didn’t comment on its growth plans.

Coinbase, which is based in San Francisco and backed by such high-profile investors as Andreessen Horowitz and Union Square Ventures, has branched out beyond its core exchange business, including with investment products aimed at consumers, custody services for institutions and a browser for blockchain-based applications. It isn’t clear how successful the company has been in these areas. Usage of blockchain-based applications in general has remained low despite widespread hype, and legacy financial institutions, including Citigroup and Fidelity, are said to be developing cryptocurrency custody businesses of their own.

New Structure Emerges

At the center of the company’s expansion to more than 500 full-time employees is Mr. Hirji, who directly oversees most of Coinbase’s top executives. Mr. Hirji’s seniority is indicative of a broader shift at Coinbase away from its flat initial organizational structure toward a more hierarchical model. Prior to Mr. Hirji’s arrival, Coinbase was led by its two co-founders, Brian Armstrong and Fred Ehrsam, with Mr. Ehrsam taking the reins on business matters and Mr. Armstrong mostly overseeing the engineering side of the company. Mr. Ehrsam left in January 2017, but retains a seat on the board.

In the company’s early days, Mr. Armstrong often deferred to Mr. Ehrsam on non-product and non-engineering matters. “He was very adamant sometimes to say ‘that’s a question for Fred,’ if it had to do with GDAX or regulation,” said a person who was close to the company then, referring to Coinbase’s institutional exchange.

Mr. Hirji now does most of the day-to-day managing of the company, another person close to Coinbase said. Mr. Armstrong is first and foremost a “product leader” who spends much of his time focused on hiring and maintaining the company culture, in addition to product development, Mr. White said in an interview before his departure.

The list of people steering the company has turned over almost entirely since its early days. With the exception of Dan Romero, an early employee and former classmate of Mr. Ehrsam’s at Duke University who serves as general manager of Coinbase’s consumer business, none of Mr. Hirji’s direct reports were at Coinbase before 2016. With the departure of Mr. White, Mr. Armstrong became the last remaining senior executive to have been with Coinbase since around its founding in 2012.

Silicon Valley Ties

Several of Coinbase’s earliest senior executives have gone on to prominent roles of their own in the cryptocurrency sector. Mr. Ehrsam, the co-founder, has launched a venture fund called Paradigm with Matt Huang, a former partner at Sequoia Capital. Olaf Carlson-Wee, Coinbase’s first employee, founded Polychain Capital, perhaps the crypto sector’s most high-profile hedge fund. And Linda Xie, a product manager at Coinbase from 2014 to 2017, is the co-founder and managing director of Scalar Capital, another cryptocurrency fund.

In their places are executives recruited over the last 12 months. In addition to the Wall Street hires, Coinbase has brought on senior executives from Silicon Valley. Emilie Choi, the vice president of corporate and business development, who specializes in mergers and acquisitions, was previously vice president and head of corporate development at LinkedIn for eight years. Tina Bhatnagar, vice president of operations and technology, was Twitter’s vice president of global operations for five years. And Rachael Horwitz, vice president of communications, joined the company after senior communications roles at Facebook and Twitter.

Nathalie McGrath, Coinbase’s vice president of people and one of the few veterans at the top of the org chart, has been with the company since 2014. Ms. McGrath is one of just four executives who reports directly to the CEO. Five of the company’s 14 most senior executives are women. But there is only one woman on the company’s eight-member board.

Brian Brooks, who joined Coinbase in October, reports directly to Mr. Armstrong, while Mike Lempres, the chief policy officer, who used to report to the CEO, now reports to Mr. Brooks. Mr. Lempres, who joined in January 2017 and previously held the title of chief legal and risk officer, has seen his portfolio divided up as Coinbase brought on Mr. Brooks and chief compliance officer Jeff Horowitz over the last few months. Mr. Lempres now focuses full-time on government affairs, a key role as regulatory scrutiny of cryptocurrencies intensifies.

Correction: Dan Romero is a former classmate of Fred Ehrsam’s at Duke University. An earlier version of this article incorrectly said that the two were fraternity brothers. The article also incorrectly implied that Adam White joined Coinbase in 2012. He joined in 2013.