Crypto goodbyes: Why are Wall Street-ers who fell down the rabbit hole now leaving the space?

There's been no shortage of high-profile traders joining the crypto ranks over the last five years.

The space has now adopted enough former Goldman Sachs employees to form a small football league. Crypto exchange Coinbase alone has adopted dozens of Wall Street heavyweights, including LJ Brock and Christine Sandler (who recently moved to Fidelity). And just yesterday, we heard crypto custody firm BitGo had scooped up another trading veteran, Nick Carmi.

But we're also now seeing a hemorrhage of crypto-converts skulking back to the city. Crypto flyaways include Chris Yoshida, who served for a year at crypto marketplace-builder TrueEx, but left in October to join The Carlyle Group – one of the world’s leading investment firms. Elsewhere, we've seen Blockstack co-founder Ryan Shea give up his crypto startup, Blythe Masters leave her post as CEO of Digital Assets, and Galaxy's Sean Galvin migrate back into traditional finance as an exec at BGC Partners (Galvin doesn't even list his tenure as Galaxy's interim CFO on LinkedIn). The list goes on; both in the U.S. and beyond.

But why are people packing up? 

The Goldman 360: Market frustration & poor behaviour

To understand some of these departures, we spoke to those who have bid farewell to crypto; either a brief foray in the space or following long tenures in senior roles.

One such individual is Kenneth Goodman, who in 2017 left his desk at Goldman to set up one of the first crypto hedge funds, Altcoin Advisors.

“When I left, my manager thought I was absolutely insane. He said it would be the biggest mistake of my life," Goodman told The Block.

Goodman says he was intrigued by the technology, having trained as a mathematician, and wanted to try his hand at trading tokens himself as well as creating a sophisticated algorithm that maximises arbitrage opportunities. The fund had a highly successful first 12 months, maxing out their portfolio and - by Goodman's own metric - becoming "by far the biggest fund at the time."

But after a year, Goodman stepped away from the space, having grown tired of the community antics.

"I decided to leave for crypto for a few reasons. First, the risk-reward wasn't high enough for me. Second, I got tired of screaming wolf on things like Bitfinex and Tether; the market was too irrational. And third, I just don’t see banks taking off with this," he said.

"It's not for me, at least not until it gets cleaned up. It's actually gotten worse."

Opportunistic hires and internal fall-outs

The other thing to remember is not everyone joins crypto believing its ideology and promise. It should come as no surprise then that sometimes people just jump on the bandwagon, says Blockchain CEO Peter Smith. 

“You have to be very careful. There’s this conversion process that happens [when the price drops]…Folks that are coming from equities or Wall Street or big tech now have to buy into the vision and mission because it no longer looks like a quick way to make money…Across the industry, you’re going to see folks who dove into this and then realized that they’re in water that’s a little too deep,” Smith said in an interview in January. "[You] have to have your eyes open that not everyone’s going to convert."

So, it's natural that with the price plunge comes a brain-drain. From weak institutional uptake to bear market meltdowns, the current climate certainly hasn't been a place for the faint-hearted.

Another explanation for the Wall Street exodus is the clash of cultures between traditional financiers and crypto startups. Coming from the regulated space of big banks, the admittedly murkier world of crypto can be a shock - especially when exec's efforts to bring Wall Street standards to crypto are shut down.

"Some crypto teams are incompetent and/or ethically challenged," one source said. “It is very much a cultural war.”

In other words, occasionally, the resistance to implementing "normal" rules may have proven too much.

Not closing the door, completely 

Still, the interesting thing about those who have left jobs in crypto is that often, they keep one toe dipped in the space. 

One example is Angus Champion de Crespigny. After 10 years, he's recently left his role leading EY's NYC blockchain and crypto team, explaining that he "couldn’t see the value proposition” of the tech anymore. But even though his new job is outside financial services altogether, he says he's not given up on the crypto dream - or its riches.

"The main benefit of blockchain is its censorship resistant value. And it's very hard to build a business around that," he explained. "[But] I don’t feel like I've left the space. I'd just prefer to buy and hold [crypto] rather than create another business....I'm just not going to be involved on the day-to-day."

He concluded: "Bitcoin is an imperfect solution but it’s the best we’ve got. I want to stay plugged in."

Meanwhile, across the pond in the UK, former Barclays VP Dotun Romini left crypto exchange BlockEx to become a blockchain strategist at the London Stock Exchange. While not on the 'front-line,' he's now capitalising on his knowledge in the corridors of influence.

As for Kenneth Goodman - the former Goldman trader turned crypto manager turned lecturer - he's still intrigued by the space. "The psychology of those involved, who they’ll trust is fascinating," he said.

And, he even wouldn't rule out returning to it one day.

"For sure I would go back. Just at this time I haven't found either the right project or the right risk-reward."

He concluded: “It’s nice to get a steady paycheck – I don’t want to fool myself. I'm taking the easy route here."