FORTUNE DECEMBER 2020 /JANUARY 2021 107WHEN COINBASE MET CANTOR FITZGERALD
SINCE JOINING Coinbase as
employee No. 5, Adam White had
risen to run GDAX, the com-
pany’s exchange for professional
cryptocurrency traders. By the
fall of 2017, Coinbase was steam-
ing toward $1 billion in annual
revenue, and White was ready for
a new challenge. He figured he
could handle anything the busi-
ness world threw at him. Coin-
base’s CEO, Brian Armstrong,
threw Cantor Fitzgerald at him.
The famous firm embodied
Wall Street’s clubby culture.
Working at Cantor Fitzgerald
meant wearing suspenders
and three-piece suits. It meant
spending hours over expensive
steak dinners and fine Scotch,
braying about how much you
made. It also meant enjoying a
coveted status: Cantor is one
of only a few firms designated
as a market maker for federal
securities, which means acting
as Uncle Sam’s bond broker.
It was White’s job to sell Can-
tor on crypto and Coinbase. The
fabled firm, he hoped, might
want Coinbase’s help in offering
Bitcoin to clients, or in someday
using blockchain—the technol-industry group FINRA and the SEC for lack of
transparency about its PFOF practices around
options. And scrutiny of how it encourages op-
tions trading has increased in the wake of the
June suicide of one of its customers, who left a
note blaming the company for letting him ac-
cumulate over $700,000 of debt while trading
options. (It later emerged that the 20-year-old
had failed to understand that the negative bal-
ance he saw on-screen was much higher than
his actual debt.)
Robinhood has promised to overhaul its
options platform and to offer better disclosure
about PFOF practices and more educational
material for traders. Tenev says that stories
about options trading don’t reflect the habits of
most customers: Only 13% trade options, and
fewer than 2% of those try multi-leg strategies.
Others connected to Robinhood are less apolo-getic, seeing condescension in the criticism. “There’s a shocking
level of sophistication in the order flow,” says an executive at one of
Robinhood’s market-making partners. “It’s not like it’s Aunt Millie
in Nebraska trading puts and calls.” Lindzon, the early Robinhood
backer, acknowledges that some customers make bad decisions—
but argues that it’s paternalistic to stop them. “You’re going to let a
kid drive a car or buy a Juul, but you’re not going to let a kid decide
what stock they’re going to buy?” he asks.
Other public relations scrapes have dented Robinhood’s reputa-
tion, as have technical meltdowns that left users unable to access
the site during peak trading days. By mid-July of this year, Robin-
hood had been the subject of 473 complaints to the Federal Trade
Commission, compared with 126 for Schwab and 69 for Fidelity—
which have comparable numbers of customers. The discontent has
arguably been aggravated by Robinhood’s approach to customer
service. Unlike traditional brokerages, which field armies of agents
to hold clients’ hands, Robinhood does not provide customers with
even a phone number, leaving them to seek help via the app.
Tenev appears to have internalized the tech credo that auto-ogy underlying cryptocurrency—
to clear securities. A Coinbase-
Cantor tie-up, meanwhile, would
go a long way toward legitimiz-
ing a crypto industry many still
saw as disreputable.
White met reps from the firm
on 59th Street in a tower over-
looking Central Park. CEO How-
ard Lutnick—the leader who had
brought Cantor back from the
tragedy of losing 658 employees
in the attack on the World Trade
Center on Sept. 11, 2001—stood
at the head of a phalanx of his
staff. White did not meet pha-
lanx with phalanx. He brought
the friendly, self-effacing, and
easygoing disposition of a na-
tive Californian and little more.
Lutnick quickly noticed White
wore no tie and arrived with no
retinue. And then he saw the
title on his business card: gen-
eral manager.
In Silicon Valley, titles—like
clothes—are often informal,
sometimes creative, like “digital
prophet” or “innovation Sherpa.”
Many startups treat titles like a
rack of hoodies—pull one off the
rack, try it on, try another. Find
one you’re comfortable with.Old-line finance firms, on the
other hand, treat titles as critical
badges of power and status.
Ranks like “executive managing
director” and “senior managing
director” send important signals
about who is worth investing
time in, who is serious, and who
can be ignored. Lutnick scoffed
at the idea that Coinbase would
send a “general manager”—what-
ever that was—to waste his time.
Didn’t they know who he was?
“So I sat down with this
big, sharp-elbowed financial
company, trying to work a deal,”
White recalls. “The CEO laughs
at me and goes, ‘Hey, GM, are
you going to make my coffee?’
I came out to New York and got
my ass handed to me by old-
school traders.”
White went home without
a new client. But he would get
the last laugh. One year later,
he would join a cryptocurrency
venture launched by Wall Street
giant Intercontinental Exchange,
becoming its president soon
after—a sign that even the most
traditional financial firms were
coming around to crypto.
—Jeff John RobertsReprinted by
permission of
Harvard Business
Review Press.
Excerpted from
Kings of Crypto:
One Startup’s Quest
to Take Cryptocur-
rency Out of Silicon
Valley and Onto
Wall Street,
by Jeff John Roberts.
© 2021 Jeff John
Roberts. All rights
reserved.BOOK EXCERPT: FINTECH & WALL STREET COLLIDECOURTESY OF HARVARD BUSINESS REVIEW PRESS