Hedge Fund Mogul Changes Course

On November 20, after the insolvency of Sam Bankman-Fried’s cryptocurrency exchange FTX, hedge fund mogul Bill Ackman published a 19-tweet thread lauding cryptocurrency’s prospects for benevolent societal influence.  In his cryptocurrency homage, he pointed out two particular blockchain projects—Helium as well as Dimo—as instances of how a coin could accrue inherent value as it ages.

Helium +1.4%, a Web3 initiative billed as a decentralized system of internet hotspots, has built what Ackman claimed as a worldwide Wi-Fi network used by Lime, an e-scooter business. The hedge fund manager noted that HNT, Helium’s native currency, benefited from Helium’s worldwide network of 974k spots and was poised to become a valuable commodity as system membership increased.

Regrettably for Ackman, the evidence says otherwise. Lime has never employed Helium, as initially revealed by The Verge as well as Mashable; Lime further confirmed this to Forbes as a portion of a September probe. According to Forbes, Helium’s management pocketed the majority of the newly produced HNT tokens, and the initiative produced only $92,000 in revenue from the consumption of Helium’s wireless service, its principal use case, from June 2021 to August 2022. Amir Haleem, founder and CEO of Helium, told Forbes that none of these figures feel outlandish or outrageous to him. The HNT token, which is currently trading at $2.46 since about Monday, November 28, has dropped more than 95% from its all-time peak of $52.70 last November.

Twitter users and industry experts pounced on Ackman for his praise. Since receiving $365 million from @a16z, Helium misrepresented its users and earned $6,500 per month.  @a16z stands for Andreessen Horowitz, a venture capital company.

Thus, a week later, on November 26, Ackman returned to Twitter to defend his prior statements. His detractors had inferred that he was promoting or even ‘pushing’ particular tokens, but Ackman claimed on Saturday morning in a new 25-tweet post that he was not. Rather, he was attempting to argue that cryptocurrency and tokenization were beneficial technology for business formation.

In the case of Helium, Ackman acknowledged that HNT was overrated in retrospect since the Helium network had not yet produced enough demand to warrant the sizeable initial HNT valuations, before adding that cryptocurrency initiatives are subject to the same basic economic laws as traditional firms. Ackman also stated on Twitter that he is not involved in Helium.

Ackman has riled up Twitter’s cryptocurrency and financial commentariat for the second time this month. On November 10, after notorious virtual currency gambler Sam Bankman-Fried apologized for his role in FTX’s insolvency, Ackman tweeted: One has to award Sam respect for his accountability there. We don’t know the details, but he’s never seen a CEO take as much accountability as he has. It speaks well of him and the likelihood of a better conclusion for FTX. Ackman erased the post swiftly, but not before some of his followers took screenshots. According to the Wall Street Journal, FTX fraudulently committed billions of dollars in customer money to Bankman Fried’s hedge fund. That is hardly something a billionaire should be proud of.

Ackman, 56, is reported to be worth $3.5 billion. He created the $18.2 billion (resources) hedge firm Pershing Square in 2004. Pershing has profited billions of dollars from well-timed wagers, including a $2.6 billion bonanza from purchasing loan hedges in March 2020, when the Covid-19 epidemic plummeted markets.

Ackman, like several of his Wall Street contemporaries, began experimenting with cryptocurrency during the epidemic, prior to the recent crisis period. Ackman stated in his Nov. 20 post that he is a modest active investor in cryptocurrency companies such as fraud detection firm TRM Labs, accountancy firm TaxBit, and NFT network ORIGYN, and that he has invested in seven virtual currency venture capital firms. Crypto investments account for “less than 2%” of Ackman’s total assets.

The Bottom Line

Ackman was playing a different song last year. Speaking at The Wall Street Journal’s Future of Everything Festival in May 2021, Ackman reportedly stated that he did not feel safe investing “a considerable amount” of capital into cryptocurrency, which had “no inherent worth” in Ackman’s opinion at the time.