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The New York Times: Tether co-founder and his shattered crypto dream

BlockBeatsBlockBeats2024/08/15 12:00
By:BlockBeats

Brock Pierce, who came to Puerto Rico seven years ago promising to revive the local economy with the magic of cryptocurrency, is now mired in legal trouble and battles with business partners.

Original title: The Unraveling of a Crypto Dream
Original author: David Yaffe-Bellany, Laura N. Pérez Sánchez, The New York Times
Original translation: Luffy, Foresight News


On sunny days in 2022, cryptocurrency entrepreneur Brock Pierce likes to take friends on a boat trip to Vieques, about 75 miles from his home in Puerto Rico. Pierce wants to show off to his friends one of his "favorite" properties in his life: a once-glamorous beachfront resort that he bought for more than $15 million.


In its heyday, the resort was a W hotel with a 6,000-square-foot spa, a restaurant run by a Michelin-starred chef and sweeping ocean views, and it was the mainstay of Vieques' tourism industry. Then, in 2017, the hotel was hit by Hurricane Maria and forced to close. Pierce reopened it, using his cryptocurrency fortune to revive the hotel and the local economy.


Brock Pierce moved to Puerto Rico in 2017


A former child actor, Pierce excelled at acting. On trips to Vieques, he would anchor his Italian-made yacht at a local port and lead guests along a beach roamed by wild horses to the doors of the shuttered W Hotel.


“It was a big personal bet for me,” Pierce says, “and it’s where my heart is.”


But Pierce’s show of luxury was an illusion. Like many of the other grand projects he started in Puerto Rico, the hotel is now mired in debt and legal disputes. Pierce lost the W in a dispute with another investor last fall. Now the hotel remains shuttered, its windows smashed and its floors covered in mold and horse manure. A $17,000 recliner designed by a famous Spanish architect gathers dust in the empty atrium.


Pierce's dream of reopening the W in Vieques didn't come true


Chairs of various colors are stacked in the shaded lobby of the W Hotel


When Pierce moved to Puerto Rico in 2017, he had invested in a series of experimental cryptocurrency businesses. With the help of a think tank, he made a surprising promise to revitalize the local economy. Pierce is known for his role in the creation of USDT, one of the world's most popular digital currencies. He led a wave of industry immigrants to Puerto Rico, many of whom began buying land and hyping a project they called Puertopia to transform the U.S. territory into a hub for cryptocurrency investors and technology startups.


"If you're an American and you're in crypto, you have to go to Puerto Rico at least once," Pierce said in 2019.


Puerto Rico is a cryptocurrency paradise. In 2012, the local government passed legislation to turn the archipelago into a tax haven for wealthy immigrants. Under the law, now known as Act 60, people who move there can apply for a benefit exempting them from paying capital gains taxes. The measure is intended to boost investment in Puerto Rico’s economy, which has been struggling to recover from two decades of financial crisis.


But Pierce’s vision of a cryptocurrency-fueled economic recovery has yet to come to fruition, according to hundreds of pages of court records and interviews with more than two dozen people familiar with his efforts in Puerto Rico. His business partners betrayed him, and some colleagues say he was running out of money. There is no clear evidence that Pierce’s arrival helped the local economy. Instead, Act 60 has become a symbol of a new era of exploitation.


Many locals see Pierce as the latest in a centuries-old legacy of the global elite treating Puerto Rico as their private playground. After the U.S. invasion in the late 19th century, American businessmen seized hundreds of acres of local land to build sugar plantations, then funneled the profits back to the U.S. Decades later, the U.S. Navy conducted military exercises on Vieques, including bomb tests that damaged the ecosystem and caused long-term health problems.


With the arrival of Pierce and other wealthy immigrants, Puerto Rican residents have seen new cracks, with soaring housing prices, especially in coastal towns, forcing local families to leave their homes. On a wall outside the W Hotel, a group of local artists painted a mural showing Pierce in a crimson tunic holding a Bitcoin logo with the caption: "Colonialism."



Chameleon Instinct


On a recent Friday evening, Pierce, 43, sat down for coffee at the Convent Hotel in Old San Juan, a Masonic lodge-turned-hotel that serves as an informal base for clandestine Puerto Rican immigrants. He wore a wide-brimmed orange hat and an oversized white T-shirt with the words “Scars Never Break.” With an exaggerated gesture, he pointed out the window, which looked out onto a bustling cobblestone thoroughfare called Cristo Street, one of the city’s oldest streets.


“This was one of the first pieces of colonial infrastructure built by the Spanish conquistadors,” he explained. “It was the first road built of brick in the entire Western Hemisphere.”


Now the view belongs to Pierce: He bought the Convent in 2018 for $4.8 million.


Pierce arrived in Puerto Rico with a unique resume: the son of a Minnesota home builder and a church official, he was a child actor who briefly appeared in the Mighty Ducks movie and starred in a film called First Child with comedian Sinbad. As an adult, he became an early investor in several prominent cryptocurrency projects, ultimately making a fortune of $700 million to $1 billion.


Aerial view of San Juan, Puerto Rico. Pierce led a group of investors to Puerto Rico who were committed to turning the U.S. territory into a hub for cryptocurrency investors and tech startups


After the passage of Act 60, tourists from the U.S. became a popular sight in restaurants and nightclubs across Puerto Rico. Pierce is a Burning Man regular and one of the most recognizable visitors. He is often seen walking the streets of Old San Juan: short and energetic, he wears a T-shirt and leather vest, with a necklace around his neck.


Pierce bought two houses in a gated community in Dorado, a place where wealthy people live, where he lives with his partner, entrepreneur Crystal Rose, and his mother, Lynette Calabro. According to two partygoers, Pierce hobnobbed with local politicians and threw lavish parties where guests sometimes took drugs such as cocaine and ketamine.


For a while, Pierce succeeded in attracting some locals with his openness and curiosity. Like a skilled actor, he has a chameleon-like instinct to adapt his behavior to the preferences of his audience. “If it’s a serious guy, he’ll act serious,” said Hugo de la Uz, a local maritime expert who helps manage Pierce’s yacht. “But if it’s a crazy guy, he’ll act crazy.”


Pierce showed an interest in nearly every world religion and had a hippie spirit. Once, while traveling with some fellow Act 60 immigrants, he snuggled up to a kapok tree, a species worshipped by some Puerto Ricans. “I felt a connection to him because he had a spiritual depth,” said Carli Muñoz, a Puerto Rican pianist who dated Pierce in San Juan.


Kapok Tree Park is a tourist attraction and protected area on Vieques, with Puerto Rico’s oldest kapok tree at its center


But the goodwill ended there. “I had made up my mind not to do business with him anymore,” Muñoz said.


Real estate records show that Muñoz has purchased at least 14 properties since moving to Puerto Rico. Some of them, like the convent, are already functioning businesses. But Muñoz has also announced plans to transform much of his portfolio into new projects, including an art gallery and a community center. None of those projects have come to fruition. A hospital he bought in Humacao late last year is struggling, and the gallery was recently put up for sale. In 2019, Pierce took over a three-story building in Old San Juan that once housed a children’s museum. For a while, he told local media he used it as “a place to meet with friends and discuss ideas.” Today, the building sits empty, paint peeling from its walls.


The abandoned space inside the former Children’s Museum in Old San Juan, which Pierce said he bought “as a place to gather and discuss great ideas.”


“It’s so sad,” said Robert Cimino, a Puerto Rican businessman who owned the building for 19 years before selling it to Pierce for $2 million. “I wanted to sell it to someone who could maintain it.”


Time and again, Pierce turned to local Puerto Ricans to help him with development projects, but many of those collaborators later said they were exploited and not paid their fair share. Meanwhile, he’s also been locked in a court battle with another Act 60 immigrant, Joseph Lipsey III, who seized control of the W Hotel last year, claiming Pierce defaulted on a loan.


Pierce denies defrauding anyone. But at least three lawsuits are pending against him in local courts. Over coffee at the monastery, he admitted that his poor judgment and naivety had derailed his plans in Puerto Rico. “I trusted people,” he said. “That’s one of the things that got me into trouble.”


Booting at beauty pageants


Pierce likes to portray himself as a geopolitical mover. In 2020, he ran for president of the United States as an independent candidate and received nearly 50,000 votes. He boasted about “having appointments” in El Salvador and Panama, and one evening in June, his assistant announced that Pierce would join a Zoom call with the president of Palau, a small archipelago in the western Pacific.


“I’ve spent a lot of time with almost every religious leader in the world,” Pierce said at the monastery, “and with many of the leaders of the world’s nation states.”


But Pierce’s main focus is Puerto Rico, where he has become a leading spokesman for Act 60. After moving, he told Rolling Stone that he would rebuild the economy “with the money we saved from the IRS in a Robin Hood way.” The publicity has helped make Puerto Rico a popular destination for cryptocurrency enthusiasts: About 2,600 people currently receive tax breaks under Act 60, according to government data.


As soon as Pierce arrived, locals showed their opposition. Someone wrote in red paint on the wall of the Children’s Museum: “Foreigners go home.”But behind the scenes, Vieques is expanding his real estate empire. He hired Gonzalo Gracia, a prominent local hotel developer, to help him find buildings in Puerto Rico that could be restored and transformed into tourist attractions.


Pierce helped organize the 2021 Miss World pageant in San Juan. When he was introduced as one of the judges, the crowd booed


Soon, Pierce’s business progress began to deteriorate, and he frequently got into legal trouble with local partners. In 2021, he helped organize the Miss World pageant at a concert venue in San Juan. By then, Pierce was already considered an opportunistic politician in Puerto Rico: When he was introduced as one of the judges, the crowd booed him. He later sued Puerto Rican pageant executive and former Miss World Stephanie del Valle, claiming she owed him $1.2 million. Ms. Del Valle fought back against the lawsuit against her, accusing Pierce of defamation and seeking $31 million in damages. (The dispute is pending in local court. Pierce said he is “committed to a fair resolution of this matter.”)


Del Valle was one of the first Puerto Ricans to clash with Pierce, accusing him of deceiving and manipulating them. During the pageant, Pierce bought an 80% stake in the W Hotel. The deal was one of his largest investments in Puerto Rico and paved the way for him to seek more than $30 million in tax credits from the local government.


Gracia assisted with the purchase. He met with local officials in Vieques on Pierce’s behalf and found an architect to plan the hotel’s reopening, court records show.


But the partnership was short-lived: Gracia claimed in a 2022 lawsuit that Pierce cut him out of the project after the deal was completed and refused to pay him a $790,000 commission.


A similar situation unfolded at another project on Vieques. In 2021, Pierce asked a local naval engineer to help him open a hotel and museum on a boat docked on the island’s northern coast. The engineer, who requested anonymity to avoid commercial repercussions, arranged meetings with local administrators and discussed the project with the mayor, but Pierce abruptly abandoned the plan. In an interview, he said Pierce still owed him $17,000 for work. (Pierce said he had no such debt.)


Last year, there were signs that Pierce was stretched thin. He had asked De la Uz to repair the Aurora, the yacht he used to ferry friends to and from the West Coast. Most of the guests were “Americans who he tried to convince to give him money,” De la Uz recalled, “and he portrayed himself as the savior of Puerto Rico.”


In a 2023 lawsuit, De la Uz claimed that he and Pierce, who co-owned the yacht, had defaulted on repairs. De la Uz said the yacht was taking on water and slowly sinking into the Caribbean Sea as guests partied on the deck.


Pierce declined to comment on the allegations, saying, “We are actively working these issues through the courts to reach a fair resolution.”


“I didn’t do any due diligence”


When Pierce went out on the Aurora, he sometimes brought a newcomer to the Act 60 community — Lipsey, a 62-year-old logistics magnate. For a while, Pierce knew Lipsey only by his nickname, Jopepi. Pierce found him socially awkward but likable. “This is a very kind person, I believe,” Pierce said.


Pierce knew only the general circumstances of Lipsey’s arrival in Puerto Rico. In 2017, Lipsey made a fortune from disaster relief efforts after Hurricane Maria, through contracts with the U.S. government. But two years later, a legal scandal exposed his high-society life in Aspen, Colo. A wild New Year’s party at Lipsey’s home sparked a police investigation, and he and his wife eventually pleaded guilty to serving alcohol to minors and were sentenced to a year of probation.


The Lipseys sold their house in Aspen and eventually moved to Puerto Rico, settling near Pierce. Soon, the two families became close. Lipsey’s wife became friends with Pierce’s mother. After Ms. Calabro died of a heart attack in 2022, Pierce recalled, Lipsey said he had promised her that he would always be there for her family.


Pierce and Lipsey worked together on various business projects, but the most significant deal involved the W Hotels. Last October, Lipsey agreed to lend Pierce $10 million, $4 million of which was used to buy the remaining 20% of the hotel and $6 million to invest in the bankrupt hospital chain. The terms were risky for Pierce: He had to close the hotel deal within two weeks. As collateral, he had to put up his entire stake in the W Hotels. Pierce said he was uncomfortable with the demands but agreed anyway. "I didn't do any due diligence," he recalled.


A month after the agreement was signed, Lipsey accused Pierce of violating the agreement and seizing control of the hotel. Lipsey later claimed in legal documents that instead of using the borrowed funds as planned, Pierce spent the money on private jets and a 72-hour birthday party that spanned San Juan, Miami, and Los Angeles.


As the dispute escalated, Pierce asked Lipsey to meet at the Hacienda Tamarindo, a small hotel in Vieques that Pierce had purchased for $3.2 million. Lipsey later told Puerto Rican police that the meeting amounted to a kidnapping. Pierce demanded his phone and then locked the door while an armed guard patrolled.


In 2021, Pierce purchased the boutique Hacienda Tamarindo for $3.2 million


In court, Pierce denied embezzling the borrowed money or kidnapping Lipsey. But one of his advisers, Cassandra Wesselman, who recently moved to Puerto Rico, said he was not in the best of frame of mind when the W dispute began. Ms. Wesselman said she was the one who suggested bringing armed guards to the Tamarindo estate to protect Pierce from a couple who were staying in another room. The couple, she explained, belonged to a cult.


A month after the contentious meeting, Pierce sued Lipsey in an attempt to regain control of the W, accusing him of fraud and theft.


The judge denied Pierce's request for an injunction that would have restored his ownership of the W while the case proceeded. Pierce and Lipsey have remained in touch to discuss a possible settlement. But their friendship is over.


Lipsey didn’t speak publicly about the dispute until July, when he discussed it for two hours over WhatsApp with a reporter from The New York Times. With a cigarette dangling from his lips, Lipsey gave a virtual tour of his Tennessee house, where he lives part of the year, and turned on his camera to show off his unusual art collection. On one wall hung a canvas with two splotches of red paint. It was the work of his son’s girlfriend, Lipsey explained.


Lipsey called Pierce “not a good person” and a bad businessman. “Everything he did with moving to Puerto Rico and everything he promised, he didn’t do.”


He said the same thing to Pierce’s face. In one heated exchange, Lipsey said, he called Pierce “a real letdown for your mom.”


Carefree Confidence


On a June morning, Mr. Pierce strolled through Old San Juan, winding his way along narrow sidewalks and pointing out his favorite spots along the way. Despite the heat, he wore all black, as he does every day, so he doesn’t have to agonize over time-consuming wardrobe choices. “Mark Zuckerberg and Steve Jobs, these people wear the same thing every day,” Mr. Pierce explained.


He stopped outside Carly’s, an upscale jazz bar owned by Mr. Muñoz, a Puerto Rican pianist. Mr. Muñoz, Mr. Pierce said, had written a song just for him and Ms. Rose. He smiled at the thought. “It’s called ‘Superhero,’ ” Mr. Pierce said. (The song’s actual title is “Super Power.”)


Even through all the setbacks, Pierce remained confident that he could be a force for progress in Puerto Rico. But his confidence masked a persistent turmoil in his business affairs. The conflict between Pierce and Lipsey has sparked intense speculation among his friends. Robert Anderson, a cryptocurrency enthusiast who lives in Puerto Rico and is friendly with Lipsey, said they acted “like children.”


Pierce’s friends and colleagues said he seemed to be running out of money. Lipsey’s lawyers argued in court that Pierce lacked the “funding or resources” to develop the W Hotel. This summer, a representative for the Mets de Guaynabo, a Puerto Rican basketball team, emailed Pierce to complain that he had failed to pay more than $25,000 in sponsorship fees he owed the team, according to documents reviewed by The New York Times.


Pierce, dressed all in black and wearing a black hat, sat on a stool in a white room


Pierce also expressed concerns about his personal safety in Puerto Rico. According to two people close to Pierce, he privately discussed plans to build an ammunition depot on Vieques. He said the arsenal would provide a degree of protection if locals rose up against him.


In a 17-page statement, Pierce denied that he proposed the arsenal and said he was still wealthy, refuting claims that he was financially strapped. He said the Mets de Guaynabo complaint was a "misunderstanding" that stemmed from a misunderstanding of the terms of the sponsorship, which he has now agreed to pay.


However, just as The New York Times was finishing its story, a publicist for Pierce mistakenly sent a message to a group chat that included The New York Times reporter and Ms. Wesselman, Pierce’s adviser: “We haven’t been paid yet.” “I guess you don’t have the money to pay us, otherwise you would have paid it long ago.” Wesselman laughed off the message, calling the publicist “totally teasing us.” After learning that a reporter had seen the text, the publicist said Pierce “always paid on time.”


Pierce defended his work in Puerto Rico. He said he had made charitable donations, including a six-figure donation to support Covid relief efforts in the region. “Transformative projects take time,” Pierce said, “and while some initiatives have faced challenges, others have been significant successes.”


Among his many accomplishments, Pierce mentioned a hospital in Humacao that he bought in late 2023 — an investment he pitched to Lipsey. He said he worked with a Puerto Rican radiologist, Josué Vázquez Delgado, to pull the hospital out of bankruptcy and keep more than 90% of its staff.


But in an interview, a doctor at the hospital, who asked not to be named, said Pierce owed him tens of thousands of dollars in wages. The hospital had been late paying vendors, the doctor said, and some surgeons were running out of equipment. (Pierce said his team had fixed those problems and had “significantly improved operations at the hospital.”)


Last month, Pierce tried to put a visual spin on his success in Puerto Rico as he walked through San Juan. He led two New York Times reporters to a building he bought in 2019 that was sparsely furnished with an extra-prominent TV screen. The building, he claimed, houses the world’s first NFT art gallery. “You might not expect Puerto Rico to be the first place in the world to pioneer something in tech,” he said. Images on display include a fluorescent dinosaur perched in a forest of giant cacti, which Pierce said was designed by his 5-year-old daughter using an artificial intelligence tool.



But what he failed to mention was that a luxury real estate company had posted a notice to sell the building and held an open house. Confronted with that fact, Pierce admitted that he had recently tried to sell the gallery. It had never fully opened, he explained, and that he had been struggling to make money.


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