Road to IPO: Coinbase's Power Struggles

A new book about Coinbase, which this week announced plans for an IPO, lifts the lid on executive infighting at the startup in 2018 and 2019.

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Updated May 9, 2023 at 3:14 a.m. UTC
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“Some people lead by loyalty and inspiration. Balaji [Srinivasan] leads by fear and by money,” says Nathalie McGrath who, as Coinbase’s VP of People, watched as infighting engulfed the company. 

Balaji’s style as he led the charge for a non-corporate vision of crypto was abrasive but effective. For someone who by all accounts did not work well with others, [Coinbase's former CTO] was remarkably good at office politics. Anyone in his way got edged aside with alacrity. Balaji either fired them outright or, through back-office maneuvering, stripped them of influence until, totally demoralized, they quit on their own accord. 

This is an excerpt from "Kings of Crypto: One Startup’s Quest to Take Cryptocurrency Out of Silicon Valley and Onto Wall Street," published by Harvard Business Review Press and available now. Jeff Roberts is a senior writer for Fortune, who has covered Bitcoin since 2013.

Among these casualties was Adam White. The former Air Force commander and Coinbase employee number five had risen to run the company’s professional trading exchange and, in his latest role, was in charge of the company’s new office in New York City. But in Balaji’s view, the New York office was supporting the corporate vision of the future and would divert resources from his obsession – adding new cryptocurrency assets – and so the office and its staff had to be demeaned and diminished. Adam knew what was up. “[Former Coinbase President] Asiff [Hirji] cared about decorum in an office environment and tried to carry himself that way,” says Adam. “But Balaji was cutthroat and manipulative. He had this political genius. He would be the ideal person to be on 'Survivor.'" 

Adam was okay with this. He had new opportunities. Wall Street was at last waking up to the potential of cryptocurrency. The New York Stock Exchange came calling, telling Adam in confidence about an ambitious plan to offer bitcoin futures and work on a crypto deal with Starbucks. Would he like to be the new project’s COO? Hell yes he would. 

Adam flew back to Coinbase headquarters and broke the news to Brian [Armstrong, the CEO]. Years ago, the early Coinbase crew had instituted something called a “walk and talk” – a way to get out of the office, get some air and speak frankly. Now, treading the streets of San Francisco, Adam and Brian went for their final walk and talk. For more than 90 minutes, the pair engaged in another Coinbase ritual – candid comments about how the other could improve. Brian offered friendly advice and encouraged Adam to bring their shared spirit of crypto evangelism to the East Coast. For his part, Adam offered a subtle plea for his long-time boss to rein in warring factions at his company. “Brian, at the end of the day, it’s you and you alone who can shape the culture of this company as the CEO,” he said. 

Good advice is not always heeded, and in this case the politics and power struggles went on unabated as Balaji pushed out designers and a head engineer. Also toppled was Mike Lempres, the veteran legal fixer who had tried to get Brian to warm to Washington, D.C. Lempres had worked at the top levels of the Justice Department and once, as a side hustle, he had served as mayor for the affluent Silicon Valley town of Atherton. But none of this compared to what he saw at Coinbase in late 2018. “I’ve been the mayor of a California town, but I’ve never seen a place as political as Coinbase,” he said on his way out the door in the spring of 2019. 

Lempres would remain philosophical about his ouster and still speaks warmly of Brian, if not of his lieutenants. “I would be such an asshole if I was a billionaire at his age,” he observes. “And he’s not.” 

Soon after, Coinbase lost Nathalie McGrath, who years before had helped the startup overcome its “Vulcan banker” culture by introducing a spirit of warmth and humanity, had endured bomb threats and had seen her fill of office warfare. Unlike Lempres, she felt less forgiving. “Balaji was Coinbase’s first brilliant jerk,” she recalls, “and it changed the culture of our leadership. That’s why I left. The heart and soul of what I built is gone.” 

The departures of longtime fixtures like Adam and Nathalie did not trouble Asiff, who regarded employee churn as ordinary. In Silicon Valley, he says, every startup outgrows its early managers and the executive team will turn over four or five times if a company is scaling up fast. Besides, amid all the drama, he and Balaji were doing a lot to fix Coinbase’s earlier problems. 

In April, the company hired a banking veteran, Alesia Haas, as CFO. Finally, there would be someone to reform Coinbase’s loosey-goosey cash management system. And the firm’s scattershot approach to strategy began to tighten up. 

In early 2018, the vice president of Coinbase’s Consumer Group, Dan Romero, boasted to Business Insider the company was becoming the “Google of Crypto” – a tagline the public relations team pushed to others in the media. It was a neat phrase. Being the Google of anything sure sounds good. But what did it mean? Google had lots of successful products – YouTube, Gmail, Docs, Cloud, and so on. But Coinbase only had one product anyone cared about. Meanwhile, it was squandering money on experiments that had no obvious appeal, like Toshi. 

One benefit of Balaji’s wrecking-ball approach was that the secondary projects got sidelined or smothered and Coinbase moved to focus on his priority – adding new cryptocurrencies. Coinbase unveiled new currency offerings like XRP and ethereum classic for U.S. customers, and dozens more for clients overseas. The gap with Binance started to shrink. 

But as Balaji consolidated power and sidelined lesser rivals, it became harder to avoid direct collisions with Asiff, who continued to push a strategy centered on Chicago and Wall Street. Tension between the two was palpable at executive meetings. The conflict became so strident that, in time, rumors would swirl in crypto circles that Balaji and Asiff had come to blows. Like many juicy startup rumors this wasn’t true, but screaming matches occurred whenever Asiff pushed the company down a corporate path. “Balaji would jump in and yell, ‘Fuck all that! We need to add assets!” says a former senior Coinbase executive who attended the meetings. 

Realpolitik replaced the idealism Brian had always tried to impart. This became even clearer in early 2019 when the company set out to buy a blockchain analytics service. Coinbase had long relied on a service called Chainalysis, a firm known for creating forensics reports for law enforcement, to provide it with data about blockchain activity. But after Chainalysis insisted on parsing data about Coinbase customer wallets – and after an Israeli security firm reported that a Coinbase account had been funneling bitcoin donations to the terrorist group Hamas – the company dropped Chainalysis in order to bring its analytics service in-house. 

Rather than build it, they bought it. In February, Coinbase triumphantly announced the acquisition of Neutrino, an Italian analytics startup known for its work analyzing blockchains in Europe. Unfortunately, Neutrino’s founders also headed up a company called Hacking Team, which had colluded on spying operations with some of the nastiest governments around the globe, including the Saudi intelligence unit that orchestrated the murder of Washington Post journalist Jamal Khashoggi. Reporters Without Borders had labeled Hacking Team an “enemy of the internet” for spy work it had conducted on behalf of despots in Somalia and Morocco. It was clear that Neutrino’s founders were cold-blooded  mercenaries. And now they were Coinbase’s newest employees. 

An uproar ensued as crypto journalist David Z. Morris set out the new hire’s ugly past. In response, Coinbase’s normally sharp PR team dithered for days, initially brushing off the allegations as uninformed and then claiming the company’s higher-ups knew nothing about the Hacking Team’s activities. That didn’t work. Public outrage grew louder and a new hashtag began trending on crypto social media: #DeleteCoinbase. 

The apparent duplicity of senior management didn’t play any better among Coinbase employees. “They knew about it,” says engineer Craig Hammell. “It showed a lack of understanding of what crypto is all about. This is not like other industries. Crypto is driven by the philosophies and ideals behind it.” 

As the scandal rumbled on, Brian finally acted. After weeks of inertia, he went to where he was most comfortable, writing a blog post where he announced Coinbase had screwed up and the company would part ways with anyone who had worked at Hacker Team. “Bitcoin – and crypto more generally – is about the rights of the individual and about the technological protection of civil liberties,” he wrote. “We will fix this and find another way to serve our customers while complying with the law.” 

But even as Brian tamped down one crisis, another was coming to a head. The battle between Asiff’s and Balaji’s factions raged on, and Balaji seemed to have the upper hand. By early 2019, many of Asiff’s pet projects lay in tatters. 

The biggest blow to Asiff came in April 2019 when Coinbase abruptly shut its Chicago office and sent 30 people packing. The move came amid growing opposition to Asiff’s corporate vision as Balaji amassed more allies and more power, but it also came down to dollars and cents. Crypto winter had dragged on for so long that even Coinbase began to feel pinched. It didn’t help that word leaked to the longtime San Francisco engineers that their Chicago counterparts were making more money than they were. Silicon Valley techies are used to being the top earners – Asiff’s decision to pay more for talent in the Midwest came as an affront. Shutting down Chicago solved multiple problems, even if it was a black eye for Asiff. 


Balaji was winning the internal political struggle, but he wasn’t handling it graciously. In a meeting where Balaji set out his latest road map for adding new crypto assets, Asiff asked a sensible question. Was there a process to delist assets? Balaji snapped. “Why are you even asking about this when you don’t know anything about crypto?” he sneered at the company’s president and COO. 

It looked bad for Asiff. In less than a year, Balaji had sown deep divisions in Coinbase, pushed out many longtime employees, thwarted all kinds of projects that didn’t benefit his vision and even got an entire office shuttered. He had also added many new cryptocurrencies – by mid-2019, Coinbase offered dozens of coins in markets around the world – and shook up a tired bureaucracy. And then he quit. 

Coinbase’s board had structured Balaji’s contract to pay him richly once a period of time – in this case, one year – had elapsed, a typical arrangement in [Silicon] Valley. And like others before him, Balaji waited until the moment those riches rained down and then, vested, he left to do something else. 

Balaji’s departure in early May would end the factional drama that had roiled the company. Asiff, suddenly and unexpectedly, saw an opening to have a free hand running Coinbase. He took the bold step of asking Brian in mid-2019 if Brian would report to him, Asiff, on questions of product. 

Asiff had overplayed his hand. He had regarded himself as the company’s de facto CEO, and for months had acted that part. In the process, he had exhausted much of his political capital at the executive level. Coinbase’s true crypto believers had never warmed to him, and still wouldn’t even if Balaji was gone. Coinbase’s real CEO at last reasserted himself. It was time for Brian to take charge of his company again. He told Asiff, “No!” 

Asiff took the rejection poorly. Rather than accept a reduced role, he declared he would resign. Brian obliged. And in a moment that still rankles Asiff, he was quickly shown the door without any sort of formal farewell or chance to say goodbye to his staff. The two men haven’t spoken since. 

Asiff says now that Brian has a lot to learn as a leader: “Brian is a genuinely good person, but he struggles with what his role is. Every successful CEO is one of three things – a product visionary, a culture and talent magnet, or a super salesman. Brian doesn’t fit any of those roles.” 

Reprinted by permission of Harvard Business Review Press. Excerpted from "KINGS OF CRYPTO: One Startup's Quest to Take Cryptocurrency Out of Silicon Valley and Onto Wall Street" by Jeff John Roberts. Copyright 2021 Jeff John Roberts. All rights reserved.


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