After the Colonial Pipeline ransomware attack, mainstream commentators wagged their fingers at bitcoin. Fortunately for the cryptocurrency community, it had a ready and credible defender in former prosecutor Katie Haun.
The Andreessen Horowitz (a16z) partner appeared as a voice of reason in the pages of The New York Times, explaining that crypto is helpful in ransomware investigations: It allowed law enforcement to retrieve the money extorted by Colonial Pipeline’s attackers unusually fast.
“It is unprecedented that the Justice Department would be able to recover the proceeds from international criminal activity so quickly. That timeline is usually years, if ever,” Haun told the Gray Lady.
For such advocacy, not to mention her kingmaker role as co-chair of a16z’s new $2.2 billion crypto venture fund, Haun has secured a spot among CoinDesk’s Most Influential people in crypto for 2022. Her pedigree and gravitas are likely to become ever-more important in the year ahead as a showdown brews between regulators (not least of all U.S. Securities and Exchange Commission (SEC) Chairman Gary Gensler) and the industry’s biggest stakeholders (among whom a16z ranks prominently).
Haun’s career arc speaks to the gradual mainstreaming and legitimization of digital currencies. As a federal prosecutor, she investigated some of the darkest chapters of early cryptocurrency history, including the misconduct of federal agents handling the Silk Road case, the looting of Mt. Gox and the criminal case against BTC-e.
After 11 years at the U.S. Department of Justice (DOJ), she leveraged what she’d learned, joining crypto exchange Coinbase as a board member in 2017 and a16z as a general partner the following year.
Now Haun is helping to pump wads of cash into a selection of crypto startups. Launched in June 2021, a16z’s fund focuses on projects building crypto infrastructure and scalability tools, the “picks and shovels” of the space, as well as novel and popular fields of crypto like decentralized finance (DeFi), non-fungible tokens (NFTs) and gaming, Haun told The Times in June.
Far from harboring any cypherpunk dreams, Haun said that crypto is “desperate for regulators to say what the rules are.” While that may not be true of everyone in the field – there are still plenty who ignore or defy the law – it definitely describes startups that have become as big as mainstream financial companies can get, such as Coinbase, which went public this year. (Haun’s shares in the exchange were at one point reportedly worth $150 million.)
For such companies, Haun might be viewed as the quintessential convert: Unlike many of her peers in the U.S. regulatory and law enforcement agencies, she was quick to understand crypto and to see its promising future. (It’s no coincidence that a16z added former Commodity Futures Trading Commission (CFTC) member Brian Quintenz and SEC veteran William Hinman to round out its regulatory team.)
‘Never lost a case’
In retrospect, Haun’s first crypto-related assignment as an attorney at the DOJ was an impossible task.
It was 2012, and U.S. government agencies were just starting to grasp the technology. “My boss came in and said, ‘How would you like to prosecute this other new thing called bitcoin?’ I had never heard about it at the time,” she recalled in Jeff John Roberts’ book “Kings of Crypto.”
The potential “culprit” in her file, code named F-N-U L-N-U (“first name unknown, last name unknown”), was initially supposed to turn into some shadow puppet master who invented bitcoin to provide a money-laundering tool to the criminals of the world. Yet at the end, Haun concluded that bitcoin itself was not a crime.
“It’s like you would prosecute cash. It wasn’t something you could do,” she recalled.
Instead of loathing crypto, she started loving it for the transparency provided by the blockchain, or public ledger. Cryptocurrency transactions leave “digital breadcrumbs,” like no other money laundering tools, even bank wires, she told TechCrunch earlier this year. This allows investigators to follow the stolen or extorted money right from the crime scene to where they meet the fiat money world, often pointing at actual criminals cashing out.
The days when Haun was determining if she could “prosecute bitcoin” were also the earliest days of Coinbase. Back then, Haun paid a visit to the fledgling startup – years later, she would join its board, and that would lead to the latest turn in her career – becoming a partner at a16z.
When another a16z partner, Chris Dixon, met her thanks to both of them being on the Coinbase board, he saw her as a good fit for the venture capital firm and introduced her to co-founder Ben Horowitz.
Horowitz recalled to CNBC how he phoned Haun’s former supervisor at the DOJ and heard: “This woman has never lost a case – she takes more cases than anybody, and she takes the hardest cases. There’s nobody like Katie here.”
So now, instead of probing criminal activity, she’s investigating the best ways to put money into crypto, legally and for profit.
Unlike many crypto advocates, Haun sounds convincing when speaking of her faith in the future of concepts that are sometimes viewed as no more than a fleeting hype. This may be because she has been so consistent in her own crypto discovery journey, so her evolution from a prosecutor to a startup patron to a venture capital investor looks organic.
When she was a prosecutor, after Haun had to educate herself on the nature of crypto, she started educating her peers, launching training seminars on cryptocurrencies for the U.S. Treasury, IRS and other government agencies. Between leaving the government and joining the private sector, she ended up teaching a class on crypto and cybercrime at Stanford Graduate School of Business.
Beyond the hype, she believes there is a serious adoption-boosting side to things like NFTs. “It’s about this new business model for creators and bringing entirely new audiences to crypto, entirely new types like creators, sports fans and media types,” she said in The Times interview.
Another thing Haun (and a16z, through her) might be signalling about the future institutional adoption of crypto is that big money is warming up to token sales – again. However, unlike the initial coin offering (ICO) craze of 2017, now is the time for a meticulous approach, she told TechCrunch, adding that the majority of a16z’s funds are now deployed in crypto projects’ tokens.
Haun is leading a16z’s fund with fellow partners Chris Dixon, Arianna Simpson and Ali Yahya. To win Haun’s vote for an investment, these are some of the questions founders need to answer well:
“Has the team set aside enough tokens for the community? Once the protocol is live, what does that look like? Are they going to airdrop tokens? What’s their go-to-market strategy? Are they incentivizing early employees with tokens?”
Sounds like the expression “token economics” gains more weight when she uses it. And according to her, a16z is as serious as it can be about those tokens it buys.
As she said in another interview with TechCrunch: “We’re 7- to 10-year patient investors; we’re not running a crypto hedge fund.”
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