Fund Manager Got NY BitLicense 11 Months After Hiring Its Architect

Benjamin Lawsky, the former regulator who created New York’s BitLicense in 2015, joined a bitcoin fund manager nearly a year before it applied for, and received, the license.

AccessTimeIconMay 13, 2020 at 8:05 p.m. UTC
Updated Sep 14, 2021 at 8:41 a.m. UTC

Benjamin Lawsky, the former financial regulator who created New York’s BitLicense in 2015, joined New York Digital Investment Group Asset Advisory LLC (NYDIG) nearly a year before the bitcoin fund manager applied for, and received, that license.

Lawsky’s ties to NYDIG, which has raised $230 million in six separate fund sales since 2018, are documented in the asset advisory’s March Form ADV filing with the U.S. Securities and Exchange Commission (SEC). Lawsky is recorded as an “elected manager” of NYDIG with an indirect ownership stake through New York Digital Investment Group LLC. The filing did not define what an elected manager’s role is precisely.

Lawsky had previously served as New York State’s first superintendent of the Department of Financial Services from 2011 to 2015, a tenure capped by his landmark decision – shared in his final speech in office – that New York state would adopt the nation’s first licensing regime created specifically for cryptocurrency businesses. 

Lawsky is one of many regulatory veterans who have gone on to work in the blockchain or crypto industry, a pattern that arguably resembles the so-called revolving door between Wall Street and Washington. To be clear, however, Lawsky’s work at NYDIG is not prohibited by law and there is no indication either he or NYDIG acted inappropriately in applying for and receiving the BitLicense.

New York Digital Investment Group Asset Advisory's indirect ownership list from the March 2020 Form ADV
New York Digital Investment Group Asset Advisory's indirect ownership list from the March 2020 Form ADV

The controversial BitLicense has been issued sparingly since its introduction five years ago. Less than half a dozen were issued in its first three years, and though the rate of distribution ramped up across 2018 and 2019, only 25 companies hold one today.

Lawsky became an “elected manager” at NYDIG in December 2017, the regulatory filing shows. NYDIG received a BitLicense in November 2018. In its glossary of terms, the SEC lists elected managers as persons who can control an LLC.

Benjamin Lawsky and the New York State Department of Financial Services did not immediately respond to requests for comment.

“It’s not uncommon to see a former regulator going to work for a regulatee,” said Carol Van Cleef, a lawyer at Bradley Arant Boult Cummings. “New York bans former officials from appearing before their former employers for two years.”

Lawsky’s departure from NYDFS in mid-2015 and arrival at NYDIG in December 2017 would appear to place him outside that window. 

NYDIG goes big

NYDIG has sold six separate funds, including three that mention bitcoin in their title and one mentioning “digital assets,” according to Form D filings. The latest, NYDIG Bitcoin Yield Enhancement Fund LP, closed Tuesday after raising nearly $140 million.  

On Tuesday, Forbes reported Lawsky’s indirect ties to NYDIG via Stone Ridge Asset Management LLC, where he is head of regulatory affairs. Stone Ridge is NYDIG’s registered investment adviser and the Stone Ridge co-founder Robert Gutmann is CEO of NYDIG. 

Robert Gutmann did not respond to a request for comment.

After leaving the administration of Gov. Andrew Cuomo, Lawsky set up a legal consulting firm that press reports at the time suggested would focus on bitcoin and digital currency concerns. Lawsky denied those rumors in a 2015 on-stage interview with Marc Hochstein, then the editor-in-chief at American Banker and now executive editor at CoinDesk. 

“I can’t work at all for life on anything I ever worked on,” Lawsky said at the time. “If someone wanted to hire me to get a BitLicense, no can do.” 

As noted, the filing does not spell out what Lawsky does as an elected manager, and nothing in the document indicates he helped NYDIG obtain its BitLicense.

In addition to New York Digital Investment Group, Lawsky is a member of Ripple’s board of directors. While Ripple also holds a BitLicense, the remittance firm received it more than a year before Lawsky joined in late 2017. He was still listed as a member of the board on May 12.


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