Bloomberg: How the "Princeton Mafia" Dominates the Encryption Treasury Craze?

Source: Bloomberg

Compiled by: Zhou, ChainCatcher

Prominent figures in the crypto space, including Mike Novogratz of Galaxy Digital and Dan Morehead of Pantera Capital, have repeatedly appeared in deal after deal, shaping one of the boldest bets in the new era of crypto: the digital asset treasury craze.

These publicly listed companies (about 85 this year and still increasing) have raised billions of dollars from various investors ranging from the United States, Gulf countries to Asia. Their strategy is to raise funds using Wall Street tactics, hoard crypto assets, and then repeat the process. Week after week, many of the same names keep appearing in the boldest trades in the industry.

Novogratz, Morehead, and Joe Lubin (co-founder of Ethereum), along with their classmates from Princeton and longtime friends. They are not only veterans of the crypto industry but also key figures in the high-stakes advancement of digital assets, coinciding with the broader wave of financial instability that is beginning to emerge – and the bond between them can be traced back to their undergraduate days at Princeton in the 1980s.

Novogratz and Lubin were college roommates back in the day. Novogratz was a wrestler from the East Coast, while Lubin was a squash player skilled in computer science. Morehead was an engineering student who played football and lived nearby. These connections have shaped decades of crypto trading facilitation.

While close-knit networks are common in traditional finance, the crypto industry is built on the promise of decentralization and anonymity. However, these familiar faces tell a different story, a dynamic that has led them to be dubbed the “Princeton Mafia” by Fortune magazine.

Novogratz leads Galaxy, a giant in digital asset financial services; Morehead is the CEO of Pantera Capital, one of the earliest crypto investment firms; Lubin is a co-founder of Ethereum, operates the blockchain software company Consensys, and serves as the chairman of the publicly traded Ethereum treasury company SharpLink.

As momentum builds and notable figures take the helm, the question becomes whether DAT (Digital Asset Treasury) can continue to deliver returns, or if they are built on an unstable foundation?

“With a good story and a good storyteller, you can bring more capital to Solana or Ethereum, and do it faster than ever,” Novogratz said in an interview.

Galaxy and Pantera are among the top ten DAT investors and lenders. This close orbit also extends to trading facilitators, with about one-third of DAT transactions involving the same small group of boutique investment banks. Overall, according to PitchBook data, the top ten DAT investors participated in about 14% of treasury transactions in the past six months. Even excluding conservative estimates of the major players, such as significant moves from Michael Saylor's Strategy Inc., DAT has attracted a record-breaking $15.4 billion in new capital this year.

For these three Princeton alumni, none of this was planned in advance. But a certain something that has persisted since their undergraduate days is the appetite for risk and a belief that “Wall Street can be reconstructed faster and lighter.” Each of them has carved out their own niche in finance or technology. Then their paths began to intersect again. For over a decade, they have exchanged ideas and investments—sharing notes, supporting projects, and occasionally entering together.

In May, Lubin helped create the Ethereum treasury company SharpLink Gaming, with Pantera and Galaxy among the investors. Lubin said that friends only discuss DAT after the investors confirm. Pantera and Galaxy are also investors in the Ethereum treasury company BitMine Immersion. “We are friends, but we don't meet every day,” Lubin said in a recent interview. “But every time we meet, we have a lot to talk about.”

Their companies will also compete. In September, Pantera supported a new Solana-focused DAT called Helius. Just a few days ago, Galaxy helped launch a competitor named Forward Industries. This was not a coordinated effort. “It just so happens that our companies both launched Solana DAT within a week,” Morehead said. Novogratz expressed a similar sentiment: “We should have called each other to chat, but we didn't.”

Their paths continuously intersect, sometimes purely by chance. When Morehead discovered that Novogratz had moved next door in Tokyo, this overlap felt almost surreal. Their alma mater now also reflects this shared legacy. In 2022, Novogratz, Lubin, Morehead, and Briger jointly funded a new center at Princeton University - a center for decentralizing power through blockchain technology.

When the U.S. Securities and Exchange Commission (SEC) signaled that it would not consider most tokens as securities, a trading window opened—paving the way for a strategy pioneered by Saylor: raising funds, buying crypto assets, riding the stock price up, and repeating. “We are indeed starting to become more creative and aggressive in our thinking,” Lubin said. “And it makes a lot of sense.”

This method is quite rewarding until it no longer works. In June, SharpLink, supported by Lubin, saw its stock price plummet 72% in a single day after submitting a registration for a stock offering. BitMine dropped 40% after filing similar documents. These sell-offs remind people that the inherent volatility in high-wire attempts at cryptocurrency is distressing.

“SharpLink is here for the long haul,” Lubin said. “Our current strategy is to continuously raise funds under favorable conditions, consistently purchase Ether and hold it long-term, and continue to seek and deploy Ether into scenarios with favorable risk-adjusted returns.”

This week, over $1.5 billion worth of positions in the crypto market were forcibly liquidated, with no clear triggering factor.

These participants are still expanding their reach. Galaxy often acts as a service provider—engaging in token staking, designing DeFi strategies, and providing consulting for teams. Pantera has a risk exposure of over $1 billion in DAT and has supported more than 15 companies. “DAT is indeed providing a pathway for a new type of investor to enter the blockchain market,” Morehead said.

Novogratz does not believe the market has peaked. “I don't think all DAT companies will succeed, but if they can achieve critical mass—boosting the returns of their base tokens and building ecosystems—I believe they will be beneficial for the overall crypto space. These are the companies that will exist in the long term.”