The Receipt
Newly unsealed Department of Justice documents confirm convicted sex offender Jeffrey Epstein injected $3 million into Coinbase during its 2014 Series B funding round. The revelation, reported by Bloomberg on Tuesday, sent Coinbase shares (COIN) sliding 3.5% to $187.86 as the market digested the compliance failure.
The capital did not flow directly. Documents identify Blockchain Capital, the venture firm co-founded by Brock Pierce, as the conduit. The investment occurred six years after Epstein’s 2008 solicitation conviction, contradicting standard Anti-Money Laundering (AML) protocols for institutional capital raises.
The Email Trail
Internal correspondence pierces the “passive investor” defense. Emails uncovered in the filing show Coinbase co-founder Fred Ehrsam was not only aware of the source but amenable to direct engagement.
“I have a gap between noon and 3pm today… would be nice to meet him if convenient.”, Fred Ehrsam, Dec. 3, 2014
The timeline is damning. In 2014, Coinbase was aggressively courting regulators to position itself as the “compliant” alternative to Mt. Gox. Yet, the exchange accepted capital from a registered sex offender whose financial blacklisting was already common knowledge among Tier 1 banks.
Market & Institutional Reaction
COIN touched a daily low of $174.05 before stabilizing. While the $3 million figure is negligible against Coinbase’s current $48B market cap, the reputational overhang is substantial. Institutional allocators, already sensitive to crypto’s “wild west” stigma, now face evidence that the industry’s compliance poster child failed basic due diligence on its own cap table.
Documents suggest Epstein liquidated half his stake in 2018 for approximately $15 million, netting a 400% return while retained equity likely appreciated further before his death in 2019.
