Jeffrey Epstein, the infamous late convicted sex offender, invested about US$500,000 in a 2014 seed round for Blockstream, a Montreal-founded Bitcoin company last valued at US$2.5 billion, according to documents released by the U.S. Department of Justice.
Epstein made the investment in the US$21 million round through a company called Kyara Investments III, which he co-owned with former MIT Media Lab director Joi Ito, documents reveal. The company was explicitly created to make the investment, and Epstein and Ito each owned 50 per cent of it, although Ito’s original contribution, at US$2,000, was much smaller than Epstein’s, according to the documents.
In a Sunday post on X, Blockstream co-founder and CEO Adam Back said Kyara sold its stake a few months after making the investment “due to a potential conflict of interest, and other concerns.” “Blockstream has no direct nor indirect financial connection with Jeffrey Epstein, or his estate,” wrote Back, who is well known in the Bitcoin community as an early correspondent with Bitcoin creator Satoshi Nakamoto. Blockstream did not immediately respond to The Logic’s requests for comment.
Ito’s internet company Digital Garage and its associated fund DG Ventures later invested in Blockstream’s US$55-million Series A and US$25-million Series A2 rounds in 2016 and 2017. The New Yorker has previously reported that Epstein contributed US$1.2 million to investment funds controlled by Ito. Ito, Digital Garage and Blockstream did not respond when asked if Epstein’s estate stands to benefit from those investments.
In 2019, financier Epstein was charged with operating a sex trafficking ring, recruiting minors to his residences to engage in sex acts with him. Epstein’s victims have also accused him of trafficking them for abuse by his associates and high-profile politicians and celebrities in his circle. He was also allegedly involved in multiple frauds and Ponzi schemes. Epstein died in prison while awaiting trial.
In 2008, Epstein pleaded guilty to soliciting prostitution from a 14-year-old and served 13 months of an 18-month jail sentence, later telling the New York Post, “I’m not a sexual predator, I’m an ‘offender.'” Blockstream did not respond when asked when it learned of Epstein’s crimes, and what action it took in response.
According to emails released by the Department of Justice, Blockstream co-founder and former CEO Austin Hill first met Epstein in Vancouver in March 2014. Hill and Back made arrangements to meet with Epstein a month later in St. Thomas in the U.S. Virgin Islands, according to the emails.
In May 2014, Epstein emailed Hill to confirm he would invest in the company. “My investment in your deal will be made through Joi Ito investment co. when do you expect papers?” he wrote.
Two months later, Hill told Ito and Epstein that he was increasing their investment from US$50,000 to US$500,000, even though the round was “10x oversubscribed,” after LinkedIn co-founder Reid Hoffman — a known associate of Epstein’s who went on to become a director of Blockstream — told Hill to bump up the pair’s stake in the round. “This is causing no small amount of headaches,” Hill wrote, adding that the company had given “everyone else a haircut to make room.”
Hill and Hoffman did not respond to requests for comment.
Two weeks later, Hill threatened to reduce or eliminate Epstein and Ito’s investment in the round because they had backed a competing blockchain called Stellar. Ito and Hill talked on the phone and worked out their concerns, the emails show.
Hill went on to email Epstein repeatedly over the years, at one point seeking funding for a charity in which cancer survivors would pledge a portion of their future earnings to support research. On Jan. 7, 2015 — days after a lawsuit filed by a woman who said Epstein forced her to have sexual relations with Prince Andrew became public — Hill asked if Epstein was available to meet him in New York City the following week for “advice & council on a few things both business, Bitcoin, personal & esoteric mind games that we play.” “My apologies for interrupting in what I’m sure is a crazy media storm for you & your team,” he wrote.
Ito resigned from the MIT Media Lab, an interdisciplinary research institution, in 2019, after The New Yorker reported on his ties with Epstein. In an online post, he said he “was never involved in, never heard [Epstein] talk about, and never saw any evidence of the horrific acts that he was accused of,” and pledged to donate sums equal to Epstein’s contributions to the lab, and return the money Epstein had invested in his funds.
In a 2016 blog post, Ito said he sold his stake in Blockstream, and exited other crypto-related investments to avoid conflicts of interest before launching a blockchain research group called the MIT Media Lab Digital Currency Initiative in April 2015. Ito said in the post that he recused himself from discussions related to his company Digital Garage’s subsequent investments in Blockstream.
Blockstream’s co-founders originally envisioned the company as playing a similar role for Bitcoin as the Mozilla Corporation does for open-source internet tools like the Firefox browser by employing prominent developers and funding research and adoption. The company went on to expand into bitcoin mining, hardware and investment products before splitting into three companies in April.
The revelation of Epstein’s investment has sparked online backlash. Bitcoin is based on open-source software, but its core developers — some of whom are employed by Blockstream — have a lot of power over the protocol. Critics have long raised concerns about the concentration of Bitcoin developers employed and backed by a handful of institutions and funders.
The documents also reveal that Epstein’s donations to MIT Media Lab — which The New Yorker reported totalled US$525,000 — helped its Digital Currency Initiative hire three Bitcoin developers in 2015. “Used gift funds to underwrite this which allowed us to move quickly and win this round. Thanks,” Ito wrote to Epstein after the hires.
Epstein’s crimes have created a moral and public relations dilemma for the many companies and organizations he had financial ties with. Epstein’s US$40 million investment in billionaire Peter Thiel’s venture capital firm Valar Ventures more than 10 years ago is now worth US$170 million. The New York Times reported the firm hopes any eventual payout benefits victims.
Harvard University, meanwhile, said in 2020 that US$200,937 of the US$9.1 million Epstein donated remained unspent and had been redirected to two anti-human trafficking organizations.
Blockstream did not respond when asked if it has made, or will make, any similar donations.
