How Eric Trump Got Rich From Bitcoin While Losing Investors A Fortune |
Eric Trump jumped on an earnings call in February ready to do what Trumps do best—sell. His company, American Bitcoin, had debuted just a year earlier and was already trading on the Nasdaq. “We are fast becoming the leader in the bitcoin world, and I truly think we have the greatest brand of all,” Eric said. “I want to recognize Mike, Asher, Matt and everybody at American Bitcoin.”
It was a noteworthy closing—“and everybody at American Bitcoin”—given that there is hardly anyone else at American Bitcoin. An annual report filed one month after the earnings call stated that the company has just two full-time employees, presumably chief executive Mike Ho and president Matt Prusak. Maybe there are a couple of others—Ho also serves as an executive at another company. Someone who worked in investor relations at Ho’s other company for less than a year now calls herself “chief of staff” at American Bitcoin on her LinkedIn page. Another person says she started as American Bitcoin’s social-media manager in January. (Asher Genoot, the executive chairman, sits on a five-person board with Ho and three independent directors.)
The Trump family learned long ago that there is money to be made in acting like things are bigger than they actually are. Fred Trump, Donald’s father, allegedly juiced his profits by duping authorities into thinking his projects cost more than they actually did. Donald Trump lied to banks (and media outlets like Forbes) about the value of his assets, leading a New York judge to conclude that he committed fraud. Eric Trump got caught up in that case, too, and was banned from serving as an officer or director of any New York corporation for two years. He created his own company anyway, incorporated in Delaware and headquartered in Florida, then marketed it in a way that would make his forefathers proud.
Eric Trump’s newest bitcoin venture may be selling a story more than a business. As he tells it, American Bitcoin can print money by mining bitcoin for roughly half of what it is worth. But a closer look at the numbers calls into question whether the company can mine bitcoin profitably at all, let alone with such massive margins. Representatives of Eric Trump, the Trump Organization and American Bitcoin did not respond to repeated requests for comment. Plenty of people trust in the president’s son, putting real money at stake. When American Bitcoin hit the public markets on Sept. 3, investors valued Eric Trump’s company—with an estimated $270 million of bitcoin on its balance sheet—at $13.2 billion.
Over the last eight months, American Bitcoin has taken advantage of that astronomical valuation, dumping shares to buy more bitcoin. The much-diluted stock is now down 92% from its peak. Given that Eric Trump seems to have invested little to get involved with the venture in the first place, he’s still doing fine, having boosted his personal fortune from an estimated $190 million to $280 million through a stroke of financial alchemy. Other insiders have done well, too. The everyday investors who bought into the sales pitch, by contrast, are down an estimated $500 million.
Eric Trump’s first big standalone project wasn’t a condo tower—it was a charity. He graduated from Georgetown in 2006 with a degree in finance and management, eager to make an impact on the world. His older siblings, Don Jr. and Ivanka, were already inside Trump Tower by then, working on real-estate deals. Rolling on the New Jersey turnpike one day, as Eric later recalled in an interview with Forbes, his mind moved to other pursuits—specifically how he might make a difference in the world. So began his formative entrepreneurial venture, a nonprofit named the Eric Trump Foundation.
The group did a lot of good. More of a fundraising organization than an operating charity, it routed over $16 million to St. Jude Children’s Research Hospital. But as the years passed, the group—and Eric himself—started to look more Trumpian, with a dishonest sales pitch, weak governance and sketchy financials, according to a review of documents obtained by Forbes through a freedom of information request, despite objections from the nonprofit’s legal team. Eric Trump told donors he limited expenses and ensured that virtually all their money went straight to St. Jude, in part because his dad let him use Trump clubs for free and famous people agreed to perform “pro bono.” But checks and invoices uncovered by Forbes indicate that more than $500,000 went to other charities, over $500,000 went to Trump properties, at least $90,000 went to various performers and more than $35,000 went to a chauffeur service that drove passengers including Eric’s mom, a cast member of “The Real Housewives” and a sprinter van of people headed to a Hooters restaurant.
At his day job inside his father’s business, Eric spent much of his early years working on hotels, where he learned many things, including how much easier it is to make money branding businesses than actually building them. The Trump Organization defaulted on a loan against a hotel it constructed in Chicago in 2008, took its Atlantic City portfolio into bankruptcy in 2009, then struggled to make money on its Washington, D.C. hotel year after year. Ultimately, the Trumps shifted their........