The Unraveling of a Crypto Dream
Brock Pierce arrived in Puerto Rico seven years ago, promising to use crypto magic to revitalize the local economy. Now he’s mired in legal disputes and fighting with his business partners.
Supported by
On sun-drenched days in 2022, the cryptocurrency entrepreneur Brock Pierce liked to take his friends sailing to the island of Vieques, about 75 miles from his home in Puerto Rico. Mr. Pierce wanted to show off a property that he described as “the most important passion in my life”: a once-glamorous beachside resort that he had recently bought for more than $15 million.
In its heyday, the resort, a W Hotel, boasted a 6,000-square-foot spa, restaurants run by a Michelin-starred chef and sweeping views of the ocean; it was a key source of tourism jobs in Vieques. Then, in 2017, the hotel was damaged by Hurricane Maria, forcing it to close. Mr. Pierce planned to reopen it, using his crypto riches to revitalize both the glistening property and the local economy.
A former child actor, Mr. Pierce knew how to put on a show. On the trips to Vieques, he would anchor his Italian-made yacht at a local harbor, then lead his guests to the gates of the shuttered W, along a stretch of beach where wild horses roamed.
“This was my massive personal bet,” Mr. Pierce said recently. “This was where my heart was.”
But Mr. Pierce’s display of opulence was something of an illusion. Like many other grandiose projects that he has started in Puerto Rico, the hotel’s revival is now mired in unpaid bills and legal quarrels. Last fall, Mr. Pierce lost the W in a dispute with another investor. The hotel is still closed, its windows smashed and its floors covered in mold and horse dung. A $17,000 lounge chair, designed by a prominent Spanish architect, is collecting dust in the empty atrium.
When he moved to Puerto Rico in 2017, Mr. Pierce, an investor in a range of experimental crypto ventures, made headline-grabbing promises to revive the local economy, with the help of a tech-bro brain trust. Best known for his role in the creation of Tether, one of the world’s most popular digital currencies, Mr. Pierce led a wave of industry migrants to Puerto Rico, many of whom started buying land and trumpeting a project they called Puertopia — the transformation of the U.S. territory into a hub for crypto investors and technology start-ups.
“If you’re an American, and you’re in crypto, you have to at least take the trip,” Mr. Pierce said in 2019.
Puerto Rico was a convenient place to cash in on crypto profits. In 2012, the local government passed legislation to turn the archipelago into a tax haven for wealthy transplants. Under a law now known as Act 60, people who move there can apply for a benefit that allows them to pay nothing in capital gains taxes. The measure was aimed at increasing investment in the Puerto Rican economy, which has struggled to overcome two decades of financial crisis.
But Mr. Pierce’s vision of a crypto-fueled economic turnaround has yet to materialize, according to hundreds of pages of court records and interviews with more than two dozen people familiar with his efforts in Puerto Rico. His business partners have turned on him, and some colleagues say he is running out of cash. There is no clear evidence that the arrival of tech entrepreneurs has helped the local economy. Instead, the Act 60 arrivals have become symbols of a new era of exploitation.
Many locals consider Mr. Pierce the latest offender in a centuries-long history of global elites who have treated Puerto Rico as their personal playground. After the United States invaded in the late 1800s, American businessmen took over hundreds of acres of local land to build sugar plantations, funneling profits back to the United States. Decades later, the U.S. Navy conducted training exercises in Vieques, including bomb tests that harmed the ecosystem and caused lingering health issues.
With the arrival of Mr. Pierce and other wealthy newcomers, Puerto Ricans observed a new rupture, as housing prices surged, especially in coastal towns, displacing local families. On a stretch of wall outside the W, a group of local artists has painted a mural that shows Mr. Pierce, dressed in a crimson tunic, holding a sign shaped like the Bitcoin logo. “Colonialismo,” the caption reads.
Chameleonic Instincts
On a recent Friday evening in Old San Juan, Mr. Pierce, 43, settled down for a cup of coffee at the Monastery, a masonic lodge-turned-hotel that has served as an unofficial home base for crypto migrants in Puerto Rico. He wore a wide-brimmed orange hat and an oversize white T-shirt, emblazoned with the words “bruised never broken.” With a sweeping gesture, he pointed out the window, which overlooks a bustling cobblestone thoroughfare called Calle del Cristo, one of the oldest streets in the city.
“This is some of the first colonial Spanish conquistador infrastructure that was developed,” he explained. “The first formal road with bricks in all of the Western Hemisphere.”
Now the view belongs to Mr. Pierce: He bought the Monastery in 2018 for $4.8 million.
Mr. Pierce arrived in Puerto Rico with an eclectic résumé: The son of a home builder and a church officer in Minnesota, he was a child actor who had a short-lived career in the “Mighty Ducks” movies and starred in a film called “First Kid” with the comedian Sinbad. As an adult, he became an early investor in several prominent crypto projects, ultimately achieving a net worth estimated at $700 million to $1 billion.
After Act 60 passed, arrivals from the United States became a visible presence in restaurants and nightclubs throughout Puerto Rico. Mr. Pierce, a regular at Burning Man, was easily one of the most recognizable. He could often be spotted walking the streets of Old San Juan — a short, energetic man in a T-shirt and leather vest, a chain dangling from his neck.
Mr. Pierce bought two houses in a gated community in Dorado, a wealthy enclave where he settled with his partner, an entrepreneur named Crystal Rose, and his mother, Lynette Calabro. Mr. Pierce hobnobbed with local politicians and hosted extravagant parties, where the guests sometimes took drugs, like cocaine and ketamine, according to two people who attended the events.
For a while, Mr. Pierce managed to charm some of the locals with his openness and curiosity. He had the chameleonic instincts of a skilled actor, adjusting his behavior to suit the audience. “If it was serious people, he’d act seriously,” said Hugo de la Uz, a local maritime expert who helped manage Mr. Pierce’s yacht. “If it was crazy people, he’d act crazy.”
Mr. Pierce expressed interest in nearly every world religion, cultivating a kind of hippie spirituality. Once, on an excursion with some fellow Act 60 migrants, he nestled in the bosom of a Ceiba tree, a species revered by some Puerto Ricans. “I feel connected to him, because he has a spiritual depth,” said Carli Muñoz, a Puerto Rican pianist who has socialized with Mr. Pierce in San Juan.
But the good vibes only went so far. “I’ve made myself sure not to go into business with him,” Mr. Muñoz said.
Since he moved to Puerto Rico, Mr. Pierce has bought at least 14 properties, according to real estate records. Some, like the Monastery, were already functioning businesses. But Mr. Pierce also announced plans to convert much of his portfolio into new projects, including an art gallery and a community center. None of those ventures has come to fruition. A hospital in the city of Humacao that he bought late last year has struggled, and the gallery was recently listed for sale. In 2019, Mr. Pierce took over a three-story building that once housed a children’s museum in Old San Juan; for a while, he told the local media, he used it as “a space to meet and discuss big ideas.” Today, the building is empty, paint peeling from its walls.
“It’s so sad,” said Robert Cimino, a Puerto Rican businessman who owned the building for 19 years before he sold it to Mr. Pierce for $2 million. “I wanted to sell it to someone who could maintain it.”
Over and over, Mr. Pierce has found local Puerto Ricans to help him with development projects — only for many of those collaborators to later say that he exploited them, failing to pay bills or cutting them out of deals. At the same time, he has battled in court with another Act 60 arrival, Joseph Lipsey III, who seized control of the W last year, claiming that Mr. Pierce had defaulted on a loan.
Mr. Pierce has denied that he deceived anyone. But at least three lawsuits against him are pending in the local courts. Over coffee at the Monastery, he acknowledged that his own poor judgment and naïveté had upended his plans in Puerto Rico. “I trust in people,” he said. “That’s one of the things that have gotten me into a little bit of trouble.”
Booed at a Beauty Pageant
Mr. Pierce likes to present himself as a kind of geopolitical mover and shaker. In 2020, he ran for U.S. president as an independent, collecting a little under 50,000 votes. He boasts of “engagements” in El Salvador and Panama, and one evening in June, his assistant announced that Mr. Pierce was joining a Zoom call with the president of Palau, a tiny archipelago in the western Pacific.
“I spend a lot of time with pretty much all of the world’s religious leaders,” Mr. Pierce said at the Monastery. “And a lot of the world’s nation state leaders.”
But Mr. Pierce’s main focus is Puerto Rico, where he has become a leading spokesman for Act 60. After he moved, he told Rolling Stone that he would rebuild the economy “with money that we saved from the I.R.S. in a Robin Hood fashion.” The publicity helped turn Puerto Rico into a popular destination for the crypto set: These days, about 2,600 people receive the Act 60 tax break, according to government figures.
The local backlash against Mr. Pierce started almost as soon as he arrived. “Gringo go home,” someone wrote in red paint on the side of the Children’s Museum. But behind the scenes, Mr. Pierce was expanding his real estate empire. He recruited a prominent local hotel developer, Gonzalo Gracia, to help him find buildings in Puerto Rico that he could rehabilitate and convert into tourist attractions.
Soon Mr. Pierce’s business dealings began to deteriorate into legal disputes with local partners. In 2021, he struck a deal to help produce the Miss World beauty pageant at a concert venue in San Juan. By then, Mr. Pierce was already considered something of a carpetbagger in Puerto Rico: When he was introduced as one of the judges, the crowd booed him. Later, he sued Stephanie del Valle, a Puerto Rican pageant executive and former Miss World, claiming she owed him $1.2 million. Ms. Del Valle countered with her own suit, accusing Mr. Pierce of defamation and seeking $31 million in damages. (The dispute is pending in local court. Mr. Pierce said he was “committed to resolving this matter fairly.”)
Ms. Del Valle was one of the first in a string of Puerto Ricans who have clashed with Mr. Pierce, saying he cheated or manipulated them, according to lawsuits and interviews. Around the same time as the pageant, Mr. Pierce bought an 80 percent stake in the W. The deal was among his largest investments in Puerto Rico, and it paved the way for him to seek more than $30 million in tax credits from the local government.
Mr. Gracia helped set up the acquisition. He represented Mr. Pierce in meetings with local officials in Vieques and found an architect to make plans for the hotel’s reopening, court records show.
But the partnership was short-lived: Once the deal was finalized, Mr. Pierce cut him out of the project, Mr. Gracia claimed in a lawsuit in 2022, and refused to pay him a $790,000 commission.
A similar pattern unfolded on another project in Vieques. In 2021, Mr. Pierce asked a local naval engineer to help him open a hotel-cum-museum on a boat docked on the island’s northern coast. The engineer, who requested anonymity to avoid business repercussions, arranged meetings with local administrators and discussed the project with the mayor, before Mr. Pierce abruptly abandoned the plan. In an interview, he said that Mr. Pierce still owed him $17,000 for the work. (Mr. Pierce said he had no record of that debt.)
By last year, there were signs Mr. Pierce was stretched thin. He had asked Mr. De la Uz to make repairs to the Aurora, the yacht he used to ferry friends back and forth from the W. Most of the guests were “Americans that he was trying to convince to give him money,” Mr. De la Uz recalled. “Portraying himself as Puerto Rico’s savior.”
In a 2023 lawsuit, Mr. De la Uz claimed that he and Mr. Pierce co-owned the yacht, and that Mr. Pierce missed repair payments, even when one of the boat’s engines “could shut down at any time for no reason.” While guests partied on the deck, Mr. De la Uz said, the yacht was collecting water and slowly sinking into the Caribbean Sea.
Mr. Pierce declined to comment on the allegations, saying, “We are actively working through these issues in court to reach a fair resolution.”
‘I Did Zero Due Diligence’
When Mr. Pierce went out on the Aurora, he sometimes brought along a newcomer to the Act 60 community — Mr. Lipsey, a 62-year-old logistics mogul. For a while, Mr. Pierce knew Mr. Lipsey just by his nickname, Jopepi. Mr. Pierce found him socially awkward but likable enough. A local rabbi had vouched for him. “I was led to believe this was a very charitable man,” Mr. Pierce said.
Mr. Pierce knew only the vague outlines of how Mr. Lipsey had ended up in Puerto Rico. In 2017, Mr. Lipsey had made a fortune from disaster relief efforts after Hurricane Maria, transporting bottled water via a contract with the U.S. government. But two years later, a legal scandal upended his family’s upper-crust life in Aspen, Colo. A wild New Year’s party at Mr. Lipsey’s house led to a police investigation; he and his wife ultimately pleaded guilty to providing alcohol to minors and were sentenced to a year of probation.
The Lipseys sold their house in Aspen and eventually moved to Puerto Rico, settling near Mr. Pierce in Dorado. Soon the families grew close. Mr. Lipsey’s wife became friends with Mr. Pierce’s mother. After Ms. Calabro died of a heart attack in 2022, Mr. Pierce recalled, Mr. Lipsey said that he had made a promise to her: He would always be there for her family.
Mr. Pierce and Mr. Lipsey collaborated on various business ventures, but their most consequential deal involved the W. Last October, Mr. Lipsey agreed to lend Mr. Pierce $10 million — $4 million to buy the remaining 20 percent of the hotel and $6 million for a separate deal to invest in a chain of bankrupt hospitals. The terms were risky for Mr. Pierce: He was supposed to complete the hotel deal within two weeks. As collateral, he had to post his entire stake in the W. Mr. Pierce said that he was uncomfortable with the requirements, but that he agreed anyway. “I did zero due diligence,” he recalled.
The month after the deal was signed, Mr. Lipsey accused Mr. Pierce of violating their agreement and seized control of the hotel. Rather than use the borrowed funds as intended, Mr. Lipsey later claimed in legal papers, Mr. Pierce had spent the money on private jet flights and a 72-hour-long birthday party that spanned San Juan, Miami and Los Angeles. (The event was titled “Brock Pierce’s Odyssey Birthday Celebration: Three Mythical Events,” according to court documents.)
As the dispute escalated, Mr. Pierce summoned Mr. Lipsey for a meeting at the Hacienda Tamarindo, a small hotel in Vieques that Mr. Pierce had bought for $3.2 million. Mr. Lipsey later told the Puerto Rican police that the meeting amounted to a kidnapping. Mr. Pierce had asked for his phone and locked the door, he said, while an armed guard hovered nearby.
In court, Mr. Pierce has denied misusing the borrowed money or kidnapping Mr. Lipsey. But when the W dispute began, he wasn’t in a healthy frame of mind, said one of his advisers, Cassandra Wesselman, who recently moved to Puerto Rico. Ms. Wesselman said it was she who had suggested bringing the armed guard to the Hacienda Tamarindo — to protect Mr. Pierce from a couple who were staying in another room. They belonged to a cult, she explained, and she believed that they had been exercising a malign influence over Mr. Pierce. (In response, Mr. Pierce called that account of his actions “misleading.”)
A month after the disputed meeting, Mr. Pierce sued Mr. Lipsey, seeking to reclaim control of the W and accusing him of “malevolent acts” and “insidious machinations,” including fraud, extortion, deception and theft.
A judge rejected Mr. Pierce’s request for an injunction, which would have restored his ownership of the W as the case proceeds. The parties have stayed in touch, discussing possible settlements. But the friendship between the two men is over.
Mr. Lipsey had not spoken publicly about the dispute until July, when he discussed it for two hours with a reporter from The New York Times over a WhatsApp call. A cigarette dangling from his mouth, Mr. Lipsey gave a virtual tour of his house in Tennessee, where he spends part of the year, switching on his camera to show off an unusual collection of artwork. On one wall hung a canvas with two splotches of red paint. It was the work of his son’s girlfriend, Mr. Lipsey explained; the splotches were imprints of her breasts.
Mr. Lipsey called Mr. Pierce “not a good guy” — a terrible businessman who was constantly running out of money. “All the stuff he moved to Puerto Rico for and he’s talking about, he’s not doing,” Mr. Lipsey declared.
He has said about as much to Mr. Pierce’s face — and worse. During one heated conversation, Mr. Lipsey said, he called Mr. Pierce “a real disappointment to your mother.”
A Blithe Confidence
One morning in June, Mr. Pierce went on a stroll through Old San Juan, winding his way along the narrow sidewalks as he pointed out his favorite spots. Despite the summer heat, he had dressed all in black — part of a simple color scheme he follows every day, so time-consuming wardrobe decisions are one less distraction to worry about. “Mark Zuckerberg and Steve Jobs, these guys wore the same outfit every day,” Mr. Pierce explained.
He stopped outside Carli’s, an upscale jazz bar run by Mr. Muñoz, the Puerto Rican pianist. Mr. Muñoz once dedicated a song to him and Ms. Rose, Mr. Pierce said. He smiled at the thought.
“It’s called ‘Superheroes,’” Mr. Pierce said. (The song’s actual title is “Superpower.”)
Even after all the setbacks, Mr. Pierce expresses a blithe confidence that he can be a force for progress in Puerto Rico. But his self-assurance belies a persistent messiness in his business affairs. Among his friends, Mr. Pierce’s clash with Mr. Lipsey is the subject of vigorous armchair speculation. Robert Anderson, a crypto enthusiast who lives in Puerto Rico and is friendly with both men, said they have behaved “like children,” acting out because they’re bored. “They need some stimulation,” he said. “They want to feel something.”
Friends and colleagues say that Mr. Pierce appears to be running out of cash. In court, Mr. Lipsey’s lawyers have argued that Mr. Pierce lacked “the capital or resources” to develop the W. This summer, a representative for a Puerto Rican basketball team, Mets de Guaynabo, sent Mr. Pierce emails complaining that he had failed to pay more than $25,000 he owed the team as a part of a sponsorship deal, according to documents reviewed by The Times.
Mr. Pierce has also voiced concerns about his safety in Puerto Rico. Privately, he has discussed a plan to build a munitions repository in Vieques — a store of weapons that he said would offer a measure of protection if the locals ever rose up against him, according to two people who heard the comments.
In a 17-page statement to The Times, Mr. Pierce denied that he proposed creating the weapons repository, and said he remains wealthy, disputing the claims that he is financially strapped. He said that the complaint from Mets de Guaynabo was a “misunderstanding,” stemming from confusion over the terms of the sponsorship, and that he has now agreed to pay the fee. (The team representative declined to comment.)
Still, as The Times was finishing its reporting, a publicist for Mr. Pierce mistakenly sent a message to a group chat that included a Times reporter and Ms. Wesselman, Mr. Pierce’s adviser: “We still have not gotten paid,” the text said. “I assume your [sic] not paying us or you would have done it already.” Ms. Wesselman laughed off the message, saying that the publicist was “totally messing with us.” After he learned that a reporter had seen the text thread, the publicist said Mr. Pierce “always pays his bills.”
In his statement, Mr. Pierce defended his work in Puerto Rico. He said he had made charitable contributions, including a six-figure donation to support Covid relief efforts in the region. “Transformative projects take time,” Mr. Pierce said. “While some initiatives have faced challenges, others have seen significant success.”
Among his achievements, Mr. Pierce cited a hospital in the city of Humacao that he bought in late 2023 — the investment he had pitched to Mr. Lipsey. He said he had worked with a Puerto Rican radiologist, Josué Vázquez Delgado, to drag the hospital out of bankruptcy, retaining more than 90 percent of the staff.
But in an interview, a doctor at the hospital, who asked to remain anonymous to avoid discipline, said Mr. Pierce owed him tens of thousands of dollars in unpaid wages. The hospital has been late paying suppliers, the doctor said, and some of the surgeons are short on equipment. (Mr. Pierce said his team has addressed those problems and “dramatically improved the hospital’s operations.”)
On his walk in San Juan last month, Mr. Pierce sought to offer a visual demonstration of his success in Puerto Rico. He led two Times reporters to a building he had bought in 2019, a sparsely furnished space dotted with TV screens. The property, he declared, housed the world’s first art gallery dedicated to nonfungible tokens, the digital artwork known as NFTs. “You normally wouldn’t think that Puerto Rico would be the first place in the world to be pioneering in tech,” he said. The images on display included a fluorescent dinosaur, perched amid a forest of giant cactuses, that Mr. Pierce said his 5-year-old daughter had designed using an artificial intelligence tool.
But what he failed to mention was that a luxury real estate firm had put up a notice listing the building for sale and had held an open house. Confronted with that fact, Mr. Pierce acknowledged that he had recently tried to sell the gallery.
It was never fully opened, he explained, and has struggled to make money.
Kitty Bennett contributed research.
David Yaffe-Bellany writes about the crypto industry from San Francisco. He can be reached at davidyb@nytimes.com. More about David Yaffe-Bellany
Advertisement
Posts
No comments:
Post a Comment