U.S. President Donald Trump’s former Treasury under secretary for terrorism and financial intelligence, Sigal Mandelker, has revealed her first project since leaving Trump’s Treasury and joining venture firm Ribbit Capital earlier this year. In addition to joining the expanded $49 million Series B in cryptocurrency investigation startup Chainalysis, Mandelker will work on the startup’s board of advisors.
Mandelker’s firm and actor-turned investor Ashton Kutcher’s Sound Ventures participated in a $13 million extension to the previously announced Series B, as part of a larger push at the startup to deepen its government relationships and focus on using transactions paid for in bitcoin and other cryptocurrencies to track human rights abuses and other illicit activity. Cryptocurrency use for illicit purposes more than doubled to $11.5 billion in 2019, still only accounting for little more than 1% of the total transactions.
While the investment is doubly-notable in that it is both Mandelker’s first public work since leaving the Treasury Department, and it is in a company that works with bitcoin, ethereum, XRP and 96 other cryptocurrencies, it is also notable for the continuation of an increasingly clear trend of influential regulators joining the cryptocurrency companies they once oversaw. Former deputy assistant to U.S. President George W. Bush, Juan Zarate, joined another Ribbit portfolio company, Coinbase’s advisory board in 2014; former chairman of the influential New York Department of Financial Services, Ben Lawsky joined Stone Ridge Asset Management LLC, a $15 billion advisor with ties to multiple bitcoin funds in 2017; and most recently the law firm of the former chairman of the U.S. Commodity Futures Trading Commission, Chris Giancarlo, was hired by Ripple this year.
As part of the investment, which values the company at less than $1 billion, Mandelker, 48, will meet with the Chainalysis team on an as-needed basis to share with them insights gleaned from her own past experience investigating crime that relies on blockchain, and to help them build out new partnerships in both the public and private sectors. “The fact that they’re building relationships, terrific relationships, both with financial institutions and with the government sector, including with law enforcement, is going to be really important for the future of this industry,” says Mandelker.
Born in Chicago, in 1971, Mandelker earned a Bachelor’s Degree from the University of Michigan and a Juris Doctorate from the University of Pennsylvania Law School, before serving as a law clerk to Supreme Court Justice Clarence Thomas. After six years working at various government agencies, she moved to the private sector as a partner at law firm Proskauer Rose LLP.
Then, in March 2017, Trump appointed Mandelker as Treasury under secretary where she oversaw the U.S. Financial Crimes Enforcement Network (FinCEN), the Office of Foreign Assets Control, (OFAC), the Office of Terrorist Financing and Financial Crimes, and the Treasury’s Office of Intelligence and Analysis, which identifies and maps illicit transaction networks.
Mandelker had her first big success using digital currencies to trace illicit activities in 2008, when a Department of Justice team she led helped convict the directors of pre-blockchain digital currency company, E-Gold for their role helping launder funds used to buy child pornography and more. In September 2019, Mandelker made one of her biggest cryptocurrency investigation breaks with the announcement of sanctions against three hacker groups that helped the North Korean government steal and launder billions of dollars in cryptocurrency funds.
Mandelker says she first met Ribbit cofounder Micky Malka earlier this year. Malka sold his first company, a digital wallet called Lemon in 2013 for $46 million, using the funds to become an early investor in bitcoin startups, Coinbase, Robinhood and Xapo. The two hit it off, bonding in part over both having immediate family who survived the holocaust and their desire to fight injustice in the world, she says. She was officially brought onboard in April as a general partner.
In addition to her role helping build relationships as an advisor to Chainalysis, Mandelker will focus on a more full-time basis helping Ribbit identify new investment opportunities, answering regulatory questions for other portfolio companies, and looking for new ways to connect regulators with a wide range of financial technology, “thinking through how to help build bridges between the fintech world and the regulator community, whether it’s here or abroad,” she says.
The New York-based company has now raised a total of about $66 million, from investors including Accel, Benchmark and Digital Currency Group, employs 158 people, and has 295 clients, including the Bank of Montreal and the U.S. Internal Revenue Service, which is managed by Mandelker’s former employer, the U.S. Department of Treasury, through a different department.
The company isn’t revealing its most recent revenue, though in 2018, it generated $8 million selling services to investigators looking into cryptocurrency transactions and companies looking to ensure they comply with anti-money-laundering and know your customer requirements, enough to land it a place on the Forbes Next Billion-Dollar Startups list. Though the company isn’t revealing the terms of the investment, CEO Michael Gronager says they haven’t quite achieved that milestone yet. “We’ll work hard to get there pretty soon,” he says.
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