Kevin Warsh, the nominee for the Federal Reserve chair, has filed a 69-page financial disclosure with the U.S. Office of Government Ethics, revealing a portfolio that includes stakes in cryptocurrency and blockchain companies.
The disclosure indicates that Warsh, through various investment funds, holds equity positions in over a dozen companies involved in decentralized finance, or DeFi, Ethereum scaling networks, Bitcoin payment infrastructure, and prediction markets. Warsh has pledged to divest most of these holdings due to potential conflicts of interest. The companies in which Warsh has invested include those focused on DeFi lending, decentralized derivatives, and Layer 1 and Layer 2 networks. His investments also extend to Bitcoin-specific companies, such as a startup working on the Bitcoin Lightning Network, and firms providing crypto investment and financial infrastructure.
Furthermore, Warsh has invested in companies related to Web3, non-fungible tokens, or NFTs, and other crypto-adjacent technologies. Notably, the disclosure reveals that Warsh previously invested in Bitwise Asset Management, the company behind a spot bitcoin exchange-traded fund.
However, this investment does not appear in the current disclosure. The majority of Warsh's crypto positions are held within fund vehicles, with individual line items reported without dollar values, indicating that each investment is worth less than $1,000.
Warsh also holds larger positions in Juggernaut Fund LP and THSDFS LLC, although the underlying assets are not disclosed due to confidentiality agreements. These investments will require full divestiture to comply with the Ethics in Government Act. The divestiture process may be complex, particularly for illiquid venture stakes.
Even after selling his crypto holdings, Warsh will face a complicated recusal landscape, with federal ethics rules requiring a one-year cooling-off period for matters directly affecting his recent financial interests. This could impact the Fed's decisions on various regulatory and monetary policy issues. Warsh's financial profile and earning history also underscore his connections to the crypto industry.
He has earned significant consulting fees from prominent investment firms with digital asset trading operations, including Duquesne Family Office, GoldenTree Asset Management, and Cerberus Capital Management. Additionally, Warsh has collected substantial speaking fees from various firms, including those involved in the financial and investment industries. His spouse, Jane Lauder, has an estimated net worth of $1.9 billion, which would make Warsh one of the wealthiest Federal Reserve chairs in modern history.
The Senate Banking Committee is expected to hold a confirmation hearing for Warsh next week, although the timing of the final vote remains uncertain due to an ongoing criminal investigation of current Fed Chair Jerome Powell. During the hearing, Warsh's crypto holdings are likely to be a topic of discussion, with senators on both sides increasingly focused on financial conflicts at the Fed.
For the crypto industry, Warsh's disclosure presents a mixed signal: on one hand, a Fed chair with personal experience in the crypto space may bring a more nuanced understanding of the technology, but on the other hand, the mandatory divestiture and recusal obligations may limit his ability to act on those sympathies, at least in the first year.