Mark Cuban Throws His Fans Into The Crypto Shark Tank

Multi-billionaire Mark Cuban is well-known as a serial entrepreneur (MicroSolutions, Broadcast.com, 2929 Entertainment), his ownership of the Dallas Mavericks basketball team, and his regular appearances on the ABC reality show Shark Tank. Less well-known until recently is Cuban’s infatuation with crypto-currencies and his belief that crypto is the wave of the future when it comes to money and investing.

Because of his high profile in sports and media, Cuban has a large fan base who move in lockstep when he announces a new favorite investment theme. As reported in this article, Cuban and his fans marched off a cliff together with their investment in Voyager, a kind of crypto-bank that took deposits and made loans in crypto-currencies.

Voyager acted like a classic bank but transacted in various cryptocurrencies instead of dollars or some other major currency. Voyager took deposits from customers and offered interest on those deposits. That seems innovative because one of the criticisms of cryptocurrencies is that they do not pay dividends like stocks or interest like normal bonds or bank deposits.

Voyager would make money by lending these crypto deposits to other customers who would pay a higher rate of interest on the loans. Voyager would make money on the spread between its deposit rate and the rate it charged for loans, plus other transaction fees and storage fees.

On October 28, 2021, Cuban’s Mavericks franchise announced a promotion with Voyager that offered fans a $100 credit on Voyager transactions if they deposited $100 (in dollars) and traded $10 or more on the venue. Cuban hosted a joint press conference with Voyager CEO Steve Ehrlich where they conducted a Q&A session for first-time crypto traders.

This all ended in disaster when Voyager filed for bankruptcy on July 5, 2022. Depositors may lose some or all of their accounts; investors in Voyager stock may lose everything. Mavericks fans are up in arms and claim that Cuban misled them. His brand has been badly damaged.

Some businesses succeed, and some fail, so it’s not fair to blame Cuban merely because of the Voyager bankruptcy. Cuban’s real fault was in not understanding that crypto is not the wave of the future, but just another bubble in the long history of financial bubbles.

When depositors stage a run on the bank or when borrowers can’t repay their loans, banks typically fail. That’s why the U.S. introduced deposit insurance in the 1930s and has regulated banks closely ever since. Voyager was nothing new. It was just a bank dressed up in crypto clothing.

Without regulatory guardrails, Voyager crashed and burned just as banks have always done since at least the fourteenth-century. There really is nothing new under the sun.

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