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The Bitcoin Barons: How a marketer and a money launderer sold Montana on digital gold

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March 6, 2017: 1 Bitcoin = $1,270

Sweat glistens on Sean Walsh’s brow as he begins his pitch. He’s standing in the circular Al Falak ballroom at the Burj Al Arab, one of the world’s most extravagant hotels. Built on its own man-made island, where guests are transported by a fleet of white Rolls-Royces, the Dubai resort is shaped like a lateen sail pressing into the Persian Gulf, a symbol for a city on the leading edge. Everything in the ballroom seems to glitter; the hotel features 22,000 square feet of 24-karat gold gilding.

The gold that Walsh is pitching can’t be seen, but its emerging power is on full display. Bitcoin first took off as the currency of drug sales and get-rich-quick scams. But by March 2017, 570,000 people had digital wallets containing at least one bitcoin, including some of the biggest names in tech. The value of the world’s first cryptocurrency had tripled in the previous year, and would balloon many times over in the following months.

Walsh is a marketer who is remaking himself as a “crypto-industry luminary,” as the speakers at this World Blockchain Forum are billed. He looks slick with a scruffy beard, blue tie and buttoned black suit. Part Silicon Valley casual, part Wall Street hedge fund manager, Walsh’s appearance fits his biography as a California man who left an executive position in private equity to start an angel investment firm, Redwood City Ventures, dedicated to promoting bitcoin to the masses. “I brought something for the group,” he begins, striding past the podium. He reaches his left hand to his back pocket, then passes a small bag to his right hand and holds it above his head. The bag is full of cowrie shells, which, he reminds his audience of businessmen and industry insiders, was humankind’s first form of money. Walsh asks a man at the front table if he’ll sell his watch for the shells. When he declines, Walsh pulls out a second bag and drops both on the table.

“I’m trying to make a point here,” he says.

His delivery is more polished six months later, when he sells a similar pitch to an audience in London: “The point is that we’ve lost trust in cowrie shells as money, despite the fact that they’ve been used for 12,000 years. Money moves on. People move on to new forms of money. They moved on to gold, they moved on to fiat currency. We’re now moving into electronic money.”

Bitcoin is the best form of money ever devised, Walsh tells the crowd, but it can only be as good as the faith society places in it. “So we need a sales pitch,” he continues. “We need to speak to our target customers in a language … that will resonate with them and will get them to feel the way we want them to feel, get them to act the way we want them to act.”

Walsh’s idea is to use affiliate sales reps to help convince more people to convert cash into digital currency. He predicts a return on investment of 28,000 percent as new users drive up bitcoin’s price. “I can tell you, even as a Silicon Valley venture capital investor, this type of opportunity is not out there,” he says. It has existed before, though: in Countrywide Financial, the so-called 23,000 percent stock, where Walsh managed customer acquisitions in 2007 just as the lender’s subprime mortgage bubble burst. But the conversion campaign is only part of Walsh’s plan. The far bigger part, the one he alludes to as the “foundation” of his effort to take bitcoin mainstream, is half a world away, humming in an old lumber yard next to the Blackfoot River, minting more invisible money than any place else in North America.

Few people know how Montana became a mother lode in bitcoin’s digital gold rush. It took a blunder, days before Walsh’s talk in Dubai, for the public to even learn that bitcoin is being mined here. The story is as familiar to Montana as bitcoin is new. It also has striking parallels to the story of cryptocurrency itself. But it’s not quite the story Walsh likes to tell.


June 8, 2011: 1 Bitcoin = $29.60

The way Yan Ebyam entered the greenhouse on the outskirts of Sacramento seemed like a tell. He opened its wide door just enough to slide in sideways, then pulled it shut behind him. Or so it looked to the three undercover agents watching from their car a hundred yards away, who wanted a glimpse inside.

It wasn’t going to be that easy to pin down the man whose first name stands for “yes and no,” and whose last name spells “maybe” backward. So the driver pulled into the florist office out front and went inside to buy some flowers. While the driver was inside, the other two agents walked up to the silver Mercedes-Benz they’d seen Ebyam driving and attached a GPS tracker to it.

The agents had been led here by a woman at a renowned tomato farm 40 miles north, who told a local sheriff’s deputy that Ebyam had “taken advantage” of her. She and Ebyam had been growing more than 4,000 marijuana plants on the farm, but she said Ebyam ran off with most of the plants shortly after their landlord expressed concern to the deputy that he was acting strangely.

The federal indictments that followed that June stakeout marked a disastrous turnabout for a man who, only months earlier, had been one of the country’s boldest marijuana entrepreneurs. Starting in 2008, Ebyam set up some of the country’s largest indoor cannabis farms in defunct Oakland warehouses, angling to obtain one of the industrial-scale licenses city officials were planning to issue. Workers at one of his farms even unionized. Today, that business seems almost visionary, but at the time it relied on an interpretation of California’s medical marijuana law that strained credulity. When the City of Oakland abandoned its plan under federal pressure, Ebyam disappeared to the tomato farm, one of what “the feds saw [as] unscrupulous operators on the fringes stuffing their pockets with cash,” Peter Hecht writes in his 2014 book, Weed Land.

He definitely had an opportunistic streak. After the dot-com crash in 2002, Ebyam, then in his early 20s, and a business partner helped liquidate the surplus computer equipment that bankrupt Silicon Valley companies were offloading. They did plenty of legitimate business initially, but in 2004 they were indicted on federal money laundering charges for what a U.S. attorney later described as a “jaw-dropping conspiracy” to sell more than $6 million in stolen Cisco servers. They’d brokered the deals through a gang member with connections to a trucking warehouse, then created phony invoices to cover their tracks.

To those who encountered him, however, Ebyam came across as more eccentric than diabolical. As a kid growing up in northern California, he stayed inside surfing the web while his brother surfed waves, he told the writer of a profile republished in the New York Times. “He blurts out his thoughts in rapid fire and is highly intelligent but pays little attention to matters like clothing or social cues,” the reporter wrote, adding that Ebyam had ordered milk and cookies during a coffee shop interview. Prosecutors called him “brilliant,” a trait that was also palpable to former business partners and acquaintances interviewed by the Indy.

As his marijuana case played out in federal court, Ebyam lived with his mother for a few months before going back to his old line of work in electronics resale. During that time, he did “millions of dollars of business” as a broker for a Silicon Valley company called Prism Electronics, its CEO, John Mauro, says.

Then Ebyam got a chance to try something new.


January 14, 2014: 1 Bitcoin = $842

Walsh says the story of how he met Ebyam is too long to tell, but that both men were interested in a radical technology that was starting to generate attention around the edges of Silicon Valley.

Helping bitcoin get noticed was a man named Roger Ver, who had been plugging it in a hokey but eye-catching way: on the billboard he rented beside an expressway in Santa Clara. One of his ads touted bitcoin as “the honey badger of money,” in reference to a viral YouTube video celebrating the species’ fearlessness and snake-eating badassery. The tagline pointed to why people like Ver, whose evangelism had earned him the moniker “Bitcoin Jesus,” were ecstatic about cryptocurrency. Ver was a fervent libertarian (he once ran for the California state assembly under the party banner), and bitcoin represented a way that average people could take down the central banking system.

The key was the ingenious way the bitcoin software had been written and introduced, anonymously, in 2008. In basic terms, the software allows users to exchange data, i.e., bitcoin, without requiring a middleman to verify the transaction. Instead, verification records are logged in a public database, called the blockchain, that’s managed by the independent computers on the bitcoin network. There’s no need for a federal reserve because the network’s open-source code calls all the shots.

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Like Ebyam, Ver was in the computer resale business, which he also entered in his early 20s in the dotcom bubble’s wake. His company, Memory Dealers, became the first anywhere to accept payment in bitcoin—a service he advertised prominently on his highway billboard. In 2012, he started the first public bitcoin meetups in Sunnyvale, where early enthusiasts could chat about the technology and the curious could get initiated.

Bitcoin was gaining notice around the world, for better and worse. Some people, like Ver, saw a financial revolution brewing, while others wanted to cash in on the next big thing. Bitcoin’s price rocketed on new exchanges. The U.S. government busted ponzi schemes and unraveled the first large, online black market to use bitcoin, Silk Road, which had enabled users to buy and sell drugs anonymously. Some prominent voices in finance, including JPMorgan Chase CEO Jamie Dimon and Warren Buffett, started pushing back against the buzz.

Bitcoin was programmed so that only a certain number — 21 million — can ever exist. However, they don’t just appear out of thin air. They’re released into circulation steadily over time as rewards to members who help maintain the network. Bitcoin transactions are verified by computers guessing the answers to difficult puzzles. When a computer finds the right answer, the associated transactions are entered into the public ledger and the miner receives a reward in the form of a newly minted bitcoin. The process is known as mining.

Mining is one of the technology’s most elegant features, but the industry that was springing up around it resembles an arms race. As in any extraction industry, people saw bitcoin mining as a way to acquire the currency at a discount while providing a service to the network. Anyone with a computer could profitably mine in the early days, but as more people joined the race and manufacturers started developing specialized mining computers, only industrial-scale operations stood a chance to win the rewards. Authors Paul Vigna and Michael Casey wrote in their 2015 book, The Age of Cryptocurrency, that “there seems to be no shortage of people who think that bitcoin, as some in the community like to say, is headed ‘to the moon’ and that mining is their ticket to those riches.”

Walsh and Ebyam decided to join up to punch their tickets. The business model was simple. Walsh calls it “self-mining.” They’d fill a warehouse with servers, mint digital money and pocket the profits.

At the same time, bitcoin advocates were trying to slough off the associations with money laundering and drugs that had tainted the currency’s public image. So it was risky for Walsh, a marketing professional at Bertram Capital, a $1.3 billion private equity firm, to go into business with someone who had a federal rap sheet containing both types of offense. But Walsh says he saw Ebyam as a “mad scientist” who was otherwise naive to the world. He decided to find a way to make it work.

“Sometimes people are so open and so trusting that they don’t know what they get themselves into,” Walsh says. “And I think Yan falls into that category.”

Plus, each seemed to bring complementary skills to the project: Ebyam knew computer equipment and had managed large warehouses. Walsh worked with startups that his firm had funded. Walsh rounded up $850,000 from four investors, including himself and a relative, and in January formed a company called Aquifer. The company’s success would depend on three factors: how efficiently its servers could win bitcoin (a metric known as “hashrate”); equipment and overhead costs; and the value of the bitcoin their servers won. The price of cooling and power tended to dictate where bitcoin mines were located. Most were overseas, in places like Iceland or China, where electricity was cheap.

Walsh and Ebyam figured they could do it in Silicon Valley’s backyard.


March 12, 2014: 1 Bitcoin = $637

At first they didn’t tell their landlord exactly what they were planning to do. Debbie Olson, executive director of the Riverbank Local Redevelopment Authority, knew only that the men wanted to install a server farm when she offered Aquifer a lease in March 2014. “They were quite secretive,” Olson says.

She remembers that they became interested in the site, part of a former army munitions plant that Olson manages as an industrial park for the small city 100 miles east of San Jose, while visiting to look at used equipment for sale by another tenant. The long, narrow warehouses oozed PCBs, but the property’s access to cheap hydroelectric power from Hetch Hetchy Reservoir caught their attention.

Olson soon learned that Ebyam was under a couple of indictments, which were still winding through court, and refused to let him sign any lease documents or official correspondence. Walsh was Aquifer’s CEO, but he still had his day job at Bertram, so a coworker from the firm, Anthony Brough, left to become Aquifer’s chief financial officer and public face. Ebyam was hired as an independent contractor as the facilities engineer.

The mine they began constructing seemed to reflect the idiosyncrasies of its designer. Photos of the interior taken by technicians for Olson’s group show servers set inside plywood enclosures and cooled by rows of box fans. The fans kicked up dust throughout the complex, while the whole setup sounded like a jet engine running nonstop in an airplane hangar. Aquifer quickly became the bane of other tenants. It didn’t help that Ebyam, who worked odd hours, had a habit of wandering all over the complex at night in his rumpled t-shirts.

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Aquifer mine

Interior of Aquifer bitcoin mine in Riverbank, Ca.

Aquifer also installed a misting system for additional cooling, Olson says, which she worried could cause problems near all that electricity. After several small fires broke out in the wooden racks, the redevelopment authority brought in consultants to inspect the arrangement for compliance with health and building safety codes.

“They most certainly scratched their heads and said, ‘We’ve never seen a server farm like this. This is just so unusual,’” Olson says.

But it was cheap, and DIY server farms were the name of the bitcoin mining game. Whereas traditional data centers emphasized reliability and backup power sources, the dog-eat-dog competitiveness of bitcoin mining encouraged stripped-down facilities that squeezed in as many servers as possible and cooled them cheaply. “Sometimes you hesitate to call these buildings data centers,” one cooling equipment supplier told online industry site Data Center Knowledge in July 2014.

Aquifer brought 5 MW online, Walsh says — enough to power about 5,000 homes at any given moment. Aquifer at one point claimed it was operating the largest bitcoin mining farm in the U.S., according to a promotional video posted to YouTube. In January 2015, Brough, the CFO, introduced Aquifer at the North American Bitcoin Conference as operating a “conglomerate” of California data centers with 28 MW of power and “considerable additional headroom.”

Brough may have been getting ahead of himself, but Aquifer’s team was nothing if not audacious. And they were looking to expand. In Oakland, after a string of suspicious burglaries at one of his marijuana grow operations, Ebyam had reportedly dragged a mattress into the warehouse office, along with a foghorn to deter thieves who would try to sneak in from the roof at night. At the industrial park, Ebyam was the one walking the roofs of abandoned buildings, explaining to Olson that he was scoping out additional space.


March 4, 2015: 1 Bitcoin = $278

Walsh was escorting his elderly mother-in-law through the federal court building in San Jose when a man named Christopher Kilday saw his chance to confront him. Kilday, an equipment salesman, was owed a commission for a sale he’d brokered for Aquifer. Kilday snapped pictures with his phone as he taunted Walsh. “Hey! Hong Kong Sean!” he said, according to court filings. “You brought your mother to court?! Hey, old lady! Walk carefully!” Security had to intervene.

By March 2015, Kilday was the least of Walsh’s concerns. Bitcoin had soared to $1,200 when Walsh and his partners hatched their mining operation in early 2014. But just before Walsh signed the lease at the old munitions plant, the world’s largest bitcoin trading exchange, Mt. Gox, filed bankruptcy after revealing that $460 million in bitcoin had been stolen by hackers. Bitcoin’s value was halved virtually overnight. As Aquifer mined, the price continued to decline.

By the time the North American Bitcoin Conference rolled around in January 2015, all the gains made during Bitcoin’s first run toward broader buy-in had evaporated. The mood was glum among the panel of mine operators. Yet Brough called the price collapse a “glorious opportunity” for mining companies, like his, that had been “conservative” in their business plans.

“We wouldn’t be in this business if we didn’t believe in the long-term prospects for bitcoin,” he told the crowd.

But mining companies also had high capital expenses — in real dollars. With their revenue in bitcoin, they’d have to sell bitcoin to pay the bills. Some observers in the press feared that would drive the price down further.

Three weeks later, Aquifer filed for Chapter 11 bankruptcy. Bankruptcy documents show the company had generated and converted bitcoins into $1.4 million over roughly nine months of mining. With bitcoin prices tanking, it wasn’t enough to keep the company afloat.

Exchange rates alone don’t explain the company’s fall, according to two of its largest creditors. The business model made sense to Andy Faris, a business acquaintance of Ebyam’s who later loaned Aquifer $300,000. He knew computer hardware, and thought an ultra-low-cost facility for turning bitcoin to cash could make him some money. But Aquifer had piled on debt to build out the data center without any Plan B in case something went wrong — if servers broke down or expansion plans hit delays or the price of bitcoin dropped, Faris says. Faris says his notes show that it took only weeks for him to realize that the management of the company was as precarious as its server racks. He sought to take over management duties to try to right the ship, but Walsh — in what Faris calls “self-preservation mode” — filed bankruptcy instead.

“The company was playing with a lot of other people’s money in a very cavalier fashion,” Faris says.

Aquifer’s landlord, a public entity, had been concerned for even longer. Olson says her agency often negotiated with tenants who ran into cash-flow problems. Aquifer, however, asked for concessions “from the beginning.” Eventually, Olson began to feel strung along. She had trusted Brough, but he quit Aquifer shortly after the bankruptcy filing (Brough did not return several emails). Walsh took over as the face of the company, and the things he said to Olson didn’t seem to bear out. “He just seemed slick, the kind of person that your antenna is up,” she says.

Aquifer told the bankruptcy judge that the company’s fate was caused by delays in getting permits to supply power to the servers it was setting up in three other buildings at the site. Certain creditors took “aggressive collection actions” when they didn’t receive payment, forcing the company’s managers to seek legal protection so they could reorganize.

Bankruptcy filings show that Aquifer LLC’s majority partner was Chris Cunningham, a project manager at the Walt Disney Company (Cunningham didn’t respond to an email for comment). Walsh, the CEO, held about a quarter interest, and one of his relatives held another 11-percent stake and was owed $300,000 for a loan at the time of bankruptcy.

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Aquifer mining rigs

Aquifer mining hardware

Ebyam had no equity in the company, but he wasn’t just an independent contractor, either. Bankruptcy documents list an outstanding debt of $130,000, as well as a mining profit-share obligation, to an LLC named Vagada Holdings. Vagada was registered in California in 2002 by Ebyam and his business partner in the computer resale business that earned them money laundering convictions. (The name appears to reference a fictitious company in the 1997 film The Devil’s Advocate that engages in shady activities.) Walsh says Ebyam loaned the company money through his LLC when Aquifer “was up against the ropes,” but can’t recall specific details.

For his part, Walsh made what seemed to be a particularly bold move once the bankruptcy was filed: He resigned his day job as vice president of online marketing at Bertram Capital.

“I wanted to try to save the business,” he says. “I am a family man with wife and kids and those things. And I invested a huge portion of my life savings into that business, and so when it started failing, it was devastating. Even thinking about it now, it was very painful. It was such a stressful time in my life, you can’t imagine. It was terrible.”

Walsh bought a domain name, redwoodcityventures.com, and began introducing himself as the founding partner of a Silicon Valley investment firm dedicated to “angel investments” in cryptocurrency companies, with an additional focus on fostering partnerships between U.S. and Chinese bitcoin companies. Redwood City Ventures is not a legal entity with an investment fund. “I made some investments with different people and collaborated on various things. It’s not like you’d be imagining, like a normal Silicon Valley firm,” Walsh says.

Aquifer’s bankruptcy case stretched out nearly 18 months, until the judge finally dismissed it. Walsh had presented a plan to rescue the company by distributing Chinese mining hardware to U.S. companies, but creditors including Faris didn’t consider it a serious plan — Aquifer didn’t have a sales team. The company later moved toward liquidation but didn’t file a plan in time, and the case was dismissed over the objection of Aquifer and its creditors.

Walsh moved to Colorado, Olson says, and continued taking a salary from Aquifer, but many of the company’s debts never got paid. The Riverbank LRA was out more than $500,000 in unpaid rent and legal fees, Olson says. The agency prepaid the power bill at the industrial complex, then billed tenants for their usage, meaning the LRA ultimately paid for much of the electricity used to generate new bitcoins at Aquifer’s data center.

A local government in a town of 25,000 people had unwittingly gambled on bitcoin, and paid a hefty price for it.

“We think, quite frankly, if we can save another community from the losses that we had to bear with this company, then we feel like that’s the right thing to do,” Olson says. “We would caution any company doing business with this particular group to be concerned, to review the records and be very concerned.”


May 19, 2016: 1 Bitcoin = $446

Scotty’s Table isn’t the sort of restaurant where diners typically tap at their phones between bites of beef duo, but the four Missoula businessmen’s new friend from Redwood City Ventures wanted to show them what the puzzling business he was bringing to town was all about. They downloaded bitcoin wallets — it takes just an email address and a few seconds to set up — and, one by one, Sean Walsh deposited a bitcoin into their accounts. It was his gift to his new landlords, Steve Nelson and Mike Boehme; their Realtor; and the local economic development officer, Missoula Economic Partnership CEO James Grunke, who had helped make introductions around town, and would later help Walsh’s company apply for a $416,000 state grant. Grunke says he “knew nothing” about cryptocurrency at the time, but today he’s able to scroll through his Coinbase app and find precisely the minute — 8:36 p.m., May 19, 2016 — when he started to learn.

“He gave us one just to let us know,” Nelson says. “It’d be like handing [you] a $50 bill. At that time, they were worth $440. It was still significant. And his words were to us, ‘Pass part of it along to some people so they can get a feel for it.’”

Cryptocurrency promoters love to perform these initiations, and have used them to soften the skepticism of some of the tech industry’s biggest figures. The journalist Nathaniel Popper describes one such instance in his 2015 book, Digital Gold, when attendees of an exclusive gathering laughed in amazement as they passed $250,000 worth of bitcoin among their new wallets.

Not that Grunke and Nelson needed any convincing by that point. There was already plenty to be excited about. Three months earlier, Walsh had inked a deal with Nelson that would bring the first bitcoin mine to Montana. In doing so, Walsh would help reinvigorate a former lumber mill community in Bonner and usher in what Grunke saw as an untapped opportunity for western Montana to become a haven for large data centers. Grunke had imagined attracting companies like Facebook or Google, but bitcoin was at least as intriguing.

Nelson’s company was redeveloping the Stimson Lumber Company’s plywood plant, which closed in 2007 and left Bonner-Milltown without a major industry. His Bonner Property Development LLC was having some success attracting new businesses, but the plywood storage building, one of the largest timber-framed structures in the country, was proving tricky to put to use. “It was always impressive to walk in and look at, because it’s got these huge, high ceilings. But then because of the high ceilings it was very difficult to insulate and utilize for the manufacturing process, because it’s so expensive, there’s so much space to try to heat,” Nelson says.

What would be additional overhead for most industrial tenants was an efficiency for a bitcoin mine. It helped, too, that western Montana isn’t prone to natural disasters that could disrupt operations, Grunke says, and that the landlords were open to accommodating an unfamiliar industry. The crucial factor, of course, was power, and Montana allows large users to buy electricity on the open market. Documents posted online indicate that Walsh’s company would ultimately negotiate a deal with Energy Keepers Inc., the tribally owned corporation of the Confederated Salish and Kootenai Tribes that manages the Se̓liš Ksanka Ql̓ispe̓ dam. How cheap was the power? A press release issued Jan. 11, 2018, by Project Spokane investor Rockshield Capital put the figure at just $.033 per kWh. Aquifer had budgeted at $.05 per kWh in California, according to bankruptcy records.

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Steve Nelson and Michael Boehme, the men working to redevelop the shuttered Stimson lumber mill, were excited to find a tenant in March 2016 for the enormous storage warehouse. They didn’t know much about bitcoin, but Nelson has since become a believer in the future of digital currency.

Grunke says his organization, a nonprofit that receives city and county funds, helped facilitate the local connections to close the deal. He recalls talking with Walsh in the old guard house onsite about what the project could look like. “Clearly, as an organization, we had a role in their decision to locate here,” Grunke says. Walsh had approached Nelson and Boehme after finding their commercial lease listing online. Rather than try to disguise the nature of his bitcoin business, Walsh sold them on it. Nelson began researching bitcoin and, after Walsh gave him his first taste of the cryptocurrency, Nelson started thinking he had stumbled across the technology of the future. He remembered the day when, as a 10-year-old in 1957, his father came home with a new Conoco credit card and placed it on the table. Nelson couldn’t believe the plastic was as good as cash. “So why wouldn’t we think of using virtual currency in this world we’re living in?” he reasoned, and soon began investing a significant portion of his own money in the cryptocurrencies Walsh was starting to mine on his property.

But otherwise, Walsh took steps to hide the new mine from public view. He incorporated the company in Montana and Colorado as Project Spokane LLC, which he has since said was meant to misdirect potential competitors. Nelson and Boehme first introduced the tenant to the Missoulian in August 2016 as Montana Data LLC, saying only that the company had built a data center to help balance energy loads for states that rely on inconsistent wind energy. It’s since been referred to in the press as Global Big Data LLC and, most recently, Project Northwest. In his talks around the world, Walsh touted his investment in the “largest blockchain security data center in North America” without saying where in North America it was.

“When we started the business, we didn’t want anyone to know anything,” Walsh says. Montana’s undiscovered supply of cheap energy was his ace in the hole in an ultracompetitive industry. And publicizing the mine’s location could make it a target for thieves or hackers. “We were just afraid,” Walsh says. “We thought people were going to try to break in and steal our bitcoin.”


January 25, 2017: 1 Bitcoin = $894

Back in San Jose, Walsh’s bankruptcy attorney, Reno Fernandez, was still trying to get paid. His firm had been dismissed by Walsh shortly after the bankruptcy was thrown out in June 2016. Between June 15 and Aug. 1, Aquifer paid Walsh $24,500, while its attorney was still owed $182,000. Fernandez says he still hasn’t been paid. Aquifer’s new attorney told the judge in early 2017 that was because the company had no cash on hand. Efforts to find new capital were unsuccessful.

Fernandez and other creditors say they had no idea that Walsh had launched a new mining operation in a different state while Aquifer’s bankruptcy was still pending. According to Nelson, the lease at the Bonner mill site began on March 1, 2016. Two days later, the bankruptcy court in San Jose held a hearing in which Aquifer withdrew its plan for reorganization and advised the court that it would be filing a liquidation plan instead.

“It signals to me that they’re hedging their bets right there by forming another company in another state,” Faris says. He says the timeline “raises questions” about whether any of the equipment, designs or other assets from Aquifer also made their way to Montana.

Walsh says he kept the businesses “totally segregated” in accordance with the law, and denies that any Aquifer assets were used in Project Spokane, noting that those assets were turned over to the company’s secured creditors, which included Faris. Walsh explains that as Aquifer failed, a friend encouraged him to “double down” and invest in a new operation. Walsh agreed, believing the problems that led to Aquifer’s demise were unlikely to recur. He says he found some “minority shareholders” for Project Spokane, but declines to identify them.

“It’s kind of a crazy thing to imagine based on what I just told you, on how devastating the loss was,” Walsh says.

Not everyone in California was in the dark about the new venture. Ebyam, still awaiting sentencing for his marijuana grow operation, had obtained permission in August 2016 from the judge overseeing his case to relocate to Montana to work at a newly built data center. Ebyam left out the bitcoin part, writing in a letter to the judge that he had “found the way to make wind energy more viable by buying the power the wind farms can’t sell.” He said that his company’s “innovative design” enabled it to cut the costs of building a data center by nearly 95 percent. The new data center was using recycled substations from a shuttered Intel facility in Colorado and transformers from an old Dell data center. Ebyam included four interior photos of the Bonner warehouse in various stages of build-out — which looks more professional than the one in Riverbank — and a letter of reference from Walsh, who wrote, “Yan is positively indispensable to our joint business venture that he leads many aspects of, and I hope to keep him at the helm for years to come.” (Walsh tells the Indy that Ebyam was an independent contractor at Project Spokane.)

By then, Ebyam was introducing himself by a different last name, Allweiss, at least to Nelson.

Nelson says the lease in Bonner was signed by Project Spokane’s other principal, a younger man named Matt Carson, who loves computer games and speaks with a Texas accent. Carson started mining bitcoin in his parents’ garage in 2010 with equipment he configured from graphics cards and motherboards purchased on Craigslist, he told the hosts of a podcast called Bitcoin Sandwich in 2014. That grew into commercial mining operations in Missouri and Colorado. He opened his Colorado facility and mining equipment distributor at the same time Aquifer got going in California. It similarly went belly-up, and the company, Miner Hosting LLC, racked up $271,000 in default judgments in Colorado from customers who said their mining equipment wasn’t delivered. (Parts delivery problems were “par for the course” in the nascent bitcoin mining industry in 2014, leading to bankruptcies and numerous lawsuits filed by customers who felt swindled, authors Paul Vigna and Michael Casey write in The Age of Cryptocurrency.) A writ of garnishment issued in 2017 was unable to collect because the company’s bank account had closed.

Nelson today says he was unaware that Walsh’s California mine had gone bankrupt. And none of the warning signs cited by the Riverbank landlords have turned up with Project Spokane. Indeed, far from sputtering on the fringe, Project Spokane was moving toward the center of the bitcoin universe. On Valentine’s Day last year, Carson and Ebyam had dinner at what appears to be Missoula’s Kobe Seafood & Steak with a development team from one of the cryptocurrency industry’s most important companies: Bitcoin.com, owned by Roger Ver, aka Bitcoin Jesus, the man who had evangelized on that Silicon Valley billboard. Ver posted a photo of their dinner to Twitter with the caption “Eight guys, and all Bitcoin.” A few weeks later, Bitcoin.com announced its latest project, a large-scale cryptocurrency mining pool.

Bitcoin.com’s announcement didn’t say where its mine is located (the company will not confirm or deny any partnership with Project Spokane), but the attached photo shows the site’s developers with their arms around Ebyam, who is wearing the same Bitcoin.com logo polo shirt he was wearing at Kobe. Its landing page for customers shows images of the Bonner data center, with its long rows of servers racked beneath the dramatic wooden trestles. Bitcoin.com’s mining business is different from how Walsh and Ebyam had mined in California. In mining pools, individual customers purchase contracts for a small portion of the mine’s overall hashrate. Pool mining provides an affordable entry point for individual miners and a more stable revenue stream for mine operators. The same risk that came back to bite Aquifer is now shared with Bitcoin.com’s customers. There’s no guarantee their contracts won’t lose money.


June 6, 2017: 1 Bitcoin = $2,822

Somebody screwed up.

Montana Gov. Steve Bullock issued a press release in June 2017 announcing that the state Department of Commerce had awarded its latest round of job-creation grants. The largest award, funded through coal severance taxes, was made to a company called Project Spokane, in the amount of $416,000 to support expansion of its “blockchain security services for the bitcoin network.” Bitcoin forums and industry websites immediately seized on the news that Montana’s government was ready to pump tax dollars into an industry that the federal government, and some other states, had been all too suspicious of. Bitcoin.com’s news service called it one of the first grants given to a bitcoin mining operation based in the U.S. In applying for the grant, Project Spokane had pledged to create 65 new jobs in Bonner over the next two years, writing that the funds would help purchase machinery, equipment, furniture and software and pay wages to new employees as it expanded operations, including additional data centers in Montana. The grant application stated that the total project would cost $26 million.

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What Walsh hadn’t expected was that anyone outside state government would find out. Walsh says he was told (he didn’t say by whom) when Project Spokane applied that “there would be no publicity whatsoever from accepting it.” In fact, Grunke had first spilled the beans locally, telling investors at a luncheon covered by the Missoulian that Project Spokane had applied for the grant, with Mayor John Engen signing a letter of support and county commissioners agreeing to sponsor the application. Grunke previously said he apologized to the company for that unwanted plug, but that his team otherwise communicated to Project Spokane’s local managers the disclosure requirements associated with the public grant. (An accounting manager listed as the business contact on Project Spokane’s application told the Indy last August that she was no longer with the company.)

Walsh decided to decline the grant. He says he hadn’t been aware that the money wasn’t as straightforward as it first seemed. The grant was technically a contract, and Project Spokane would have to submit follow-up financial documentation proving, among other things, that it had made the hires it was promising before funds were distributed. “I was like, ‘Forget it, it’s not worth the risk,’” Walsh says now.

Project Spokane continued to expand its mining capacity anyway, reaching 20 MW of contracted power, enough to power 20,000 homes. Grunke told investors at the March 2016 luncheon that the data center contained 12,000 servers, and planned to expand to 55,000. Nelson estimates the current number of employees on site is about 25, not including the temporary contractors Project Spokane hired during build-out.

Not among that crew is Ebyam, who was ordered to turn himself in at the Missoula federal courthouse by March 16, 2017, for a six-year jail sentence. He’s currently held at a federal prison in Colorado, with a scheduled release date of June 2, 2022. Nelson says he knew that Ebyam had gone to Colorado early last year, but not that he was in jail. He says he joined a conference call with Walsh and Ebyam recently to discuss technical issues about the building’s cooling system. “He understands the engineering side of things,” Nelson says.

Walsh says Ebyam is no longer involved with Project Spokane: “Oh gosh, no. You know he’s in jail, right?”


January 17, 2018: 1 Bitcoin = $11,149

Though he didn’t want it, Walsh says the attention generated by Project Spokane’s grant award turned out to be good publicity for the currency he advocates. “It helped legitimize what everyone in bitcoin is doing,” he says, before correcting himself. “Not everybody, just the good guys.”

Walsh is speaking by phone the day before he heads to Miami to deliver a presentation at the North American Bitcoin Conference, Jan. 18 and 19. His session, one of dozens, took on the question that’s become the subject of intense global speculation: Is bitcoin a bubble?

When Ebyam went to prison in early 2017, bitcoin was trading at around $1,000. By year’s end, it was trading at $13,000, down from a breathtaking rise to $20,000 in December. As the price rose and word got out that Montana was ripe for bitcoin, Grunke says his office began fielding daily calls from blockchain companies interested in setting up data centers in the area, if only they could find a big enough space.

Plans for the state’s second bitcoin mine emerged in December. The Anaconda School District agreed to sell its recently vacated elementary school for $205,000 to a company called BitPower LLC, and the county agreed to lease BitPower a 40-acre site in a tax-increment financing district for $100 per year. School Superintendent Gerry Nolan jokes that he didn’t know the difference between a bitcoin and a candy bar when the company turned up with an offer a couple of months ago. He says he still doesn’t have any idea what its representatives meant when they told the school board they wanted to turn the elementary school into a “training facility.” The Montana Standard reported that one of the company’s local spokespersons is Rick Tabish, who was famously convicted, then acquitted, of murdering gambling mogul Ted Binion and then stealing silver stashed in Binion’s desert vault. Nolan says knowing that another mine was already running in Bonner was one factor that put the school board at ease. That, and the 300 jobs the company reportedly promised to bring to town.

Project Spokane has contributed new tax base to Missoula County, but it’s also becoming a problem for the mine’s neighbors. The everpresent noise generated by the facility’s thousands of servers and 450 cooling fans is keeping them up at night — even some who live several miles away, depending on how the wind carries the sound through the canyon. Members of the Bonner-Milltown Community Council have been discussing the problem for more than six months, requesting monthly progress reports from Nelson. They’re starting to grow restless.

“We need for the company to come do face-to-face,” says Burt Caldwell, the council’s secretary. “We think the right thing to do is for the company to come face the community and acknowledge there’s an issue.”

The council has invited state lawmakers representing the area to attend a special meeting on Feb. 5 to “see if the community has any recourse at all, other than declining property values and loss of sleep.” Nelson says he and his tenants have been working for months to engineer a solution, and he’s already spent more than $10,000 to commission sound analyses. They’ve settled on a plan that involves swapping out the fan blades for a quieter configuration. If the plan works with the first few dozen fans, Nelson says, he plans to apply for tax-increment money to offset the upgrade costs, which will amount to several hundred thousand dollars. Nelson considers the potential upgrades an investment less in Project Spokane than in the burgeoning bitcoin and blockchain industry as a whole.

So far, Walsh’s play is paying off. Walsh has been quoted increasingly by national publications for his crypto-industry insights, and was announced as founder and CEO this month of Hyperblock Technologies Corp., a Canadian cryptocurrency mining company that disclosed $15 million in securities distribution in December. A company website unveiled Jan. 22 says it is “building the future of cryptocurrency mining” and features extensive promotional material showing the Bonner mine, which it calls Project Northwest. Hyperblock touts a diverse revenue model, including wholesale hashrate sales to Bitcoin.com, server hardware sales, server hosting generating “monthly USD-denominated payments” and “self-mining” like that done by Aquifer. Its mission is the same one Walsh promoted in Dubai: “to accelerate the development of the blockchain and cryptocurrency industry through hyper disruptive innovation.”

“I’m glad that I did take a second risk and invest a bunch more money, because we have a thriving business now,” Walsh says.

A Bitcoin.com manager hinted obliquely in a recent interview with Business Insider Nordic that the site was making “an awful lot of money” as the price of bitcoin and other cryptocurrencies spiked. The Indy plugged in Bitcoin.com’s advertised hashrates, the power costs advertised for “Project Northwest” and other inputs into a bitcoin mining profit calculator, which suggests that Project Spokane has mined hundreds of millions of dollars worth of cryptocurrency, at current prices.

When the price of bitcoin reached $17,000 in December, Grunke decided to cash out one-tenth of Walsh’s gift — the first time he’d sold any cryptocurrency. He says he felt a small thrill.

“It’s like pretend money to me, or being in Vegas,” says Grunke, who on Jan. 19 announced his departure from MEP to pursue other opportunities out of state.

But should Montanan communities bank on it? Is bitcoin just another gold rush? And who will be left holding the bag if the rush goes bust?

“Those are good questions,” Grunke says. “They aren’t ones we’ve thought about.”

Staff Reporter

Staff reporter Derek Brouwer joined the Indy in 2015 after year-long stints covering education at the Billings Gazette and the Helena Independent Record. He graduated from Montana State University. Follow him on Twitter: @derekwbrouwer.

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