Business

The Tale of a Crypto Executive Who Wasn’t Who He Said He Was

When ZenLedger put out word of a deal in March for the Internal Revenue Service to keep using its software, Dan Hannum said he was “thrilled.” It was a big moment for the company, which has the backing of Mark Cuban and other investors as it aims to be a kind of TurboTax for crypto enthusiasts.

It was no surprise Mr. Hannum was front and center in ZenLedger’s news release. As its chief operating officer, he had spoken with the voice of the company to The Wall Street Journal, Politico and numerous podcasters.

And who wouldn’t want to talk to him? In interviews — and a lengthy Forbes profile — he talked about turning his life around and getting his M.B.A., stints at Wall Street heavyweights like Goldman Sachs, and staggeringly profitable crypto investments that allowed him to make millions of dollars for himself and people like the talk show host Larry King.

If only all of that were true.

Within a few weeks of announcing the I.R.S. deal, the company fired Mr. Hannum. I had asked ZenLedger about things I could not verify about Mr. Hannum after I talked to him for an article about crypto trading and taxes. Much of what he had said to others did not check out, either.

All emerging industries — with their attendant opportunities for entrepreneurial people no one has heard of to get rich real quick — draw at least a few fabulists. But it is astounding that Mr. Hannum got away with it for as long as he did, even if few of us should be surprised by now at the power of untruths and our own inclination to believe them.

Mr. Hannum initially tried to offer some proof and assurances that he was being truthful, but he stopped responding to me before he was dismissed. So I don’t know why he did what he did.

But the fault isn’t his alone. Stopping to ask questions is a good way to get left out of the bro-ish backslapping — one podcaster referred to Mr. Hannum as an O.G., or original gangster — that we see across the worlds of business, politics and digital culture. There’s a nasty price to seeing only what we want to see: Slowly and then all at evvel, lying in public has come to feel like a reasonable strategy to getting or staying ahead. We need a little less mythmaking and a lot more fact-checking.

So first, the story he told about himself.It begins with the police pulling over a teenage Mr. Hannum with 17 pounds of marijuana, then a year in a program for juvenile offenders that was his warning bell. Then, he told interviewers, he attended the University of South Carolina as an undergraduate and earned his M.B.A. there, which led to stints at Goldman Sachs, Morgan Stanley and TD Ameritrade.

Mr. Hannum said he then caught the crypto bug and went west, working for Blockchain Capital, which paid him in Bitcoin, and helped run a green-energy-focused initial coin offering. That venture, he said, netted Mr. King — and the professional investors Stan Bharti and Jim Rogers — many millions of dollars in a matter of weeks.

Enamored investors soon lined up to give Mr. Hannum more money, or so he said.

“Rich people always have some extra dollars laying around that they’re willing to throw away, or at least they’re willing to risk a little bit,” he said on “The Fundamental Value,” a podcast.

Mr. Hannum told the podcast that he had put up “the first million” and that Mr. King had given him $4 million — as well as access to other well-heeled investors. “He opened up his Rolodex, and that opened up tons of doors that I should have probably never had access to,” Mr. Hannum said.

Eventually, Mr. Hannum claimed, he had $100 million under management and was placing bets on blockchain infrastructure. He said that one of those investments was ZenLedger, and that he had joined its C-suite after investing his fund’s money.

Given the credibility that comes with a fancy title, it was only natural that people might have wanted to hear what he had to say and not stop to question it. (Forbes said it was looking into the details of the profile, which was written by a nonstaff contributor who it said had looked up “basic details” about Mr. Hannum but had not checked on his employment or education history.)

I first encountered Mr. Hannum in March, when I talked to him about crypto and taxes. Nothing about the advice he offered in our phone conversation set off any alarms — in fact, it all checked out with the I.R.S.

But the life story he told me didn’t quite add up.

The University of South Carolina is a fine school, but not the first place snobby Wall Street banks look for new hires. And was Larry King, who died last year, really investing millions of dollars in crypto?

Mr. Hannum claimed to have paid millions in taxes alone on his crypto winnings, but his office in Charlotte, N.C., where he worked remotely, looked generic on Zoom. And don’t all the crypto people live in Miami, anyway?

So I started asking around. It didn’t take long to figure out that Mr. Hannum had made up a lot of it.

I could pick up the thread of his life only in college; juvenile court records are hard to come by. He did attend the University of South Carolina — he emailed me a picture of his student identification card before he went dark — but the school said he had completed neither an undergrad nor a graduate degree. And Goldman, Morgan Stanley and TD Ameritrade had no record of his being an employee.

Dan Hannum’s student identification badge.

W. Brad Stephens, a founder and managing partner of Blockchain Capital, also said Mr. Hannum had never worked for him. “I vaguely remember first meeting him around 2017, a meeting at our office for something he was trying to start,” Mr. Stephens said in an email. “We didn’t invest. But he seemed like a birçok young guy who was extremely excited about Bitcoin and blockchain.”

What about the three investors for whom Mr. Hannum claimed to have made millions? The offering never formally launched, according to a lawyer for the investment company that Mr. Bharti founded.

“No profits were made by anyone,” said the lawyer, Neil Said, responding to questions for Mr. Bharti, who was involved in the venture that sought to offer the coin.

Mr. King did record a görüntü for the nascent initial coin offering, but his widow, Shawn, told me that he never had crypto investments and that she didn’t know Mr. Hannum.

Mr. Rogers, who ran an investment fund with George Soros and wrote the book “Investment Biker,” said he had briefly been a “skeptical adviser” on the project since he did not expect it to work. He added that he had never bought cryptocurrency, let alone via Mr. Hannum.

“I have never heard of him,” he told me by email. “This is all absurd.”

Mr. Hannum was somewhat connected to the failed venture: He worked at a marketing firm in Santa Monica, Calif., called Hawke Media that helped with it, according to Erik Huberman, Hawke’s chief executive.

A Guide to Cryptocurrency


Card 1 of 9

A glossary. Cryptocurrencies have gone from a curiosity to a viable investment, making them almost impossible to ignore. If you are struggling with the terminology, let us help:

Bitcoin. A Bitcoin is a digital token that can be sent electronically from one user to another, anywhere in the world. Bitcoin is also the name of the payment network on which this form of digital currency is stored and moved.

Blockchain. A blockchain is a database maintained communally and that reliably stores digital information. The original blockchain was the database on which all Bitcoin transactions were stored, but non-currency-based companies and governments are also trying to use blockchain technology to store their veri.

Cryptocurrencies. Since Bitcoin was first conceived in 2008, thousands of other virtual currencies, known as cryptocurrencies, have been developed. Among them are Ether, Dogecoin and Tether.

Coinbase. The first major cryptocurrency company to list its shares on a U.S. stock exchange, Coinbase is a platform that allows people and companies to buy and sell various digital currencies, including Bitcoin, for a transaction fee.

DeFi. The development of cryptocurrencies spawned a parallel universe of alternative financial services, known as Decentralized Finance, or DeFi, allowing crypto businesses to move into traditional banking territory, including lending and borrowing.

NFTs. A “nonfungible token,” or NFT, is an asset verified using blockchain technology, in which a network of computers records transactions and gives buyers proof of authenticity and ownership. NFTs make digital artworks unique, and therefore sellable.

Web3. The name “web3” is what some technologists call the idea of a new kind of internet service that is built using blockchain-based tokens, replacing centralized, corporate platforms with open protocols and decentralized, community-run networks.

DAOs. A decentralized autonomous organization, or DAO, is an organizational structure built with blockchain technology that is often described as a crypto co-op. DAOs form for a common purpose, like investing in start-ups, managing a stablecoin or buying NFTs.

I could find no evidence that Mr. Hannum had made any venture investments, let alone $100 million worth. And it’s not clear exactly how he found his way to ZenLedger. Pat Larsen, ZenLedger’s chief executive and a founder, would not get on the phone with me and did not respond to any of my emails. I also wanted to know if he had read the big Forbes profile, where Mr. Hannum described how he had been an early funder of ZenLedger.

Rob Ford, an outside spokesman for ZenLedger, tried to clear some things up. He said that Mr. Hannum did not invest in ZenLedger and that Mr. Larsen had not read the Forbes article. The company does not believe Mr. Hannum ever misrepresented the company itself, he added.

(The I.R.S. connection is real: ZenLedger has four contracts, totaling $509,600, under the corporate name Blockchain Analytics and Tax Software L.L.C. The agency said contracts generally remained in place until they expired. “However,” it added, “government contracts, including this one, are subject to ongoing review in accordance with federal contracting standards.”)

So how did Mr. Hannum end up at ZenLedger?

“Mr. Hannum was referred to ZenLedger through a professional relationship and was cleared by a federal background check with no flags regarding his education or work history,” the company’s statement said. “Once it became evident that he had misrepresented his education and work history, as well as the nature of his role with ZenLedger, his employment with the company was terminated that day.”

A check of federal records is never a bad idea when hiring someone, but it probably wouldn’t raise red flags about a person’s professional or educational background. So if ZenLedger wasn’t asking the right questions, what about its investors?

Firms that want in on a deal often lean on the due diligence that the so-called lead investor conducts. In ZenLedger’s case, that was Bloccelerate, which led a $6 million funding round last year. At the time, a Bloccelerate general partner, Kate Mitselmakher, called the ZenLedger team “talented, driven and creative.”

So how much did her firm know about that team?

“Our due diligence was extensive, including talking to the I.R.S.,” she told me. “We did more due diligence than a traditional venture capitalist would have done.”

Bloccelerate vetted the company’s chief technical officer, she said — although she didn’t think anyone had spoken to Mr. Hannum, the chief operating officer. “No V.C. would be in business if we had to do background checks on everyone in the company,” she said.

So what really happened here? Mr. Cuban, whose firm was also part of last year’s funding round, offered some additional explanation in an email.

“Most of us are naturally trusting, trying to focus on making our business a success, rather than looking underneath every résumé,” he wrote. Fabricators can be a sorun at any company, and had even bitten The New York Times, he noted.

“People lie, and sometimes they are really good at lying,” he said. “All a company can do is move on.”

But accepting deceit is accepting defeat, and really, why should we? Perhaps Mr. Hannum could channel his enthusiasm toward a solution: Use the blockchain — with all its promises of permanent, unalterable records — to create an opt-in, verified platform for education and employment history. That way, people can’t do what he did.

ZenLedger, at least, seems to have learned its lesson. Its new chief strategy and chief operations officers did stints at the Central Intelligence Agency and in the Green Berets. (I checked.)

And when Mr. Larsen said on Twitter in late March that ZenLedger was looking for a “great leader and communicator” to step into Mr. Hannum’s old job, the posting he linked to highlighted work-from-anywhere flexibility and the option of getting at least part of your salary in crypto.

It also came with a warning: “We will check references.”

Kirsten Noyes, Katie Robertson and David Yaffe-Bellany contributed reporting.

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