This Banker-Turned-Crypto Executive Called the Deutsche Bank Dumpster Fire

July 9, 2019 10:35 UTC

At 10 am on Monday morning, bankers were seen leaving Deutsche Bank offices with white severance envelopes and bags of personal belongings. Some were in tears. Others gathered in local bars to drown their sorrows. The Deutsche Bank axe was swift and sharp, culling some 18,000 jobs in a matter of days.

The Deutsche Bank cleanup begins. | Source: Tolga Akmen / AFP

The heartbreaking images are strikingly similar to the aftermath of the 2008 financial crisis when thousands of bankers lost their jobs and the infamous Lehman Brother’s sign was removed.

But one former Deutsche Bank employee arguably saw it coming, leaving the bank in 2018 to co-found a crypto company.

From Deutsche Bank to cryptocurrency

Medio Demarco was an analyst in Deutsche Bank’s hedge fund credit risk division in New York. But in July 2018, he left to co-found Delphi Digital, an investment grade research agency specializing in digital assets.

In a tweet yesterday, he said his Deutsche Bank colleagues probably thought he was taking a huge risk when he handed in his notice. The way he saw it, staying on the sinking ship was a riskier move.

As the axe falls on thousands of jobs at Deutsche, Demarco’s move proved to be the smartest thing he could have done. As he explains:

“When I left Deutsche Bank last year I’m sure many of my co-workers thought I was taking too big of a risk going into crypto. I thought they were taking the greater risk by staying.”

Demarco’s move means he avoided this week’s jobs cull and established himself as a leader in an emerging industry. The 18,000 bankers let go this week may not find a new career path so easily. As Bloomberg points out, almost all major investment banks are cutting staff and doubling down on automation. One Deutsche Bank trader leaving the Hong Kong office told Reuters:

“The equities market is not that great so I may not find a similar job, but I have to deal with it.”

Deutsche Bank disaster continues

More than a decade after the financial crisis, the firm has never truly recovered. In 2007, its share price traded at €110. Today it’s less than €7.

Even in 2017, Deutsche was still paying the price for its role in triggering the banking collapse. The firm was forced to pay a $7.2 billion fine for repackaging sub-prime mortgages into investment bonds. The scandals didn’t end there. The bank was fined again in 2017 for enabling $10 billion in Russian money laundering.

An image circulated on Monday of a man outside Deutsche Bank holding a “bitcoins” bag. The man was later identified as a tailor, not a banker, but the symbolism is powerful. Source: REUTERS/Simon Dawson

Monday’s announcement to slash 18,000 jobs is a hail Mary attempt to save the bank from collapse. The axe fell hardest on the investment division which has been a drag on profits. Last month, Deutsche also created a “bad bank” to sweep its underperforming assets under the rug.

A trigger for bitcoin?

Deutsche’s downfall is a sharp reminder of why bitcoin exists. It’s designed to operate outside the flawed banking system. The hangover of the 2008 banking crisis still lingers and bitcoin offers a promising alternative.

It’s little surprise that bitcoin spiked 10% over the two-days that Deutsche Bank layoffs took place.

A new paradigm has emerged.

Last modified: July 9, 2019 10:36 UTC

Ben is a journalist with a decade of experience covering financial markets. Based in London, UK, his writing has appeared in The Huffington Post and he was Chief Editor at Block Explorer, the world's longest-running source of Blockchain data. Reach him at benjamin-brown.uk or on Twitter at _Ben_Brown. Email ben @ benjamin-brown.uk.

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