Gavin returned to Malta in high spirits, having put together one more piece of the puzzle. He allowed himself a small reprieve from the seemingly infinite stress that had plagued him the past few months.
He stared out of the window at the yacht-filled natural ports of the tiny island nation, a new haven for financial firms seeking to reduce their tax outlay. It was a meeting place of East and West, ruled by a long succession of civilizations that desired it for its strategic location in the middle of the Mediterranean. The rocky yet verdurous island’s charming mix of Eastern, Western and North African cultures, 300 days of sunshine and beautiful baroque plazas had made it a strong candidate for the fund headquarters. Low taxes and a location within the Eurozone clinched it. There were rumors that changes to the Commission’s new rules would shut out hedge funds located outside the EU from raising money on the continent. It wasn’t a sure thing, but Gavin wasn’t the type to risk it.
He was relieved Rohan wasn’t upset about the fact that he had hidden away money out of their Cryptonomy account. Rohan never noticed the “maintenance fees” Gavin had been funneling out of the company, which at final tally was around around $30,000 back then. That amount was now worth over a million dollars with the meteoric rise of bitcoin. The windfall profit silenced any concerns of impropriety.
The last six months prior to his trip to Colombia, had been spent figuring out what it would take to launch the world’s first bitcoin hedge fund. It was no small task developing a threat modeling approach that took into account all the risks associated with cryptocurrencies that he knew investors would demand. Risks of hardware failure, data loss, hackers, and even employee dishonesty had to be documented and addressed. The infrastructure too, had to be designed and implemented. Every decision was critical in the safekeeping of their assets. He decided on TrueCrypt containers with Shamir’s Secret Sharing algorithm to split the passwords onto separate flash drives. The drives would be physically stored in separate locations to eliminate the risk of lost funds if one deposit box was compromised. For anonymity, they would only use a network of non-bank safety deposit boxes distributed around the globe.
Gavin even wrote code for the first time in years, since there was no way the trading platform’s out-of-the-box solutions wouldn’t suffice for the large volume of trading they’d be doing. Unfortunately, high frequency trading was frowned upon by the bitcoin community and aware of this, Bitstamp drove a hard bargain. Only a fortuitous drop in the value of bitcoin had strengthened Gavin’s position enough to secure a favorable dealer agreement.
The plane taxied off the strip and Gavin’s mind drifted to the letter from Viktor’s lawyer that he had received only a few days ago. It turned out that Viktor had several terabytes of data on a secure server which could only be accessed by an enclosed key. Contained in the virtual hard drive were a host of items that would be essential to their cause. Confidential documents, security design specifications, metadata related to forum accounts and chat aliases, transcripts of conversations with various hackers and hacktivist organizations and another sum of bitcoin. Some half-developed programs of ambiguous purpose were included as well. The letter stated that if Viktor didn’t send a secure message to the server every six months, the instructions to download the contents via file transfer protocol would be sent to Gavin. That date was only two months away. Viktor’s research and hacker connections would be invaluable to their cause. He hadn’t revealed it to Rohan yet, but playing spoilers would require a flexible disposition regarding the legality of their actions.
After a customary wait in the cab line, Gavin hopped into a white Peugeot, just in time for a conference call with some lawyers and a newly-contracted PR firm. He dialed into the conference bridge and waited for a tone before speaking his name. His entry was announced by a perky robotic female voice and he heard shuffling as the other participants came to attention. The call was organized to discuss negotiations that were taking place with several prime brokerages, the facility that would clear their transactions in traditional securities, and provide margin financing for their trades. Jacob Heinz, the son of a partner at Heinz & Marigold, was the first to speak up with a recommendation after the brief introductory comments.
“Gavin, Barclays’ offering is clearly the option to go for considering the amount of flexibility your trading strategies require. Only Goldman offers the same breadth of market coverage, but the distance adds milliseconds.”
“How stringent are their high frequency trading rules?” Gavin asked, cutting right to the heart of the matter.
“As in, ones that are actually enforced?”
“Of course, Jake.” Gavin replied.
“Practically none, and I confirmed with some insiders that they provide order information to dark pool clients for a fee. We’d have to cross-connect to their servers, but it’d be easy to front run trades made by larger clients. Elephants make easy prey,” he said, referring to pension funds, college endowments, and other slow moving beasts. Gavin thought it over, “Anyone have any other recommendations?”
There was silence on the line.
“Well, this is going to be a short call then. Would any of you mutes like to speak up?”
“Well, sir—” Gavin interrupted the unnamed speaker, “Before you go on, who’s speaking?”
“This is Lionel Davies, from Granderson PR.”
“Well, go on Lionel, what does Granderson have to say in this matter?”
“Sir, Barclays has ample documentation that goes directly counter to what Jacob just said. We’ve reviewed their marketing for another project and they state very clearly that their ultrafast direct data feeds prevent any latency arbitrage. They block HFTs from taking advantage of other players.”
“Jacob, what say you?” Gavin passed the baton.
“Well, yeah, obviously their marketing materials say all that. I mean, why would you hire a PR firm if you could just tell the truth? Look, what it boils down to is this, Barclays wants to grow its dark pool, and to do that they need more clients trading on it. By sending more and more of their trades into the dark pool they can provide liquidity to the market. On top of that, order flow data can be purchased.”
“Jacob, how’d you get all this?”
“I worked in The City for a while after college, still have a few friends out there at Barclays.”
“Is that right? Well, how’d you like to move out of your father’s shadow, back into the world of finance?”
“Uhm… Gavin,” he paused, appreciating the fact that he was being head hunted by one of the controversial figures of the day, “can we discuss this privately?”
“Of course. The rest of you can hang up. Oh wait, before you do, Lionel please complete any outstanding business we have with your firm and cancel any future engagements. Martin, are you on the call?”
There was a long pause, the audience clearly shaken at Gavin’s rapid maneuvering. Finally, Martin, one of Jacob’s colleagues answered, “Yeah, Gavin, I’m here.”
“Finalize the paperwork with Barclays. I want to meet with an MD before we sign. Now, everyone except Jacob hang up.”
Jacob didn’t take much convincing. Gavin could tell early on that he was restless in his role of glorified scribe. He was malleable but sharp and seemed to grasp, at least superficially, the crooked nature of the system within which they played. Gavin was confident he could guide him philosophically, eventually bring him a little further into the fold, just as he had done with Rohan.