“If you are a participant in a state or local government-sponsored pension fund, then a portion of your hard-earned retirement savings is likely invested in cryptocurrency or a cryptocurrency-adjacent enterprise,” I warned Forbes readers in early October of this year—a month before Sam Bankman-crypto Fried’s empire FTX started to fall apart. I highlighted a 2022 report from the CFA Institute that showed that, in spite of the clear risks, 94% of state and government-sponsored pension funds held investments in one or more cryptocurrencies.
“Siedle’s assertion that your US state pension is gambling away a percentage of your hard-earned retirement funds on bitcoin is just false,” asserted Kim, who lacks any investment experience and cannot reasonably know for sure (since his organization’s members themselves are unsure). Kim serves as Vice Chair of the $1.9 billion Fairfax County Uniformed Retirement System in addition to his paid responsibilities at NCPERS. The $1.6 billion Police Pension and the $4.8 billion Employees Pension are two other related Fairfax County accounts. Have the three Fairfax County pensions successfully avoided engaging in bitcoin gaming, as Kim informed the public while speaking on behalf of NCPERS?
Hank Kim, who is the executive director and legal counsel for the National Conference on Public Employee Retirement Systems, a conference promoter heavily funded by Wall Street money managers and committed to defending current public pension practices—including the bad and ugly—replies to my Forbes article.
No, not even close. FOR YOU: MORE Never again display this to me | Close The Forbes Snowman was located by you! Enter the contest Find Out About The Unknown Immigrant Billionaire Betting Her Fortune To Compete Against Musk In Space Using Sea, Sand, And Sun Parrot Cay, COMO ESG Isn’t About Ethical Values And Standards Recently, the Employees’ and Police Officers Retirement Systems, two of the Fairfax pensions, “have invested in something called Blockchain Technology,” according to the Executive Director of the Fairfax County Virginia Retirement Systems. The Executive Director responded, “All investments carry risk and this investment is no different. This inquiry concerning cryptocurrency, “Is This A Risky Investment?”
I just sent Fairfax County a public records request to learn more about the bitcoin risks of all three public pensions. The CIO of the County’s Uniformed pension, which Kim of NCPERS is in charge of, Brian Morales, informed me during a lengthy conversation that “I have a completely different opinion of crypto than the CIOs of the other two Fairfax County pensions. Coins from cryptocurrencies remind me of beanie babies. They are not investments at all and have no asset value. It resembles gambling.
Despite dire warnings from the greatest investor of all time, Warren Buffett of Berkshire HathawayBRK.B -0.7%, it initially appears that everyone in charge of investing the retirement funds of Fairfax county employees feels that cryptocurrencies are a suitable investment for pensions.
“In response to your public records request, I contacted the investment managers of every fund that the Uniform pension invests in and inquired about cryptocurrency holdings,” he continued. Even though not all of my managers got back to me, I located only one venture capital fund that claimed to have $190,000 worth of cryptocurrency holdings among those who did. The County Employees pension, on the other hand, had almost 10% of its assets invested in cryptocurrencies at its height and even more committed but uninvested. At its peak, the County Police pension had over 13% invested. (I requested confirmation from the County several times, but to no avail, regarding these astounding crypto percentages, which were significantly greater than previously stated.)
However, Katherine Molnar, the CIO for the Police Pension, stated: “I’ve been really happy about how we’ve thought about it and how we’ve approached” crypto-related investments during a panel discussion organised by blockchain advocacy group Chamber of Digital Commerce just a few days after FTX filed for bankruptcy.
It appears that certain public pensions are speculating far more in cryptocurrencies than even I had anticipated, at least in Fairfax County.
Morales told me he was unconcerned about the financial managers for the Uniformed pension who had refused to tell him how much, if any, of their cryptocurrency assets they had. He claimed that it is “unrealistic” for a huge fund’s CIO to be completely aware of all of its holdings. I respectfully reject Morales’ position. My belief is that the CIO of a pension should be aware of, or be able to ascertain, the precise location of every dollar of the workers’ retirement funds at any given time.
For stakeholders, like taxpayers and pensioners, knowing where part or most of the pension’s assets are placed is rarely encouraging. Any assets you can’t locate and identify might not even exist. Finally, the Uniformed pensions’ crypto holdings may be far larger than currently reported because managers with the biggest crypto assets are less likely to freely reveal them and risk criticism. We enter into confidentiality agreements with our managers under provisions within the Virginia FOIA statutes to protect portfolio investments, so to a large extent our hands are tied, according to Andrew J. Spellar, CIO of the Employees pension, in response to my request to see the actual investment records (none of which were provided). The public records of record include our website and our annual financial reports, which I would urge you toward. You may also speak with managers directly if you have any questions.
Virginia’s FOIA laws safeguard financial portfolios. The public records of record include our website and our annual financial reports, which I would urge you toward. You may also speak with managers directly if you have any questions. Well, Mr. Spellar, why on earth do you think the managers of your pension would tell me—a forensics expert attempting to uncover possible crypto gambling—if they won’t tell you or permit you (the client who pays them hefty fees to notify the public how the funds are invested)? By the way, if your hands are tied, it’s because you agreed to have them tied as a fiduciary for a pension fund with a value of close to $5 billion.
You had the option to refuse the demands for Wall Street confidentiality, and you really ought to have, in my opinion. Public pensions should be completely transparent and open to public review.
In conclusion, I concur with John Reed Stark, a consultant who questioned the Fairfax County Police pension’s CIO about the fund’s sizable holdings in cryptocurrencies. Stark, a purported opponent of cryptocurrencies, served as the previous director of the Securities and Exchange Commission’s Office of Internet Enforcement. Following an email conversation with the CIO of the Police pension, he stated in a LinkedIn post that “to me, this is possibly the most imprudent investment” undertaken by a public fund in decades. According to Stark, “FTX’s contagion has only started to spread.” Even the CIO of the pension he is in charge of agrees that cryptocurrency gambling at public pensions in Fairfax County and elsewhere is a very real problem. Kim, speaking on behalf of NCPERS, falsely assured pensioners that public pensions are not invested in cryptocurrencies days before the FTX scandal broke.
- Police And Employee Pensions In Fairfax County, Virginia Bet 13%, 10% In Crypto; Uniformed Pension Not So Much?
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