The Downfall of 'Shadow Banker' Reggie Fowler and Crypto's Rising Legitimacy
Reginald Fowler is having a real bad time, and it couldn’t have happened to a nicer guy.
A former leading player in the operations of “shadow bank” Crypto Capital, Fowler was initially indicted on charges of banking fraud in 2019 and additional charges in 2020. Among the allegations Fowler faces are that he opened U.S. business banking accounts that he claimed would be used for real estate investing, but were instead part of Crypto Capital’s operations. Fowler, a former football player turned investor, faces as much as 70 years in prison.
Fowler’s lawyers now say he will plead guilty to charges including bank fraud, wire fraud and conspiracy, and has asked to forego a trial. The plea does not involve a deal with prosecutors for lighter sentencing. In January of 2020, Fowler was reportedly close to an apparent plea deal on a single count of operation of an unlicensed money transmitter, but that deal fell through, reportedly because of financial issues.
Fowler’s assets were frozen by the Department of Justice following the 2019 indictment, and his financial issues do indeed seem severe. In November, his legal counsel withdrew from the case, saying they had not been paid. In discussion about finding new representation with the judge at the time, Fowler said, “I have used all my assets. I put my properties up for bail. I can't get a bank account. We don't have any income. We can't get to the assets. I want to find a firm that understands that.”
That’s quite a fall from grace for the briefly high-flying shadow banker, who joined Crypto Capital in 2017 and was indicted just two years later. During a period when traditional banking was even more difficult for cryptocurrency operations than it is now, Crypto Capital is known to have serviced the exchanges Bitfinex, BitMEX, Kraken and the defunct QuadrigaCX.
But they may have been up to much more: Crypto Capital founder Ivan Manuel Molina Lee was arrested in Poland, also in 2019, on allegations that Crypto Capital was also involved in laundering money for drug cartels.
Seemingly in part because of that little side hustle, Crypto Capital wound up being a very bad crypto shadow bank. Most notoriously, authorities in 2019 seized $850 million that Crypto Capital was reportedly holding for Bitfinex. The New York Attorney General later fined Bitfinex and Tether for trying to hide the losses. QuadrigaCX experienced serious problems with withdrawal delays at Crypto Capital, problems seemingly unrelated to other shady dealings at the Canadian exchange.
Fowler’s downfall was nearly inevitable – not just because he was in bed with bad people, but because he himself seems short on both ethics and competence. For instance, Fowler is sometimes described as a “former NFL investor,” but his escapades in the big leagues were a lot closer to slapstick than business. He lost his stake in the Vikings in 2014 after failing to make payments because of problems with his other businesses, according to Minnesota’s Star Tribune. The Tribune also reports that Fowler lied about his accomplishments repeatedly, including the bizarre fabrication that he played in the Little League World Series.
There’s little reason to feel sorry for a man who helped lose a lot of people huge amounts of money, and who may have abetted violent drug cartels. But there is nonetheless something tragic in the story: If they’d done things the right way, Fowler, Molina Lee and the rest of the Crypto Capital crew would be looking forward to huge success instead of facing lengthy prison stints.
As Fowler awaited trial, regulated banks, most notably Silvergate, moved aggressively to serve cryptocurrency companies, an already large market that seems poised to continue growing. Silvergate’s revenue doubled in the first quarter of this year.
Fowler is hardly the only person who got involved in crypto at a time of infinite possibility, then fumbled the bag thanks to a mix of ineptitude and short-term greed. He will likely wind up in prison thanks to his bad judgment and lackluster character, and he helped drag a lot of people down with him.
It’s a significant lesson for investors and business operators, particularly in light of Fowler’s rich history of lies and screw ups: there was a time when being in crypto meant sometimes having no choice but to deal with obviously sketchy characters, but that time has passed. It’s time to relegate Reggie Fowler and his ilk to the dustbin of history.
–David Z. Morris
