Barstool Sports’ David Portnoy bought more than $1 million worth of Bitcoin — or so he claimed — earlier this month. Less than two weeks later, the media empire president suddenly announced that he had sold it all.
“I currently own zero bitcoins,” he told his legions of Twitter followers on Friday. “I’m out on crypto because coins don’t always go up.”
Portnoy has established himself as a frat-boy entertainer with 1.7 million followers alone on Twitter. So it’s hard to know exactly what was going on behind the scenes. Did he exit the market because his site sponsorship with BlockFi apparently ended yesterday? Or did his remarks cause BlockFi to dump him?
Regardless, his sudden about-face raised some questions. Did Portnoy, who got involved in the risky business of day-trading stocks when the COVID pandemic imposed a time-out on professional sports, cross a line by talking up Bitcoin and then dumping it?
During his short love affair with crypto—which began when he hosted founders of the Gemini crypto exchange Cameron and Tyler Winklevoss at his summer home on Nantucket—Portnoy bragged about “pumping and dumping” Bitcoin along with other cryptos, such as chainlink (LINK) and orchid (OXT), which he also purportedly invested in.
Bitcoin, which was $11,755 on August 13, went up more than 7% after Portnoy let the world know that he had leapt into the market wholeheartedly. LINK, however, dumped 30% since Portnoy signaled his confidence in the coin. OXT also dropped in price.
“The thing I like about pump-and-dumps in crypto is it’s encouraged,” he said on his Davey Day Trader stream on August 17. “In crypto, you can pump and dump all day long.”
The day after Portnoy made that comment, Jake Chervinsky, a lawyer and general counsel to decentralized finance startup Compound, tweeted a reminder that manipulating crypto markets is a big no-no.
“I don't know who needs to hear this but pump-and-dumps are illegal in crypto just like in every other market & if you admit to doing them intentionally on a recorded live stream then you can expect to see the video played back for you as Exhibit A by @CFTC & @TheJusticeDept,” he said.
Indeed, the Commodity Future and Trading Commission has previously warned the public about crypto pump-and-dump schemes, which it defines as “coordinated efforts to create phony demand (the pump) and then sell quickly (the dump) to profit by taking advantage of traders who are unaware of the scheme.”
Chervinsky told Decrypt today that even though crypto has gotten a reputation for being the Wild West he wants people to be aware that the same laws apply to Bitcoin as other commodities, such as stocks, which are traded on regulated exchanges. (Gemini is a regulated exchange, but many of the exchanges where bitcoin is traded are not.)
“I saw a clip of Dave saying that pump and dumps are encouraged in crypto, and although I'm sure he was joking, I don't want his audience to come away with a false impression,” he said.
That said, Chervinsky emphasized that he did not see anything to suggest that Portnoy was engaged in a pump-and-dump scheme.
In fact, Portnoy himself admitted he got caught with his pants down: “I think I bought it at eleven five, it went up to twelve five, just like we knew when I got in. And then I turned my head for a second and people are selling it. But that’s not the one that got me, and that was by far the most money. I was probably up 150 on Bitcoin at one point but the LINK people, the ORCHARD people, killed me."
Preston Byrne, a partner at U.S. law firm Anderson Kill, told Decrypt that there’s not enough information available on Portnoy’s crypto trading activities to determine whether any unlawful activity actually took place.
It’s not enough to mention you hold a position in a coin or security, he said. “There needs to be some dishonest conduct or false representations for the trading activity to rise to the level of fraud.”
That said, Byrne added that recording a video of yourself stating that you are thinking about trading crypto and then mentioning pump-and-dump schemes in the next breath is a “profoundly stupid thing to do but, on its own, is probably not criminal.
“Misleading investors to make a profit is an entirely different matter,” he said. “but, as far as I can tell, nobody is claiming that anything Portnoy said was untrue.”
Besides, would it surprise anyone if Portnoy, being Portnoy, reemerged today bullish on Bitcoin?