Seven years ago, bitcoin was a foreign language to federal prosecutor Katie Haun. That changed when her boss at the U.S. attorney's office asked her to look into shutting it down.
What's now the most widely used cryptocurrency was a niche payment method being used in the depths of the internet, in many cases being used to buy illegal goods on black markets. But Haun quickly decided the currency itself wasn't what needed probing.
"It would have been akin to saying 'let's go prosecute cash,'" Haun said.
Instead, her department prosecuted multiple cases where bitcoin was being used for extortion and white collar crime. In some cases, the technology behind bitcoin, known as blockchain, actually helped the department solve cases.
Haun's view on cryptocurrency has evolved, and so has her career path. After spending much of her professional life prosecuting prison gangs, corrupt officials, and the mafia, she's now the first female general partner at Silicon Valley investing powerhouse Andreessen Horowitz. Haun runs the $350 million cryptocurrency fund that launched last summer and was an early part of Facebook's libra launch, making her one of the most recognizable investors in the space.
Haun spent her early years abroad thanks to her parents' jobs at a Fortune 500 company, and her teenage years in Cairo, Egypt. She moved back to the States to attend Boston University, then Stanford Law School, and began her career as a law clerk. Haun eventually worked for Supreme Court Justice Anthony Kennedy. When Kennedy asked where she wanted to be in ten years, Haun told him: "I want to be a prosecutor."
She got her break in an eastern Virginia district right outside of D.C. known as the "rocket docket" for the high volume of cases, and how fast they move from investigation to trial. It's also well-known for its high-profile cases, covering the CIA, Pentagon and other federal agencies. She saw everything from international drug cartel to national security cases come across her desk. One of those first trials was a man smuggling firearms on airplanes in and out of D.C. at Reagan National.
Haun was later sent on assignment to the Justice Department headquarters, working in a newly created group called the National Security Division, which was born out of post- 9/11 legislation. There, she monitored nationwide terrorism cases, including the Miami "dirty bomber" Jose Padilla trial. By 2009, she moved west.
"At that time, California was in the midst of a bunch of things. A number of gang wars were going on," she told CNBC at Andreessen Horowitz's Menlo Park, California office.
Haun prosecuted Nuestra Familia, one of the biggest prison gangs, as well as the Hells Angels, and the "Mongols" motorcycle gang. The latter two were in a violent battle with each other that culminated in the president of the Hells Angels being shot dead in the streets of San Francisco.
"After the biker murder trial, I was looking to do something else — I was exhausted," she said. "I changed my focus away from more of the violent criminal enterprises to some more of the kind of cyber security, white collar criminal organizations."
It was around that time that the bitcoin task came to her desk.
"They said 'we have this perfect assignment for you' — there's this thing called bitcoin and we need to investigate it," she said. "That was the first time I'd ever heard of bitcoin."
She started viewing it through the same lens as she saw cash: bitcoin could enable criminal activity but it wasn't responsible. In some ways, its technology actually helped her solve cases. Blockchain transactions are stored on a digital ledger that are visible to anyone but can't be changed. That "digital bread crumb" helped her track down illegal funds more easily than tracking cash. Haun said it was even easier than credit cards or international bank accounts, which can be tough to subpoena.
"The government was able to use that same technology to actually track down criminal activity it might not otherwise have been able to," she said. "Without the technology underlying bitcoin, we never would have been able to catch those people."
Her deepest dive into crypto came through a white collar crime and public corruption case where government agents were exploiting early adopters of cryptocurrency. One of the agents stole about 20,000 bitcoin — worth about $160 million at today's prices — while another extorted the creator of Silk Road, and stole from other early crypto investors.
Had that crime been committed in cash, she said, it would have been nearly impossible to track these people down.
She quickly became the in-house crypto expert and did see plenty of nefarious uses for cryptocurrency. But she said, a similar phenomenon had happened in the early days of the internet and cellphones.
"Sometimes, the earliest adopters of new technologies are criminal," she said. "Criminals are always looking for loopholes, or new ways to exploit systems."
Through investigations related to the now defunct cryptocurrency exchange Mt. Gox and famous internet black market, Silk Road, she got to know some of these early adopters. Legitimate players in the industry did not want their platforms to be for crime. But Haun said not all of them immediately warmed to the idea of trusting a government official.
In 2015, she decided to form a task force to be a resource for other prosecutors and agents known as "digital currency coordinator." Haun began hosting regular meetings and training seminars with Treasury, IRS and other government agencies and other government officials working in the space. It was around that time she started teaching a class on cryptocurrency at her Alma mater, Stanford Law School, which is now taught at Stanford Graduate School of Business.
After more than a decade, Haun was ready to leave the federal government, and "felt like she had accomplished what she wanted there." Still, she wasn't necessarily looking to go into the crypto space full time and was considering a higher level political appointment. In the meantime, she joined the board of cryptocurrency exchange Coinbase where she met Andreessen Horowitz partner Chris Dixon. It was Dixon, who she now runs the fund with, who floated the idea of talking to the firm's founder, Ben Horowitz.
While Haun said she had never contemplated an investing career, some of her skills as a federal prosecutor made her perfect for the role, Horowitz told CNBC.
Until then, the venture capitalist said he had never hired a prosecutor for anything: not even when he was CEO of Opsware, formerly Loudcloud, which was acquired by Hewlett-Packard for $1.6 billion in 2007. He immediately voted yes on Haun despite her lack of investing experience.
What stood out was a "glow in the dark presence," and a need to win, he said. She was also incredibly well networked with technical experts in the industry and to his knowledge, was the most well-known person in the field.
Horowitz pointed to advice a mentor named Ken Coleman, a former executive at Silicon Graphics, gave him: the mistake people make "constantly" in Silicon Valley is they hire the resume instead of the skill set. They go in blindly, looking for someone from Greylock, Benchmark, Apple or Salesforce.
"If you're always fishing in the same pond as everybody else, you can't get that big a recruiting advantage," said Horowitz, who is also a former Netscape executive. "We wanted somebody who could be the kind of poised credible face of crypto."
He called her former boss at DOJ for a reference, and as Horowitz put it, his answer was "what are you stupid? This woman has never lost a case — she takes more cases than anybody, and she takes the hardest cases. There's nobody like Katie here."
A mentor told Haun that the perfect job fit is somewhere "you know 50 percent of the job cold" and have 50 percent left to learn. This fit the bill, and she took it. But Haun ended up having a deeper skill set than she expected, thanks to days spent in front of a jury. In the deal process, she knew how to learn about a company. Instead of finding out who was a double agent, she was now sitting across the table and deciding who they could partner with.
"Do we trust them? Are we going to be good partners for each other? They have these projections and these milestones — do we think that's realistic?" These were all questions she was used to asking.
Her other key skill set goes back to her days of describing complicated topics to a jury. Cryptocurrency is among the most inaccessible, opaque topics out there.
"When you're a prosecutor, you need to feel comfortable getting up in front of an audience of people who come from all walks of life and get them to understand a topic they might have never heard anything about," Haun said.
Cryptocurrency was launched into the spotlight this summer after Facebook unveiled its digital currency project, libra. Andreessen Horowitz joined as a founding member, along with names like Visa, Mastercard, and Spotify.
The Wall Street Journal reported that the group behind the global currency payments network is becoming fractured with financial partners "reconsidering" involvement following a backlash from government officials, the Journal said, citing people familiar with the matter. PayPal announced on Friday that it was pulling out of the project.
There are still roughly two dozen members in the association, who are working on charter documents that are expected to be finalized this fall. Haun would not comment on the progress, but said her team has an "active role" in the project. For now, she said there are still important technical questions that are being worked out before it goes live.
Libra immediately drew widespread scrutiny in the days following its announcement. Facebook's involvement caught the attention of senior congressional finance committee members, global regulators, former lawmakers and industry insiders who questioned Facebook's motives.
Rep. Maxine Waters, D-Calif., chairwoman of the House Financial Services Committee, told CNBC in June that "it's very important for them to stop right now what they're doing so that we can get a handle on this" and Congress would "move aggressively" to deal with it.
"What we heard with libra were the same criticisms. They were just heightened and they got more attention because of the high-profile nature of the project and the fact that Facebook was involved," Haun said. "I think it would be a really dangerous thing, and frankly a dangerous precedent to start shutting down technology before it's built."
Haun said there are national security implications if the United States falls behind in this area. China and Russia, for example, are developing competitors to libra. Still, there is still a perception by regulators that the crypto industry, particularly Silicon Valley, wants to move fast and break things and doesn't care about the rules.
"That's a real misperception because the crypto industry would happily take regulation," she said. "What they don't want is regulatory uncertainty and it's having to comply with all of the what if scenarios."
Haun's team has backed other cryptocurrency projects like Coinbase and Dfinity. But in libra, they saw the chance to put cryptocurrency in the hands of billions of people, based on Facebook's users and all of those founding members.
"You're talking about two billion people across the globe who right now don't have exposure or really any way to access the crypto ecosystem," she said. "Instantly putting cryptocurrency in the hands of that many people we thought was just a huge opportunity."
The investing landscape is getting increasingly competitive. Andreessen has struggled to deliver the outsized returns it's known for, according to a report from the Information. The firm saw a net internal rate of return of 16% and 12% in its 2010 and 2011 funds, respectively — a steep drop from the 44% return rate of its 2009 fund.
Its crypto investments have also reportedly struggled in the past year. According to Crunchbase, Andreessen Horowitz participated in 14 funding rounds with an total value of roughly $850 million last year. This year, Crunchbase said it has backed five deals with a total value just over $75 million. Andreessen Horowitz told CNBC it could not comment on financials.
To be sure, venture capital firms often hold long-term positions and don't measure success year over year. Andreessen is taking seven to ten year bets, and invests in both equity in companies and the tokens themselves. In order to do that, the firm moved away from the majority of its Sand Hill Road neighbors to instead become a registered investment advisor, or RIA. Haun said the firm tries to ignore the price of some digital assets they hold, which are known for volatility, Bitcoin in particular is down more than 60% from its all-time high.
Despite the price swings, Haun and her colleagues are betting that crypto is really a new computing platform and could be the "next iteration" of mobile and internet. In the meantime, they invest in infrastructure to make all of these things a reality. If those bets pay off, cryptocurrencies like bitcoin and libra will eventually be used as "internet money."
"I've always tried to have a really nuanced view in the space," she said. "There's potential for much greater good to come from cryptocurrency in general — the greater beneficial uses outweigh the bad ones."