A Cold Storage Solution for Kanye
Cold storage and the ‘Kanye problem’ – how to help the ultra-rich and other edge cases secure their stack
I’ve talked about cold storage several times.
To me, it seems that the complexity and risks of cold storage are often glossed over or even ignored.
Note: to be clear: I am definitely *not* advocating keeping money on exchanges or having centralized custody and control. Also, I do currently use cold storage. What I am trying to explain is some of the challenges that my clients, ultra-high net worth investors, have with self-custody.
Once people reach a certain level of wealth, their situations become more complex and it is often difficult or even impossible for them to follow a typical self-custody arrangement. For example, many high-net-worth families have their wealth run by a family office. Family offices may have multiple employees and many family members who are beneficiaries of the family’s wealth. Simple logistics and structures such as trusts – which all relate to control of assets – make it more difficult or sometimes impossible for a person to control it in the same manner that they would if they were a single individual. This is not a problem that the modern financial world has faced – bearer assets have been phased out for over 100 years.
One reason that we should remember that bearer assets were phased out is because of the massive loss theft and other issues around bearer assets.
Bearer stocks and bearer bonds used to be a thing – if you lost your stock certificate or bond you lost the investment. That was a bad system. The advent of custodians improved on it. Custodians for gold, for example, improved on the idea of keeping gold in your house subject to loss by fire flood bandits or natural disaster.
Kanye West & Custody
Let’s call this Ye problem
Ye is a tricky case for self-custody:
– extremely high net worth
– personal mental health issues / possibly unreliability for phrases, procedures
– multiple advisors/ complex estate
– busy life/travel/difficulty keeping physical devices
-he is a security target
Think for a moment about the unique concerns that he would have in his cold storage.
If you were his financial advisor what would you recommend?
“Do your own research!”
“It’s not hard man it’s just 12 words”
“It’s just a piece of software it’s super easy”
“Hire someone to do it for you”
The devil is in the details, it is easier said than done.
Even people who do not have a life or situation as complex as Kanye should consider the various ways that they are at risk with cold storage.
Some basic tests for your self-custody:
Self Custody Test #1:
Tell your next of kin to retrieve your coins as if you had died. They are only allowed to use the info they have now. No new note or instructions allowed- if you died today they wouldn’t have those instructions either.
See how the test works.
Self-custody test #2:
Put your phone down and pretend that it, your PC, and every single thing in your home/office is destroyed. Now retrieve your coins. Remember – no use of your phone or anything from your home – no paper, notes, nothing.
Stop what you are doing & assume 2 or more armed attackers are now at your main premises. Assume they have disabled means for help & assume they will find a safe if you have one. If they threaten violence against you how exactly do you deal with this? What can they get?
Assume that over a period of 3 weeks you suffer from illness, amnesia, dementia, or extreme trauma which causes you to forget everything about your current setup. How do you or your loved ones/living assistants rebuild and understand your storage system?
Assume you have spoken “misinformation”, are a political enemy, or are accused of a crime.
The government gets a search warrant for your office, home, bank & safe deposit box. Assume they will find any 12 or 24-word passphrase or private key on the premises. Can an agent sweep it?
How did you do on these five tests?
If you passed all five then you most likely spent more effort or time than “five minutes” simply “writing down 12 words”. Cold storage is the best option we have now but it’s not flawless and takes planning, knowledge, and consideration of your own unique situation and risks.
I don’t know any perfect solution now. There are lots of great folks at companies like Casa that are working on making self-storage easier and more accessible to trusts, family offices, disabled people, and other complex or unique situations. I think it’s going to get easier and more seamless. In time there will be options for more complex situations. In the meantime, be careful and deliberate.
Get your coins off exchanges but take heed of the details and don’t get rekt.