Spring Labs, a Los Angeles start-up that wants to overhaul the consumer credit industry using blockchain technology, has added Gary Cohn, a former top Goldman Sachs executive and economic aide to President Trump, to its board of advisors.
The announcement marks Cohn’s biggest move since ending his sometimes acrimonious tenure with the Trump administration. The former official was a key figure in the White House’s tax-cut plan, but resigned in March as director of the National Economic Council in opposition to Trump’s tariffs on aluminum and steel.
Cohn joins a board of advisors that already boasts a number of high-profile names, including Sheila Bair, former chairwoman of the Federal Deposit Insurance Corp.; Nigel Morris, co-founder and former president of Capital One bank; and Bobby Mehta, the former chief executive of credit bureau TransUnion.
Their association gives the start-up some immediate credibility in an emerging field of technology that has widespread potential applications, but has been tarnished by its association with fraudulent cryptocurrency offerings. Last year, JP Morgan Chief Executive Jamie Dimon called bitcoin a fraud and “worse than tulip bulbs.”
Others remain bullish on the technology. Walmart recently announced that its suppliers of lettuce will have to use blockchain so any outbreaks of food-borne illnesses can be traced more rapidly.
Blockchain is essentially a digital ledger that’s kept on millions of computers at the same time. That decentralized network prevents any one person from taking ownership of the ledger and corrupting it. When changes are made, anyone with access to the ledger can see the changes.
Spring Labs, which raised $14.8 million in seed funding in March, believes applying blockchain to consumer credit could help thwart hackers and streamline the way financial institutions access personal credit ratings. By sharing that data using blockchain, banks can potentially circumvent credit reporting companies such as Equifax and Experian, which aggregate consumer credit information and sell it back to the banks. Tougher security may also help prevent breaches such as the one that affected 148 million Equifax customers in 2017.
“I have been very interested in blockchain technology for a number of years, and Spring Labs is developing a network that could have profound implications for the financial services sector, among others,” Cohn said in a company news release. “I am excited to actively support the Spring Labs team in the development of this important business and network.”
Cohn received an undisclosed amount of equity in Spring Labs. Adam Jiwan, Spring Labs’ chief executive, said Cohn and the 11 other members of the company’s board of advisors have an equal stake in the Marina del Rey firm.
“Gary brings an imprimatur of credibility and validation,” Jiwan said. “It doesn’t mean we can’t fail, but we’ve tried to maximize the probability of success by hiring the brightest and surrounding ourselves with the best people we can.”
Spring Labs was founded in 2017 by Jiwan, Anna Fridman and John Sun, who are also founders of Avant, an online lender that’s originated nearly $5 billion in loans and counts venture capitalist Peter Thiel as an investor. Spring Labs also has an office in Chicago.
Jiwan said he was introduced to Cohn by a mutual friend at investment bank Goldman Sachs. Jiwan made his pitch to the former administration official over breakfast, arguing that a decentralized network could have warned about rising risk in the U.S. housing market before the 2008 financial crisis. Jiwan told Cohn he wanted his help navigating the financial industry with all its regulations.
“We thought Gary, coming out of the administration and being the former president of Goldman Sachs, was someone with unparalleled networks and unparalleled knowledge of regulations,” Jiwan said. “He’s someone who deeply understands the types of problems we’re trying to solve with this network.”
Cohn could not be reached for comment.
Jiwan said Spring Labs, which has 20 employees, has enough capital to delay another round of fundraising for more than a year. The company will announce customers in the coming months, he said.
Cohn is not the first Wall Street executive to take a foray into the new technology.
Former Goldman Sachs investment manager Matthew Goetz launched a cryptocurrency hedge fund in 2017 called BlockTower Capital. And Blythe Masters, a former JP Morgan executive who helped create credit-default swaps, is now the chief executive of financial blockchain firm Digital Asset Holdings.
2:45 p.m.: This article was updated with more details and background information, as well as comments from Spring Labs Chief Executive Adam Jiwan.
This article was originally published at 11:20 a.m.