Crypto Sector Seeks Lawyers, Compliance Officers After Reputational Hits

Given the reputational and financial hits to the industry in the past year, attracting legal and compliance workers to work for crypto firms is challenging, say those hiring for positions in the industry. But the expertise compliance professionals can bring to the job is likely to make a big impact in helping to rebuild the sector’s damaged reputation.

To attract talent, some crypto firms are trying hard to distinguish themselves from the bad actors in the sector by promoting their approach to compliance. But it isn’t easy.

“There’s such a stigma to the industry right now,” said Jorge Pesok, who is hiring people for the legal team at the nonprofit HBAR Foundation, which awards grants to crypto projects.

“[The candidates] are just more hesitant to join now, because they are thinking about their long-term career moves, if it’s a smart idea, because some people have gotten burned,” said Pesok, who serves as chief legal officer at the foundation. He made the jump to crypto full-time in 2021, serving as the general counsel and chief compliance officer at crypto exchange platform Tacen.

Before the most recent crypto market crash, firms in the sector were able to lure away legal and compliance talent with higher pay, better perks—such as firm equity—and opportunities to develop and implement compliance procedures and programs in an emerging field, industry participants said.

Some of those hiring for compliance jobs have had to change tack in the current environment. To persuade a recent candidate to take a job offer, for example, Pesok spent hours answering questions and addressing concerns and using the story of his own career path and experience working at HBAR as an example.

Last year, crypto exchanges and companies were frequently poaching attorneys from both law firms and other crypto companies, bringing them in-house to aid in navigating an evolving regulatory landscape and helping to curb outside legal expenses as the industry came under increasing government scrutiny.

But with the arrival of the crypto winter last year, the ability of crypto firms to draw talent has significantly diminished. Many lawyers and compliance executives that were enticed by the opportunities are now hesitant to make the move or are leaving the industry, joining or returning to more stable companies such as consulting or mainstream finance, industry insiders said.

“The events of the past year and a half have caused a lot of people to rethink their enthusiasm for this space,” said John Wolf Konstant, senior consultant at technology-focused legal recruiting firm Whistler Partners. He cited the layoffs at crypto exchange Coinbase Global and various bankruptcies, including crypto lenders BlockFi and Celsius Network, which altogether “took a lot of the wind out of the sails.”

Carolina Ceballos, chief compliance officer for blockchain infrastructure company Paxos Trust, said that hiring for compliance positions remains difficult, despite layoffs at other companies providing her firm with a larger talent pool. Some candidates are choosing to join traditional financial institutions when deciding between competing offers from Paxos because of the industry’s challenging reputation, she said.

To attract new staff, Ceballos emphasizes that Paxos has a regulatory-first approach to compliance and a high bar for excellence.

“It’s a real opportunity for the Paxos model to shine through this moment and to be known as an alternative, and crypto can be done to protect all our users, and this faster and safer way to do finance, while having all the controls in place,” Ceballos said. “This is how we’re solving these problems and how we are talking to the regulators, and that’s a great opportunity for Paxos.”

Paxos said it has significantly increased the head count of its compliance team over the past year, but the company declined to provide specific numbers. The firm, which issued and listed Binance’s dollar-pegged cryptocurrency, drew regulators’ ire earlier this year. New York regulators told Paxos to stop creating more BUSD tokens, also known as Binance USD. A Paxos spokeswoman said, “Since that date, we have successfully wound down the token and redeemed more than $12 billion in value to customers without any market dislocation.”

Cathy Yoon, who has been working in various legal roles in the crypto sector since 2017, said she plans to stay in the industry. She said people are still interested in joining or remaining in the space despite being laid off, but candidates are looking for more long-term stability and are hesitant to jump on board after the bankruptcies and scandals of the past year.

Yoon, who recently started as the general counsel at Wormhole Foundation, a steward of crypto platform Wormhole protocol—her third job since April 2022—said she has increased the amount of due diligence she does before taking on prospective projects.

“I ask more questions and ask about things that as a normal job seeker I wouldn’t ask before,” said Yoon. These questions include determining what the internal approval process is like and who is in charge of the firm’s finances.

Will Brown, executive search lead for financial services at recruiting firm Hamlyn Williams, said hiring for banking and traditional financial technology firms has picked up over the past six months as these companies try to fill vacancies and lure talent back from crypto. But he expects the pace for crypto compliance hiring to gain steam in the coming months.

“In the last nine months or so, a lot of the regulatory pressure hasn’t gone away, a lot of projects are seeing compliance become more business-critical, and we’re seeing more hires because of that,” Brown said, adding that recent regulatory actions against crypto firms, such as those against Ripple Labs and Coinbase, “solidify the view that they need to keep hiring for these roles.”

Write to Mengqi Sun at mengqi.sun@wsj.com