The Big Read

Trading places: How Bunz went from cashless bartering community to cryptocurrency flameout

Illustration by Hanna Lee

“If f—— up is an art, I’m Picasso,” said Sascha Mojtahedi. It was March 2018, and he was addressing a room filled with hundreds of other entrepreneurs at a speakers’ series about failure. “I can’t count the number of things that I’ve started and made a complete mess of,” he said, listing some of them: there was the motorcycle shop, the wearable-tech company, the band and most recently, he admitted, Bunz. 

The Toronto-based bartering platform—whose users can trade everything from furniture to bus tokens, but never money—had attracted buzz as it went from an informal online community to a growing business. But Mojtahedi, its CEO, was recounting the story of the company’s terrible year: a failed redesign had seen it lose swaths of users and core employees as it blew through $1 million of angel funding. Bunz had since bounced back, he assured the crowd, thanks, in no small part, to his belief in the company and his sense of duty to it. What Mojtahedi didn’t tell the audience was that Bunz was about to launch a cryptocurrency; unbeknownst to him at the time, it would become his messiest endeavor yet. 

Less than two years after the digital currency’s launch, Mojtahedi had failed to secure funding to sustain it. As it unravelled this fall, to try to keep Bunz alive he cut most small business out of the program, fired the bulk of his employees and froze their crypto wallets, blocking them from spending their tokens. In the process, the company alienated most of the online communities that once bore its name, and drove away the brand’s founder, Emily Bitze.

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Talking Point

Bunz started as a way to make city living easier for a cohort of millennials who graduated into a post-recession labour market and felt squeezed. To cope, they built an online bartering community that it claimed included more than a million people. But as the community grew, investors started circling. Pressure to monetize what was a moneyless bartering app culminated in September as the company culled its workforce and scaled back a cryptocurrency that was meant to take Bunz to the next level.  

Bunz started as a way to make city living easier for a cohort of millennials who graduated into a post-recession labour market and felt squeezed by precarious employment, stagnant wages and the soaring cost of living. To cope, they built a community where they could trade beer for house plants, diamond rings for motorcycles; where they could find roommates and bandmates and make Toronto feel a little less brutal. The cardinal rule was that no money could change hands; it was the symbol of a capitalist system that many of them felt wasn’t working. But as Bunz grew—Mojtahedi claimed earlier this year that the Facebook groups had more than a million users—it caught the attention of would-be investors, including eBay, The Logic has learned. The community that had grown up around it felt they were losing control. 

The same divisions played out within the company. Interviews with seven former employees, who spoke on condition of anonymity, along with internal documents obtained by The Logic, reveal a long-standing rift between Mojtahedi and much of his staff—including Bitze—not just over how to monetize Bunz, but over whether it should try to make money at all. “In the beginning, it was very much a feel-good thing and more about making sure we could build something worthwhile at the end of the day rather than try and find a way to monetize it,” said one founding employee. As Mojtahedi searched for a viable business model for Bunz, the principles on which the online community was founded presented not just a practical challenge, but an existential one. The question weighed on the company: how do you create a business that can pay for a growing workforce and return value to investors, when a mistrust of money is central to its identity?

Bitze is credited with creating Bunz in 2013, after running out of tomato sauce for her pasta. The fashion school graduate had recently moved to Toronto from Montreal and couldn’t make ends meet. Though she had no money to buy ingredients for her dinner, she had other things she didn’t need that could be valuable to someone else, she thought. That revelation led her to start a private Facebook group where members could swap things they didn’t need for things they did, without ever exchanging money. “It made sense to me considering nearly everyone I knew was also struggling financially and I was constantly annoyed by the amount of items I’d see thrown in the trash that still had a lot of life left in them,” Bitze told Flare in a 2017 interview. 

The idea took off. Requests to join the Facebook group, originally called Bums, began flooding in. Within two years, the bartering community boasted 12,000 members; by 2017, the original group had snowballed to almost 60,000.

During that period, a group of Toronto developers was working on an app built on a similar premise. Called Shufl, it would let users sell and trade their unwanted stuff with other users. Mojtahedi, who had become Shufl’s CEO while working as a TD Bank manager, saw an opportunity for a merger. “It just happened that we had a product and Bunz had a brand,” an early developer told The Logic. 

The Shufl team liked the idea—Mojtahedi, who would lead the company under the Bunz banner, promised to help bankroll their efforts until they secured funding, and the tens of thousands of Bunz Facebook members would fuel the app’s user base. But Bitze took some convincing. 

Several former colleagues told The Logic that Bitze was never interested in turning Bunz into a business. The thought of incorporating and monetizing the brand, which was rooted in anti-capitalism, didn’t sit well with her, they said. But Mojtahedi courted her over several months, trying to convince her that his corporate experience would appeal to investors and ultimately help grow their community. Finally, at a dinner with Mojtahedi at Toronto’s Soho House in October 2015, Bitze acquiesced. 

By many measures, over the following year Bunz thrived as a company. Mojtahedi secured angel investment to pay for a downtown office, the brand launched its app and another 10,000 people joined the Facebook community which, by March 2016, had spread to eight cities. Fidelity, a major financial services company, had become interested in Bunz and was committed to leading its Series A. EBay was considering a partnership that would grant the startup $3 million in financing over two years, according to documents viewed by The Logic.

As the company grew, so did Bitze’s public profile. The story of a starving artist spinning her hardship into a successful, woman-led business resonated with the press. She was featured in HuffPost, Complex, the New York Post and Flare, among other major publications.

Emily Frances Bitze, founder Bunz Trading Zone, poses for a photo outside her home in Toronto, August 27, 2015. Marta Iwanek/Toronto Star

While Bitze was the public face of the company, Mojtahedi was the de facto leader, calling the shots and answering to investors. However, according to several sources, their visions for Bunz were at odds. Bitze’s priority was to help connect people with each other in pursuit of a need or want they might not be able to fulfill if not for Bunz. But Mojtahedi, with $2 million in funding by the end of 2016 and mounting expenses, was increasingly focused on making money. 

“The question was never if we would monetize but instead how [Bunz] would be different than applications that exploit user data and attention,” Mojtahedi told The Logic via LinkedIn. Rethinking how value is distributed online is a recurring theme he invokes in public talks. He said people should be compensated in some way for the treasure trove of data they give away to digital platforms and advertisers—the foundation of companies like Facebook and Google. “What if instead of centralizing the value created by the network as profit, Bunz distributed part of that value to its community members proportional to their individual contribution to the network? This could create an economy where both the platform and community members benefit economically – a non-zero sum game.”

Employees batted around myriad ideas for how to do that. They considered a feature called Experiences by Bunz, where members could, for example, make meals or give music lessons to other members, with Bunz taking a share of the revenue. But according to a source who worked on the concept, the idea was complicated by the fact that many Bunz community members didn’t have credit cards with which to pay for the experiences. To solve that problem, Bunz considered launching its own credit card or a payments service; those ideas fizzled, too.

Determined to find an answer, in October 2017, Mojtahedi organized a weekend-long hackathon at a cottage near Algonquin Provincial Park. There, one of the developers began prototyping a cryptocurrency. 

The idea of a digital coin had been floated in the office before. With Bitcoin and other digital tokens surging in value and popularity, a decentralized currency seemed, in some ways, like the perfect cash alternative for a bartering community. Users would collect the hypothetical currency—dubbed Bunzcoin at the time—by trading goods on the app, then redeem it at participating stores. Bunz would make money through monthly fees from retailers and potentially an initial coin offering (ICO) down the road. 

Developing the token became a priority for Mojtahedi over the following year. His laser focus on the idea drove a wedge between him and most of the founding team, whose values aligned more with Bitze’s and who didn’t think the Bunz community cared about crypto. “When you’re doing something new, debate is common and healthy to make the best decisions as an organization,” said Mojtahedi. “It can be challenging to reach consensus, but it’s nice to work on a project that people feel so passionately about. After numerous discussions, we decided that our community should share in the value of the network as it grew and we had the support of our advisors and investors in this decision.”

It was during this period that Bitze began distancing herself from Bunz, according to several people working at the company at the time. Company emails, once signed “from Emily,” became simply “from Bunz.” One former employee said Bitze interviewed her for a position in summer 2017, but when she started the job, she was told Bitze was no longer with the company. “I was told to keep it a secret for months,” said the employee, who also said she was instructed to field media requests by telling journalists Bitze wasn’t doing interviews at that time. “Meanwhile, I knew she wanted nothing to do with Bunz. She was completely over it.”

According to one founding employee, Mojtahedi only offered equity in the newly merged company to the original Shufl employees, and not to Bitze. The thought of the co-founder being denied ownership didn’t sit well with some of her colleagues, one of whom offered her a piece of their own equity. When the company’s angel investor found out, they insisted Bitze be cut into the deal. (Mojtahedi declined to comment on this.) “She only had a small percentage of it,” said a former colleague. “She didn’t have much skin in the game, so she stopped caring about the company after a while.” By that fall, Bitze had fully stepped away from Bunz, according to several former co-workers. By year’s end, most of the company’s founding team was gone. As one former employee put it, “It was a clean slate for the company to build something new.”

As Bitze was quietly making her exit, the company itself was retreating from the Facebook community that had spawned the app and drove its popularity. Near the start of 2017, Bunz had instructed Facebook admins to stop accepting new members, as Mojtahedi told employees to focus strictly on the app. “The separation between the app and the Facebook groups was really bizarre,” said one former employee who worked in community engagement, but was told not to focus on the platform’s communities. “The issue was that our name was all over Facebook, and that’s where all the controversial stuff happens,” said the ex-employee, recounting an incident where a community member was offering sexual favours for items on the platform. “I was like, ‘Guys, this is happening under the Bunz banner.’” The Facebook communities were also the biggest brand ambassadors and could drive users to the app, said the source. “I felt like I needed to be in there.”

But Mojtahedi was focused on the cryptocurrency that would become BTZ (pronounced “bits,” like Emily’s last name). It was named after the Bunz Trading Zone, the original Facebook group. And with a slate of new workers, he was barreling ahead with renewed support from his staff. “It made a ton of sense,” said an early Bunz community member who started working for the company before it launched BTZ. “We wanted to have something that our users could use as a value instead of gift cards or cash and still keep that trade mentality.” 

The company launched the coin in April 2018 by giving away 1,000 BTZ (worth about $10) to its more than 200,000 app users, and 25 million apiece to employees. Users could collect more BTZ by giving up some of their data to advertisers—by doing surveys and watching ads, for example—by referring friends to the app or by trading items for the coins. Business owners were eager to accept BTZ. For them, there was no downside: customers could buy their merchandise with the tokens, and Bunz would reimburse the businesses. At the same time, retailers would get exposure on the Bunz app and be part of a community that, at that point, had a certain cachet. In the first 100 days after launching BTZ, the network of stores accepting the coin grew from about 25 to more than 250 across Canada, and the company facilitated more than a billion BTZ transactions; for each coin, it paid the merchant about one cent.

Critics quickly pointed out that BTZ lacked the key features of a cryptocurrency: it wasn’t decentralized or on the blockchain, and its supply was controlled by Bunz itself. The criticism bothered Mojtahedi. “Sascha became obsessed with this,” said one former staff member. The CEO defended the coin, and gave himself a deadline to address it. On August 2 of that year, he announced BTZ owners could store up to 500,000 of their coins in a decentralized Ethereum wallet. While the move technically put BTZ on the blockchain, it meant anyone who moved their coins to the wallet couldn’t use them to make purchases through the Bunz app—Apple had banned cryptocurrencies from its App Store, so Bunz never wrote that capability into its code, according to a source familiar with the technology. The BTZ were effectively useless. 

“I think debating if it’s a cryptocurrency is less important than the impact it has had on the lives of people that use it,” Mojtahedi told The Logic. “Ultimately, we are more focused on the benefits than defining it technically.”

The company, which had recently moved from its first downtown Toronto office into a bigger space, spent heavily to promote BTZ. At one point, Mojtahedi let every employee—at the time around 20 people—give each of 10 friends $200 worth of BTZ; whoever spent them the fastest would win one million more of the coins. “We were just giving away free money,” said a former staff member. 

Andrew McCracken, owner of Town Moto, a Toronto-based shop that sells motorcycle gear, estimates his company accepted about $20,000 worth of BTZ in the six months or so for which it participated in the program. “I never understood how it made sense for [Bunz] from a business perspective,” he said. “It was sweet for us while it lasted, but we weren’t surprised when they shut it down.”

Bunz CEO Sascha Mojtahedi. Sascha Mojtahedi | Twitter

Mojtahedi didn’t say how Bunz ever planned to make money from BTZ. “We don’t comment on any financial, revenue or user growth projections or platform statistics and forward looking strategies,” he said. Cryptocurrency companies typically generate revenue through ICOs, similar to IPOs, wherein public investors can buy into the company and receive crypto coins, rather than stock, in hopes that the coins will appreciate. Documents viewed by The Logic show the CEO had planned a BTZ ICO for January 2018 as a means to generate revenue, claiming that investors BlackRock, GMP Securities, Fidelity and Galaxy Digital had committed a combined $15 million for the listing. Mojtahedi declined to comment on the plans, and none of the investors responded to questions about their interest in a potential ICO. 

Sources close to Bunz’s fundraising efforts told The Logic the company had been trying to raise money to build BTZ into a standard cryptocurrency that holders could use outside the Bunz app. “It kept getting pushed back, [with Mojtahedi] saying, ‘We’ll build the real thing when we have money.’ But the fundraising hit a snag,” said an ex-employee. 

Less than two years after launching, BTZ was unsustainable. In September of this year, Mojtahedi slashed the program to include only cafes and restaurants, giving no warning to the other businesses that had been accepting the coin. He laid off 15 employees, the vast majority of Bunz’s workforce, and locked their BTZ wallets so they couldn’t redeem any of the coins they had accumulated—whether through bonuses from the company or from their personal trades. “As a start up trying to do things differently, this was a necessary change we had to make on short notice for sustainability reasons,” he wrote in a Medium post following the layoffs. Today, according to Mojtehadi, the BTZ program includes just 51 vendors.

Bunz’s Facebook community in particular was furious. The company had worked hard to sell members on the cryptocurrency, insisting it didn’t erode the Bunz no-money rule and promising the coins would appreciate in value. In at least one instance, the company paid volunteer administrators of its Facebook groups to work at a Bunz event with their choice of $200 in cash or $500 worth of BTZ. A Bunz employee urged admins to opt for the BTZ, suggesting it’d be worth more than cash one day. The community felt cheated, like they’d been co-opted by the very capitalist ideals the bartering platform was intended to circumvent. In Facebook messages, admins ranted about their frustrations and hashed out ways to take Bunz back. “[Sascha] is Billy. BTZ is fyre fest,” one wrote, invoking the infamous would-be music festival whose organizer, Billy McFarland, defrauded investors of $36 million. 

After the period in 2017 when employees were leaving and growth sputtered, Mojtahedi said he asked himself, “How would I feel if I gave up working on Bunz or it didn’t exist in a year? Would I feel that the world would be a lesser place without it?” Now, the community was answering for him: they didn’t need the CEO and they didn’t need Bunz—at least not its name. “Monetizing our communities completely contradicts the barter system that birthed the Bunz lifestyle, as well as the anti-capitalist practices that have shaped our collective communities,” a group of volunteer administrators wrote in an open letter. “Today, we would like to reclaim our communities,” they wrote. “We do not want to profit. We do not want your app sign-ups. We do not want you to buy into an online currency that will let you down.” They rebranded the Bunz pages to instead bear the name “Palz,” making them forums for bartering independent of the company. There was nothing Bunz could do.

Mojtahedi has apologized for “any inconvenience” and “difficulty” that resulted from the BTZ experiment. The regrets, however, are often accompanied by justifications for the company’s choices: “Much of what we are doing is uncharted territory, mistakes are an inevitability as we are all human and are learning,” he told The Logic. “In retrospect I can say that we continually did what was best for the community even when it appeared otherwise.” 

Mojtahedi wouldn’t say whether the company is still trying to raise money, plans to expand BTZ or rebuild its workforce. One thing that’s clear, however, is that he hasn’t given up on Bunz, characterizing 2019 as “a year of incredible growth for Bunz as a community and as a business.” 

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“We want Bunz to go from redistributing millions of dollars a year to redistributing tens and eventually hundreds of millions of dollars a year to the community,” he said. 

As for its founder, Bitze has long since moved on, quietly disappearing from the community she helped start. For a while after she was gone, her presence could still sometimes be felt. She would call the office to see how things were going, and her voice would appear in quotes in news articles about the company, but even those shadowy visits eventually stopped. Several requests to interview Bitze for this article went unanswered. Former colleagues told The Logic she lives in Vancouver now, far from the company’s founding city. “She was never bitter,” one of them said. “She just moved on. She’s on the West Coast, playing music and just being a creative—doing what she loves.”