Sam Bankman-Fried Saves Crypto Lenders BlockFi, Voyager

With no central bank ready to defend, crisis-ridden crypto companies are turning to their peers for help.

Billionaire crypto exchange boss Sam Bankman-Fried has signed deals to bail out two firms in as many weeks: BlockFi, a quasi-bank, and Voyager Digital, a digital asset brokerage.

FTX, Bankman-Fried’s crypto exchange, on Tuesday agreed to provide a $250 million revolving credit facility to BlockFi. Bankman-Fried added that the financing will help BlockFi “navigate the market from a strong position.”

“We take our duty to protect the digital asset ecosystem and its customers very seriously,” he tweeted.

BlockFi said earlier this month that it would lay off 20% of its workforce. Meanwhile, a report from The Block said earlier this month that BlockFi was in talks to increase the value of the firm to $1 billion, down from $3 billion last year.

BlockFi was not immediately available for comment when contacted by CNBC.

Last week, Voyager Digital said that Alameda Research, the quantitative research firm of Bankman-Fried, would provide it with $500 million in funding.

The deal includes a $200 million line of credit and USDC stablecoins as well as a separate 15,000-bit bitcoin revolving facility worth approximately $300 million at current prices.

Several major players are facing financial hardship as a result of the decline in the value of digital currencies in recent weeks.

Bitcoin and other cryptocurrencies are falling hard as the market grapples with the Federal Reserve’s interest rate hike and the $60 billion collapse of TeraUSD, a so-called stablecoin, and its sister token, Luna.

Last week, crypto lender Celsius halted all account withdrawals, blaming “extreme market conditions”. The firm, which takes users’ crypto and lends it to deliver high returns, is believed to have hundreds of millions of dollars tied up in a liquid token derivative called stETH.

Elsewhere, crypto hedge fund Three Arrows Capital has been forced to end leveraged bets on various tokens, according to the Financial Times.

On Wednesday, Voyager revealed the extent of the damage caused by 3AC’s troubles.

The company said it is prepared to incur a loss of $650 million on loans issued to 3AC if the company fails to make payments. 3AC had borrowed 15,250 bitcoins – worth more than $300 million as of Wednesday – and $350 million in USDC stablecoins.

Voyager said that 3AC requested an initial repayment of $25 million in USDC by June 24 and the full balance of USDC and bitcoin by June 27, adding that neither amount has yet been repaid.

The firm said it intends to recover the money from 3AC and is in talks with its advisors “with respect to available legal remedies”.

“The company is unable to assess at this point the amount it will be able to recover from 3AC,” Voyager said.

The news came as Voyager shares tumbled up to 60% on Wednesday.

3AC co-founder Zhu Su had earlier said that his firm was considering the sale of assets and hedge by another firm to avoid collapse. The company did not respond to multiple requests for comment.

According to Forbes, Bankman-Fried is one of the wealthiest people in crypto, with an estimated net worth of $20.5 billion. Their crypto exchange FTX had a valuation of $32 billion as of early 2022.

The 30-year-old has emerged as a $900 billion savior for the cryptocurrency market as it faces a deep liquidity crisis. In an interview with NPR, Bankman-Fried said he thinks his exchange has a responsibility to “seriously consider taking steps, even if it harms itself, to stop the contagion.”

His actions suggest that a lack of regulation for the crypto industry means companies cannot turn to the federal government when things turn south – a sharp contrast with the banking industry in 2008.

Leave a Reply