The richest of crypto’s billionaires, Sam Bankman-Fried, is riding to crypto’s rescue, bailing out two teetering firms to the tune of nearly $750 million dollars.
In a one-two punch, the CEO of the FTX cryptocurrency exchange backstopped the troubled crypto lending platform BlockFi with a $250 million line of credit on Tuesday (June 21), just days after his Alameda Research trading firm offered up $500 million in cash and cryptocurrencies to Voyager Digital, a crypto broker.
See also: Bankman-Fried Bails Out Crypto Broker Voyager and Blames Fed for Downturn
Both were rumored to be facing difficulties after crypto lenders Celsius and Babel Financial halted withdrawals, and hedge fund Three Arrows Capital suffered forced liquidations and is reported to be facing insolvency. BlockFi was one of the firms that liquidated Three Arrows’ positions at a huge loss when it couldn’t meet margin calls.
BlockFi can confirm that we exercised our best business judgment recently with a large client that failed to meet its obligations on an overcollateralized margin loan. We fully accelerated the loan and fully liquidated or hedged all the associated collateral.
— Zac Prince (@BlockFiZac) June 16, 2022
Bankman-Fried is attempting to “stem contagion” after a stablecoin’s $45 billion collapse sent financial shockwaves throughout the industry just as the Fed’s inflation-fighting rate hikes sent all markets tumbling, he told NPR on Sunday (June 19).
“I do feel like we have a responsibility to seriously consider stepping in, even if it is at a loss to ourselves,” Bankman-Fried noted. “Even if we weren’t the ones who caused it, or weren’t involved in it. I think that’s what’s healthy for the ecosystem, and I want to do what I can help it grow and thrive.”
He’s apparently serious about the “loss to us” part, as the Financial Times (FT) reported Tuesday (June 21) that “FTX’s claims on the facility would be subordinate to all client balances,” if BlockFi fails.
This isn’t the first time Bankman-Fried has stepped in. Last August, FTX loaned Japanese FinTech and cryptocurrency exchange Liquid Group $120 million after it was hit with a $100 million hack. In February, FTX acquired the company outright on undisclosed terms.
“Sam became a lender of last resort,” said Anatoly Crachilov, CEO of fund manager Nickel Digital Asset Management, the FT reported.
That isn’t to say he’s handing out loans to all comers — or not acting in his own interest. For one thing, FTX was one of the three exchanges that liquidated Three Arrows.
For another, Crachilov noted, “if you have a few Lehman events at the same time, concentrated, then it could impose crypto winter for a very extended period of time. FTX has the balance sheet to support these businesses, and it’s in their long-term vested interest to see this ecosystem survive.”
As Visible as His Hair
Crypto isn’t the only area where Bankman-Fried is focused on acting as a deep-pocketed savior. In May, he announced plans to spend $100 million to $1 billion to influence the outcome of the 2024 presidential elections.
That’s separate from his Washington, D.C., lobbying efforts, where his vast ball of hair has become an increasingly visible sight and influential presence as crypto steps up its attempts to influence both Congress and the Biden administration as they work on creating a regulatory framework that will determine the industry’s future.
See more: Crypto Industry Lobby Punching Above Its Weight Class
Well, mostly separate. Despite his protestations that the 2024 campaign contributions — so far mostly focused on supporting Democrats — aren’t crypto-related, nine-figure campaign donations are nearly unprecedented. That kind of checkbook pushes pretty much anything the donor is interested in up to the front of a lot of agendas.
More broadly, he has also been stepping up his promotion of the industry publicly, paying $135 million to put FTX’s name on the NBA’s Miami Heat arena and plunking down $6.5 million for a Super Bowl commercial.
Unlike fellow advertisers Coinbase and Crypto.com, FTX hasn’t announced big job cuts over the last month.
Also read: Super Bowl Curse Comes for Crypto as Layoffs Mount
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