Bitcoin billionaire Sam Bankman-Fried bails out embattled crypto firms BlockFi and Voyager
The crypto industry is in dire need of help, and there’s no central bank that can save them.
Sam Bankman-Fried, the billionaire chief of crypto exchanges, has signed agreements to bail out two companies in just a few weeks: BlockFi (a quasi-bank) and Voyager Digital (a digital asset brokerage).
FTX, Bankman-Fried’s crypto exchange, agreed Tuesday that BlockFi would receive a $250 million revolving loan facility. According to Bankman-Fried, the funding would allow BlockFi to ‘navigate market from a position that is strong.
He tweeted, “We take our responsibility seriously to protect digital asset ecosystems and their customers,”
This comes just a month after BlockFi stated that it would layoff 20% of its staff. A report by Block stated earlier this month that BlockFi was looking to raise $1 billion in a down round. This is a decrease of $3 billion from last year.
CNBC reached BlockFi for comment but was unable to reach them immediately.
Voyager Digital announced last week that Alameda Research (Bankman-Fried’s quantitative researcher firm) would finance it with $500 million.
The deal includes a $200 million cash and USDC stablecoin credit line, along with a separate 15,000- Bitcoin revolving facility of approximately $300 million at current market prices.
Many key players in this space are facing financial difficulties due to a plunge in digital currency’s value in recent weeks.
As the market struggles with the Federal Reserve interest rate hikes, and the $60 billion collapse TerraUSD, a so called stablecoin and its sister token luna, Bitcoin and other cryptocurrency are causing a steep fall in price.
According to Celsius , the crypto lender stopped all account withdrawals last week due to ‘extreme market conditions’. It is believed that the firm, which lends out crypto to users, has hundreds of millions of dollars in an illiquid derivative called stETH.
Three Arrows Capital, a crypto hedge fund, has had to liquidate its leveraged bets on different tokens, according the Financial Times.
Voyager disclosed Wednesday the extent of 3AC’s damage.
According to the company, it is expected to lose $650 million on 3AC loans if it fails to pay. 3AC had borrowed 15,250 Bitcoins, which were worth more than $300 million as of Wednesday. The company also borrowed $350 million in USDC stablecoins.
3AC requested a $25 million USDC initial repayment by June 24, and full repayment by June 27 of the total USDC and Bitcoin balances. Voyager stated that neither amount has been repaid.
According to the firm, it plans to recover funds from 3AC and is currently in discussions with its advisors “regarding legal remedies”.
Voyager stated that the Company was unable to estimate at this time how much it can recover from 3AC.
Zhu Su, 3AC co-founder, previously stated that his company is looking at asset sales and a rescue plan by another firm in order to avoid collapse. Multiple requests for comment were not answered by the company.
According to Forbes, Bankman-Fried is the richest person in crypto with a net worth of $20.5 million. At the beginning of 2022, his crypto exchange FTX had a valuation of $32 billion.
As the crypto market faces an increasing liquidity crisis, the 30-year-old is seen as a hero for the market. Bankman-Fried stated that he believes his exchange is responsible to consider taking over, even if it means losing money, to stop contagion.
His actions demonstrate how the lack of regulation in the crypto industry means firms cannot turn to the federal government when things go south, a stark contrast to 2008’s banking industry.