Bankman-Fried, founder and CEO of Crypto exchange FTX, says the company has “a few billion” to support the embattled crypto industry
FTX, one of the largest cryptocurrency exchanges, has become the savior of the crypto industry as about half a dozen crypto companies became the casualties of the sudden crypto carnage. Last week, FTX bought the beleaguered crypto lender BlockFi for $25 million, a 99% discount from its $4.8 billion valuation in July 2021.
BlockFi is not alone. FTX founder and CEO Sam Bankman-Fried’s crypto-trading firm, Alameda Research, also gave crypto-asset broker Voyager Digital a $200 million cash and stablecoin revolving credit facility, and a facility of bitcoin before the company filed for bankruptcy this Tuesday, a little over a year after raising $100 million in funding.
BlockFi and Voyager are two of the crypto companies that suffered heavy losses due to their exposure to crypto hedge fund Three Arrows Capital, which went bust last week after defaulting on loans from a number of firms in the industry. Others include Census Network and Vauld.
In May, Bankman-Fried revealed he had personally taken a 7.6% stake in Robinhood Markets Inc, capitalizing on the trading app’s weakened share price. There were speculations that FTX wanted to buy fintech startup and commission-free trading app Robinhood.
However, he quickly dispelled the rumor. Bankman-Fried said he and his company have a “few billion” on hand to help struggling crypto companies that could further destabilize the embattled crypto industry.
He also allayed fear about the ongoing crisis in the crypto market, adding that the worst of the liquidity crunch has likely passed.
“We’re starting to get a few more companies reaching out to us,” Bankman-Fried said in an interview. Those firms are generally not in dire situations, though some smaller crypto exchanges may still fail, he said, adding that the industry has moved beyond “other big shoes that have to drop.”
Bankman-Fried, 30, who is from California but lives in the Bahamas where FTX is based, has become crypto’s white knight in recent weeks, throwing lifelines to digital asset platforms which have faltered as cryptocurrencies prices have cratered. Bitcoin is down around 70% from its all-time November high of nearly $69,000.
As we reported last month, FTX also gave BlockFi a $250 million revolving credit facility and on Friday announced a deal giving FTX the right to purchase it based on certain performance triggers. Bankman-Fried said the goal of the bailouts was to “protect customer assets and stop contagion from ricocheting through the system.”
“Having trust with consumers that things will work as advertised is incredibly important and if broken is incredibly hard to get back,” he said. “It does get increasingly expensive with each one of these,” Bankman-Fried said, adding that the firm still had enough cash on hand to do a $2 billion deal if necessary.
“If all that mattered was one single event, we could get above a couple billion,” he said, stressing that isn’t his preference.
On one or two occasions, Bankman-Fried, who made billions arbitraging cryptocurrency prices in Asia beginning in 2017, said he has used his own cash to backstop failing crypto companies when it didn’t make sense for FTX to do so.
“FTX has shareholders and we have a duty to do reasonable things by them and I certainly feel more comfortable incinerating my own money,” he said.
FTX was founded in 2019 by 29-year-old MIT graduate Sam Bankman-Fried and his co-founder Gary Wang. The Bahamas-based crypto exchange FTX offers derivatives products like futures and options as well as spot trading. Once an unknown startup, FTX has become a key player in the crypto space, rivaling the likes of Coinbase and Binance.
Bankman-Fried, who currently resides in Hong Kong, is now worth at least $25 billion making him the richest person in crypto, according to Forbes. Sam graduated from the Massachusetts Institute of Technology in 2013 at the age of 21. He was skilled in math and loved to solve problems and give back to society.
With $2 billion in total funding since its inception three years ago, FTX has built up a war chest at a time when digital currency prices have sunk considerably. However, Bankman-Fried doesn’t think we’re entering a “long-term crypto winter.”
In an interview with CNBC, Bankman-Fried said, “I think we’re not entering a long-term crypto winter. There have been changes in expectations of interest rates, and that’s been moving crypto markets. But it’s been moving markets more generally as well.”
In 2020, Bankman-Fried made headlines after he donated a whopping $5.2 million to Joe Biden’s campaign, making him the second-biggest donor. Today, Sam is a celebrity in crypto circles. FTX specializes in derivatives and trading on leverage, the use of borrowed funds to amplify trades.
Below is a video of Bankman-Fried discussing the crypto ecosystem, the future of crypto, and FTX interests with CNN.
— Julia Chatterley (@jchatterleyCNN) July 6, 2022