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Sam Bankman-Fried rescues crypto lenders BlockFi, Voyager

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With no central bank willing to come back to the rescue, beleaguered crypto firms are turning to their peers for help.

Billionaire crypto boss Sam Bankman-Fried’s firms 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, agreed Tuesday to supply BlockFi with a $250 million revolving credit facility. Bankman-Fried said the financing would help BlockFi “navigate the market from a position of strength.”

Sam Bankman-Fried, CEO of FTX US Derivatives, testifies throughout the House Agriculture Committee hearing titled Changing Market Roles: The FTX Proposal and Trends in Latest Clearinghouse Models, in Longworth Constructing on Thursday, May 12, 2022.

Tom Williams | CQ-Roll Call, Inc. | Getty Images

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

It comes after BlockFi said earlier this month that it could lay off 20% of its staff. Meanwhile, a report from The Block said earlier this month that BlockFi was in talks to lift funds in a deal valuing the firm at $1 billion, down from $3 billion last yr.

Zac Prince, BlockFi co-founder and CEO, said the take care of FTX was greater than only a round of debt, adding it “also unlocks future collaboration and innovation” between the 2 firms.

Last week, Voyager Digital said Alameda Research, Bankman-Fried’s quantitative research firm, would offer it with $500 million in financing.

The deal consists of a $200 million credit line of money and USDC stablecoins, in addition to a separate 15,000-bitcoin revolving facility price roughly $300 million at current prices.

A plunge in the worth of digital currencies in recent weeks has resulted in quite a few key players within the space facing financial difficulty.

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

Read more about tech and crypto from CNBC Pro

Last week, crypto lender Celsius halted all account withdrawals, blaming “extreme market conditions.” The firm, which takes users’ crypto and lends it out to make higher returns, is believed to have a whole lot of hundreds of thousands of dollars tied up in an illiquid token derivative called stETH.

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

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

The corporate said it was set to take a lack of $660 million on loans issued to 3AC if the corporate fails to pay. 3AC had borrowed 15,250 bitcoins — price around $310 million as of Wednesday — and $350 million in USDC stablecoins.

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

The firm said it intends to get better the funds from 3AC and is in talks with its advisors “regarding the legal remedies available.”

“The Company is unable to evaluate at this point the quantity it would give you the chance to get better from 3AC,” Voyager said.

Voyager shares cratered on the news, falling as much as 60% on Wednesday.

Zhu Su, 3AC’s co-founder, previously said his company is considering asset sales and a rescue by one other firm to avoid collapse. 3AC didn’t reply to multiple requests for comment.

Bankman-Fried is one in all the wealthiest people in crypto, with an estimated net price of $20.5 billion, in response to Forbes. His crypto exchange FTX notched a $32 billion valuation at first of 2022.

The 30-year-old has emerged as something of a savior for the $900 billion crypto market because it faces a deepening liquidity crunch. In an interview with NPR, Bankman-Fried said he feels his exchange has a “responsibility to significantly consider stepping in, even whether it is at a loss to ourselves, to stem contagion.”

His actions highlight how a scarcity of regulation for the crypto industry implies that firms cannot turn to the federal government for a bailout when things turn south — a pointy contrast with the banking industry in 2008.

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