With no central bank ready to come to the rescue, threatened crypto companies are turning to their peers for help.
Billionaire crypto exchange boss Sam Bankman-Fried signed deals to bail out two companies over the course of weeks: BlockFi, a quasi-banker, and Voyager Digital, a digital asset brokerage. digital.
FTX, Bankman-Fried’s cryptocurrency exchange, agreed to provide BlockFi with $250 million in revolving credit on Tuesday. Bankman-Fried said the funding will help BlockFi “navigate the market from a strong position.”
“We take our duty seriously to protect the digital asset ecosystem and its customers,” he tweeted.
It comes after BlockFi said earlier this month that it would lay off 20% of employees. Meanwhile, a report from Unit Earlier this month, it was reported that BlockFi was in talks to raise the company’s valuation 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 Alameda Research, Bankman-Fried’s quantitative research arm, would provide $500 million in financing.
The deal includes a $200 million cash line of credit and USDC stablecoins, as well as 15,000-bitcoin revolving facility worth approximately $300 million at current prices.
The decline in the value of digital currencies in recent weeks has resulted in many major players in the space experiencing financial difficulties.
Bitcoin and other cryptocurrencies are plummeting as the market grapples with Federal Reserveinterest rate hikes and the $60 billion collapse of terraUSDa so-called stablecoin and its sister token Moonlight.
Last week, crypto lender Celsius suspend all withdrawals from the account, blamed “extreme market conditions.” The company that takes users’ cryptocurrencies and lends them to generate higher profits, is said to have hundreds of millions of dollars tied up in a illiquid token derivative called stETH.
Elsewhere, crypto hedge fund Three Arrows Capital was forced to liquidate 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 would incur a $650 million loss on loans granted to 3AC if the company defaults. 3AC borrowed 15,250 bitcoins — worth more than $300 million on Wednesday — and $350 million in stablecoins.
3AC requested an initial refund of $25 million USDC on June 24, and a full refund of USDC and bitcoin balances on June 27, Voyager said, adding that both have yet to be refunded. to return.
The company said it intends to withdraw funds from 3AC and is in talks with its advisors “about existing legal remedies.”
“The company cannot assess at this time how much money it will be able to recover from 3AC,” Voyager said.
Zhu Su, co-founder of 3AC, previously said His company is considering selling assets and another company bails out to avoid collapse. The company did not respond to multiple requests for comment.
Bankman-Fried is one of the richest people in the crypto space, with an estimated net worth of $20.5 billion, according to Forbes. His crypto exchange FTX achieved a valuation of $32 billion in early 2022.
The 30-year-old has emerged as a savior for the $900 billion crypto market as it faces a deepening liquidity crisis. In an interview with NPRBankman-Fried said he feels his exchange has a “responsibility to seriously consider participating, even at our own expense, to prevent contagion.”
His actions highlight a lack of regulation for the crypto industry that means companies can’t turn to the federal government for a bailout as things turn South – a turn in sharp contrast to the banking industry in 2008.
