An FTX bailout of $750 million will keep two crypto lenders solvent: $250 million for BlockFi and $500 million for Voyager. Both companies have been struggling with defaults on their loans while worried customers threaten a bank run-like panic.
Investors dumped the stock of publicly traded Voyager to an all-time low on Wednesday. Worryingly, Voyager flagged over $650 million in possibly irrecoverable defaults from Three Arrows Capital. Embarrassingly, Voyager’s share price performance is -95% year-to-date.
BlockFi has also accumulated hundreds of millions of dollars in losses. According to leaked income statements, BlockFi had operating income of -$63.93 million in 2020 and -$221.5 million in 2021.
FTX bailout limits contagion and protects SBF’s portfolio
Obviously, CEO Sam Bankman-Fried (SBF) directed the FTX bailout to limit cascading liquidations that might affect his portfolio. Nevertheless, he downplayed his profit motive to National Public Radio in a way that cast him as the hero of the story. He said he feels “responsibility to seriously consider stepping in, even if it is at a loss to ourselves, to stem contagion.” CNBC fawned, calling SBF ”something of a savior.”
Contagion is spreading across risky crypto projects. The once-$28 billion Terra LUNA crashed to near-$0. Celsius, Three Arrows Capital, and StableGains are teetering on the brink of insolvency. Finblox limited withdrawals to $1,500 per month. This week, Babel Finance suspended withdrawals indefinitely.
Nevertheless, SBF is ready to deploy capital in another FTX bailout to keep some of crypto’s riskiest lenders solvent. This is not SBF’s first time orchestrating a bailout for the benefit of his mostly Solana (SOL)-based portfolio. Indeed, he’s rescued the unreliable Solana blockchain many times.
Sam Bankman-Fried tirelessly pumps Solana
- He offered an unlimited bid to allow a disgruntled investor to liquidate their Solana position.
- He pumped Solana as an investment to Elon Musk.
- Often, SBF can be found cheerleading an investment or bailout of Solana, such as when Chicago-based Jump bailed out Solana’s primary token bridge, Wormhole.
- SBF often tweets Solana service updates.
- He also serves as Solana’s de facto press relations representative. SBF has half a million more followers than the founder of Solana, Anatoly Yakovenko.
Not only this, SBF advertises developer job openings at Solana (as of September, Solana only had 20 core developers — and only five did not work for Anatoly directly) and he once analogized his power to that of CZ at Binance, saying as Binance Smart Chain tokens are to Binance, so Solana Program Library tokens are to FTX.
He also co-invests alongside Solana Ventures, directing Alameda Research to invest in a Solana derivatives exchange and he recently watched as Solana’s primary DEX lender, Solend, orchestrated a bailout of hundreds of millions of dollars worth of SOL that could have crashed its price to zero.
Even as three-quarters of DeFi has collapsed from its December peak, SBF and his quants at Alameda Research have committed funds to become the largest political donor in U.S. history — and to bail out some of DeFi’s biggest companies. BlockFi and Voyager are emblematic of FTX’s expansive portfolio.
In January, FTX announced a $2 billion crypto venture fund and closed a $400 million Series A round. Forbes estimates SBF’s personal net worth at $20 billion. Protos enumerated a comprehensive timeline of his career here.