Crypto exchange FTX bails out lending platform BlockFi

FTX CEO Sam Bankman-Fried bolstered the $ 900 million cryptocurrency industry stumble with its second bailout of a troubled digital asset company in as many weeks.

The 30-year-old boss announced on Tuesday that his cryptocurrency trading platform FTX has extended a $ 250 million loan to BlockFi. Last week, Bankman-Fried helped cryptocurrency broker Voyager Digital withdraw from the edge with a $ 485 million loan in cash and bitcoins.

The bailouts came as the crypto industry tried to restore confidence during a period of accelerated pressure on the price of digital assets such as bitcoin, which pushed even some of the largest market participants in the industry.

One of the critical principles of cryptocurrencies is their independence from authorities such as central banks. But billionaire Bankman-Fried is building a key role similar to the authorities that rescued banks in the 2008 financial crisis, analysts say.

“Sam has become a lender of last resort,” said Anatoly Crachilov, chief executive of London’s fund manager Nickel Digital Asset Management.

“If you have a few ‘Lehman’ events at the same time, focused, then you could impose the winter of cryptography over a very long period of time. FTX has the balance to support these companies, and it’s in their long-term interest to see this ecosystem survive. “.

The sharp drop in digital asset prices has claimed an increasing number of casualties in the past month, including stablecoin TerraUSD and its sister token luna, as well as the Celsius loan platform, which has prevented customers from withdrawing their assets in an attempt to survive. Since reaching an all-time high in November, bitcoin has fallen about 70 percent and rival token ether has lost about four-fifths of its value.

Loans to BlockFi and Voyager have marked a further step in the scale of support and the prominence of groups in need of help. Earlier last week, the BlockFi loan platform downsized about a fifth of its staff, citing a “dramatic change in macroeconomic conditions.”

Last week, it also liquidated at least some of Three Arrows ’positions, after the cryptocurrency hedge fund failed to meet BlockFi’s demands for more funds to hedge its digital currency bets.

On Tuesday, BlockFi said it had agreed to a $ 250 million revolving credit facility from FTX, but did not disclose the terms or interest rate. BlockFi said FTX’s claims about the installation would be subordinated to all customer balances if BlockFi failed.

Bankman-Fried said BlockFi had no debt or risk of Three Arrows or Celsius.

“Sometimes leadership means acting decisively and that’s what BlockFi did: eliminating problematic counterparts before they become a problem and adding money before it’s needed,” Bankman-Fried wrote on Twitter.

He added: “BlockFi is financially strong; all operations are normal, as they always have been, and the assets are secure.”

Bankman-Fried added that it was considered an important role in supporting market participants in difficulties even in cases where FTX was not involved. “I think that’s what’s healthy for the ecosystem and I want to do what can help it grow and thrive,” he wrote.

Voyager has agreed to a $ 200 million cash and USDC credit facility, a popular stable currency in the cryptocurrency industry, and a second for $ 15,000 bitcoins, which equates to approximately $ 285 million. Both facilities are due by the end of 2024 and have an annual interest rate of 5 percent.

Zacc Prince, CEO of BlockFi, said the deal would give his company “access to capital that further strengthens our balance sheet.”

“Our team is battle-proof and has withstood many storms over the years, which only makes us stronger and more resilient as we navigate the current market environment,” he added.

As the industry has grown, large cryptographic exchanges have repeatedly intervened to rescue troubled projects or companies.

Last year, FTX provided $ 120 million in debt financing to Liquid, a cryptocurrency exchange that lost about $ 90 million in cryptocurrency tokens to hackers. FTX later acquired the smaller exchange.

This year, Binance, the world’s largest cryptocurrency exchange by volume, led the rescue of Sky Mavis, the company that runs the popular Axie Infinity game, which was hacked for more than $ 600 million.

“We firmly believe that Sky Mavis will bring a lot of value and growth to the larger industry and we believe it is necessary to support them as they work hard to resolve the recent incident,” said Changpeng Zhao, Executive Director of Binance.

This article has been modified to correct the Axie Infinity hacking-related figure

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