sbf bailouts

The popular crypto derivatives platform FTX has come to the rescue during the crypto winter after bailing out two important firms in the ecosystem via the injection of nearly $900 million in capital to prevent their collapse.

The founder of FTX and Alameda Research, Sam Bankman-Fried stated at a conference recently that he feels obligated to step in even if that results in losses for his businesses as these actions can prevent further contagion across the ecosystem.

“Even if we weren’t the ones who caused it, or weren’t involved in it. I think that’s what’s healthy for the ecosystem, and I want to do what can help it grow and thrive”, Bankman-Fried stated in regards to his latest moves.

The first action undertaken by SBF was a $250 million loan extended to BlockFi, a popular pure-play crypto exchange, as the company experienced severe losses during the latest turmoil.

BlockFi stated in a press release published on 21 June that it plans to deploy the funds “as needed” to bolster its balance sheet so it can ensure the “long-term stability” of the firm.

Next up, Bankman-Fried bailed out Voyager Digital by loaning them $200 million in USDC Coin (USDC) along with a revolving line of credit consisting of 15,000 BTC valued at approximately $450 million at the time.

However, this last move may have backfired as Voyager Digital shares are plunging by over 60% this morning following news that the company is heavily exposed to crypto hedge fund Three Arrows Capital (3AC).

Your capital is at risk.

Is Voyager in Capacity of Repaying this Loan?

According to Voyager, 3AC owes the firm $370 million in BTC (around 15,250 coins) and another $350 million in USDC. The company stated that it plans to issue a notice of default if the Asian investment fund fails to honor its obligations.

In a press release, Voyager stated that it had $152 million in cash and $20 million in restricted funds that can only be used for the purchase of USDC. The agreement with Alameda Research – the vehicle that SBF used to bail out Voyager – is that the company cannot withdraw more than $75 million during a given 30-day rolling period while the firm’s corporate debt must remain limited to 25% of customers’ assets.

In addition, Voyager is obligated to secure additional funds to ensure its survival within the next 12 months.

Rumors about the dire situation in which the fund was at have been circulating for months in both social media and crypto forums due to 3AC’s large exposure to Terra’s demised native token, currently listed as Luna Classic (LUNC).

It is highly likely that Bankman-Fried was already aware of Voyager’s big exposure to 3AC and the fact that he was still willing to extend the company this lifeline to withstand the crisis indicates that he believes in its ability to survive.

Much Has Changed Since The Latest FTX Funding Round

ftt price chart
FTT/USD YTD price chart – Source: CoinMarketCap

During its latest Series C funding round, FTX was reportedly valued at approximately $32 billion. This round took place in late January this year. Since then, macroeconomic conditions have changed dramatically and that may have led to a significant reduction in the company’s appraised value.

Meanwhile, FTX’s native crypto token – FTT – has lost 33.5% of its value since the year started compared to around 57% Bitcoin (BTC) has shed during that same period and 70% in the case of Ethereum (ETH).

It appears that the market is more confident about the prospects of the FTT token due to the perceived financial strength of its parent company compared to major digital assets in the ecosystem.

However, considering the latest decline in the value of tech stocks and equities within the crypto sector as a whole, the loans extended by SBF to the companies mentioned above may hurt the firm’s valuation if investors perceive that the exchange will be unable to recover the money down the road if the situation worsens.

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