In a recent interview, Sam Bankman-Fried, the founder of popular exchange FTX, warned that some crypto exchanges are “secretly insolvent” and may fail soon. Bankman-Fried’s FTX and Alameda Research have already helped Blockfi and Voyager Digital, as the 30-year-old billionaire says sometimes you have to do “whatever it takes to stabilize things and protect customers.”
Bankman-Fried’s FTX and Alameda Research Provide Credit Lines to Specific Crypto Firms
The crypto economy has been hit hard by the current bear market and the fallout from Terra LUNA and UST that took place last month. The fall of Terra arguably started a major domino effect that saw many exposed companies suffer significant losses.
Many of the problems plaguing the crypto community stem from massive leverage and most of the contagion effect is tied to lenders and borrowers. More than two weeks ago, crypto lender Celsius halted withdrawals, and “people familiar with the matter” said that Celsius is dealing with notable financial difficulties.
Three Arrows Capital (3AC), a Singapore-based crypto hedge fund, was allegedly the victim of crucial liquidations and bought $200 million locked moon classic (LUNC) now worth $700. The issues that stemmed from Terra, Celsius, and 3AC have apparently reduced exposure to other crypto firms as well.
Bankman-Fried’s cryptocurrency quantitative trading firm Alameda Research helped Voyager Digital cope with the 3AC exposure by providing the firm with a $500 million credit facility. His crypto exchange FTX gave crypto lender Blockfi a $250 million credit facility on June 21.
Bankman-Fried: ‘Some companies have gone too far’ or ‘There isn’t much business left to save’
In addition, Bankman-Fried speak about 3AC on June 19, explaining on Twitter that 3AC’s financial difficulties “couldn’t have happened with a chain protocol that was transparent.” On June 28, 2022, the Forbes author steven erlich did an interview with Bankman-Fried, and the FTX CEO was very candid about crypto exchanges being “secretly insolvent.”
Bankman-Fried also spoke about recent investments in Blockfi and Voyager, as the FTX CEO explained that there is a possibility that he may not get a return on his investment. “You know, we’re willing to do a pretty bad deal here, if that’s what it takes to stabilize things and protect customers,” Bankman-Fried told the Forbes contributor. The FTX CEO said that more platforms will get rid of financial burdens in the near future.
“There are some third-tier exchanges that are secretly insolvent already,” Bankman-Fried detailed. “There are companies that are basically too far gone and it’s impractical to back them for reasons like a substantial hole in the balance sheet, regulatory issues, or there’s not much business left to salvage,” she added.
On May 27, 2022, Bankman Fried said that FTX was prepared to invest billions in mergers and acquisitions. Bankman-Fried told Forbes that FTX is financially strong and has been profitable for 10 quarters.
He told Ehrlich that FTX was eyeing overleveraged crypto miners. Bitcoin.com News also recently reported that estimates say there is currently $4 billion in distressed loans backed by crypto mining platforms. Bankman-Fried also spoke with Ehrlich about the largest stablecoin by market valuation, Tether (USDT). According to Ehrlich’s interview with Bankman-Fried, the FTX CEO isn’t worried about the connection.
“I think the really pessimistic views on Tether are wrong… I don’t think there’s any evidence to back them up,” Bankman-Fried told the reporter.
What do you think of the recent Bankman-Fried interview on struggling crypto companies? Let us know what you think about this topic in the comments section below.
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