Bankman-Fried Says His Crypto Rescues Had ‘Mixed Results’

Sam Bankman-Fried, CEO of digital asset exchange FTX, said his efforts to bail out companies during the crypto market downturn have yielded “mixed” results.

The 30-year-old billionaire engineered deals worth about $1 billion to shore up companies struggling after prices of cryptocurrencies such as Bitcoin plummeted in the spring and summer. Not all of those bailouts had happy endings, Bankman-Fried said in an interview on Bloomberg’s “David Rubenstein Show: Peer-to-Peer Conversations.”

“I think some would turn out to be profitable, some won’t be,” Bankman-Fried said. “We had to make quick assessments.”

He pointed to a deal struck in June with troubled crypto lender Voyager Digital Ltd. as one that went bad. Alameda Research, the crypto trading firm that Bankman-Fried founded, offered a $485 million loan to Voyager, but that was not enough to prevent the company from filing for bankruptcy in July.

Bankman-Fried said he had higher hopes for other deals he was involved in, including one with BlockFi Inc. FTX US, the U.S. affiliate of FTX, agreed to provide a $400 million revolving credit facility to BlockFi and was given the opportunity to to buy the crypto. lending platform directly.

BlockFi had “just kind of burned through their runway, had a functional business with a strong team and just needed more money to be able to operate effectively going forward,” Bankman-Fried said.

He said his backstopping, which earned him comparisons to John Pierpont Morgan in the 1907 banking crisis, was driven in part by FTX’s profitability and fundraising, and had the ultimate goal of supporting companies in the industry, rather than just “maximizing on deals. “

In the interview, Bankman-Fried said he often goes to Washington to lobby Congress on behalf of the crypto industry. There are still big questions about whether the Securities and Exchange Commission or the Commodity Futures Trading Commission will claim authority over the crypto space. Bankman-Fried said he would be fine with both regulators taking responsibility.

“What we’ve tried very hard to do over the last year is get the industry to a place where it’s willing to accept sensible regulation,” he said, noting that he believes tensions have cooled somewhat between regulators and the digital currency companies.

As for the crypto winter, although the price of Bitcoin has fallen below $20,000, he noted that things could be worse. He said he’s not “super worried” about the industry imploding anytime soon.

The interview has been edited and condensed.

When tech stocks and cryptocurrencies started falling in May, did you get nervous?

Not super nervous. It was definitely going to be a rocky road for the industry and you saw some businesses explode when Bitcoin hit $20,000. If we saw things melt down much further than they did, if we saw the NASDAQ drop 30%, 40% from here and Bitcoin go down to $10,000 per token, I think you would see another round of pain for the industry that would potentially be more. of a medium to long-term problem.

When this was going on, did you calculate your net worth every hour that went down?

I tried not to. So if you just pretend nothing has moved, then you can wish away all the problems.

You were called the JP Morgan of crypto after bailing out companies. Does it bother you?

It doesn’t bother me that much. I think it’s something that I thought was the right thing for the industry. And, you know, our very explicit mandate that we kind of gave to the team of people who were working on this was, “Your goal is not to make a fortune for us to do this.”

Like, “Your goal is to make good deals. Your goal is for us not to get our faces ripped off.” But depending on that, you know, doing as much as we can to bail out the industry, and the higher goal was to try to stop places rather than maximize these deals. I would love for others to do that. I think that would have been great.

Were these investments profitable?

Mixed is basically the answer. I think some would turn out to be profitable, others won’t be. I mean, with Voyager, I think that’s $70 million where we’re putting in that I’m not sure we’ll ever see again.

And so we had to make quick judgments, and we made them so that if things went well, they would be good investments, and if they turned out badly, they would be bad investments. But we kind of limited the amount we could lose on it.

The crypto industry seems to want to be regulated by the CFTC, and some want the SEC to be the main regulator. Do you have a view on this?

So in the end both are going to be regulators. And you know, the CFTC is going to regulate commodity futures, so it’s going to regulate very likely futures on tokens that aren’t securities. The SEC is very likely to end up regulating the spot security token markets.

And there is some territory in between. When you look at spot commodity markets, when you look at what security token futures might look like, these might end up being common regimes; they may end up in one place or another. In principle, I’m fine with either regulator or any combination of them. I think the non-security token aspect of this is a good fit for the CFTC’s regime.

Hannah Miller reports for Bloomberg News.

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