The Block CEO resigns amid the Sam Bankman-Fried loan scandal
The Alpha:
- Michael McCaffrey, the former CEO of the crypto news publisher The block, resigned today after it emerged he failed to disclose a series of loans obtained from Alameda Research, the trading arm of Sam Bankman-Fried’s FTX, to restructure and raise capital for the publication in early 2021, according to a statement released on the company’s blog. McCaffrey has also resigned from the company’s board.
- The three loans, which totaled $43 million and reportedly included a $16 million payout to finance the purchase of a condo in the Bahamas for the outgoing CEO, have called into question the credibility of the publication.
- The Block’s Chief Revenue Officer Bobby Moran has been named the new CEO of the company, effective immediately. Moran wants to restructure the company to buy out McCaffrey’s majority stake in the company, according to information shared with Axios.
- The company claims McCaffrey was the only person with knowledge of the loans and that they have seen “no evidence” that he tried to influence the site’s newsroom or research team in any way.
Why it’s important:
Founded in 2018, The block had bought out its investors in April 2021, making the publication 100 percent employee-owned. The company had previously raised over $4 million from venture firms such as Greycroft, BlockTower Capital, Bloomberg Beta and Pantera. However, the acquisition was financed by a $12 million loan, the first of three provided by the now disgraced Alameda Research. The second loan of $15 million provided additional capital The block using an LLC called Lonely Road, while the final $16 million loan went to an LLC called Red Sea that McCaffrey used to buy property in the Bahamas.
That a media platform in the crypto space received under-the-table funding from one of Web3’s most discredited names (and used a significant amount of that funding to buy real estate for personal use) is a disaster for both Web3 and Web3. The block like. It proves that the tremors from SBF’s shady professional trading in the crypto space continue to ripple outward.
“This news comes as both a shock and a disappointment to The Block’s management team,” new CEO Bobby Moran wrote in the company’s statement. – Mike’s decision to take out a loan from SBF and not disclose that information shows a serious lack of judgment. It undermines The Block’s reputation and credibility, particularly that of our reporters and researchers, as well as our commitment to industry-leading transparency.”
Moran goes on to say that no one on the team knew about McCaffrey’s loan deal, and claims he has seen no evidence that the money has any influence on the publication’s coverage. Moran himself said he first learned about the loans just before Thanksgiving this year.
What’s next:
The block has a difficult time ahead. The publication’s reputation has taken a serious hit, having not only traded in off-the-book finances to fund its operations, but having done so using loans provided by the year’s leading crypto villain. How Moran chooses to move the company forward will be crucial to its survival. One thing is certain, however: the damage from the greed and lack of transparency that marked the fall of FTX and left the Web3 community wide-eyed is likely to be far from being fully exposed.
