Sam Bankman-Fried, head of one of the largest cryptocurrency exchanges, FTX, said that he and his company still have some “a few billion” on hand to support companies that are struggling and can further destabilize the digital asset industry, but that the worst of the liquidity crisis has probably passed.
Bankman-Fried, 30, who is from California but lives in the Bahamas where FTX is based, has become the white knight of crypto in recent weeks, and has thrown lifelines to digital asset platforms that have faltered as the prices of cryptocurrencies have cratered. Bitcoin is down around 70% from the highest level in November of almost $ 69,000.
“We are starting to get a few more companies to reach out to us,” Bankman-Fried said in an interview. These companies are generally not in serious situations, although some smaller crypto exchanges may still fail, he said, adding that the industry has moved beyond “other big shoes that need to drop.”
Bankman-Peace’s crypto-trading firm, Alameda Research, gave crypto-lender Voyager Digital a $ 200 million cash and stack-coin-revolving credit facility, and a bitcoin facility, as the company faced losses from exposure to crypto hedge fund Three Arrows Capital. On Wednesday, Voyager filed for bankruptcy.
Also in June, FTX gave the US cryptocurrency lender BlockFi a $ 250 million revolving credit facility and on Friday announced an agreement that gives FTX the right to buy it based on certain performance triggers.
The goal of the rescue packages was to protect customers’ assets and stop infection from ricocheting through the system, Bankman-Fried said.
“Trusting consumers that things will work as advertised is incredibly important, and if it breaks down, it’s incredibly difficult to get back,” he said.
In January, FTX unveiled FTX Ventures, a $ 2 billion venture capital fund focused on digital asset investments, which it has since stepped in to help rescue companies that lack liquidity but not assets.
“It’s getting more expensive with each of these,” said Bankman-Fried, adding that the firm still had enough money on hand to make a $ 2 billion deal if necessary.
“If all that mattered was a single event, we could get over a couple of billion,” he said, stressing that it is not his preference.
On one or two occasions, Bankman-Fried, who made billions on arbitrating cryptocurrency prices in Asia as of 2017, said he had used his own money to stop failing crypto companies when it did not make sense for FTX to do so.
“FTX has shareholders and we have a duty to make reasonable things out of them, and I certainly feel more comfortable burning my own money,” he said.
Bankman-Fried also revealed in May that he had personally taken a 7.6% stake in Robinhood Markets Inc, and took advantage of the trading app’s weakened share price.
Forbes estimated Bankman-Peace’s net worth this year at around $ 24 billion, but the Bloomberg Billionaires Index in May said the number had halved due to cryptocurrency.
CRYPTO WINTER
As the US Federal Reserve has begun to raise interest rates aggressively to combat hyperinflation, investors have fled the crypto markets.
The crash in cryptocurrency prices, referred to as “cryptocurrency winter”, may have bottomed out, as prices have stabilized, but it will largely depend on the macroeconomic situation, said Bankman-Fried, a 2014 graduate of the Massachusetts Institute of Technology.
“I do not think there is an existential threat to the industry, but I think it is a little worse than I would have expected,” Bankman-Fried said.
Bankman-Fried began his career in finance at the quantitative trading firm Jane Street, then founded the crypto-trading firm Alameda Research and in 2019 created FTX, which was valued in January at $ 32 billion.
He has said he plans to give away 99% of his fortune, and that he can spend up to $ 100 million on supporting candidates in the 2024 election cycle, focusing on issues such as pandemic prevention and bipartisanship.
While rival crypto exchanges face layoffs after previous hires, FTX has around 300 employees, and Crunchbase sets Alameda’s employees at less than 50.
“Every quarter of this year, I expect our workforce to be larger than last quarter, but we try not to grow insanely fast,” he said.
(Reporting by John McCrank and Megan Davies in New York; Additional Reporting by Hannah Lang in Washington; Editing by Chizu Nomiyama)
