In a recent interview, Sam Bankman-Fried, the founder of the popular exchange FTX, warned that some crypto exchanges are “secretly insolvent” and may soon fail. 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 “what it takes to sort of 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 Terra LUNA and UST fallout that took place last month. Terra’s downfall arguably started a significant domino effect that saw numerous exposed firms suffer sizable losses.
Many of the issues hurting the crypto community stem from massive leverage and most of the contagion effect is tethered to lenders and borrowers. Over two weeks ago, the crypto lender Celsius paused withdrawals, and ‘people familiar with the matter’ have said Celsius is dealing with notable financial hardships.
Three Arrows Capital (3AC), a crypto hedge fund based out of Singapore, allegedly fell victim to crucial liquidations and purchased $200 million of locked luna classic (LUNC) that’s now worth $700. The issues that derived from Terra, Celsius, and 3AC have seemingly trickled exposure down to other crypto firms as well.
Bankman-Fried’s quantitative cryptocurrency trading firm, Alameda Research, helped Voyager Digital cope with 3AC exposure by providing the firm with a $500 million line of credit. His crypto exchange FTX gave the crypto lender Blockfi a $250 million line of credit on June 21.
Bankman-Fried: ‘Some Companies Are Too Far Gone’ or ‘There’s Not Much of a Business Left to Be Saved’
Furthermore, Bankman-Fried spoke about 3AC on June 19, and explained on Twitter that 3AC’s financial hardships “couldn’t have happened with an onchain protocol that was transparent.” On June 28, 2022, Forbes author Steven Ehrlich did an interview with Bankman-Fried, and the FTX CEO was very candid about crypto exchanges that are “secretly insolvent.”
Bankman-Fried also spoke about the recent investments in Blockfi and Voyager, as the FTX CEO explained there’s a chance he may not get a return on his investment. “You know, we’re willing to do a somewhat bad deal here, if that’s what it takes to sort of stabilize things and protect customers,” Bankman-Fried told the Forbes contributor. The FTX CEO said that…
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