Charles Morgan Bankman-Fried’s Media Apology Tour | BlockFi Bankruptcy

DISGRACED FTX FOUNDER RETURNS TO THE PUBLIC STAGE

Sam Bankman-Fried isn’t done making a spectacle of himself. The former FTX CEO has made multiple public appearances this week, addressing the undoing of his crypto empire in early November. “I’ve had a bad month,” he told reporter Andrew Sorkin at the New York Times DealBook Summit Wednesday, eliciting a chuckle from the live audience. He insisted he “didn’t ever try to commit fraud” and was “shocked” by the exchange’s collapse.

Speaking Thursday in a Twitter conversation that garnered nearly 40,000 listeners, however, the fallen executive, seemed to admit that FTX mixed funds that were supposed to be held in segregated customer accounts with other company business, making it difficult for investors who thought they had simple positions to get their money out as digital-asset prices plunged early last month. When asked why customers could not retrieve their holdings as a crisis in digital assets blossomed, despite terms of service that stated the investments were not allowed to be used by FTX, the former CEO said that the exchange would have been able to make those investors whole if it could have settled its other positions.

Earlier in the day, Bankman-Fried admitted to poor risk oversight in a morning interview with the ABC network’s Good Morning America television show. “I wasn’t spending any time or effort trying to manage risk on FTX,” he said.

BLOCKFI REVEALS $680 MILLION OF BAD LOANS TO ALAMEDA

A BlockFi representative laid the blame for the crypto lender’s bankruptcy filing Monday squarely on FTX, whose Alameda Research affiliate allegedly defaulted on $680 million of collateralized loans to the digital financing platform. FTX had engineered a bailout of BlockFi over the summer, as the collapse of the luna and terraUSD cryptocurrencies set off a cascade of liquidity events in the digital-assets market. The bailout had included a credit line of $400 million that BlockFi could tap. The company borrowed about $275 million, one of its bankruptcy documents indicated, and then sought $125 million more on November 8. FTX did not provide the additional funds, and it filed its own Chapter 11 case three days later. After BlockFi’s credit request was denied, Alameda defaulted on $680 million of collateralized loan obligations, “the recovery on which is unknown,” according to the document.

BlockFi limited platform activity on November 10, including pausing customer withdrawals. The lender has $355 million in cryptocurrencies trapped on FTX, a BlockFi attorney was quoted as telling the bankruptcy court on Tuesday. BlockFi also sued a company controlled by Bankman-Fried, apparently seeking to take control of a 56.3 million-share stake in the online brokerage Robinhood, after a separate default.      

Source: Forbes Digital Assets, powered by Nomics.  Prices as of 4:00 p.m. on December 2, 2022.

KRAKEN CUTS 30% OF EMPLOYEES

One of the world’s largest crypto exchanges is laying off 1,100 people, or about a third of its staff “in order to adapt to current market conditions,” cofounder and CEO Jesse Powell said in a blog post on Wednesday. This reduction brings the team size back to where it was 12 months ago. Powell blamed “macroeconomic and geopolitical factors” that reduced trading and client sign-ups.

The crisis rolling through the digital-asset market is putting additional pressure on many crypto firms. Barry Silbert’s Digital Currency Group laid off about 13% of its staff in November. Crypto.com idled 2,000 employees in October.      

GENESIS NOT YET READY TO FILE FOR PROTECTION

Embattled crypto brokerage Genesis told Reuters it was seeking to avoid a bankruptcy reorganization following a Tuesday report alleging that creditors of the firm are huddling with restructuring lawyers to seek options that would help Genesis stay afloat. One group of creditors is getting advice from law firm Proskauer Rose, while another group is working with Kirkland & Ellis, the report said.

The brokerage has $2.8 billion in outstanding loans, according to Bloomberg, with about 30% made to related parties including parent Digital Currency Group. Genesis suspended redemptions and loan originations a few days after revealing on November 10 that it had approximately $175 million locked in an FTX trading account. ”      

ELSEWHERE

Galaxy Digital Agrees To Buy Some Assets From Bankrupt Crypto Lender Celsius [CoinDesk]

Coinbase Says Apple Forced It To Remove NFT Transfers From Its IOS Wallet [The Verge]

Maersk, IBM Shutting Down Blockchain-Enabled Supply Chain Project [The Register] 

Nina Bambysheva
Reporter
Forbes Money & Markets

Steven Ehrlich
Editor 
Forbes CryptoAsset & Blockchain Advisor

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