With no central bank willing to come to the rescue, embattled crypto firms are looking to their peers for help.
Billionaire crypto exchange boss Sam Bankman-Fried has signed deals to bail out two companies in as many weeks: BlockFi, a quasi-bank, and Voyager Digital, a digital asset brokerage firm.
FTX, the Bankman-Fried crypto exchange, agreed on Tuesday to provide BlockFi with a $250 million revolving credit facility. Bankman-Fried said the funding would help BlockFi “navigate the market from a position of strength.”
“We take seriously our duty to protect the digital asset ecosystem and its customers,” he tweeted.
This comes after BlockFi said earlier this month that it dismiss 20% of its staff. Meanwhile, a report from The block said earlier this month that BlockFi was in talks to increase the company’s value to $1 billion from $3 billion last year.
BlockFi was not immediately available for comment when contacted by CNBC.
Last week, Voyager Digital said Alameda Research, Bankman-Fried’s quantitative research firm, would provide it with $500 million in funding.
The agreement consists of a $200 million line of credit in cash and USDC stablecoins, as well as a separate line of $15,000-bitcoins renewable worth approximately $300 million at current prices.
A fall in the value of digital currencies over the past few weeks has resulted in many key players in the space facing financial difficulties.
Last week, crypto lender Celsius stopped all account withdrawals, blaming the “extreme market conditions”. The company, which takes users’ crypto and lends it out for higher returns, is believed to have hundreds of millions of dollars tied up in a illiquid token derivative called stETH.
Elsewhere, crypto hedge fund Three Arrows Capital was forced to liquidate leveraged bets on various tokens, according to the Financial Times.
On Wednesday, Voyager revealed the extent of the damage inflicted by 3AC issues.
The company said it was on course to suffer a $650 million loss on loans made to 3AC if the company did not repay. 3AC had borrowed 15,250 bitcoins – worth more than $300 million as of Wednesday – and $350 million in USDC stablecoins.
3AC has requested an initial repayment of $25 million in USDC by June 24 and a full repayment of the entire balance of USDC and bitcoin by June 27, Voyager said, adding that neither amount had yet been repaid.
The company said it intends to recover the funds from 3AC and is in discussions with its advisers “regarding available legal remedies.”
“The company is unable to estimate at this stage how much it will be able to recover from 3AC,” Voyager said.
Voyager shares slumped on the news, falling as much as 60% on Wednesday.
Zhu Su, co-founder of 3AC, previously said his company is considering asset sales and rescue by another company to avoid collapse. The company did not respond to multiple requests for comment.
Bankman-Fried is one of the richest people in crypto, with an estimated net worth of $20.5 billion, according to Forbes. Its crypto exchange FTX snagged a valuation of $32 billion in early 2022.
The 30-year-old has become something of a savior for the $900 billion crypto market as it faces a growing liquidity crunch. In an interview with NPRBankman-Fried said he felt his exchange had “a responsibility to seriously consider stepping in, even if it’s at a loss to us, to stem the contagion.”
His actions highlight how a lack of regulation for the crypto industry means companies cannot turn to the federal government for a bailout when things go south — a stark contrast to the banking industry in 2008.
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