Crypto billionaire Sam Bankman-Fried has become a lender of last resort for his beleaguered industry. He may end up owning large chunks of it as well.
Mr. Bankman-Fried’s crypto exchange, FTX, is in talks to acquire a stake in BlockFi, a crypto lender to which FTX extended a $250 million line of credit this week, people familiar with the matter said. His other company, Alameda Research, also acquired a large stake in Canadian crypto broker Voyager Digital Ltd.
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Earlier this month, Alameda announced that it had extended two lines of credit, one for $200 million in cash and stablecoins, and another for 15,000 bitcoins, to Voyager.
Talks between BlockFi and FTX are ongoing and no fairness agreement has been reached, people familiar said.
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The deals come after other high-profile investments from Mr. Bankman-Fried and his companies, and as crypto investors begin to sort out which companies will survive the current downturn.
Crypto firms are grappling with a massive price crash that has wiped out $2 trillion in value since the market peak in November. In early May, the Terra USD stable collapsed, wiping out around $40 billion in crypto assets. A number of companies, including Celsius Network LLC and Three Arrows Capital Ltd., have faced severe liquidity constraints in recent months.
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This week, Voyager lowered the withdrawal limit for its customers to $10,000 in a 24-hour period from $25,000, according to an update to its website.
Voyager said Three Arrows owed it $666 million and that Voyager was considering issuing a notice of default. Voyager loaned the hedge fund 15,250 bitcoins and $350 million in USD Coin. Voyager had about $5.9 billion in cash and other assets on its balance sheet as of the date of its last financial report in March. It reported $3.4 billion in crypto assets held and $2 billion in assets on loan.
Alameda acquired a $35 million stake in Voyager last month, paying $2.34 per share to acquire 14.96 million shares. In addition to the roughly 7.7 million shares held by Alameda Ventures Ltd., he gave the combined entities, both controlled by Mr. Bankman-Fried, an 11.56% stake in Voyager.
The purchase price was about a 16% discount to the then-prevailing market price, although it has since lost value. On May 20, shares of Voyager closed at $2.78. Voyager shares were trading at 66 cents on Friday, down 9.6%. Since the beginning of the year, they are down 96%.
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The discounted bid price is not that unusual in the current environment, said HC Wainwright managing director Kevin Dede. “What you will see are many private trades placed below market price,” he said. “It depends on the financial situation of the company.”
Some of Mr. Bankman-Fried’s other recent investments include a 7.6% stake in Robinhood Markets Inc. for $648 million, making him the trading app’s third largest shareholder. In June, FTX acquired a Canadian crypto exchange called Bitvo for an undisclosed amount, and FTX’s US division, FTX US, recently added brokerage services firm Embed Financial Technologies Inc.
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On Thursday, Alameda said it sold 4.5 million shares to Voyager, which were canceled by the company, reducing Alameda’s stake to 9.49%, so it would not be classified as a reporting insider in under Canadian securities laws. The shares were worth $2.6 million based on Wednesday’s prices. No money was exchanged upon cancellation.
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