Crypto-lending platform BlockFi, one of embattled Celsius’s rivals, has announced it’s secured US$250 million worth of credit from the FTX exchange to help it through rough liquidity seas.

The aim is to help secure BlockFi users’ funds at a time when prominent crypto firms (such as Celsius and Three Arrows Capital and others) are struggling to stay afloat in the bear-market downturn and from knock-on “contagion” effects from the recent Terra LUNA implosion.

Zac Prince, CEO of New Jersey-based BlockFi, announced the news on Twitter, claiming the new “revolving credit” flow of capital would bolster the firm’s balance sheet, and will be used to safeguard user funds across all accounts.

BlockFi, like its chief competitors Celsius and Nexo, is a CeFi protocol – a centralised entity that offers high levels of annual yield to investors who lock up crypto assets on their platforms.

Essentially, CeFi is meant to combine beneficial elements of traditional finance (e.g. security) with the sort of large returns that decentralised finance can offer. At the moment, that marriage isn’t a particularly happy one, to say the least. And that can partly be attributed to behind-the-scenes over-leveraging that have put a handful of companies in hot water as bear market-prices beat down.

Additionally, some of these lending platforms were already feeling regulatory heat in recent months, including BlockFi, which was fined US$100 million in February by the US Securities and Exchange Commission (SEC) for being deemed to run unregistered securities products.

 

Is Sam Bankman-Fried crypto’s saviour?

The loan to BlockFi isn’t the first of its sort offered to struggling crypto companies by Sam Bankman-Fried’s FTX. In fact, the exchange pretty much bailed out the large US crypto brokerage Voyager just last week.

As reported by the Financial Times, Bankman-Fried helped Voyager “pull back from the brink” with a US$485 million loan in USD and Bitcoin.

And as of today, further details regarding Voyager’s… cicumstances… have now emerged, with the company revealing US$663 million worth of exposure to Three Arrows Capital (3AC).

Not good. The latter is still rumoured to be facing potential insolvency… unless they’re in line for some SBF-like white-knight action, too.

In a Twitter thread this week, Bankman-Fried wrote: “We take our duty seriously to protect the digital asset ecosystem and its customers.”

And on National Public Radio in America, the 30-year-old crypto billionaire also revealed that the bailout measures are something he and FTX have done “a number of times in the past” to “stem the contagion” of crypto companies cascading into liquidation nightmares.

Elsewhere on Twitter this week, “SBF” commented further with:

“I do feel like we have a responsibility to seriously consider stepping in, even if it is at a loss to ourselves, to stem contagion… Even if we weren’t the ones who caused it, or weren’t involved in it. I think that’s what’s healthy for the ecosystem.”

The crypto rescues have led SkyBridge Capital’s Anthony Scaramucci, among others, to compare Bankman-Fried with the Wall Street financial baron John Pierpont Morgan. Old JPM was famed for pledging his own money to help bolster the US banking system during “The Bankers’ Panic” financial crisis back in 1907.

However, not every crypto supporter is a fan of Bankman-Fried’s deep-pocket assistance…

 

Hester Peirce speaks out against crypto bailouts

US Securities and Exchange Commission (SEC) commissioner Hester Peirce is sometimes referred to as “Crypto Mom” for her generally positive outlook on the crypto industry. At least compared with the chairperson of the regulatory body, Gary Gensler, that is.

GG is well known to have a hard-on for particularly firm regulation on DeFi, stablecoins and other crypto sectors, whereas Peirce has often voiced a more gentle, innovation-friendly, hands-off approach from the SEC towards the crypto industry.

However, Peirce has this week spoken out against the FTX crypto bailouts, reasoning that it’s better to “let these things play out,” in order to grow a more sustainable industry.

Speaking with Forbes, the commissioner said:

“When things are a bit harder in the market, you discover who’s actually building something that might last for the long, longer term and what is going to pass away.

“Crypto does not have a bailout mechanism,” she added. “I don’t want to come in and say that we’re going to try to figure out a way to bail you out if we don’t have the authority to do it. But even if we did, I would, I would not want to use that authority, we really need to let these things play out.”

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