In an unregulated industry that lacks a central savior, Sam Bankman-Fried is spending big money to save failing cryptocurrency ventures.
Last month, he told NPR that he feels obligated to “stem contagion.” And he spoke to Forbes last week, stating that FTX, the cryptocurrency exchange he founded and helms, is “willing to do a somewhat bad deal here, if that’s what it takes to sort of stabilize things.”
As risk assets respond to tightening from the Federal Reserve, those bad deals include extending lifelines to victims of a market rout that has yet to settle. He offered a $250 million line of credit to BlockFi and up to $500 million in cash and cryptocurrencies to Voyager Digital last month.
Bankman-Fried was declared as crypto’s lender of last resort after the rescue. He was referred by Anthony Scaramucci as “the new John Pierpont Morgan,” whose bailouts of the US financial system more than 100 years ago helped give rise to the Federal Reserve.
This wasn’t the first time Bankman-Fried came to the rescue. FTX extended Japanese crypto exchange Liquid Group a $120 million loan after it suffered a $100 million hack last August.
At a time when digital assets are in freefall, Bankman-Fried has emerged as central banker-like figure for the crypto market. He may not be alone in the future, analysts say, as volatility continues within the crypto market, giving other billionaires an opportunity to jump in.
Chris Brendler, managing director and senior research analyst at D.A. Davidson said, “Yes, Sam was just the first”. Cryptocurrencies are currently experiencing a similar financial crisis in 2008, and “larger exchanges will be prioritized to limit systemic risk.”
Binance founder and CEO Changpeng Zhao has also played the role of crypto savior when in April, Binance led a $150 million fundraising round to Sky Mavis, the parent of play-to-earn game Axie Infinity, which suffered a $625 million hack.
“We strongly believe Sky Mavis will bring a lot of value and growth for the larger industry and we believe it’s necessary to support them as they work hard to resolve the recent incident,” Zhao said at the time.
Zhao wrote in a blog post on June 23, that given Binance’s healthy cash reserves, “We also have a responsibility to help industry players survive and hopefully thrive.”
Such rescues may not be totally charitable. Bankman-Fried and Zhao as the head of crypto exchanges have shown an interest in preventing a sector collapse.
Bankman-Fried also would not want to miss a good bargain. BlockFi announced on Friday, a deal for a $400 million credit facility from FTX US, which has an option to purchase for up to $240 million.
“It looks like SBF is playing chess while the rest of the cryptoverse is playing checkers and just waiting for the latest crash to bottom out,” said OANDA analyst Edward Moya. “A lot of crypto companies are close to insolvency and SBF is positioning himself to try to take advantage of some very attractive discounts.”
The takeover of BlockFi would follow an earlier precedent. After extending the lifeline to Liquid, FTX bought the company in February with more deals likely to come.
Martha Reyes, head of research at BEQUANT said, “[There’s] no doubt others will come in to swoop up assets as the situation evolves and not limited to crypto players”.