FTX, a cryptocurrency exchange led by its philanthropic founder, Sam Bankman-Fried, has $2 billion in cash and will offer credit lines to distressed strategic crypto firms.
The FTX Bailout Plan
According to a Reuters report on July 6, Sam said the cryptocurrency exchange would be willing to inject funds to critical digital firms whose collapse might destabilize the entire cryptocurrency industry even if the worst of the recent crypto liquidity crisis may be coming to an end.
Sam Bankman-Fried, the 30-year-old U.S. billionaire, is a vocal supporter of crypto and has continued to guide his cryptocurrency exchange. He has been active in social media and mainstream media in the last seven months of a biting bear market which has seen leading crypto assets, especially Bitcoin, drop from as high as $69k in some crypto exchanges to as low as $17.8k in June.
The re-calibration of assets’ valuation has significantly impacted most crypto assets and firms, forcing some to announce cost-cutting measures until normalcy returns. The crypto crash has been pinned on central banks changing their monetary policies to curb runaway inflation.
In response to the damages caused by tanking prices, FTX has received requests from several crypto firms, including small cryptocurrency exchanges seeking capital injection to mitigate adverse effects caused by the bear market.
The objective of their backstopping is, according to Sam, to protect retail clients’ assets and to prevent contagion. He has sometimes used his money when bailing out a distressed crypto firm “doesn’t make sense” for FTX.
Backstopping the now Bankrupt Voyager
Besides small cryptocurrency exchanges that may fail in Sam’s assessment, some top crypto lending firms, including BlockFi, Celsius Network, and Voyager Digital, have been under duress. As BlockMagnates reported, Voyager has since filed for a Chapter 11 Bankruptcy in New York as it seeks to restructure while committing to pay out its over 100k creditors.
Earlier, Alameda Research, the crypto trading firm owned by the billionaire, extended a $200 million credit facility in Bitcoin, cash, and stablecoin to the crypto lending firm. This follows 3AC defaulting on the $665 million loans it had taken from Voyager Digital, reported to be almost 60 percent of the crypto lending firm’s loan book.
- Exhange BlockMagnates: Photo by Alexander Popov on Unsplash