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Sam Bankman Fried, the 30-year-old billionaire investor and founder of crypto exchange FTX, believes that more failures among crypto exchanges are coming amid the ongoing market downturn that has wiped off around $2T in market value since November.
“Some third-tier exchanges are already secretly insolvent,” he told Forbes on Wednesday.
The slump in cryptos has been exacerbated by recent collapses in algorithmic stablecoin TerraUST (UST-USD) and its sister token Luna (LUNA-USD), followed by crypto exchange Celsius and crypto-focused hedge fund Three Arrows Capital.
As crypto winter sets in, though, Bankman-Fried has taken bold steps to bail out a handful of troubled crypto firms to stem contagion, namely Voyager Digital (OTCQX:VYGVF) and BlockFi after both companies got hit hard after Three Arrows Capital’s levered crypto bets turned sour. SBF’s FTX and Alameda, his quant trading shop, extended a combined $750M in credit lines to those companies, but it’s possible that SBF doesn’t recoup his investment.
“We’re willing to do a somewhat bad deal here, if that’s what it takes to sort of stabilize things and protect customers,” SBF, who has an estimated net worth of $21B, explained to Forbes.
Recall crypto lender BlockFi had secured a $250M line of credit from FTX in an effort to increase “access to capital that further bolsters our balance sheet and platform strength,” BlockFi CEO Zac prince wrote in a Twitter post on June 21.
The crypto meltdown doesn’t stop there as there are more “companies that are basically too far gone and it’s not practical to backstop them for reasons like a substantial hole in the balance sheet, regulatory issues, or that there is not much of a business left to be saved,” SBF said, as quoted by Forbes.
Also, FTX was reportedly exploring a possible takeover of Robinhood Markets (NASDAQ:HOOD) earlier this week, though Bankman-Fried denied any active merger discussions with the financial services platform, he told Forbes.
Previously, (June 7) Sam Bankman-Fried said his company won’t freeze hiring despite market slump.