In a recent interview, Sam Bankman-Fried, the founder of popular exchange FTX, warned that some crypto exchanges are “secretly insolvent” and may soon fail. Bankman-Fried’s FTX and Alameda Research have helped Blockfi and Voyager Digital before, as the 30-year-old billionaire says sometimes you have to do “whatever it takes to stabilize things and protect customers.”

FTX and Bankman-Fried’s Alameda Research Provide Lines of Credit to Specific Crypto Firms

The crypto-economy has been hit hard by the current bear market and the fallout from Terra LUNA and UST that took place last month. The fall of Terra arguably triggered a significant domino effect that saw many exposed companies suffer significant losses.

Many of the problems plaguing the crypto community stem from massive leverage and most of the contagion effect is with lenders and borrowers. More than two weeks ago, crypto lender Celsius suspended withdrawals, and “people familiar with the matter” said Celsius was facing notable financial difficulties.

Three Arrows Capital (3AC), a Singapore-based crypto hedge fund, has reportedly fallen victim to crucial liquidations and bought $200 million Locked Classic Luna (LUNC) that is now worth $700. Problems stemming from Terra, Celsius, and 3AC have apparently also been exposed to other crypto companies.

Bankman-Fried’s cryptocurrency quantitative trading firm, Alameda Research, helped Voyager Digital deal with exposure to 3AC by providing the company with a $500 million line of credit. Its crypto exchange FTX granted crypto lender Blockfi a $250 million line of credit on June 21.

Bankman-Fried: “Some companies are too far away” or “There is not much left to save”

Additionally, Bankman-Fried spoke about 3AC on June 19 and explained on Twitter that 3AC’s financial difficulties “couldn’t have happened with a transparent onchain protocol.” On June 28, 2022, Forbes author Steven Ehrlich did an interview with Bankman-Fried, and the FTX CEO got very candid about crypto exchanges being “secretly insolvent.”

Bankman-Fried also talked about recent investments in Blockfi and Voyager, as the CEO of FTX explained that there is a chance he won’t get a return on his investment. “You know, we’re ready to get a bad deal here, if that’s what it takes to stabilize things and protect customers,” Bankman-Fried told the Forbes contributor. The CEO of FTX said that more platforms will withdraw from finance charges in the near future.

“Some third-tier exchanges are already secretly insolvent,” Bankman-Fried detailed. “There are companies that are fundamentally too far behind and it is impractical to support them for reasons such as a substantial hole in the balance sheet, regulatory issues or that there is not much business left to salvage” , he added.

On May 27, 2022, Bankman Fried said FTX was ready to deploy billions on mergers and acquisitions. Bankman-Fried told Forbes that FTX has been financially strong and profitable for 10 quarters.

He told Ehrlich that FTX is eyeing overmined crypto miners. News also recently reported that estimates indicate that there are currently $4 billion in distressed loans backed by crypto-mining platforms. Bankman-Fried told Ehrlich about the largest stablecoin by market valuation, tether (USDT), as well. According to Ehrlich’s interview with Bankman-Fried, the FTX CEO isn’t concerned about the tether.

“I think the really bearish views on Tether are wrong…I don’t think there’s any evidence to back them up,” Bankman-Fried told the reporter.

Keywords in this story

3AC, Balance Sheet, Blockfi, Celsius, Exchange Failures, Exposed Companies, Exposure, Financially Sound, ftx, Insolvency, Insolvent, Liquidations, Mergers & Acquisitions, Paused Withdrawals, Regulatory Issues, Risk Exposure, Secretly Insolvent, Steven Ehrlich , Terra, terra (LUNA), Terra UST, Tether, third-tier exchanges, Three Arrows Capital, USDT, travel

What do you think of Bankman-Fried’s recent interview regarding struggling crypto companies? Let us know what you think about this topic in the comments section below.

Jamie Redman

Jamie Redman is the News Manager at News and a fintech journalist living in Florida. Redman has been an active member of the cryptocurrency community since 2011. He is passionate about Bitcoin, open-source code, and decentralized applications. Since September 2015, Redman has written over 5,700 articles for News about disruptive protocols emerging today.

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