Rapture #257: Looks like more Corruption in Crypto
Dominos are continuing to fall because of the FTX implosion. While much of the initial news centered around liquidations, more recently light is being shed on the fact that FTX looks to be at the center of widespread corruption throughout the ecosystem.
Let's look at the latest allegations that are stemming from the fallout of the FTX implosion.
Lead news source The Block implicated
Two days ago, Axios released an article that stated SBF, via Alameda Research, secretly loaned The Block's CEO, Forbes 40 under 40 winner Michael McCaffrey, $16 million in order to finance the purchase of an apartment in the Bahamas. Multiple other loans ranging above $10 million were also given to McCaffrey controlled LLCs according to the Axios article.
For those who don't follow crypto as closely, The Block is one of the leading media players in crypto. For the past few years, the entire executive team of The Block in my opinion has been extremely chummy with FTX based on their digital media coverage, their tweets, and their interviews.
The Block has never made any disclosure regarding the financial support SBF's Alameda Research provided.
After the news was released, Michael McCaffrey resigned from his CEO position, though he still supposedly owns more than 50% of The Block's equity.
Response from The Block's team
Multiple leaders of The Block have opted to respond to this event via Twitter. News editor Frank Chaparro insisted via a tweet that McCaffrey kept him and the rest of The Block's team in the dark. Many industry leaders, from Compound's old lawyer Jake Chervinsky to Franklin Bi at Pantera to famed traders like @depression2019, came to Frank's defense publicly.
Larry Cermak, Director of Research from The Block, also claimed via a tweet that he just found out about these loans. Furthermore, Larry states that he lost roughly the same amount on FTX as he made from The Block's compensation and bouses since joining 4 years ago.
Mike Dudas, the founder and old CEO of The Block, was tweeting about how he was attempting a buyout of the company with outside investors in order to oust McCaffrey. Those tweets now seem to have been deleted, as his entire tweet history is gone.
Takeaways
Personally, I had always found The Block's coverage of FTX to be way too glowing. Furthermore, all of the top people at The Block seemed to have an extremely strong relationship with SBF across a multi-year period.
I will not go so far as to accuse them all of being at the back and call of SBF, but there have been puff pieces about SBF/FTX from The Block over the years and it did seem like they had a closer relationship with him than other crypto executives.
Regardless, many industry participants have come out in support of The Block's executives, vouching for their character.
I don't know what will happen, but I do think The Block's brand is tarnished.
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