SBF, Leader of Recent Crypto Bailouts, Says Some Exchanges are ‘Already Secretly Insolvent’

FTX CEO Sam Bankman-Fried (SBF) has warned that more crypto exchanges are headed towards insolvency, but they are yet to be exposed. The remarks come as the crypto billionaire has recently provided some hefty loans to bail out a number of struggling crypto firms.

Some Crypto Exchanges are “Too Far Gone”

Sam Bankman-Fried, who has recently emerged as crypto’s bail-out king, has issued a stark warning about the financial status of some platforms and companies operating within the crypto industry. “There are some third-tier exchanges that are already secretly insolvent,” he said during an interview with Forbes.

Binance, the world’s largest crypto exchange in terms of trading volume, along with Coinbase, FTX, Kraken, and a limited number of other exchanges are industry giants. These are seemingly far away from any financial trouble. Still, some had to cut from their workforce and take other measures in order to be able to survive another “crypto winter.”

However, outside of this group, there are more than 600 crypto exchanges operating around the globe, and some without proper regulatory oversight. According to Bankman-Fried, some of these platforms are “too far gone” that even he is not able, or willing, to save.

He said:

“There are 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.”

Bankman-Fried: Savior of Last Resort

Over the past month, the FTX boss has agreed to bail out some troubled digital currency platforms. Last week, crypto lender BlockFi said it had received a $250m revolving line of credit from Bankman-Fried’s FTX which was injected to help bolster its balance sheet. 

Bankman-Fried’s quantitative trading firm Alameda has also committed $500 million in financing to Voyager Digital, a crypto brokerage. The move came after it was revealed that Voyager had exposure to embattled crypto hedge fund Three Arrows Capital. On Monday, Voyager said 3AC had defaulted on a loan totaling $666 million.

Moreover, in mid-May, Bankman-Fried purchased a 7.6% stake in leading stock trading app Robinhood, according to a filing with the SEC. FTX has also acquired Canadian crypto trading platform Bitvo as well as Embed Financial Technologies. 

Meanwhile, in the interview with Forbes, Bankman-Fried said there is no guarantee that he would be able to recoup his recent investments. “You know, we’re willing to do a somewhat bad deal here, if that’s what it takes to sort of stabilize things and protect customers,” he said.

Despite Bankman-Fried’s generous bailouts, the collapse of Terra, which erased more than $40 billion in value from crypto, has already sent ripple effects across the entire industry. Crypto lender Celsius and crypto fund 3AC are among the more notable companies that have been affected—but the damage apparently isn’t done yet, says SBF.

Do you think Bankman-Fried would be able to recoup his recent investments during the next bull run? Let us know in the comments below. 

About the author

Ruholamin Haqshanas is an accomplished crypto and finance journalist with over two years of experience writing in the field. He has a solid grasp of various segments of the FinTech space, including the decentralized iteration of financial systems (DeFi), and the emerging market for non-fungible tokens (NFTs). He is an active user of digital assets for remittances.