- Sam Bankman-Fried is pumping big money into an unregulated industry that lacks a central savior.
- The crypto billionaire has said he feels obligated to "stem contagion" and make bad deals "if that's what it takes to sort of stabilize things."
- Experts say he won't be alone for long as a rescuer of failing crypto ventures.
Sam Bankman-Fried is spending big money to save failing cryptocurrency ventures, pumping liquidity into an unregulated industry that lacks a central savior.
He told NPR last month that he feels obligated to "stem contagion." And speaking to Forbes last week, Bankman-Fried said FTX, the cryptocurrency exchange he founded and helms, is "willing to do a somewhat bad deal here, if that's what it takes to sort of stabilize things."
Those bad deals include extending lifelines to victims of a market rout that has yet to settle as risk assets respond to tightening from the Federal Reserve. Last month, he offered up to $500 million in cash and cryptocurrencies to Voyager Digital and a $250 million line of credit to BlockFi.
The rescues prompted declarations that Bankman-Fried was crypto's lender of last resort. Anthony Scaramucci even anointed him as "the new John Pierpont Morgan," whose bailouts of the US financial system more than 100 years ago helped give rise to the Federal Reserve.
But it wasn't the first time Bankman-Fried came to the rescue. Last August, FTX extended Japanese crypto exchange Liquid Group a $120 million loan after it suffered a $100 million hack.
In essence, Bankman-Fried has emerged as central banker-like figure for the crypto market at a time when digital assets are in freefall. And he may not be alone in the future, analysts say, as continued volatility within the crypto market gives other billionaires an opportunity to jump in.
"Yes, Sam was just the first," said Chris Brendler, managing director and senior research analyst at D.A. Davidson. He added that the climate for cryptos mirrors that of the 2008 financial crisis, and that "larger exchanges will be prioritized to limit systemic risk."
Meanwhile, Binance founder and CEO Changpeng Zhao has also played the role of crypto savior. In April, Binance led a $150 million fundraising round for Sky Mavis, the parent of play-to-earn game Axie Infinity, which suffered a $625 million hack.
"We strongly believe Sky Mavis will bring a lot of value and growth for the larger industry and we believe it's necessary to support them as they work hard to resolve the recent incident," Zhao said at the time.
More recently, he opined last month on crypto bailouts broadly. In a blog post on June 23, Zhao wrote that given Binance's healthy cash reserves, "We also have a responsibility to help industry players survive and hopefully thrive."
To be sure, such rescues may not be totally altruistic. As the head of crypto exchanges, Bankman-Fried and Zhao have an interest in preventing a sector collapse.
And Bankman-Fried also may not want to miss a good bargain. On Friday, BlockFi announced a deal for a $400 million credit facility from FTX US, which has an option to buy for up to $240 million.
"It looks like SBF is playing chess while the rest of the cryptoverse is playing checkers and just waiting for the latest crash to bottom out," said OANDA analyst Edward Moya, before the deal was announced. "A lot of crypto companies are close to insolvency and SBF is is positioning himself to try to take advantage of some very attractive discounts."
A takeover of BlockFi would follow an earlier precedent. After extending the lifeline to Liquid, FTX bought the company in February. And more deals are likely to come.
"[There's] no doubt others will come in to swoop up assets as the situation evolves and not limited to crypto players," said Martha Reyes, head of research at BEQUANT.