Sam Bankman-Fried, the accused founder of the bankrupt cryptocurrency company FTX and its trading arm Alameda Research, reportedly made a secret investment in a crypto news website, The Block.
According to the reports, Michael McCaffrey, the news site’s previous CEO, received payments from Alameda to support The Block.
The investment was previously unknown to the staff of The Block, but the discovery could cause a conflict of interest issues. The relationship between Sam Bankman-Fried and Michael McCaffrey had never been disclosed by the website.
The website for crypto news The Block revealed on Friday that Alameda Research had been funding it covertly for the past two years. Following the disclosure of the loans, The Block’s CEO, Michael McCaffrey, resigned immediately and will also leave the company’s board of directors.
According to the company, McCaffrey was the only employee who was aware of the loans.
The Block claims that from 2021 to this year, McCaffrey obtained three loans totaling $43 million. The first loan was made in 2021 for $12 million to buy out other investors in the media organization, and McCaffrey then assumed the role of CEO.
The third was for $16 million earlier this year for McCaffrey to buy personal real estate in the Bahamas, while the second was for $15 million in January to fund day-to-day operations.
The Block’s chief revenue officer, Bobby Moran will take over as CEO with immediate effect. Alameda Research provided those loans, totaling $27 million according to Moran. The money was used to complete the restructuring and give The Block access to capital investment.
According to Moran, The Block’s executive team was shocked and disappointed by the information. It shows a tremendous lack of judgment on McCaffrey’s part to take out a loan from SBF without disclosing that information.
They had asked him to resign due to his actions. He will not be responsible for The Block’s daily management or operational tasks anymore, he added.
Michael McCaffrey was named CEO of The Block in 2020 after it was created in 2018. The Block became 100% employee-owned in April 2021 after McCaffrey oversaw a buyout of the company’s investors, with McCaffrey owning the majority of the company.
According to reports, the unprofitable startup had previously received over $4 million through convertible notes from venture capital firms like Greycroft, Pantera, BlockTower Capital, and Bloomberg Beta.
This year, it is expected to bring roughly $20 million in revenue, primarily from memberships and advertisements. According to reports, McCaffrey started speaking with Bankman-Fried about a loan to finance the purchase at the beginning of February last year.
According to Moran, Just before Thanksgiving, McCaffrey first informed him about the transactions. Earlier this week, he and McCaffrey briefed a few members of the senior editorial staff of the organization. In an all-staff meeting early on Friday afternoon, the information was revealed.
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Moran said that his initial response was one of rage, irritation, and concern for all his coworkers. Everyone believed that this would cast doubt on their years of hard work to provide fair, accurate, and independent reporting, which began even before Moran joined the team. And to Moran that was so frustrating.
Meanwhile, Sam Bankman-Fried, who is accused of defrauding investors of billions of dollars, stated he is not ready to appear before a US congress committee on December 13.
The immediate collapse of the cryptocurrency exchange, FTX, which destroyed the money of billions of investors, is being investigated by the US House Financial Services Committee.
Certain reports state that Bankman-Fried has secretly transferred $10 billion in FTX client funds to his trading business Alameda Research.
After its potential merger with a prominent cryptocurrency exchange, Binance did not materialize, FTX filed for bankruptcy last month.
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