Cryptocurrency news outlet The Block secretly received millions of dollars in funds from disgraced former FTX CEO Sam Bankman-Fried.
Mike McCaffrey, the outlet’s former chief executive, resigned from his role on Friday after he told chief revenue officer Bobby Moran that Bankman-Fried provided $27 million in loans through his trading firm, Alameda Research. No other employees at The Block reportedly had any knowledge of the financial arrangement.
“This news came as both a shock and disappointment to The Block leadership team,” Moran said in a statement. “Mike’s decision to take out a loan from SBF and not disclose that information demonstrates a serious lack of judgment. It undermines The Block’s reputation and credibility, especially that of our reporters and researchers, as well as our efforts at industry-leading transparency.”
Moran claimed that McCaffrey did not seek to “improperly influence the newsroom or research teams” in their coverage of Bankman-Fried and his now-bankrupt cryptocurrency empire.
Officials at the Securities and Exchange Commission have opened a criminal investigation into the entrepreneur to determine whether he broke the law by transferring FTX customer funds to Alameda Research, according to a report from The New York Times. Bankman-Fried plans to testify before the House Financial Services Committee next week. Members of the Senate Agriculture Committee held a hearing with Commodity Futures Trading Commission Chairman Rostin Behnam on increasing oversight of the cryptocurrency sector.
The Block’s announcement came as a report from Axios detailed the transactions. One of the loans, amounting to $16 million, was used in part to buy McCaffrey an apartment in the Bahamas, where FTX is headquartered. The other loans were utilized to fund the buyout of The Block through LLCs controlled by McCaffrey, who acquired a majority stake in the company.
“As this news becomes public, our work will be held up to the most rigorous scrutiny,” Moran added. “We are confident that any objective analysis will show that our team’s work has been and remains fair, independent, and accurate. The Block’s mission remains more vital than ever: to be the leading source for objective, impactful, and timely information covering the world of digital assets.”
The Block, which is wholly owned by employees after a restructuring last year, will have revenue of approximately $20 million this year, largely through advertisements and subscriptions. The unprofitable company nevertheless plans to continue operating. Reporters for the outlet recently interviewed Bankman-Fried for their podcast.
Several other publications had portrayed Bankman-Fried as an “effective altruist” who donated his fortune to causes such as “pandemic prevention.” Even after his companies’ recent liquidity crunch, Bankman-Fried has been the subject of multiple puff pieces. The 30-year-old had formerly given multimillion-dollar grants to various outlets through his nonprofit entity Building a Stronger Future. ProPublica and The Intercept were promised $5 million and $4 million, respectively, to investigate issues such as biosecurity and public health preparedness. Vox likewise received a grant that would allow employees to execute “a project on technological and innovation bottlenecks that hamper human progress.”
Bankman-Fried, a prolific campaign donor, has denied accusations of overt criminality. New York Times financial columnist Andrew Ross Sorkin told the entrepreneur that he received multiple letters from FTX customers who accused Bankman-Fried of stealing their life savings, prompting him to say that he was “deeply sorry about what happened.” After Sorkin pressed him on the alleged intertwining of funds between his companies, Bankman-Fried claimed that a “failure of oversight” on his part resulted in confusion rather than any desire to defraud investors for his own profit.