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The Terra (CRYPTO: LUNA) crash caused the crypto market to plummet more than 67% from its all-time high, brought about individual investors to lose billions of dollars and triggered liquidations of crypto enterprises that could not repay overcollateralized margin loans.
This is where FTX, the second-largest cryptocurrency exchange in the world led by millennial billionaire Sam Bankman-Fried comes into play.
What happened: Earlier in the week, news broke that crypto exchange BlockFi signed a term sheet with FTX, extending a $250 million revolving credit facility that provided the firm with capital intended to be contractually subordinated to all clients' balances.
News broke Friday that FTX may be using the $250 million loan as a double-edged sword to acquire an undisclosed stake in the company. According to the Wall Street Journal, no equity agreement has been struck and discussions between BlockFi and FTX are still ongoing.
Why It Matters: As the $900 billion cryptocurrency market struggles with a growing liquidity crisis, Bankman-Fried has emerged as a hero, distributing loans to support a financial industry still in its infancy.
“We take our duty seriously to protect the digital asset ecosystem and its customers,” Bankman-Fried said in a June 21 tweet.
Alameda Research, Bankman-Fried’s quantitative trading firm, also extended Voyager Digital, a similar crypto company, $500 million in financing, including a $200 million credit line and 15,000 Bitcoins (CRYPTO: BTC).
Photo: Shutterstock
