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SEC commissioner criticizes crypto bailouts as ECB president calls for staking regulations

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SEC commissioner criticizes crypto bailouts as ECB president calls for staking regulations

SEC commissioner criticizes crypto bailouts as ECB president calls for staking regulations Oluwapelumi Adejumo · 16 hours ago · 2 min read

SEC Commissioner Hester Peirce says the tough times in the industry allows people to know who is actually building a product that will stand the test of time.

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Updated: June 23, 2022 at 7:53 am

Cover art/illustration via CryptoSlate

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U.S. SEC Commissioner Hester Peirce criticized crypto bailouts in a recent Forbes interview and said the current market crash could set the foundation for a more sustainable future for the industry.

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According to Peirce, tough times in the industry reveal projects and products that will stand the test of time.

She added that the current market conditions provide a learning opportunity for regulators and market participants to know how the crypto market reacts to acute stress.

Peirce said:

“It is helpful for us to see the points of connection. It’s a moment, not only for market participants to learn but also for regulators to learn, so that we can have a better sense of how the market operates.”

She added that the SEC could learn more about the industry during market downturns like this than during bull runs. In her opinion, scammers will take advantage of market conditions, and the SEC could learn from that.

Commissioner Peirce condemns crypto bailout

Speaking about bailouts for distressed crypto companies, the SEC commissioner revealed that she does not support bailouts for the industry.

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Peirce said:

“Crypto does not have a bailout mechanism. And that’s been perceived as one of the strengths of that marketplace.”

She also clarified that the SEC does not have the authority to bail out crypto companies, but even if the commission did, she would still prefer to ‘let these things play out.’

Due to liquidity issues, Crypto companies like Celsius Network, BlockFi, Three Arrows Capital, Babel Finance, and Maple Finance have recently been in the news.

BlockFi, on June 21, secured a $250 million credit facility from leading crypto exchange FTX to bolster its reserve sheets.

ECB President demands regulations for crypto lenders

Meanwhile, ECB President Christine Lagarde has called for the regulation of crypto staking and lending firms.

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Lagarde said:

“Innovations in these unexplored and uncharted territories put consumers at risk, where the lack of regulation is often covering fraud, completely illegitimate claims about valuation, and very often speculation as well as criminal dealings.”

The ECB president has previously said that cryptocurrencies are highly speculative investment instruments that authorities must regulate.

3AC

Controlling The Chaos: Alameda Ventures Bails Out Voyager With $200M & 15K BTC

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Controlling The Chaos: Alameda Ventures Bails Out Voyager With $200M & 15K BTC

Apparently, Voyager Digital is out of the woods. The company ran into liquidity issues when Three Arrows Capital failed to pay a huge loan to them. Welcome to another chapter of the crypto death spiral caused by the Terra/ Luna collapse. Who came to the rescue this time? Sam Bankman-Fried’s other company, Alameda Ventures. Is this man bailing out crypto or is he taking total control of the industry?

In a recent press release, Voyager Digital announced that it “entered into a definitive agreement with Alameda Ventures Ltd. related to the previously disclosed credit facility, which is intended to help Voyager meet customer liquidity needs during this dynamic period.” That’s one way of putting it. The company received “US$200 million cash and USDC revolver and a 15,000 BTC revolver.”

This morning, we announced a definitive agreement with Alameda Ventures for a $200 million dollar cash / USDC revolver and a 15,000 BTC revolver.

Read today’s release: https://t.co/8wPfzcaI6K

— Voyager (@investvoyager) June 22, 2022

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As a reminder, yesterday transpired that FTX, also owned by Bankman-Fried, bailed out BlockFi with $250M. At the time, we described the situation as follows:

“Over the last few weeks, the crypto market has been trending down. The contagion effect of the Terra/ Luna extinction event rocked every company out there, most of all those who offered yield on cryptocurrency deposits like BlockFi and Celsius and hedge funds like Three Arrows Capital. These companies’ problems and possible liquidation of assets, in turn, sent the crypto market into even more turmoil.”

The Voyager case fits right into that description.

Sam Bankman-Fried’s Loan To Voyager, The Conditions

The rumors were already flying. On June 16th, analyst Dylan LeClair tweeted “Speculation here, but in its quarterly report, Voyager had loaned $320m to a singapore based entity named “counterparty b”. One has to wonder whether “counterparty b” was 3AC and if so, how much of a hit Voyager took?” The answer came quicker than anyone thought. 

Speculation here, but in its quarterly report, Voyager had loaned $320m to a singapore based entity named “counterparty b”.

One has to wonder whether “counterparty b” was 3AC and if so, how much of a hit Voyager took? $VOYG shares are down 33% over the last two days… pic.twitter.com/sCiYskwLEq

— Dylan LeClair 🟠 (@DylanLeClair_) June 16, 2022

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In the press release, Voyager explained the loan:

“As previously disclosed, the proceeds of the credit facility are intended to be used to safeguard customer assets in light of current market volatility and only if such use is needed. In addition to this facility, as of June 20, 2022, Voyager has approximately US$152 million cash and owned crypto assets on hand, as well as approximately US$20 million of cash that is restricted for the purchase of USDC.”

The loan comes with “certain conditions,” among them:

  •  “No more than US$75 million may be drawn down over any rolling 30-day period.”
  • “The Company’s corporate debt must be limited to approximately 25 percent of customer assets on the platform, less US$500 million.” 
  • “Additional sources of funding must be secured within 12 months.” 

Voyager Digital price chart on OTC | Source: TradingView.com

It’s All About Three Arrows Capital Right Now

The press release confirms the rumors, the Singapore-based entity named “counterparty b” was 3AC. “Voyager concurrently announced that its operating subsidiary, Voyager Digital, LLC, may issue a notice of default to Three Arrows Capital (“3AC”) for failure to repay its loan.” In a recent article, our sister site Bitcoinist broke down the hedge fund’s situation:

“The crypto fund had been directly in the crosshairs of the Luna crash with exposure of more than $200 million and speculated to be as high as $450 million. At first, the firm had appeared to bounce back from the Luna collapse but it would be soon obvious that 3AC was in a more perilous position than investors thought.”

The Voyager situation makes it even more obvious. The company’s “exposure to 3AC consists of 15,250 BTC and $350 million USDC”. So, the Alameda loan covers most of it. What did they have to give in return, though? Formally, “Alameda currently indirectly holds 22,681,260 common shares of Voyager (“Common Shares”), representing approximately 11.56% of the outstanding Common and Variable Voting Shares”. If everything goes well, Voyager has nothing to worry about. However, what if it doesn’t?

Voyager levered 3AC up with 650million of their customers money, leaving them with only 150million cash reserves.

Who tf is in charge of risk over there, Merrill Lynch?

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— Tyler (@ApeDurden) June 22, 2022

In any case, for those that like gossip, here’s the story as narrated by Voyager:

“The Company made an initial request for a repayment of $25 million USDC by June 24, 2022, and subsequently requested repayment of the entire balance of USDC and BTC by June 27, 2022. Neither of these amounts has been repaid, and failure by 3AC to repay either requested amount by these specified dates will constitute an event of default. Voyager intends to pursue recovery from 3AC and is in discussions with the Company’s advisors regarding the legal remedies available.”

Answers And Conclusions

The crypto industry as a whole is in a precarious situation. And there’s one question at the center of it, is Sam Bankman-Fried controlling the chaos or is he taking total control of the industry?

Featured Image by Sebastian Herrmann on Unsplash  | Charts by TradingView

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Balance Sheet

Crypto Lender Blockfi Secures $250 Million Line Of Credit From FTX, CEO Says Capital Will Bolster Its Balance Sheet

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Crypto Lender Blockfi Secures $250 Million Line Of Credit From FTX,  CEO Says Capital Will Bolster Its Balance Sheet

The crypto lender Blockfi detailed on Tuesday that the company secured a $250 million line of credit from FTX. Blockfi’s CEO Zac Prince announced on Twitter that the company will use the capital to bolster Blockfi’s “balance sheet and platform strength.”

Blockfi Obtains $250 Million Revolving Credit Line From FTX After Crypto Lending Firms Struggle With 2022’s Market Volatility

  • It’s been a rough year for crypto lenders due to digital assets losing significant value over the last few months. One lender, Celsius, has been accused of being insolvent and last week it paused withdrawals.
  • In 2021, U.S. securities regulators from various states sent cease and desist orders to Celsius and the crypto lender Blockfi. In February 2022, the U.S. Securities and Exchange Commission (SEC) charged Blockfi for failing to register its retail crypto lending products.
  • During the second week of June, Blockfi co-founders Zac Prince and Flori Marquez announced the company would lay off “roughly 20%” of its staff due to “market conditions” that had a “negative impact” on the company.
  • On June 16, Prince discussed “speculation about BlockFi’s risk management practices,” and the Blockfi CEO stressed that the company always enforces “prudent and proactive risk management.”
  • Prince revealed on Tuesday that Blockfi has secured a $250 million line of credit from FTX. “Today Blockfi signed a term sheet with FTX to secure a $250M revolving credit facility providing us with access to capital that further bolsters our balance sheet and platform strength,” the Blockfi CEO said.
  • “The proceeds of the credit facility are intended to be contractually subordinate to all client balances across all account types (BIA, BPY & loan collateral) and will be used as needed,” Prince continued in his Twitter thread.
  • The Blockfi CEO added that during the crypto market volatility, he was proud of the company’s risk management protocols and he further said that the agreement with FTX “unlocks future [collaborations]” with the crypto company.
  • Meanwhile, since Celsius paused withdrawals, the crypto lending company updated the community in a newly published blog post. “We want our community to know that our objective continues to be stabilizing our liquidity and operations. This process will take time,” the Celsius blog post details.
Tags in this story

Balance Sheet, Blockfi, Blockfi lender, Cease and Desist, Celsius, Credit Line, Crypto Lenders, crypto lending firms, Fine, Flori Marquez, ftx, FTX collaboration, FTX credit line, platform strength, revolving credit line, SEC, SEC Fine, zac prince

What do you think about the current state of crypto lending firms? What do you think about Blockfi securing $250 million from FTX? Let us know what you think about this subject in the comments section below.

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Jamie Redman

Jamie Redman is the News Lead at Bitcoin.com News and a financial tech journalist living in Florida. Redman has been an active member of the cryptocurrency community since 2011. He has a passion for Bitcoin, open-source code, and decentralized applications. Since September 2015, Redman has written more than 5,000 articles for Bitcoin.com News about the disruptive protocols emerging today.

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Image Credits: Shutterstock, Pixabay, Wiki Commons

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Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.

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$20

Crypto Lending Company Blockfi Cuts Staff By 20%

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Crypto Lending Company Blockfi Cuts Staff By 20%

On Monday, the cryptocurrency lending company Blockfi announced that “market conditions” have had a “negative impact” on the firm’s business and it will be laying off “roughly 20%” of its staff. The message written by Blockfi co-founders Zac Prince and Flori Marquez follows a slew of well known crypto firms cutting back employees due to the bear market.

Blockfi to Lay off ‘Roughly 20%’ of Its Workforce

Digital currency values are not that hot these days, and the crypto economy slipped below the $1 trillion region on June 13. The entire crypto economy shed more than 14% in USD value during the past 24 hours. Crypto prices have steadily dropped for weeks on end and Monday’s market rout was quite gruesome. The leading crypto asset bitcoin (BTC) slid to a low of $22,600 on Monday, and a myriad of other alternative digital assets saw deeper losses. Amid the last few weeks of the crypto economy’s bear market downturn, digital currency companies have been laying off staff.

On June 13, Blockfi joined the slew of companies laying off workers, as it noted that roughly 20% of its staff would be let go. “We’ve been through several tough days at Blockfi in the past, but today is probably the hardest,” the Blockfi co-founders wrote. “Like many others in the tech industry, we have been impacted by the dramatic shift in macroeconomic conditions worldwide. We are in the gut-wrenching position of needing to reduce our headcount today. This is not a decision we take lightly and candidly is one that brings us great sadness.”

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The message from Prince and Marquez adds:

We are reducing our headcount by roughly 20% and the reduction impacts every team at the company. This decision was driven by market conditions that have had a negative impact on our growth rate and a rigorous review of our strategic priorities.

Co-Founders Insist ‘Blockfi Is Here for the Long Haul’

Just recently, Bitso announced layoffs and Buenbit cut staff back as well. Furthermore, Coinbase revealed it had to “rescind a number of accepted offers,” and Gemini cut its staff by 10%. The crypto businesses Rain Financial and the Latin American crypto exchange 2TM have also cut employee counts.

On Monday, the Blockfi co-founders stressed that the decision was painful for Blockfi’s management. “Today is a painful day for Blockfi but more so for employees who we have to part ways with,” the blog post says. “We are doing everything in our power to treat all of our impacted colleagues with the empathy and compassion that they deserve.”

Despite the setback, Blockfi’s co-founders remarked that the company will be sticking around for a long time. “For our remaining 600+ colleagues and our clients, partners, and stakeholders who have supported us worldwide – we are steadfast in our commitment to ensure Blockfi is here for the long haul,” the co-founders said.

Tags in this story

$20, 2TM, Bear Market, Bitso, Blockfi, Blockfi layoffs, Blog Post, Buenbit, Coinbase, colleagues, crypto companies, crypto lending, crypto lending company, crypto market carnage, Employees, Flori Marquez, Gemini, Lay offs, Rain Financial, staff, zac prince

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What do you think about Blockfi laying off 20% of its workforce due to the market conditions having a negative impact on the startup? Let us know what you think about this subject in the comments section below.

Jamie Redman

Jamie Redman is the News Lead at Bitcoin.com News and a financial tech journalist living in Florida. Redman has been an active member of the cryptocurrency community since 2011. He has a passion for Bitcoin, open-source code, and decentralized applications. Since September 2015, Redman has written more than 5,000 articles for Bitcoin.com News about the disruptive protocols emerging today.

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Image Credits: Shutterstock, Pixabay, Wiki Commons

Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.

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