SBF secretly funded crypto news site

Axios

The Block, a media company that says it covers crypto news independently, has been secretly funded for over a year with money funneled to The Block’s CEO from the disgraced Sam Bankman-Fried’s cryptocurrency trading firm, sources told Axios.

Why it matters: The payments, which employees of The Block were previously unaware of, could undermine the news company’s credibility and cast doubt on its coverage of Bankman-Fried, the now-bankrupt FTX and Alameda Research, Bankman-Fried’s trading firm. One $16 million batch of funding from Alameda was used in part to finance the purchase of an apartment in the Bahamas for Block CEO Michael McCaffrey, according to sources familiar with the transactions.

Driving the news: McCaffrey has resigned as CEO and is leaving the company, The Block’s chief revenue officer Bobby Moran confirmed to Axios on Friday. McCaffrey is also stepping down from its board. Moran will take over McCaffrey’s role as CEO and will also look to restructure The Block to buy out McCaffrey’s stake in the company, he said.

McCaffrey has been the sole board member for the company since April 2021. Moran said he will join The Block’s board, which will also add two more seats.

Catch up quick: The Block was founded in 2018 and McCaffrey became CEO in 2020. In April 2021, McCaffrey led a buyout of The Block’s investors, making the firm 100% owned by its employees, with McCaffrey holding a majority stake. The company, which isn’t profitable, had previously raised over $4 million across convertible notes from venture firms, including Greycroft, Pantera, BlockTower Capital, and Bloomberg Beta, Axios’ Kia Kokalitcheva reported. Its revenue, mostly from ads and subscriptions, is expected to be around $20 million this year, a source told Axios.

Details: In early February of last year, McCaffrey began talks with Bankman-Fried about a loan to finance the buyout, according to two sources familiar with the conversations. LLCs controlled by McCaffrey received a total of three loans from Alameda, some of which may be convertible into equity in the company by the LLCs. McCaffrey used the first loan, for $12 million in April 2021, to fund the buyout of the Block, via an LLC named MJMCCAFFREY LLC. The second, for $15 million in Jan. 2022, provided capital for the Block via an LLC named Lonely Road. The third, for $16 million in spring of 2022, went to an LLC named Red Sea that McCaffrey used, in part, to buy the Bahamas apartment. Moran confirmed these transactions took place.

Between the lines: Moran said McCaffrey first told him about the transactions just before Thanksgiving. He and McCaffrey briefed a few members of the company’s senior editorial team earlier this week. The newsroom was informed in an all-hands meeting early Friday afternoon “My immediate reaction was anger, frustration and concern for all my colleagues,” Moran said. “Everyone has worked incredibly hard over the years — since before I joined and since I’ve been here — to be fair, accurate and independent in their coverage and thought this would call that into question. And that’s frustrating.”

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