Is Sam Bankman-Fried led FTX the lender of last resort in the crypto sector’s Lehman moment?

Sam Bankman-Fried, CEO of crypto exchange FTX, is doing all he can to stave off a “crypto winter” threatening to bring the industry to its knees amidst an unrelenting downward spiral in asset prices, and high profile stumbles such as Terra and Celsius. FTX has bailed out struggling crypto lender BlockFi with a $250 million loan. (FT)

The loan to BlockFi follows a similar package extended by FTX to crypto broker Voyager Digital in the form of a $485 million loan comprising cash and bitcoin. The actions by Bankman-Fried to stabilize the crypto market are being likened by market participants to the massive bailouts extended at the time of the 2008 GFC to banks and insurance companies.

“Sam became a lender of last resort,” said Anatoly Crachilov, chief executive of London fund manager Nickel Digital Asset Management to FT. “If you have a few ‘Lehman’ events at the same time, concentrated, then it could impose crypto winter for a very extended period of time. FTX has the balance sheet to support these businesses, and it’s in their long-term vested interest to see this ecosystem survive.”

BlockFi last week cut a fifth of its employee head count and liquidated some positions of crypto hedge fund Three Arrows after it failed to put additional margin to cover its positions.

Bankman-Fried wrote on Twitter: “Sometimes leadership means acting decisively and that’s what BlockFi did: removing troublesome counterparties before they become a problem, and adding cash before it was necessary.”

He added: “BlockFi is financially strong; all operations are normal, as they always have been, and assets are safe.”

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