Photo illustration: Sarah Grillo/Axios. Photo: Eva Marie Uzcategui/Bloomberg via Getty Images
Sources told Axios that The Block, a media company that says it covers crypto news independently, was secretly funded for more than a year by funneling money to The Block CEO from shady cryptocurrency trading firm Sam Bankman-Fried.
why does it matterThe payments, which The Block employees were previously unaware of, could undermine the news company’s credibility and cast doubt on its coverage of Bankman-Fried, the now-bankrupt FTX firm, and Alameda Research, Bankman-Fried’s trading firm.
- A single $16 million in financing from Alameda was used in part to fund the purchase of a Bahamas apartment for Block CEO Michael McCaffrey, according to people familiar with the transactions.
Leading the newsBobby Moran, chief revenue officer at The Block, confirmed to Axios on Friday that McCaffrey has resigned as CEO and will be leaving the company. McCaffrey is also stepping down from his board of directors.
- He said Moran will take over McCaffrey’s position as CEO and will also look to restructure The Block to buy McCaffrey’s stake in the company.
- McCaffrey has been the sole member of the company’s board since April 2021. Moran said he will join The Block’s board, which will also add two more seats.
Catch up quickly: The Block was founded in 2018 and McCaffrey became CEO in 2020.
- In April 2021, McCaffrey led a buyout of The Block investors, making the company 100% owned by its employees, with McCaffrey retaining a majority stake.
- Kia Kokalycheva reported that the company, which does not pay a dividend, previously raised more than $4 million via convertible bonds from investment firms, including Greycroft, Pantera, BlockTower Capital and Bloomberg Beta.
- Its revenue, mostly from ads and subscriptions, is expected to be around $20 million this year, a source told Axios.
detailsIn early February of last year, McCaffrey began talks with Bankman Fried about a loan to fund the acquisition, according to two people familiar with the talks.
- The LLCs controlled by McCaffrey have received a total of three loans from Alameda, some of which can be converted into equity in the company.
- McCaffrey used the first loan, for $12 million in April 2021, to fund the purchase of the block, via a limited liability company called MJMCCAFFREY LLC.
- The second, for $15 million in January 2022, provided capital for the block via an LLC called Lonely Road.
- And the third, for $16 million in the spring of 2022, went to a limited liability company named Red Sea that McCaffrey used, in part, to purchase the Bahamas condo.
- Moran confirmed the occurrence of these transactions.
Between the lines: Moran said McCaffrey first told him about the transactions before Thanksgiving. He and McCaffrey briefed some members of the company’s senior editorial team earlier this week.
- The newsroom was informed of an All Hands meeting early Friday afternoon.
- “My immediate reaction was anger, frustration and concern for all of my colleagues,” said Moran. “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 I think that would raise questions about that. It’s frustrating.”
The news came as a shock To the editorial leadership at The Block, who sources say are outraged by McCaffrey’s failure to disclose such a close and crucial financial partnership with Bankman-Fried and Alameda, especially now that they continue to cover the aftermath of FTX’s collapse.
- Bankman-Fried was interviewed by the site’s news director Frank Chaparro for the company’s podcast on Monday.
- Vice President for Research, Larry Cermak, Tue List circulated He has compiled hundreds of investments made by Alameda that have been reported by the Financial Times.
- Two of the loans from Alameda to McCaffreys LLC are on the list. Cermak said he did not know the LLC was associated with McCaffrey when he distributed the list on Twitter.
- “Neither Mike nor anyone at the research asked me to cover FTX or SBF in any particular way. Or anyone else, for that matter. We had complete discretion to do our jobs,” Cermak said.
- “I am proud of the work our journalists have done, especially covering the aftermath of the FTX implosion,” said Sarah Cobbett, editor-in-chief of The Block. “In my time, Mike never had undue influence on the newsroom. We’ve always been completely independent.”
The Big PictureNo disclosure has been made by The Block of financial support from Bankman-Fried’s Alameda Research, or that McCaffrey-controlled LLCs have received loans from Alameda.
- On its disclosure page, The Block writes, “It is critical that The Block be completely transparent about our financial holdings to avoid any semblance of bias or inappropriateness. The most valuable asset we hold and strive to earn back every day is the trust of our reader.”
What’s Next: Moran said all senior leaders will remain with the organization and the company will continue to operate and publish.
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