The Block CEO Resigns Amid Sam Bankman-Fried Loan Scandal
The Alpha:
Michael McCaffrey, the former CEO of the crypto news publisher The Block, resigned today after it came to light that he failed to disclose a series of loans obtained from Alameda Research, the trading arm of Sam Bankman-Fried’s FTX, to restructure and provide capital to the publication in early 2021, according to a statement released on the company’s blog. McCaffrey has also resigned from the company’s board.
The three loans, which totaled $43 million and reportedly included a $16 million payout to fund the purchase of an apartment in the Bahamas for the outgoing CEO, have called the credibility of the publication into question.
The Block’s Chief Revenue Officer Bobby Moran has been named the new CEO of the company, effective immediately. Moran is looking to restructure the company to buy out McCaffrey’s majority stake in the company, according to information shared with Axios.
The company claims McCaffrey was the only person with knowledge of the loans and that they have seen “no evidence” that he tried to influence the site’s newsroom or research team in any way.
Why it matters:
Founded in 2018, The Block had bought out its investors in April 2021, making the publication 100 percent employee-owned. The company had previously raised over $4 million from venture firms like Greycroft, BlockTower Capital, Bloomberg Beta, and Pantera. However, that buyout was funded by a $12 million loan, the first of the three supplied by the now disgraced Alameda Research. The second loan of $15 million supplied capital to The Block by way of an LLC called Lonely Road, while the final $16 million loan went to an LLC called Red Sea that McCaffrey used to buy real estate in the Bahamas.
That a media platform in the crypto space received under-the-table funding from one of Web3’s most discredited names (and used a significant amount of that funding to purchase real estate for personal use) is a reputational disaster for both Web3 and The Block alike. It proves that the tremors from SBF’s shady professional dealings in the crypto space continue to ripple outward.
“This news came as both a shock and disappointment to The Block leadership team,” the new CEO Bobby Moran wrote in the company statement. “Mike’s decision to take out a loan from SBF and not disclose that information demonstrates a serious lack of judgment. It undermines The Block’s reputation and credibility, especially that of our reporters and researchers, as well as our efforts at industry-leading transparency.”
Moran goes on to say that no one on the team knew of McCaffrey’s loan deal, maintaining that he has seen no evidence of the money having any influence on the publication’s coverage. Moran himself said he learned of the loans for the first time just before Thanksgiving of this year.
What’s next:
The Block has a hard time ahead of itself. The publication’s reputation has taken a serious blow, having not only dealt in off-the-books financials to fund its operations but having done so by using loans supplied by the year’s leading crypto villain. How Moran chooses to move the company forward will be crucial to its survival. One thing remains certain, however: the damage from the greed and lack of transparency that characterized the fall of FTX and gave a major black eye to the Web3 community is likely far from being revealed in its entirety.
But wait! There’s more:
The Fall of FTX Has Revealed Web3’s True Colors
FTX Is in Shambles, But Web3 Can Still Be Grateful
Here’s How the NFT Community Is Reacting to the FTX Crash
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