SBF is secretly funding crypto news site The Block and its CEO’s apartment in the Bahamas

Photo illustration: Sarah Grillo/Axios. Photo: Eva Marie Uzcategui/Bloomberg via Getty Images

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

Why is it important?: The payments, previously unknown to The Block staff, could undermine the news outlet’s credibility and cast doubt on its reporting on Bankman-Fried, now-bankrupt FTX, and Alameda Research, Bankman-Fried’s trading firm.

  • According to sources familiar with the transactions, the $16 million in funding from Alameda was used in part to finance the purchase of an apartment in the Bahamas for Block CEO Michael McCaffrey.

Manage 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 leaving the board.

  • Moran said he would take over McCaffrey’s role as CEO and also try to restructure The Block to buy out McCaffrey’s stake in the company.
  • McCaffrey has been the company’s sole board member since April 2021. Moran said he will join The Block’s board and add two more locations.

Grab it fast: The Block was founded in 2018 and McCaffrey became CEO in 2020.

  • In April 2021, McCaffrey led a buyout of The Block’s investors and the firm became 100% employee-owned, with McCaffrey holding the majority stake.
  • Kia Kokalitcheva of Axios said the non-revenue company previously raised more than $4 million in convertible notes from venture firms including Greycroft, Pantera, BlockTower Capital and Bloomberg Beta.
  • Its revenue is expected to be around $20 million this year, mostly from advertising and subscriptions, a source told Axios.

Details: In early February of last year, McCaffrey began negotiating a loan to finance the acquisition with Bankman-Fried, according to two sources familiar with the discussions.

  • LLCs controlled by McCaffrey received a total of three loans from Alameda, some of which could be converted into equity in the company by the LLCs.
  • McCaffrey used a first loan of $12 million in April 2021 to finance the purchase of the Block through an LLC called MJMCCAFFREY LLC.
  • Second, in January 2022, it provided capital for Block through an LLC called Lonely Road for $15 million.
  • The third went to an LLC called Red Sea, which McCaffrey used in part to buy an apartment in the Bahamas, for $16 million in the spring of 2022.
  • Moran confirmed that these transactions took place.

Between the lines: Moran said McCaffrey first told him about the surgeries just before Thanksgiving. He and McCaffrey briefed several members of the company’s senior editorial staff earlier this week.

  • The newsroom was informed at a general meeting on Friday afternoon.
  • “My immediate reaction was anger, frustration and concern for all my colleagues,” Moran said. “Everybody has worked incredibly hard over the years — before I joined and since I’ve been here — to be fair and accurate and independent in their coverage, and they thought that would call that into question. And that’s frustrating.”

The news came as a shock Sources say they are concerned that McCaffrey did not disclose such a close and critical financial partnership with Bankman-Fried and Alameda to The Block’s editorial board, especially now that they are continuing to cover the fallout from the FTX collapse.

  • Frank Chaparro, the site’s news director, interviewed Bankman-Fried for the company’s podcast on Monday.
  • Larry Cermak, vice president of research, on Tuesday published the list he compiled hundreds of investments made by Alameda reported by the Financial Times.
  • Two of the loans to McCaffrey’s LLC of Alameda are listed. Cermak said he didn’t know MMCs were affiliated with McCaffrey when he tweeted the list.
  • “Mike never asked me or anyone doing the investigation to cover FTX or SBF in any way. Or anyone else for that matter. We had full discretion to do our job,” Cermak said.
  • “I’m proud of the work our journalists are doing, especially covering the aftermath of the FTX explosion,” said Sarah Kopit, editor-in-chief of The Block. “In my time, Mike has never had any undue influence in the newsroom. We have always been completely independent.”

Big picture: No disclosures have been made by The Block about financial support from Bankman-Fried’s Alameda Research or whether McCaffrey-controlled LLCs received loans from Alameda.

  • On its disclosure page, The Block writes: “To avoid any appearance of bias or impropriety, it is vital that The Block is fully transparent about our financial holdings. The most valuable asset we have and strive to regain every day is the trust of our readers.”

What’s next: Moran said all senior leaders remain with the organization and will continue to operate and publish the company.

Editor’s note: This story has been updated to clarify who will own the equity in Block after the loans are converted to McCaffrey’s LLCs.

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