Sam Bankman-Fried, co-founder and chief executive officer of FTX, in Hong Kong, China, on Tuesday, May 11, 2021.
Lam Yik | Bloomberg | Getty Images
Sam Bankman-Fried became a crypto billionaire and one of the most famous players in the industry by building cryptocurrency exchange FTX into a top site used by traders and investors.
His company was valued at $32 billion in January and currently has more than a million users averaging a total of nearly $10 billion in daily trading volume. But it’s still privately held, so the public doesn’t know how badly it’s been harmed by the “crypto winter” of the last few months. As a point of reference, Coinbase, which is public, has lost roughly two-thirds of its value this year, and mining company Marathon Digital is down by more than half.
While Bankman-Fried, who lives in the Bahamas, has the financial benefit of opacity, his exposure to the broader industry washout became readily apparent last week during a five-hour Chapter 11 bankruptcy hearing in the Southern District of New York for beleaguered crypto brokerage Voyager Digital.
Voyager is among a growing crop of crypto firms to seek bankruptcy protection amid a flood of client withdrawals that followed the plunge in bitcoin, ethereum and other digital currencies. Bankman-Fried’s role in the morass is further complicated, because he also controls quantitative trading firm Alameda Research, which borrowed hundreds of millions of dollars from Voyager and became a major equity investor before turning around and offering a bailout package to the firm.
Meanwhile, Bankman-Fried is trying to play the role of industry consolidator, snapping up distressed assets both as a wager on their eventual recovery and to strengthen his foothold in the U.S. In July, FTX purchased crypto lending company BlockFi, and two months earlier Bankman-Fried disclosed a 7.6% stake in beaten-down trading app Robinhood. Bloomberg even reported that FTX was trying to buy Robinhood, though Bankman-Fried has denied any active discussions are underway.
With his activity on hyperdrive, it’s become abundantly clear that Bankman-Fried is not immune to the contagion that’s infected the cryptocurrency industry.
Last week, lawyers for Alameda Research and Voyager tussled in court over what was revealed to be a deep and complex relationship between the two companies. Documents reviewed by CNBC show ties that extend as far back as September 2021. In Voyager’s bankruptcy documents, the firm divulged that Alameda owed the company over $370 million but didn’t say how long Alameda had been a Voyager borrower.
Voyager filed for bankruptcy in early July after suffering huge losses from its exposure to crypto hedge fund Three Arrows Capital, also known as 3AC, which went under after defaulting on loans from a number of firms in the industry — including over $650 million from Voyager.
Voyager’s court documents and financial statements show that Alameda moved from a borrower to a lender in the span of a few weeks after the 3AC debacle left Voyager in a desperate spot. Bankman-Fried’s firm provided a $500 million bailout to Voyager in late June.
Joshua Sussberg, a partner at Kirkland & Ellis representing Voyager, said in court that Bankman-Fried “wore many hats” during Voyager’s rapid journey from prosperity to bankruptcy. In fact, a few weeks after Voyager’s bankruptcy filing, FTX and Alameda jointly moved in as a potential bidder for Voyager’s customer accounts, with Bankman-Fried saying his priority was to offer them liquidity.
Bankman-Fried took to Twitter to make his case, turning a typically boring process into somewhat of a circus. Voyager’s legal team wasn’t pleased and suggested that the billionaire was trying to create leverage for himself in a potential transaction.
“Parties in our process have expressly made concerns aware to us that FTX has a leg up and is working behind the scenes to force its way,” he said. “I want to assure all parties, the court and our customers, that we will not stand for that.”
Andrew Dietderich, Alameda’s lawyer and a partner at Sullivan & Cromwell, said the rescue deal provided a faster timeline than Voyager’s, yet it had been “rejected violently.”
Michael Wiles, U.S. bankruptcy judge for the Southern District of New York, didn’t like where the arguments were headed.
In addressing the lawyers, Wiles said he had no intention of turning the hearings into “a sort of cable news show with people slinging accusations at each other and making extremely characterized descriptions of what their prior proposals or discussions were.”
Attorneys from Alameda acknowledged that the business ties between Voyager and their client ran deeper than a simple lending relationship, and that the firm borrowed about $377 million from Voyager.
Voyager’s financial documents, which are public because the company’s stock traded in Canada, appear to show that Alameda had initially borrowed significantly more than that. The firm’s December 2021 books refer to a $1.6 billion crypto asset loan, with rates from 1% to 11%, to an entity based in the British Virgin Islands.
Alameda is registered in the British Virgin Islands, with head offices in Tortola, and is the only counterparty located there. It was one of at least seven entities that borrowed heavily from Voyager. The same Voyager document that disclosed 3AC’s default also lists a “Counterparty A,” a British Virgin Islands-registered firm, as owing Voyager $376.784 million. In the company’s bankruptcy presentation, the firm lists Alameda as owing Voyager $377 million. In another filing, that loan amount is tied to a firm with borrowing rates of 1% to 11.5%.
A Voyager didn’t respond to requests for comment.
Loan balances to the British Virgin Islands-based fund fell to $728 million in March 2022, representing 36% of Voyager’s loaned crypto assets, before dropping to roughly $377 million three months later. Disclosure data was provided by FactSet and sourced from Canadian securities administrators.
Voyager’s relationship with Alameda would quickly turn from lender to borrower, as 3AC’s default on the $654 million it owed Voyager brought the firm to the ground.
Alameda stepped in with a bailout on June 22, but with restrictions. The $500 million rescue — $200 million in cash and USDC and roughly $300 million in bitcoin, based on prevailing market prices — had a capped rate of withdrawal, limiting the funding amount to $75 million over a 30-day period.
Alameda attorneys said in court on Thursday that the loan was given “on an unsecured basis” at the specific request of Voyager management.
By that time, Bankman-Fried was already a major stakeholder in Voyager through two equity investments from Alameda.
In late 2021, Alameda closed a $75 million stock purchase, obtaining 7.72 million shares at $9.71 a piece, according to Voyager’s filing for the period ended Dec. 31. In May of this year, Alameda spent another $35 million on about 15 million shares, with the stock price having plunged to $2.34.
The combined purchases gave Alameda an 11.56% stake in Voyager and made it the largest shareholder. By the following month, when Alameda completed the bailout, its $110 million equity investment was worth only about $17 million.
As a holder of at least 10% of Voyager’s equity, Alameda was required to file disclosures with Canadian securities regulators. But on June 22, the day of the rescue, Alameda surrendered a block of 4.5 million shares, bringing its ownership down to 9.49% and nullifying reporting requirements, per Canadian regulation and Voyager’s own filing. That same filing shows the surrendered shares “were subsequently cancelled by Voyager.”
Disclosure of the sale indicated that, in pulling its ownership below the 10% threshold, Alameda was giving away a 2.29% stake worth some $2.6 million.
Neither Bankman-Fried’s equity infusion nor bailout funding could stem the tide as customer redemptions swallowed Voyager’s cash. Nine days after announcing the $500 million package, Voyager froze customer withdrawals and trading. On July 6, Voyager declared Chapter 11 bankruptcy.
To reassure the platform’s millions of users, Voyager CEO Stephen Ehrlich tweeted that after the company goes through bankruptcy proceedings, members with crypto in their account would potentially be eligible for a grab bag of stuff, including a combination of some amount of their holdings, common shares in the reorganized Voyager, Voyager tokens, and whatever proceeds they could get from the now-defunct loan to 3AC.
None of that is guaranteed. Voyager customers netted a small win in bankruptcy court on Thursday, after the court granted them access to $270 million in cash Voyager held with Metropolitan Commercial Bank. Users, however, are still out of luck when it comes to everything else.
Bankman-Fried says he’s here to help customers get back up and running and recapture what they can. Voyager attorneys, on the other hand, portray the FTX-Alameda bid as a fire sale.
Whatever happens, this might be Bankman-Fried’s last best shot of getting some value out of his hefty financial commitment. In a July press release, he tried spinning his offer as a benefit to Voyager customers who were suddenly wrapped up in an “insolvent crypto business.”
Bankman-Fried said in the statement that the deal would let Voyager clients “obtain early liquidity and reclaim a portion of their assets without forcing them to speculate on bankruptcy outcomes and take one-sided risks.”
George Clooney, Gladys Knight among Kennedy Center honorees
Secretary of State Antony Blinken, second from left, and his wife, Evan Ryan, left, join 2022 Kennedy Center Honorees, front row from left, Amy Grant, Gladys Knight, George Clooney, Tania León, and Kennedy Center President Deborah Rutter, back row from left, Kennedy Center Chairman David Rubenstein, along with fellow 2022 Honorees Adam Clayton, Larry Mullen Jr., The Edge, and Bono for a group photo at the State Department following the Kennedy Center Honors gala dinner, Saturday, Dec. 3, 2022, in Washington.
Kevin Wolf | AP Photo
Performers such as Gladys Knight or the Irish band U2 usually would be headlining a concert for thousands but at Sunday’s Kennedy Center Honors the tables will be turned as they and other artists will be the ones feted for their lifetime of artistic contributions.
Actor, director, producer and human rights activist George Clooney, groundbreaking composer and conductor Tania León, and contemporary Christian singer Amy Grant will join Knight and the entire crew of U2 in being honored by the John F. Kennedy Center for the Performing Arts.
The organization honors a select group of people every year for their artistic influences on American culture. President Joe Biden, Vice President Kamala Harris and their respective spouses are slated to attend.
The 61-year-old Clooney — the actor among this year’s musically leaning group of honorees — has television credits going back into the late 1970s but became a household name with the role of Doug Ross on the television show “ER.” conductor Tania León, and
From there he starred in movies such as “Three Kings,” “Ocean’s Eleven” (and “Twelve” and “Thirteen”), “O Brother, Where Art Thou?” and his most recent film, “Ticket to Paradise.” He also has extensive directing and producing credits including “Good Night, and Good Luck.” He and his wife, humanitarian rights lawyer Amal Clooney, created the Clooney Foundation for Justice, and he’s produced telethons to raise money for various causes.
“To be mentioned in the same breath with the rest of these incredible artists is an honor. This is a genuinely exciting surprise for the whole Clooney family,” said Clooney in a statement on the Center’s website.
Knight, 78, said in a statement that she was “humbled beyond words” at receiving the Kennedy honor. The Georgia-born Knight began singing gospel music at the age of 4 and went on to a career that has spanned decades.
Knight and family members started a band that would later be known as Gladys Knight & The Pips and produced their first album in 1960 when Knight was just 16. Since then she’s recorded dozens of albums with such classic hits as “I Heard It Through the Grapevine” and “Midnight Train to Georgia.” Along the way she’s acted in television shows and movies. When Knight and the band were inducted into the Rock & Roll Hall of Fame, Mariah Carey described Knight as “a textbook you learn from.”
Sometimes the Kennedy Center honors not just individuals but groups; “Sesame Street” once got the nod.
This year it’s the band U2. The group’s strong connection to America goes back decades. They performed in Washington during their first trip to America in 1980. In a statement the band — made up of Bono, The Edge, Adam Clayton and Larry Mullen Jr. — said they originally came to America with big dreams “fueled in part by the commonly held belief at home that America smiles on Ireland.”
“And it turned out to be true, yet again,” read the statement. “It has been a four-decade love affair with the country and its people, its artists, and culture.”
U2 has sold 170 million albums and been honored with 22 Grammys. The band’s epic singles include “I Still Haven’t Found What I’m Looking For,” “Pride (In the Name of Love)” and “Sunday Bloody Sunday.” Lead singer Bono has also become known for his philanthropic work to eradicate poverty and to raise awareness about AIDS.
Christian music performed Amy Grant said in an interview with The Associated Press that she’d never even been to the Kennedy Center Honors even though her husband, country musician Vince Gill, has performed during previous ceremonies. Grammy winner Grant is well known for crossover pop hits like “Baby, Baby,” “Every Heartbeat” and “That’s What Love is For.” She’s sold more than 30 million albums, including her 1991 record “Heart in Motion,” which introduced her to a larger pop audience.
Composer and conductor León said during an interview when the honorees were announced that she wasn’t expecting “anything spectacular” when the Kennedy Center initially reached out to her. After all, she’s worked with the Kennedy Center numerous times over the years going back to 1980, when she was commissioned to compose music for a play.
But the 79-year-old Pulitzer Prize winner said she was stunned to learn that this time the ceremony was going to be for her.
León left Cuba as a refugee in 1967 and eventually settled in New York City. She’s a founding member of the Dance Theatre of Harlem and instituted the Brooklyn Philharmonic Community Concert Series.
Michigan couple teaches people how to start lucrative side hustles
In 2020, Jamie and Sarah McCauley filmed themselves ripping, repainting and restoring thrifted furniture. They resold the items, made more than $1,000 in profit and posted the results on YouTube.
Within a week, the video received 20,000 views. The McCauleys, who live off a variety of concurrently running side hustles, sensed opportunity. They started posting more videos about their other streams of income, which include rental properties, house flipping projects and reselling return pallets from Amazon and Target.
Teaching people how to build those types of hustles has proved lucrative: In the last year, the McCauleys made $102,000 from their YouTube and other social media channels, according to documents reviewed by CNBC Make It.
That averages out to $8,500 per month. During their best month of the year, they brought in $9,000.
“We started to realize: This is a great way for people to make extra money if they have bills, or they just aren’t able to pay their rent, or they want to go on a nice vacation with their family,” Sarah says. “Anyone can do it.”
But of all their income streams, Jamie says their YouTube and social media presence is the most stressful to manage.
Here’s how they built it, and what goes into maintaining it.
Jamie and Sarah knew the ins and outs of social media from years of running a successful wedding photography business, which at its height made $150,000 per year, Jamie says.
But after having two children, the couple realized they didn’t want to spend weekends away from their family. So they started buying, renovating and renting out properties around west Michigan, hoping for a more passive income stream that would encourage schedule flexibility.
It worked, and the extra time allowed them to embrace a variety of side hustles. They got the idea to post their furniture and property-flipping adventures on YouTube in 2019, and immediately found it challenging.
Initially, Jamie worked 30 hours per week on the YouTube project alone, with Sarah working an additional 10 — on top of their efforts to sell two flipped houses and manage their photography business.
It took them a full year to hit 1,000 subscribers and 4,000 hours of watch time, making them eligible for Google AdSense, a feature that allows creators to monetize their YouTube videos with advertisements.
“We weren’t really sure where home design or flipping or photography or YouTube would lead us,” Sarah says. “But we knew if we put ourselves out there, it would open more opportunities.”
There are a couple of clear-cut benefits to flipping and reselling furniture and home décor online, especially during times of economic uncertainty, Sarah says.
For instance, more people are willing to hunt for deals on eBay and Facebook Marketplace when times are tough, instead of frequenting their usual retail stores.
“When a recession hits, people don’t want to pay full price for things,” she says. “Thrift stores thrive during recessions, and I think resellers do, too, because people are trying to save money in any way they can.”
Unlike real estate, the gambles of buying and reselling furniture are minimal in both price and risk, the McCauleys say. There’s less of a financial investment, and Sarah says she’s broken even on every flip.
The couple says one of their best flips was a mid-century dresser they bought for $50 on Facebook Marketplace. All they had to do was stage and take a nice photo of the dresser before reselling it for $300.
Sometimes, after buying furniture, the couple realizes the items have more flaws than they expected. Usually, this means investing more time and money into fixing up the piece, which can affect the item’s eventual sale value, they say.
In those cases, “we just get our money back instead of gaining a huge profit, but we’ve never really lost money from it,” Sarah says.
Going a full year without making any money from YouTube was difficult, the McCauleys say. And simply qualifying for AdSense didn’t guarantee the big bucks.
“The slower growth and the inconsistency of it, it’s been more of a mental struggle to keep pushing and believing the process,” Jamie says. “Now, we’re in a better spot, but throughout that two-year period, it was a question of, ‘Is this what we should be doing? Is this going to work out?'”
In 2020, the couple felt a shift, they say. Their videos started going viral more regularly, and brands like Skillshare, Beyond Paint and HelloFresh reached out to them with partnership opportunities.
The sudden attention was overwhelming, and they didn’t immediately know which brands to trust. These days, the McCauleys work with an agency that vets the brands and sets up contracts for them, claiming an 18% from a number of those partnerships, they say.
Monetizing their YouTube presence allowed them to shut down their photography business, which significantly cut down their weekly workload.
But there’s still a mental struggle that comes with inconsistent income, Jamie says. When you’re reliant on advertising and brand partnerships, your earnings depend on viewership, and the algorithm often feels beyond their control.
“There are times of discouragement where there’s not a whole lot coming in,” Jamie says. “But there are also good months where a lot of money is coming in. It’s about the long game and trying to continue to push through. It’s perseverance.”
The couple says they have no plans to abandon their social media business. Collectively, their income streams help them make a good living while spending more time with their families than they would in standard 9-to-5 jobs.
“We want it to fit within our life, and that’s the reason we wanted non-traditional jobs,” Sarah says. “So that we can choose what we do.”
Want to earn more and work less? Register for the free CNBC Make It: Your Money virtual event on Dec. 13 at 12 p.m. ET to learn from money masters how you can increase your earning power.
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