According to Axios, The Block, a media company that claims to cover crypto news independently, has been secretly funded for more than a year with money funneled to The Block’s CEO from the disgraced Sam Bankman-Fried’s crypto trading firm.
Credibility In Question
The payments, which The Block employees were previously unaware of, have the potential to undermine the news organization’s credibility and cast doubt on its coverage of Bankman-Fried, the now-defunct FTX, and Alameda Research, Bankman-Fried’s trading firm.
According to sources familiar with the transactions, a $16 million round of funding from Alameda was used in part to finance the purchase of an apartment in the Bahamas for Block CEO Michael McCaffrey.
The Block’s chief revenue officer Bobby Moran confirmed to Axios on Friday that McCaffrey has resigned as CEO and is leaving the company. McCaffrey is also stepping down from its board of directors.
New CEO and Board Members Incoming
Moran will take over as CEO and will look to restructure The Block in order to buy out McCaffrey’s stake in the company. McCaffrey has been the company’s sole board member since April 2021. Moran announced his intention to join The Block’s board, which will gain two additional seats.
McCaffrey became CEO of The Block in 2020 after it was founded in 2018. McCaffrey led a buyout of The Block’s investors in April 2021, making the company 100% owned by its employees, with McCaffrey holding a majority stake.
According to Axios‘ Kia Kokalitcheva, the company previously raised over $4 million in convertible notes from venture firms such as Greycroft, Pantera, BlockTower Capital, and Bloomberg Beta. According to Axios, its revenue this year will be around $20 million, primarily from advertising and subscriptions.
Alameda made three loans to McCaffrey-controlled LLCs, some of which may be convertible into equity in the company by the LLCs. McCaffrey used the first loan, for $12 million, in April 2021 to fund the Block’s buyout through an LLC called MJMCCAFFREY LLC.
The second, for $15 million in January 2022, provided funding to the Block through an LLC called Lonely Road. The third, for $16 million in the spring of 2022, went to an LLC called Red Sea, which McCaffrey used to purchase the Bahamas apartment in part.
Moran confirmed that these transactions occurred. Moran also stated that McCaffrey first informed him of the transactions shortly before Thanksgiving. Earlier this week, he and McCaffrey briefed a few members of the company’s senior editorial team.
Publishing to Continue Anyway
The news shocked The Block’s editorial leadership, who are said to be furious at McCaffrey’s failure to disclose such a close and critical financial partnership with Bankman-Fried and Alameda, especially since they are still covering the fallout from FTX’s collapse.
The Block has never disclosed that it received financial support from Bankman-Fried’s Alameda Research or that McCaffrey-controlled LLCs received loans from Alameda.
Yet, the company’s disclosure page states; “it is critical that The Block is fully transparent about our own financial holdings so as to avoid any appearance of bias or impropriety. The most valuable asset that we hold and strive to earn again every day is our reader’s trust.”
Despite this report, Moran stated that all the organization’s senior leaders will remain, and the company will continue to operate and publish.
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