Bahamas office of SBF secretly funded crypto news site The Block and its CEO

The Block, a media company that says it independently publishes crypto news, has been secretly funded for over a year with money transferred from discredited Sam Bankman-Fried’s crypto trading firm to The Block’s CEO, sources told Axios.

why is it important: Payments previously unaware of The Block’s employees could undermine the credibility of the news company and cast doubt on reporting by now-bankrupt FTX Bankman-Fried and Bankman-Fried’s trading company Alameda Research.

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

steer the news: Bobby Moran, chief revenue officer at The Block, confirmed to Axios on Friday that McCaffrey is stepping down as CEO and is leaving the company. McCaffrey is also leaving the board.

• Moran will assume the role of McCaffrey’s CEO and will also seek to restructure The Block to buy McCaffrey’s stake in the company.
• McCaffrey has been the sole board member of the company since April 2021. Moran said he will join The Block’s board, which will add two more seats.

catch up fast: The Block was founded in 2018 and McCaffrey became CEO in 2020.

• In April 2021, McCaffrey, buy The Block’s investors are 100 percent owned by the company’s employees, while McCaffrey owns a majority stake.
• The unprofitable company had previously raised over $4 million in convertible bonds from venture firms including Greycroft, Pantera, BlockTower Capital and Bloomberg Beta, Axios’ Kia Kokalitcheva. reported.
• A source to Axios is that its revenue, mostly from ads and subscriptions, is expected to be around $20 million this year.

Detail: According to two sources familiar with the conversations, McCaffrey began discussions with Bankman-Fried in early February last year about a loan to finance the acquisition.

• McCaffrey-controlled LLCs received a total of three loans from Alameda, some of which may be converted into equity in the company.
• McCaffrey used the initial $12 million loan to finance the acquisition of Block through an LLC called MJMCAFFREY LLC in April 2021.
• Second, for $15 million in January. 2022 provided capital to Blok through an LLC called Lonely Road.
• The third went in the spring of 2022 for $16 million to an LLC called Red Sea, which McCaffrey partially used to purchase the Bahamas flat.
• Moran confirmed that these transactions took place.

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

• The newsroom was briefed at a public meeting early Friday afternoon.
• “My immediate reaction was anger, frustration and anxiety for all of my colleagues,” Moran said. “Over the years, everyone – before I joined and since I’ve been here – has worked incredibly hard to be fair, truthful and independent in their reporting and thought it would question that. And that’s frustrating.”

The news shocked Sources say McCaffrey is furious with The Block’s editorial leadership for failing to disclose such a close and critical financial partnership with Bankman-Fried and Alameda, especially as they continue to report on the consequences of FTX’s collapse.

• Frank Chaparro, the site’s news director interviewed Bankman-Fried for the company’s podcast Monday.
• Larry Cermak, Vice President of Research, Tuesday flipped a page compiled hundreds of investments made by Alameda as reported by Finance Times.
• Two of the loans from Alameda to McCaffrey’s LLCs are on the list. Cermak said he didn’t know the LLCs were affiliated with McCaffrey when he circulated the list on Twitter.
• “Mike has never asked me or anyone in research to address FTX or SBF in a particular way. Or anyone else for that matter. We have complete discretion in doing our job,” Cermak said.
• “I’m proud of the work our journalists are doing, especially the consequences of the FTX explosion,” said Sarah Kopit, editor-in-chief of The Block. “In my time, Mike never had an undue influence on the newsroom. We’ve always been completely independent.”

big picture: No statement was made by The Block that Bankman-Fried has financial support of Alameda Research or that McCaffrey-controlled LLCs have received loans from Alameda.

• The Block writes on its disclosure page: “It is critical that The Block be fully transparent about our own financial assets so as not to give the impression of any bias or impropriety. The most valuable asset we hold and strive to regain daily is our reader’s trust.”

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