With the crypto industry in crisis this summer, some of FTX’s venture capital investors were starting to scratch their heads: Why was its CEO, Sam Bankman-Fried, spending so much money bailing out distressed crypto lenders and spraying cash at startups?
The 30-year-old, hailed as the golden boy of crypto, told one of his investors “there’s some method to the madness” in striking deals to buy Voyager Digital and bail out BlockFi, according to notes from a September meeting viewed by The Information. “We’ve thought deeply about these things. There are large error bars, of course, but we think they’re good bets.”
One investor said even though it questioned the deals, it chose not to push back forcefully after Bankman-Fried justified them. Other venture capitalists looked the other way, too. “Everyone had a small position,” the investor said. That spending spree during the crypto winter now looks like a major missed red flag, given revelations of the misuse of customer funds and the heavy borrowing that fueled those bets.