By Amy Castor and David Gerard
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Crypto news site The Block has laid off a third of its staff.
Larry Cermak, the site’s former head of research, has been promoted to CEO by the new company board, which features Evgeny Gaevoy of crypto hedge fund Wintermute — a former Celsius market-maker, and current FTX creditor. [Axios]
The move comes in the wake of The Block’s FTX funding scandal — when the news came out in December 2022 that then-CEO and majority owner Mike McCaffrey had taken secret loans from Sam Bankman-Fried to fund the site. They also blame the general crypto winter.
Frank Chaparro, Sam Bankman-Fried, Mike McCaffrey, Larry Cermak
The Wintermute Blockage
Don’t worry too much about how the rise of Wintermute, and the excuses for it, are disconcertingly parallel to the story of FTX/Alameda — particularly the nigh-magical arbitrage and how Gaevoy is a mathematical genius, much as SBF was. [Forbes, 2022]
If we were sufficiently suspicious about crypto, we’d think Wintermute was proceeding with its widely promoted plan to become the replacement for FTX/Alameda, and was lining up The Block as a suitable media promoter for the new enterprise.
Cermak has been at The Block since it started in 2018. In 2018 and 2019, he was a rabid critic of Tether, Inc., its popular US dollar stablecoin of the same name, and its sister company, the Bitfinex crypto exchange. In fact, he was becoming a bit of a problem for Tether.
In October 2018, Cermak repeatedly leaked Bitfinex’s banking information. This led to the indictment of Bitfinex money mule Reggie Fowler and the New York Attorney General investigating Bitfinex and Tether — an investigation that cost the companies $18.5 million and ended up with them being kicked out of New York state. [Twitter, archive]
In March 2019, Cermak called the bitcoin community irrational and compared it to a cult, full of unrealistic expectations. In November 2019, Cermak boasted that he was unusual in the space because he had no holdings. “I don’t have any bitcoin. I don’t have any Ethereum. I would probably want to, but I want to stay unbiased.” [Medium, archive; YouTube]
Cermak also did a 180 on Tether. In a podcast debate in January 2021, Cermak said he believed Tether was fully backed “when it comes to dollars in bank accounts” and he thought the “majority of the funds are at Deltec in The Bahamas” — though he presented no evidence to support these statements.
Cermak used to have a column at The Block called “Skeptic’s Lens.” He may need to look up the word “skeptic.” [The Block, archive]
McCaffrey the wonder kid
The Block’s founder, Mike Dudas, had tried to keep the site going on venture funding — but it just wasn’t self-sufficient. Mike McCaffrey, who was 24 at the time, took over as CEO in April 2020.
A year later, in April 2021, McCaffrey led a buyout of The Block’s seed investors. McCaffrey became the majority owner and sole director of the company.
In December 2022, it came out that McCaffrey had taken three secret loans from Sam Bankman-Fried — $27 million to keep The Block funded, and $16 million for an apartment in the Bahamas.
Dudas said he had no knowledge that the funding came from Bankman-Fried, and that he had thought McCaffrey got the money from his wealthy family. Per Axios at the time, “With a mix of debt and cash from CEO Mike McCaffrey, the company returned to its investors 1.5 times the capital they paid in, plus interest.” [Fortune, 2020; Axios, 2021; TechCrunch, 2022]
McCaffrey stepped down from the Block — but Axios writes that McCaffrey is still a majority shareholder in the company, with all the rights of a majority shareholder.
John Jay Ray, the CEO of FTX in bankruptcy, doesn’t seem to have come calling on McCaffrey to claw back the loan from SBF — which would have been criminally misappropriated funds that FTX customers likely have a claim on. It’s possible that when Ray does come calling, McCaffrey may have interesting things to say about that funding arrangement.
Journalism in the crypto ice age
Promote crypto, do whatever you can to lure more retail dollars into the space, and crypto companies will wave money in front of you.
When it comes to crypto media, people will always wonder who your funders are and what you’re doing for them. Way too often, they’ll be quite correct to do so.
With the Block having lost a third of its staff, we guess nobody will have the spare time to put the lost archive of old stories back up. Wonder what might be lurking in there.
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