BlockFi secret financials show a $1.2 billion relationship with Sam Bankman-Fried’s crypto empire
BlockFi logo displayed on a phone screen and representation of cryptocurrencies are seen in this illustration photo taken in Krakow, Poland on November 14, 2022.
Jakub Porzycki | Nurphoto | Getty Images
Bankrupt crypto lender BlockFi had over $1.2 billion in assets tied up with Sam Bankman-Fried’s FTX and Alameda Research, according to financials that had previously been redacted but were mistakenly uploaded on Tuesday without the redactions.
BlockFi’s exposure to FTX was greater than prior disclosures suggested. The company filed for Chapter 11 bankruptcy protection in late November, following the collapse of FTX, which had agreed to rescue the struggling lender before its own meltdown.
The balance shown in the unredacted BlockFi filing includes $415.9 million worth of assets linked to FTX and $831.3 million in loans to Alameda. Those figures are as of Jan. 14. Both of Bankman-Fried’s firms were wrapped into FTX’s November bankruptcy, which sent the crypto markets reeling.
Lawyers for BlockFi had said earlier that the loan to Alameda was valued at $671 million, while there were an additional $355 million in digital assets frozen on the FTX platform. Bitcoin and ether have since rallied, lifting the value of those holdings.
The financial presentation was assembled by M3 Partners, an advisor to the creditor committee. The firm is represented by law firm Brown Rudnick and is entirely composed of BlockFi clients who are owed money by the bankrupt lender.
A lawyer for the creditor committee confirmed to CNBC that the unredacted filing was uploaded in error but declined to comment further. Attorneys for BlockFi did not respond to a request for comment.
Other information that’s now available regarding BlockFi includes its customers numbers and high-level detail on the size of their accounts as well as trading volume.
BlockFi had 662,427 users, of which close to 73%, had account balances under $1,000. In the six months from May to November of last year, those clients had a cumulative trading volume of $67.7 million, while total volume was $1.17 billion. BlockFi made just over $14 million in trading revenue over that period, according to the presentation, averaging $21 in revenue per customer.
The company had $302.1 million in cash, alongside wallet assets valued at $366.7 million. In all, the crypto lender has unadjusted assets worth almost $2.7 billion, with close to half tied to FTX and Alameda, the presentation shows.
BlockFi’s failure was precipitated by exposure to Three Arrows Capital, a crypto hedge fund that filed for bankruptcy protection in July. FTX had arranged a rescue plan for BlockFi, through a $400 million revolving credit facility, but that deal fell apart when FTX faced its own liquidity crisis and rapidly sank into bankruptcy.
According to the latest released BlockFi financials, the value of both the Alameda loan receivable and the assets connected to FTX have been adjusted to $0. After all adjustments, BlockFi has just shy of $1.3 billion in assets, only $668.8 million of which is described as “Liquid / To Be Distributed.”
BlockFi’s 125 remaining employees are being paid handsomely as part of the proposed retention plan designed to keep some people on board during the bankruptcy process, the filing shows.
The retained employees will collect an aggregate $11.9 million on an annualized basis. Among the remaining staffers are three client success employees, who will each take home an annualized average of over $134,000.
Five employees still with the company make an average of $822,834, according to the presentation, which shows that BlockFi’s retention “plans are larger than comparable crypto cases.”
Apple’s expected to post its first revenue decline since 2019 on Thursday
Apple CEO Tim Cook speaks at an Apple special event at Apple Park in Cupertino, California on September 7, 2022. – Apple is expected to unveil the new iPhone 14. (Photo by Brittany Hosea-Small / AFP) (Photo by BRITTANY HOSEA-SMALL/AFP via Getty Images)
Brittany Hosea-small | Afp | Getty Images
Analysts expect Apple to post its first year-over-year revenue decline since 2019’s March quarter when it reports earnings on Thursday. There are a few contributing factors.
The company couldn’t build enough of its high-end iPhones when its primary assembly facility in China was shut down for weeks during Covid lockdowns. Customers in many regions noticed as early as November that Apple couldn’t promise Christmas delivery of a new iPhone.
Apple gave a rare warning to investors that month explaining that production issues would result in lower shipments than “previously anticipated.” It was a data point that caused many analysts watching the stock to cut their estimates.
“We believe the peak impact of the disruptions was felt in early to mid November as wait times hit an extreme level (link) as the wait time in the US for the 14 Pro and 14 Pro Max reached 34 days while wait time in China at the high-end hit 36 days,” UBS analyst David Vogt wrote in January.
Analysts polled by Refinitiv expect Apple to report just over $121 billion in revenue in the December quarter, which would be a slight decline from the company’s $123.9 billion from a year ago.
But the problems aren’t Apple-specific. The PC and smartphone markets are slumping as consumers and businesses digest sales from the pandemic and cut costs to prepare for a possible recession.
The smartphone market saw an 18% decline in shipments in the fourth quarter, according to IDC, the worst decline ever recorded by the market research firm. The PC market fell 28% in the fourth quarter, according to the company. But many investors believe that Apple is outperforming its competitors even in a contracting market.
“While the state of consumer demand remains a near-term concern, we believe the underlying drivers of Apple’s model – a growing installed base and spend per user – remain intact, and that the strength/stability of Apple’s ecosystem remains undervalued,” Morgan Stanley analyst Erik Woodring wrote in a note earlier this month.
Here’s what Wall Street is expecting, according to Refinitiv consensus estimates:
- Revenue: $121.19 billion
- Earnings per share: $1.94 per share
- iPhone revenue: $68.29 billion
- iPad revenue: $7.76 billion
- Mac revenue: $9.63 billion
- Other products revenue: $15.26 billion
- Services revenue: $20.67 billion
Apple hasn’t given guidance since 2020, citing uncertainty first caused by the pandemic. However, the company usually provides a few data points that can give analysts a sense of how it’s doing.
Investors want to know whether the shortage of iPhone 14 Pro models in the December quarter will drive demand in the March quarter now that supply has improved.
Analysts expect just over $98 billion in sales in the March quarter, according to consensus estimates, signifying slight year-over-year growth.
“While we believe it’s well understood that Apple’s March quarter revenue should decline at a less-than-seasonal rate due to the pushout of iPhone demand from the December quarter to the March quarter,” Morgan Stanley’s Woodring wrote in a note last week, “the consumer electronics spending backdrop remains challenging, with tablets, PCs and more discretionary products (i.e. wearables) all facing continued demand headwinds.”
But if consumer confidence erodes in the face of higher interest rates and shrinking savings around the world, then Apple could suggest to investors that the company’s March quarter will be slow.
“While we don’t expect the resumption of detailed guidance typical of Apple earnings prior to Covid, we expect the commentary to be cautious regarding Product demand across the board,” UBS’s Vogt wrote.
If management commentary is soft, investors looking for a silver lining might want to look at Apple’s services business, which is profitable and has been growing strongly for years. However, several data points in the fourth quarter, including Apple’s own App Store payouts, suggest a significant slowdown in App Store growth, although analysts are split on its severity.
The App Store is one of the largest components of services, but it’s only a part of the business, which includes online subscriptions, warranties and search licensing fees. Apple shares could push higher if services such as Apple TV+ and Apple Music look like they’re generating a higher percentage of Apple’s revenue, D.A. Davidson analyst Tom Forte wrote in January.
Services are expected to total $20.67 billion in the December quarter, according to Refinitiv estimates, representing a 5.9% growth rate.
Analysts will also watch to see if the strong dollar continues to hurt Apple, given that so much of its sales are overseas. During the December quarter, the British pound, the Canadian dollar and the Japanese yen all weakened compared to the dollar. Apple management previously said the strong dollar would be a 10 percentage point drag on sales growth.
Folding iPad will launch next year, top Apple analyst Kuo says
The world’s biggest iPhone factory, located in China and run by Foxconn, faced disruptions in 2022. That is likely to filter through to Apple’s December quarter results. Meanwhile, analysts questioned demand for the iPhone 14 from Chinese consumers.
Nic Coury | Bloomberg | Getty Images
“I’m positive about the foldable iPad in 2024 and expect this new model will boost shipments and improve the product mix,” Kuo wrote on Twitter. Kuo’s prediction aligns with a report from analyst firm CCS Insight, which wrote in Oct. 2022 that the Cupertino company would launch a foldable iPad before a foldable iPhone.
Several other manufacturers, including Lenovo and Samsung, make laptops or phones with full-size foldable displays. Apple has so far shied away from taking advantage of OLED technology in the same way. Rival Samsung has released multiple foldable phones but Apple has maintained the rectangular shape of the iPhone since its launch.
“Right now it doesn’t make sense for Apple to make a foldable iPhone. We think they will shun that trend and probably dip a toe in the water with a foldable iPad,” Ben Wood, chief of research at CCS Insight told CNBC in a 2022 interview.
In 2021, Kuo had predicted the release of a foldable iPhone in 2024, the same year he now predicts a foldable iPad to launch instead.
Kuo expects that a foldable iPad to feature a carbon fiber kickstand sourced from Chinese manufacturer Anjie Technology.
A representative for Apple did not immediately respond to a request for comment.
Kuo is one of the most prolific and respected Apple analysts. The analyst has predicted multiple details on the iPhone SE 3, the 2021 MacBook Pro, and on numerous iPad releases which have been substantiated at launch. Most recently, Kuo predicted a delayed launch for Apple’s highly-anticipated mixed reality headset.
TikTok CEO to testify before House panel about app’s security and ties to China
Shou Zi Chew, chief executive officer of TikTok Inc., speaks during the Bloomberg New Economy Forum in Singapore, on Wednesday, Nov. 16, 2022. The New Economy Forum is being organized by Bloomberg Media Group, a division of Bloomberg LP, the parent company of Bloomberg News. Photographer: Bryan van der Beek/Bloomberg via Getty Images
Bloomberg | Bloomberg | Getty Images
TikTok CEO Shou Zi Chew will testify before a House panel on March 23 about the app’s security and privacy practices and its ties to China through parent company ByteDance.
The House Energy and Commerce Committee announced the hearing on Monday, saying it would be Chew’s first appearance before a congressional panel.
“ByteDance-owned TikTok has knowingly allowed the ability for the Chinese Communist Party to access American user data,” E&C Chair Cathy McMorris Rodgers, R-Wash., said in a statement. “Americans deserve to know how these actions impact their privacy and data security, as well as what actions TikTok is taking to keep our kids safe from online and offline harms.”
The hearing announcement comes as the company’s negotiations with U.S. government over how to secure its app in the country have continued to drag. TikTok has been engaging with the Committee on Foreign Investment in the U.S., which can determine if certain risk mitigation measures are adequate to dampen national security concerns.
Still, those negotiations have reportedly been delayed at least as of last month, as officials continue to worry about the implications of the app’s ownership by Chinese parent company ByteDance. That’s because Chinese-based companies can be compelled to hand over data to the government there on request. In the past, TikTok has assured U.S. officials and lawmakers that it does not store U.S. user data in China to mitigate that risk, but that’s done little to assuage fears.
Fears over TikTok’s national security and privacy implications for consumers have spanned both sides of Congress, and stretched across the Trump administration into the Biden administration.
Lawmakers passed a ban on TikTok on government devices in a year-end legislative package, citing security fears. A TikTok spokesperson called the passage of the bill “a political gesture that will do nothing to advance national security interests,” in a statement at the time, adding that the agreement CFIUS was reviewing would “meaningfully address any security concerns that have been raised at both the federal and state level.”
TikTok did not immediately respond to a request for comment on the House hearing.
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