1 big thing: SBF on what was real, what was BS

2. The BFD: SBF's Dealbook denials

3. Credit score

Illustration of a credit score meter with emoji faces showing sad, neutral, and happy emotions.

4. Deals of the day

5. It's personnel

Good morning, fintech friends. Can you believe it's December already?

Situational awareness: The U.S. House Select Subcommittee on the Coronavirus Crisis has released a staff report alleging waste, fraud, and abuse related to the Paycheck Protection Program (PPP).

In particular, the panel found that some fintech lenders, given the task of identifying fraudulent PPP applications, may have committed fraud themselves.

Thanks to Michael Flaherty for editing and Carlos Cunha for copy editing this newsletter.

And thank you for reading Axios Pro Fintech Deals! Please ask your friends, colleagues, and Senators to sign up! 

Fintech Deals

1. SBF on failure

Illustration of the silhouette of Sam Bankman-Fried crumbling and falling. 

2. SBF on his future

Photo Illustration of Elizabeth Holmes and Sam Bankman-Fried with eyes and rectangles behind them

3. SBF's personal finances

Photo illustration of Sam Bankman-Fried with downward arrows and abstract shapes.

4. Alameda's Twitter stake

Photo illustration of Sam Bankman-Fried with hair made out of Twitter logos. 

5. Credit score

Illustration of positive and negative trend lines coming out of center point.

6. Deals of the day

Situational awareness: Lucinda was able to speak on the phone with Sam Bankman-Fried. Buckle up, and see below for what she gathered. 

🙏🏿 you for reading! FYI, SBF is speaking (virtually) at the New York Times Dealbook event today at 4:55 pm EST. The title of the interview session: What Happened?

1 big thing: BlockFi's bad loan

Illustration of a sad face on a digital, pixelated coin

Web3 got more interest than fintech before FTX blowup

2. The BFD: Web3 over fintech — for now

Illustration of a pattern of hands trading tokens.

Illustration of a Scrabble board with letter tiles spelling "credit."

Situational awareness: India is launching a pilot program for the introduction of a retail digital currency, starting on Dec. 1, according to its central bank. 

And thank you for reading Axios Pro Fintech Deals! Please ask your friends, colleagues, and risk management teams to sign up!

1. BlockFi files for bankruptcy 

2. Bad loan BlockFi 

3. SBF, the interview 

4. SBF says he "didn't knowingly commingle funds"

Good morning, Fintech friends. What a week. Let's get right to the digest. 

✍️ Michael Flaherty here, saying thank you for reading this week's digest. Please send us tips and thoughts on where the crypto contagion goes from here, and where the next shoe may drop. 

1 big thing: Circle can't square its public plans

Illustration of a stop sign with SPAC written on it

2. The BFD: Eyeing LedgerX

Illustration of a row of laptops with binary code, money and circles.

Illustration of a credit card headed towards a goal post to score a touchdown.

Situational awareness: FTX founder Sam Bankman-Fried says its unlikely he'll testify in front of the House Committee on Financial Services come Dec. 13.

 Thanks to Michael Flaherty and Carlos Cunha for today's edits.

Thanks for reading. Tell your fintech friends about this newsletter. They can sign up here.

Another round of bidding has begun for the assets of bankrupt crypto firm Voyager Digital after the collapse of would-be buyer FTX. 

Why it matters: With FTX no longer available to play white knight, Voyager and creditors have to go back to the well and seek a new buyer.

Flashback: FTX won the initial auction in September, pledging $51 million in cash plus an additional $60 million in earnouts and incentives.

Crypto exchanges Binance and CrossTower were also reported to be in the mix for the Voyager assets during that process.

State of play: With FTX announcing its own bankruptcy proceedings, Voyager and its creditors said the no-shop provisions of the purchase agreement are no longer binding, and they are "evaluating strategic options."

A CrossTower spokesperson confirmed that it intends to submit a revised bid, but no further details are available.

Meanwhile, Binance has yet to say whether it plans to be a part of the new process. 

Of note: As part of its statement, Voyager said it did not transfer any assets to FTX US, but that the proposed acquirer had previously submitted a $5 million "good faith" deposit, which is held in escrow.

Voyager also said it successfully recalled loans from Alameda Research for 6,500 BTC and 50,000 ETH and had no outstanding loans with the firm.

Voyager maintained a balance of about $3 million at FTX at the time of the latter's bankruptcy filing, which was comprised of locked LUNA2 and locked SRM that it was unable to withdraw.

What’s next: An omnibus hearing is scheduled to take place at 11:00 am ET Tuesday. 

Voyager Digital re-opens bidding for bankrupt exchange's assets

After FTX's collapse, the company and its creditors are seeking a new buyer.

Illustration of a crypto coin with crossed gavels on it. 

Fintech

Another round of bidding <a class="gtmContentClick" data-vars-link-text="has begun" data-vars-click-url="https://www.prnewswire.com/news-releases/voyager-digital-and-voyager-official-committee-of-unsecured-creditors-provide-update-on-reorganization-plan-301675969.html" data-vars-content-id="08530c9c-ac87-480b-af53-a9278033a095" data-vars-headline="Voyager Digital re-opens bidding for bankrupt exchange&#x27;s assets" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.prnewswire.com/news-releases/voyager-digital-and-voyager-official-committee-of-unsecured-creditors-provide-update-on-reorganization-plan-301675969.html" target="_blank">has begun</a> for the assets of bankrupt crypto firm Voyager Digital after the collapse of would-be buyer FTX. Why it matters: With FTX no longer available to play white knight, Voyager and creditors have to go back to the well and seek a new buyer.

Intuit has agreed to acquire San Francisco-based financial health startup SeedFi, which it plans to integrate into its Credit Karma division and expand its credit-building capabilities.

Why it matters: Fintech M&A activity might have slowed to a trickle over a turbulent 2022, but acquirers are still opportunistically looking to add products and features to engage with users.

How it works: SeedFi helps low- and no-credit consumers boost their scores and increase their savings at the same time.

Users decide how much they want to save each month (as little as $20 per month or $10 per paycheck), and SeedFi makes small, interest-free loans to credit builder accounts.

Users' automated repayments are then reported to credit bureaus, which increases their credit scores.

Finally, customer funds are put into a locked savings account that can be accessed once its total reaches $500.

Between the lines: With this deal, Intuit is simply bringing the technology and team behind Credit Karma's credit builder offering in-house.

Intuit Ventures was a strategic investor in SeedFi, and in January Intuit announced a partnership to integrate the startup's automated savings and credit-building product into Credit Karma Money, initially targeting users with credit scores of 620 or below.

Since its launch, the program has helped users increase their scores by an average of 21 points over as little as 30 to 45 days, according to Poulomi Damany, SVP and GM for Credit Karma Money and Tax.

"If you're new to credit or really deep subprime — like sub-600 — we've seen upwards of 45 to 60 point [increases]," Damany said.

Of note: Financial terms of the deal were not disclosed. 

In addition to Intuit, SeedFi raised funds from investors that include Andreessen Horowitz, Flourish Ventures, Core Innovation Capital and Quiet Capital, among others.

Intuit agrees to acquire credit-building startup SeedFi

SeedFi to be integrated into Credit Karma business

(Photo Illustration by Rafael Henrique/SOPA Images/LightRocket via Getty Images)

Intuit has agreed to acquire San Francisco-based financial health startup SeedFi, which it plans to integrate into its Credit Karma division and expand its credit-building capabilities.Why it matters: Fintech M&amp;A activity might have slowed to a trickle over a turbulent 2022, but acquirers are still opportunistically looking to add products and features to engage with users.How it works: SeedFi helps low- and no-credit consumers boost their scores and increase their savings at the same time.<ul><li>Users decide how much they want to save each month (as little as $20 per month or $10 per paycheck), and SeedFi makes small, interest-free loans to credit builder accounts.</li><li>Users&#x27; automated repayments are then reported to credit bureaus, which increases their credit scores.</li><li>Finally, customer funds are put into a locked savings account that can be accessed once its total reaches $500.</li></ul>Between the lines: With this deal, Intuit is simply bringing the technology and team behind Credit Karma&#x27;s credit builder offering in-house.<ul><li>Intuit Ventures was a strategic investor in SeedFi, and in January Intuit announced a partnership to integrate the startup&#x27;s automated savings and credit-building product into Credit Karma Money, initially targeting users with credit scores of 620 or below.</li><li>Since its launch, the program has helped users increase their scores by an average of 21 points over as little as 30 to 45 days, according to Poulomi Damany, SVP and GM for Credit Karma Money and Tax.</li><li>&quot;If you&#x27;re new to credit or really deep subprime — like sub-600 — we&#x27;ve seen upwards of 45 to 60 point [increases],&quot; Damany said.</li></ul>Of note: Financial terms of the deal were not disclosed. <ul><li>In addition to Intuit, SeedFi raised funds from investors that include Andreessen Horowitz, Flourish Ventures, Core Innovation Capital and Quiet Capital, among others.</li></ul>

National

Cryptocurrency lender BlockFi has filed for Chapter 11, becoming the latest casualty of crypto contagion following the collapse of FTX.

Why it matters: The dominoes continue to fall in the crypto world, as a series of bad bets and a market plunge has sent companies like FTX into bankruptcy.

Details: The firm and eight of its affiliates filed in the U.S. Bankruptcy Court for the District of New Jersey.

The firm has engaged Haynes and Boone, Kirkland & Ellis, and Cole Schotz as legal counsel. Moelis & Company is serving as its investment banker, and Berkeley Research Group (BRG) is serving as its financial adviser.

BlockFi says it has $256.9 million in cash on hand to support ongoing operations during the restructuring process.

Flashback: BlockFi was one of several firms FTX helped prop up following the liquidation of 3AC.

In July, BlockFi agreed to a $400 million credit facility from FTX, along with an option for the crypto exchange to acquire it outright for up to $240 million.

State of play: But FTX's business quickly collapsed the company filed for bankruptcy, putting BlockFi's own future in doubt.

The day FTX filed, BlockFi halted withdrawals and asked clients not to make any additional deposits.

Later, the company said it had significant exposure to FTX and related entities, including assets held at FTX.com, undrawn amounts from its credit line with FTX US, and obligations owed by FTX's sister trading firm Alameda Research.

Of note: Prior to the events of this year, BlockFi had raised $1 billion in venture funding from investors like Tiger Global and Bain Capital Ventures.

The intrigue: Most of BlockFi’s top 50 creditors aren’t revealed by the filing, but those that are include West Realm Shires (a.k.a. FTX US) for $250 million and the SEC for $30 million.

The money owed to the SEC is associated with a $100 million settlement it struck earlier this year with the agency and state regulators related to its yield-earning product.

But any FTX-related liabilities BlockFi has might be offset by funds it is owed from the bankrupt crypto exchange.

In a statement announcing the filing, BlockFi said that “due to the recent collapse of FTX and its ensuing bankruptcy process, which remains ongoing, the Company expects that recoveries from FTX will be delayed.”

Editor's note: This story has been updated to remove Dan Loeb as an investor, who was mistakenly added in a previous version. 

Crypto lender BlockFi files for bankruptcy

The crypto lender is the latest casualty of FTX's contagion

Illustration of a business person standing on a crumbling bitcoin.

Cryptocurrencies

Economy & Business

Crypto lender BlockFi was taken down by exposure to FTX and Alameda Research, the latter of which defaulted on $680 million of collateralized loan obligations, according to a bankruptcy filing.

Why it matters: Despite claims of transparency and decentralization in crypto, the intertwined balance sheets and opaque nature of crypto lending have led to contagion in the ecosystem.

State of play: The filing from Mark Renzi of Berkeley Research Group — BlockFi's proposed financial adviser in the case — breaks down the events leading to its bankruptcy into two acts: the first related to the collapse of Luna and Three Arrows Capital (3AC) and the second due to the fall of FTX.

At the time of its collapse, 3AC was one of BlockFi's largest borrower clients and led to losses of around $80 million, the company said in July.

Yes, but: That's nothing compared to BlockFi's exposure to FTX and sister firm Alameda Research. 

Despite a series of margin calls and recalls of open-term loans with FTX and Alameda, the filing claims BlockFi could not avoid being caught up in the collapse of those firms.

In early November, BlockFi made a borrowing request on its loan agreement with FTX, which was not honored.

Alameda also defaulted on approximately $680 million of collateralized loan obligations with BlockFi, according to the filing.

Between the lines: BlockFi received unaudited quarterly financial statements and crypto wallet addresses from Alameda as part of its credit evaluation process, the filing notes. 

It also had regular dialogue with Alameda staff, who "made ongoing representations regarding its financial standing, significant equity capital, and unencumbered assets on Alameda’s balance sheet."

BlockFi bankruptcy filing claims Alameda defaulted on $680M in loans

Heavy exposure to FTX and Alameda led to BlockFi's bankruptcy.

<a class="gtmContentClick" data-vars-link-text="Crypto lender BlockFi" data-vars-click-url="https://www.axios.com/2022/11/28/blockfi-chapter-11-bankruptcy" data-vars-content-id="d424efbc-3ecd-42fa-aae3-ec7074fca6b9" data-vars-headline="BlockFi bankruptcy filing claims Alameda defaulted on $680M in loans" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.axios.com/2022/11/28/blockfi-chapter-11-bankruptcy" target="_self">Crypto lender BlockFi</a> was taken down by exposure to FTX and Alameda Research, the latter of which defaulted on $680 million of collateralized loan obligations, according to a <a class="gtmContentClick" data-vars-link-text="bankruptcy filing" data-vars-click-url="https://restructuring.ra.kroll.com/blockfi/Home-DownloadPDF?id1=MTM1MjM3NQ==&amp;id2=-1" data-vars-content-id="d424efbc-3ecd-42fa-aae3-ec7074fca6b9" data-vars-headline="BlockFi bankruptcy filing claims Alameda defaulted on $680M in loans" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://restructuring.ra.kroll.com/blockfi/Home-DownloadPDF?id1=MTM1MjM3NQ==&amp;id2=-1" target="_blank">bankruptcy filing</a>.Why it matters: Despite claims of transparency and decentralization in crypto, the intertwined balance sheets and opaque nature of crypto lending have led to contagion in the ecosystem.

For the past ten months or so, fintech startups Axios has spoken to have sought to put up a strong front, saying they can brave the market downturn as they have at least 12 to 18 months of runway. 

Yes, but: That deadline is coming up, fast.

Why it matters: As bank accounts begin to dry up, desperate companies will be far more amenable to buyouts. A mix of M&A sprees, venture debt financings, and startup meltdowns is probably around the corner. 

Details: According to Silicon Valley Bank's November "State of Fintech" report, about 44% of fintechs with under $10 million in annual revenue had less than 12 months of runway as of the end of the third quarter.

Fintech startups face a wake-up call in 2023

The companies are beginning to run out of runway.

Illustration of a clock with lightning bolts

Illustration: Sarah Grillo, Rebecca Zisser/Axios

For the past ten months or so, fintech startups Axios has spoken to have sought to put up a strong front, saying they can brave the market downturn as they have at least 12 to 18 months of runway. Yes, but: That deadline is coming up, fast.

Ryan Lawler

Stories

Intuit agrees to acquire credit-building startup SeedFi

BlockFi bankruptcy filing claims Alameda defaulted on $680M in loans

Crypto lender BlockFi files for bankruptcy

Fintech startups face a wake-up call in 2023

Voyager Digital re-opens bidding for bankrupt exchange's assets

Newsletter editions

Fintech: Circle's SPAC dies

Fintech: SBF's confessions

Fintech: SBF on BS

Fintech: The SBF interview

Fintech: BlockFi's imbroglio