Bloomberg

Crypto’s Liquidity Troubles Are Spreading Across Platforms

(Bloomberg) — A broad-based selloff in digital assets and the collapse of high-profile tokens TerraUSD and Luna have caused ripple effects across the crypto industry. 

A wave of liquidations triggered fear of contagion risks. Major lenders Celsius Network and Babel Finance have frozen withdrawals, and Three Arrows Capital, a major crypto hedge fund, is facing liquidity troubles that rattled investors. 

Total market value of cryptocurrencies, which topped $3 trillion in November, has dropped to $991 billion, according to data from CoinGecko. 

Below are the latest developments from the crypto fallout. 

DeFi Startup Kyber Discloses Treasury Exposure

The head of Kyber Network, a decentralized trading platform, said the company had “a small portion” of Treasury exposed to the troubled crypto hedge fund Three Arrows Capital, and had not received a response about tokens held with the fund.  

“We have tried talking to them but no responses so far. We are taking legal action,” Loi Luu, chief executive officer of Kyber, said on Twitter. Kyber said it can sustain its development for many years. Luu did not immediately respond on Friday when asked whether a lawsuit had been filed.

Three Arrows’ law firm, Solitaire LLP, didn’t respond to a request for comment.  

Crypto Yield Firm CoinFlex Pauses Withdrawals

Crypto physical futures exchange CoinFlex said it paused all withdrawals on its platform, citing “extreme market conditions” last week and “continued uncertainty involving a counterparty,” without disclosing the name. The firm said that the counterparty isn’t Three Arrows Capital or any lending firm. 

Founded in 2019, CoinFlex is a smaller crypto exchange focusing on derivatives trading. CoinGecko shows that it currently supports 34 crypto pairs for derivatives. The exchange’s investors include Roger Ver, one of the most vocal Bitcoin Cash advocates.

CoinFlex provided an estimated time for withdrawals of June 30. A company representative said in an email to Bloomberg that it is “working towards a solution to resolve the situation and resume withdrawals,” and will communicate with customers, counterparties and partners in a transparent manner. CoinFlex’s website said its next update will be on June 27.

Voyager Digital Sets Limits on Withdrawals

Crypto brokerage and exchange Voyager Digital Ltd. is limiting customer withdrawals from its platform to $10,000 and to 20 transactions during a 24-hour period. 

The New York-based firm, which secured credit lines of $485 million in the past week from Alameda Research to shore up protection for customer assets, announced the limits on its website. This week, it disclosed exposure of about $660 million in loans to the troubled crypto hedge fund Three Arrows Capital, sending shares plunging as analysts raised the prospect of further damage. 

Voyager shares trading in Toronto have plunged 95% this year. 

Crypto Lender Nexo Taps Citigroup for M&As

Nexo, a crypto lender that has positioned itself as immune to the storms shaking decentralized finance, said it had hired Citigroup Inc. to advise on potential acquisitions.

The lender said it was seeking “best-in-class advice” from the bank, including on “liquidity restructuring deals,” according to a blog post dated June 22. 

Nexo has made an unsolicited offer to acquire assets of its competitor Celsius, which has frozen investor withdrawals. The offer “didn’t come to fruition,” a Nexo spokesperson said in an email. Citigroup declined to comment. 

(Adds Kyber’s news, comment from CoinFlex)

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From the Obamas to Bill Gates: Political Leaders, Celebrities React to Supreme Court Ruling

(Bloomberg) — After the US Supreme Court released its decision that overturned Roe v. Wade, strong reactions on both sides of the abortion divide are being voiced across Twitter.

Former US First Lady Michelle Obama urged action in a post that read in part, “our story does not end here. It may not feel like we are able to do much right now, but we can. And we must.”

Former Democratic Presidential candidate Hillary Clinton tweets that today’s ruling “will live in infamy as a step backward for women’s rights and human rights.”

President Barack Obama tweeted, “Today, the Supreme Court not only reversed nearly 50 years of precedent, it relegated the most intensely personal decision someone can make to the whims of politicians and ideologues—attacking the essential freedoms of millions of Americans.”

New York City Mayor Eric Adams tweeted assurances, “To all New Yorkers: you still have access safe, legal abortions here in New York City. To those seeking abortions around the country: you are welcome here.”

Cynthia Nixon, who starred in the hit-series “Sex and the City” and ran for governor of New York, weighed in connecting the decision to New York City’s celebration of Pride this weekend, adding “we’re all in this together.” 

Lending support, Canadian Prime Minister Justin Trudeau tweeted, “The news coming out of the United States is horrific. My heart goes out to the millions of American women who are now set to lose their legal right to an abortion. I can’t imagine the fear and anger you are feeling right now.” Adding, “I want women in Canada to know that we will always stand up for your right to choose.”

Billionaire Bill Gates said the ruling will hurt poor women the most. 

Actress Alyssa Milano tweeted, “Today’s Supreme Court ruling overturning #RoeVsWade will have deadly consequences, with the harm falling hardest on people of color who already face disproportionate discrimination in our country and grapple with a severe maternal mortality crisis.”

Other celebrities weighed in, including Bette Midler, who commented, “#SCOTUS is absolutely tone-deaf to the will and even the actual needs of the American people.” Some expressed disbelief including Finneas, Andy Cohen and Seth McFarlane who said, “How much farther this will go once again depends on American voters.”

Meanwhile, others are celebrating the ruling as a victory.Texas Attorney General Ken Paxton tweeted, “Abortion is now illegal in Texas. And today I’m closing my office—and making it an annual holiday—as a memorial to the 70 million lives lost bc of abortion.” Senator Lindsey Graham tweeted, “Today’s decision by the Supreme Court is a long overdue constitutional correction allowing for elected officials in the states to decide issues of life.”

Senator Mitch McConnell added, “The Supreme Court’s landmark ruling in Dobbs is courageous and correct. This is an historic victory for the Constitution and for the most vulnerable in our society.”

 

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Thiel-backed Bitpanda Cuts Hundreds of Jobs on Crypto Tumult

(Bloomberg) — Bitpanda GmbH is eliminating almost a third of its workforce as the crypto exchange turned investment platform looks to weather a bout of market volatility and plunging asset prices.

The Peter Thiel-backed firm will reduce headcount to about 730 from more than 1,000 as part of cost-cutting measures announced in reaction to the uncertain market environment. Bitcoin, the largest cryptocurrency, has tumbled about 70% from an all-time high reached in November.

“We need to make fundamental changes in how we operate and sharpen our focus by getting back to the basics,” Bitpanda said in a letter to employees posted on its website. The company said it will focus on “safety and compliance, user experience, education and community, while deprioritizing everything else.”

The job eliminations follow similar reductions across the sector, including at Coinbase Global Inc., Gemini Trust Co. and BlockFi Inc. 

The Vienna-based company was valued at $4.1 billion in August when it raised $263 million, including from Thiel’s Valar Ventures, billionaire financier Alan Howard and REDO Ventures.

Bitpanda said it was seeking to preserve financial health in response to the uncertain outlook and wanted to remain self-funded.

“There’s lots of uncertainty in the financial markets right now and, while we do know that the industry is cyclical, nobody knows when the market sentiment will change.”  

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Ant-Backed Zomato to Buy Blink Stake in $568 Million Deal

(Bloomberg) — India’s online food delivery platform Zomato Ltd. said it will acquire instant grocery delivery service company Blink Commerce Pvt. for 44.47 billion rupees ($568 million), in a bid to expand its business for quick deliveries of groceries and essentials.  

The Zomato board on Friday approved the issuance of up to 628.5 million fully paid-up equity shares worth 70.76 rupees each for the stake in the brand known as Blinkit, according to a statement issued by the company to the stock exchanges. Blink was formerly known as Grofers India Pvt.

Zomato was among the first generation of Internet unicorns to tap India’s capital market. It raised $1.3 billion via an initial public offering in July 2021. The Blink acquisition is in line with the Zomato’s strategy of investing in the quick commerce business, it said. Zomato shares closed 1.4% higher, before the statement, at 70.5 rupees on Friday, the highest since June 3.

The acquisition of Blinkit’s tech platform, scale of business, third party brands and sellers, and its network of warehouses will help save costs for Zomato, Chief Executive Officer Deepinder Goyal said in a separate statement. 

Zomato, backed by Sequoia Capital and Jack Ma’s Ant Group among others, first invested in Blink in August 2021 and plans to keep the Blinkit app and brand separate from itself, Goyal said. The acquisition will help it increase the hyper-local delivery fleet utilization and reduce the cost of delivery, according to the company. 

Zomato expects the market for quick deliveries to extend across multiple categories, including beauty and personal care, electronics, over-the-counter pharmaceuticals and stationery, it said. Zomato expects that demand for quick deliveries will grow in large Indian cities in the long term.

Zomato Hyperpure Pvt., a subsidiary of Zomato, has also entered into a business transfer agreement with Hands on Trades Pvt. and others to purchase their warehousing and ancillary services business, the statement said.

Zomato plans to fully acquire Blink Commerce, in which it currently owns about 9%, in addition to the warehousing and ancillary services business of Hands on Trades for a total of 45.08 billion rupees. This will be paid in the form of shares worth 44.47 billion rupees in the parent and another 607 million rupees in cash for acquiring the ancillary unit, it said.

(Updates to add details throughout.)

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Zalando Cuts Profit Forecast, Blaming Weakening Economic Trend

(Bloomberg) — Zalando SE slashed its profit forecast, blaming worse-than-anticipated macroeconomic conditions that are holding back online fashion sales.

The retailer said late Thursday that it expects full-year adjusted earnings of 180 million euros ($190 million) to 260 million euros, well below previous guidance in May of 430 million euros to 510 million euros. The second quarter is still profitable, but weaker than expected, Zalando said. 

The stock dropped as much as 18% in early German trading before recovering most of its losses for the day. It’s fallen about 64% this year.

While sales for online retailers boomed during lockdowns, when people were forced to shop online, that growth has since cooled as normal shopping patterns return. Record euro-zone inflation is also hitting consumer confidence. 

“After some promising signs of improving consumer demand between the end of April and May things seem to have deteriorated significantly in June,” said Guido Lucarelli, an analyst at Citigroup, adding that he didn’t see much hope for a recovery in the second half, “and possibly neither in the first half of 2023.”

Asos Plc and Boohoo Group Plc, two of Britain’s biggest e-commerce chains, last week also reported slowing sales in a fresh sign of consumer distress. Asos slashed its profit and sales guidance while Boohoo recorded the first UK sales decline in its history as shoppers bought less online and returned more goods.

Zalando has been expanding aggressively. Last year, when online sales were booming, it set out a plan to corner a 10th of Europe’s fashion market — estimated to be worth 450 billion euros in the long term. 

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Pinterest Must Face Suit by Woman Who Says She Helped Create It

(Bloomberg) — Pinterest Inc. must face a lawsuit from a digital marketing strategist who says she helped conceive the social media platform, but not one of its founders, a California judge ruled.

Late on Thursday, Alameda County Superior Court Judge Richard Seabolt denied the company’s motion to dismiss the suit, but he eliminated co-founder Paul Sciarra as a defendant because he left Pinterest a decade ago.

Christine Martinez sued the company in September, saying she contributed key ideas to the platform but was never compensated by founders Ben Silbermann and Sciarra. According to her complaint, Oakland resident Martinez was friends with Silbermann when he asked her to “salvage a failed shopping app” that later became Pinterest. 

She says she developed some of the main concepts for the platform, including features that allowed users to create “pinboards” reflecting their cultural tastes and created a marketing plan to enlist bloggers to recruit users. Martinez claims she was so integral to the site’s creation that Silbermann and Sciarra embedded her name in the platform’s source code.

Pinterest moved to dismiss the case in December, saying Martinez’s claims were too old and therefore barred by statute of limitations. But Seabolt said Martinez “sufficiently alleges” that the parties agreed to deferred compensation and that her claims stem from the company’s 2019 initial public offering. The judge called the IPO a “transformative event” that would trigger the obligation to pay her, while dismissing claims of conversion and unjust enrichment.

Representatives for Pinterest and a lawyer for Martinez didn’t immediately respond to requests for comment.

But Seabolt said Sciarra’s early departure from Pinterest meant Martinez’s claims against him were time-barred.

“To the extent plaintiff alleges that defendants touted plaintiff’s contributions in the IPO, it is clear that these allegations do not include Sciarra who ‘left the company in 2012, just a few years after it was formed,” the judge said.

The case is Martinez v. Pinterest, RG21112456, California Superior Court, Alameda County (Oakland).  

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New Private Club Heimat Aims to Be a Sweat-Driven Social Hub

(Bloomberg) — The front lobby of Heimat, the new private wellness club opening in Hollywood June 29, feels like arriving at your mildly eccentric uncle’s midcentury modern home in Joshua Tree, Calif. 

There is salmon-hued floral wallpaper, caramel-leather couches, and flea-market tchotchkes placed carefully on the walls. A long wooden credenza looks straight from 1975. The large black fireplace burning at the early morning hour seems a little out of place for June in Los Angeles— but ’60s soul music wafting over the sound system is never wrong, so you decide to go with it.

Leave the lobby and pass through a set of silently sliding doors, and you find yourself in a completely different environment. The 75,000-square-foot, five-floor members club has now shifted to some sort of fitness holy place. The bamboo-lined, light-drenched chambers of a 1928 former Cadillac plant are filled with dozens of treadmills. A butterfly press with actual wings painted on the top is a content creator’s dream TikTok.

There are studios specifically built for reformer Pilates, hot yoga underneath infrared panels built into the ceiling, a huge space for group Kinesis classes, boxing, cycling, dance, and the popular TRX workout that involves hanging from the ceiling like an overhyped acrobat.

On the roof, overlooking the pool and 180-degree views of the Hollywood Hills, chef Michael Mina’s Mother Tongue restaurant offers Keto-friendly cuisine, vegetable couscous, and steak tartare. There’s also a bar that opens at 10 a.m. and a hamburger that is “worth the calories,” says Sebastian Schoepe, the president and CEO of RSG Group North America. The 160-seat space draped in soft pinks, teals, and golds is open to the public 7 a.m. to midnight; Heimat members get priority seating among the intimate booths, expansive bar, and tables that sit as many as 10. 

That’s the thing about this new offering from RSG Group, Rainer Schaller’s company that includes 6.4 million customers across Gold’s Gym, John Reed, and Europe’s McFit fitness chains, among other brands. Heimat may include enough workout options to satisfy the world’s most needy health mavens—that is, wealthy Angelenos—but nothing suggests deprivation. In an email after a recent tour, a spokesperson requested that references to the group’s latest health house not include the word “gym.”  

“Most gyms are about sacrifice and about discipline,” says Schoepe. “We have the approach of, ‘No have that burger.’ You can go out on a Friday night and get some drinks or get hammered. But Saturday morning you show up at the gym. It may not be your best workout, but you have to have both.”

“It’s about hospitality and embracing being together on different levels—not just fitness, but also social and indulgence,” he continues. Heimat, which is the German term for a nostalgic feeling of home, or a sense of belonging, has additional outposts planned for Paris, San Francisco, Dallas, and Berlin.  

The New Gym Is a Members Club

A first look during its soft-open launch saw me softly bombarded with art from Abel Macias and Mr. Brainwash, carefully curated playlists that featured Kate Bush remixes, and marble-lined locker rooms with Dyson dryers and glorious vanity lighting. 

I was skeptical about why exactly LA needed another gym, especially when the city’s abundant hiking trails, soundbath studios, and Crossfit boxes seem to do the trick for many of my wellness enthusiast, or, let’s be honest, just plain single-and-ready-to-mingle friends. But where gyms here are as popular here as grocery stores, and about as interchangeable, too, Heimat feels more like a fresher Soho House that also happens to have better food and wellness facilities. 

“It’s challenging to meet people in LA, but hopefully this creates an environment where you bond over either a glass of wine or over how serious that cycling class was,” Schoepe says of the vision. “You come in the morning, bring your laptop, work a bit, get your workout in, get your nails done, chill by the pool in the afternoon, have a lunch meeting, invite your friends for dinner and have a glass of wine by the fire pit. It’s a safe space. It should feel like you’re coming home to someone’s house.”

Someone’s house filled with well-heeled friends. 

Membership fees vary between $200 a month for those under 25 years old to $300 for everyone else. Parking, massage and beauty treatments, private training, and the restaurant and bar are not included in the fee, though group classes are included as is access to Ted-style talks and film screenings.

Schoepe isn’t forthcoming on how potential members are evaluated and curated—besides the cursory glance over social media channels—but emphasizes they’ll be more adult and cosmopolitan than perhaps those at DJ-heavy John Reed Fitness, and far less monastic than those who might visit Equinox or LA Fitness. Demand, a Heimat spokesperson said, has been intense. 

An Industry Hard Hit

The upper-end feel of the club and its patrons will be critical to separating itself from the rest of the pack. The $160 billion fitness industry took a massive hit during the coronavirus pandemic, when revenue declined by 58% and 17% of health and fitness clubs closed their doors for good, according to data from the International Health, Racquet & Sportsclub Association.

Heimat’s overbudget opening is delayed by more than two years, and has been in the works for at least twice that long, Schoepe says. Hiring has been a “painful” challenge, though no more so than for any other hospitality provider lately. The club at full capacity will include a staff of 200 including the restaurant attendants, trainers, aestheticians, yoga guides, valets, and hospitality specialists, among others.

Bottom line: The Heimat team is operating under the belief that rather than kill the need to join a fitness club, coronavirus exacerbated it.

“People didn’t notice how important not just working out is, but also being social about it,” says Schoepe. “You can work out at home, but you work out differently when you’re with other people. You go that extra breath, you add another five pounds, you go for another 10 minutes on the treadmill—if the environment is right.”

Bouncing Back

Speaking in one of the weight rooms with Jordan Taylor, one of Heimat’s personal trainers, I saw 30- and 40-somethings in black lycra doing bench presses and free weights in the studio mirrors. They were fit but more cool and toned than oiled up for Muscle Beach. Artwork by Jessalyn Brooks and Sophia Dherbecourt diverted as I gritted my teeth and imitated Taylor through a round of stretching, squats, and crunches meant to mimic what a prospective member may request as an intro to what the club can offer. Actual fitness classes and private training for members had yet to start when I visited the space. 

Later, comparing notes with an acquaintance who had been gifted a six-month trial membership, we marveled at the quality of the club’s design like the refurbished original multipane windows and multitiered chandeliers strung with large with globe lights throughout. I mentioned how nice it was to find that the entrance to parking had been located behind the front of the building in a clean, wide-open lane easily marked as the valet spot.

I was surprised with how well the walls between each room and floor—bolstered by special acoustical mats nearly an inch thick, I found out later—deadened the sound between floors like a bank vault. I felt like I could cancel my other social club and fitness class accounts and just consolidate them into one membership here.

According to IHRSA, after the darkest months of Covid, 94% of people said they planned to return to their gym in some capacity. The fitness industry is expected to grow 172% to be worth $434 billion by 2028, according to Market Research, with gyms alone seeing an annual growth rate of 7.2% from 2021 to 2028.

“Health club membership and usage trends indicated sustainable growth over the long-term,” the report said. “While recovery from the current downturn will be daunting, the health club industry has shown resilience when faced with previous challenges.” 

That day at the club, as I walked back into Heimat’s lobby after a quick round of selfies in those lit-for-Hollywood locker room mirrors, Schoepe handed me a brown paper bag.

“It’s banana bread—the best you’ve ever had,” he said with a proud smile.  

I’m not one for banana bread. But ensconced in that wallpaper-lined living room, delightfully relaxed after all those crunches, that pretty little loaf of carbo-indulgence felt about right.

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Tesla Job Cuts Include Workers Who Joined the Company Weeks Earlier

(Bloomberg) —

Tesla has outperformed established automakers the last several years, expanding production and deliveries at a blistering pace as much of the rest of the industry struggled with lockdowns and supply shortages. The mass firing now being carried out at the behest of Elon Musk suggests this strong run of execution has come to an end, and could complicate efforts to get back on track.

We’ll find out roughly a week from now how many electric vehicles Tesla built and handed over to customers this quarter. There was little the company could do, of course, about Shanghai shutting down the city for weeks and costing the carmaker output from its most productive plant. Musk’s words and actions lately don’t inspire much confidence in how the company has coped.

First, the chief executive officer gave an interview to the Tesla Owners of Silicon Valley on May 31 (though the fan club only just aired the footage this week). Musk described the new factories opened recently near Berlin and in Austin, Texas, as “gigantic money furnaces” losing billions of dollars.

Days later, Reuters reported Musk had sent an email to Tesla executives saying he wanted to dismiss 10% of employees. He then wrote in an all-staff email that cut would only apply to salaried workers. Then he tweeted Tesla’s overall headcount will increase over the next year.

Finally, Musk told Bloomberg News Editor-in-Chief John Micklethwait this week that the salaried job cuts would take place over roughly three months. He also downplayed the significance of  a lawsuit by former employees who claim Tesla violated federal law by failing to provide advance notice of the job cuts, calling it “ trivial.”

Some already affected have taken to LinkedIn to share that they were let go after having been brought on very recently. A recruiter who had been with Tesla just two weeks deemed his dismissal a gut punch. A former intern wrote that the carmaker rescinded a full-time offer he’d accepted over another job opportunity. In seeming contradiction to Musk’s company-wide memo, some hourly workers also have been shown the door.

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This is all reminiscent of the days when Tesla was hiring rapidly around the start of Model 3 production, only to announce it would fire 9% of employees in June 2018, followed by a 7% reduction in January 2019. When Musk communicated yet another round of cuts the following month and a plan to close many of Tesla’s stores, then called off the retail strategy change in a matter of weeks, one analyst described the episode as “amateur hour.”

Tesla eventually navigated its way out of that mess and may well bounce back again. But the clumsy way Musk handled this latest round of layoffs will have ripple effects: on the lives of employees let go and those who remain. Job cuts are always a horrible process, but steps could have been taken in this case to make it less painful for all involved.

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Almost $4 Billion in Bitcoin Miner Loans Are Coming Under Stress

(Bloomberg) — The prolonged slump in Bitcoin is making it more difficult for some miners to repay the up to $4 billion in loans they have backed by their equipment, posing a potential risk to major crypto lenders.

A growing number of loans are now underwater, according to analysts, as many of the mining rigs lenders accepted as collateral have now halved in value along with the price of the world’s largest digital token.

Few miners have defaulted on their loans so far, but recent sales are showing signs of distress. Core Scientific Inc. sold more than 2,000 Bitcoin in May to help cover operational costs. Meanwhile, Bitfarms Ltd. offloaded nearly half of its mined tokens earlier this month to pay down part of its $100 million loan with Galaxy Digital Holdings Ltd. It has also taken out another machine-backed loan from New York Digital Investment Group LLC.

If the market doesn’t improve, analysts warn it could be an ugly scenario. Selling Bitcoin reserves puts further pressure on prices and the cost of equipment could fall even lower if lenders — looking to recoup their losses on defaults — start liquidating machines they repossess. The value of Bitmain’s popular S19 mining rig is down about 47% from a high of roughly $10,000 in November, according to data from Luxor Technologies Corp. 

“Bitcoin miners, broadly speaking, are feeling pain,” said Luka Jankovic, head of lending at Galaxy Digital. “A lot of operations have become net IRR negative at these levels. Machine values have plummeted and are still in price discovery mode, which is compounded by volatile energy prices and limited supply for rack space.”

Bitcoin mining — which uses powerful computers to process records of transactions and earn rewards in the token — was among the most lucrative businesses in the run-up of crypto’s historic bull run. Margins could be as high as 90%. But loans for upgraded machines via traditional finance could be hard to come by or included high interest rates given the market’s volatility. 

To fill the void, native-crypto lenders such as Galaxy Digital, NYDIG, BlockFi Inc., Celsius Network Ltd., Foundry Networks LLC and Babel Finance began to accept rigs as collateral in addition to cash down payments. But now those lenders could be significantly undercollateralized, said Ethan Vera, co-founder of Seattle-based mining company Luxor Technologies. “They are nervous about their loan books, especially those with high collateral ratios.”

Vera estimates there’s up to $4 billion in loans backed by machines, which is on top of even more token-backed loans, first popularized in Asia with lenders like Babel. 

BlockFi Chief Risk Officer Yuri Mushkin said in an email to Bloomberg that mining-backed loans are “only a portion of our larger lending portfolio” and follow the same risk and underwriting practices implemented across its institutional business.

Foundry declined to comment while NYDIG, Babel and Celsius did not respond to a request.

Signs of Distress

Many Bitcoin miners still enjoy decent profit margins. The cost of production for a large mining company is around $8,000 per token, assuming average electricity prices and fairly new mining machines, according to Jaran Mellerud, a mining analyst at Arcane Crypto.

“But the reduced income still impacts their business as some of them have loans to repay and collateral to post for their machine purchases,” Mellerud said. “These payments might be hard for them to make without selling a significant portion of their Bitcoin holdings.”

Read more: Bitcoin Miners Face Industry ‘Shakeout’ as Prices Stay Depressed

An industry shakeout could be around the corner, especially for smaller, negative cash-flow operators that bought pricey equipment months ago, thinking it would appreciate in value.

If you factor in overhead costs for infrastructure and interest rates, the total costs for some miners may already be above $20,000, which is around Bitcoin’s current price, said Wilfred Daye, chief executive officer of Securitize Capital.

“Miners thought they would be in a better capital raising environment today,” Vera said. “They bought tens of thousands of machines, signed up for hosting, put the deposits down and now they can’t fulfill” obligations, he said.

Will Foxley, director of content at Compass Mining Inc., said the cost to raise capital has surged dramatically with debt and equity market opportunities drying up for miners.

“Bitcoin walks off the cliff, then the value for the machines goes down even more because people do not really want to use it for anything else,” he said. “There are just a ton of machine orders that are still outstanding.”

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SoftBank Pays Ex-COO $94 Million in Severance, Incentives

(Bloomberg) — SoftBank Group Corp.’s former Chief Operating Officer Marcelo Claure has secured severance and incentives worth an estimated $94 million as part of his compensation from the tech investment giant.

Claure departed SoftBank in January with severance totaling 4.6 billion yen ($34 million), the company said in a filing on Friday. His compensation also includes another 8.1 billion yen — the estimated value as of March of the executive portion in an incentive program. Claure has a claim to 30% of the employee incentive award pool for the Vision Fund’s Latin America fund, that could run through 2029.

Claure’s departure put an end to a tumultuous tenure capped by a clash over compensation with founder Masayoshi Son. Claure had sought more authority and as much as $1 billion in compensation in recognition of his work. 

The 51-year-old Claure became one of Son’s top lieutenants after selling his cellphone distributor to SoftBank, rising to become COO in 2018. He was the company’s operational guru, helping to turn around the U.S. wireless carrier Sprint Corp. and the troubled co-working startup WeWork. 

Claure also accumulated 7 million shares in T-Mobile US Inc., which acquired Sprint, a stake now worth about $957 million. The former COO owed $515 million at the end of March on a loan SoftBank provided him to purchase 5 million T-Mobile shares in 2020, Friday’s filing said. The loan balance is due in 2024.

Claure’s retirement has been followed by a series of high-profile exits in recent months. Michel Combes, who took over Claure’s responsibility for SoftBank Group International and was in charge of SBGI’s operating and investment portfolio, is also leaving the post as of June 30, the company said this week. In April, two of the three managing partners at the company’s Latin America Fund left to start their own venture business.

The operator of the Vision Fund — the world’s largest investor in tech startups — is struggling to regain its footing amid a drop in tech valuations resulted in a record loss for the company in the quarter ended in March. Its own shares have lost 33% from a year ago, wiping out $35 billion in value.

(Updates with T-Mobile holdings in fifth paragraph)

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