On December 10, Mike McCaffrey, the former CEO of crypto news publication The Block, announced that he would be stepping down from his role.

McCaffrey was asked to step down by entering CEO Bobby Moran and other executive members of the publication. The change comes as a result of the former CEO taking undisclosed loans of roughly $43 million USD from FTX’s trading arm Alameda Research — including $16 million that is purported to have been a payout for an apartment in the Bahamas, according to NFT Now.

1/ I have difficult news to share. I’m stepping down as The Block’s CEO. While it’s personally painful, it’s the right thing for The Block and the team.

— Mike McCaffrey (@McCaffrMike) December 9, 2022

Contagion and Credibility

The news comes as yet another example of how widespread the contagion of the FTX scandal is. Whether or not McCaffrey was aware of where Alameda’s funds were coming from, his biggest mistake was not disclosing the information, as it has now brought the credibility of the publication into question.

“This news came as both a shock and disappointment to The Block leadership team. Mike’s decision to take out a loan from SBF and not disclose that information demonstrates a serious lack of judgment. It undermines The Block’s reputation and credibility, especially that of our reporters and researchers, as well as our efforts at industry-leading transparency,” shared Moran.

The Block had taken funding before, though it was all above board and included investments from groups like Greycroft, BlockTower, Capital, Bloomberg Beta, and more. However, in this case, McCaffery shared on Twitter that he took the initial loan from SBF in February of 2021, when The Block was evaluating whether to sell, merge, or restructure.

“The loan was to an entity I own and the funds were used to effect the restructuring. In early 2022, there was an additional $15m loan to strengthen the business’s position,” wrote McCaffery.

He admitted that in hindsight he had displayed “undoubtedly poor judgment,” going on to claim that despite the loans he never attempted to influence any coverage of FTX, Alameda, or SBF.

Transparency

In what is a very timely manner, the U.S. Securities and Exchange Commission (SEC) has released new guidelines for companies making crypto holding disclosures, urging increased transparency.

The guidelines include a sample letter, which companies can use to provide detailed information about their various holdings and even express their exposure to third-party crypto market participants.

“The Division urges companies to take these sample comments into consideration as they prepare disclosure documents that may not typically be subject to review by the Division before their use, such as automatically effective registration statements and prospectus supplements for takedowns from existing shelf registration statements,” expressed the letter.

A “Risk Factor” section of the sample letter states that companies can use the field to “discuss any reputational harm you may face in light of the recent disruption in the crypto asset markets,” giving the example of discussing “how market conditions have affected how your business is perceived by customers, counterparties, and regulators, and whether there is a material impact on your operations or financial condition.”

While transparency and increased regulations are needed in the crypto space, some question if the SEC is the right agency for the job.

As just recently, one Congressman has called for the investigation of SEC Chair Gary Gensler for his role in the FTX demise.