Today, The Block announced that its CEO, Michael McCaffrey, had resigned after failing to disclose a number of loans from the Alameda Research, the business of former FTX CEO Sam Bankman-Fried. The news was first reported by Axios.
Among other more ancillary uses for the money, an employee-led buyout of the business was one of them.
According to a statement, McCaffrey will be replaced right away by Bobby Moran, the company’s chief revenue officer. Other than Mike, no one at The Block was aware of this financial arrangement, according to Moran.
In a string of tweets on Friday, McCaffrey reaffirmed that: “I didn’t disclose the loan to anyone. The editorial and research teams at The Block were completely unaware of the financial arrangement between my holding company and SBF. He stated that he made this choice in order to “not compromise the objectivity of coverage” of SBF.
Mike Dudas founded The Block in 2018. McCaffrey became CEO in 2020. By April 2021, McCaffrey had spearheaded a buyout of every investor in The Block, turning it into an employee-owned business with McCaffrey as the largest shareholder. He continues to hold the majority of the company’s shares even today.
Dudas stated that he is “exploring what, if any, avenues exist to get The Block into trustworthy ownership” in an exchange with TechCrunch after the news broke.
According to Dudas, Mike McCaffrey’s family was wealthy at the time of The Block’s sale and loaned him money to buy out [his stake] and the VCs so the team could take on full independent ownership.
Dudas wrote, “I’d like to buy The Block back,” in a tweet.
Conflicts of interest must be disclosed by media companies when they occur; even the appearance of a conflict can harm a brand because it can erode readers’ faith in its objectivity.
Mike showed “a serious lack of judgement” by taking out a loan from SBF without disclosing that information, according to Moran. It compromises The Block’s credibility and reputation, particularly that of our reporters and researchers, as well as our efforts to provide the highest level of transparency possible.
Bankman-Fried/Alameda provided three loans to McCaffrey totaling $43 million. With the first loan, which totaled $12 million, he was able to acquire The Block and become CEO in 2021. The second, in January, was for $15 million to support the media and data research company’s operations. Finally, McCaffrey received a $16 million loan earlier this year to purchase private property in the Bahamas.
The Block uses a combination of research and advertisements to finance its newsroom. TechCrunch occasionally makes use of the data section of the magazine.
It is not shocking that funds from SBF were invested in a media company given the former web3 tycoon’s prodigious media investments. This particular episode is different, though, because the loans in question weren’t adequately disclosed. Current employees and former executives were furious about the transactions, the lack of transparency, and how their leader had essentially been lying to them for a long time.