News startup Semafor started operations late last year with big ambitions backed by well-funded investors. But the company soon found itself in a dilemma: How to handle the largest outside investment, around $10 million, from Sam Bankman-Fried after his crypto company collapsed and he was federal government charges of fraud.
Now, Semafor is planning to acquire the ownership of Mr. Bankman-Fried while exploring raising new funds.
Justin Smith, co-founder and chief executive officer of Semafor said: “We are planning to acquire Sam Bankman-Fried’s interest in Semafor and move the funds into a separate account until the authorities The relevant legislation gives instructions on where the money will be returned.” .
According to several people with knowledge of the company’s operations, the company’s fundraising chats have yet to lead to any investments.
Semafor is one of a number of media companies that have received money from Mr. Bankman-Fried or his affiliates. Mr. Bankman-Fried is the founder and former CEO of crypto exchange FTX, declared bankruptcy in November after withdrawing customer deposits exposing an $8 billion loss in his account. In December, federal prosecutors charged him with fraud and other charges. He has plead not guilty. A spokesman for Mr Bankman-Fried declined to comment on Tuesday.
Several other media companies, including Vox Media and ProPublica, said they would return donations shortly after Mr Bankman-Fried’s arrest. duty said that it will wait for guidance from law enforcement to determine its next steps. That position has drawn some criticism against the company co-founded by Justin Smith and Ben Smith, who was previously a media columnist for The New York Times.
Until Semafor replaces Mr. Bankman-Fried’s investment, putting cash aside means giving up capital the company could have used for its initial expansion.
Semafor, a publishing company with a staff of around 60 people, raised a total of about $25 million ahead of its October launch. It has already racked up deals worth more than $2 million each. translated with several advertisers before publishing began, ensuring the company’s monthly cash flow, according to two people familiar with the transactions.
Since the company landed those initial advertising deals, it has signed advertising deals ranging from $100,000 to $2 million, one of the people said. The company plans to generate at least $15 million in revenue this year through a mix of advertising and events, according to another person with knowledge of the company’s finances. Mr. Smith said the company had exceeded its growth targets for audience and ad revenue, but declined to provide specific numbers.
Steven Brill, a media entrepreneur who co-founded news rating company NewsGuard, said there was no shame in raising money from Mr Bankman-Fried before he was accused of fraud. But since Mr Bankman-Fried has been arrested, even a private media company is obligated to be transparent about the terms of the deal, he said.
“It was awkward,” Mr. Brill said. “But it’s hard to argue that this was predictable.”
Katie Robertson contribution report.
