BlockFi Signs $400M Credit Line and $240M “Option to Acquire” Deal With FTX US
Troubled cryptocurrency lending company BlockFi has inked a “definitive agreement” with FTX US, the American division of Sam Bankman-Fried’s crypto exchange FTX.
The deal involves a $400 million credit line from FTX US with an option to acquire the crypto lender for $240 million, according to Zac Prince, CEO and founder of BlockFi.
FTX US Gets Option to Acquire BlockFi for $240M
“Yesterday we signed definitive agreements, subject to shareholder approval, with FTX US for 1) A $400M revolving credit facility which is subordinate to all client funds, and 2) An option to acquire BlockFi at a variable price of up to $240M based on performance triggers,” Prince wrote.
He said the recent crypto market crisis was the reason his company had to sign the deal with FTX US. According to him, the liquidation issue with rival Celsius and crypto hedge fund Three Arrows Capital (3AC) impacted BlockFi.
Prince noted that BlockFi recorded increased withdrawal requests from users after Celsius halted withdrawals and other services on June 12.
That same week, news about 3AC’s liquidation and insolvency surfaced, driving more fear across the market. The hedge fund had monster leverage with multiple crypto lenders, including BlockFi, and failed to meet its margin calls. Although BlockFi was among the first lenders to liquidate 3AC, Prince said his company recorded $80 million in losses.
According to the CEO, both events left BlockFi in a difficult position. The company had to sign a $250 million revolving credit facility with FTX on June 21 to bolster its balance sheet.
Prince Denies $25 Million Acquisition Rumors
After securing the loan from FTX, rumours emerged that Sam Bankman-Fried’s crypto exchange was close to acquiring BlockFi for $25 million, a 99% discount from the $4.8 billion valuation the crypto lender recorded in its last funding round in March 2021.
However, Zac Prince quickly debunked the rumour, saying that the company is not being sold for $25 million while promising to share more information once an agreement is reached. The BlockFi CEO said he was “extraordinarily disappointed that an inappropriately leaked call led to reporting on potential negative impacts to the BlockFi team.”
While the agreement with FTX US is subject to shareholders’ approval, the deal puts BlockFi’s total value at $680 million, Prince said.
Meanwhile, CryptoSavingExpert reported last week that BlockFi plans to increase its interest rates on crypto deposits across all account tiers. The new policy goes into effect today, July 1st 2022.
~ By William A. Frederick ~
