FTX US signs deal with BlockFi, with option to acquire the lending platform

The U.S. arm of the bitcoin exchange FTX will extend a $400 million revolving credit facility to BlockFi and will obtain an option to acquire the lending platform for $240 million, according to BlockFi CEO Zac Prince.

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.

— Zac Prince (@BlockFiZac) July 1, 2022

He said that, taking into account additional factors, the deal values BlockFi at up to $680 million. The agreement awaits shareholder approval.

Prince noted that the deal with FTX US was prompted by fear and uncertainty in the crypto market due to the fall in prices, Celsius’s crypto-lending service problems and the default of hedge fund Three Arrows Capital (3AC).

The head of BlockFi said the platform’s losses amounted to about $80 million, despite rapid action to liquidate positions and hedge. Prince pledged to cover the losses without impacting client funds.

In the same week, 3AC news spread further fear in the market. While we were one of the first to fully accelerate our overcollateralized loan to 3AC, as well as liquidate and hedge all collateral, we did experience ~$80M in losses, which is a fraction of losses reported by others.

— Zac Prince (@BlockFiZac) July 1, 2022

Prince asserts that the deal will not affect BlockFi’s products and clients. Going forward he expects improvements in services through collaboration with FTX US.

“All of our products and services, including deposits and withdrawals, the trading platform, the credit card, and global institutional services, continue to operate normally, with additional financial backing,” said the BlockFi CEO.

The FTX US platform and products are highly complementary to BlockFi and we anticipate enhancements to our services through increased collaboration. Expect more exciting news to come on this soon.

— Zac Prince (@BlockFiZac) July 1, 2022

On June 21 BlockFi agreed with FTX on a revolving credit line of $250 million.

On June 24, WSJ wrote about plans for the exchange to acquire a stake in the platform. According to CNBC, the figure was $25 million.

In March 2021 BlockFi reached a valuation of $3 billion. In June 2022, according to The Block, investors reduced the platform’s valuation from $5 billion to $1 billion.

As reported by the media, Morgan Creek Digital and the crypto-lending platform Ledn also expressed interest in BlockFi.

Earlier in May, FTX chief Sam Bankman-Fried promised to spend billions on buying stakes in other companies.

In June he spoke about Alameda Research efforts to mitigate negative trends in the crypto market.

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