FTX US Reaches An Agreement With BlockFi For A Credit Facility And Possible Acquisition
- Part of the terms of the deal will enable FTX to acquire BlockFi at a maximum price of $240 million.
After previously denying a possible acquisition deal is on the cards, zac Prince (BlockFi CEO) has revealed that BlockFi can indeed be sold. Prince made a long Twitter thread about the possibility of the sale today.
Under the terms of the deal, FTX US will grant the troubled crypto lender a $400 million credit facility. However, the credit facility also allows FTX US to purchase BlockFi. Zac Prince explains the terms of the deal are to “protect user funds.”
According to Prince’s Friday tweet, the parties reached an agreement on the deal on Thursday. However, he said the shareholder still needs to approve the deal. The total value of the deal might rise to $680 million. The terms of the deal show that Blockfi’s valuation is not fixed.
BlockFi and FTX Deal
Rumors were circulating yesterday that the crypto lending firm would sell for $25 million. However, the terms of the deal state that Blockfi’s valuation might reach $230 million. The firm’s performance will determine the variation in its valuation.
BlockFi CEO said the company hasn’t spent out of the credit facility. Prince’s tweet reads, “one of our fundamental principles is to protect client funds. It is the right thing to do. Also, it is highly beneficial to the adoption and growth of the crypto-financial services sector globally. Hence, we needed the capital injection to strengthen our liquidity and protect customer funds.”
BlockFi was on the receiving end of the current market volatility, especially the market events that affected Celsius and 3AC. The Celsius news on June 12 led to an unusual rise in customer withdrawals on Blockfi’s platform even though it had no exposure to them.
As the 3AC news spread further in the same week, there was greater fear in the market. BlockFi was one of the first crypto firms to fully accelerate its overcollateralized loan to 3AC and liquidate and hedge all collateral.
However, it still experienced an $80 million loss. The loss is small compared to what other crypto firms reported. Prince states that BlockFi has no further exposure to 3AC besides the $80 million loss.
Hence, the firm will absorb these losses without affecting customer funds. These losses will be part of 3AC’s current bankruptcy claim. Hence, BlockFi will provide more updates as the case progresses.
According to BlockFi, it has no client funds in DeFi protocols. Its risk framework combines portfolio limits (based on stress testing), counterparty credit analysis, and collateral haircuts. This story is developing and we will be updating it accordingly with time.