FTX Finalises Deal with BlockFi, Option to Buy for Up to $240 Million
Categories: Crypto News US
FTX Finalises Deal with BlockFi, Option to Buy for Up to $240 Million
Embattled crypto lender BlockFi has signed a deal with FTX US, the American arm of Sam Bankman-Fried’s crypto exchange, which will see FTX increase its credit facility to BlockFi with an option for FTX to acquire the struggling lender.
BlockFi started to experience financial strain following the May collapse of the Terra blockchain and the subsequent bankruptcy of the highly LUNA-exposed Three Arrows Capital, to whom BlockFi had made sizeable loans.
These events – combined with the recent aversion to centralised lenders sparked by Celsius’ liquidity crisis, and the general market decline – have tested BlockFi’s resilience and forced the lender to shed around 20 percent of its workforce, approximately 170 employees.
In June, FTX extended a US$250 million line of credit to BlockFi to help the lender secure client funds. With this new deal, the credit facility has been extended to US$400 million.Prince said the deal was primarily about ensuring BlockFi could protect client funds and that FTX was the ideal partner as it shares the same client-first values:
“As a matter of principle, we fundamentally believe in protecting client funds,” Prince tweeted. “Not only because it’s absolutely the right thing to do, but this also benefits the ongoing health and adoption of crypto financial services worldwide. Therefore, it was important to add capital to our balance sheet to bolster liquidity and protect client funds.”
BlockFi’s claims of financial strength have been widely questioned on Twitter, with many users wondering why a company in a supposedly strong position would seek an increased line of credit and accept an option to acquire it for a fraction of its valuation.