FTX reaches a deal to buy BlockFi for up to $240 million

Posted: 1 July 2022 5:45 pm

The price is well over the $25 million floated in some news reports, but much less than the $1 billion BlockFi was valued at a month ago.

FTX signed a deal on Friday that gives it the “option to acquire” BlockFi for a maximum price of $240 million. That’s well over the price some floated a day earlier, but it’s a fraction of what BlockFi was valued at just a month ago.

That’s a sign of just how much pain the crypto pullback is handing out.

Earlier reports from Coindesk and CNBC had said the price tag could be $25 million; Zac Prince, the SEO of BlockFi, tweeted at the time that was “100%” wrong.

Still, the $240 million maximum price is less than a quarter of BlockFi’s previous valuation of $1 billion, based on a funding round only a month ago. There’s no word on a minimum price.

Rival Ledn tried to step in at the last minute with fresh funding to BlockFi rather than a complete acquisition, according to Bloomberg.

Prince tweeted that “We were presented with various unattractive options where client funds would take a haircut or be behind a lender in the capital stack.” But this was not the case with FTX, which is why they went with the deal.

The players

BlockFi is a crypto lending platform that reported 1 million clients and over $10 billion in assets and deposits at the beginning of the year. This made it one of the leading crypto lending platforms.

BlockFi’s main problem arose with the collapse of Three Arrow Capital, a crypto hedge fund, for which BlockFi was a major creditor.

Another problem stemmed from the problems of Celsius, a crypto lender that froze withdrawals in mid-June, facing a liquidity crunch. BlockFi was not exposed to Celsius’ problems directly, but many BlockFi users reportedly requested withdrawals from the platform, fearing similar woes.

Even before that, BlockFi said it would lay off 20% of its 850 staff due to profitability woes. During the time, FTX extended a $250 million line of credit but denied they were acquiring the firm.

FTX is a major cryptocurrency exchange led by Sam Bankman-Fried. While many crypto companies, including Coinbase and Gemini, have struggled during this crypto winter, FTX reported that they have $2 billion ready for acquisitions. And now it seems they are putting some of that money into play.

The FTX deal

FTX will give a $400 million credit facility to BlockFi, which gives FTX the right to acquire BlockFi at “a variable price of up to $240M based on performance triggers” and protect client funds.

In a tweet on Friday, Zac Prince said the deal is subject to shareholder approval.

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Disclaimer: Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may have holdings in the cryptocurrencies discussed.

Kliment Dukovski owns cryptocurrencies as of the publishing date

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