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Breaking News: Ripple And SEC Reach Major Deal: Remaining $75M Penalty Returned, Injunction Lifted
BlockFi FTX

BlockFi Clears Up Rumors, Crypto Exchange FTX Will Have $240 Million Purchase Option

Reynaldo Marquez
by Reynaldo Marquez
3 years ago
·
Posted in Crypto News
Trusted Editorial content, reviewed by leading industry experts and seasoned editors. Ad Disclosure

Crypto lending platform BlockFi addressed the rumors of a potential purchase from major crypto exchange platform FTX. Initially reported by U.S. news outlet CNBC, the company was allegedly being bought by FTX at a $25 million valuation, a 99% discount from its nearly $5 billion 2021 valuation.

Related Reading | Colombia Launches National Land Registry on XRPL, How Ripple Made It Happen

According to BlockFi’s CEO Zac Prince, the company has signed an agreement with FTX US. Currently, under shareholder approval, this will provide BlockFi with a $400 million credit facility to ensure all clients have access to their funds and contemplate an option to acquire.

Unless what CNBC reported, this purchase option has a variable price of up to $240 million, almost ten times what initial reports were claiming. The final purchase value will depend on BlockFi’s performance and other factors. Prince said:

This, together with other potential consideration, represents a total value of up to $680M. We have not drawn on this credit facility to date and have continued to operate all our products and services normally. In fact, we raised interest rates, effective today.

BlockFi seeks this deal with FTX US, as the CEO confirmed, due to the current downside trend in the crypto market. Similar to other companies in the industry, the crypto lending platform is suffering from the consequences of the collapse of the Terra ecosystem and investment firm Three Arrows Capital (3AC).

The company claims that they have no exposure to the cryptocurrency they did issue a loan to the failed investment firm, but these events triggered an “uptick in client withdrawals”. One after the other, events in the crypto space fueled fear amongst investors that decided to take their funds out of platforms like BlockFi.

Prince said:

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.

Bitcoin BTC BTCUSD BlockFi FTX
BTC’s trends to the downside on the 4-hour chart. Source: BTCUSD Tradingview

What The Future Holds For A FTX-BlockFi Partnership

BlockFi saw an $80 million loss from their 3AC exposure. The company claims that they have no “further exposure” to the firm and claims they will be able to absorb losses “with no impact to client funds”.

In that sense, Prince and BlockFi executives said they rejected other offers because client funds would have “taken a haircut”. The executive said FTX US has become a “great partner” to the company and that they share the same respect for their users and values.

Related Reading | Crypto Market Liquidations Surges Past $250 Million As Bitcoin Declines Below $20,000

The funds provided by FTX US will enable the crypto company to improve its services and products. Unlike other companies affected by the Terra and 3AC fallout, BlockFi never halted users’ withdrawals. Prince concluded:

The FTX US platform and products are highly complementary to BlockFi and we anticipate enhancements to our services through increased collaboration (…). To date our clients have received over $575M in interest, including >$10M today, from BlockFi and have never taken a loss of principal.

Editorial Process for bitcoinist is centered on delivering thoroughly researched, accurate, and unbiased content. We uphold strict sourcing standards, and each page undergoes diligent review by our team of top technology experts and seasoned editors. This process ensures the integrity, relevance, and value of our content for our readers.
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Reynaldo Marquez

Reynaldo Marquez

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As an editor at NewsBTC, Reynaldo is an experienced journalist passionate about all things crypto. Reynaldo has interviewed key industry leaders, and created unique pieces analyzing the promise of crypto as the next frontier for an economic and social transformation of humanity. Since 2018, he has been at the forefront of the industry, closely following every major development and analyzing critical events at the heart of the crypto industry. With a keen eye for detail and an unwavering commitment to excellence, Reynaldo has been instrumental in bringing the latest news and insights to the crypto community. Outside of work, Reynaldo enjoys lifting weights and literature, which he believes gives him a unique perspective into the world of crypto. As an aspiring trader, he is always looking for new opportunities to explore and believes that crypto holds the key to unlocking the future of finance.

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