FTX Signs Agreement To Buy BlockFi for Up to $240M
CEO Zac Prince said that market volatility and fear have had a negative impact on the lending platform.
In a Twitter thread on Friday, July 1, BlockFi CEO Zac Prince said that the definitive agreements were signed on Thursday, June 30, and are subject to shareholder approval. The agreement also includes a $400 million USD “revolving credit facility, which is subordinate to all client funds.”
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
The $240 million USD variable price is based on “performance triggers,” and together with other considerations, represents a total value of up to $680 million USD.
“We have not drawn on this credit facility to date and have continued to operate all our products and services normally,” Prince tweeted. “In fact, we raised interest rates, effective today.”
The CEO said that “crypto market volatility, particularly market events related to Celsius and 3AC,” has had a “negative impact” on BlockFi, leading to its deal with FTX US. He added that Celsius’ freezing of user withdrawals on June 12 resulted in “an uptick in client withdrawals from BlockFi’s platform despite us having no exposure to them.”
“In the same week, 3AC news spread further fear in the market,” Prince continued. “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.” He followed up by assuring users that BlockFi’s involvement with Celsius will have “no impact on client funds.”
A deal with FTX US represented an opportunity to “add capital to our balance sheet to bolster liquidity and protect client funds,” Prince explained. “For our clients, absolutely nothing changes in terms of how you experience BlockFi products — but there is now even more upside in the future.”
“All of our products and services — including funding and withdrawals, our trading platform, credit card, and global institutional services — continue to operate normally, with incremental capital strength behind them,” he concluded.
Last week, FTX extended a $250 million USD line of credit to bail out BlockFi after the crypto lending platform was forced to reduce its staff by 20% due to market conditions. The exchange has also been exploring a potential partnership with Robinhood.
In other news, OpenSea says its user email data was compromised in a data leak.