FTX has signed a deal with BlockFi that includes an option for the cryptocurrency exchange to buy the lending platform for up to $240 million, as digital asset firms grapple with the fallout from the crypto slowdown.
BlockFi chief executive Zac Prince said on Twitter on Friday that the deal included a $400 million revolving credit facility from FTX US, as well as an option to buy at a “variable price.” . . based on performance triggers”.
The deal increases the scale of support for BlockFi from FTX, which last week provided BlockFi with a $250 million loan.
“We have not drawn on this credit facility to date and have continued to operate all of our products and services as normal,” Prince added.
The deal represents another step by FTX chief executive Sam Bankman-Fried to shore up crypto businesses weakened by an acute credit crunch hitting crypto markets, which analysts have likened to a “ Lehman moment” for the digital asset industry.
Through his ventures, the 30-year-old billionaire has also provided loans to crypto broker Voyager Digital, totaling $485 million in cash and bitcoins. On Friday, Voyager announced that it was “temporarily suspending transactions, deposits, withdrawals and loyalty rewards” as of 2 p.m. Eastern Time in the United States. The conditions attached to the loan limit the amount Voyager can withdraw over a 30-day period to $75 million.
Voyager Chief Executive Stephen Ehrlich said the move “gives us more time to continue exploring strategic alternatives with various interested parties while preserving the value of the Voyager platform.” The company added that it was “actively pursuing all available remedies” to recover more than $650 million it had loaned to troubled hedge fund Three Arrows Capital, which went into liquidation this week.
If FTX acquires BlockFi, the deal would likely value the crypto lender at around $150 million, according to people familiar with the deal.
On Thursday, CNBC reported that FTX was to pay around $25 million for BlockFi, a figure denied by Prince. The company was valued at $4 billion after a $500 million funding round last summer, according to data from Crunchbase.
In his Twitter feed On Friday, Prince said that as crypto asset prices fell, a move by lending platform Celsius last month to block customers from withdrawing their assets led to an “increase in customer withdrawals from the BlockFi platform, although we are not exposed to it”.
He also said the company suffered losses of $80 million due to its exposure to Three Arrows Capital.
Prince said he had declined various other bailout options that would have resulted in a discount to client funds, adding: “As a matter of principle, we fundamentally believe in protecting client funds.”
BlockFi earlier this month announced plans to cut a fifth of its staff as many crypto firms cut jobs to deal with slowing crypto markets. Token prices have fallen around 70% from their highs last fall.