FTX gives BlockFi $400M credit facility; has option to buy company for up to $240 million
BlockFi CEO Zac Prince announced a $ 400 million credit line from FTX on July 1st, with the option to buy the entire company for up to $ 240 million, depending on business performance.
The statement was issued within 24 hours after CNBC reported that BlockFi was acquired by FTX for only $ 25 million. Prince quickly denied the claim, but he postponed releasing more information until Friday afternoon.
Brett Harrison, president of FTX, said he was “excited” to support BlockFi through a “strategic partnership.”
FTX US looks forward to further cooperation @BlockFiZac And that @BlockFi team! We are pleased to be able to strengthen BlockFi’s business and cooperate on the path to strategic partnerships. https://t.co/SKbql5Hexd
— Brett Harrison (@Brett_FTX) July 1, 2022
BlockFi claims that FUD causes liquidity problems
Prince has confirmed that BlockFi has not yet requested the use of the loan and that all BlockFi services “continue to work properly”.
In a multi-part Twitter thread, Prince detailed the events that led to the deal, including confirming that recent market volatility “had a negative impact on BlockFi.”
Prince claimed that BlockFi was “not exposed” to Celsius, but the subsequent influx of customer withdrawals created liquidity issues for the company.
However, Prince confirmed that he lost $ 80 million when BlockFi liquidated the loan issued to 3AC.
BlockFi CEO said the loss does not affect the client’s funds and is the only exposure to the company. “The risk framework is a combination of counterparty credit analysis, collateral haircuts, and portfolio limits based on stress testing, and the DeFi protocol has no client funding,” he added.
The decision to secure a transaction with FTX was made to “add capital to the balance sheet to increase liquidity and protect client funds.”
After securing additional investment, Prince said that FTX’s “free” products will “further benefit the future” of BlockFi clients. He then commented on the rise in FUD in the crypto market, stating that crypto is a “rising ecosystem” and tried to calm fear.
The bullish future of BlockFi?
Prince also announced that BlockFi’s interest rates will be raised, allowing investors to earn more interest on their deposits.
The general community consensus on presentations is broadly positive, with people such as Rahu Sood from Irrevertent Labs. say it“We will respect how we dealt with this situation.”
We will respect how we have dealt with this situation. Ignore disgust and commotion. It is worth noting what you have experienced and how you are dealing with the situation.Congratulations @SBF_FTX When @BlockFiGo through this winter of cryptography and move on to the next winter.
— Rahul Sood 🐔🐴🦄∞ / 21m🚀 (@rahulsood) July 1, 2022
The entire Twitter thread is below.
(Long thread!)
The latest information on previously announced term sheets @FTX_US – And how did you expand the scope of your first transaction for all major gains? @BlockFi Stakeholders.
— Zack Prince (@BlockFiZac) July 1, 2022
