Crypto exchange FTX agreed to a deal that would give it the option to buy BlockFi for as much as $240 million, according to a series of tweets Friday from BlockFi CEO Zac Prince.
That price point may vary based on certain “performance triggers” that Prince did not detail.
At its heart, the deal boosts a revolving credit facility FTX offered the struggling crypto lender last month to $400 million, from $250 million.
“I think there are synergies between the businesses,” FTX CEO Sam Bankman-Fried told Bloomberg earlier Friday. “There are a lot of ways that our products can work together and can mesh together in a way that’s better than either would be independently.”
Prince said, "Outside of this transaction, we realize that there is a lot of fear, uncertainty, and doubt in the crypto markets.”
Fellow crypto lender Celsius’ move last month to halt the withdrawal of assets by customers “started an uptick in client withdrawals from BlockFi’s platform despite us having no exposure to them,” Prince said.
BlockFi did, however, see about $80 million in losses in bad debt from Three Arrows Capital — “a fraction of losses reported by others,” he said. Those losses will be part of Three Arrows’ ongoing bankruptcy case.
FTX was not BlockFi’s only potential suitor. Canadian company Ledn reportedly offered BlockFi an alternative deal to raise up to $400 million in a funding round and provide $50 million in equity in exchange for a sizable portion of the company, Bloomberg reported last week.
Prince on Friday, however, said financing options outside of the FTX arrangement required haircuts for client funds or a structure in which lenders would be put ahead of clients.
“This represents the best path forward,” Prince said.
An acquisition by FTX would likely value BlockFi at roughly $150 million, the Financial Times reported. That’s far below the $4.8 billion at which the crypto lender was last valued, according to PitchBook. But it’s also well above the $25 million CNBC initially reported Thursday.
The deal asserts FTX’s influence across the crypto sphere. The company acted as a lender of last resort to Voyager Digital, offering credit lines there, Bloomberg reported. FTX, however, turned down a request to bail out Celsius, the wire service reported.
FTX had been central to M&A rumors early last week, as Bloomberg reported the crypto exchange was considering acquiring Robinhood — a prospect Bankman-Fried later dashed.
The FTX deal is subject to shareholder approval, BlockFi said.
BlockFi has seen its share of regulatory troubles this year. The company in February agreed to pay $100 million in penalties to the Securities and Exchange Commission (SEC) and 32 states over allegations its interest-bearing account products were unregistered securities.
And with the prices of many digital assets tumbling, this crypto winter has proved arduous for BlockFi. CNBC reported last month that the lender has laid off 20% of its workforce.
Prince, in his tweets Friday, maintained a positive outlook.
“From our view, we still see an ecosystem on the rise — with billions of institutional borrowing demand allowing us to offer innovative wealth building products,” he wrote.