Last week, the world was shocked to learn that the “JP Morgan” of our time - Sam Bankman-Fried (head of the FTX exchange) - could buy the largest cryptocurrency lending platform BlockFi for just $25 million, which would be 99% below its actual value!
BlockFi CEO Zac Prince immediately hurried to reassure users with the statement that the deal wasn’t going to happen for that kind of money. Rumors were quickly dispelled: the parties agreed to open a revolving credit line for $400 million and an option to buy the entire company for $240 million (with possible price adjustments depending on performance triggers).
Thus, the total cost of the offer increased to $640 million. It was also emphasized that the overdraft received from FTX is not yet needed to support BlockFi programs and services, which continue to operate as usual. “In fact, we just raised the interest rates that were in effect before that.”
BlockFi has been the unwitting victim of the disruption caused by the problems of another credit provider, Celsius, and the bankruptcy of The Three Arrows Capital (3AC) fund. Panic has led to an abrupt withdrawal of assets from the platform, threatening unforeseen consequences and causing security risks.
Against the backdrop of ongoing processes, the company chose to incur an $80 million loss and repay its credit to 3AC in advance, even though it was fully secured. Significant funds were also spent on hedging other collateral positions.
Such a maneuver is supposed to avoid any associations with “troubled” players and signal the market about its solvency and reliability. Plus, BlockFi expects to compensate for some of the losses within 3AC bankruptcy proceedings.
The platform emphasizes that they never use user assets for profit in any DeFi protocols, and their risk management system is unprecedented. Any strategic decisions made by the Board of Directors are based on the concept of “Client, not Consumer”.
Zac Prince calls the FTX deal a “partnership”, not a “takeover”, and promises interesting announcements “shortly”.The products of both projects “complement each other perfectly”, and the quality of service will increase. FTX US head Brett Harrison also confirmed the constructive nature of the cooperation:
