BlockFi And FTX Agree On Acquisition Terms And Credit Deal

BlockFi and FTX agree on acquisition terms and a credit deal as the former announced that it reached an agreement with the US division of the exchange led by Sam Bankman Fried so let’s read more today in our latest cryptocurrency news.

BlockFi and FTX agree on the acquisition terms but also made a deal for a revolving line of credit. The deal represents a total value of $680 million Zac Prince, the CEO of BlockFi added. The option to acquire Blockfi at a price of $240 million is also on the table. The deal came amid rumors that FTX will acquire Blockfi for $24 million and Price denied those rumors but the struggling crypto lender now signed a term sheet with FTX US which leaves the room open for acquisition.

(Long thread!)

Excited to share an update on our previously announced term sheet with @FTX_US – and how we've broadened the scope of the initial deal for the benefit of all key @BlockFi stakeholders.

— Zac Prince (@BlockFiZac) July 1, 2022

The $680 million deal increased the size of the revolving credit line from the exchange to $400 million which is an icnrease from the previous $250 million and still keeps payments on subordinate to client funds. This means that if a push comes to the shove, Blockfi will fulfill its obligations to the clients before it pays back fTX. Prince added:

“We have not drawn on this credit facility to date and have continued to operate all our products and services normally. In fact, we raised interest rates, effective today.”

Prince said that Blockfi saw an increase in client withdrawals recently after competitor Celsius froze its withdrawals to stave off a possible bank run. Since then, Celsius hired two different companies to explore bankruptcy restructuring options and reached out to clients on the blog to say that stabilizing the business will take more time. Prince denied the rumors as well that Blockfi had exposure to bad debt from Celsius but said his company also experienced an $80 million loss from the forced liquidation of Three Arrows Capital:

“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 the losses reported by others.”

If FTX exercises the option to acquire Block, it will be the second deal of this kind that started with a line of credit to a struggling company. The exchange finalized a deal to acquire the Japanese fintech company Liquid Group for an undisclosed amount the deal was initially announced in February and started with a $120 million loan to help the company survive after the hack attack worth $90 million. The news about the deal of BlockFi was happily met by FTX US president Brett Harrison who said his team is excited to help the business and work together towards a strategic partnership.