BlockFi, a crypto lending platform, has secured a revolving line of credit of $250M with FTX, the second-largest crypto exchange by trading volume, leaders of both companies said Tuesday.
BlockFi CEO Zac Prince said the credit would be used “as needed” and would be “subordinate to all client balances across all account types.”
The move was announced only days after Prince took to Twitter to quell rumors the lending platform, with about $15B in assets under management, would go the way of competitor Celsius, which froze withdrawals on its accounts.
Crypto traders have become concerned plummeting digital asset prices and turmoil in multi-billion dollar hedge fund Three Arrows Capital, which have already destabilized firms including Celsius and Babel Finance, could cause other dominoes to fall. Some investors worried BlockFi could be one of them.
FTX founder Sam Bankman-Fried tried to ease investors’ concerns.
“BlockFi customer assets are appropriately managed, with no debt/risk from 3AC, Celsius, etc.,” Bankman-Fried tweeted. “BlockFi is financially strong; all operations are normal, as they always have been, and assets are safe.”
Last week, while Prince insisted BlockFi’s financials were strong, the company laid off 20% of its workforce
It’s not the first time that SBF, as Bankman-Fried is known, has stepped in to assist floundering crypto firms. Last year, FTX provided Liquid, a Japanese crypto exchange, $120M in financing after it suffered a $100M hack. FTX later purchased Liquid for an undisclosed amount of money. More recently, Alameda Research, the crypto trading firm Bankman-Fried founded in 2017, gave Voyager Capital a line of credit worth almost $500M.
Jake Chervinsky, head of policy at the Blockchain Association, an industry lobbying group, disputed the characterization of FTX’s line of credit as a “bailout.”
“Private companies doing a private deal is the exact opposite of a bailout,” he tweeted. “This is how capitalism is supposed to work in times of market stress. No government intervention necessary.”
In a recent interview with NPR, Bankman-Fried said FTX has a responsibility “to seriously consider stepping in, even if it is at a loss to ourselves, to stem contagion.”
“I think that’s what’s healthy for the ecosystem, and I want to do what can help it grow and thrive,” he said.