FTX Reaches Deal to Acquire BlockFi for Up to $240M as CeFi Lenders Buckle Under Market Pressure

FTX, the second-biggest cryptocurrency exchange by trading volume, has signed an option to purchase crypto lender BlockFi for as much as $240M, BlockFi CEO Zac Prince said Friday.

The agreement, which Prince said was signed Thursday, is subject to shareholder approval and would also grant BlockFi a $400M credit line. The deal gives FTX “an option to acquire BlockFi at a variable price of up to $240M based on performance triggers.”

Prince did not say what those triggers were in a Twitter thread announcing the agreement.

As crypto platforms buckle under the pressure of a collapsing market, Thursday’s move may calm BlockFi customers worried the firm would be the next to fall.

Quashing Rumors

The announcement quashes rumors that FTX had offered to buy BlockFi for just $25M. Prince denied that was true in a tweet Thursday. Nevertheless, the news represents a stunning reversal of fortune for BlockFi, which was valued at $5B last year.

Prince stressed customers were at no risk of losing their money. But turmoil at crypto titans Celsius and Three Arrows Capital prompted BlockFi’s search for a savior, he said.

Withdrawals Uptick

Celsius, a direct competitor with BlockFi, halted customer withdrawals last month, citing market turmoil, a move that “started an uptick in client withdrawals from BlockFi’s platform despite us having no exposure to them,” Prince said.

Then, as Three Arrows imploded, BlockFi lost $80M, Prince continued.

“This represents the full extent of the impact to BlockFi from 3AC,” the CEO explained. “We have no further exposure and the limited losses we did experience will be absorbed by BlockFi with no impact to client funds.”

FTX Bailouts

The $400M credit line is the second FTX has offered BlockFi in recent weeks. Last month, FTX gave BlockFi a $250M credit line, feeding rumors it might go the way of Celsius.

FTX has emerged as a lender of last resort in the crypto world, offering credit to or outright acquiring distressed companies. Last year, it 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. On Friday, Voyager announced it would, like Celsius, temporarily halt customer withdrawals “to preserve the value of the Voyage platform.”

Solid Footing

Prince and FTX CEO Sam Bankman-Fried have repeatedly stressed BlockFi was on solid footing, a message Prince repeated in Friday’s announcement.
“We have not drawn on this credit facility to date and have continued to operate all our products and services normally,” he said. “It was important to add capital to our balance sheet to bolster liquidity and protect client funds.”