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FTX has signed a deal giving it the option to buy crypto lending company BlockFi.
The agreement gives FTX the ability to buy BlockFi at a maximum price of $240 million, the company announced Friday. The deal price is based on certain performance targets. The company it did not give a minimum deal price.
CNBC reported Thursday that a term sheet would be signed by the end of this week, with a source saying it could be as low as $25 million. Even at the high end of FTX’s deal price, it marks a significant decrease in the value of BlockFi. The Jersey City, New Jersey-based company was last worth $4.8 billion, according to PitchBook.
The term sheet also pads BlockFi’s balance sheet with a larger loan.
FTX increased a previous $250 million revolving credit facility to a total $400 million. BlockFi executives said the company had not drawn on this credit facility to date, and has “continued to operate all our products and services normally.”
FTX CEO Sam Bankman-Fried has been seen as a lender of last resort in the space. In addition to BlockFi, Bankman-Fried’s company Alameda Research provided a $500 million loan to Voyager.
As to why BlockFi agreed to move forward with the deal, the company pointed to crypto market volatility and the failure of hedge fund Three Arrows Capital. It also pointed to embattled crypto company Celsius, which froze customer deposits two weeks ago citing “extreme market conditions.” BlockFi said it had seen an uptick in client withdrawals that week, despite having no exposure to Celsius.
BlockFi said it has suffered $80 million in losses “which is a small fraction of losses publicly reported by other lenders.” Its losses with the hedge fund will be part of Three Arrows’ ongoing bankruptcy case, the company said.
“Outside of this transaction, we realize that there is a lot of fear, uncertainty, and doubt in the crypto markets,” BlockFi CEO Zac Prince said. “From our vantage point, we continue to see a healthy ecosystem on the rise.”
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