According to Blockfi’s co-founder Zac Prince, the company has signed definitive agreements with the crypto firm FTX and the deal is currently up to shareholder approval.
The deal represents a total of $680 million, but Prince also noted that $240 million of that total could be used to acquire Blockfi at a variable price up to that amount.
Zac Prince, the co-founder of Blockfi, explained that his company has come to an agreement with Sam Bankman-Fried’s crypto firm FTX. The deal is meant to “protect client funds” and is still subject to shareholder approval. Prince disclosed that part of the arrangement was a “$400 [million] revolving credit facility which is subordinate to all client funds.”
Furthermore, the Blockfi CEO added that FTX has “an option to acquire Blockfi at a variable price of up to $240M based on performance triggers.”
Prince detailed that Blockfi has not drawn on the credit facility yet and the company raised interest rates for its Blockfi Interest Accounts (BIAs). “Blockfi rates are increasing for BTC, ETH, USDC, GUSD, PAX, BUSD, and USDT across all rate tiers,” the company’s rate hike announcement notes.
The Blockfi executive continued by explaining what put the company in its current predicament, and he mentioned the crypto lender Celsius and the crypto hedge fund Three Arrows Capital (3AC). While Blockfi had zero exposure to Celsius, Prince said that Celsius freezing withdrawals caused a significant “uptick in client withdrawals” on the Blockfi platform.
As far as 3AC, Blockfi did have exposure to the crypto hedge fund that recently filed for Chapter 15 bankruptcy. “[As] 3AC news spread further fear in the market … we were one of the first to fully accelerate our overcollateralized loan to 3AC, as well as liquidate and hedge all collateral,” Prince remarked. “[Blockfi] did experience ~$80M in losses, which is a fraction of losses reported by others.” The Blockfi CEO added: “This represents the full extent of the impact to Blockfi from 3AC. We have no further exposure and the limited losses we did experience will be absorbed by Blockfi with no impact to client funds.”
Prince said that the company’s 3AC losses will be a part of the hedge fund’s “ongoing bankruptcy case(s)” and the Blockfi executive noted that more information on those proceedings will come out as they come to fruition. “As a reminder, our risk framework combines counterparty credit analysis, collateral haircuts, and portfolio limits based on stress testing, and we have zero client funds in [decentralized finance] protocols,” Prince added.
Toward the end of Prince’s Twitter thread about the definitive agreements with FTX, the CEO said that Blockfi’s main goal has always been focused on protecting client funds. Prince further noted that it was important for Blockfi to bolster the company’s balance sheet.
“We were presented with various unattractive options where client funds would take a haircut or be behind a lender in the capital stack,” Prince revealed, explaining how Blockfi received various offers from other firms. “These alternatives were completely unacceptable to me, [Flori Marquez] and our board and conflict with our core value of ‘Clients not Customers’ as well as the interests of Blockfi and our shareholders,” Prince concluded.