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BlockFi’s deal with Sam Bankman-Fried’s FTX will prioritize clients

·2 min read

The crypto lender signed definitive agreements with FTX US for a US$400 million revolving credit facility that will be subordinate to all client funds. The crypto exchange also has an option to acquire BlockFi for about US$240 million based on performance targets.

See related article: Sam Bankman-Fried steps in to bail out BlockFi

Fast facts

  • Client funds will be prioritized as part of the deal, BlockFi CEO and founder Zac Prince said on Saturday, expanding on a previous term sheet for a US$250 million revolving credit facility from the cryptocurrency exchange.

  • BlockFi has not drawn on this credit facility to date and continues to operate all products and services normally, Prince said.

  • However, the crypto lender did book about US$80 million in losses, a fraction of what other lenders publicly reported, he said.

  • News of Celsius Network pausing withdrawals and transfers led to “an uptick in client withdrawals” from BlockFi’s platform, Prince said.

  • It wasn’t immediately clear if FTX’s option to buy BlockFi compensates only the investors in the senior-most tranche of the company’s latest raise.

  • BlockFi investor Morgan Creek previously said it was preparing a counter offer as FTX’s term sheet would allow it to buy the crypto lender “at essentially zero price,” according to a CoinDesk report of a leaked call between the U.S. asset manager and its investors.

  • “I am extraordinarily disappointed that an inappropriately leaked call led to reporting on potential negative impacts to the BlockFi team,” Prince said on Saturday. “These comments were purely personal conjecture by a single party and were subsequently retracted.”

  • Morgan Creek did not immediately respond to Forkast’s request for a comment in an email sent outside of normal U.S. business hours.

See related article: Three Arrows Capital files for Chapter 15 bankruptcy