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Morgan Creek said to try to counter FTX’s BlockFi bailout

·2 min read

Asset manager Morgan Creek Digital is trying to raise US$250 million to counter crypto exchange FTX’s bailout of beleaguered crypto lender BlockFi, according to a report by CoinDesk.

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

Fast facts

  • Morgan Creek is attempting to raise funds to purchase a majority stake in BlockFi, the report said, citing a leaked investor call from last week.

  • The American asset manager is one of BlockFi’s largest investors, participating through BlockFi’s D series fundraise.

  • The move comes after FTX offered to extend a US$250 million revolving credit facility to BlockFi.

  • On the call, Morgan Creek managing partner Mark Yusko said BlockFi had not received any equity financing options at the time.

  • Among other credit offers, FTX was the only one that offered to not subordinate client assets to an investor, Yusko said. Otherwise, depositors would have to wait for a new lender to be repaid, he added.

  • But in return, FTX got the option to buy BlockFi “at essentially zero price,” with only investors in the most senior tranche of the company’s latest raise getting compensated, Yusko said.

  • “The only alternative is to raise an equivalent amount in equity and that’s what we’re working on,” Yusko told investors on the call. “I would say it’s a 10% possibility but not zero.”

  • On Friday, The Wall Street Journal reported that FTX was in talks to acquire an equity stake in BlockFi.

  • Yusko said Morgan Creek was open to pursue a joint deal. “Not that I have SBF on speed-dial, but I could probably get that call,” he reportedly said.

  • A potential lead investor had agreed to offer US$100 million in funds with two other investors expressing interest to put up US$50 million towards a Morgan Creek bid, Yusko said.

  • Pomp Investments, the family office of Anthony “Pomp” Pompliano, participated in BlockFi’s D series, the crypto lender’s website showed Monday.

  • Until September of 2020, Pompliano was a partner and the cofounder of Morgan Creek Digital, a multi-strategy investment firm backed by Morgan Creek Capital Management, his verified LinkedIn profile accessed by Forkast on Monday showed.

  • Pompliano was with Morgan Creek when the firm invested in the crypto lender’s C series raise in August of 2020 and invested through his family office in the D series raise in March of 2021.

See related article: BlockFi among those that foreclosed on Three Arrows Capital: report