FTX US, the United States division of Sam Bankman-Fried’s cryptocurrency derivatives exchange FTX has signed a “definitive agreement” worth $640 million with troubled crypto lender BlockFi.
According to BlockFi’s CEO Zac Prince, the terms of the agreement with FTX US include a $400 million revolving credit facility subordinate to all customer’s funds and a $240 million “option to acquire” the lending company based on certain performance targets. The deal, however, is subject to shareholders’ approval, the CEO said.
The agreement between the two companies comes after rumors emerged that FTX was planning to acquire BlockFi for $25 million, about a 99% discount from the $4.8 billion valuation the crypto lending platform recorded in 2021.
Prince stated that the inherent market volatility, particularly the recent market events with Celsius Network and Three Arrows Capital (3AC), a crypto hedge fund currently in insolvency due to a liquidation crisis, was the major reason BlockFi had to sign a deal with FTX US.
He further highlighted that BlockFi lost $80 million to 3AC’s liquidation crisis despite being one of the first lenders to liquate the hedge fund when it failed to meet its margin calls.
Prince also noted that news of rival Celsius halting withdrawals caused panic among BlockFi’s users, which led to increased withdrawal requests even though the company had no exposure to Celsius.
He stated that the latest deal with FTX US will not deter BlockFi’s obligations to customers nor will it affect the company’s operations.
“As a matter of principle, we fundamentally believe in protecting client funds. Not only because it’s absolutely the right thing to do, but this also benefits the ongoing health and adoption of crypto financial services worldwide. Therefore, it is important to add capital to our balance sheet to bolster liquidity and protect client funds,” Prince added.
Meanwhile, the CEO said that BlockFi had not drawn on the credit facility it received from FTX earlier in June/
Source: https://coinfomania.com/ftx-us-to-rescue-blockfi/#utm_source=rss&%23038;utm_medium=rss&%23038;utm_campaign=ftx-us-to-rescue-blockfi