Crypto Lender BlockFi Gains $250 Mln Credit Line From FTX

Crypto lender BlockFi said on Tuesday that it has signed a deal with crypto exchange FTX for a $250 million revolving credit facility.

The credit line will be used by BlockFi to meet its obligations with client balances, and will be “used as needed,” CEO Zac Prince said in a Twitter thread.

The deal comes amid one of the worst crypto downturns in recent history, which has liquidated several major players in the market, including lender Celsius, and hedge fund Three Arrows Capital (3AC).

BlockFi was likely exposed to 3AC. The firm recently said it had liquidated a loan where a “large client” failed to meet its obligations on an overcollateralized margin loan.

Earlier this week, FTX also offered a $485 million loan to crypto broker Voyager Digital, according to a report by Bloomberg.

BlockFi faces the heat from recent crypto crash

Tuesday’s loan announcement highlights the pressure on crypto lenders by an unwinding crypto market. While the lender had initially denied speculation that its finances were strained, the loan agreement with FTX may indicate otherwise.

Peer Celsius has already suspended withdrawals indefinitely, and is now undergoing restructuring- a step away from bankruptcy.

BlockFi recently announced that it would cut 20% of its headcount due to ongoing ructions in the crypto market. It was also fined $100 million by U.S. regulators earlier this year for selling unregistered securities.

FTX behind recent crypto market woes?

A bulk of the pressure faced by BlockFi and Celsius stems from a drop in the value of Lido-Staked Ethereum (stETH), a token commonly used as collateral in DeFi spaces.

But the token’s initial drop was triggered by Alameda Research- a trading desk backed by FTX CEO Sam Bankman-Fried. Alameda had earlier this month allegedly dumped all of its holdings in the token- about 50,000 stETH then worth $57 million. It swapped the tokens for ETH on Curve, causing a major imbalance in the DeFi platform’s liquidity pool- which in turn dented stETH prices.

The fall in stETH prices caused 3AC and Celsius to both face margin calls from their creditors, some of which they were likely unable to meet.

But Bankman-Fried has denied such speculation. The FTX founder recently called the notion a “dumb conspiracy theory.” 

With more than five years of experience covering global financial markets, Ambar intends to leverage this knowledge towards the rapidly expanding world of crypto and DeFi. His interest lies chiefly in finding how geopolitical developments can impact crypto markets, and what that could mean for your bitcoin holdings. When he isn’t trawling through the web for the latest breaking news, you can find him playing videogames or watching Seinfeld reruns.
You can reach him at [email protected]

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