Key points to remember
- BlockFi secured a $250 million credit facility from crypto exchange FTX.
- BlockFi CEO Zac Prince said the deal would “unlock future collaboration and innovation between BlockFi and FTX.”
- The new credit facility may help ease fears that BlockFi is facing a liquidity crunch.
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BlockFi CEO Zac Prince said the loan would strengthen the company’s balance sheet and platform strength.
BlockFi accepts credit from FTX
BlockFi has partnered with FTX for a new line of credit.
CEO Zac Prince announcement in a Twitter thread on Tuesday that BlockFi had secured a $250 million credit facility from crypto exchange FTX. The deal, which Prince said would strengthen the firm’s balance sheet and platform strength, provides BlockFi with a $250 million umbrella loan.
Although the details of the agreement have not been made public, credit facilities such as this often give the companies that receive them greater flexibility in the amount of debt incurred and the repayment term compared to other loan agreements. Prince added that the deal would also “unlock future collaboration and innovation between BlockFi and FTX,” hinting at a closer working relationship between the two companies in the future.
Early last week, BlockFi announced it would cut 20% of its workforce, raising questions about the company’s finances. More recently, a report from FinancialTimes revealed that the company had liquidated a loan made to prominent crypto hedge fund Three Arrows Capital. Although he assured viewers that no customer funds were affected by Three Arrows’ default, rumors that BlockFi was facing a liquidity crunch continued to circulate online. Many fear the firm is in a similar position to rival lending platform Celsius, which reportedly does not hold enough cash to pay its depositors.
Not-confirmed reports from a leaked BlockFi balance sheet also indicates that the company may be in financial trouble. The leaked financial statement indicates that BlockFi has lost more than $285 million over the past two years and currently only holds enough liquid assets to repay a tiny portion of its depositors’ total funds. If true, such rumors would also help explain why the company is to have problems attracting investment in its most recent funding round, despite having dramatically reduced its valuation from the $3 billion it reached in March last year to $1 billion today.
After exploring other avenues of funding, BlockFi may have finally found a lender willing to help it weather the current market downturn. In a recent interview with NPR, FTX CEO Sam Bankman-Fried said he believes his company has a “responsibility” to bail out crypto companies in times of crisis. With the new $250 million cash injection, BlockFi may be the first company to benefit from Bankman-Fried’s new altruistic policy.
Disclosure: At the time of writing this article, the author owned ETH, FTT, and several other cryptocurrencies.