BlockFi Inks $250M Credit Deal With FTX To Ease Liquidity Fears
FTX CEO Sam Bankman-Fried says his company takes seriously its duty to protect the digital asset ecosystem
Blockworks exclusive art by Axel Rangel
key takeaways
- The proceeds of the credit facility are intended to be contractually subordinate to all client balances, according to BlockFi CEO Zac Prince
- FTX-associated Alameda Research previously provided $500 million in funding to Voyager
Crypto exchange FTX continues to stay busy amid the crypto market downturn, revealing on Tuesday that it has agreed to support BlockFi with a $250 million revolving line of credit.
FTX CEO Sam Bankman-Fried said in a Tuesday tweet that his company takes seriously its duty to protect the digital asset ecosystem and its customers.
The partnership with BlockFi follows Alameda Research, a trading firm founded by Bankman-Fried, lending crypto broker Voyager Digital $500 million. The capital gives the firm more flexibility to mitigate current market conditions, Voyager CEO Stephen Ehrlich said in a statement.
FTX also agreed to acquire Canadian crypto trading firm Bitvo last week. Bankman-Fried told Blockworks in April that difficult market conditions could trigger a wave of mergers and acquisitions, and that it “wouldn’t be totally shocking” for the company to acquire some shrinking exchanges.
The proceeds of the credit facility are intended to be contractually subordinate to client balances across all BlockFi account types and will be used to bolster BlockFi’s balance sheet.
BlockFi CEO Zac Prince said in a statement that the deal will help ensure client funds are safeguarded, noting that it also unlocks future collaboration and innovation between the firm and FTX.
Prince told Bloomberg that BlockFi received a higher volume of withdrawal requests last week, but noted the trend is returning to normal.
The capital injection comes as the industry grapples with recent cryptocurrency price plunges.
Prince revealed on Twitter last week that the company would be reducing staff by around 20%, noting that “the dramatic shift in macroeconomic conditions” had hurt BlockFi’s growth rate.
The crypto lender also confirmed on Thursday it liquidated an unnamed “large client” that failed to meet its obligations on an overcollateralized margin loan. The Financial Times reported that crypto hedge fund Three Arrows Capital (3AC) was the counterparty involved.
“BlockFi has careful risk management and great leadership. So they successfully removed at-risk counterparties preemptively,” Bankman-Fried said in a Twitter post Tuesday. “BlockFi customer assets are appropriately managed, with no debt/risk from 3AC, Celsius, etc.”
The CEO added in the Twitter thread that FTX would partner with BlockFi to offer “industry-leading products” going forward.
An FTX spokesperson declined to comment further on the company’s decision to partner with BlockFi or what future collaboration with the firm could entail.
This story was updated on Jun. 22 at 6:20 am ET.
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