FTX agrees deal with option to buy BlockFi for up to $240mn

FTX has signed a deal with BlockFi that includes an option for the cryptocurrency exchange to buy the lending platform for up to $240mn, as digital asset firms grapple with the fallout from the crypto downturn.

BlockFi chief executive Zac Prince said on Twitter on Friday that the agreement included a $400mn revolving credit facility from FTX US, as well as an option to be bought at a “variable price . . . based on performance triggers”. 

The deal increases the scale of the aid to BlockFi from FTX, which last week extended BlockFi a $250mn loan.

“We have not drawn on this credit facility to date and have continued to operate all our products and services normally,” Prince added.

The deal represents a new step by Sam Bankman-Fried, FTX chief executive, to shore up crypto firms weakened by an acute credit crisis gripping crypto markets, which analysts have likened to a “Lehman moment” for the digital asset industry.

Through his companies, the 30-year-old billionaire has also extended loans to crypto broker Voyager Digital, totalling $485mn in cash and bitcoin. On Friday Voyager announced that it was “temporarily suspending trading, deposits, withdrawals and loyalty rewards” from 2pm Eastern Time in the US. The terms attached to the loan limit the amount Voyager can draw in any 30 day period to $75mn.

Voyager chief executive Stephen Ehrlich said the move “gives us additional time to continue exploring strategic alternatives with various interested parties while preserving the value of the Voyager platform”. The company added that it was “actively pursuing all available remedies” to recover more than $650mn it lent to struggling hedge fund Three Arrows Capital, which fell into liquidation this week.

If FTX acquires BlockFi, the deal would likely value the crypto lender at around $150mn, according to people close to the transaction.

On Thursday, CNBC had reported that FTX was expected to pay roughly $25mn for BlockFi, a figure Prince denied. The company was valued at $4bn after a $500mn funding round last summer, according to Crunchbase data.

In his Twitter thread on Friday, Prince said that as crypto asset prices had dropped, a move by lending platform Celsius last month to stop customers from withdrawing their assets led to an “uptick in client withdrawals from BlockFi’s platform despite us having no exposure to them”.

He also said that the company was hit by $80mn in losses due to its exposure to Three Arrows Capital.

Prince said he had turned down various other rescue options that would have resulted in client funds taking a haircut, adding: “As a matter of principle, we fundamentally believe in protecting client funds.”

BlockFi earlier this month announced plans to shed a fifth of its staff, as many crypto firms cut jobs to weather the downturn in crypto markets. Token prices have fallen by around 70 per cent from their peak last autumn.