The agreement between FTX and BlockFi gives FTX the right to buy BlockFi.

Teddy Sagi
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KEY POINTS

  • The deal between FTX and BlockFi gives FTX the right to buy BlockFi for up to $240 million. The business did not say what the cheapest price would be.
  • FTX also raised the amount of its previous loan from $250 million to $400 million.
  • One of BlockFi’s partners goes bankrupt, the hedge fund Three Arrows Capital shuts down, and the crypto market’s declining market claims more victims.

FTX has signed a deal that gives it the right to buy BlockFi, a company that lends crypto.

Friday, the company said that the agreement lets FTX buy BlockFi for a maximum of $240 million. The price of the deal depends on achieving some specific goals. The company didn’t say what the lowest deal price would be.

A source told CNBC on Thursday that a deal might happen for as little as $25 million by the end of the week. Even at the high end of FTX’s deal price, BlockFi’s value has significantly dropped. PitchBook says that the last value of the Jersey City, New Jersey-based company was $4.8 billion.

FTX also increased a previous amount of $250 million in loans to $400 million.

Executives at BlockFi said that the company has not used this loan yet and has “continued to operate all our products and services normally.”

Sam Bankman-Fried, the CEO of FTX, has been thought of as a lender of last resort in the space. Along with BlockFi, Bankman-Fried’s company Alameda Research gave Voyager a loan of $500 million.

BlockFi agreed to the deal because of the uncertainty of the cryptocurrency market. Moreover, the failure of the hedge fund Three Arrows Capital. It also mentioned the troubled cryptocurrency company Celsius. The company froze customer deposits two weeks ago, saying that “extreme market conditions” made it necessary. BlockFi stated that the number of client withdrawals had gone up that week, even though it had nothing to do with Celsius.

BlockFi said it has suffered $80 million in losses, “which is a small fraction of losses publicly reported by other lenders.” Its losses with the hedge fund will be part of Three Arrows’ ongoing bankruptcy case, the company said.

“Outside of this transaction, we realize that there is a lot of fear, uncertainty, and doubt in the crypto markets,” BlockFi CEO Zac Prince said. “From our vantage point, we continue to see a healthy ecosystem on the rise.”

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