The United States-based arm of leading crypto exchange FTX has entered into a new deal that would see it provide embattled crypto lender, BlockFi, a $400 million credit facility.
According to available information, the credit facility will be used to help improve the company’s current financial status.
The deal was announced by BlockFi’s Chief Executive Officer, Zac Prince in a Twitter thread on Friday.
Prince revealed that aside from the provision of the credit facility, another primary implication of the deal is that FTX now has the option to acquire BlockFi at a price of up to $240 million based on performance triggers.
He wrote that,
This, together with other potential consideration, represents a total value of up to $680M. We have not drawn on this credit facility to date and have continued to operate all our products and services normally. In fact, we raised interest rates, effective today.
The numbers agreed to in the deal sum up the recent troubles facing BlockFi. Recently, the company was valued at $2 billion, a figure that is eight times higher than the amount FTX could now acquire it for.
How BlockFi Got Here
Speaking on the factors that brought the company to its knees, Prince named the recent crypto market crash alongside the spate of issues currently facing Celsius Network and Three Arrows Capital.
According to him, the issues with these firms resulted in a situation where a significant majority of its clients started withdrawing their funds from the platform.
He added that the company has recorded roughly $80 million in losses due to the crisis.
Celsius Network had paused withdrawals in June citing extreme market conditions. Later in the month, a court ordered the liquidation of Three Arrow Capitals.
FTX on a Mission to Save Crypto Firms
Sam Bankman-Fried, in an interview, hinted that his firms could be open to giving “bailouts” to embattled crypto firms.
Since the interview, his firm had earlier given BlockFi a $250 million credit facility prompting speculations that he might be buying the firm for $25 million.
FTX had also reportedly backed out of a deal to acquire Celsius Network because the crypto lender had $2 billion unaccounted for on its balance sheet.