Crypto lender BlockFi is struggling to raise funds despite offering to take a steep discount to its valuation, raising the risk that it will be forced into financial restructuring, The Post has learned.
The Jersey City, NJ-based startup, which raised $400 million last fall in a funding round valuing the company at $5 billion, has been trying for at least a month to raise $100 million for a valuation of just $1 billion – a haircut that equates to 80% over six months, according to people briefed on the situation.
BlockFi adviser JPMorgan touted the deal as a massive bargain and reached out to potential investors this week who have already said they weren’t interested in participating in the round, a source said.
Still, insiders say investors are increasingly concerned that the firm could soon end up like crypto lender Celsius Network, which this week hired restructuring advisers after freezing all withdrawals, trades and transfers last week. due to market volatility, said a source familiar with the situation.
“That could be next,” the source said, referring to BlockFi.
“BlockFi does not comment on market rumors,” a company spokeswoman told The Post on Friday.
A JPMorgan spokesperson declined to comment.
On Thursday, BlockFi Founder and CEO Zac Prince tweeted, “Over the past five years, BlockFi has been battle tested in all types of market conditions. Throughout this current period of market volatility, BlockFi continues to respond to all withdrawal requests in accordance with our Terms of Service.
Previous BlockFi investors included Bain Capital Ventures, Valar Ventures, Galaxy Digital, Akuna Capital, SoFi, and Coinbase Ventures.
BlockFi confirmed on Thursday that a large customer recently defaulted on a margin loan, Bloomberg reported. BlockFi “fully accelerated the loan and fully liquidated or covered all associated collateral,” BlockFi chief executive Zac Prince said on Twitter. “We believe we were one of the first to act with this counterparty.”
Prince did not name the client but earlier the Financial Times reported that BlockFi was among the firms that liquidated at least some of their positions with Three Arrows, a giant Singapore-based hedge fund that focuses on cyrpto which apparently failed to answer margin calls.
On Tuesday, Three Arrows co-founder Zhu Su tweeted that the company had pledged to “fix this” without giving further details.
BlockFi recently cut its workforce by 20% and a spokesperson told Bloomberg that its management team, including founders Prince and Flori Marquez, took a pay cut. Bloomberg earlier reported that BlockFi was looking to raise funds at a reduced valuation of $1 billion, citing unnamed sources.
Dan Loeb’s Third Point was set to become BlockFi’s top round investor last fall, but pulled out because the Securities and Exchange Commission began investigating crypto lending making Loeb nervous, the source said. .
The SEC in February reached a $100 million settlement with BlockFi and 32 states for failing to register offers and sales of its retail crypto lending product, according to a public filing.
BlockFi in the settlement agreed to stop unregistered sales.
The Texas securities regulator said on Thursday it was investigating Celsius’ plan to freeze withdrawals and transfers, according to Reuters, and several other states have also reportedly begun their own investigations.
Crypto news service The Block first reported on the BlockFi fundraising earlier this month.