Sam Bankman-Fried, CEO of cryptocurrency exchange FTX, at the Bitcoin 2021 conference in Miami, Florida on June 5, 2021.
Eva Marie Uzcategui | Bloomberg | Getty Images
FTX has signed a deal giving it the option to buy crypto lending company BlockFi.
The deal gives FTX the option to buy BlockFi for up to $240 million, the company announced on Friday. The transaction price is based on certain performance targets. The company did not give a minimum sale price.
CNBC reported on Thursday that a term sheet would be signed by the end of this week, with a source saying it could be as low as $25 million. Even at the high end of FTX’s sale price, this marks a significant decrease in BlockFi’s value. The Jersey City, New Jersey-based company was last worth $4.8 billion, according to PitchBook.
The term sheet also supplements BlockFi’s balance sheet with a larger loan.
FTX increased a previous $250 million revolving credit facility to a total of $400 million. BlockFi executives said the company has not drawn on that credit facility to date and has “continued to operate all of our products and services as normal.”
FTX CEO Sam Bankman-Fried has been seen as a lender of last resort in the space. In addition to BlockFi, Bankman-Fried’s Alameda Research provided a $500 million loan to Voyager.
As to why BlockFi agreed to go ahead with the deal, the company pointed to the volatility of the crypto market and the failure of hedge fund Three Arrows Capital. He also pointed to beleaguered crypto firm Celsius, which froze customer deposits two weeks ago citing “extreme market conditions.” BlockFi said it saw an increase in customer withdrawals that week, despite having no exposure to Celsius.
BlockFi said it suffered losses of $80 million “which is a small fraction of the losses publicly reported by other lenders.” His losses with the hedge fund will be part of Three Arrows’ ongoing bankruptcy case, the company said.
“Outside of this transaction, we realize there is a lot of fear, uncertainty and doubt in the crypto markets,” said BlockFi CEO Zac Prince. “From our perspective, we continue to see a healthy ecosystem on the rise.”
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