FTX is rumored to be buying BlockFi, the probably-insolvent centralized crypto lender, for just $25M. BlockFi was a $4B company before the Terra, 3 Arrows Capital, and Celsius collapses. Now it's rumored to be selling for a 99% discount. All previous investors are said to be "wiped out."
BlockFi CEO Zac Prince called the 99% discount for BlockFi "market rumors" on Twitter, saying "I can 100% confirm that we aren’t being sold for $25M." I can see why Prince would be a bit salty. One year ago he was raising a $500M Series E at a $4B valuation. Now he's guaranteeing BlockFi will be sold for more than $25M.
To be honest, this is a bit surprising. Last month, we were praising BlockFi for acting first among the centralized crypto lenders. The company admitted it was in trouble and raised a down round in early June 2022. What's crazy is BlockFi raised that round at a $1B valuation–a 75% discount on its Series E in 2021. Unfortunately, it looks like crypto's rough June accelerated BlockFi's problems, as 3 Arrows Capital defaulted on some big loans, including a $1B loan from BlockFi. BlockFi failed to close the new round and never received the new funding.
Last week, FTX loaned $250M to BlockFi to help it “navigate the market from a position of strength,” according to FTX CEO Sam Bankman-Fried. It seems like the $250M was intended to help BlockFi keep withdrawals flowing.
BlockFi is said to be shopping for other acquisition deals, including talks with former investor Morgan Creek. It’s unclear what terms the $250M loan came with and how those terms could affect BlockFi’s ability to execute this fire sale.
This acquisition is yet another 1907 J.P. Morgan-style move executed by SBF, as the FTX and Alameda owner expands his empire during the bear market. SBF is said to be focused on BlockFi after passing on Celsius due to a “$2 billion hole” in its balance sheet.