Leaked investor call: BlockFi backer Morgan Creek Digital aims to raise $250M to counter FTX's BlockFi bailout, since it could wipe out BlockFi shareholders
FTX's $250 million credit facility offer - if inked as initially proposed - stood to effectively wipe out all BlockFi shareholders …
CoinDeskTracy Wang
Context & Ripple Effects
FTX had already extended BlockFi a $250M credit line while discussing an equity stake, putting rescue financing and ownership negotiations on the same track. Morgan Creek Digital’s proposed alternative capital raise is an effort to preserve an outcome other than the shareholder wipeout embedded in the initial terms.
Morgan Creek Digital must assemble $250M quickly to offer BlockFi a financing path that does not impose the proposed shareholder wipeout.
FTX’s leverage over BlockFi is immediately contested, as its credit facility is no longer the only reported route to liquidity.
Second-order effects
BlockFi’s existing shareholders gain a potential negotiating lever against FTX, while FTX must weigh whether to improve terms or risk losing influence over the lender.
The competing proposals make the allocation of rescue capital central: financing terms determine not only BlockFi’s liquidity but who captures its remaining equity value.
Third-order effects
The episode points to distressed crypto lenders becoming acquisition targets for the counterparties able to supply emergency liquidity, with debt terms functioning as a route to control.
BlockFi’s subsequent disclosed exposure to Alameda and FTX illustrates how interconnected counterparties can turn a rescue transaction into a broader creditor-risk problem when the rescuer fails.
The trend: Crypto-market stress is concentrating control in the hands of firms that can provide emergency credit, while the terms of that credit reshape ownership and creditor risk.
SCOOP: @APompliano and @MarkYusko's Morgan Creek Digital are trying to put together an alternative rescue package for @BlockFi. Why? @FTX_Official's $250M credit line stood to wipe out BlockFi shareholders, including Morgan Creek. @0x_bae reports https://www.coindesk.com/...
What's happening in crypto is that unlike banks who can borrow from the Fed if there's a run on them, crypto lenders have no backstop outside a private bailout from folks like SBF (BlockFi) or Goldman (Celsius). Retail investors remain the biggest losers. https://twitter.com/...
My two cents — I'm a Blockfi equity holder, and wiping out equity holders is exactly what SHOULD happen if a bank/lender goes insolvent. Customer deposits must be protected at all costs. https://twitter.com/...
So the way I interpret this: - Sam made a $250m secured RCF, which is probably max drawn - Zac agreed to this ... to call bluff on any equity investors who were looking to receive token deposits - Sam wins either way: he has $250m payback if liquidation or APY % in high teens htt…
I'm not sure if CoinDesk can comment on Genesis, but it does look like 3AC will wipe out BlockFi, Voyager, Celsius, and likely all of Genesis' lifetime revenue (fortunately they have the DCG balance sheet behind them). Every major crypto lender. Gone. https://twitter.com/...
People seem surprised that the crypto bailouts are zeroing out equity in now-insolvent lenders and I am at least a little surprised that they are surprised. You ran a bank. The bank failed. What did you think was going to happen to the equity? What *should* happen to it? https://…
Today: BlockFi Faced with the prospect of getting a bupkis if SBF/FTX successfully schwoops in, Pomp's investment firm is trying to raise big money to protect its BlockFi bags. At issue: Should investors or depositors get first dibs? 3/x https://www.coindesk.com/...
In case anyone believed the LIE that @BlockFi wasn't about go under, the facility from @SBF_FTX was the only one that wouldn't have subordinated BlockFi's DEPOSITORS in a bk. In exchange, the FTX entity also received an option to WIPE OUT 100% of BlockFi's equity holders. 🌶 💰 htt…
aside from seeing some grifters suffer, the fascinating thing is so much of “crypto” is just a bunch of big money doing same old big money stuff like buying distressed assets at fire sale prices, wiping out equity. https://twitter.com/...
This cycle is different: crypto media is getting leaked calls from investors in high pressure situations... tradfi and trad comms tactics are now appearing in the once innocent realm of crypto media https://twitter.com/...
as an aside, blockfi was required to pay $100m to the federal and state governments earlier this year (not depositors) if they fail and/or retail gets pegged here, we should rethink where these fines go https://www.sec.gov/...
https://www.coindesk.com/... This article confirms that Blockfi credit line was essentially a bailout. The FTX deal effectively wipes out all prior equity investors. This seems unnecessarily draconian unless Blockfi was truly on the ropes. Wishing the best to the investors.
Yusko cautioned that while Morgan Creek was doing all it could to salvage its investment in BlockFi, success was far from assured. “It's not over, but it is definitely looking dark,” he said. END Great work @coindesk with the extensive coverage https://www.coindesk.com/...