BlockFi says it agreed to an option to be acquired by FTX for up to $240M; the deal also includes a $400M revolving credit facility from FTX

Troubled crypto lender BlockFi said Friday that it agreed to an option to be acquired by FTX for up to $240 million.

Axios 2022-07-02 Dan Primack

Context & Ripple Effects

BlockFi’s financing talks with FTX progressed quickly from a $250M revolving-facility term sheet to reported discussions over an equity stake without a settled agreement. The acquisition option ties that liquidity support to a defined path to ownership.

The arrangement matters beyond the funding itself: FTX later collapsed, and the related record describes major legal and financial fallout, making the deal an example of how a rescuer’s own stability can become central to a distressed borrower’s risk.

First-order effects

BlockFi receives access to a $400M revolving credit facility, while FTX obtains an option to acquire the lender for up to $240M.
The agreement replaces the earlier reported stake discussions with a structure that gives FTX both creditor exposure and a potential ownership route.

Second-order effects

BlockFi’s negotiating leverage shifts toward FTX because the same counterparty supplying liquidity also holds the acquisition option.
Other distressed crypto lenders and their funders face a sharper trade-off between rapid rescue financing and the control rights that can accompany it.

Third-order effects

The later collapse of FTX shows the structural counterparty risk in rescue deals: concentrating emergency funding and acquisition rights in one firm can transmit a rescuer’s failure to the companies it supports.

The trend: Crypto-market stress was pushing lenders toward rescue financing that paired immediate liquidity with investor control or consolidation rights.

Discussion

@blockfizac Zac Prince on x
(Long thread!) Excited to share an update on our previously announced term sheet with @FTX_US - and how we've broadened the scope of the initial deal for the benefit of all key @BlockFi stakeholders.
@blockfizac Zac Prince on x
Yesterday we signed definitive agreements, subject to shareholder approval, with FTX US for: 1. A $400M revolving credit facility which is subordinate to all client funds, and 2. An option to acquire BlockFi at a variable price of up to $240M based on performance triggers.
@brett_ftx Brett Harrison on x
FTX US is looking forward to working further with @BlockFiZac and the @BlockFi team! We're excited help bolster BlockFi's business and work together on paths towards strategic partnership! https://twitter.com/...
@pt Parker on x
I am genuinely confused how you sell for pennies on the dollar and the post-mortem characterizes it as a minor oopsie. https://twitter.com/...
@sbf_ftx @sbf_ftx on x
Really excited to work with @BlockFi https://twitter.com/...
@pitdesi @pitdesi on x
Actual price for BlockFi is “up to $240M” depending on performance + a $400m revolving credit facility. Still a far cry from the $3B a year ago (& we have no idea what's in the performance triggers and whether they will hit them)... https://twitter.com/...
@frances_coppola Cassandra Schadenfreude on x
Let's unpick this. It consists of two elements: - a call warrant with a variable strike price conditional on unspecified performance triggers - a subordinated credit facility. Both are bad news for ordinary shareholders. https://twitter.com/...
@crypto @crypto on x
The deal represents a discount to BlockFi's $3 billion valuation as of March 2021. BlockFi CEO Zac Prince said the company had about $80 million in losses from bad debt of Three Arrows https://www.bloomberg.com/... https://twitter.com/...
@ummjackson Jackson Palmer on x
“up to” doing a lot of work here https://twitter.com/...
@byrnehobart Byrne Hobart on x
You thought the crypto boom was over, but BlockFi's valuation went up almost 10x in a day! https://www.axios.com/...
@tomaxwell Thomas Maxwell on x
FTX to BlockFi https://twitter.com/...
@krugermacro @krugermacro on x
This is good news for the industry IMO. It removes uncertainty. https://twitter.com/...
@stephanlivera Stephan Livera on x
So the earlier leak was way off, $240M not $25M, and with a $400M credit facility. https://twitter.com/...
@haseeb Haseeb Awan on x
It's easy to criticize others but this seems to be a very good outcome for Clients. The stakeholders ( Investors/Founders/Employees etc) will absorb the losses. ( Disclosure: I've no relationship with BFi) https://twitter.com/...
@northrocklp @northrocklp on x
This is actually a pretty favorable outcome all things considered. https://twitter.com/...
@forexlive @forexlive on x
How does an $80m loss on a company that's raised $1 billion lead to a firesale? This is certainly not the whole truth. https://twitter.com/...
@tomaxwell Thomas Maxwell on x
it's just an option but still, blockfi has raised more than $2.1 *billion* from investors, so they're basically wiped out https://twitter.com/...
@twobitidiot @twobitidiot on x
Just to cut through the noise: + BlockFi took $80mm loss on 3AC + The issue was *fear* of a bank run + BlockFi's unwillingness to suspend withdrawals which led to a sale ("customers before company" broke the bank) + FTX deal locks in capital; upside for BlockFi principals
@coindesk @coindesk on x
JUST IN: BlockFi and FTX US reach deal that gives the exchange the right to acquire the crypto lender at a valuation up to $240 million, based on “performance triggers.” @realDannyNelson reports https://www.coindesk.com/...
@tomaxwell Thomas Maxwell on x
“up to” so still could sell for $25M, lol https://twitter.com/...
@danprimack Dan Primack on x
Again... We have zero clue how much of the $240 million is guaranteed. https://twitter.com/...
@danprimack Dan Primack on x
It's official: FTX has a deal with BlockFi. $240 million is high end of price range (as we reported earlier, all the deals include earnouts). No word on the low end, which may well be that $25m. No matter what, a huge loss for the investors.
@tomaxwell Thomas Maxwell on x
blockfi gave FTX the option to sell for 1/10th its last fundraising valuation, yikes https://twitter.com/...
@ryanlawler Ryan Lawler on x
FTX signs deal that could buy BlockFi for up to $240 million https://www.axios.com/...
@benhuh @benhuh on x
Lots of seed round caps are above $25M... (Yeah, I know cap is not cash.) https://twitter.com/...

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