Sam Bankman-Fried’s FTX is taking advantage of the runaway volatility in the crypto lending market to make a name for itself by supporting major institutions.
The US arm of the company has struck a deal with troubled crypto lender BlockFi that gives them the opportunity to buy the startup, recently valued at $2 billion, for $240 million depending on the startup’s performance. BlockFi CEO Zach Prince did not reveal what the bottom of the deal could look like in a thread revealing the terms of the deal on Twitter. This announcement came after CNBC report yesterday estimated the deal at $25 million.
In addition to the acquisition opportunity, as part of the deal, FTX US is providing BlockFi with a $400 million revolving line of credit to bolster its finances amid market uncertainty.
This is a dramatic twist for a centralized exchange that allowed users to buy, sell and earn cryptocurrencies. In the thread, Prince pointed to “[c]crypto market volatility, especially Celsius and 3AC-related market events” as catalysts for the company’s financial troubles that led to clients withdrawing their funds from the platform. The ongoing collapse of crypto-currency hedge fund 3AC has left BlockFi with an estimated $80 million in losses, Prince notes.
While the deal appears to be far from a happy ending for BlockFi’s venture backers, it’s likely a relief for clients who are still holding funds with the lender.
“As a matter of principle, we fundamentally believe in protecting client funds. Not only because it is absolutely correct, but also because it benefits the continuous development and implementation of crypto-financial services around the world, ”says Prince.
For FTX CEO Sam Bankman-Fried, the deal represents another opportunity for his cryptocurrency exchange to expand its ambitions as its main US rival struggles with the boom and bust of US public markets.
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