Crypto lender BlockFi’s CEO, Zac Prince, announced Tuesday morning on Twitter that the company has secured a $250 million revolving line of credit from crypto exchange FTX.
On his page, he wrote in a Twitter thread, “Today @BlockFi signed a term sheet with @FTX_Official to secure a $250M revolving credit facility providing us with access to capital that further bolsters our balance sheet and platform strength.”
Prince said the proceeds from the FTX loan are contractually subordinated to all client balances, meaning that BlockFi will satisfy its obligations on client accounts—BlockFi Interest Accounts, BlockFi Personalized Yield and loan collateral—before paying FTX.
The company has been especially hard hit in the downturn. Last week BlockFi joined the growing list of firms reducing their workforce to weather the crypto winter, cutting its staff by “roughly 20%.”
At the time, Prince said on Twitter that all BlockFi’s products and services would continue to operate normally. Although, Celsius, one of BlockFi’s crypto lending competitors, froze all its operations last week due to “extreme market conditions.” Yesterday, Celsius announced that it needs more time before starting the operation.
Amid the market crisis last week, BlockFi was dealt a major blow when the company made a $1 million payment to the Iowa Insurance Division as part of a larger $100 million penalty that BlockFi agreed to pay to settle an investigation into its high-yield accounts.
BlockFi’s Future Collaboration
In his announcement of the line of credit from FTX, Prince hinted that it could open the door to a partnership between FTX and BlockFi.
“This agreement also unlocks future collaboration and innovation between BlockFi & FTX as we work to accelerate prosperity worldwide through crypto financial services,” he said on Twitter.
The feeling seems to be mutual. Yesterday, FTX CEO Sam Bankman-Fried said the cryptocurrency exchange has a “responsibility” to bail out struggling companies during this unrelenting bear market.
Speaking to NPR this weekend, Bankman-Fried said of the current crypto crash, “I do feel like we have a responsibility to seriously consider stepping in, even if it is at a loss to ourselves, to stem contagion.” He added, “Even if we weren’t the ones who caused it or weren’t involved in it. I think that’s what’s healthy for the ecosystem, and I want to do what can help it grow and thrive.”
“The core driver of this has been the Fed,” Bankman-Fried said, referring to the Federal Reserve’s decision to raise interest rates by 0.75%, the largest hike since 1994. This has had a knock-on effect on crypto prices; when fiscal policies tighten, people dump their riskier assets. “Markets are scared,” said Bankman-Fried. “People with money are scared.”
