Blockfi co-founder Zac Prinse said that the company had signed definitive agreements with FTX, and the deal is still subject to shareholder approval. Prince noted that the deal amounts to $680 million. However, $240 million could be used to purchase Blockfi at a fixed price.
Zac Prince, co-founder of blockfi explained that his company had reached an agreement with Sam Bankman Fried’s crypto firm FTX. The agreement is intended to “protect client funds” but is still subject to shareholder approval. Prince revealed that a part of the agreement was a “$400 million revolving credit facility, which is subordinate all client funds.” Additionally, Blockfi CEO said that FTX had “an option to acquire Blockfi at a variable cost of up to $240M based upon performance triggers.”
Prince explained that Blockfi had not yet drawn on its credit facility and that the company raised interest rates to fund its Blockfi Interest Accounts. The company’s rate increase announcement notes stated that Blockfi rates have increased for BTC and Ethereum as well as USDC, GUSD. PAX, USD, BUSD and USDT at all rate levels. Blockfi’s executive explained why the company was in such a dire situation, mentioning the crypto lender Celsius as well as the crypto hedge fund Three Arrows Capital (TAC). Prince stated that Blockfi was not exposed to Celsius. However, Celsius freezing withdrawals led to a significant increase in client withdrawals on the Blockfi platform.
Blockfi was exposed to the crypto hedge funds that filed for Chapter 15 bankruptcy. “[As] 3AC News spread further fear in market… we were among the first to fully speed up our over collateralized loans to 3AC as well as liquidate all collateral and hedge all collateral,” Prince commented. “Blockfi did suffer $80M losses which is only a fraction of the losses reported by other parties,” said Blockfi CEO.
This is the extent of Blockfi’s impact from 3AC. Blockfi will absorb any losses that we have experienced and avoid any further exposure. Client funds will not be affected.
Blockfi was presented to ‘Clients not Customers’ — Blockfi was presented ‘with Various Unattractive Option where Client Funds Would Get a Haircut.
Prince stated that 3AC losses by the company will be part of the hedge fund’s “ongoing bankruptcy cases(s).” The Blockfi executive also noted that more information about those proceedings will be available as they progress. Prince said that our risk framework includes counter party credit analysis and collateral haircuts. Portfolio limits are based on stress testing and we have zero client money in [decentralized finance] protocols.
The CEO stated that Blockfi has always had its main objective to protect client funds. Prince also noted that Blockfi must strengthen the company’s balance sheets.
“We were presented various unattractive options in which client funds would be taken a haircut or behind a lender on the capital stack,” Prince explained. He also revealed how Blockfi was offered various deals from other firms. Prince stated that these alternatives were unacceptable to Flori Marquez and my board. They also conflict with our core value of “Clients Not Customers” and the interests of Blockfi as well as our shareholders.
