Crypto Exchange FTX Pays “Up to” $240 Million in Potential BlockFi Purchase | 08/09/22

After the crypto market crash, Bitcoin billionaire and FTX CEO Sam Bankman-Fried rushed to the aid of crypto companies like BlockFi and Voyager Digital. Not entirely without ulterior motives, it seems, because now the crypto exchange FTX BlockFi could possibly buy for a fraction of the said “up to” 240 million US dollars.

• FTX CEO Sam Bankman-Fried helps BlockFi and Voyager Digital
• Credit facility and option to purchase BlockFi
• FTX plans to buy BlockFi for up to $240 million

According to figures from a letter to shareholders, the crypto exchange FTX should have increased its revenue by 1,000 percent last year, generating 1.02 billion US dollars. FTX owes this to a whole series of company takeovers. The next takeover is already tempting: FTX could buy the crypto finance company BlockFi – and possibly for a good price.

Bankman-Fried becomes the savior of crypto companies

After the crypto market took a beating this year, FTX co-founder Sam Bankman-Fried announced via Twitter that crypto firm BlockFi would receive a $250 million funding injection to “start it from a strong position to trade out”.

In addition, thanks to the Bitcoin billionaire, the Voyager Digital crypto exchange could look forward to a credit limit of 200 million US dollars.

According to Bloomberg, hedge fund manager Anthony Scaramucci said of Bankman-Fried’s move: “Sam Bankman-Fried is the new John Pierpont Morgan – he’s saving cryptocurrency markets like JP Morgan did after the 1907 crisis.”

FTX CEO not entirely altruistic

In rescuing these crypto companies, however, Bankman-Fried is not acting entirely altruistically, because Bankman-Fried’s crypto exchange FTX is also dependent on the crypto market stabilizing again. And this is how the Bitcoin billionaire sees his duty to act in the current time of crisis: “I think we have a responsibility to seriously consider whether we should help slow down the spread, even if it means a loss for us. Even if we didn’t trigger this or we weren’t involved. I think it’s the best thing for the ecosystem and I want to do what I can to help it grow and thrive.” , Bankman-Fried said in an interview with NPR.

Credit facility and option to buy BlockFi

After BlockFi announced on its blog on June 21 that the company had signed a term sheet with FTX to secure the so-called “$250 million revolving credit facility that provides BlockFi access to additional capital,” the company announced that the company will provide an update to this. Term Sheet on 1 July. The revolving credit facility increased to $400 million, and alongside it, BlockFi gave FTX an option to acquire the crypto-financial services company for a variable price of up to $240 million — “based on performance triggers,” the company explained in a blog contribution. “Together with other potential considerations, this represents a total value of up to $680 million.”

BlockFi acquisition: FTX wants to pay up to $240 million

That “up to” should be looked at more closely when considering how much FTX could buy BlockFi for, as FTX’s option to acquire BlockFi includes performance measures around a key SEC approval and an increase in client assets, CoinDesk reports, citing people who familiar with substance. Only if these targets are met will the purchase price increase to US$240 million. Otherwise, the price may be much lower.

Two people with direct knowledge of the matter told CoinDesk that FTX US could eventually be allowed to buy BlockFi for as little as $15 million. That’s the minimum price for the deal, which is again well below the $25 million that CNBC reported in a report a few months ago. At the time, BlockFi CEO Zac Prince dismissed the deal as market rumours, saying on Twitter: “I can 100% confirm that we are not being sold for $25 million.”

Those are the requirements

As CoinDesk reports, the sources explained that FTX US would pay an additional $25 million if BlockFi received an S-1 filing for BlockFi Yield by the end of the year. Then it would be the first crypto platform with an SEC-registered lending product, which would give BlockFi a huge advantage over its competitors.

In addition, FTX US would pay an additional $100 million if BlockFi reached at least $10 billion in customer assets until the company exercises its call option. By comparison, BlockFi had at the end of 2. quarter 2022 only $4.4 billion under management – less than half of its goal.

In the end, FTX US agreed to pay an amount equal to 25 percent of BlockFi’s annual operating revenue, up to a maximum of $100 million, CoinDesk reports, citing the sources.

According to CoinDesk, these conditions to which FTX is attaching its purchase price make it clear what is particularly interesting to FTX about BlockFi — namely, the billions of dollars in retail client assets and the prospect that BlockFi will soon become the first crypto platform with an SEC — could be registered credit product. Both fit FTX US’s strategy of attracting retail users to its new stock trading platform and gaining regulatory approvals through acquisitions.

A BlockFi spokesperson declined to comment on the legality of the financials and the report, according to CoinDesk. A spokesman for FTX also declined to comment.

So it remains to be seen how BlockFi’s business will continue to develop, whether the company will meet its stated goals, and how much FTX will ultimately pay, or whether the deal will go through at all, because according to CoinDesk, BlockFi CEO Zac Prince stated that FTX will not exercise its call option until October 2023, and BlockFi can buy back FTX’s option at any time for “two to three times the capital that FTX has committed to the deal.”


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