FTX Bails Out BlockFi
Posted by Colin Lambert. Last updated: June 22, 2022
Hailed by the firms as a “landmark deal”, cryptocurrency exchange FTX has bailed out crypto lender BlockFi with the provision of a $250 million loan – the second such bailout by FTX is as many weeks after it lent more than $480 million (in cash and crypto) to lender Voyager Digital.
The crypto industry has been hit with a series of firms abandoning their stablecoins, closing their doors, cutting staff or failing to meet margin calls as prices in the still-nascent sector plummeted to two year lows. While the price of many crypto assets are still healthy compared to three or more years ago, the big problem seems to be more recent entrants to the space that have done so at much higher asset prices.
“Sometimes leadership means acting decisively and that’s what BlockFi did: removing troublesome counterparties before they become a problem, and adding cash before it was necessary,” Sam Bankman-Fried wrote in a tweet revealing the deal. ““BlockFi is financially strong; all operations are normal, as they always have been, and assets are safe.”
The proceeds of the FTX credit facility are intended to be contractually subordinate to all client balances across all account types at BlockFi, the firm says in a release, and will be used as needed to further bolster BlockFi’s balance sheet, “underscoring long-term stability for the company”.
This is not the first time that FTX has been involved in a bail out, last year it stepped in with financing for fellow crypto exchange Liquid, which had been hacked, but subsequently had to acquire Liquid. While it is not clear that the same course of events will follow here, BlockFi CEO and founder Zac Price says, “Today’s landmark announcement reinforces the commitment that BlockFi has to serving its clients and ensuring their funds are safeguarded. This agreement also unlocks future collaboration and innovation between BlockFi and FTX as we work to accelerate prosperity worldwide through crypto financial services. This is a significant step forward in our continued commitment to the strength and accessibility of cryptocurrency markets.”