Sam Bankman-Fried to buy BlockFi in $25 million deal

Sam Bankman-Fried is reportedly close to buying BlockFi in a deal worth about $25 million. This development follows reports that FTX granted an emergency $250 million line of credit to struggling crypto lender BlockFi, following which it warned the[...]

FTX is reportedly close to purchasing BlockFi in a deal valued at around $25 million. The deal follows FTX's reported issuance of an emergency $250 million credit line to the troubled crypto lender, BlockFi.

BlockFi was close to finalizing a round, which would have valued the company at $1 billion.

The Purchase 

With the term sheet almost finalized, sources close to the matter have revealed that it is expected that the deal will be signed and completed by this week. The deal signifies a staggering fall for BlockFi, with FTX expected to pay around $25 million for the embattled company. This figure is 99% lower than BlockFi's last private valuation.

A different source with knowledge of the matter estimated that the deal's price is closer to $50 million. For some context, BlockFi was valued at $4.8 billion last time it was checked in on. However, there is a possibility that the price will change between now and Friday, when the acquisition is expected to be completed; the deal could end up being an option for acquiring BlockFi at a later date, depending on regulatory approval.

Uncertainty Surrounding Actual Estimate

Reports also revealed that the end of the quarter served as a catalyst for the deal. Initial reports stated that FTX was looking to acquire an equity stake in the company, while other reports emerged stating that there was an outright sale in the works. FTX refused to comment on the speculation, with a spokesperson saying that they would not be commenting on this matter. However, Zac Price, BlockFi CEO, pushed back against reported figures and took to Twitter to respond:

“I can 100% confirm that we aren’t being sold for $25M. I encourage everyone to trust only details that you hear directly from @BlockFi. We will share more [with] you as soon as we can.”

A $250 million line of credit 

The sale came only a week after FTX extended a $250 million line of credit to BlockFi. At the time, Sam Bankman-Fried, CEO of FTX, said that the line of credit would help BlockFi navigate the current market situation from a position of strength. Bankman-Fried has been emerging as a lender of last resort in recent times; Alameda Research had given Voyager a $500 million loan.

The Market is Stagnant 

BlockFi's sale appears to be the latest setback for the crypto markets and crypto lending companies, with market prices plummeting. Lending companies have struggled with liquidity issues as counterparties fail to meet margin calls. Earlier, Celsius and CoinFLEX had halted customer withdrawals citing extreme market conditions. 

Three Arrows Capital, a crypto hedge fund, has also been liquidated. It is one of the biggest casualties of the current market situation. Sources reported that equity investors in BlockFi have been “wiped out” and are writing off their losses. The source revealed that multiple offers were being considered.