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BlockFi has seen its total valuation drop to $1 billion and is now using a down round to raise much-needed funds.
Crypto company BlockFi is set to close a down round at a lower valuation than previous raises, according to reports. This development comes amid the relatively general contraction of the crypto marketplace from its record high last November.
BlockFi was reportedly raising funds at a valuation exceeding $5 billion in 2021. In March last year, the company raised $350 million at a valuation of $3 billion. In addition, BlockFi was also reportedly set to raise an additional $500 million in a Series E funding round in July 2021. This was to be another stepping stone for the New Jersey-based company going public down the line en route. However, the crypto financial services firm now looks to raise fresh capital at a $1 billion valuation. This is a strong indicator that the shrinking of crypto and tech stocks valuations that hit public markets is also crossing over to private markets.
Furthermore, BlockFi’s looming down round reflects the present macro-economic issues in the crypto space and ongoing regulatory uncertainty surrounding crypto-focused firms. The issue affects BlockFi, which offers high-interest payouts against crypto holdings.
According to inside sources, venture investment firm Bain Capital Ventures will spearhead the new down round. In addition, there will also be participation from other venture capital platforms such as DST Global and Valar ventures.
A down round occurs when a private company seeks to generate more capital but discovers that it now has a lower valuation compared to previous financing. Consequently, the company must use a smaller valuation as the basis for funding, offering additional shares at a reduced price.
Other Notable BlockFi News Besides Down Round
BlockFi also weathered some regulatory challenges earlier this year with the Securities and Exchange Commission (SEC). In February, the crypto firm agreed to pay a total of $100 million to the Commission as part of a settlement over registration charges. According to the SEC, BlockFi failed to register its Interest Accounts, which is the crypto firm’s retail crypto lending product. In addition, 32 state regulators also joined the SEC to charge BlockFi. The charge accused the company of failing to acknowledge its high-yield lending products as a securities offering.
BlockFi chose to forego contending the allegations and instead opted to pay the SEC a $52 million settlement. The firm also paid another $52 million to the 32 states over the same accusation. Commenting on BlockFi’s concession, SEC Chair Gary Gensler said at the time:
“This is the first case of its kind with respect to crypto lending platforms. Today’s settlement makes clear that crypto markets must comply with time-tested securities laws.”
Meanwhile, BlockFi has since indicated that it looks to offer more than 600,000 users a similar product in light of the payout. However, this time, the crypto financial services firm suggested that it would first secure the requisite regulatory approvals.