Crypto Exchange Operator FTX Is Seeking to Acquire BlockFi Outright

According to reports, cryptocurrency exchange operator FTX is reportedly looking to acquire now-troubled crypto firm BlockFi outright. The latest news follows rumors that FTX was in talks to acquire a stake in the cryptocurrency lender, which this month entered into a $250 million loan deal with FTX.

Additional reports state that the deal provided FTX an option on 50% of the ownership in BlockFi, with the remaining portion costing $25 million to purchase. An attempt to get BlockFi to speak, however, proved futile as a spokesperson for the firm stated, “BlockFi does not comment on market rumors. It would be inappropriate to suggest any claims made outside of official BlockFi channels as anything more than pure speculation.”

BlockFi, over the last few weeks, has been the center of rumors in the crypto world. Earlier this week, a leaked call from a Morgan Creek Digital investor revealed that the cryptocurrency investment firm is attempting to fund $250 million to acquire a majority stake in BlockFi, cutting down existing equity holders’ ownership to 49%.

Morgan Creek is already a significant investor in BlockFi, having been involved in and leading previous funding rounds for the platform. The rumor also suggested that FTX, through its credit deal, possessed the right to convert loans into BlockFi’s equity without restriction, a move which was described by a BlockFi representative as “highly speculative.”

The leaked call also revealed Mark Yusko, managing director of Morgan Creek Digital, reportedly stating that its offer would be a counter to that of FTX and would give FTX the option to buy BlockFi “at essentially zero price.”  Yusko again told investors on the call that if FTX were to exercise its option it would effectively clear all of their existing shares from BlockFi’s cap table.

Morgan Creek also claimed that BlockFi’s loan to 3AC was $1 billion and that it was overcollateralized by 30%. Additional reports also suggest that Morgan Creek “seemed to hint” that BlockFi may undertake more layoffs after the platform announced on June 13 that it’d be “reducing its headcount by about 20%.”

BlockFi reportedly held discussions to raise millions of dollars at a $5 billion valuation in June last year but is currently valued at less than $500 million, according to The reports.

A $250 million equity offer would give the investor syndicate 51% ownership, which would cut the current equity holders’ stake to 49 percent, Mark Yusko reportedly indicated on the call.That means this equity sale would represent a 90% decrease in the value of the firm.

BlockFi announced last week that it was exposed to hedge fund Three Arrows Capital (3AC) which subsequently led to a rapid withdrawal of customer funds from the platform.