Morgan Creek Digital in Talks with Investors to Join FTX in the BlockFi Bailout

UTC by Benjamin Godfrey · 3 min read
Morgan Creek Digital in Talks with Investors to Join FTX in the BlockFi Bailout
Photo: Morgan Creek

Morgan Creek Digital, a cryptocurrency investment firm, is reportedly in talks with potential investors as it seeks to raise funds to counter FTX’s proposed bailout of crypto lender BlockFi.

As reported earlier by Coinspeaker, the embattled crypto lender is on track to receive $250 million in bailout funds from FTX Derivatives Exchange as it looks to bolster its balance sheet in order to be able to meet its financial obligations.

The bailout from FTX, however, comes with a major caveat that will not favor existing investors. This is the option for FTX to acquire BlockFi at almost a zero price, a move which if allowed to happen will harm Morgan Creek, one of the lender’s first investors. In a bid to protect the investment firm’s holdings in BlockFi, Morgan Creek Digital managing partner Mark Yusko, has been on a call with investors as he pitches the idea of matching FTX’s offer.

On the leaked call which was reviewed by Coindesk, Yusko explained to investors that the preliminary signing agreement that was announced was “probably three days away from signing a definitive agreement.”

He revealed that the move by BlockFi to accept FTX’s offer did not come uncalculated as only that from the derivatives exchange gave the lender’s clients some flexibility in recouping their locked-up funds. Should BlockFi have gone with other rescuers, its client’s funds would be on schedule to be repaid by the new rescuer, a move that will largely take time and be inconvenient in general.

According to Yusko, Morgan Creek may be able to counter the FTXs offer or consider a joint bailout with the trading behemoth. He made this reference when asked on the call whether he would consider such a partnership.

“I will definitely try to pursue [a joint deal],” said Yusko. “Not that I have SBF on speed-dial, but I could probably get that call.”

In order to be able to make the right pitch that can counter FTX’s initial offer, the investment firm said it was raising as much as $250 million.

“The only alternative is to raise an equivalent amount in equity and that’s what we’re working on,” Yusko told investors on the call. “I would say it’s a 10% possibility but not zero.”

Morgan Creek Digital and BlockFi

It is unclear when Morgan Creek hopes to be able to complete the fundraiser, considering how far discussions between BlockFi and FTX have gone. What is however of crucial importance is the lack of willingness on the part of Morgan Creek to let its BlockFi investors go down the drain.

While Yusko affirmed that the run to become positively in line to benefit from the current BlockFi is looking as bad as it is obvious, he noted that there is still a chance to fight back. Through the call, it was inferred that there is an investor that can issue $100 million with at least two that can sign a $50 million cheque should negotiations become favorable overall.

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