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FTX, one of the largest cryptocurrency exchanges, is set to acquire a stake in BlockFi. BlockFi is a cryptocurrency lending firm recently bailed out by Alameda Research after facing liquidity issues.
FTX to acquire a stake in BlockFi
A report by the Wall Street Journal said that discussions were already underway for FTX to acquire a stake in BlockFi. The acquisition talks come after Alameda Research provided a $250 million line of credit to BlockFi. Sam Bankman-Fried is the CEO of FTX and the co-founder of Alameda Research.
While commenting on the bailout, the CEO of FTX tweeted, “Today [BlockFi] signed a term sheet with [FTX] to secure a $250M revolving credit facility providing us with access to capital that further bolsters our balance sheet and platform strength.”
The documents that discuss how the loan issued to BlockFi by FTX will be used are still being processed. These documents could include FTX acquiring a stake in the crypto lending company. The WSJ report said that the two companies are yet to reach an equity agreement.
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BlockFi’s CEO talked about this line of credit earlier this week, saying that it will come secondary to client funds. Therefore, the company will be obligated to fulfill the needs of its customers first before repaying the FTX loan.
In an interview with Bloomberg, Prince said that accepting FTX’s bailout was both offensive and defensive in the strategy being used. He said that the company recently witnessed an influx in withdrawals following the halting of withdrawals on the Celsius Network. The Celsius Network suspended withdrawals around two weeks ago, and the company recently hired consultants to discuss bankruptcy.
FTX bailing out crypto firms
The CEO of FTX, Sam Bankman-Fried, is yet to comment about this deal. However, he recently called out venture capitalists reluctant to offer the needed crypto startups that needed funds during the market downtrend.
“We’d love to help you backstop crypto firms and provide liquidity because we care deeply about preventing market contagion. Can we please do it for the one great company (after you fix it) and make a lot of money doing it, you can take the others k thx bye,” SBF said.
BlockFi is not the first firm that Bankman-Fried has bailed out. Alameda Research also issued a $200 million line of credit to Voyager Digital. The firm is also facing liquidity issues.
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