FTX is on the verge of acquiring BlockFi

Popular crypto exchange FTX is on the verge of acquiring BlockFi. The U.S offshoot of the firm FTX.US is working on completing the purchase of the crypto lending platform that gained prominence last year. The deal is about $15 million, which is subject to review depending on the performance of BlockFi. 

Meanwhile, emerging crypto enthusiasts reported that the takeover could cost about $240 million. FTX.US seems to be getting the crypto lender at a lower price due to the market situation. Though, the price is likely to increase if BlockFi performs well lately. Fortunately, the crypto lender emerged as one of the firms that benefited from the bull run of the crypto market in 2021.

In numerous reports, the CEO of BlockFi, Zac Prince, revealed that the deal could hit $240 million. He added that for the figure to hit such a level is tied to some performance clause. Through Zac Prince, indications emerged that the crisis of Celsius, Three Arrows Capital, and the general crisis the crypto sphere endured this year affected the platform. 

Reports about the takeover first emerged around early last month. Before then, the crypto lending firm obtained a $400 million rolling credit aid from FTX. Also, BlockFi received another $250 million credit line from the crypto exchange. All these financial interventions from FTX to BlockFi took place between June. 

At the end of a funding round last year, BlockFi’s value sat at $4.8 billion. This high valuation has evaporated following the crisis that visited the crypto space. There are strong indications that FTX.US is making a steal by acquiring the firm at a discounted price of $15 million. Despite the troublesome circumstances around the deal, there are also positive points to note from it. By the last day of the year, BlockFi will obtain a regulatory permit for its yield project, BlockFi Yield.

Though, the approval is subjected to specific performance triggers. If BlockFi could meet these targets, it will get the operational license from the United States Securities and Exchange Commission (SEC). It will also include an extra financial injection of $25 million from FTX.US. 

With the additional funds, the firm will be looking to compete with prominent crypto firms within the U.S market. These firms include Binance.US and Coinbase. More so, The performance clause includes another injection of $100 million if users’ assets within the custody of BlockFi surpass $10 billion by October 2021.

The initial $15 million remains the fixed price of the takeover. If there are shortfalls in the performance clause, FTX has no financial obligation to fulfill. Nonetheless, there is an option for BlockFi to back out from the deal before October 2023. The firm can walk out if it can pay about $30 million or $45 million before.

Related

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