FTX in Talks to Receive BlockFi Equity After $250M Credit Line Extension

Crypto exchange, FTX, is in talks to acquire equity from BlockFi, a crypto lender that recently took a $250 million credit line from FTX, according to a Wall Street Journal report. 

While BlockFi and FTX are in talks, an equity agreement has yet to be made. 

This puts FTX’s owner Sam Bankman-Fried in a peculiar situation as he is slowly owning more of the crypto industry by offering credit to companies and potentially receiving equity. 

Another one of his companies, Alameda Research, also acquired a big ownership stake from Canadian crypto broker Voyager Digital Ltd, which received two credit lines from Alameda in the form of cash/USDC and Bitcoins. 

These investments by Bankman-Fried and his companies, come as crypto investors are sorting between which firms will survive the nasty turn of events the crypto market has experienced. 

This sort of thought process is similar to Binance’s founder and CEO’s, Changpeng Zhao, process when he thinks about which company’s deserve a bailout. 

These discussions, bailouts and loans are happening after a dramatic turn of events occurred in May, which saw the Terra Network collapse. Their two cryptocurrencies UST and LUNA dropped by 99% in the course of a week. At that time, UST was the third-largest stablecoin by market cap and was touted as the best decentralized stablecoin.

That in turn sparked a more abrupt downward trajectory in the crypto market as a whole, which has seen Bitcoin drop to sub $21,000 and Ether below $1,200. In addition, crypto firms such as Celsius Network LLC and Three Arrows Capital Ltd. (3AC) have experienced insolvency problems. 

According to 3AC co-founder Kyle Davies, they were exposed to the Terra Network in the form of $200 million worth of their native cryptocurrency LUNA. While Davies said that 3AC was able to recover from that devastating collapse, the ensuing market collapse was too challenging to overcome. 

Voyager previously lent 3AC 15,250 Bitcoins and $350 million in USD Coin (USDC), coming out to at least $668 million. Voyager then requested that 3AC payback their loan or receive a notice of default. Voyager requested a repayment of $25 million USDC by June 24, 2022, with the remaining amount due by June 27. Voyager has since lowered their daily withdrawal limit to $10,000 from $25,000, according to an update.

That event then caused Voyager to seek funds from other companies, which is how they acquired a credit line from Alameda. The cryptocurrency market is fast and constantly changing. A drop in price now can cause serious insolvency problems in a couple of weeks for numerous companies, as seen in this example above. 

Author: Tyler Irvin

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