FTX Exchange bails out BlockFi with $250M

Will FTX save the crypto industry or control it? Derivatives-focused cryptocurrency exchanges have been on the sidelines, watching everything around them crumble before finally deciding to take action. Or, as the rumor says, FTX created it all in their labs and is now buying the asset on the cheap. However, this is only circumstantial evidence. The bailout, on the other hand, is completely real.

Earlier, BlockFi CEO Zac Prince tweeted, “Today BlockFi signed a term sheet with FTX to secure a $250 million revolving credit facility to fund us and further strengthen our assets. Balance sheet and platform strength.” Sam Bankman-Fried, CEO of FTX, responded: “Today we injected $250 million into BlockFi and partnered with them so they could have a dominant position in the market.”

The cryptocurrency market has been on a downward trend over the past few weeks. The contagion effect of the Terra/Luna extinction event shook every company out there, especially those that provide yield for crypto deposits like BlockFi and Celsius, and hedge funds like Three Arrows Capital. The problems of these companies and the possible liquidation of assets have, in turn, plunged the crypto market into greater volatility.

Related reading | Crypto Exchange FTX US Growth: Q3 Volume Soars 512%

What is the end of FTX?

We don’t know, but the exchange has put itself in a position of power in all of these movements. According to Bankman-Fried, BlockFi “successfully removed risky counterparties pre-emptively,” and the company acted decisively to “eliminate troublesome counterparties before they become a problem, and increase cash before necessary.” Yes, by “troubling counterparties” he meant Celsius and 3AC.

For his part, Zach Prince described it as an all-out win. “I couldn’t be more proud of the performance of our team, platform and risk management protocol during the market volatility of the past few weeks. Today’s landmark announcement reinforces BlockFi’s commitment to serving its clients and ensuring their funds are protected.” However, is $250 million enough for a company of this size? Let’s hope it is, for its customers.

Regardless, both companies seem excited about the collaboration. “The agreement also opens up future collaborations and innovations between BlockFi and FTX as we work to accelerate global prosperity through crypto financial services,” Prince said. On the same topic, Bankman-Fried claimed that FTX “is delighted to partner with BlockFi to provide Industry-leading products”.

So, everything is good on the cryptocurrency front right now, right? But what would happen if BlockFi kept losing money? Is there a chance for FTX to buy the entire company?

SOL price chart on FTX | Source: SOL/USD on TradingView.com

Problems before BlockFi

In an article on the subject at hand, Zerohedge reminds us A recent episode in BlockFi history:

“As a reminder, BlockFi was fined $100 million in February for its high-yield interest account that was deemed a security product by the SEC.”

And, who can forget when they Issue BTC instead of stablecoins To some lucky users?

“One Reddit user shared a screenshot of their bonus payout showing that they received 701.4 bitcoins, which at the time of writing equates to more than $24 million. They said they believed they were owed about $700 and bitcoin The coin transaction has been reversed.”

Related reading | BlockFi co-founder sees huge crypto growth and FOMO in 2022

To this, Zach Prince responds, “Our team is battle-tested and weathered many storms over the years, which has only made us stronger and more resilient in dealing with today’s market environment.” That’s one way of saying it. But what can he say about rumors that the company lost more than $285 million during the bull market?

If the rumors are true, does it mean their business model has failed and cannot survive a bear market? No, it doesn’t. However, it hints at it.

Featured Image by Cytonn Photography on Unsplash  | Charts by TradingView



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