Yahoo Finance crypto reporter David Hollerith breaks down FTX’s deal with BlockFi, in addition to Voyager Digital’s stock trading halt.
SEANA SMITH: Breaking news in the crypto space. BlockFi reaching a deal with FTX, giving FTX the, quote, “option” to acquire BlockFi for a maximum price, $240 million. David Hollerith has more on this breaking story for us. David.
DAVID HOLLERITH: Yeah, so the deal is $680 million. And that’s $400 million in revolving credit to BlockFi, in addition to an option to outright acquire the firm for $240 million, as you pointed out. And this comes after a number of reports from the Wall Street Journal, the Block, and CNBC, that all sort of circled around the fact that FTX was progressing towards a deal with BlockFi.
And notably, BlockFi has cited, you know, given the recent crypto or financial contagion that we’ve seen in the crypto sector, this has been an ongoing concern, especially with crypto lenders. Notably, BlockFi had, as an investor, and more recently, as a heavy borrower, Three Arrows Capital, which is a crypto hedge fund that has recently come into a lot of liquidation troubles, given that the market’s conditions have gotten a lot worse over the last two months.
So that being said, although BlockFi was exposed to Three Arrows Capital, they weren’t exposed to the Celsius Network at all, another crypto lender who’s a close competitor of theirs. But they did say– or at least, BlockFi CEO Zac Prince did say in a recent tweet that once Celsius sort of halted their customer accounts, froze their customer accounts, sort of created a market panic, which increased the number of withdrawals that BlockFi also saw.
So I guess one way we can think of this as BlockFi’s increasing troubles has sort of gone into not just the market sell-off, but also just the fact that customers have had increased panic in terms of having their digital assets hosted with these, you know, what are essentially crypto banks, although they aren’t regulated like traditional banks. And that has led to a lot of this. But obviously, on the other side of the trade, for FTX, this is a heck of a deal.
DAVE BRIGGS: And also, some breaking news, David, on Voyager Digital paused trading as of 2 o’clock Eastern time after shares have plummeted. Now, we heard some initial bad news as related to Three Arrows. What’s happening today? What are you learning?
DAVID HOLLERITH: Well, so Voyager, interestingly, is another firm that Sam Bankman-Fried, the CEO and founder of FTX, has extended credit to through his trading firm, Alameda Research. And so, they also, one would think, have some extended credit and they have some optionality. That being said, seeing something like withdrawals, obviously, is bad. But from what I can tell from the reports, Voyager is using the withdrawals as a way to come up with plans.
Another thing that has been surfacing a lot in the crypto sector is that a lot of troubled firms have been hiring structuring lawyers. And that’s, obviously, sparked more fears around bankruptcy. So, you know, it’s too soon to tell in terms of Voyager’s financial position. It’s clearly a bad sign that they are having to freeze their accounts for their customers. But hopefully, given that Sam Bankman-Fried has been able to offer them this line of credit, they might have more optionality, as the market sort of stays closed over the weekend. But I think that’s definitely a developing story at this point.
DAVE BRIGGS: Indeed, as the crypto winter drags on along throughout a long summer. David Hollerith, thanks so much. Appreciate that on the breaking news.