Crypto trading platform FTX bails out lender BlockFi with $250 million credit facility

BlockFi has signed a term sheet with Sam Bankman-Fried led FTX to secure a $250 million revolving credit facility (Image Source: Bloomberg)

Cryptocurrency lender BlockFi has secured a $250 million revolving credit facility from crypto trading platform FTX exchange.

“Today BlockFi signed a term sheet with FTX to secure a $250 million revolving credit facility providing us with access to capital that further bolsters our balance sheet and platform strength,” said BlockFi CEO Zac Prince, announcing the infusion.

The proceeds of the credit facility are intended to be contractually subordinated to all client balances across all account types, said Prince. This means that BlockFi will satisfy its obligations towards all client accounts — BlockFi Interest Accounts, BlockFi Personalized Yield, and loan collateral — before paying FTX.

FTX CEO Sam Bankman-Fried, 30, said the funds have been injected into BlockFi so that it can navigate the market from a position of strength.

BlockFi is among the major crypto firms that have been impacted by bearish crypto market sentiments. Last week, the company, which has around 850 people on its roster, announced that it was slashing its headcount by around 20 percent.

BlockFi has paid $1 million to the Iowa Insurance Division — the securities regulator in the US state of Iowa — as part of a larger $100 million penalty that it agreed to pay to settle an investigation by the Securities and Exchange Commission (SEC) and other agencies into its high-yield accounts.

The lender was ordered to stop opening new accounts of its high-yield lending product to most Americans as part of the settlement.

FTX chief executive Bankman-Fried said that BlockFi has “careful risk management and great leadership” and that it had successfully removed at-risk counterparties pre-emptively. “BlockFi customer assets are appropriately managed, with no debt/risk from 3AC, Celsius, etc.,” Bankman-Fried said.

Notably, BlockFi, without revealing names, had last week announced that it had liquidated a large client that “failed to meet its obligations on an over-collateralized loan.”

In a move that had rattled the markets, crypto lending platform Celsius, a competitor of BlockFi, had on June 20 paused withdrawals over what it labelled "extreme market conditions."