Crypto lender BlockFi has temporarily secured a $250 million revolving line of credit from FTX to secure more funding as it tries to shore up liquidity and fend off the Celsius cold that has plagued fellow lenders.
CEO Zac Prince confirmed the signing of a non-binding term sheet with FTX to strengthen its balance sheet and make its platform more resilient to the current market volatility.
The lending platform, notorious for feuding with securities regulators at the state and federal levels in the U.S., has so far weathered the crypto winter storm without major disruptions to customers. In a Twitter post on Tuesday, Prince praised the company’s risk management protocols, team and platform’s efforts to protect user funds, even as rival Celsius faced severe problems after suspending withdrawals for its 1.7 million customers. A press release confirmed that all funds in the line of credit are subject to customer balances in all types of BlockFi accounts.
FTX CEO lauds elimination of counterparty risk
The CEO also said that this could be the first step in a stronger partnership with cryptocurrency exchange FTX. In a Twitter post, FTX CEO Sam Bankman-Fried praised BlockFi’s risk policies and management, highlighting how the firm decisively and pre-emptively liquidated the positions of Three Arrows Capital and other counterparties that failed to meet lenders’ margin calls. Genesis, another firm in the crypto financial services space, also liquidated its position in Three Arrows. Neither Prince nor Bankman-Fried discussed the interest rate on the new line of credit.
BlockFi strives to raise $100 million
BlockFi’s move to secure a loan comes after it failed to raise $100 million at a $1 billion valuation, sparking fears it could be heading down the same path as Celsius, which recently hired a bankruptcy expert to resolve its financial woes , but no date has been provided for resumption of withdrawals, swaps and exchanges. New Jersey-based BlockFi has denied any form of collaboration between the two companies and allayed concerns about its holdings of staked ETH, the derivative token at the heart of Singapore-based Three Arrows Capital’s recent woes. BlockFi had previously raised $350 million in March 2021 at a $3 billion valuation.
The term sheet signed to secure the FTX line of credit is contingent on binding documents that have not yet been drafted by the two companies.
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