Controlling The Chaos: FTX Exchange Bails Out BlockFi With $250M
22 June 2022 - 08:57AM
NEWSBTC
Is FTX saving the crypto industry or taking control of it? The
derivatives-focused cryptocurrency exchange has been on the
sidelines, watching everything around them collapse, and finally
decided to take action. That or, as the rumor says, FTX created
this whole situation in their labs and is now buying assets on the
cheap. There’s only circumstantial evidence of that, though. The
bailout, on the other hand, is completely real. The proceeds
of the credit facility are intended to be contractually subordinate
to all client balances across all account types (BIA, BPY &
loan collateral) and will be used as needed. — Zac Prince
(@BlockFiZac) June 21, 2022 Earlier, BlockFi CEO Zac Prince
tweeted, “today BlockFi signed a term sheet with FTX to secure a
$250M revolving credit facility providing us with access to capital
that further bolsters our balance sheet and platform strength.” For
his part, FTX CEO Sam Bankman-Fried replied “today we’re injecting
$250m into BlockFi and partnering with them so they can navigate
the market from a position of strength.” Sources tell me that it is
common knowledge within the #Crypto industry right now that Alameda
(FTX) & SBF are 100% trying to push the #Bitcoin price down
right now to liquidate a number of market participants including,
but not limited to #Celsius. pic.twitter.com/u4o8s60m2S — N
(@NickNew41532832) June 21, 2022 Over the last few weeks, the
crypto market has been trending down. The contagion effect of the
Terra/ Luna extinction event rocked every company out there, most
of all those who offered yield on cryptocurrency deposits like
BlockFi and Celsius and hedge funds like Three Arrows Capital.
These companies’ problems and possible liquidation of assets, in
turn, sent the crypto market into even more turmoil. Related
Reading | Crypto Exchange FTX US Sees Growth: Trading Volume Surged
512% In Q3 What Is FTX ‘s Endgame? We wouldn’t know, but the
exchange put itself in a position of power with all of these
movements. According to Bankman-Fried, BlockFi “successfully
removed at-risk counterparties preemptively,” and the company acted
decisively by “removing troublesome counterparties before they
become a problem, and adding cash before it was necessary.” And
yes, by “troublesome counterparties” he means Celsius and 3AC. 3)
Sometimes leadership means acting decisively and that’s what
BlockFi did: removing troublesome counterparties _before_ they
become a problem, and adding cash _before_ it was necessary. — SBF
(@SBF_FTX) June 21, 2022 For his part, Zac Prince frames it as a
victory all around. “Throughout the market volatility of the last
several weeks, I’m incredibly proud of how our team, platform and
risk management protocols have performed. Today’s landmark
announcement reinforces BlockFi’s commitment to serving its clients
and ensuring their funds are safeguarded”. However, are $250M
enough for a company this size? Let’s hope it is, for the sake of
its clients. In any case, both companies seem excited to
collaborate. Prince said, “this agreement also unlocks future
collaboration and innovation between BlockFi & FTX as we work
to accelerate prosperity worldwide through crypto financial
services.” On the same subject, Bankman-Fried claims FTX is
“excited to partner with BlockFi to offer industry leading
products.” So, everything’s peachy on the crypto front at the
moment, right? However, what happens if BlockFi keeps losing money?
Does FTX get a chance to buy the whole company for peanuts? SOL
price chart on FTX | Source: SOL/USD on TradingView.com BlockFi ‘s
Previous Problems In an article about the subject at hand,
Zerohedge reminds us of a recent episode in BlockFi’s
history: “As a reminder, BlockFi was fined $100 million in
February this year for its high-yield interest accounts, which were
deemed as security products by the United States Securities and
Exchange Commission.” And, who could forget when they gave out BTC
instead of stablecoins to some lucky users? “One Reddit-user
shared a screengrab of their bonus payment showing that they
received 701.4 Bitcoin, which equates to more than $24 million US
dollars at the time of writing. They said they believe they were
owed around $700 USD and that the Bitcoin transaction had been
reversed.” Related Reading | BlockFi Co-Founder Sees Huge Growth
And FOMO For Crypto In 2022 To that, Zac Prince responded, “Our
team is battle tested and has weathered many storms over the years,
which only makes us stronger and more resilient as we navigate
today’s market environment.” That’s a way of putting it. However,
what could he say about the rumor that the company lost more than
$285M during the bull market? @BlockFi income statement is
real bad It's a mess of negative numbers, let's dig into it
togetherhttps://t.co/Kr9lhiH8AS — otteroooo (@otteroooo) June 19,
2022 If the rumors are true, does that guarantee that their
business model failed and they won’t be able to survive the bear
market? No, it doesn’t. It suggests it, though. Featured Image by
Cytonn Photography on Unsplash | Charts by TradingView
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