Finance

Sam Bankman-Fried, chief executive officer of FTX Cryptocurrency Derivatives Exchange, speaks during a House Financial Services Committee hearing in Washington, D.C., U.S., on Wednesday, Dec. 8, 2021.
Stefani Reynolds | Bloomberg | Getty Images

FTX is swooping in to buy crypto lender BlockFi for pennies on the dollar, sources told CNBC.

The term sheet is almost over the finish line and expected to be signed by the end of the week, according to one source, who asked not to be named because the deal discussions were confidential. FTX will pay roughly $25 million — 99% below BlockFi’s last private valuation. Jersey City, New Jersey-based BlockFi was last valued at $4.8 billion, according to PitchBook. 

An acquisition could take multiple months to close, and the price tag could shift between now and Friday, a source said. Friday also marks the end of the quarter, which the person said was a catalyst for getting a deal signed. The Wall Street Journal first reported that FTX was seeking an equity stake in the company, while the Block reported this week that an outright deal was in the works. 

An FTX spokesperson said the company “would not be commenting on the matter.” BlockFi did not immediately respond to a request for comment.

The fire sale comes a week after FTX provided a $250 million emergency line of credit to BlockFi.
FTX CEO Sam Bankman-Fried said at the time that the financing would help BlockFi “navigate the market from a position of strength.” 

It’s the latest fallout for crypto lending companies amid plunging crypto asset prices. Funds have struggled with liquidity issues as counterparties fail to meet margin calls. Celsius and CoinFlex paused customer withdrawals citing “extreme market conditions.” Major cryptocurrency hedge fund Three Arrows Capital has fallen into liquidation, CNBC reported earlier, marking one of the biggest casualties of crypto’s bear market.

Another source said equity investors in BlockFi are “wiped out” and are now writing off the value of their losses. The person said multiple offers were being considered, since there was no “shop clause” in the term sheet. 

“There was more than one deal on the table,” a source told CNBC. 

Billionaire Bankman-Fried has been seen as a lender of last resort in the space. In addition to BlockFi, Bankman-Fried’s company Alameda Research provided a $500 million loan to Voyager.

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