FTX is rushing to buy crypto lender BlockFi for pennies on the dollar, sources told CNBC.
The term sheet is nearing the finish line and should be signed by the end of the week, according to three sources, who asked not to be named as talks over the deal were confidential. FTX is expected to pay around $25 million, a source said, 99% below BlockFi’s latest private valuation. BlockFi, based in Jersey City, New Jersey, was last valued at $4.8 billion, according to PitchBook.
The price could change by Friday, the source said. An acquisition could also take several months to complete.
Friday also marks the end of the quarter, which the person said was a catalyst for signing a deal. The Wall Street Journal first reported that FTX was looking to take a stake in the company, while The Block reported this week that an outright deal was in the works.
A spokesperson for FTX said the company “would not comment on this.” A BlockFi spokesperson said the company “does not comment on market rumours.” BlockFi CEO Zac Prince pushed back against the $25 million figure in a tweet calling the figure “market rumors”.
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 funding would help BlockFi “navigate the market from a position of strength.”
This is the latest fallout for crypto lending companies amid falling crypto asset prices. The funds had to deal with liquidity problems, with counterparties not responding to margin calls. Celsius and CoinFlex suspended customer withdrawals citing “extreme market conditions”. Leading cryptocurrency hedge fund Three Arrows Capital has fallen into liquidation, CNBC reported earlier, marking one of the biggest victims of the crypto bear market.
Another source said BlockFi stock investors are “wiped out” and are now reversing the value of their losses. The person said multiple offers were being considered, as 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 Alameda Research provided a $500 million loan to Voyager.
Subscribe at CNBC PRO for exclusive news and analysis, and live business day programming from around the world.