- BlockFi has borrowed $250 million from FTX
- Rumours have been swirling about the solvency of the lending platform
- SEC commissioner Hester Pierce disagreed with the concept of private bailouts
Troubled lending platform BlockFi announced yesterday that it has borrowed $250 million from FTX in order to shore up its resources for the coming crypto winter. BlockFi was forced to cut 20% of its workforce last week as the pressures of the bear market began to take hold, with customers abandoning lending platforms after the issues surrounding Celsius. BlockFi has not announced publicly that it is having liquidity issues, but there is plenty of speculation that the company has had to massively reduce its valuation in order to borrow funds or go out of business.
BlockFi Survives to Fight Another Day
BlockFi hasn’t had the best year. In February it was hit with a $100 million fine by the Securities and Exchange Commission (SEC) over its BlockFi Interest Account (BIA) product, which was ruled a security. Then this month it was hit with a further $1 million fine on top of that, just a week before it announced that it was cutting a fifth of its workforce as a cost-saving measure.
BlockFi CEO Zac Prince tweeted about the loan deal yesterday, saying that the loan would provide the company with “access to capital that further bolsters our balance sheet and platform strength.” Nice and vague. Not everyone was buying it, however many Twitter investigators calling bullshit:
BlockFi is untenable even after the Alameda loan
I have them burning ~$350mm in 2022 and w/ negative gross profit
Calibrated ‘leaked’ financials for
– Lower retail volumes (in line to q1 actuals)
– Higher borrowing costs due to rates
– Normalized credit loss
– New RCF interest pic.twitter.com/5ZEPWBEUrx— 0xHamZ (@0xHamz) June 21, 2022
In just a few hours we find out @BlockFi and specifically @BlockFiZac’s true colors. They’ve done nothing but reassure their retail customer base all is well since we last heard from them publicly.
Just like @Mashinsky and @celsius did the day before they shut it all down.
— bazooka💨 (@b420oka) June 21, 2022
Peirce Says No
The loan comes just a few days after FTC founder and CEO Sam Bankman-Fried said that companies like FTX had a “responsibility to seriously consider stepping in, even if it is at a loss to ourselves, to stem contagion.”
This theory has not gone down well with SEC commissioner Hester Peirce, who told Forbes yesterday that in a bear market “you discover who’s actually building something that might last for the long, longer term and what is going to pass away.”
Clearly, BlockFi is doing its best to ensure it doesn’t meet this end.
