FTX US, the U.S. arm of crypto exchange FTX, agreed to inject $400 million into BlockFi, a New Jersey-based crypto lending platform, to save the troubled firm that froze customer withdrawals after suffering a liquidity crisis.
The deal also includes an option to buy the firm for a maximum of $240 million based on performance triggers, according to a post on BlockFi's website.
BlockFi was previously valued at $4.25 billion when it last raised funds in July 2021 with a $500 million Series E.
The billionaire founder of FTX, Sam Bankman-Fried, has positioned himself as the savior of the troubled cryptocurrency industry, which has been suffering from a systemic contagion of sorts as the collapse of crypto companies like Celsius and TerraLuna have reverberated throughout the entire ecosystem.
Bankman-Fried also floated the idea of buying Robinhood Markets, but says no M&A talks are underway.
FTX is based out of The Bahamas, but its U.S. arm has a business address in Berkeley. Bankman-Fried himself is a Stanford native but has founded companies across the world, including Alameda Research based in Hong Kong.
In June, BlockFi laid off 20% of its staff due to what it described as "market conditions that had a negative impact on growth rate."
The company also said it suffered about $80 million in losses on a loan issued to the hedge fund Three Arrows Capital, or 3AC, which has fallen into liquidation.
"This represents the full extent of the impact to BlockFi from 3AC," BlockFi founders Zac Prince and Flori Marquez wrote in a blog post. "We have no further exposure and the limited losses we did experience will be absorbed by BlockFi with no impact to client funds. Our 3AC losses will be part of 3AC’s ongoing bankruptcy case(s) so more info will surely come out as those cases proceed."
