Riding The Wave News Summary #54
FTX may be planning to purchase a stake in BlockFi: Report, Morgan Creek Is Trying to Counter FTX’s BlockFi Bailout, Leaked Call Shows, & more
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A video I found interesting:
An important note if your planning to minimize your crypto taxes: https://www.forbes.com/sites/shehanchandrasekera/2022/05/20/large-crypto-losses-may-not-become-instant-tax-write-0ffs-but-heres-what-you-can-do/?sh=ff3cbf2d2ce9
Crypto exchange FTX is reportedly in talks to acquire a stake in BlockFi after the company issued a $250 million credit to the lending firm.
According to a Friday report from the Wall Street Journal, FTX is currently in discussions with BlockFi regarding the crypto exchange purchasing a stake in the firm, but no equity agreement has been reached. The reported ongoing talks followed BlockFi signing a term sheet with FTX to secure a $250 million revolving credit facility on Tuesday.
"BlockFi does not comment on market rumors," a BlockFi spokesperson told Cointelegraph. "We are still negotiating the terms of the deal and cannot share more information at this time. We anticipate sharing more on the terms of the deal with the public at a later date.
It’s unclear if FTX’s reported intent to purchase a stake in BlockFi was related to financial difficulties at the crypto lending firm amid a bear market. However, in February the United States Securities and Exchange Commission ordered BlockFi to pay $50 million in settlement to the agency as well as $50 million to 32 state-level regulators over allegedly unregistered securities.
Based on what I have seen regarding the revolving credit and potential acquisition I would be surprised if the revolving credit was effectively enacted with how stringent the conditions attached to them appear to be. Of course some of these conditions will likely be phased out and are in the agreements currently as FTX holds the initiative to increase the odds that FTX can acquire Blockfi or some of its assets.
Cryptocurrency investment firm Morgan Creek Digital is attempting to raise $250 million from investors to purchase a majority stake in crypto lender BlockFi, a leaked investor call from Tuesday reveals.
Morgan Creek’s plan to rapidly assemble an equity offer was hatched in response to crypto exchange FTX’s Tuesday morning announcement that it would extend a $250 million credit line to BlockFi.
there are multiple venture capital funds that are exploring ways to provide equity financing to BlockFi as the lender struggles to stay afloat.
According to Yusko, the FTX credit line proposal had a catch for BlockFi’s existing shareholders: It gave FTX the option to buy BlockFi “at essentially zero price.” If FTX were to exercise said option, it would effectively wipe out all of BlockFi’s existing equity shareholders, including management and employees with stock options, as well as all equity investors in the company’s previous venture rounds.
Morgan Creek Digital, co-founded by Anthony “Pomp” Pompliano, is one of BlockFi’s largest investors. The firm has participated in BlockFi’s Series A through D fundraising rounds across three funds and a special purpose vehicle (SPV), a type of investment structure that allows an investor to invest in a single company.
Yusko cautioned that while Morgan Creek was doing all it could to salvage its investment in BlockFi, success was far from assured.
“It's not over, but it is definitely looking dark,” he said.
I would be surprised if this whole situation was resolved without anyone getting burnt off of lending platforms in crypto general disregard for risk management but it remains to be seen, especially if we have further lows coming in the near future.
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