Thursday, December 1, 2022

Morgan Creek Tries To Counter BlockFi Bailout By FTX: Report

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Morgan Creek tries to counter the Blockfi bailout by the FTX Exchange worth $250 million with a  credit facility offered which will essentially wipe out the BlockFi shareholders so let’s read more today in our latest cryptocurrency news.

Crypto investment company Morgan Creek tries to counter the BlockFi bailout plan and tries to raise $250 million from investors and purchase a stake in the company. The plan is to assemble an equity offering which was hatched in response to FTX’s morning announcement that it will extend the $250 million credit lien to BlockFi. Morgan Creek Digital declined to comment but a person with knowledge of the matter said there are multiple venture capital funds that are exploring ways to provide equity financing to Blockfi as the lender tries to stay afloat.

At stake is the ability of the existing shareholders including long-term backer Morgan Creek to recoup investments. According to Yusko, the FTX Credit line proposal had a catch for the existing shareholders of BlockFi and gave FTX the chance to buy BlockFi at zero price. If FTX were to exercise the option it will wipe out BlockFi’s equity shareholders like management and employees with stock options but also equity investors in the company’s previous venture rounds.

morgan creek

Yusko said on the leaked call that BlockFi founders Zac Prince and Flori Marquez had a reason for accepting the terms and one of the several emergency financings offers Blockfi got, was the one from FTX which was the one that will not subordinate the client assets to the rescuer. Unless BlockFi went with FTX, the depositors will have to wait in line behind the new lenders to be repaid. BlockFi didn’t get any equity financing option at this level. BlockFi CEO noted that the company signed a term sheet with FTX and Yusko told investors that FTX and BlockFi were three days away from signing an agreement:

“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.”

Wall Street company Goldman Sachs was trying to organize the investor group and scoop up assets of another troubled lender Celius at a steep discount in an event that the company filed for bankruptcy. The Wall Street Journal reproted that FTX was in talks to acquire the equity stake in BlockFi but it remains unclear whether new developments changed the negotiations.

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