BlockFi Announces US$250 Million Credit Facility Amid Risk Management Woes

Following the Celsius Network crash that dragged bitcoin prices further down, fellow crypto lender BlockFi is determined to set to take itself out of the narrative. CEO Zac Prince announced on Tuesday that the firm inked a US$250M revolving credit facility term sheet with crypto exchange FTX Trading.

The proceeds of the debt financing arrangement are said to be “intended to be contractually subordinate to all client balances across all account types.” It will also be “used as needed,” according to the firm’s chief.

“Throughout the market volatility of the last several weeks, I’m incredibly proud of how our team, platform and risk management protocols have performed,” said Prince.

This seems to be an effort by the firm to alleviate risk management concerns raised by traders regarding the crypto platform, most especially after Celsius saw its CEL token plummet after halting its trading due to a supposed liquidity problem.

Read: What IS Celsius? Examining The Crypto Lender Amid Its Liquidity Crisis

The crypto platform immediately distanced itself from the crypto event that dragged major coin prices down.

Prince himself tried to allay the circulating talks on how the firm’s risk management policies are playing, saying its “prudent and proactive risk management is for the benefit of [its] broader client base.” The policies in place also allow the firm “to remain open for business during times of market stress.”

To illustrate, Prince disclosed that the firm “fully accelerated the loan and fully liquidated or hedged all the associated collateral” with a large client that failed to meet its obligations on an overcollateralized margin loan.

“No client funds are impacted. We believe we were one of the first to take action with this counterparty,” Prince added.

The credit facility signed with FTX seems to be a show of support for these risk management practices. In a tweet announcing the arrangement, FTX CEO Sam Bankman-Fried mentioned that “BlockFi has careful risk management and great leadership.”

“BlockFi is financially strong; all operations are normal, as they always have been, and assets are safe,” Bankman-Fried added.

For crypto traders on Twitter, the credit agreement seems to be a move to “bail” the firm out of its problems.

Reports of suspended withdrawals have also been circulating in the past days after some users weren’t able to conduct a transaction successfully on the platform.

Amid rumors of a US$285 million loss in the past two years, the firm maintained it is “fulfilling increased demand from institutional borrowers at higher interest rates,” similar to US Treasury yield movements.

“Over the past five years, BlockFi has been battle tested through all types of market conditions. Throughout this current period of market volatility, BlockFi continues to fulfill all withdrawal requests pursuant to our terms of service,” Prince said in a tweet.

Just earlier this month, BlockFi announced that it is cutting down 20% of its workforce due to the plummeting bitcoin prices.

The firm is expected to implement its new rates on July 1.

Information for this briefing was found via Twitter and the companies mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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