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  • BlockFi Investors Prepare to Undertake Major Losses as Private Equity Firm Slashes Valuations

In their latest report, Private Shares Fund has marked down BlockFi series E warrants as totally worthless.

Beleaguered crypto lender BlockFi has been facing tough liquidity challenges following the crypto market crash. As per the latest report, BlockFi investors are preparing to undertake huge losses as valuations tank.

Bad News for BlockFi Investors

The Private Shares Fund recently slashed the valuations of BlockFi Series E warrants and preferred shares. Warrants are basically agreements between a company and its investors. These warrants entitle their holders to purchase shares in a company at a particular price and at a particular time.

In its latest report ending June 2022, the Private Shares Fund market down BlockFi’s funds as worthless. As per Bloomberg, earlier in April, Private Shares Fund gave BlockFi Series E warrants a valuation of $67 per unit. Now, it has downgraded the Series E warrants to worthless or $0. It also cut BlockFi’s preferred shares valuation to $20 per share, down from $77 in April.

In early June, BlockFi was looking to raise $100 million at a $1 billion valuation. However, as other crypto lenders like Celsius started defaulting, BlockFi also faced massive withdrawals on its platform.

Due to its exposure to embattled hedge fund Three Arrows Capital (3AC), BlockFi also lost $80 million. This is because 3AC failed to meet a margin call. However, BlockFi shall be compensated for losses as part of the Three Arrows Capital bankruptcy case.

Crypto Exchange FTX US to Buy BlockFi

Cryptocurrency exchange FTX US has shown major interest in buying the beleaguered crypto lender BlockFi. Last month, BlockFi had already secured a $250-million loan from FTX.

Furthermore, crypto exchange FTX has also put forward a complete buyout offer to BlockFi. FTX CEO Sam Bankman-Fried has also lauded the crypto lender for its robust risk management. Last month, in a series of tweets, SBF stated:

“BlockFi has careful risk management and great leadership. So they successfully removed at-risk counterparties preemptively. BlockFi is financially strong; all operations are normal, as they always have been, and assets are safe. And, going forward, we’re excited to partner with BlockFi to offer industry leading products”.

Citing people familiar with the matter, Bloomberg noted:

“All investment rounds in BlockFi are pari-passu, meaning that investors are on equal footing. Proceeds from the deal with FTX US will also be pari-passu”.

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