According to the study, BlockFi had around $1.8 billion institutional and retail credit portfolio with $1.2 billion in loan collateral. The company said that, the device used to calculate the net exposure is the fair value of loans made to a loan counterparty less the fair value of collateral posted by the counterparty. This indicates that more than $500 Million in loans made by BlockFi in Q2 were not secured by collateral.
It was also revealed that the corporation holds other digital properties worth $2.6 Billion. These digital assets were initially raised by the business through loans taken out from customers and used to fund loans for both its retail and institutional clients. Customers were mostly solicited through the company’s programs including BlockFi Interest Account and BlockFi Personalized yield campaigns.
According to the report, the company has over $600 million in loans that are not secured by any collateral. As a result, if BlockFi’s margin calls to recover the loan are unsuccessful, the company will proceed to liquidate the borrower’s business and acquire legal ownership of the funds that are left over. When Three Arrows failed to meet the margin calls in the same situation that included BlockFi, BlockFi proceeded to liquidate the business.
BlockFi’s market slump.
Credits: Corportate Finance Institute
As Blockfi had made big loans to 3AC, the collapse of 3AC surely brought down Blockfi. The company started to lay-off workforce and also started to freeze the accounts of the investors. As the situation for the company was getting colder, it went on to sign a term sheet with FTX led by Sam Bankman-Fried.
The term sheet gave BlockFi a loan of $250 Million. But then there was news pouring in that, the term sheet had been altered. The new term sheet gave Block Fi, a credit facility of $400 Million, but on a condition that, if it fails to achieve its said professional goals, then FTX will get the ownership of the company.
Writer’s Analysis:
The current situation for BlockFi is surely stable, especially after the intervention of FTX. But, the company has to keep in mind that, it is hanging on a thin thread in the market and if it fails to achieve the promised objectives, then it shall get dissolved under FTX.
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