Crypto lender Nexo made an unsuccessful offer to acquire troubled rival BlockFi earlier this year as part of a proposed deal worth about $850 million, according to The Block. The deal included $30 million for the acquisition of 51% of BlockFi as well as a $500 million credit line.
In July, Nexo had offered rival BlockFi an $850 million deal when the latter firm was struggling financially due to its exposure to now-bankrupt crypto hedge fund Three Arrows Capital, a proposal document obtained by The Block said.
Then, BlockFi rejected Nexo’s offer and signed a non-final agreement with FTX.US, which filed for bankruptcy protection last week alongside sister trading firm Alameda Research.
“I can confirm that we offered BlockFi a deal in the summer,” Antoni Trenchev, Nexo co-founder, told The Block. “It was a better alternative to the FTX proposal, but BlockFi’s management chose to go with FTX. Since it did not make economic sense for them to go with a worse deal, we were perplexed and there were speculations about conflicts of interest.”
In his words, if BlockFi accepted Nexo’s offer, it might not have found itself in its current situation. Meanwhile, BlockFi co-founder and CEO Flori Marquez had suggested the company was fine after FTX first faced a liquidity crunch, the fallout spread fast. BlockFi had to pause withdrawals last week, and the Wall Street Journal reported on Nov. 16 that it was preparing for a possible Chapter 11 bankruptcy protection filing.
“We already knew by then that Alameda was BlockFi’s largest debtor, second only to Three Arrows Capital which they had just liquidated at a loss,” Trenchev added. “It is Nexo’s belief that our proposal, which focused on better risk management, cost reduction, new products, and markets, could have created a lot of value for all stakeholders – the clients, the shareholders, and BlockFi as a company.”
According to the investment proposal document, Nexo had offered BlockFi a deal worth a total of around $850 million, Trenchev said. It included $30 million for the acquisition of 51% of BlockFi through a combination of cash and equity, $30 million payable to BlockFi’s existing shareholders upon successful S1 registration of BlockFi’s yield product with the US Securities and Exchange Commission, and a $500 million credit line to address BlockFi’s liquidity needs.
Meanwhile, FTX.US’s winning offer for BlockFi was worth a total of $680 million, including a $400 million credit facility and an option to acquire BlockFi at a price of up to $240 million.
Also, the offer included Nexo having a 5-year call option on the remaining 49% of BlockFi’s equity at a 10x valuation of the proposal and termination of BlockFi’s unvested employee option pool, “thus increasing stakes of existing shareholders,” the document read. The offer for the 49% stake was worth about $288 million, making the total offer around 850 million, Trenchev said.
Last week, BlockFi informed customers that it would be “limiting platform activity” and paused withdrawals amid the crypto market turmoil caused by FTX collapsing.