Morgan Creek Digital is reportedly looking to raise $250 million to counter FTX’s line of credit to BlockFi.
The move resulted from one of FTX’s terms for the credit line to BlockFi, to wipe out shareholders, including Morgan Creek Digital.
Morgan Creek Digital, the hedge fund founded by Mark Yusko, Jason Williams, and Anthony Pompliano, is reportedly looking to raise $250 million to counter FTX’s line of credit to BlockFi.
FTX’s Offer to Lend $250 Million to BlockFi Came With a Catch.
According to a report by Coindesk, Morgan Creek Digitial is rapidly trying to come up with an equity offer to counter that of FTX.
The report explains that according to Mark Yusko, the FTX credit line had a catch in that it would wipe out all BlockFi’s existing shareholders, giving the crypto exchange the option of buying BlockFi ‘at essentially zero price.’ FTX exercising the option would result in all BlockFi’s shareholders, including Morgan Creek Digital, losing all equity in the company.
In addition, Mr. Yusko acknowledged that at the time of the offer, BlockFi’s founders Zac Prince and Flori Marquez had a valid reason to consider it. FTX’s offer was the only one that would not subordinate clients’ assets to a potential rescuer. This means that other offers meant depositors and BlockFi clients would have to wait till the new lender recouped their investments to get back their assets on the platform.
FTX’s BlockFi Deal is Probably Three Days Away from Being Finalized.
Mark Yusko also told investors in a leaked call that the deal between FTX and BlockFI was probably three days away from being sealed. He added:
The only alternative is to raise an equivalent amount in equity and that’s what we’re working on. I would say it’s a 10% possibility but not zero.
Morgan Creek Digital Could Pursue a Joint Deal with FTX for BlockFi.
Also during the leaked call, Mr. Yusko floated the idea of a possible joint deal with FTX with both entities putting up a portion of the capital to ‘bail out’ BlockFi. He said:
I will definitely try to pursue [a joint deal]. Not that I have SBF on speed-dial, but I could probably get that call.