According to the report, BlockFi has a new bidder in Morgan Creek

According to the report, BlockFi has a new bidder in Morgan Creek

Asset manager Morgan Creek Digital wants to compete with struggling crypto lender BlockFi by backing FTX.

The investment firm is looking to raise $250 million from investors to acquire a majority stake in BlockFi. CoinDesk reported on Sunday, citing a leaked investor call.

Morgan Creek, a long-time backer of BlockFi, reportedly came up with this plan after FTX announced a $250 million credit facility for the lender last week. According to the leaked audio, Mark Yusko, managing partner of Morgan Creek Digital, said he was "on the phone all day."

Crypto billionaire and FTX CEO Sam Bankman-Fried has been dubbed a “lender of last resort” for trying to save the struggling industry. In one tweet On Tuesday, he said his company is committed to protecting the digital asset ecosystem and its customers.

Several venture capital funds are reportedly looking at ways to provide funding to BlockFi and strengthen its balance sheet amid the shaken market.

According to Yusko, FTX's $250 million credit agreement with BlockFi raises concerns for existing shareholders, including Morgan Creek - it gives FTX the option to acquire BlockFi for free. If the crypto exchange proceeds with this option, all of BlockFi's existing shareholders, investors in previous venture rounds, management and employees with stock options would be liquidated.

If FTX were to exercise this option after extending its credit line, only investors in the oldest tranche of BlockFi's latest fundraising would receive a minimal amount of their investment back, Yusko said. Morgan Creek would be among those in a tough spot.

This could make the FTX deal seem difficult. But there was a sound reason why BlockFi's founders accepted the terms, Yusko said, according to CoinDesk. Of the many emergency funding offers the company reportedly received, FTX's deal was the only one that would not diminish the role of customer assets.

This means that if BlockFi were to make another offer, its depositors would have to wait for the new lender to be repaid first. Yusko did not mention which other companies approached BlockFi with bailouts. In addition, the lender had not received any equity financing options until then.

The only other option, Yusko told investors on the call, is for BlockFi to raise an equivalent amount of equity capital. He said he expects a 10 percent chance of the idea working, “but not zero.”

Yusko also told an investor he would be open to a deal that would allow FTX and Morgan Creek to each raise a portion of their capital.

So far, Yusko has reportedly spoken to one investor who could write a check for $100 million and two others who could fund up to $50 million. He warned that bid efforts were far from certain.

Both Morgan Creek and BlockFi did not immediately respond to Blockworks' request for comment.

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The post “BlockFi Has a New Bidder in Morgan Creek, Report Says” is not financial advice.