Private fund slashes valuation of BlockFi E warrants to $0
Warrants tied to cryptocurrency firms are signaling deep doubts about whether those securities will find someone to buy, and little or no relief for investors after plunging prices have gutted their assets.
In its latest report ending June 2022, a prominent private fund has downgraded the status of its investments in the beleaguered crypto lender BlockFi. The Private Shares Fund has slashed valuations of BlockFi series E warrants to “worthless” compared to a valuation of $67 per unit in April.
A warrant agreement is a contract that provides one party the right to purchase a company’s stock at a specific price and at a specific date. As revealed in its report released at the end of June, the private fund also downgraded BlockFi’s preferred shares valuation to $20 per share, down from $77 three months ago.
Earleir in June, BlockFi was reportedly in late-stage talks with new and existing investors to close a down round at a lower valuation of about $1 billion. In 2021, the New Jersey-based company was valued at $5 billion, a few months after it completed a $350 million series D funding round that gave it a valuation of $3 billion.
BlockFi, founded in 2017, provides traditional financial services to cryptocurrency holders. Crypto exchange FTX is reportedly looking to acquire a stake in the beleaguered crypto lender as concern increases across the industry about liquidity in the wake of the recent collapse in prices.
The news came hot on the heels of Bankman-Fried’s decision to provide a $250 million credit line for BlockFi. Through the other company he controls, Alameda Research, the crypto billionaire also stepped in to bail out Canadian crypto broker Voyager Digital.
The new investment comes as BlockFi tries to restore confidence during a period of accelerating pressure after rivals Celsius Networks and Babel Finance froze withdrawals and transfers.
BlockFi also announced deep layoffs amid a brutal bear market and also liquidated a large client’s overcollateralized margin loan to mitigate risk. On the regulatory front, the Iowa watchdog hit the company with a $1 million fine to settle charges of offering unlicensed interest-bearing accounts for retail investors. Several state regulators in the US have already issued cease and desist notices to BlockFi, which claims over $10 billion in client assets. This coordinated regulatory scrutiny hinged on the firm’s crypto savings and loans product, dubbed BlockFi Interest Accounts (BIAs).
Earlier this year, BlockFi agreed to pay a $50 million penalty to the SEC and additional $50 million in fines to 32 states to settle similar charges. The company and its parent also agreed to cease selling its Interest Accounts, which let users earn returns on cryptocurrencies, and attempt to register their business within 60 days.
