A prominent private fund has downgraded the status of its investments in BlockFi, the beleaguered crypto lender.
The Private Shares Fund has slashed valuations of BlockFi series E warrants and preferred shares, as revealed in a fund report released at the end of June. Warrants are agreements between a company and investor entitling holders to purchase shares in companies at a particular price over a certain period.
The Private Shares Fund, a late-stage investor in private companies like Discord, Impossible Foods, and Kraken, downgraded BlockFi series E warrants from $67 in April to $0 currently, while the value of BlockFi’s preferred shares is $20 from about $77 at the end of April.
Downgrade of series E warrants and preferred shares
Being a private company, BlockFi had multiple fundraising rounds. Series A and B rounds were led by Peter Thiel’s Vallar Ventures, series C by Morgan Creek Digital, series D by Tiger Global et al., and series E was initially set to be co-led by Hedosophia and Third Point, but funds affiliated with Valar ended up leading the round. There were also two seed funding rounds.
BlockFi attempted to raise $100 million in a $1 billion valuation in early June from Bain Capital Ventures, DST Global, Castle Island Ventures, and Vallar Ventures. The company had previously raised $350 million in March 2021.
BlockFi thrown a lifeline
The cessation of withdrawals from lender Celsius exposed BlockFi to an increased number of withdrawals, despite the company having no connection with Celsius.
BlockFi also lost $80 million through exposure to embattled Singaporean hedge fund Three Arrows’ Capital. BlockFi liquidated Three Arrows’ loan after the company failed to meet a margin call and will be compensated for losses as part of Three Arrows’ bankruptcy case.
FTX CEO Sam Bankman-Fried subsequently lauded the company for its robust risk policies and for acting decisively to liquidate all counterparties that failed to meet lender margin calls.
FTX recently threw BlockFi a $400 million lifeline, with an option to purchase the embattled lender for $240 million, valuing the company at a little over 20% of its initial valuation in March 2021.
After loaning $120 million to crypto exchange Liquid last year, FTX bought the company following a $90 million hack.
One of the early signs that the crypto lender was feeling the strain from a broader market rout that saw over $2 trillion wiped off the cryptocurrency market cap was the reduction of its workforce by a fifth on June 14.
BeInCrypto has reached out to company or individual involved in the story to get an official statement about the recent developments, but it has yet to hear back.