Private Equity Firm Slashes Valuations of BlockFi Investments

Updated by Geraint Price
In Brief
  • Private equity firm The Private Shares Funds dropped its valuations of BlockFi's series E warrants and preferred shares.
  • The Private Shares Funds has interests in crypto exchange Kraken.
  • BlockFi has struggled to raise funds in a prolonged bear market, and received a $680 million valuation from FTX US.
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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.

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