Morgan Creek Digital's Leaked Investor Call Reveals The Current Situation Of BlockFi

KEY POINTS

BlockFi might lay off additional employees in the near future
The firm is currently valued at less than $500 million
BlockFi's loan to 3AC amounted to $1 billion of which two-thirds was in BTC while the rest was in GBTC

A leaked investor call from hedge fund Morgan Creek Digital has suggested that the firm wants to acquire BlockFi and counter FTX’s BlockFi bailout with a $250 million credit line. However, as per a report, the call also revealed that BlockFi's valuation is less than $500 million.

As first reported by CoinDesk, the leaked investor call suggested that Morgan Creek Digital wants to acquire BlockFi crypto exchange and is in talk with investors for raising $250 million to counter FTX's bailout via a $250 million credit line.

Morgan Creek is also an early investor in the crypto exchange and BlockFi's deal with FTX would give the exchange the option to buy the firm at "essentially zero price,” said Morgan Creek Digital managing partner Mark Yusko. If FTX were to exercise this option, the chances of the hedge fund recouping its investment turn zero because all of its existing equity from BlockFi’s will be cleared.

However, according to TheBlock, there are three other major things that came out of the leaked investor call. The first and foremost is the fact that the firm is currently worth less than $500 million. Yusko explained that a $250 million equity offering would buy 51% of the company while current stakeholders will be reduced to 49%. This is significant because the firm was valued at $5 billion in its last funding round.

Furthermore, another important detail gained from the investor call is the fact that BlockFi had loaned Three Arrows Capital around $1 billion, and as the firm went bankrupt, the exchange received a heavy blow. The loan was overcollateralized by around 30% as Morgan Creek co-founder Anthony Pompliano stated that two-thirds of it was bitcoin while the remaining was GBTC.

“All of this has been reported from them [BlockFi] to us,” Pompliano said.

Additionally, BlockFi might lay off more employees after recently cutting its staff short by "roughly 20%."

"They’ve already imposed draconian measures,” Yusko said, “80 percent layoffs — actually higher than that, 85 percent layoffs.”