Morgan Creek Digital is trying to raise $250 million from investors to acquire a majority stake in cryptolanding platform BlockFi. CoinDesk reports this, citing the head of the venture capital firm, Mark Yusco.
Journalists obtained a recording of a conversation between Jusko and investors that took place on June 21. According to the senior executive, the Morgan Creek initiative is a response to BlockFi’s agreement with the FTX exchange.
BlockFi CEO Zack Prince announced Tuesday that his company had signed a preliminary agreement with FTX to open a $250 million revolving line of credit.
Later, media reports reported that the bitcoin exchange planned to purchase a stake in BlockFi.
Yusco stressed that the original agreement allows FTX to buy the trading platform “at virtually zero cost.” If the exchange takes this opportunity, it will “sweep” existing shareholders, including management and employees with stock options, as well as venture capitalists.
Speaking with CoinDesk, a BlockFi spokesman said the parties have not yet reached a final agreement and are discussing the details of the deal.
According to Yusko, if FTX decides to take over the platform after the credit line is extended, only the biggest investors in BlockFi’s latest funding round will get at least some of their money back.
Morgan Creek, which has participated in several investor rounds, will find itself in a difficult situation, he explained.
“The only alternative is to raise an equivalent amount of capital, which is what we’re working on. I would say the probability of that is 10 percent, but not zero. It’s not over yet, but the situation definitely looks grim,” Yusko said.
He said the venture capital firm is not opposed to a joint deal with FTX, where both parties would enter into capital.
Yusko said he has spoken to a potential lead investor who could write a check for $100 million, as well as two other interested parties willing to contribute up to $50 million.
Recall that BlockFi has not given up hope of going public.