Backroom Deals at “Crypto Bank” BlockFi

Another day, another “crypto bank” in the spotlight! Today we check in on Celsius Network (CEL-USD) competitor BlockFi… New products shipping at Polygon (MATIC-USD)… And the latest cybersecurity news in the New Digital World.

A close-up of the website for BlockFi.
Source: Jarretera / Shutterstock.com

Keep an Eye on BlockFi

First, FTX (FTT-USD) extended a $250 million credit line to BlockFi. Nine days later – rumor has it – FTX is looking to buy BlockFi outright.

BlockFi CEO Zac Prince quickly denied that his “crypto bank” is about to be sold for the “fire sale” price of $25 million that was reported by CNBC.

How could we even be talking about $25 million? After all, this time last year, BlockFi was valued at $5 billion!

Here’s the context: An investor call leaked last week – with a LOT of inside-baseball revelations about BlockFi.

For one: When FTX extended the credit line, the deal gave FTX an option to take it over – which “would effectively wipe out all of BlockFi’s existing equity shareholders.” So, on the investor call, a partner at Morgan Creek Digital said he was “making calls all day” to put together a counter-offer.

But wait! There’s more.

BlockFi had to move quickly to snatch back $1 billion in Bitcoin (BTC-USD) it had loaned to failing crypto firm Three Arrows Capital. (Plus $330 million of collateral.)

Sounded like it was successful… But BlockFi must not be out of the woods:

When Morgan Creek offered $250 million to buy 51% of BlockFi – countering FTX’s $250 million credit line – it implied that it’s worth less than $500 million. Again, a sizeable drop from $5 billion last June.

The Morgan Creek guy also seemed to allude to 80% or even 85% layoffs coming at BlockFi. They’d already laid off “roughly 20%” on June 13.

Why this matters: BlockFi had $8 billion in assets under management as of June 2. That’s not quite as much as Celsius that’s caused all this trouble ($12 billion as of May). But it ain’t nothing. Let’s hope these backroom deals get made soon to save the “crypto banks.”

Polygon Delivers 2 More Launches in 2 Weeks

Sure is nice to see Polygon (MATIC-USD) shipping products… While other projects are making headlines because their leader fled the country, liquidated funds, and might have the repo man coming for their superyacht.

Yesterday: Polygon launched its new modular blockchain on a “testnet”: Polygon Avail.

“Avail’s goal is to provide a shared security layer for the Web3 world,” as “the base layer for thousands of chains [with] trustless bridges” between them. You can read all about how it works (and what problems it solves) in the announcement from Polygon. Because it’s modular, not “monolithic” like Ethereum (ETH-USD), it can actually scale up!

Last Wednesday: Developers launched “the first iteration of Polygon ID,” which is kind of like the “Sign In With Google” feature we often have on Web 2.0 sites – except actually private.

Wouldn’t it be great to verify our identity online without signing away all our data to some corporation? Crypto developers say they can do it with “zero-knowledge proofs,” which are what Polygon ID uses. First up: Polygon ID for decentralized autonomous organizations (DAOs) – how a lot of blockchain startups work these days.

On the “good P.R.” front: Polygon also has a lot of climate initiatives in the works lately. Apparently, it’s providing tech to reforest the Indian subcontinent, plus it’s achieved carbon neutrality.

And the latest project to launch on Polygon – called Reneum – lets companies buy “renewable energy credits” (from solar, wind, or hydroelectric projects) to offset their own “dirty” operations. The credits correspond to Reneum’s upcoming RENW crypto token.

Bottom line: Polygon seems to be comporting itself more like…you know…a major tech company than a crypto bro’s vanity project.

This is the type of organization that institutions and wealthy individuals can look at and see a “real investment.” Perhaps this is why: “MATIC sharks and whales have been in a pretty big accumulation trend for about six weeks” as of (at least) June 22, according to the blockchain analysts at Santiment.

Looks Like North Korean Hackers Struck Again

Crypto-hack news junkies will recall that Harmony (ONE-USD) was taken for $100 million last Friday. Yes, it was another bridge hack, where swapping cryptos across blockchains turned out to be…less than secure.

Now, the crypto forensic investigators at Elliptic say: “There are strong indications that North Korea’s Lazarus Group may be responsible for this theft.” Elliptic lays out the evidence in its new report.

The thieves are attempting to launder the money, of course. But Elliptic said its software traced the crypto to specific Ethereum wallets, anyway. Now, exchanges and businesses can “detect any incoming funds that originate from the Horizon Bridge Hack” – and refuse to accept the stolen crypto.

Oftentimes, hackers accept “ransom” funds from the compromised blockchain, and give them their crypto back. But would North Korea want to do that? Already, Harmony has had to raise the “ransom” from $1 million to $10 million.

Meanwhile: There are ethical ways for hackers to collect “bounties,” too. And that’s what Livepeer (LPT-USD) is now going for.

Like many blockchain projects, Livepeer is launching a new bug bounty program. If a friendly “white hat” hacker spots a bug that could affect the “video streaming experience [or] infrastructure” on Livepeer’s platform, they’ll earn a little reward. If the “white hat” spots a bug in the actual smart contracts beneath its video network, they can earn a lot more.

Payback: When hacks aren’t prevented by these bounty programs… You’ve just got to hope the project will reimburse you.

Axie Infinity (AXS-USD) just got its Ronin bridge back online after the $625 million hack. The bad news was that even its longtime investor Delphi Digital took the chance to cash out its investment. Once at $95 million, Delphi had just $9 million in Axie (now reclaimed), as The Block’s lead researcher spotted Tuesday.

The good news is that Sky Mavis, the braintrust behind Axie Infinity, says it’s now reimbursed all users affected by March’s hack. Binance (BNB-USD) came in with a major assist. First, Binance opened its bridge to Ronin (RON-USD) back in April (so users could withdraw). Then it provided roughly $150 million of Wrapped Ethereum (WETH-USD) to the reimbursement fund.

Naturally: Axie also announced new security measures for Ronin, like a “circuit breaker” system and withdrawal limits. I hope ALL crypto startups sit up and see what measures they might be able to copy now!

Listen Now: New Podcast Episode

“It’s time to refocus on the underlying infrastructure layers that make [tokens and Web3] possible and really think about how we make crypto more resilient,” said Meltem Demirors of major European crypto investor CoinShares on Cointelegraph yesterday.

We couldn’t agree more. And that same day, our own Charlie Shrem had the founder of Pocket Network (POKT-USD), Michael O’Rourke, on his Untold Stories podcast.

O’Rourke makes the case that DeFis are actually “weathering the storm much better than their centralized counterparts,” and shares what Pocket Network learned from a wild year of “exponential growth and adoption.”

You’ll also hear the pros and cons of popular money-making tools, like “liquid staking.” Click here to listen now.

On the date of publication, Ashley Cassell did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines. To have more news from The New Digital World sent to your inbox, click here to sign up for the newsletter.


Article printed from InvestorPlace Media, https://investorplace.com/newdigitalworld/2022/06/backroom-deals-at-crypto-bank-blockfi/.

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