SALT Lending has closed a $64.4 million Series A funding round from a share sale to accredited investors less than three months after a planned sale fell through due to the implosion of centralized crypto exchange FTX. SALT will use the capital toward new products and its growth strategy, according to a draft press release provided to CoinDesk.
A Feb. 3 filing with the U.S. Securities and Exchange Commission shows SALT sold Series A preferred shares to existing borrowers and lenders to the company in exchange for the conversion and cancelation of SALT's outstanding debt.
In November, online investing platform Bnk To The Future terminated its planned acquisition of SALT Lending after the latter informed customers it would pause withdrawals and deposits on its platform due to an unspecified exposure to FTX. This new funding was to recapitalize SALT’s balance sheet and capital reserves. Subject to regulatory approval, SALT is working to return to full operations during the first quarter of this year.
Founded in 2016, Denver-based SALT offers blockchain-backed loans where borrowers put up cryptocurrency as collateral. The past year has seen the collapse of crypto lenders BlockFi, Celsius Network and CoinDesk sister company Genesis Global Trading as the bear market and wave of collapses revealed insolvency and some illegal activities such as re-loaning customer funds. The collapses tinged all crypto lenders with a degree of suspicion.
“Crypto faced a perfect winter storm in 2022, taking with it significant industry participants like Terraform Labs, Voyager Digital, Celsius Network, Three Arrows Capital, FTX, and BlockFi. SALT was not immune to these market forces, but we are determined to emerge stronger than ever,” said SALT founder and interim CEO Shawn Owen in a statement. “Despite facing an unprecedented situation and, frankly, an existential threat, we have embarked on a growth plan that we believe positions us for even greater success in the future.”
Emerging from the FTX contagion
In an interview with CoinDesk last week, Owen said SALT initially saw a huge opportunity as the bull market of 2021 gave way to a bear market early last year. While the implosions of hedge fund Three Arrows Capital and Celsius “put the words ‘crypto lending’ front and center – in a bad way,” Owen said SALT entered into its merger agreement in part because Bnk To The Future agreed with its plan to bid on Celsius assets to try and find a solution to the once high-yield lender’s downfall.
However, the FTX collapse that began in early November caught the market – and SALT – off-guard. SALT said it agreed to calling off the merger to focus on the problem at hand. As the FTX contagion spread, SALT decided to “just get out of the market, shut everything down, protect our customers and reassess,” said Owen. The platform wasn’t designed to shut down in that way, and the user base was left spooked. SALT spent the aftermath talking to its base to try and restore confidence.
Asked how crypto lenders can win back nervous customers, Owen said the answer is transparency and providing proof of reserves, noting that his company is raising more money than it otherwise might have in order to build a surplus.
“We've completely opened up and just been more transparent than ever,” said Owen. “The tone out in the market seems to be extremely cautious, people feeling like they were taken advantage of or that they didn't know what's going on or they're told one thing and something else happened.”
Read more: Why Do Crypto Lenders Keep Blowing Up?
UPDATE: (Feb. 9, 13:17 UTC): Adds information from SEC filing about debt conversion in second paragraph.
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