Crypto Lender SALT Raises $64.4 Million To Resume Operations

SALT Lending has closed a $64.4 million Series A funding round from an equity 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 for new products and its growth strategy, according to a draft press release provided to CoinDesk.

A filing with the US Securities and Exchange Commission on February 3 shows that SALT sold Series A preferred stock to existing borrowers and lenders to the company in exchange for the conversion and cancellation of SALT’s outstanding debt.

In November, online investment platform Bnk To The Future terminated its planned acquisition of SALT Lending after the latter informed customers that it would pause withdrawals and deposits on its platform due to an unspecified exposure to FTX. This new financing 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. In the past year, crypto lenders BlockFi, Celsius Network and CoinDesk sister company Genesis Global Trading have collapsed, as the bear market and wave of collapses exposed insolvency and some illegal activities such as re-lending customer funds. The collapses characterized all crypto borrowers with a degree of suspicion.

“Crypto faced a perfect winter storm in 2022, bringing with it significant industry players such as 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 stand stronger than ever,” SALT founder and interim CEO Shawn Owen said in a statement. “Despite 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 .”

In an interview with CoinDesk last week, Owen said SALT initially saw a big opportunity when the 2021 bull market gave way to a bear market early last year. While the implosions of hedge fund Three Arrows Capital and Celsius “put the words ‘crypto’ front and center – in a bad way,” Owen said SALT entered into the merger deal in part because Bnk To The Future agreed with the plan to bid. on Celsius assets to try to find a solution to the once high-interest lender’s downfall.

However, the FTX collapse that began in early November caught the market – and SALT – off guard. SALT said it agreed to suspend the merger to focus on the issue. As the FTX infection spread, SALT decided to “just get out of the market, shut everything down, protect our customers and reevaluate,” Owen said. The platform wasn’t designed to shut down like that, and the user base was freaked out. SALT used the aftermath to talk to the base to try to restore trust.

Asked how crypto lenders can win back jittery customers, Owen said the answer is transparency and proof of reserves, noting that his company is raising more money than it might otherwise have to build a profit.

“We’ve opened up completely and just been more transparent than ever,” Owen said. “The tone in the market seems to be extremely cautious, people feel they were taken advantage of or they didn’t know what’s going on or they’re being told one thing and something else happened.”

UPDATE: (February 9, 13:17 UTC): Adds information from SEC filing on debt conversion in second paragraph.