Dave Buys Back Its Stake from FTX Ventures After Bankruptcy

Dave, a fintech company that offers banking and financial services through a mobile app, has announced that it will buy back its stake from FTX Ventures, the venture capital arm of the bankrupt crypto exchange FTX. The deal, which is subject to court approval, will allow Dave to regain full ownership of its convertible promissory note worth $100 million, which it had issued to FTX Ventures in March 2022.

Dave and FTX Ventures: A Brief History

Dave and FTX Ventures had partnered in March 2022 to enable cryptocurrency payments on Dave’s platform. As part of the partnership, FTX Ventures had invested $100 million in Dave, in exchange for a convertible promissory note. A convertible promissory note is a type of loan that can be converted into equity or shares of the company at a later date.

The partnership was seen as a strategic move for both parties, as Dave aimed to expand its user base and offer more financial options to its customers, while FTX Ventures sought to diversify its portfolio and gain exposure to the fintech sector.

However, the partnership turned sour when FTX, the parent company of FTX Ventures, collapsed into bankruptcy in November 2022, after being accused of fraud, money laundering, and market manipulation by the US authorities. FTX’s founder and CEO, Sam Bankman-Fried, was found guilty of multiple charges and is awaiting sentencing in March 2024.

The bankruptcy of FTX triggered a series of legal actions and asset sales, as the court-appointed liquidators tried to recover the funds owed to the creditors and customers of FTX. Among the assets that were put up for sale were the convertible promissory notes issued by Dave and other companies to FTX Ventures.

Dave’s Deal to Buy Back Its Stake

On January 5, 2024, Dave announced that it had reached an agreement with the liquidators of FTX Ventures to buy back its convertible promissory note for $71 million, at a discounted rate. The deal, which is pending approval from a bankruptcy court, will allow Dave to regain full ownership of its stake and avoid any dilution of its equity.

Dave’s CEO, Jason Wilk, said in a press release that the deal was in the best interest of the company and its shareholders, as it would protect Dave’s valuation and future growth potential. He also said that Dave had no involvement in the illegal activities of FTX and that the company remained committed to providing innovative and accessible financial services to its customers.

Dave, which was founded in 2016, claims to have over 10 million users and offers products such as savings accounts, cash advances, spending accounts, and credit building. The company also plans to go public through a merger with a special purpose acquisition company (SPAC) called VPC Impact Acquisition Holdings III, which is expected to close in the first quarter of 2024.

The Impact of FTX’s Bankruptcy on the Crypto Industry

The bankruptcy of FTX, which was once one of the largest and most influential crypto exchanges in the world, has had a significant impact on the crypto industry and the broader financial markets. FTX’s collapse caused a sharp drop in the prices of Bitcoin and other cryptocurrencies, as well as a loss of confidence and trust among investors and regulators.

FTX’s bankruptcy also exposed the risks and challenges that crypto companies face in terms of compliance, security, and governance. Many crypto companies have been under increased scrutiny and pressure from regulators and law enforcement agencies, who have been cracking down on fraud, money laundering, and tax evasion in the crypto space.

Some crypto companies have also been trying to distance themselves from FTX and its affiliates, by terminating their partnerships, canceling their deals, or reclaiming their assets. For example, Galaxy Digital, a crypto asset management firm, bought back its stake in FTX’s derivatives platform, LedgerX, for $70 million in December 2023.

However, some crypto experts and enthusiasts believe that FTX’s bankruptcy is not the end of the crypto industry, but rather an opportunity for innovation and improvement. They argue that the crypto industry is resilient and adaptable, and that it will continue to grow and evolve despite the setbacks and challenges.