BlockFi Exploring Bankruptcy in Response to FTX Fallout: Report
BlockFi is looking for answers to its liquidity troubles caused by its heavy exposure to FTX – and bankruptcy is reportedly on the table.
- The crypto lending firm is already preparing a potential bankruptcy filing, people familiar with the matter told the Wall Street Journal. It’s also reportedly planning to lay off workers – a common practice for crypto firms during the 2022 bear market.
- BlockFi already paused customer withdrawals and limited activity last week, citing the uncertainty around FTX’s financial situation.
- Just one day later, FTX, FTX US, and Alameda Research filed for bankruptcy. The once top-tier crypto exchange reportedly faces an $8 billion shortfall in customer deposits.
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“Certainly nothing official, but the contagion is obviously real,” a spokesman from BlockFi told CryptoPotato on the matter.
- BlockFi already faced liquidity trouble in June as contagion spread from the collapse of Terra and its algorithmic stablecoin, UST, in May. Two other crypto lenders – Celsius and Voyager – filed for bankruptcy at the time.
- BlockFi received a $250 million revolving credit facility with FTX in June to help it navigate those financial issues. In July, BlockFi’s CEO asked not to be compared to Celsius or Voyager, since those firms were frozen and bankrupt, while BlockFi was neither.
- The lender provided a statement on Monday saying that it still had the necessary liquidity to “explore all options” to help restore funds for customers.
- Other exchanges and lenders are also freezing withdrawals following FTX’s collapse, including Liquid Global. Other firms including Huobi and Ikigai now have millions of dollars in assets trapped within the insolvent exchange.
- Former FTX CEO Sam Bankman-Fried reportedly sought additional funding from investors over the weekend.
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