FTX's Crash Prompted BlockFi to Prep for Bankruptcy

    TheMorningCrypto Desk
    TheMorningCrypto Desk
    Published on November 16, 2022 7:57 PM

    Updated on January 9, 2023 12:50 PM

    Due to its "substantial exposure" to the insolvent cryptocurrency exchange FTX, crypto lender BlockFi is ready to file for bankruptcy.
    FTX's Crash Prompted BlockFi to Prep for Bankruptcy
    Source: The Economics Times

    A Substantial Exposure to FTX

    The cryptocurrency lender BlockFi said on Monday that it had a sizable exposure to the bankruptcy filings made last week by Sam Bankman-FTX Fried's and related firms.

    In response to calls for greater regulation following the biggest blowup in the cryptocurrency business, FTX founder Bankman-Fried also resigned as CEO.

    According to BlockFi,

     "We do have significant exposure to FTX and associated corporate entities, including obligations owed to us by Alameda, assets held at, and undrawn funds from our credit line with FTX.US."

    It also said that withdrawals from its platform remained halted and that customers had been urged not to put money into interest or BlockFi wallets.

    BlockFi and FTX agreed to a $400 million revolving credit facility in July, with an option for FTX to purchase the facility for up to $240 million.

    BlockFi Updated Platform Users

    BlockFi declared that "business as usual" was no longer an option.

    The "most logical" action at this time is to stop various platform activities because FTX and all of its affiliates are currently involved in bankruptcy proceedings, according to the business. Customers are instructed not to make any deposits and withdrawals will still be temporarily suspended.

    The business rejected rumors that the majority of its assets were held in custody at the defunct cryptocurrency exchange FTX, where they would have been possibly held for a very long time.

    BlockFi to "Explore All Possibilities" To Nullify FTX's Effect

    BlockFi, a cryptocurrency lender, stated on Monday that it will "consider all possibilities" to reduce its "substantial exposure" to FTX's insolvency.

    As other crypto financial institutions, notably Three Arrows Capital and Voyager Digital, fell in the wake of the summer's market collapse, BlockFi got a $250 million loan from FTX in June.

    The financing was utilized to keep the business solvent. Additionally, BlockFi claimed that it had corporate assets with FTX and is owed money by Bankman-Fried-owned cryptocurrency trading company Alameda Research.

    The cryptocurrency sector has been preparing for a fallout from the FTX bankruptcy, with numerous firms estimating their exposure to the troubled company in the millions.

    Related: BlockFi Halting Withdrawals Following FTX and Alameda Collapse

    In reality, at least one additional business that got funds from Alameda also had to change the way it operated. On Monday, the CEO of the African Web3 business Nestcoin tweeted that due to the company's exposure to FTX, it will be making layoffs and holding part of its assets there.