Crypto lender BlockFi, on Monday, filed for bankruptcy citing the exposure and subsequent downfall of one of crypto’s high-profile collapses in recent years, the FTX exchange. Earlier this month, amid reports of corporate missteps and suspicious management, FTX filed for bankruptcy which has since rattled the crypto industry.
The New Jersey-based BlockFi, founded nearly five years ago, filed for Chapter 11 bankruptcy protection after the crypto prices plummeted. In the filing, Zac Prince, founder and chief executive of BlockFi, said that its “significant exposure” to FTX led to a liquidity crisis.
This comes days after, the founder of the FTX exchange, Sam Bankman-Fried, said that traders pulled $6 billion from the platform within three days while Binance, a rival exchange platform, declined to sign a rescue deal. Additionally, BlockFi blamed its liquidity crisis on its exposure to FTX via loans to Alameda, a crypto trading firm affiliated with FTX.
BlockFi claims that its cryptocurrencies were held on FTX’s platform and are now trapped there. The financial entanglement between the two platforms began in June when FTX was seen as a safety net given its credibility in the market, the exchange platform then extended a $400 million credit line to BlockFi which its founder Prince at the time said would bolster “our balance sheets.”
In the court filings, BlockFi said that it subsequently borrowed $275 million from a subsidiary of FTX. However, amid reports of corporate missteps and the subsequent collapse of FTX, BlockFi began to struggle too. Earlier this month, BlockFi also announced it has halted withdrawal citing “significant exposure” to FTX and its sister hedge fund Alameda.
After filing for bankruptcy BlockFi also filed a lawsuit against FTX demanding that Bankman-Fried turnover collateral BlockFi claims that it is owed and sought to recover shares in Robinhood Markets Inc which was pledged as collateral before the two platforms went under.
BlockFi has also listed its assets and liabilities as being somewhere between $1 billion to $10 billion, in its bankruptcy court filings and that it owes money to more than 100,000 creditors. The crypto lender also said that it has a little over $250 million cash on hand for restructuring and is currently working on reducing costs by announcing layoffs for 300 of its 850 employees as of last year.
Bitfront: Another crypto exchange hit?
Another US-based crypto exchange platform, Bitfront, backed by Line Corp, a Japanese social media firm said that it has recently suspended new sign-ups and credit card payments as of November 28. The company based in California, released a statement on its website that they are shutting down “BITFRONT in order to continue growing the LINE blockchain ecosystem and LINK token economy.”
Bitfront said that it will suspend withdrawals by the end of March, next year, while interest for deposits made between December 5 and 11 will be paid by December 13, this year. However, they clarified that the decision is not related to the ongoing investigations into certain crypto exchanges alleged of “misconduct” seemingly referring to FTX.
(With inputs from agencies)
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