Crypto Lender BlockFi Pauses Platform Activity, Prepares for Bankruptcy Amid FTX Drama
Crypto lender BlockFi has continued to pause withdrawals amid the fallout of cryptocurrency exchange FTX, saying that they are exploring all scenarios to find the best path forward.
In a blog post, the platform admitted that it continues to pause many activities due to the recent collapse of FTX and its affiliates. The company also admitted that it had “significant exposure” to FTX and its affiliated companies but insisted it has the necessary liquidity to explore all options. The blog post also cleared up some rumors that have been circulating online,
"The rumors that a majority of BlockFi assets are custodied at FTX are false. That said, we do have significant exposure to FTX and associated corporate entities that encompasses obligations owed to us by Alameda, assets held at FTX.com, and undrawn amounts from our credit line with FTX.US,"
The latest update comes as the BlockFi founder Flori Marquez's said in a Twitter thread on November 8 that all BlockFi products were “fully operational” because it had a $400 million line of credit from FTX US. Since FTX US has also filed for bankruptcy, the line of credit might not be available anymore.
"While we will continue to work on recovering all obligations owed to BlockFi, we expect that the recovery of the obligations owed to us by FTX will be delayed as FTX works through the bankruptcy process,"
Without mentioning a potential bankruptcy filing, BlockFi said they are exploring a number of scenarios that may be available to determine the best path forward. "Haynes and Boone continue to serve as our primary outside counsel, and BRG has been engaged as our financial advisor," they added.
However, a Tuesday report from the Wall Street Journal claims that the crypto lender is preparing for a potential bankruptcy filing as well as possible layoffs.
Early last week, speculation around the health of FTX and Alameda arose after a report revealed that the investment firm's balance sheet was loaded with illiquid tokens. This meant that there was not enough money to exchange their tokens for cash if need be.
By the end of the week, FTX announced that it had filed for Chapter 11 bankruptcy in Delaware on Thursday. Notably, FTX US was also included in the proceedings, despite claims by the former CEO that their US exchange was fine.
As of 2021, BlockFi had between $14 billion and $20 billion of customer deposits and had lent out $7.5 billion.