BlockFi Heading For Bankruptcy As FTX Contagion Spreads

Crypto lender BlockFi is getting ready a chapter submitting as a consequence of its “important publicity” to the bankrupt crypto trade FTX, in accordance with the most recent report by WSJ. 

Key Takeaways

  • BlockFi initially denied its publicity to FTX, however now admits to it.
  • BlockFi bumped into liquidity issues earlier this yr, so FTX prolonged a $400 million revolving credit score facility to the lender
  • Withdrawals had been paused final week, and BlockFi is now planning to put off some staff.

FTX Contagion Brings Down BlockFi

Earlier the lender denied that it had most of its property at FTX. Nevertheless, now it has acknowledged that it has an undrawn line of credit score with FTX and obligations with FTX. In a weblog publish, it admitted that it does have ”important publicity to FTX and related company entities”. This was as a consequence of FTX’s bailout of BlockFi in July of this yr, which concerned FTX offering the lender with a $400 million revolving credit score facility and the choice to purchase the corporate for as much as $240 million.

BlockFi paused withdrawals and restricted exercise final week as a consequence of uncertainty about FTX, saying it could not function as common. In preparation for a attainable chapter 11 submitting, BlockFi is now planning to put off a few of its staff, per WSJ.

Fears of Additional Fallout After Courtroom Submitting

Crypto market fears are rising after FTX reported a extreme liquidity disaster in its chapter filings and mentioned it might have greater than 1 million collectors. FTX founder Sam Bankman-Fried and his remaining staff reportedly spent the previous weekend calling traders to boost financing for a shortfall of as much as $8 billion, however have thus far been unsuccessful. With BlockFi now heading into cryptocurrency, the repercussions might be much more extreme.

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The Backside Line

The investments of FTX, and its buying and selling arm Alameda Analysis have already had an impact on one other cryptocurrency venture. The CEO of African Web3 firm, Nestcoin, introduced this week on Twitter that the corporate held a few of its property with FTX and would now be compelled to chop workers because of the publicity. Resulting from its advanced mixture of shell firms and international subsidiaries, the true results of FTX’s collapse could take a while to emerge.