Key Takeaways
- BlockFi has admitted to having “significant exposure to FTX and associated corporate entities.
- Earlier this year, FTX extended a $400 million revolving credit facility to BlockFi
The bankruptcy contagion is taking over the crypto industry by storm, and crypto lender BlockFi is no safe from it. As per reports, BlockFi is preparing for possible bankruptcy filing following exposure to the bankrupt exchange FTX.
In an earlier email to customers, BlockFi had denied allegations that a majority of its assets were tied up in FTX but admitted to having “significant exposure to FTX and associated corporate entities that encompass obligations owed to us by Alameda, assets held at FTX.com, and undrawn amounts from our credit line with FTX US.”
When BlockFi faced a liquidity scare in July this year, Sam Bankman Fried’s FTX extended a $400 million revolving credit facility to the crypto lender. Last week, BlockFi paused customer withdrawals citing a “lack of clarity” on the FTX situation.
According to Wall Street Journal, BlockFi is also planning to lay off some of its employees to reduce the impact of the potential bankruptcy looming over its head.
The current reports on BlackFi prepping for bankruptcy filing come as a surprise to many since on November 8, BlockFi’s founder and chief operating officer(COO), Flori Marquez, assured users that all BlockFi products were “fully operational” because it had a $400 million line of credit from FTX US, which is a separate entity from FTX, the global company affected by the bankruptcy crisis.
In the coming weeks, it is expected that more crypto firms will likely admit to their exposure to the now-collapsed FTX. FTX filed for a Chapter 11 bankruptcy proceeding earlier this week. More than 100,000 creditors are involved in FTX’s bankruptcy procedures, and that number might rise beyond one million, the filing said.
FTX liquidity crunch started in the last week following the plunge of the FTT token, which in turn triggered a concerning number of customer withdrawals from the platform. Following this, FTX’s now-former CEO Sam Bakman-Fried declared that its rival exchange Binance had signed a non-binding letter of intent to acquire FTX. But Binance backed out, stating FTX was “beyond our control or ability to help,” forcing the crypto exchange to file for bankruptcy.
