Cryptocurrency lending platform BlockFi is reportedly preparing to file for chapter 11 bankruptcy, citing the company’s “significant exposure” to the beleaguered crypto exchange FTX.
BlockFi Prepares to File for Bankruptcy
In July, crypto lender BlockFi received a $400 million revolving credit facility from FTX in an agreement that also gave the exchange an option to purchase the company. With FTX bankrupt, there seems to be trouble for BlockFi.
Despite BlockFi denying that it held most of its assets on the beleaguered FTX, sources familiar with the matter claim that the crypto lender is planning to lay off workers and is also exploring a bankruptcy filing.
Last week, the company paused withdrawals and limited activity on its platform, announcing that it couldn’t operate business as usual given the uncertainty about FTX. Withdrawals are still halted due to “significant” exposure to FTX.
BlockFi’s Financial Entanglement with FTX
In addition to the revolving credit BlockFi received from FTX, the lender on Monday, November 14th, acknowledged in an email to investors that it had assets on FTX and exposure to other associate corporate entities.
BlockFi also announced that it has an undrawn line of credit from FTX and obligations that FTX owed it. The company also took to Twitter to announce that it was “shocked and dismayed” by the failure of FTX and Alameda.
On the Flipside
- According to Sam Bankman-Fried, the former CEO of FTX, the company still has enough assets to pay off its creditors, as he hopes to restart the exchange.
Why You Should Care
A bankruptcy filing from BlockFi would be due to the crypto lender’s significant financial entanglement with the now-bankrupt FTX.
Read more on BlockFi’s struggle in:
BlockFi has “Significant Exposure” to FTX, Denies Holding Majority of Assets on Exchange
Find out more on FTX’s financial situation in:
FTX Has Enough Funds to Compensate Customers – Sam Bankman-Fried Wants to Restart the Exchange