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BlockFi follows FTX and files for bankruptcy protection

Tuesday 29 November 2022 12:54 CET | News

US-based crypto lender BlockFi has filed for Chapter 11 bankruptcy protection due to a liquidity crisis caused by its proximity to FTX.

 

BlockFi conducted business with FTX by issuing loans to crypto trading firm Alameda, and it also held cryptocurrencies on FTX’s platform. According to BlockFi, its assets and liabilities are somewhere between USD 1 billion and USD 10 billion. Operations relating to the ongoing restructuring process will be funded by the USD 256.9 million in cash that BlockFi currently has on hand.

According to decrypt.com, BlockFi took a USD 400 million line of credit from FTX US in the summer of 2022, and it also received USD 850 million in two funding rounds in 2021. As the company is figuring out how to move forward, customer withdrawals remain paused. Customers were also asked not to submit any deposits to their accounts.

BlockFi representatives cited by fintechnews.ch revealed that the management team and board of directors immediately took action to protect clients and the company following the collapse of FTX. The company also denied that a majority of its assets were tied up in FTX but admitted to significant exposure to FTX and associated corporate entities.

 

US-based crypto lender BlockFi has filed for Chapter 11 bankruptcy protection due to a liquidity crisis caused by its proximity to FTX.

 

Previous BlockFi developments

Earlier in 2022, BlockFi was directly affected by the downturn of the crypto market and had to lay off around 20% of its workforce in a decision that affected 170 employees. The company also struck the aforementioned deal with crypto exchange FTX during which it laid out terms for a potential acquisition by FTX. 

In November 2022, the company launched a new digital assets interest product for accredited investors. The launch followed an agreement to shut down a yield-paying crypto product after it was deemed illegal by the SEC. 

In the same month, Curve, a UK-based payments company, has announced its intention to acquire BlockFi’s more than 87,000 credit card customers. The outreach and negotiations started in November 2022 and were still in the process with Banking as a Service (BaaS) company Deserve, which services the BlockFi card program. 

BlockFi was particularly affected by the meltdown of Three Arrows Capital and the associated collapses of lending companies Celsius and Voyager, which minimised trust in the crypto lending sector and caused monthly revenue at BlockFi to fall from around USD 48 million early in 2022 to USD 15 million by August 2022.


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Keywords: cryptocurrency, crypto asset, financial services, lending
Categories: DeFi & Crypto & Web3
Companies: BlockFi
Countries: United States
This article is part of category

DeFi & Crypto & Web3

BlockFi

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