- Crypto lender BlockFi revealed the move to file for insolvency after its FTX exposure triggered a liquidity crisis.
- Also, BlockFi sued Sam Bankman-Fried holding company to recover shares promised as security three weeks ago.
BlockFi, a cryptocurrency lender, filed for bankruptcy protection, according to its Monday statement, becoming the latest industry victim as the company suffers from its exposure to the collapse FTX exchange. The New Jersey filing comes as the crypto market stares at plummeted prices amid the latest unwelcoming events.
For instance, the leading crypto Bitcoin has lost over 70% from last year’s high. Meanwhile, BlockFi’s insolvency confirms substantial asset infection risks related to the cryptocurrency industry, according to Fitch Ratings senior director Monsur Hussain.
Meanwhile, fintech exec-turned-cryptocurrency entrepreneur Zac prince founded New Jersey-based lender BlockFi. The bankruptcy filing revealed that the platform’s significant FTX exposure welcomed a liquidity issue. Sam Bankman-Fried’s FTX filed for insolvency protection in the US this month.
That came after investors withdrew $6B from the platform within 72 hours as rival Binance suspended a rescue deal. BlockFi’s proposed monetary adviser Berkeley Research Group confirmed that the lending platform isn’t facing the myriad problems that FTX faces, and the debtor’s FTX exposure remains the leading driver of the insolvency filing.
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BlockFi emphasized that FTX exposure triggered the liquidity problems through loans to Alameda – an FTX-affiliated cryptocurrency trading company – and digital tokens trapped in FTX’s platform. Meanwhile, BlockFi recorded its liabilities and assets between $1B and $10B. The filings revealed that BlockFi sold part of its cryptocurrency assets early this month to fund its insolvency.
The sales raised $238.6M in cash, and the lender now has $256.5M cash on hand. The Monday court filing had BlockFi listing FTX as its 2nd largest creditor – with $275M owed following an early this year loan extension. It added that it owes over 100K creditors money. Moreover, BlockFi confirmed layoff plans.
The Bankruptcy Crisis
BlockFi’s filings come after two of its leading rivals, Voyager Digital and Celsius Network, filed for insolvency in July, citing massive losses due to extreme market conditions. Meanwhile, BlockFi will have its first hearing on Tuesday. Moreover, FTX didn’t respond when requested to comment.