Another Bit Bites the Dust: Crypto Lender BlockFi Preparing Bankruptcy Filing Due to FTX Collapse
FILE – An advertisement for Bitcoin cryptocurrency is displayed on a street in Hong Kong, on Feb. 17, 2022. Bitcoin slumped to a two-year low, Wednesday, Nov. 9, and other digital assets sold off following the sudden collapse of crypto exchange FTX Trading, which has been forced to sell itself to larger rival Binance.
BlockFi, a US-based digital asset lender, was once valued at $3 billion. The firm has offices in New York, New Jersey, Singapore, Poland, and Argentina.Cryptocurrency lending platform BlockFi is preparing to file for bankruptcy in the coming days, according to an exclusive Bloomberg report published Wednesday.The outlet cited sources with knowledge of the situation, who requested anonymity.BlockFi paused withdrawals from the platform last week, citing uncertainty surrounding FTX’s collapse. BlockFi had been extended a $400 million line of credit by FTX earlier this year in a deal that could have ended up with FTX purchasing BlockFi if the loan platform had hit certain targets.BlockFi also gave loans to FTX’s sister site Alameda Research, a trading firm. FTX reportedly loaned Alameda Research consumer funds, which led to FTX’s insolvency when Alameda Research lost its investments. It has been reported that FTX lent out as much as $10 billion to Alameda Research.A representative for BlockFi declined to comment on the situation. The Wall Street Journal previously reported that the company was considering bankruptcy.The FTX collapse has sent shockwaves throughout the cryptocurrency industry. The second largest cryptocurrency exchange by volume, the company had connections within and outside of the cryptocurrency market. Over 135 entities were named in its bankruptcy filings and it estimated the site as having over a million creditors.Outside of the cryptocurrency market, Sequoia Capital and the Ontario Teachers’ Pension Plan had invested in FTX. Visa, Goldman Sachs, Gamestop, and the Coachella music festival had partnerships with FTX, and last week, Miami-Dade County canceled a $90 million stadium naming rights deal with FTX.
AmericasFTX Crypto Exchange Goes Bankrupt, CEO Replaced by Figure Registered by SEC for Insider Trading11 November, 17:31 GMTThe collapse has led to increased calls for regulations, both inside the United States and globally. Germany’s chief financial regulator called for global standards on Monday. Meanwhile, South Korean regulators urged their government not to wait for international regulations.In the United States, Sen. Elizabeth Warren (D-MA) said she will continue to pressure the US Securities and Exchange Commission (SEC) to step up enforcement on cryptocurrency exchanges, something the White House later echoed. However, FTX was based in the Bahamas and would have been out of the SEC’s regulatory reach. FTX US is subject to SEC regulations but FTX lent funds from its international trading platform.FTX’s founder and owner Sean Bankman-Fried was an adamant supporter of increased cryptocurrency regulation, including the Digital Commodities Consumer Protection Act currently under consideration by the Senate.
