Major crypto lending and staking platform BlockFi officially filed for bankruptcy on Monday. BlockFi becomes the latest causality of the financial turmoil caused by Sam Bankman-Fried’s FTX scandal.
The company was one of the many affiliates of FTX and Alameda. In fact, Alameda was the sister hedge fund for BlockFi. Earlier this month the platform suspended all user withdrawals, citing that its assets and investments were significantly associated with FTX. Since then, the company has been exploring several alternatives, and its stakeholders agreed that filing bankruptcy was the only viable measure available.
How were BlockFi and FTX connected?
BlockFi was founded five years ago with the unique and effective business model of providing loans backed by crypto collaterals. Users of the platform were also able to deposit their crypto and earn interest. In its public statement, the firm stated that it owed money to over 100,000 creditors. FTX was its second-largest creditor, followed by Ankura Trust, which is owed $729 million.
Just like most crypto service providers, the company was also struggling to cope with the falling crypto prices this year. FTX was a lifeline for the firm, as Bankman-Fried’s exchange provided $400 million in financial support to the company.
The company stated that it only has $257 million liquid cash on hand, which will provide sufficient funding to support its restructuring. According to the firm’s bankruptcy application, its estlimated liabilities are between $1-10 billion.
FTX’s fallout continuous to claim new victims
BlockFi joins the long list of crypto service providers that have been crushed by the leading exchange’s failure. Soon after the collapse, leading crypto brokerage firm Genesis also suspended withdrawals and new loan applications. The platform reportedly received an unprecedented number of withdrawal requests that exceeded its current liquidity.
The Gemini exchange founded by the Winklevoss twins also followed the same path, as customer redemptions were delayed significantly. It’s hard to say how far this turmoil will drag the crypto market, but FTX’s collapse has left a long-lasting stain on the crypto industry which will shape how exchanges and firms operate in the future.
