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BlockFi yesterday acknowledged considerable exposure in the form of not just assets on the exchange but also additional obligations owed by FTX, especially an undrawn line of credit from FTX, despite refuting rumors earlier that the majority of its assets were stored in FTX exchange.
Crypto Contagion Spreads After FTX Collapse
BlockFi Inc. is now said to be in preparation for filing bankruptcy, as per the latest reports. The potential Chapter 11 filing by the ailing crypto lender comes soon after it temporarily halted client withdrawals last week owing to a “lack of clarity” over Sam Bankman-Fried’s FTX empire at the time.
Read More: This Hedge Fund Loses Majority of Funds Due To FTX Bankruptcy
On November 10, BlockFi tweeted “We are shocked and dismayed by the news regarding FTX and Alameda”. The tweet further went on to state:
“We, like the rest of the world, found out about this situation on Twitter. Given the lack of clarity on the status of FTX.com, FTX US and Alameda, we are not able to operate business as usual.”
Following this, on Monday, BlockFi in its official blog post remarked that given FTX’s bankruptcy, it is “the most prudent decision” to continue pausing many of its platform activities.
Ironically, FTX had intended to buy BlockFi outright for up to $240 million in July, depending on the startup’s performance. Although the potential acquisition came with a catch: BlockFi had a $400 million revolving line of credit to keep it afloat as it attempted to reduce its exposures from the collapse of borrowing markets following the dismantling of Three Arrows Capital, one of the biggest hedgefunds of its time.
What Led To FTX Filing Bankruptcy?
In what appeared to be a potential bailout of the troubled exchange, under a liquidity constraint, Binance signed a letter of intent on Tuesday to acquire its ailing rival, FTX. However, that plan failed a little more than 24 hours later following Binance’s due diligence on FTX.
Read More: SBF Resigns, John Ray III Joins As New FTX CEO
The renowned crypto exchange, once a leader in its domain, has crumbled into pieces in less than a week. And along with it, many organizations are anticipated to face the heat as well.
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