24/7 Cryptocurrency News

Breaking: BlockFi Preps For Potential Bankruptcy After FTX Collapse

BlockFi, which is financially linked to the now-bankrupt FTX, intends to lay off employees and is considering filing for bankruptcy soon.
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Breaking: BlockFi Preps For Potential Bankruptcy After FTX Collapse

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.

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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.

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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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Pratik Bhuyan

Pratik has been a crypto evangelist since 2016 & been through almost all that crypto has to offer. Be it the ICO boom, bear markets of 2018, Bitcoin halving to till now - he has seen it all.

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Why trust CoinGape: CoinGape has covered the cryptocurrency industry since 2017, aiming to provide informative insights to our readers. Our journalists and analysts bring years of experience in market analysis and blockchain technology to ensure factual accuracy and balanced reporting. By following our Editorial Policy, our writers verify every source, fact-check each story, rely on reputable sources, and attribute quotes and media correctly. We also follow a rigorous Review Methodology when evaluating exchanges and tools. From emerging blockchain projects and coin launches to industry events and technical developments, we cover all facets of the digital asset space with unwavering commitment to timely, relevant information.
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