Crypto Lender BlockFi Halts Withdrawals As FTX Contagion Spreads

The crisis sparked by the collapse of the FTX exchange has spread like a wildfire across the crypto market. A few hours ago crypto lender BlockFi said that they are now limiting client activity and pausing withdrawals on the platform.

In a message, the crypto lender noted: “Given the lack of clarity on the status of FTX.com, FTX US, and Alameda Research, we won’t be able to operate business as usual”. Interestingly, FTX US was an investor in BlockFi after the crypto lender was in troubled waters following the collapse of the Terra ecosystem.

In the summer of 2022, FTX US offered BlockFi a major lifeline by offering a $400 million revolving credit facility. It also came with an option to purchase the company.

The collapse of crypto exchange FTX and its sister trading platform Alameda Research has led to growing concerns about how the contagion could spread to other crypto firms.

BlockFi’s Message to Clients

The crypto lender said that its priority has always been protecting its client’s interests. Besides, BlockFi has also requested its customers refrain from depositing funds into their BlockFi wallets or other client accounts.

Crypto lenderBlockFi has been facing the heat of the market collapse this year. In March 2021, the crypto lender was valued at $3 billion. However, during this year in June, the company was looking to raise funds at a one-third valuation of $1 billion.

Amid the collapse of other crypto lenders like Voyager Digital and Celsius Networks, BlockFi too faced the heat of massive withdrawals in the market. After the collapse of the Terra ecosystem and the implosion of crypto hedge fund Three Arrows Capital, BlockFi took an $80 million heat due to its bad debt with 3AC.

The recent collapse of FTX has forced regulators to make a move. Authorities in the Bahamas, where FTX.com is based have initiated measures to freeze the assets of its local trading subsidiary.