BlockFi, a US-based cryptocurrency lender, has applied for Chapter 11 bankruptcy protection as a result of a liquidity crisis brought on by its proximity to FTX. BlockFi did business with FTX by lending money to the cryptocurrency trading company Alameda and by holding cryptocurrencies on FTX’s platform. According to BlockFi, the company’s assets and liabilities ranging from USD 1 billion to USD 10 billion.
Following the failure of FTX, the management team and board of directors immediately took action to protect clients and the business, according to BlockFi representatives quoted by fintechnews.ch. Additionally, the company acknowledged having a sizable exposure to FTX and related corporate entities but denied that the majority of its assets were invested in FTX.
BlockFi received USD 850 million in two funding rounds in 2021, in addition to a USD 400 million line of credit from FTX US in the summer of 2022. Customer withdrawals are still on hold as the company decides how to proceed. Additionally, customers were urged not to make any deposits into their accounts.
BlockFi was compelled to act in a manner that it had previously resisted during the Voyager and Celsius meltdowns. BlockFi stopped accepting withdrawals from customers on November 11, the day FTX declared bankruptcy. Investors at companies like FTX, Voyager, and Celsius are currently in limbo without access to their money.
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