The bankruptcy contagion is spreading through the crypto industry as per a report by The Wall Street Journal, BlockFi, a cryptocurrency lender, is also exploring bankruptcy filing following the FTX fallout.
BlockFi Significant Exposure To FTX
The Wall Street Journal, citing people familiar with the matter, reported that BlockFi is now preparing to lay off some of its workforce while potentially planning for a Chapter 11 filing. A case filed under Chapter 11 of the United States Bankruptcy Code is a form of bankruptcy that involves a reorganization of a debtor’s business affairs, debts, and assets.
BlockFi previously denied rumors that it is holding most of its assets in FTX before the exchange’s collapse. However, BlockFi acknowledged that they have significant exposure to FTX and its associated corporate entities that include obligations owed by Alameda. In addition, they also have assets held on the platform and an undrawn line of credit from FTX.
BlockFi reassured its clients that the company has the necessary liquidity to explore all options to help restore funds for customers and is currently consulting with experts and advisers on how to move forward.
Earlier this year, FTX extended a $400 million revolving credit facility to BlockFi and potential acquisition terms amid the crypto market decline.
BlockFi’s Limited Activity And Suspended Withdrawals
The New Jersey-based crypto lending platform announced last week that it would be limiting its operations due to the lack of clarity surrounding the future of FTX. As a consequence of the current market climate, BlockFi halted customer withdrawals and advised its clients to avoid making deposits to their BlockFi wallets or interest accounts until further notice. Following BlockFi’s announcement, FTX, FTX US, and Alameda Research filed for bankruptcy.
Similar to BlockFi, numerous crypto firms have also exposure to FTX prior to its fallout. The list includes Ikigai, Genesis Trading, CoinShares, Galaxy Digital, Wintermute, Crypto.com, Matrixport, Coinbase, and Galois Capital. Some companies have publicly disclosed the figures of assets they have on FTX’s platform, ranging from $4 to $175 million.