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BlockFi, Crypto Exchange Fails Due To FTX

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BlockFi, Crypto Exchange Fails Due To FTX-GadgetAny
FTX

The defunct cryptocurrency exchange FTX, which squandered customers’ monies and is unable to account for billions of dollars’ worth of assets, is currently collapsing like a dying sun. BlockFi, one of the most well-known decentralized lenders in the cryptocurrency industry, is the latest company to fall victim to the wave of financial disaster caused by the crisis that now threatens to devour other businesses that did business with it.

The Wall Street Journal reports that BlockFi, formerly an FTX partner, is considering filing for Chapter 11 bankruptcy soon and has plans to lay off a sizable portion of its workforce. Customers were previously informed by the lender that it had “significant exposure” to the chaos at FTX because of its close financial ties to the struggling cryptocurrency exchange.

FTX
Image credit: hindustantimes

Customers were first alerted to the dire situation by BlockFi in a blog post posted on Monday. According to the company’s statement at the time, “We do have significant exposure to FTX and associated corporate entities, which includes obligations owed to us by Alameda, assets held at FTX.com, and undrawn amounts from our credit line with FTX.US.”

BlockFi was already experiencing financial difficulties earlier this year as a result of the severe “crypto winter” of 2022, but in June it inked a term sheet with FTX to obtain what was basically a financial bailout. BlockFi received “access to extra financing” thanks to FTX’s acceptance of a $250 million revolving line of credit, and the two businesses discussed potential future cooperation. That must have felt pretty thrilling at the time. The CEO of FTX, Sam Bankman-Fried, bailed out a number of faltering cryptocurrency exchanges, which are now suffering as a result of his terrible mismanagement.

FTX
Image credit: Shutterstock

“Today’s landmark announcement reinforces the commitment that BlockFi has to serving its clients and ensuring their funds are safeguarded,” Zac Prince, CEO & Founder of BlockFi, ironically commented, on the day of the bailout deal. “This agreement also unlocks future collaboration and innovation between BlockFi and FTX as we work to accelerate prosperity worldwide through crypto financial services.” 

Less than a week after FTX filed for Chapter 11, BlockFi is reportedly considering bankruptcy and laying off some employees. According to the newspaper, Kenric Kattner, a bankruptcy partner at the law firm Haynes & Boone, has been assisting the business, which was once valued at over $3 billion. BlockFi was contacted by Gizmodo for comment on the company’s state, and this story will be updated if they do.

FTX
Image credit: hindustantimes

The web3 community has been shaken by FTX’s implosion, which started last week. The overall impact of this situation on the crypto industry is not yet evident. Some have predicted that it might be the industry’s Lehman Brothers, potentially bringing down a large number of other businesses as a result. In the event that BlockFi fails, it might be the first domino to fall.

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Prelo Con

By Prelo Con

Following my passion by reviewing latest tech. Just love it.

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