After revealing a large exposure to FTX, crypto lender BlockFi is reportedly planning to file for bankruptcy. BlockFi plans to lay off employees during this time.
BlockFi, a crypto lender, is reportedly in the midst of a possible bankruptcy. BlockFi plans to lay off some employees. Due to FTX’s liquidity problems, the lender had stopped withdrawing last week. This was revealed earlier in this week. FTX had rescued BlockFi in July by providing a $400 million credit line.
BlockFi, a New Jersey-based crypto lender, is reportedly about to be the latest victim of the crypto contagion triggered in bankruptcy of Sam Bankman Fried’s crypto exchange FTX.
BlockFi prepares for a possible bankruptcy
According to The Wall Street Journal, BlockFi plans to lay off some employees. The lender was one of many companies in the crypto space that have had to deal with the aftermath of FTX bankruptcy. According to people familiar with the matter, the crypto lender is now preparing for a bankruptcy filing.
The crypto lender stopped withdrawing funds and restricted activity from its platform on 11/11. This was due to confusion about the status of FTX or Alameda Research. California’s Department of Financial Protection and Innovation (DFPI) took enforcement action and suspended BlockFi’s state lending license for 30 days. They also launched an investigation into whether the company was in compliance with state laws.
The crypto lender disclosed “significant exposure” to FTX on 14 November and associated corporate entities, including Alameda Research.
We will continue to work to recover all obligations owed BlockFi, but we expect that the recovery obligations owed us by FTX may be delayed while FTX goes through the bankruptcy process.” read the official website.
Numerous lenders and exchanges were severely affected by Terra’s May collapse, which triggered the year’s notorious crypto contagion. Voyager Digital and Celsius were among the many firms that were left in a difficult position by Three Arrows Capital’s insolvency.
In the aftermath, there was uncertainty about the future of the crypto lender’s operations. CEO Zac Prince announced on 21 June that he had signed a $250 million term with Sam Bankman-Fried’s FTX. He would later be dubbed crypto’s white knight. FTX extended a $400 million credit to Prince’s company. Ironically, the company that saved BlockFi is now the reason it’s in danger.