According to recent sources, less than a week after BlockFi stopped allowing thousands of its customers to withdraw money, the struggling cryptocurrency lender is reportedly preparing for a potential bankruptcy because of the decline of the crypto exchange FTX.
The most recent company to become embroiled in a financial web with the now-defunct FTX is BlockFi. According to people with knowledge of the situation, BlockFi has begun planning layoffs and is thinking about declaring Chapter 11 bankruptcy.
The CEO of Twitter, Crypto Tea, recently stated that BlockFi was hit with a $100 million fine from the Security and Exchange Commission. She stated that when BlockFi runs out of money, FTX bails them out and takes the remaining funds belonging to BlockFi members.
“The SEC charged BlockFi $100 million BlockFi runs low on cash, and FTX bails them out FTX steals the rest of BlockFi user’s money.”
BlockFi Suspends Client Deposits
The cryptocurrency lender acknowledged having "substantial exposure" to the insolvent exchange FTX and stopped customer deposit withdrawals. The company said it couldn't operate normally because of the uncertainties surrounding FTX.
The company's founder and COO, Flori Marquez, tweeted the week before that all of the items are up and running. Given that BlockFi has a $400 million line of credit from FTX.US and not FTX.com, the COO views the company as autonomous. It won't merge with anything else until at least July 2023. Processing the client's withdrawals was her final point.
“All BlockFi products are fully operational. BlockFi is an independent business entity. We have a $400MM line of credit from FTX.US (not FTX.com) and will remain independent until at least July 2023. We are processing all client withdrawals.”
BlockFi, founded in 2017 by Zac Prince and Flori Marquez, offers financial services geared toward cryptocurrencies, including zero-fee trading and interest-bearing accounts. The business started financing in January 2018 and now provides customers with the option to use Bitcoin and Ether to leverage USD loans.
The company has 44 states where it operates and is supported by well-known financiers like Galaxy Digital Ventures LLC, ConsenSys Ventures, and SoFi. Additionally, it is a non-bank secured lender that offers USD loans to owners of cryptoassets who pledge their cryptoassets as collateral for the loan. Their goods meet the needs of both individuals and institutions that own blockchain assets and increase liquidity in the market for blockchain assets.