Rumor: BlockFi Is Laying Off Workers and Exploring Bankruptcy
As the crypto winter continues, rumors swirl that another major exchange is about to file for bankruptcy. Crypto lender BlockFi is allegedly set to file for bankruptcy due to its "significant exposure" to FTX, the cryptocurrency exchange that went bankrupt in early November 2022.
BlockFi, which has paused withdrawals from its platform, has strong ties to FTX, exacerbating the issues with the now-bankrupt exchange.
BlockFi Is Set to File for Bankruptcy, Taking Money and Jobs With It
As the Wall Street Journal reports, popular crypto-lending platform BlockFi is set to file for bankruptcy. BlockFi has paused withdrawals from its platform, locking all assets in place (including user funds) and effectively shutting down operations.
BlockFi is also expected to lay off workers as part of its chapter 11 filing, though how many jobs is unknown.
BlockFi Has "Significant Exposure" to the FTX Exchange Collapse
In a BlockFi blog post dated 14 November 2022, the company confirmed that its issues relate to the collapse of the FTX crypto exchange a week prior (7 November 2022).
The rumors that a majority of BlockFi assets are custodied at FTX are false. That said, we do have significant exposure to FTX and associated corporate entities that encompasses obligations owed to us by Alameda, assets held at FTX.com, and undrawn amounts from our credit line with FTX.US.
BlockFi's exposure to FTX is two-fold. First, the crypto-lending service was one of many that took bailout deals when the crypto market's sky-high prices began to fall. BlockFi took a $400 million revolving credit facility from FTX, and those familiar with the situation say the company took most of the loan.
Second, BlockFi also lent money to FTX partner company Alameda Research which was collateralized using FTX's FTT tokens. Once FTX's FTT token price dropped, the loans became wildly unstable and worth a fraction of the original price, creating a huge black hole in the finances of both companies.
The Crypto Winter (Potentially) Claims Another Victim
Although BlockFi is yet to file for bankruptcy formally, the wheels are allegedly already in motion. So it appears that it won't be long before yet another cryptocurrency service falls.
The knock-on effect from FTX's disastrous trading and subsequent bankruptcy is sending waves throughout the crypto world, and it's highly unlikely that BlockFi will be the last crypto service taken under.
For now, the advice to all cryptocurrency users is to move your cryptocurrency from exchanges into secure, personal crypto wallets as soon as possible, as there is no knowing which service may fall next.