According to insider sources, BlockFi has retained legal counsel to review a potential Chapter 11 bankruptcy filing in the latest crypto news. The company has sought help from Binance and is considering layoffs.
Withdrawals Suspended After FTX Collapse
Last week, all customer withdrawals were suspended when the cryptocurrency exchange FTX crashed. BlockFi previously acknowledged significant exposure to FTX and its affiliated entities and will continue to suspend withdrawals for now while reminding customers not to deposit to BlockFi wallets or interest accounts. This follows BlockFi’s announcement last week that it would suspend withdrawal operations due to the unclear status of FTX.com, FTX US, and Alameda Research, which prevented BlockFi from doing business as usual. Binance US, Coinbase, Curve, and others are reportedly bidding on the BlockFi credit card program and its associated customers, totalling approximately 87,500 accounts. As a result, The California Department of Financial Protection and Innovation (DFPI) announced that it would suspend cryptocurrency lending platform BlockFi’s state license for 30 days pending an investigation into the company’s announcement to stop offering loans and customer withdrawals in the wake of the FTX incident. According to reports, BlockFi has also been in contact with Binance about possible financial assistance.
BlockFi’s Significant Exposure To FTX
In July, the troubled BlockFi entered into a line of credit and acquisition option agreement with FTX US worth a total of $680 million. BlockFi sought this line of credit as the cryptocurrency market hit a low point with the collapse of Terra, and BlockFi was facing difficulties.
A BlockFi employee revealed, “The only reason FTX bailed us out was to get our user funds onto their platform to use in their shell game. They applied immense pressure to get BlockFi funds migrated to FTX custody. Employees were told by executives not to ask questions about the move”
The Ethereum wallet address labelled as BlockFi has initiated a total of four USDC transfers to Alameda’s address since September this year, totalling 65 million USDC, or 4.5 times its current total assets. As of a few days ago, BlockFi’s Ethereum wallet assets totalled about $14 million, of which it held about 3.01 million USDC.
BlockFi is just one of the many victims of FTX’s unexpected bankruptcy last week. According to The Block Research, FTX owes more than $5 billion in cash, $1.41 billion in bitcoin, $800 million in USDT and $670 million in ETH, as well as loans to BlockFi, Genesis, and LayerZero, totalling nearly $9 billion.
Read more on the FTX crypto news:
FTX Collapse Under Investigation By U.S. Authorities
Tether freezes $46 Million FTX-held USDT On Behalf of Law Enforcement
Binance Backpedals On FTX Buyout Deal
Crypto Companies Scramble To Deny Ties To FTX And Alameda Research
Binance CEO Unveils Plans For FTX Acquisition