Business, Finance & Tech
BlockFi files for bankruptcy as FTX contagion grips crypto markets
(CNN) — Crypto lender BlockFi filed for bankruptcy Monday, becoming the latest casualty of the financial contagion unleashed by the collapse of Sam Bankman-Fried’s empire.
BlockFi announced earlier this month that it had halted withdrawals, citing “significant exposure” to Bankman-Fried’s FTX exchange, as well as its sister hedge fund Alameda. FTX, Alameda and dozens of affiliates filed for bankruptcy on November 11.
“Since the pause, our team has explored every strategic option and alternative available to us, and has remained laser-focused on our primary objective of doing the best we can for our clients,” the company said in a statement.
The privately held firm, founded in 2017 by Zac Prince and Flori Marquez, made loans to customers using crypto assets as collateral.
In its bankruptcy filing, BlockFi said it owed money to more than 100,000 creditors. The largest creditor listed is Ankura Trust, a company that represents creditors in stressed situations, which is owed $729 million. FTX, BlockFi’s second-largest creditor, is owed $275 million.
BlockFi has about $257 million in cash on hand, and the company expects that will provide sufficient liquidity to support it during restructuring. The company estimates it has between $1 billion and $10 billion in assets and liabilities, according to the filing.
Part of that restructuring will include layoffs. It wasn’t immediately clear how many employees would be let go, but the company said it had “initiated an internal plan to considerably reduce expenses, including labor costs.” A representative from BlockFi didn’t immediately respond to requests for comment about staffing.
The New Jersey-based company was one of several that received financial support from Bankman-Fried over the summer, as falling crypto prices threatened to take down key players in the digital asset ecosystem. In July, BlockFi secured a $400 million financial lifeline from FTX.
The fallout from FTX’s decline is ricocheting throughout the crypto industry. Soon after FTX’s collapse, the lending arm of crypto brokerage Genesis suspended redemptions and new loan originations after an “abnormal” number of withdrawal requests that exceeded its current liquidity, citing market turmoil from the failure of FTX.
“In the crypto world, the minute you see a company or firm announce ‘we’re temporarily halting withdrawals’ — yikes,” said Daniel Roberts, editor-in-chief of Decrypt Media, a crypto-focused news outlet. “You put them on death watch now.”
One of Genesis’ partners, Gemini — the crypto firm founded by Tyler and Cameron Winklevoss — soon followed, warning customers that redemptions under its Earn program would be delayed. Gemini said at the time that it was working with Genesis to help customers redeem funds from the program, which allowed customers to earn interest on crypto holdings. No other Gemini products or services were affected, the company said.
FTX began unraveling in early November, when questions about its relationship with Alameda spurred panic among investors. A surge of withdrawals plunged FTX into a liquidity crisis that ultimately caused it to flame out. Since then, bankruptcy proceedings have revealed stunning evidence of corporate mismanagement — a “complete failure of corporate controls,” according to FTX’s new CEO, that eclipses even that of Enron.
The-CNN-Wire
™ & © 2022 Cable News Network, Inc., a Warner Bros. Discovery Company. All rights reserved.
By: Ceci Partridge
November 28, 2022
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