BlockFi Set For Possible Bankruptcy As FTX Contagion Deepens: Report
A day after BlockFi said that it will explore all options to mitigate its significant exposure to beleaguered exchange FTX, the cryptocurrency lending and trading platform on Tuesday is reportedly ready to file for bankruptcy.
In response to the failure of FTX and its sister firm Alameda Research, BlockFi halted customer withdrawals last week, citing a "lack of clarity" regarding the situation.
Quoting unnamed sources, The Wall Street Journal reported that BlockFi is now preparing to fire some of its employees as the struggling company gears up for a potential chapter 11 filing on its own.
If BlockFi proceeds to a bankruptcy filing, it would become the latest victim of Sam Bankman-Fried's crypto empire collapse, which already includes FTX, FTX US, trading company Alameda Research, and more than 130 related organizations.
Ironically, BlockFi, in its email to customers on Nov. 14, had denied “rumors” that most of its assets were tied to FTX.
The exchange, however, conceded that it had “significant exposure to FTX and associated corporate entities that encompass obligations owed to us by Alameda, assets held at FTX.com, and undrawn amounts from our credit line with FTX US.”
When several cryptocurrencies fell throughout the summer, another crypto lender, Celsius, tried to maintain liquidity similarly by halting customer withdrawals, but it ultimately declared bankruptcy in July.
According to PitchBook, Bankman-Fried's trading company Alameda Research, which is closely associated with FTX, invests in more than 100 crypto businesses.
Although Alameda Research does not invest in BlockFi, the two companies are intimately related because of BlockFi's loan to FTX.