The collapse of the FTX cryptocurrency exchange has not finished spilling the ink. After the bankruptcy of Sam Bankman-Fried’s company, another platform, BlockFi, falls under Chapter 11 of the bankruptcy law in the United States.
BlockFi specializes in lending. And the bankruptcy, after the collapse of FTX, was quite predictable.
Why is BlockFi going bankrupt? Which links with FTX?
Immediately after the collapse of FTX, BlockFi had warned that it had significant exposure to the crypto exchange, but also to Alameda, Sam Bankman Fried’s other company. In addition, as a sign that things were going badly, BlockFi had suspended withdrawals.
In a new statement, BlockFi explains that it has explored all options, with the main goal of “doing the best for the customer.”
Under Chapter 11, BlockFi aims to “stabilize the business” and “implement a reorganization plan that maximizes value for all stakeholders,” including customers.
The company has $257 million in cash, which will allow it to continue operating through the restructuring. BlockFi wants to reduce its costs, including those of staff.
What will happen to the platform?
Right now, BlockFi customers are in the dark, though the company is trying to reassure them: “Acting in the best interest of our customers is our top priority and remains our way forward. We will continue to communicate with our customers throughout the process to ensure they hear directly from us.”, we can read in an FAQ. At this time, withdrawals remain suspended.
And the situation will also depend on the evolution of FTX, to which BlockFi admits to having significant “exposure”.
According to the lending platform, work is underway to collect the obligations owed to it. As for the obligations BlockFi by FTX has, it admits that it will be delayed. Indeed, FTX also has to manage its bankruptcy.
As part of our restructuring efforts, we will focus on recovering all obligations to BlockFi from counterparties, including FTX.
—BlockFi (@BlockFi) November 28, 2022
BlockFi vs. Emerging Fidelity Technologies
Following the bankruptcy, BlockFi filed a lawsuit against Emergent Fidelity Technologies, a holding company owned by Sam Bankman Fried, according to an article in the Financial Times. The goal would be to seize the FTX founder’s shares in Robinhood, which were allegedly used as collateral. SBF would be a 7.6% shareholder in Robinhood.