The crypto quake caused by the fall of FTX continues to claim its victims. Cryptocurrency lending platform BlockFi files for bankruptcy and suspended most of its services. The move comes shortly after the company admitted it had “high exposure” to the stock market set up by its associated entities, including Sam Bankman-Fried and the Alameda Research fund.
BlockFi initiates a restructuring process involving its eight subsidiaries by voluntarily applying for the protection of Section 11 of the United States Bankruptcy Act. The company says it has $256.9 million in cash to meet its obligations as it continues its operations. FTX US, the US arm of FTX, is one of its main creditors with a $275 million loan.
BlockFi will try to stand up
This isn’t the first time BlockFi has found itself at a crossroads. In fact, his first salvation has become his current punishment. Crypto lending platform Recovered by FTX USA mid this year. The exchange, founded by Bankman-Fried, has signed an agreement to offer up to $400 million of revolving lines of credit, only a portion of which is used to continue operating.
According to The Information, BlockFi has received $250 million in FTX token FTT, which has lost nearly 95% of its value in the past 30 days as part of its recovery plan. It was trading at around $50 in March of this year, and it has remained at around $25 in the middle of this year. However, after the Bankman-Fried stock market debacle, the crypto asset fell as low as $1.28.
Details on what happened internally at BlockFi that led to the company’s decision to file for bankruptcy are not publicly available, but Bloomberg notes that a large portion of the company’s balance sheet may be made of FTT and hence the sudden drop in value of this token. It directly affected them as they would never pressure them. some of their assets would lose more than 95% of their value.
The restructuring process will include layoffs, but there was no mention of how many people will leave the company. It was said that an internal plan was launched to significantly reduce expenses, including only labor costs. It’s time to wait to find out if at some point BlockFi will offer its services again. Let’s remember that the platform has about 450,000 customers.
It is worth noting that the decline of FTX, Genesis and other platforms negatively affected the prices of cryptocurrencies. Bitcoin has dropped 70.2% last year and is trading at $16,211 at the time of this writing. Ethereum is down 71.3% over the same period. After all, most coins are dropping. Likewise, there has been a loss of trust in the crypto ecosystem in general.
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