(Kitco News) -
Crypto lender BlockFi is now preparing a bankruptcy filing after halting customer withdrawals last week, and it has confirmed “significant exposure” to FTX, according to a report from the Wall Street Journal on Tuesday afternoon.
On Thursday evening, BlockFi announced that uncertainty surrounding FTX had forced them to suspend withdrawals on the platform. "We are shocked and dismayed by the news regarding FTX and Alameda," they wrote in a Twitter post. "Given the lack of clarity on the status of FTX.com, FTX US and Alameda, we are not able to operate business as usual."
BlockFi also appeared to throw shade at FTX, saying, "We, like the rest of the world, found out about this situation through Twitter." This is surprising considering FTX had recently played the role of their savior, extending the embattled lender a $400 million credit facility in July to help stave off the bankruptcy faced by rivals Celsius and Voyager.
In the end, this rescue may have further weakened FTX, plunging both firms into crisis just months later.
FTX, FTX.US and Alameda Research filed for bankruptcy on Friday without disclosing which other crypto firms’ holdings were stranded on their exchange. There were reports on Friday that BlockFi had retained bankruptcy counsel as well.
Today, sources told WSJ that BlockFi is planning to lay off workers while they prepare for their own chapter 11 bankruptcy filing.
In a blog post on Monday, BlockFi wrote that “rumors that a majority of BlockFi assets are custodied at FTX are false,” but they conceded that they were still very exposed, including “obligations owed to us by Alameda, assets held at FTX.com, and undrawn amounts from our credit line with FTX.US.” The company asked clients to continue refraining from making deposits to BlockFi Wallet or Interest Accounts until further notice.
BlockFi said that they are continuing to work on recovering the funds, but they expect that “the recovery of the obligations owed to us by FTX will be delayed as FTX works through the bankruptcy process.”
The post stated that there were “a number of scenarios” open to them, and they are still working to decide “the best path forward.”
