BlockFi blames FTX for bankruptcy, but lets bitcoin mining debt slide
Crypto lender BlockFi is blaming its recent bankruptcy on the now infamous Bahamas-based exchange FTX, citing an unpaid and unsecured debt of $275 million.
Despite the money owed from Sam Bankman-Fried’s imploding empire, BlockFi also lists more than $1 billion in additional unsecured debt to other borrowers and huge amounts of assumed debt.
Among this secured debt is $54 million from troubled bitcoin mining titan Core Scientific. In its latest filing with the Securities and Exchange Commission (SEC), Core claims that because it defaults on its loans (the company currently has only 24 bitcoins and about $26.6 million in cash), creditors can take over their guarantees and collateral.
Despite this, BlockFi has so far done nothing to take back any of Core’s mining equipment.
Core Scientific, which is based in Austin, Texas, until recently mined around 47 bitcoins weekday. However, this speed has slowed considerably, and the company is now being sued by a number of its investors for lying about electricity costs.
With bitcoin’s price now below $20,000, many miners, including Core, have been hit by skyrocketing energy prices and have been forced to sell much of their mined crypto.
An indicator by Capriole Investments showed that last month bitcoin miners carried out some of the most aggressive selling in history. Core has warned that it is a very real possibility that it could run out of cash by the end of the year and will most likely have to shut down operations.
As a result, BlockFi would have to navigate and wait out more court cases if it were to take back any security.
According to the bankruptcy filing, BlockFi expects to revive its assets and pay all of its customers as soon as borrowers repay their loans, and has no other option for its bankruptcy recovery plan.
The company has even sued FTX to speed up the process of getting the money back. But with FTX also in bankruptcy mode, the prospect of BlockFi receiving anywhere near the required $275 million is less than likely. Especially since clients are always paid first in bankruptcy proceedings.
Read more: Bitcoin miners forced to dump stakes to stay afloat amid market crash
According to a leaked documentFTX currently owes around $8.5 billion in crypto to its customers, but only has $1 billion in crypto and liquid cash or equivalent. Other FTX assets that may have some value include the Robinhood shares (valued at $472 million) and some investments considered illiquid, notably Twitter shares worth $43 million.
Protos has reached out to BlockFi for comment and will update this story as and when we hear back.
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