BlockFi suspends withdrawals after FTX crisis
Crypto lender BlockFi has suspended operations following the collapse of the crypto exchange FTX.
The company announced on Twitter that it has suspended withdrawals and normal business operations due to a lack of clarity around the current status of FTX.
“We are shocked and appalled by the news regarding FTX and Alameda,” BlockFi said late Thursday on its Twitter account, becoming the latest casualty of the sudden fall of Sam Bankman-Fried’s FTX. Alameda Research is an affiliated trading firm also controlled by Bankman-Fried.
Currently caught in a financial conundrum, BlockFi was once worth $3 million.
The company took to Twitter to announce that platform activity will be limited until further notice and withdrawals for clients will be suspended “as permitted under our terms.”
BlockFi has not announced an exact time frame for service restoration.
However, the crypto lender announced via Twitter that ACH deposits and “transfer transactions scheduled for 11/11 will not be processed until 11/14.”
In July, the embattled crypto-lender suffered a liquidity crisis following sharp declines in crypto prices, which engulfed many lenders.
The crypto lender had brokered a $680 million deal with FTX.US, which included a $400 million revolving credit facility and an option for FTX to buy BlockFi.
While in June, the crypto lender had attempted to raise money at a reduced valuation of around $1 billion, down $2 billion from its original March 2021 valuation of $3 billion.
Crypto lenders have had a bad year due to the downturn in the crypto market. In addition, the collapse of the TerraUSD stablecoin in May was a catalyst that caused the domino effect. It led to the implosion of other crypto lenders such as Celsius Networks and the hedge fund Three Arrows Capital.
BlockFi was hit with $80 million due to the bad debt of Three Arrows.
FTX has witnessed a sudden collapse this week after the crypto exchange was flooded with client withdrawal requests over the weekend.
According to The Wall Street Journal, FTX’s financial crisis has driven the company to near insolvency as it had lent out billions of dollars in customer assets to fund risky trading games from Alameda. That set the stage for FTX’s implosion.
Furthermore, the downfall of FTX has also affected other major crypto firms, such as Crypto.com, which has suspended deposits and withdrawals of two stablecoins, USDC and USDTon the Solana blockchain on Wednesday.
Bankman-Fried has informed investors that the crypto exchange will have to file for bankruptcy if it is unable to raise a cash injection, according to Bloomberg, which received this information from a person with direct knowledge of the matter.
Bankman-Fried – who was once worth $26 billion – also informed them that his crypto exchange is facing a shortfall of up to $8 billion and needs $4 billion to remain solvent.
Bankman-Fried had until recently acquired crypto firms struggling due to a credit crunch caused by the sudden collapse of cryptocurrencies Luna and UST or TerraUSD.
FTX is now on a mission to obtain rescue financing in the form of debt, equity or a combination of both, the person familiar with the matter told Bloomberg.
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