BlockFi Suspends Withdrawals Following FTX Crisis
Crypto lender BlockFi has suspended business following the collapse of crypto exchange FTX.
The company announced on Twitter that they have suspended withdrawals and normal business operations due to the lack of clarity around the current status of FTX.
“We are shocked and dismayed 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.
BlockFi, which is currently caught in a financial conundrum, was once worth $3 million.
The company took to Twitter to announce that platform activity will be limited for the time being and withdrawals for clients will be suspended “as is allowed under our terms.”
BlockFi has not announced any exact time frame for service restoration.
However, the crypto lender announced through Twitter that ACH deposits and “wire transactions scheduled for 11/11 will not process until 11/14.”
In July, the embattled crypto lender suffered a liquidity crisis after steep 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 sought to raise money at a reduced valuation of about $1 billion, a $2 billion decrease from its original valuation of $3 billion in March 2021.
Crypto lenders have had a bad year due to the crypto market downturn. Additionally, 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 hedge fund Three Arrows Capital.
BlockFi suffered an $80 million hit from the bad debt of Three Arrows.
FTX has witnessed a sudden collapse this week after the crypto exchange was swamped by client withdrawal requests over the weekend.
According to The Wall Street Journal, FTX’s financial crisis has driven the company into near insolvency as it had lent billions of dollars in customer assets to fund risky trading bets by Alameda. It set the scene for FTX’s implosion.
Furthermore, the downfall of FTX has also affected other major crypto firms, such as Crypto.com, who has suspended deposits and withdrawals of two stablecoins, USDC and USDT, on the Solana blockchain on Wednesday.
Bankman-Fried has informed investors that the crypto exchange would need to file for bankruptcy if it fails to procure a cash injection, according to Bloomberg, who 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 faces a shortfall of up to $8 billion and is in need of $4 billion to remain solvent.
Bankman-Fried, until recently, had been buying up crypto firms struggling due to a credit crunch caused by the sudden collapse of the cryptocurrencies Luna and UST or TerraUSD.
FTX is now on a mission to raise rescue financing in the form of debt, equity or a combination of both, the person familiar with the matter informed Bloomberg.
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