Two weeks ago, BlockFi banned withdrawals owing to “lack of clarification over the fate of FTX.com, FTX US, and Alameda.”
As previously mentioned by the BlockFi team, the move would be directly spurred by the demise of FTX, the business that initially offered a $400 million credit line to fund the crypto-lending startup. This is in addition to the exchange formed by Sam Bankman-option Fried’s to acquire for an additional $280 million USD.
Now BlockFi joins the infamous list of crypto companies that have gone bankrupt in 2022.
The Fatal Strike: The Demise of FTX
In July, FTX’s U.S. subsidiary signed an option to purchase BlockFi. According to Flori Marquez, co-founder and chief operating officer of BlockFi, the lender halted withdrawals on November 10 since the transaction had not yet been finalized. FTX filed for Chapter 11 bankruptcy the next day.
Monday, BlockFi announced in a press statement that it will attempt to collect funds due to them by FTX.
Bermuda, Bahama
BlockFi likewise filed for bankruptcy in Bermuda at the same time as it did in the United States.
Like the Bahamas, Bermuda has accepted cryptocurrency as the future of money. Both frameworks were expressly designed to handle crypto assets and digital currencies. The Bahamas, with the failure of FTX, and Bermuda, with the failure of BlockFi, are now facing the first big legal challenges of their crypto legislation.
The bankruptcy petition for BlockFi reveals that the company’s biggest reported client owes approximately $28 million.
FTX’s bankruptcy has put pressure on numerous crypto businesses, including BlockFi, which PitchBook valued at $4.8 billion. FTX extended a $400 million revolving credit line and offered to acquire BlockFi in July to prevent bankruptcy.
On Nov. 11, Sam Bankman-cryptocurrency Fried’s exchange FTX filed for Chapter 11 bankruptcy in the U.S. The crypto industry was quickly impacted.
New CEO from Enron
Alameda Research, Bankman-Fried’s crypto trading business, and FTX.us, its U.S. counterpart, are among 130 connected firms. In a Delaware Bankruptcy Court petition, FTX’s new CEO, John Ray, stated he had never seen “such a catastrophic collapse of corporate controls and such a complete lack of trustworthy financial information as transpired here” in his 40 years of legal and restructuring expertise.
Ray led Enron following its collapse.
As liquidity dried up, consumers sought withdrawals, and rival exchange Binance threw up its nonbinding deal to purchase FTX, the firm plunged from $32 billion to insolvency in days. Gross negligence was shown. Ray stated that “substantial” FTX assets may be “missing or stolen.”
According to the latest bankruptcy papers, FTX has over 1 million creditors, suggesting its collapse will have a major effect on crypto traders and other counterparties with links to Bankman-Fried’s business.
Cover: Masaaki Komori on Unsplash.
© 2024 Cryptopress. For informational purposes only, not offered as advice of any kind.
