Crypto contamination spreads, BlockFi prepares for potential bankruptcy

It seems FTX isn’t the only crypto platform facing the chopping block as BlockFi is allegedly preparing to file for bankruptcy.

According to the Wall Street Journal, the crypto lender is acknowledging “significant exposure” from the FTX meltdown after halting all customer withdrawals and deposits.

According to CBInsights, BlockFi's latest funding round was a Line of Credit for US$250M by FTX on June 21, 2022.

Twitter user @WhaleChart tweeted earlier today that the company has filed for bankruptcy but no formal statement has been made yet. 

All this drama comes after the acquisition of FTX by Binance fell through as the company found irregularities last week. 

Only a few days ago, BlockFi said that the “most prudent decision” for them was to pause many of its platform activities for now.

They also addressed the rumours that a majority of BlockFi assets are custodied at FTX and said they are false.

However, it has emerged that it has an undrawn line of credit with the disgraced crypto platform.

“We do have significant exposure to FTX and associated corporate entities that encompass obligations owed to us by Alameda, assets held at FTX.com, and undrawn amounts from our credit line with FTX.US.

“While we will continue to work on recovering all obligations owed to BlockFi, we expect that the recovery of the obligations owed to us by FTX will be delayed as FTX works through the bankruptcy process,” the company said in a statement.

Last week, the platform said it is in the “heartbreaking” position of sharing the news of its bankruptcy.

They said, “We are shocked and dismayed by the news regarding FTX and Alameda. We, like the rest of the world, found out about this situation through Twitter. Given the lack of clarity on the status of FTX.com, FTX US and Alameda, we are not able to operate business as usual. Our priority has been and will continue to be to protect our clients and their interests.

“Until there is further clarity, we are limiting platform activity, including pausing client withdrawals as allowed under our Terms. We will share more specifics as soon as possible. We request that clients not deposit to BlockFi Wallet or Interest Accounts at this time.”

Watch this space.