The fall of FTX has another unprecedented victim, which is a well-known crypto lender BlockFi. After it became clear that FTX is bankrupt, BlockFi paused withdrawals.
Will BlockFi fail too?
— Investro.com (@investrocom) November 11, 2022
BlockFi and FTX US declared in July of this year that they had reached an agreement under which the latter would give BlockFi a $400 million credit facility, and the former would have the option to be acquired by FTX US. This seems no longer the case, as FTX has just filed for Chapter 11 bankruptcy.
Related article: Kraken co-founder Jesse Powell on FTX collapse
This event worries BlockFi, making them stop withdrawals until the situation clears out. BlockFi also told clients not to make any deposits to their wallets.
No wire withdrawals will be processed between November 10th and November 14th. The company said they are not able to operate as usual given the lack of clarity about the situation on November 11th.
Is BlockFi safe?
As a $10 billion hole in FTX’s books was found, there are doubts about exposure and links of BlockFi to FTX. FTX is now being investigated by the Securities and Exchange Commission (SEC) and the Department of Justice (DoJ). This, of course, will cause any companies linked to FTX will be investigated as well.
In the good old days, BlockFi offered its clients up to 9.3% annual percentage yield (APY) on specific cryptocurrencies and stablecoins. However, when the market did a U-turn, companies like BlockFi went into deep trouble. Now it’s unclear whether BlockFi won’t end up like other fellow crypto lenders, such as Hodlnaut.
BlockFi claims its number one priority is to protect its clients and their interests, but we’ll see about that in the upcoming days. When the dust settles and the smoke clears about the mess FTX caused, then clients of BlockFi will find out if their money is gone or accessible.
It’s unclear to what extent there are ties to what companies, but it’s clear it’s a billion-dollar exposure. FTX could cause many other companies to fail, and they will probably pop up in the upcoming weeks. Hopefully, BlockFi won’t be one of them, as it would just make even more people sceptical about cryptocurrencies.