BlockFi appears to be on the verge of filing for Chapter 11 bankruptcy protection, according to a Wall Street Journal report citing “people familiar with the situation”, although no official statement has emerged from the cryptocurrency lending platform.
It certainly would not be a surprise, given the company’s exposure to collapsed crypto exchange FTX.
FTX committed US$250mln to a BlockFi bailout in June following this year’s first market rout.
That credit line vanished into thin air when FTX filed for its own Chapter 11 last Friday.
BlockFi paused client withdrawals in the aftermath, stating that “we are not able to operate business as usual,” even though the company maintained “the rumours that a majority of BlockFi assets are custodied at FTX are false”.
Regardless, the company is clearly in dire straits, and despite stopping short of using the B word, admitted on Monday that “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”.
“That BlockFi is filing for bankruptcy should come as no major news as the firm has been under distress for some time,” said Dmitry Ivanov, chief marketing officer at crypto payment ecosystem CoinsPaid.
It should be reiterated that since BlockFi has yet to make an official filing, it remains speculation.
But Ivanov predicted that “over the course of the coming weeks and months, we are going to be seeing more companies with exposures to FTX likely fold up, a trend that is significantly going to be impacting the industry sentiment and price of bitcoin negatively”.
Proactive has reached out to BlockFi for clarity on the situation.