Crypto lender BlockFi announced on Monday that it has filed for bankruptcy, another casualty of the spectacular collapse of the exchange FTX.
BlockFi’s struggles are intertwined with those of FTX, which collapsed in a matter of days and sent the cryptocurrency market into disarray as its fallout spread. Earlier this year, FTX provided BlockFi with a $400 million credit line and the option to buy the company.
In BlockFi’s Chapter 11 filing, the company indicated that it had liabilities and assets ranging from $1 billion to $10 billion and in excess of 100,000 creditors. Its largest disclosed client has a balance approaching $28 million.
“With the collapse of FTX, the BlockFi management team and board of directors immediately took action to protect clients and the Company,” said the company’s financial adviser, Mark Renzi of Berkeley Research Group. “From inception, BlockFi has worked to positively shape the cryptocurrency industry and advance the sector. BlockFi looks forward to a transparent process that achieves the best outcome for all clients and other stakeholders.”
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BlockFi, which was most recently valued at $4.8 billion, had felt the deleterious effects of FTX’s dramatic collapse and founder Sam Bankman-Fried’s spectacular fall from grace.
Shortly after the implosion of FTX, BlockFi suspended withdrawals on its platform and asked clients not to submit any deposits. In a news release at the time, the company noted that it has “significant exposure” to FTX and its associated corporate entities.
“We know the past few days have been incredibly difficult for you,” the company told clients. “We are deeply saddened to see the devastation that is cascading across an industry that we love and believe in, touching the lives of so many people.”
Cryptocurrencies across the board were in the red following the news about BlockFi’s bankruptcy. Bitcoin was down about 2.5% to $16,100, while ethereum was off by 4.5%. In just the past month alone, bitcoin’s value has nosedived by more than 21%, a sign that investors are panicking and selling off digital assets in response to the FTX collapse.
Because of the massive size of FTX, which was valued at $32 billion in a financing round this year, its downfall has left many fearful that more blockchain companies, such as FTX rivals Binance and Coinbase, and digital currencies could face a loss of confidence and suffer failures.
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For instance, Coinbase’s stock has fallen by a whopping 40% in the past month. And in the six days after FTX’s implosion, Binance users withdrew some $1.35 billion, or more than 15% of the bitcoin on the world’s largest crypto exchange.
FTX and associated entities are now facing investigations from several entities, and at least two congressional committees have already announced public hearings to probe for information. The House Financial Services Committee plans to hold a hearing next month, at which it expects to hear from Bankman-Fried and other officials tied to FTX.
