FTX Contagion: Cryptocurrency Lender BlockFi Files for Bankruptcy

Sam Bankman-Fried, founder and chief executive officer of FTX Cryptocurrency Derivatives Exchange, speaks during the Bloomberg Crypto Summit in New York, US, on Tuesday, July 19, 2022. The Bloomberg Crypto Summit brings together top names from the worlds of tokens, blockchain, Web3, NFTs, decentralized finance, economics, investing, venture capital, and …
Jeenah Moon/Bloomberg via Getty Images

Cryptocurrency lender and financial services firm BlockFi has filed for bankruptcy as the fallout of Democrat super donor Sam Bankman-Fried’s FTX exchange collapsing continues to spread.

The New York Times reports that BlockFi, a cryptocurrency lender and financial services firm, filed for bankruptcy this week. BlockFi has been struggling since the spring, when a number of prominent crypto businesses went bankrupt, causing the market to panic and causing a substantial drop in Bitcoin’s value. The collapse of FTX seems to have been what pushes BlockFi over the edge.

Breitbart News previously reported that BlockFi was at risk earlier this month, with Breitbart Tech reporter Allum Bokhari writing:

BlockFi, a platform for crypto-backed loans and trading, may also face bankruptcy due to its exposure to FTX, the beleaguered cryptocurrency exchange that was led by Democrat megadonor Sam Bankman-Fried.

Sources familiar with the matter told the Wall Street Journal that BlockFi is preparing for a potential bankruptcy filing, after pausing withdrawals and limiting activity on user accounts last weeks.

FTX signed a $400 million credit line with BlockFi in June that Zac Prince, BlockFi’s CEO, said would give the firm “access to capital that further bolsters our balance sheet.” BlockFi also gave FTX the option to purchase the firm as part of the deal.

But this agreement placed BlockFi in a financial agreement with FTX, meaning that much of BlockFi’s future was based on the stability of FTX. Since then FTX has collapsed completely after news of a number of corporate missteps and suspicious management was made public.

A few days after the news came to light, BlockFi suspended withdrawals and stated that it had “significant exposure” to FTX, including undrawn amounts from its credit line with the exchange and assets held on FTX’s platform.

BlockFi is based in Jersey City, New Jersey, and was founded in 2017. Last year, it claimed more than 450,000 retail clients who could obtain loans in minutes without credit checks. Flori Marquez, a co-founder of BlockFi, told the New York Times in September  that “we are just at the beginning of this story.”

BlockFi reached a $100 million settlement with the SEC in February over registration failures, the first since the regulator warned that it would be taking action against crypto firms offering loans that failed to register them as securities or register themselves as investment companies.

Read more at the New York Times here.

Lucas Nolan is a reporter for Breitbart News covering issues of free speech and online censorship. Follow him on Twitter @LucasNolan

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