Following the footsteps of FTX, the leading crypto exchange in the world, which filed for bankruptcy on the 11th of November, cryptocurrency lender BlockFi filed for the same bankruptcy protection on Monday. On the same day FTX announced its bankruptcy, BlockFi responded with the decision to halt withdrawal. At this stage, most were expecting it was only a matter of time before BlockFi would go insolvent or bankrupt.
Backtrack to May 2022, the fallen of Luna and Terra, which led to 3AC liquidations in June, caused a massive loss of $80M to one of its creditors – BlockFi. The company CEO Zac Prince seek for help immediately, and FTX was there to rescue him by providing a $400M revolving credit facility. With the emergency fund, BlockFi avoided its first death sentence. Everyone was praising FTX then, and even Sam Bankman-Fried (SBF) was called “the JP Morgan of crypto”. Of course, no one knew FTX, in fact, had an awful balance sheet at the time.
BlockFi's CEO, Zac Prince, tweeted in July
The bankruptcy of FTX earlier in the month cut off BlockFi’s life-saving line of credit completely; BlockFi filed for Chapter 11 bankruptcy protection roughly two weeks later. In the bankruptcy filing today, BlockFi stated that the company has more than 100,000 creditors and between $1B and $10B in liabilities.
Among all the creditors, Ankura Trust Company was brought in as the representative of others’ interests in the bankruptcy proceeding, for which BlockFi owed a whopping $729M. FTX is listed as the second-largest creditor, with $275M owed on a loan extended earlier this year. The fourth on the list is the U.S. Securities and Exchange Commission (SEC), with an outstanding $30M yet-to-claim fine levied against BlockFi earlier this year. Other than these three entities, other creditors are all unnamed, with the most significant creditors having a tremendous $48.6M claim.
So to speak, due to the collapse of FTX, BlockFi’s bankruptcy is inevitable and pretty much in expectation. No crypto firm right now is willing to risk saving others at such difficult times. It might be sad to hear, but self-preservation is the best option to survive in a bear market. What’s worrying is that this may not be the final of the FTX event; the fallout shall continue, yet nobody knows who will be the next.
Joy
