BlockFi is preparing to file for bankruptcy due to “significant exposure” to the FTX fallout, The Wall Street Journal reported, citing anonymous sources.
BlockFi paused withdrawals from the platform last week and announced Monday that, in the wake of FTX’s bankruptcy, the “most prudent decision for us…is to continue to pause many of our platform activities for now.”
The company requested that customers refrain from submitting deposits into their BlockFi wallets or interest accounts.
BlockFi is also planning layoffs, The Wall Street Journal reported.
The dominos are falling in the crypto world as more companies feel the effects of the spectacular collapse of FTX.
The $2.8 billion lending arm of Genesis Global Trading, a crypto investment bank, suspended redemptions and loan originations Wednesday because of its exposure to FTX, interim CEO Derar Islim told customers, according to CoinDesk; and crypto platform Gemini Trust said customer redemptions are delayed in connection to Genesis’ pause on withdrawals.
Travis Kling, chief investment officer at Ikigai, said Monday that his company also found itself damaged by the FTX fallout, with a “large majority of the hedge fund’s total assets on FTX.”
“By the time we went to withdraw Monday [morning], we got very little out. We’re now stuck alongside everyone else,” Kling tweeted.
It was only two months ago that FTX’s founder, Sam Bankman-Fried, made the winning $1.4 billion bid to purchase bankrupt crypto exchange Voyager Digital. Less than five months ago, he cut a deal to provide a revolving credit facility to BlockFi.
Now, U.S. authorities are considering extraditing Bankman-Fried from the Bahamas to question him on what exactly happened to FTX, three people familiar with the matter told Bloomberg on Tuesday. Bankman-Fried has been cooperating with authorities in the Bahamas, where FTX is headquartered, one of the sources said.
U.S. crypto investors are suing Bankman-Fried and several celebrity endorsers who promoted FTX, including NFL quarterback Tom Brady and comedian Larry David, in a proposed class-action filed Tuesday in Miami court. The suit alleges that Bankman-Fried and others engaged in deceptive practices to sell FTX yield-bearing crypto accounts, and that the accounts were unregistered securities sold unlawfully in the U.S.
“FTX’s fraudulent scheme was designed to take advantage of unsophisticated investors from across the country, who utilize mobile apps to make their investments,” Oklahoma resident Edwin Garrison said in the complaint. “As a result, American consumers collectively sustained over $11 billion in damages.”
