Crypto Lender BlockFi is Reportedly Preparing for Potential Bankruptcy

Crypto Lender BlockFi is Reportedly Preparing for Potential Bankruptcy

According to sources, BlockFi is considering employee layoffs while preparing for potential bankruptcy.

BlockFi, a digital asset lender established in 2017 by Zac Prince and Flori Marquez, is reportedly preparing for potential bankruptcy.

According to a news report shared by the Wall Street Journal, the company is preparing for bankruptcy due to “significant exposure” to the troubled crypto exchange FTX.

Did you know?

Want to get smarter & wealthier with crypto?

Subscribe - We publish new crypto explainer videos every week!

What is a Rug Pull in Crypto? (Meaning + Examples)

What is a Rug Pull in Crypto? (Meaning + Examples) What is a Rug Pull in Crypto? (Meaning + Examples)

The person familiar with the matter revealed that the company is planning large employee layoffs while preparing for Chapter 11 bankruptcy filing. Moreover, some sources claim that BlockFi held talks with Binance for possible financial assistance.

It is worth noting that, on November 10th, BlockFi paused customer withdrawals. In its November 14th announcement, BlockFi highlighted that users will continue to be unable to withdraw their funds, adding:

The rumors that a majority of BlockFi assets are custodied at FTX are false. That said, we do have significant exposure to FTX and associated corporate entities that encompasses obligations owed to us by Alameda, assets held at, and undrawn amounts from our credit line with FTX US.

At the end of June, BlockFi received $250 million credit from now-bankrupt crypto exchange FTX. The credit was supposed to provide BlockFi more access to capital, strengthening the platform and boosting its balance sheet.

On top of that, in early July, the news broke that FTX is planning to acquire BlockFi for $25 million. However, at that time, BlockFi CEO Zac Prince denied the rumors, claiming that users should trust only the information coming from the company.

After facing “significant exposure” to FTX, BlockFi published a message on its website, noting:

BlockFi is not able to operate business as usual. We have limited platform activity, including pausing client withdrawals as allowed under our Terms. We request that clients not deposit to BlockFi Wallet or Interest accounts at this time.

Although now the news is surfacing about the possible bankruptcy of BlockFi, just over a week ago, BlockFi’s founder and chief operating officer, Flori Marquez, used Twitter to reassure investors, claiming that the company's “products are fully operational.”

Gile K. - Crypto Analyst

by Gile K. - Crypto Analyst, BitDegree