BlockFi withdrawal halt: ‘Shocked’ lending platform got FTX credit lifeline but has outstanding Alameda loans
By Peter Henn
Updated
The crypto broker BlockFi has postponed withdrawals on its network following the collapse of the FTX crypto exchange, expressing its “shock and dismay” at the news.
The site had posted on Twitter about its decision to limit platform activity. It came earlier today before the FTX exchange and Alameda Research, a trading company owned by FTX founder Sam Bankman-Fried, as well as FTX’s American subsidiary, FTX.US, filed for bankruptcy.
In its statement, BlockFi said: “We are shocked and dismayed by the news regarding FTX and Alameda. We, like the rest of the world, found out about this situation through Twitter.
“Given the lack of clarity on the status of FTX.com, FTX US and Alameda, we are not able to operate business as usual.” Saying that looking after its clients and their interests was a priority, BlockFi continued:
“We intend to communicate as frequently as possible going forward but anticipate that this will be less frequent than what our clients and other stakeholders are used to.”
BlockFi and the fall of FTX
A report by Bloomberg suggested that BlockFi, one of many crypto lenders that had been hit by market events so far in 2022, had been in the process of moving its assets over to FTX when disaster struck.
Earlier this week, BlockFi founder and COO Flori Marquez said that her company had received a $400m loan from FTX’s counterpart FTX.US.
It is worth noting that earlier this week Bankman-Fried had stressed that FTX.US was a separate eternity from the beleaguered FTX, although concerns had begun to come to light that it may also have to put a stop to withdrawals, which may only be fuelled by bankruptcy filing.
However, the Bloomberg report claimed that BlockFi had itself loaned Alameda an undisclosed amount of money.
BlockFi had made about 20% of its workforce redundant during the summer as the crypto market came under pressure following the depegging of the terrausd (UST) stablecoin and the collapse of the associated LUNA cryptocurrency.
It was around this time that Alameda offered a line of credit, on the condition that FTX had the option to purchase BlockFi.
FTX and the liquidity crisis
FTX, which had been the second largest crypto exchange as recently as 7 November, announced on Tuesday this week that it had been hit with a liquidity crunch.
While it initially looked as if its largest rival, Binance (BNB), had come to the rescue by taking it over, Binance boss Changpeng ‘CZ’ Zhao later changed his mind, with his company citing concerns about some of Bankman-Fried’s business dealings relating to a substantial amount of Alameda’s holdings being held in FTT, FTX’s native cryptocurrency.
BlockFi’s decision to pose withdrawals comes in the wake of the news that the US Securities & Exchange Commission (SEC) is investigating whether or not Bankman-Fried broke rules relating to securities.
Bankman-Fried, who has joined the ranks of the world’s former billionaires after this week’s events, has apologised for the events of this week and the liquidity crisis in FTX. Once his companies filed for bankruptcy, he resigned as CEO to be reoplaced by John J Ray III.
Markets in this article
Related topics
