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Market Analysis Report (29 Nov 2022)

Date:

Cryptocurrency lender BlockFi has filed for bankruptcy in the US, citing “significant exposure” to the collapse of cryptocurrency exchange FTX. BlockFi had already halted most activity on its platform and is seeking court protection to restructure, settle its debts, and recover money for investors.

The lender had received a rescue deal from FTX earlier this year after UST’s fall from grace. After a leaked Alameda Research balance sheet revealed it relied heavily on FTX’s FTT, a bank run on FTX occurred. That bank run revealed FTX did not have users’ funds, leading to its collapse.

BlockFi has said that FTX’s collapse was “shocking,” and sued FTX founder Sam Bankman-Fried’s Emergent Fidelity Technologies for the Robinhood (HOOD) shares held by the company and pledged to BlockFi as collateral.

In a court filing, the firm said it owed money to more than 100,000 creditors, and listed FTX as its second-largest creditor, with $275 million owed on a loan extended earlier this year. BlockFi also owes the U.S. Securities and Exchange Commission $30 million after the regulator found BlockFi did not properly register its products.

BlockFi’s Chapter 11 bankruptcy filing will allow it to develop a “reorganization plan that maximizes value for all stakeholders, including our valued clients”.

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