Ultimately, BlockFi Also Files for Bankruptcy... Direct Hit from FTX Collapse

[Image source=Reuters Yonhap News]

[Asia Economy New York=Special Correspondent Joselgina] The cryptocurrency lending company BlockFi has finally filed for bankruptcy. As feared, the aftershocks of the bankruptcy of FTX, one of the world's top three cryptocurrency exchanges, continue.

The Wall Street Journal (WSJ) reported on the 28th (local time) that BlockFi filed for bankruptcy protection under Chapter 11 at a bankruptcy court located in Trenton, New Jersey, USA. According to documents submitted to the court, BlockFi owes approximately $1.2 billion in debt to its top 10 creditors. The total number of creditors and the scale of debt are estimated to be much larger. WSJ described it as "the latest bankruptcy case following the FTX incident."

BlockFi was already pushed into a liquidity crisis earlier this year as a chain of bankruptcies, including Voyager Digital, followed the decline in cryptocurrency prices such as Bitcoin in June. At that time, Sam Bankman-Fried, the founder of FTX, stepped in as a white knight, giving the company a breather. BlockFi maintained a close relationship by receiving a $400 million credit line from FTX and its affiliate Alameda Research and borrowing funds using FTT, issued by FTX, as collateral.

However, with the recent bankruptcy of FTX, BlockFi also appears to be heading toward bankruptcy proceedings. After the FTX incident broke out, BlockFi acknowledged significant exposure to FTX and Alameda Research. It also halted customer fund withdrawals and restricted platform services, citing "operational difficulties." As a result, rumors spread in the market that BlockFi was preparing for bankruptcy.

According to the bankruptcy protection filing, the largest creditor is the investment trust Ankara Trust, with claims amounting to $729 million. FTX, which had once shown interest in acquiring BlockFi, also appeared on the list. FTX US, a U.S. subsidiary of FTX, was identified as the second-largest creditor with $275 million.

As of last year, BlockFi's customer deposits ranged from $14 billion to $20 billion. Customer loans secured by cryptocurrency amounted to $7.5 billion. However, considering the decline in cryptocurrency prices this year, WSJ reported that the value of these deposits is likely to be much lower.