• FTX collapse sends cryptocurrencies plummeting
• BlockFi received a cash injection from FTX prior to the crash
• BlockFi is pausing customer payouts and asking for patience
The bankruptcy of crypto service FTX has sent shock waves across the crypto universe and has put numerous digital currencies under great pressure. Above all, this was also evident from the original cyber currency Bitcoin, which fell to a 52-week low of 15,871.2049 US dollars on November 9th. Since then, the digital coin has only recovered marginally. The memories of the Terra/LUNA debacle a few months ago, which caused the cryptocurrencies to collapse massively, are too fresh.
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BlockFi the next victim after FTX bankruptcy?
Now there is concern in the sector that other crypto exchanges could meet the same fate as FTX. So does the crypto lending service BlockFi. The company gained notoriety as a crypto exchange that attracted investors with loans and staking at low interest rates. However, the exchange came under great pressure in the course of the collapse of the algorithmic stablecoin Terra and the resulting crash of other cryptocurrencies.
FTX rushed to BlockFi’s aid after Terra debacle
Curiously, it was then-FTX CEO Sam Bankman-Fried who rushed BlockFi with a $250 million funding injection so the company could “operate from a strong position,” as he tweeted at the time announced. However, the capital grant was not only used for altruistic purposes at the time, but was intended to stabilize the crypto sector as a whole again. Only a short time later, FTX even secured the option to take over BlockFi entirely for up to $240 million.
BlockFi is pausing customer payouts
As the FTX bankruptcy shows, however, the intention was not crowned with success, which is why BlockFi investors now also have to fear for their money. The company recently announced via Twitter and on its own website that the activities of the crypto platform would be restricted due to the current diffuse news situation about FTX and Alameda (a trading company Bankman-Frieds). This also includes the fact that customer payments are now paused. In addition, BlockFi also asks investors not to make any deposits.
– BlockFi (@BlockFi) November 11, 2022
In the message, the company is very concerned about the FTX bankruptcy: “We are shocked and appalled by the news from FTX and Alameda. Just like the rest of the world, we found out about this situation via Twitter. Due to the lack of clarity around Due to the status of FTX.com, FTX US and Alameda, we are unable to continue operations as before.” However, the top priority is to protect customers and their interests. BlockFi will continue to keep investors up to date with the latest developments, but warned that this would likely happen “less frequently than our clients are used to”.
So it remains to be seen whether BlockFi will still manage to pull its head out of the noose or become the next victim of the FTX bankruptcy.
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