BlockFi Filing For Bankruptcy After The Collapse of FTX
The collapse of FTX, the second-largest cryptocurrency exchange, has brought chaos and disarray to the whole cryptocurrency landscape. In July 2022, the exchange worth up to $32 billion. The one caught up in the snare is BlockFi, as the investigation revealed that it has more than 100,000 creditors accompanied by 1,000 - 10,000 million USD worth of assets and liabilities.
Before jumping to what happened to BlockFi, let’s take a step back and get to know BlockFi briefly.
What is BlockFi and how does it work?
BlockFi is a crypto exchange platform offering custodial wallet and crypto trading services to customers. Additionally, what makes BlockFi unique is the fact that it also offers high-interest crypto lending services including crypto credit cards.
BlockFi was founded in 2017 and had been running so far until it was charged by the Securities and Exchange Commission and had to pay $100 million in fines as it violated securities laws. And this might be the beginning of the collapse of BlockFi.
Why did BlockFi file for bankruptcy?
The main reasons for the bankruptcy filing came from:
The continuing impact of the Terra hedge fund case with BlockFi’s major debtors
The collapse of FTX as FTX was a major creditor and promised a rescue deal to BlockFi
Crypto market volatility as a domino effect from several incidents within the past year
BlockFi bankruptcy filing timeline
For a clear understanding of the situation, we list major events that occurred periodically to BlockFi below:
On November 21, 2021 - BlockFi had been examined by the SEC of the United States due to high-interest deposit products, and would like to verify that this product is not classified as a listed security before trading.
On February 22, 2022 - US SEC issued a fine of $100 million and ordered BlockFi to halt its services immediately since it was considered that BlockFi use the customer’s money to further invest or in other ways.
In June 2022 - FTX assisted BlockFi by lending money.
November 11, 2022 - BlockFi announced the suspension of customer withdrawals.
November 16, 2022 - BlockFi planned to file for bankruptcy. It had contacted Binance for help and was considering laying off some employees as it took a heavy loss from the FTX crisis.
November 28, 2022 - Crypto platform BlockFi officially declared bankruptcy. BlockFi withdrawal service was also suspended indefinitely.
With all being discussed in this article, BlockFi’s bankruptcy may turn out to be a long process, so some customers will have to wait a while before figuring out what can be recovered. All these continuing ripples of the FTX incident have never before highlighted the vulnerabilities of centralized exchanges. This may be the time to start considering whether you want to continue storing crypto on centralized services, or whether to start taking the custody of our assets into our own hands.
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