The Wall Street Journal reported on Tuesday that bitcoin lender BlockFi Inc. is preparing for potential bankruptcy filings after stopping customer withdrawals because of its “substantial exposure” to the insolvent cryptocurrency exchange FTX.com.
According to the Journal, which cited sources familiar with the situation, the company is currently preparing to potentially file for Chapter 11 bankruptcy and is therefore likely to lay off some of its employees.
On Friday, BlockFi tweeted that it was ceasing all client transactions because there was a “lack of clarity” over the status of FTX.com and its sister company Alameda Research.
— BlockFi (@BlockFi) November 11, 2022
BlockFi acknowledged having “significant exposure to FTX and associated corporate entities that encompass obligations owed to us by Alameda, assets held at FTX.com, and undrawn amounts from our credit line with FTX US.”, in an email to customers on Monday.
The company is just the most recent in a long line of businesses affected by the bankruptcy of FTX, which filed for bankruptcy last Friday without disclosing which businesses may have been exposed to its operations. These businesses include investment firm SoftBank and the Solana Foundation.
Sam Bankman-Fried, the founder of FTX, agreed to provide BlockFi with a US$250 million revolving credit facility in June as a result of the Terra/Luna collapse’s knock-on effects.
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