BlockFi Crash: Why did BlockFi file for Bankruptcy?

Posted On November 29, 2022 1:18 pm

The FTX crash is starting to expose many other crypto companies that were involved with it. BlockFi is yet another company that filed for bankruptcy, leaving its users to bust. Why did BlockFi file for bankruptcy? Let’s talk about the BlockFi crash.

What is BlockFi?

BlockFi was another crypto exchange that also offered interest-bearing custodial service for cryptocurrencies. It started its business back in 2017. To date, BlockFi had more than 100,000 creditors, with liabilities and assets ranging from $1 billion to $10 billion.

Blockfi

exchange comparison

Why did BlockFi file for bankruptcy?

There are 2 main reasons for the reason BlockFi went bankrupt:

The crashing crypto market
Big exposure with FTX which went bankrupt

BlockFi filed for bankruptcy on Monday 28th of November 2022. They are the newest victim of the financial crisis brought on by FTX. BlockFi stated earlier this month that it had stopped accepting withdrawals due to “substantial exposure” to the FTX exchange as the sister company Alameda. On November 11, FTX, Alameda, and other affiliates declared bankruptcy.

Today, BlockFi filed voluntary cases under Chapter 11 of the U.S. Bankruptcy Code.https://t.co/adaAx6me4r
— BlockFi (@BlockFi) November 28, 2022

BlockFi Crash: Was BlockFi involved with FTX?

According to BlockFi, the liquidity problem was brought on by both coins locked on FTX’s platform and its exposure to FTX through loans to Alameda, a crypto trading company connected to FTX. According to BlockFi, its assets and liabilities range between $1 billion to $10 billion.

In a separate lawsuit filed on Monday, BlockFi sought to reclaim shares of Robinhood Markets Inc, which had been pledged as collateral three weeks earlier, before BlockFi and FTX sought bankruptcy protection.

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