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The crypto contagion is spreading with the crypto lender, BlockFI filing for bankruptcy, as the dramatic collapse of FTX continues to reverberate across the industry. BlockFi said it was seeking court protection to restructure, settle its debts and recover money for investors.
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BlockFi said the liquidity crisis was due to its exposure to FTX via loans to Alameda, a crypto trading firm affiliated with FTX, as well as cryptocurrencies held on FTX's platform that became trapped there. BlockFi listed its assets and liabilities as being between $1 billion and $10 billion.
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BlockFi on Monday also sued a holding company for Bankman-Fried, seeking to recover shares in Robinhood pledged as collateral three weeks ago. In the court filing, BlockFi listed FTX as its second-largest creditor, with $275 million owed on a loan extended earlier this year. It said it owes money to more than 100,000 creditors.
Why it matters
The collapse of FTX has shaken faith in the crypto industry and drawn scrutiny from regulators. BlockFi, which offered loans and other financial services backed by borrowers' crypto assets, described the collapse of FTX as "shocking". Amid a liquidity crisis that exposed many companies operating in the crypto sector to the risk of bankruptcy, investor concerns have increased and weakened their confidence in these assets.
