Cryptocurrency company Blockfi files for bankruptcy after FTX collapse

BlockFi petitioned the Bankruptcy Court for the District of New Jersey for bankruptcy protection. The cryptocurrency company said that in its financial report it had more than 100,000 creditors, with liabilities and assets ranging from $1 billion to $10 billion.

Blockfi became the latest crypto company to collapse after the rapid crash of the FTX cryptocurrency exchange. The digital asset lender has filed for Chapter 11 bankruptcy in New Jersey, the company said in a statement Monday.

Citing “a lack of clarity” about the status of bankrupt companies FTX and Alameda Research, the Jersey City, New Jersey-based company earlier halted withdrawals and said it was exploring “all options” with outside advisers.

BlockFi received a capital injection from now-bankrupt FTX US in July and had also guaranteed loans for Alameda Research, the trading company of Sam Bankman-Fried.

This follows the collapse of the putative acquirer FTX. The company has said it had an outstanding $275 million loan to FTX US, the US arm of Sam Bankman-Fried’s bankrupt empire.

BlockFi expects a transparent process that achieves the best outcome for all customers and other stakeholders,” said Mark Renzi of Berkeley Research Group in a press release.

The company offers trading exchange and interest-bearing custody service for cryptocurrencies. Its biggest liquidity problems were faced after the fall of Three Arrows Capital.

FTX comes under scrutiny as U.S. cryptocurrency stocks tumble amid concerns about contagion from the fall of Sam Bankman-Fried’s FTX empire. Riot Blockchain, Marathon Digital, and Coinbase refused. Bitcoin fell 0.5% to around $16,178.

Exchange-issued crypto tokens, such as bankrupt FTX Group’s FTT, can pose “extreme” risks when their issuers accept them as collateral, Bank of England Deputy Governor Jon Cunliffe said in a speech on Monday.

The president of a chamber panel asked FTX to hand over documents and information as part of its investigation into the collapse of another prominent cryptographic platform.

FTX and the now-bankrupt related companies collectively had a remaining federal net operating loss of at least $3.7 billion as of December 31 last year based on tax returns, according to court documents.

Crypto exchange tokens pose extreme risks, says BOE’s Cunliffe.

Crypto tokens issued by the exchange, such as bankrupt FTX Group’s FTT, can pose “extreme” risks when their issuers accept them as collateral, Cunliffe said.

“A company that accepts its own unbacked crypto asset as collateral for loans and margin payments, as there are indications that it may have happened with FTX, creates extreme ‘wrong way’ risk, i.e. when exposure to a counterparty increases along with the risk of counterparty default,” he said in a speech on Monday.

The Wild West days of crypto markets are back as the big trading houses that once thrived on arbitrage over price spreads are backing down after the FTX crash. That is opening up profitable opportunities for anyone who still dares to trade.

Prices of essentially identical assets across various platforms are diverging in a clear sign that the dominoes are still falling in the world of cryptocurrency trading. The gap between the funding rates of identical Bitcoin futures on Binance and OKEx, for example, has been as wide as 101 annualized percentage points and held at least 10, compared to gaps in mostly single digits last month. past.

(With information from Bloomberg)