BlockFi limits client withdrawals due to FTX’s collapse

The company’s representatives also asked users not to deposit their wallets or interest accounts

11.11.2022 - 07:30

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3 min

What’s new? The BlockFi lending platform has announced limiting the platform’s activity, including the suspension of withdrawals of user funds. The company noted that such a measure is spelled out in the terms of the contract. Representatives of BlockFi also asked clients not to deposit the platform’s wallet or interest accounts. They explained that BlockFi cannot conduct business as usual due to “the lack of clarity on the status” of the FTX crypto exchange, its US arm FTX US and trading firm Alameda Research.

pic.twitter.com/zNF1uP6evl — BlockFi (@BlockFi) November 11, 2022

How are the companies connected? In July 2022, FTX reported that it would issue a $400 million revolving loan to BlockFi with an option to buy back the platform for up to $240 million, depending on its economic performance. BlockFi CEO Zac Prince said the company was struggling because of market volatility and a massive outflow of deposits that followed a freeze on the Celsius platform, which has similar functionality.

In August, FTX US allowed the possibility of the purchase of BlockFi for only $15 million. The exchange has listed a number of metrics that the company needs to achieve by a certain date in order to increase the amount of the deal.

FTX itself is currently on the brink of bankruptcy, with the price of its native token (FTT) collapsing from $25 to $2 since early November and customers withdrawing several billion dollars from the platform. The fall followed the liquidation of FTT by Binance amid news that the capital of FTX affiliate Alameda is largely made up of these coins. Subsequently, Binance announced a takeover deal of FTX but later abandoned it after due diligence.

On November 10, Reuters reported that the owner of FTX and Alameda, Sam Bankman-Fried, used the funds of the exchange’s customers to save the trading company, as it was suffering losses on the results of deals with other crypto projects. Bankman-Fried later apologized to the community and said that FTX will continue to operate after its liquidity issues are resolved.

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