Fears of contagion in cryptocurrency markets continue to grow after BlockFi filed for bankruptcy on Monday due to the company's financial ties to failed exchange FTX.
as his former company entered bankruptcy proceedings, BlockFi's ties to FTX worsened its financial situation.and unable to access its credit facility. It was then forced to halt withdrawals from its platform and asked clients to not make deposits to their digital wallets or accounts.
FTX Group has named a slate of new independent directors to oversee the collapsed crypto empire and said its bankruptcy may involve more than a million creditors. One of those creditors is the federal government. In February, BlockFi agreed to pay the Securities and Exchange Commission a total of $100 million in penalties after it failed to register the offers and sales of its retail crypto lending product. The company still owes $30 million to the SEC as it enters bankruptcy proceedings.The bankruptcy process is intended to give the company the stability needed to restructure, and BlockFi says it has $256.
It's unclear at this time what impact the collapse of FTX and Alameda Research will have on BlockFi's bankruptcy proceedings and vice versa. BlockFi owes FTX $275 million, while Alameda Research owes BlockFi for the $680 million in loans it received before its implosion, according to bankruptcy filings.While BlockFi's exposure to FTX dragged it into bankruptcy, it may not have featured similar failures of corporate controls that FTX had.
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