The crisis sparked by the collapse of Sam Bankman-Fried’s FTX crypto empire ensnared BlockFi, a troubled crypto lender once worth $3 billion but which is now unable to operate business as usual.
(Bloomberg) — The crisis sparked by the collapse of Sam Bankman-Fried’s FTX crypto empire ensnared BlockFi, a troubled crypto lender once worth $3 billion but which is now unable to operate business as usual.
BlockFi on Twitter said it will limit platform activity and pause client withdrawals.
The firm cited “a lack of clarity” over the status of onetime savior FTX US as well as the uncertainty afflicting FTX.com and Alameda Research.
The Jersey City, New Jersey-based company asked customers to refrain from depositing funds into their BlockFi wallets or interest accounts.
FTX US once offered BlockFi a major lifeline over the summer by providing a $400 million revolving credit facility in an agreement that came with the option to purchase the company.
The developments at BlockFi underscore growing concerns about contagion from the toppling of crypto exchange FTX and its sister trading house Alameda Research.
Digital-asset lenders have been hit hard by the rout in virtual coins this year.
The downfall of the TerraUSD stablecoin in May contributed to the implosion at hedge fund Three Arrows Capital. BlockFi has said it took an $80 million hit from the bad debt of Three Arrows.
Originally valued at $3 billion in March 2021, BlockFi sought to raise money at a reduced valuation of about $1 billion in June.
The firm also faced scrutiny from financial regulators over its interest account and paid $100 million in penalties to the US Securities and Exchange Commission.
FTX’s financial troubles have led authorities in the Bahamas, where FTX.com is based, to freeze the assets of its local trading subsidiary and “related parties.”
(Updates with more context from the first paragraph.)
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