The FTX contagion has just claimed another crypto firm.
BlockFi will file for Chapter 11 bankruptcy protection later today.
In an official announcement, the New Jersey-based company said it "will focus on recovering all obligations owed to BlockFi," but that "recoveries from FTX will be delayed" due to the ongoing bankruptcy proceedings at the fallen crypto exchange.
The crypto lender is also laying off a large portion of its staff, the source said.
BlockFi, which let users earn yield for depositing idle cryptocurrencies on the platform, first halted withdrawals on November 11, the same day FTX filed for bankruptcy. “We, like the rest of the world, found out about this situation through Twitter,” BlockFi wrote in a letter at that time. “We are shocked and dismayed by the news regarding FTX and Alameda.”
Nearly a week later, a source at the company told Decrypt that it was considering filing for bankruptcy, given its hefty exposure to FTX.
BlockFi's ties with FTX
In June, BlockFi announced a revolving $250 million line of credit with FTX roughly a week after the crypto lender cut staff by roughly 20%. It said that it was reducing its headcount due to "the dramatic shift in macroeconomic conditions worldwide."
There was also discussion of an outright acquisition in July, but this was denied by Zac Prince BlockFi's CEO.
BlockFi isn't the only platform that FTX has bailed out. The crypto exchange also doled out a $120 million loan in August 2021 to the Liquid Group after the latter suffered a $90 million hack. Liquid was then acquired by FTX in May 2022.
The crypto platform suspended withdrawals on November 15 and has yet to reopen them.
Voyager Digital also landed a $500 million line of credit in June from FTX's sister firm Alameda Research. Voyager later filed for bankruptcy on July 6.