Tag: blockfi

Crypto Lender BlockFi Pauses Withdrawals Amid FTX, Alameda Research Liquidity Crisis

Crypto lending firm BlockFi has announced that it was “not able to operate business as usual,” citing a lack of clarity regarding FTX, FTX.US, and Alameda Research as the reason. The leading cryptocurrency lending platform says that until there is clarity, it will be limiting activity including pausing withdrawals. It also requested that clients do not make deposits, though that would be highly unlikely given the current situation. BlockFi claimed that its priority was to protect its clients and their interests.

The company posted an update to its Twitter account indicating that it will halt services. “We are shocked and dismayed at the news regarding FTX and Alameda,” BlockFi wrote. “We, like the rest of the world, found out about this situation through Twitter.”

Over the past several days, a substantial portion of Alameda Research’s holdings was revealed to be tied to FTX’s FTT token rather than the traditional assets. That controversy led to a bank run on FTX. To gain funding and protect against further losses, FTX tried to arrange an acquisition with Binance that ultimately fell through.

The fallout from the failed deal has continued into Thursday as CEO Sam Bankman-Fried posted an admission of failure.

BlockFi indirectly referred to these events as the reason for its service suspension. “Given the lack of clarity of the status of FTX.com, FTX US, and Alameda Research, we are not able to operate business as usual,” it wrote.

The company said that though it will provide updates on the situation, those updates will be “less frequent than what our clients and other stakeholders are used to.”

BlockFi did not explicitly state whether it had financial exposure to FTX or its related companies. Earlier this week, BlockFi COO and co-founder Flori Marquez said that the company had a $400 million (roughly Rs. 3,200 crore) loan from FTX US rather than FTX. It is unclear whether BlockFi had other exposure.

Incidentally, the competing crypto lending firm Nexo said on Tuesday that it had narrowly avoided losses from FTX’s collapse. Nexo withdrew certain balances just prior to FTX’s collapse and is still operating as usual.

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Crypto Exchange FTX Is in Talks to Acquire a Stake in BlockFi: Report

Cryptocurrency exchange FTX is in talks to acquire a stake in crypto lender BlockFi, the Wall Street Journal reported, citing people familiar with the matter.

The companies had previously announced on Tuesday that BlockFi had signed a term sheet with FTX for a $250 million (roughly Rs. 1,955 crore) revolving credit facility, which will give BlockFi crucial access to capital amid a rout in the digital currency market.

No equity agreement has yet been reached, and discussions are ongoing, according to a recent report from the Wall Street Journal.

In a statement, a BlockFi spokesperson said the company “does not comment on market rumours.”

“We are still negotiating the terms of the deal and cannot share more information at this time. We anticipate sharing more on the terms of the deal with the public at a later date,” the BlockFi spokesperson said.

A spokesperson for FTX did not immediately respond to a request for comment.

Last week, BlockFi said it was reducing its headcount by about 20 percent, in addition to implementing other cost-cutting measures like reducing marketing spending and executive compensation.

Aggressive rate hikes by the US Federal Reserve and recession fears have led to a turmoil in equities and sparked a sell-off in cryptocurrencies. Last weekend, the world’s biggest cryptocurrency, Bitcoin, dropped below the key $20,000 (nearly Rs. 15.6 lakh) level for the first time since December 2020.

In his previous announcement, BlockFi’s Chief Executive Officer, Zac Prince mentioned on Twitter that the company has signed a termed sheet with FTX to secure a revolving credit facility. Prince confirmed in a subsequent tweet that the amount secured from FTX will be used to ensure liquidity for users who are depositing funds into the project.

BlockFi’s CEO goes on to mention that the newly acquired credit facility is essential in keeping the company’s operational efficiency intact amidst the massive downturn in the broader crypto ecosystem. He proposed that the loan will provide the company with access to capital that will further bolster its balance sheet and its overall platform strength.

© Thomson Reuters 2022

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