The American cryptocurrency lending specialist BlockFi announced on Monday, November 28, that it had placed itself under the protection of the bankruptcy law in the United States, attributing its difficulties to the collapse of the virtual currency trading platform FTX which had come to its rescue this summer.
BlockFi had found itself in turmoil in the first half of the year after the widespread fall in the value of cryptocurrencies, which stumbled several companies in the sector. Some of the customers who deposited money with the company, which was founded in 2017, in return for the promise of high interest payments, then spooked and withdrew their funds. The platform was also affected by the liquidation of the Singaporean investment company Three Arrows Capital, to which it had lent money.
To help it overcome these turmoil, FTX had offered its assistance, in particular offering to grant a line of credit of 400 million dollars. But FTX has since filed for bankruptcy on November 11. BlockFi immediately had to suspend most of its activities, including withdrawals.
Domino effect
“Since this break, our team has explored all the strategic options and alternatives available to us”says a post on BlockFi website. Filing for bankruptcy in the State of New Jersey will allow the company “to stabilize the activity” and give him “the ability to implement a reorganization plan that maximizes value for all customers and other stakeholders”is added.
The company plans to focus on collecting money owed by other companies. She states that she has “more than 100,000 creditors”. It also specifies that it has $257 million in cash at its disposal, which should enable it to finance its operations during the restructuring.
The bankruptcy of FTX caused a domino effect affecting several other companies in the cryptocurrency sector. The French company Coinhouse, which offers savings in cryptocurrencies, has thus blocked withdrawals from its booklets in mid-November explaining that some partner sites to which it had lent funds had themselves blocked the outflow of money.