Another Crypto Giant Falls: BlockFi Seeks Protection Against Creditors

After FTX, it was the turn of cryptocurrency lending platform BlockFi to seek protection from creditors, under Chapter 11 of the US insolvency law. The lawsuit was filed in a New Jersey court and comes about a month after the collapse of FTX.

In the documents that started the judicial process, which have been cited by various international press organizations, the company lists more than 100,000 creditors. In the table, it appears as the second largest creditor, FTX with $275 million in debt to the platform until recently led by Sam Bankman-Fried.

The list is headed by Ankura Trust, a firm dedicated to representing creditors, with a credit of $729 million. BlockFi has already issued a red alert to the market, after it froze asset withdrawals from the platform.

In July, FTX signed an agreement with BlockFi to grant a $400 million line of credit, with an option for FTX to buy the platform for up to $240 million in the event of a default. This is after the cryptocurrency market crash in the first half of the year which was exacerbated by the collapse of the Terra USD ecosystem and threw the platform to the ground.

The risk of infection persists

The collapse of FTX begins to infect other “players” in the market. The crisis of confidence that occurred during the “crash” of the Terra USD ecosystem has come back to haunt it, with many platforms already freezing asset withdrawals. In addition to BlockFi, Genesis, a platform largely dedicated to cryptocurrency lending, has also suspended asset redemptions, citing an “abnormal number of withdrawal requests” for the decision.

Redemption requests made on the platform’s cryptocurrency deposit arm, Genesis Global Capital, have outpaced the company’s liquidity, so the company, along with a team of consultants, is considering a series of options to try to return to normalcy, according to interim CEO Azizi Islem. , quoted by Bloomberg. The Gemini Trust, led by the Winklevoss twins, also decided to freeze asset withdrawals from its Gemini Earn program for deposits that earn interest on “tokens” held. The Company has ensured that this decision does not affect other products or services.

In turn, the Hong Kong-based AXX platform suspended asset withdrawals on Monday for ten days, after reporting a liquidity shortage. “If AAX is unable to obtain financing that will allow us to resume operations, we are committed to initiating legal action to secure the distribution of assets,” Bloomberg quoted the company as saying.