Following the collapse of cryptocurrency exchange FTX, crypto lender BlockFi has ceased operations. Due to the uncertainty surrounding the current state of FTX, the company informed on Twitter that withdrawals and normal business operations had been halted.
“We are shocked and disturbed by the news surrounding FTX and Alameda,” BlockFi tweeted late Thursday on its Twitter account, becoming the latest victim of Sam Bankman’s unexpected FTX collapse. Bankman-Fried also owns Alameda Research, an allied trading firm.
BlockFi, currently in financial difficulty, was previously valued at £2.54 million. The business announced on Twitter that platform activity will be limited for the time being, and client withdrawals will be suspended “as is authorized under our terms.”
BlockFi has not specified a specific period for service resumption. The crypto lender, however, announced on Twitter that ACH deposits and “wire transactions scheduled for 11/11 will not process until 11/14.”
In July, the embattled crypto lender had a liquidity crisis due to significant price drops, overtaking several lenders. The crypto lender arranged a £576.4 million transaction with FTX.US, including a £339.09 million revolving credit line and an option for FTX to purchase BlockFi.
While in June, the crypto lender wanted to raise funds at a lower valuation of around £847.7 million, a £1.6 billion fall from its initial valuation of £2.54 billion in March 2021.
Because of the crypto market downturn, crypto lenders have had a challenging year. Furthermore, the collapse of the TerraUSD stablecoin in May was a spark for the domino effect. It resulted in the demise of several crypto lenders, including Celsius Networks and hedge firm Three Arrows Capital.
BlockFi took £67.8 million in damage due to Three Arrows’ bad debt. After being swamped with client withdrawal requests over the weekend, FTX experienced an abrupt collapse this week.
According to The Wall Street Journal, FTX’s financial turmoil has forced the company to insolvency after borrowing billions of dollars in customer assets from Alameda to support risky trading bets. It laid the groundwork for FTX’s collapse.
Furthermore, the collapse of FTX has impacted other prominent crypto businesses, including Crypto.com, which on Wednesday banned deposits and withdrawals of two stablecoins, USDC and USDT, on the Solana blockchain.
According to Bloomberg, Bankman-Fried advised investors that the crypto exchange would need to file for bankruptcy if it did not receive a financial infusion. This information was obtained from a person with direct knowledge of the subject.
Bankman-Fried, previously worth £22.04 billion, also advised them that his cryptocurrency exchange is facing a shortage of up to £6.7 billion and needs £3.39 billion to keep solvent. Until recently, Bankman-Fried had been buying up crypto companies that were failing due to a credit shortage caused by the unexpected collapse of the Luna and UST or TerraUSD.
According to a person familiar with the subject, FTX is currently on a mission to secure rescue finance through debt, equity, or a combination of the two.