Crypto lender BlockFi has suspended business following the collapse of crypto exchange FTX.
The company announced on Twitter that it has suspended withdrawals and normal trading operations due to a lack of clarity on the current status of FTX.
“We are shocked and dismayed by the news about FTX and Alameda,” BlockFi said Thursday night on its Twitter account, becoming the latest victim of Sam Bankman-Fried’s FTX flash crash. Alameda Research is an affiliated trading company also controlled by Bankman-Fried.
BlockFi, which is currently in a financial conundrum, was once worth $3 million.
The company took to Twitter to announce that platform activity will be limited for the time being and withdrawals for clients will be suspended “as our terms allow.”
BlockFi has not announced any exact time frame for service restoration.
However, the crypto lender announced via Twitter that ACH deposits and “electronic transactions scheduled for 11/11 will not be processed until 11/14.”
In July, the beleaguered crypto lender suffered a liquidity crisis after sharp drops in crypto prices, which affected many lenders.
The crypto lender had negotiated a $680 million deal with FTX.US, which included a $400 million revolving credit facility and an option for FTX to purchase BlockFi.
While in June, the crypto lender had tried to raise money at a reduced valuation of around $1 billion, a decrease of $2 billion from its original valuation of $3 billion in March 2021.
Crypto lenders have had a bad year due to the crypto market downturn. Additionally, the collapse of the TerraUSD stablecoin in May was a catalyst that caused the domino effect. It led to the implosion of other crypto lenders like Celsius Networks and hedge fund Three Arrows Capital.
BlockFi took an $80 million hit from Three Arrows’ bad debt.
FTX has witnessed a flash crash this week after the crypto exchange was inundated with customer withdrawal requests over the weekend.
According to The Wall Street Journal, FTX’s financial crisis has driven the company close to insolvency as it lent billions of dollars in client assets to finance risky Alameda trading bets. It set the stage for the implosion of FTX.
Additionally, the FTX crash also affected other major crypto firms, such as Crypto.com, which suspended deposits and withdrawals of two stablecoins, USDC and USDTon the Solana blockchain on Wednesday.
Bankman-Fried has informed investors that the crypto exchange would have to file for bankruptcy if it fails to secure an injection of cash, according to Bloomberg, who received this information from a person with direct knowledge of the matter.
Bankman-Fried, once worth $26 billion, also informed them that its crypto exchange is facing a shortfall of up to $8 billion and needs $4 billion to remain solvent.
Bankman-Fried, until recently, had been buying crypto firms that were struggling due to a credit crisis caused by the sudden collapse of the Luna and UST or TerraUSD cryptocurrencies.
FTX now has a mission to raise bailout financing in the form of debt, equity, or a combination of the two, the person familiar with the matter told Bloomberg.
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