- BlockFi has halted all withdrawals on its platform, citing a “lack of clarity on the status of FTX.com, FTX US, and Alameda”.
- The lender affirms that its clients and their interests are its top priority.
- Users have been warned not to make deposits on the platform at this time.
- Two days ago, the company claimed that its full product range was “fully operational”.
- BlockFi has a $400 million line of credit from FTX U.S.
In a statement made on Friday, November 11th, Crypto lender BlockFi announced the halt of all withdrawal services. The firm cited a “lack of clarity on the status of FTX.com, FTX US, and Alameda” as the primary reason for it’s inability to operate as usual.
“We are shocked and dismayed by the news regarding FTX and Alameda. We, like the rest of the world, found out about this situation through Twitter,” BlockFi explained on Twitter.
The firm initiated the suspsension of client withdrawal operations, as outlined in its Terms of Service for extreme circumstances, and asked users not to deposit funds in their BlockFi Wallets or interest accounts.
“Our priority has been and always will be to protect our clients and their interests. We intend to communicate as frequently as possible going forward but anticipate that this will be less frequent than what our clients and other stakeholders are used to,” BlockFi asserted.
The news comes just two days after Flori Marquez, Founder and Chief Operating Officer at BlockFi, claimed that the firm’s full range of products were “fully operational”, and that it runs “a pragmatic and diversified lending business and holds risk capital reserves to help protect against potential loan defaults”.
Sponsored
Marquez further revealed that BlockFi has a $400 million line of credit from FTX US, and “will remain an independent entity until at least July 2023”, perhaps referring to a deal conferring upon FTX the rights to acquire the lender under certain conditions.
That deal now seems to be in jeopardy after reports emerged that FTX possesses a $10 billion hole in its balance sheet, putting it on the brink of bankruptcy. The Sam Bankman-Fried-owned exchange has been accused of sending up to $10 billion in user funds to sister trading firm Alameda Research, which used the capital to engage in risky leverage trading. In light of the revelation, it is expected that Alameda will be closed down.
The implosion of FTX seems to have had a significant effect on BlockFi; not only has the firm halted all withdrawals, but Twitter users were able to unearth that the company has just $18.37 million remaining in its six Ethereum wallets, with the majority of the funds held in ETH (10,598, $13.3 million) and USDC ($3 million) tokens. It is unclear whether the firm holds funds elsewhere.
Sponsored
BlockFi’s circumstance bears striking resemblance to that of Celsius and Voyager Digital, two crypto lenders that went bust this year in the wake of the Terra Luna collapse. At the time, the firms initially halted withdrawal services, before announcing insolvency just days later. Ultimately Celsius filed for bankruptcy, while Voyager Digital managed to agree on a bailout deal with FTX, which, ironically, now looks set to fall through.
On the Flipside
- At press time, it is unclear when BlockFi will resume withdrawals operations, if at all. As previously highlighted, the histories of Celsius and Voyager show us that the halted services were never reinstated.
Why You Should Care
BlockFi has been rumored to have had liquidity problems for some time now. Indeed, the decision to suspend withdrawals speaks volumes about its current status. With its primary creditor, FTX, on the brink of insolvency, investors should consider alternate means of claiming their funds from the BlockFi platform, where possible.
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