Saved Once by Now-Teetering FTX, BlockFi Again Halts Withdrawals
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Saved Once by Now-Teetering FTX, BlockFi Again Halts Withdrawals

Created 4mo ago, last updated 4mo ago

The crypto lender staved off bankruptcy this summer after FTX CEO Sam Bankman-Fried intervened, but faces an uncertain future after the troubled exchange itself halting withdrawals.

Saved Once by Now-Teetering FTX, BlockFi Again Halts Withdrawals

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Troubled crypto lender BlockFi, which escaped bankruptcy this summer after a $400 million loan from Sam Bankman-Fried's now-insolvent FTX exchange, has once again halted withdrawals.

Citing the "lack of clarity on the status of FTX," BlockFi asked clients not to make deposits to their BlockFi Wallets or Interest Accounts — saying on Nov. 10:

"We are not able to operate business as usual… Until there is further clarity, we are limiting platform activity, including pausing client withdrawals."

FTX this week halted withdrawals and is facing bankruptcy in the wake of a run caused by fears that it was badly undercollateralized following $10 billion in loans to his trading firm Alameda Research that allegedly included the exchange's customers' funds. Bankman-Fried said in an apologetic Twitter thread on Nov. 10 that Alameda will be wound down as well.

No Savior

The announcement amounts to a harsh full circle for BlockFi, as well as a humiliating turnaround for Bankman-Fried, who just five months ago was the subject of a series of profiles by outlets like the New York Times and Wall Street Journal in which Bankman-Fried presented himself as a savior of wounded crypto firms, offering $750 million to the two crypto lenders, which had been crushed by the collapse into insolvency of hedge fund Three Arrows Capital.

Bankman-Fried told NPR in a June interview that he felt "a responsibility to seriously consider stepping in, even if it is at a loss to ourselves," for the good of the crypto ecosystem at a time when competing crypto exchanges Coinbase, and Gemini were announcing layoffs. He also presented himself as a new face of the industry while embarking on a $100 million Washington, D.C., lobbying campaign.

Meanwhile, another crypto lender Bankman-Fried attempted — unsuccessfully — to keep out of bankruptcy with a $500 million loan from his other company, Alameda Research, said yesterday that FTX had not yet closed a deal to take possession of its assets.

Voyager Digital's unsecured creditors committee tweeted:

"The FTX/Voyager transaction has not been consummated. Voyager has not transferred any crypto or other assets to FTX in connection with the transaction. The UCC will take all steps necessary to protect creditors' interest."

Which is to say, trying to keep the assets investors recovered in its own bankruptcy from becoming entangled in a potential bankruptcy by FTX.

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