Crypto lender BlockFi announced Friday the halt of withdrawals of users’ funds, citing its exposure to the troubled crypto exchange FTX.
BlockFi Pauses Withdrawals
The company tweeted that its latest action is due to “the lack of clarity on the status of FTX.com, FTX US and Alameda.”
The crypto lending firm added that, in the meantime, users should not deposit any funds into the BlockFi wallet or interest account.
BlockFi’s latest move comes only three days after users were reassured that the company’s financial health was in check. On November 8, Flori Marquez, the co-founder of BlockFi, stated that all lending platform services were “fully operational.”
BlockFi’s Relationship With FTX
Following the collapse of the crypto hedge fund Three Arrows Capital (3AC) and the global crypto market downturn, BlockFi sat at a loss of $80 million. The firm also reported a $600 million credit risk as of June.
To tackle its liquidity difficulties, BlockFi turned to FTX US for rescue. FTX US is the United States arm of Sam Bankman-Fried’s crypto exchange FTX. To save the crypto lender from its financial problem, FTX US signed a $640 million deal with the firm.
What Happened to FTX?
In the wake of the liquidity crunches faced by several crypto-based platforms like BlockFi and Voyager Digital, Sam Bankman-Fried (SBF) went on an acquisition spree. He used funds from Alameda Research to fund these acquisitions. To fill up the big hole in Alameda’s balance sheet, SBF sent funds from FTX to Alameda. The majority of these funds were sent to FTT, the native token for FTX.
The information about the financial issues eventually got to the ear of the public, resulting in the plummeting of the crypto market. Since then, platforms like Galaxy Digital that have ties with FTX have revealed their losses to the company.
Meanwhile, FTX US, on its part, is currently feeling the heat of the liquidity problems faced by its sister companies, FTX and Alameda Research. Yesterday, the U.S.-based company announced via its website that it may halt trading in a few days.
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