BlockFi to File for Bankruptcy Protection Amid FTX Collapse

Troubled crypto lending platform BlockFi is in the works to file for Chapter 11 bankruptcy protection due to its financial issues, the Wall Street Journal revealed on Tuesday.

BlockFi Struggles Amid FTX Collapse

According to two individuals familiar with the matter, BlockFi has “significant exposure” to FTX. This comes just a day after the platform denied claims that the majority of its funds are stored with the insolvent crypto exchange FTX.

The report also revealed that BlockFi is preparing to reduce its workforce as it combats liquidity difficulties. Recall that the crypto lender had laid off 20% of its workers in June when the company’s financial issues had previously come to light.

The latest development comes only a week after BlockFi halted withdrawals of users’ funds. While announcing the fund’s freeze, the platform cited its exposure to FTX and its sister companies, FTX US and Alameda Research as the cause.

Companies Impacted by FTX Insolvency

BlockFi is only one of several companies affected financially or recorded losses due to FTX’s insolvency. 

A recent report confirmed that Nestcoin, a Nigerian-based crypto startup, had a significant amount in the custody of FTX until the time of its collapse. The company had raised a pre-seed funding round worth about $6.5 million. Majority of this fund was held at FTX, hence its current liquidity struggles.

Ikigai, an asset management company, announced on Monday that it had exposure to FTX. According to a member of the company’s executives, a large portion of the firm’s assets under management were stuck in the custody of FTX. Despite the difficulty, the asset manager noted that trading of tokens not tied to FTX will resume soon.

Other companies like the Solana Foundation and Galaxy Digital have been impacted by the FTX drama. The Solana Foundation revealed a $1 million exposure while Galaxy reported a $77 million exposure to FTX. 

While FTX struggled to stand its ground financially, it was further crippled by a $600 million hack caused by a security breach.