Crypto lender BlockFi is preparing for bankruptcy as FTX contagion spreads across the crypto market

Less than a week after BlockFi suspended withdrawals for thousands of its customers, the beleaguered crypto lender is now preparing for potential bankruptcy following the collapse of the crypto exchange FTX, the Wall Street Journal reported Tuesday.

BlockFi is the latest in a series of companies caught in the financial entanglement with the now-bankrupt FTX. BlockFi is also planning to lay off workers and exploring a possible chapter 11 bankruptcy filing itself, the Journal reported, citing people familiar with the matter.

BlockFi froze withdrawals of customer deposits and admitted that it has “significant exposure” to bankrupt exchange FTX. The company added it couldn’t operate business as usual given the uncertainty about FTX.

BlockFi founder and COO Flori Marquez also tweeted last week that “All BlockFi products are fully operational. BlockFi is an independent business entity. We have a $400MM line of credit from FTX.US (not FTX.com) and will remain an independent entity until at least July 2023. We are processing all client withdrawals.”

Founded in 2017 by Zac Prince and Flori Marquez, BlockFi is a provider of cryptocurrency-focused financial products, including zero-fee trading and interest-bearing accounts. The company started lending in January 2018, the company offers the ability to leverage Bitcoin and Ether to obtain USD loans.

BlockFi operates in over 44 U.S. states and is backed by leading investors including Galaxy Digital Ventures LLC, ConsenSys Ventures, and SoFi. BlockFi is a secured non-bank lender that offers USD loans to crypto-asset owners who collateralize the loan with their crypto-assets. Our products bring additional liquidity to the blockchain asset sector and meet the needs of both individuals and institutions holding blockchain assets.