Cryptocurrency lender BlockFi Inc. files for bankruptcy related to the recent crypto fallout.
Key Details
- Cryptocurrency lender BlockFi Inc. is following FTX by filing for Chapter 11 bankruptcy.
- This marks a big blow for the crypto industry as this is another addition to the growing list of crypto businesses resulting in a bankruptcy filing in the past month.
- BlockFi said the reason for the filing was a mix of the crypto fallout this summer and the recent FTX fallout.
- FTX’s affiliated trading firm, Alameda Research, defaulted on $680 million owed to BlockFi earlier this month, according to Wall Street Journal writer Alexander Gladstone.
- BlockFi is working out a repayment plan for creditors and attempting to get back as much money as it can from FTX though that money most likely won’t be seen for a while.
- BlockFi is doing all it can but its financial adviser, Mark Renzi, says the “full extent of the fallout from FTX’s collapse remains to be determined.”
Why it’s news
The crypto world is still seeing the repercussions from the recent fallout of crypto exchange FTX and many businesses are being destroyed from the fallout.
Cryptocurrency lender BlockFi Inc. is the latest to feel those repercussions. The lending company had a rough summer as it was hit hard with the major crypto sell offs and after the FTX fallout it could not hang on any longer resulting in bankruptcy.
After FTX quickly fell earlier this month, BlockFi paused withdrawals stating that the company had “significant exposure” to FTX.
Many crypto investors are saying the fallout from FTX’s crash shows the contagion risk of cryptocurrencies. When one goes down others follow.
BlockFi’s bankruptcy “underscores significant asset contagion risks associated with the crypto ecosystem, and, potentially, deficient risk management processes,” says Monsur Hussain, senior director at Fitch Ratings.
Regulation
The multiple bankruptcies and continued fallout of cryptocurrencies are leading many to call for regulation.
Cryptocurrencies can be extremely down one day and soaring the next, but one thing always remains—little regulation.
Many people were once against government regulation, but as more issues arise people are warming up and welcoming regulation.
A national poll conducted by the Crypto Council for Innovation in October revealed that 52% of the 1,200 voters surveyed want the industry to be more regulated, while 7% said they think the industry should be less regulated, according to CoinDesk.