crypto currencies

Shocking news from The Wall Street

As soon as the crypto industry woke up after the dramatic collapse of the FTX bourse, famous cryptocurrency lender BlockFi immediately announced that they stopped “business as usual” until the lack of clarity in investigations regarding its key investor FTX. In this domino effect thousands of clients of this giant crypto-lender which issued billions of dollars of loans, could no longer use any of the platform services, including withdrawing funds. According to the latest report of The Wall Street Journal this is a fatal consequence of the epic collapse of the FTX bourse, which led to the inevitable bankruptcy of the BlocFi and eight more subsidiaries companies.

As a result on the 28th of November crypto lending giant BlockFi has filed for bankruptcy under Chapter 11 of the relevant US code as they officially stated in their press release. The company was trying to forbear the true state of things till the last moment, avoiding giving any official comments, but impending fortune was seen by many experts observing the  series of immediate layoffs of the company’s employees and engagement of Kenrick Kuttner responsible for the bankruptcy issues at Haynes & Boone. The red flags were obvious. But why exactly did BlockFi appear under the gun? Let’s have a deep dive together with AlsaBot team to understand what actually happened, and how it influenced the entire industry.

The connection of BlockFi and FTX

In the beginning of November, the US division of the bankrupt FTX bourse, FTX.US, opened a $400 million credit line for BlockFi. At the same time, the company assured that the loan does not create any risk for the company, since FTX.US is an independent organization. But it’s not the complete picture as FTX also issued a $250 million revolving loan to BlockFi. At the same time, the media reported about the FTX plans to buy out BlockFi, but as you know the deal was never completed, and according to the results of the II quarter, BlockFi distributed outstanding loans for $ 1.8 billion. BlockFi used the entire available credit line and has also raised millions of dollars of new loans that were partially backed only by FTT tokens.

Consequences for the crypto world

As part of the business restructuring, in the nearest future BlockFi will focus on recovering liabilities not only to its customers, but also to the bankrupt FTX bourse. The company said it still has $256.9 million for operational management. The funds will be used to support liquidity as it restructures the business. And since investment bank Moelis & Company acts as legal advisers of the bankruptcy in this case, we can hope that the process will go fairly safely. However, this one more reason to remind us about the extreme risky and sometimes unforeseen nature of the entire crypto industry. Problems in the cryptocurrency market continue for almost the entire 2022. In May, the stablecoin TerraUSD (UST) lost its peg to the dollar, and its LUNA cryptocurrency collapsed. In June, the Celsius Network crypto bank went bankrupt, and the following month, one of the largest cryptocurrency hedge fund Three Arrows Capital, collapsed too. The recent fall of FTX only continued this domino effect and has already led to the closure of a number of projects, like Genesis Global Capital or Gemini Trust. Unfortunately, since now BlockFi has also joined the list of bankrupt companies. And probably this list will continue to amplify, as investments in crypto projects will most likely decrease after such waves of dramatic news. 

So always remember that safety of your assets is only in your owns hands. And if you are looking for the most secure way of gaining in trading – we are here for you to offer our Trading Robot, that guarantees stable profit with no risk of losing your capital.  On this we wish  a great week! Follow us on our Telegram channel and let us be your guide into the most exciting news of a trading world!

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