The crisis sparked by the collapse of Sam Bankman-Fried's FTX crypto empire ensnared BlockFi, a troubled digital-asset lender once worth $3 billion but which has now limited activity on its platform.
BlockFi on Twitter
The Jersey City, New Jersey-based company asked customers to refrain from depositing funds into their BlockFi wallets or interest accounts. In a second-quarter
The developments at BlockFi underscore growing concerns about contagion from the toppling of crypto exchange FTX and trading house Alameda Research. Digital-asset lenders like BlockFi and Celsius Network, which is in bankruptcy, had already been buffeted by the rout in virtual coins over 2022.
BlockFi was in the process of moving its assets to FTX for custody, according to a person familiar with the matter. The majority of BlockFi's assets had not been moved yet, the person added, asking not to be identified due to the sensitive nature of the matter.
The crypto lender had given loans to Alameda Research, the person familiar said, without specifying an amount.
The loans are overcollateralized with liquid assets — including Robinhood shares — but BlockFi is no longer certain about where the funding for its credit line with FTX US and the collateral for the Alameda loans came from, the person said, citing concerns that it could have originated with customer funds.
FTX probes
The U.S. Securities and Exchange Commission and the Commodity Futures Trading Commission are looking into whether
FTX US earlier in the year offered BlockFi a major lifeline by providing a $400 million revolving credit facility in an agreement that came with the option to purchase the company.
Originally valued at $3 billion in March 2021, BlockFi sought to raise money at a reduced valuation of about $1 billion in June. The firm also faced scrutiny from financial regulators over its interest account and paid $100 million in penalties to the SEC.
BlockFi took an $80 million hit from the bad debt of crypto hedge fund Three Arrows Capital, which imploded after the TerraUSD stablecoin wipeout in May.
Authorities in the Bahamas, where
