Crypto lender BlockFi just paused withdrawals, cites ‘lack of clarity’ around FTX collapse
It has not been a good year for cryptocurrency markets, and this last week alone has been horrible. During the past few days, FTX, one of the world’s largest crypto exchanges, has neared collapse, with the owner of that exchange, 30-year-old Sam Bankman-Fried, seeing his assets go from a net worth of almost $16 billion to nearly zero (per Bloomberg).
The collapse started after CoinDesk last week reported on a document that seemed to suggest Bankman-Fried’s trading company, Alameda Research, had most of its assets tied up in FTT, a cryptocurrency minted by Bankman-Fried’s FTX. The arrangement spooked investors as Alameda’s worth now appeared too closely tied to the coin FTX created and not other stores of value like cash or other cryptocurrencies.
[Catch up: What’s happening with FTX?]
The result? A crash of FTT from a high of $22.02 on November 8 to just $3.39 at the time of this writing. But while FTX’s collapse seems almost certain at this point, the crypto exchange’s fall has now hit other players in the space, namely crypto lender BlockFi, which has paused withdrawals this morning.
In a tweet announcing the pause of withdrawals, BlockFi said the “lack of clarity” surrounding “the status of FTX.com, FTX US and Alameda” means the company can not currently operate its business as usual. As CoinDesk notes, the reason the FTX situation has hit BlockFi to the degree that it needs to pause withdrawals is because in July FTX.com agreed to provide BlockFi with a $400 million credit facility if certain conditions were met—a deal that now is in limbo due to FTX’s collapse.
So what does this mean for BlockFi users? For now, they can’t get their money out, and BlockFi is urging users not to deposit additional funds into their BlockFi wallet or interest account for the time being.
As for when BlockFi users will know more, the company says it “will share more specifics as soon as possible.” However, the company also warned that while it intends “to communicate as frequently as possible going forward,” it anticipates such communication “will be less frequent than what our clients and other stakeholders are used to.”
Given how horrible a year 2022 has been for the crypto industry as a whole, many investors can’t wait until it’s over. Yet, one wonders if 2023 will be any better. Most cryptocurrencies are a long way from their highs, but they could still fall even further if the industry shakeup continues.
As for Bankman-Fried, in a tweet on Thursday, the FTX CEO said he was sorry. “I fucked up, and should have done better.”
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