The FTX’s demise left the market with an open, untreated wound, making the crypto industry bleed. There are no heroes left – even CZ is in a dour mood.
The Domino effect hit after a series of parties stuck in between had surfaced. On November 28, BlockFi, a prominent crypto lender, filed for Chapter 11 bankruptcy in New Jersey.
The company is seeking bankruptcy protection, estimating that it had over 100,000 creditors and approximately $1 to $10 billion in assets and liabilities.
If you haven’t yet followed the case of Voyager, the proceedings are alike.
The Chapter 11 bankruptcy filing, once approved, will grant BlockFi a chance to restructure its business and reduce its debt. BlockFi is also allowed to continue to run its business during the proceedings.
BlockFi is On The Block (Sort Of)
The creditors of the company consist of Ankura Trust ($729 million), FTX US ($275 million), the U.S. Securities and Exchange Commission ($30 million), and a huge number of other creditors.
BlockFi also became the third high-profile crypto firm to file for bankruptcy following FTX and Alameda Research. The exchange reported in its Q2/2022 report that it still managed $3.9 billion in assets, but has lent out $1.8 billion, of which $600 million in liabilities.
In addition to the bankruptcy filing, the company will also cut off its workforce to reduce operating expenses. In June, BlockFi laid off 20% of its total workforce due to the tough market scenario.
The crypto lender survived the first storm when Three Arrows Capital collapsed and took other big players like Voyager and Celsius down altogether. At that time, FTX was the savor who lent BlockFi $400 million. But timing is not always on its side.
The company didn’t have enough time to recover and was beaten hard when the second storm hit.
The news that the FTX cryptocurrency exchange is in dire trouble has recently been making waves in the finance industry. And when the business sought bankruptcy protection on November 11, the worries came to pass.
The Dark Days of Winter
Sam Bankman-Fried gave up his position as well.
Now that SBF, short for Sam Bankman-Fried, has not been located, even the most basic question remains. After the FTX’s downfall earlier this month, BlockFi rapidly announced it suspended users’ withdrawals with no reasonable explanations.
On November 16, the lending platform managed by Genesis Global Trading also announced the halting of withdrawals. It was reported later that Genesis was in crisis looking for a bailout to pay back to their customers.
Investors had already encountered bankruptcy with FTX and Celsius. Halting withdrawals or any limitations of activity on the platform often become a symptom of bankruptcy. Genesis has not yet provided any new information regarding its present state.
The corporation reportedly contacted a third party for advice on the fund’s present financial situation. This would indicate that filing for bankruptcy is an option, which would make investors more anxious and tempted to take their money out.
No Heros This Time
Many financial institutions have collapsed due to excessive leverage, illiquid assets, insider wrongdoing, retail trade, and conflicts of interest. When the market crashed following the LUNA event, FTX intervened to save several distressed businesses.
However, it’s possible that this time we won’t see the same act. Even Binance, the current largest crypto trading platform, is incapable of pouring out a large sum of money.
But if the big players don’t step in to stop the bleeding, they will end up suffering, too. People are becoming more skeptical and losing trust in the system.
Blockchain research reveals that Genesis has fewer connections to influential industry actors than FTX, therefore a collapse would not have the same significant consequences.
Nevertheless, if Genesis were to fail, the cryptocurrency lending market’s standing would suffer, much to how the FTX crash caused the public to distrust exchanges.
