BlockFi, in the midst of FTX’s liquidity contagion, as a result of previous transactions between the two platforms is now in danger of declaring bankruptcy itself.
FTX initiates bankruptcy proceedings, BlockFi follows suit
The FTX exchange recently entered Chapter 11 bankruptcy proceedings, the bankruptcy was caused by the platform’s liquidity crisis after frailties on its hedges were brought to light.
Prior to these events, FTX had actually come to BlockFi’s rescue with a $250 million loan, saving it.
Doubts about the ability to continue operating also surround Crypto.com.
In the meantime, following an investigation by the Securities and Exchange Commission, BlockFi was charged $100 million and FTX with the complicity of some executives drew heavily from the platform by banning the transfer of some of the funds shortly before it went bankrupt to save what could be saved.
As a result of this news Bitcoin is back below $17,000.
BlockFi had been rescued by FTX in June of this year and nothing would have suggested how events turned out later.
The platform notified its customers last week that it was blocking both inbound and outbound trading in the ultimate goal of preserving the platform from market contagion and protecting its users in the best way possible.
To replenish its finances BlockFi has been laying off 20% of its employees in the past month and has taken out a loan of more than $400 million.
The credit card business looks like it could be spun off, and the deal is tempting Curve, a decentralized exchange that has shown interest recently and has been in negotiations since Saturday, 12 November, to acquire the branch that boasts as many as 87,000 credit cards.
The platform’s credit cards as well as wallets also appear to be currently blocked.
In a further statement to its customers and investors on its website and then on Twitter, the company went into detail about future moves.
The risk of bankruptcy is there but the potions remain many and there is more than just this one.
To handle the delicate situation, the company has relied on Haynes and Boone, who was already BlockFi’s advisor and will serve as outside counsel while the role of financial advisor will be given to BRG in a new assignment.
“Reports that the majority of BlockFi assets are held at FTX are false. That said, we have significant exposure to FTX and associated corporate entities which includes obligations owed to us by Alameda, the assets held at FTX.com and unused amounts from our line of credit with FTX.US While we will continue to work to recover all obligations owed to BlockFi, we anticipate that recovery of obligations owed to us by FTX will be delayed as FTX proceeds through the process of failure.”
The same bankruptcy process that FTX has opted for (Chapter 11) is one of the options on the table for the advisory services mentioned above (Haynes and Boone and BRG) but currently there is still room for other moves and save the company.
In the event of bankruptcy in the footsteps of FTX, BlockFi will incur a corporate restructuring and not outright bankruptcy as in the case of companies opting for Chapter 13.
Once the procedure is initiated, creditors’ actions are frozen..
Where it is functional to the survival of the company, certain types of contracts are cancelled, and these include labor contracts, some leases, maintenance and supplies.
Chapter 11 is aimed at reorganization and not liquidation of the company so that the company gets back on its feet and once it comes out of this phase it can go back to business, this time with its accounts in order.
Despite dark times for exchanges, some are going against the grain
Because of a domino that is being triggered between various exchanges such as FTX and BlockFi there are also those who are going against the trend by starting their own path as an exchange platform and launching their own token.
The case of Dash 2 Trade announced by the eponymous company on Twitter gives hope to the industry.
The second phase of D2T’s presale ended on 7 November and we are now in the third and final act, the current one.
The price of D2T is 0.0513 USDT currently and the ERC-20 token will be launched on the Ethereum network.
The platform repurposes not only to serve as an exchange marketplace for cryptocurrencies and crypto products in general but also to do financial education through the dissemination of all cryptocurrency world news, charts, analysis, etc.
As a company policy, the exchange will never charge commissions on transactions, which will always be zero in the future as well.
“We believe that the barrier to entering and exiting the Dash 2 Trade ecosystem should not be an imposed cost, so taxes will never be charged to our community.”
Another breath of fresh air comes from Binance CEO Changpeng Zhao, who as the leading global trader is championing the establishment of a fund aimed at extending a hand to all struggling companies in the crypto world.
The fund will be an aid to any future liquidity crises of other exchanges that will not be a cure-all but will provide some relief.
