FTX Contagion Spreads: Crypto Lender BlockFi Faces Potential Bankruptcy

BlockFi, a platform for crypto-backed loans and trading, may also face bankruptcy due to its exposure to FTX, the beleaguered cryptocurrency exchange that was led by Democrat megadonor Sam Bankman-Fried.

Sources familiar with the matter told the Wall Street Journal that BlockFi is preparing for a potential bankruptcy filing, after pausing withdrawals and limiting activity on user accounts last weeks.

Via the Wall Street Journal:

Cryptocurrency lender BlockFi Inc. is preparing a potential bankruptcy filing after halting withdrawals of customer deposits and acknowledging it has “significant exposure” to bankrupt exchange FTX, people familiar with the matter said.

BlockFi paused withdrawals and limited activity on its platform last week, saying it couldn’t operate business as usual given the uncertainty about FTX. BlockFi is now planning to lay off some of its workers while the troubled firm prepares for a possible chapter 11 itself, people familiar with the matter said.

BlockFi didn’t respond to requests for comment. A bankruptcy filing would make Jersey City, N.J.-based BlockFi the latest casualty of the sudden collapse of Sam Bankman-Fried’s crypto empire, which comprises FTX, FTX US, trading firm Alameda Research and more than 100 affiliated entities.

In a blog post on Monday, BlockFi admitted “significant exposure” to FTX and Alameda Research, Bankman-Fried’s trading company, including loans to the latter. BlockFi also sought to reassure observers that it has the “necessary liquidity to explore all options.”

The collapse of FTX, which filed for bankruptcy protection on Friday, has caused shockwaves across the crypto ecosystem.

It is a colossal downfall for Bankman-Fried, who became a billionaire through his crypto ventures and used his wealth to bankroll Joe Biden in 2020 and Democratic candidates at the recent midterm elections, becoming the second-biggest Democrat donor in both.

Allum Bokhari is the senior technology correspondent at Breitbart News. He is the author of #DELETED: Big Tech’s Battle to Erase the Trump Movement and Steal The Election.