BlockFi on the Brink

Contagion is spreading crypto space, and the next victim is said to be BlockFi, which is said to be preparing a potential bankruptcy filing following exposure to the bankrupt exchange FTX.

The news comes just a day after the company denied that its assets were locked away in custody at the now-defunct exchange. According to the Wall Street Journal, the company is also planning to lay off some of its employees to reduce the impact of the potential bankruptcy.

Last week, the platform paused customer withdrawals in the wake of FTX’s collapse, telling users in an email “We can no longer operate our business as usual.” However, it said it had “significant exposure” in the form of obligations owed to BlockFi by FTX-linked hedge fund Alameda, assets on the FTX platform, and an undrawn credit line from FTX.

“BlockFi has the necessary liquidity to explore all options and we have engaged expert outside advisors that are helping us navigate BlockFi’s next steps. Haynes and Boone continues to serve as our primary outside counsel, and BRG has been engaged as our financial advisor,” the platform said in an earlier on Tuesday.

BlockFi previously faced a liquidity scare in July, which prompted FTX to extend a US$400 million revolving credit facility to the crypto lender.

Elsewhere, AutismCapital reported on Twitter that its “hearing semi-credible rumors” that Genesis may be having solvency issues, and will be holding a call with their creditors tomorrow at 8 AM EST to explain the situation.