- Crypto lender BlockFi said Monday that it had "significant exposure" to the bankrupt exchange FTX.
- FTX had given BlockFi an emergency $250 million loan in June after the summer's crypto crash.
The crypto lender BlockFi said on Monday it will "explore all options" to mitigate its "significant exposure" to the bankruptcy of cryptocurrency exchange FTX.
BlockFi received a $250 million loan from FTX in June as several crypto financial institutions, including Three Arrows Capital and Voyager Digital, tumbled in the wake of the summer's market meltdown. The loan, used to help keep the firm afloat, meant that BlockFi had a credit line with Sam Bankman-Fried's FTX US. BlockFi also said it had corporate assets held with FTX and is owed debts from the crypto trading firm Alameda Research, also owned by Bankman-Fried.
Those exposures mean that BlockFi was closely tied with FTX, which could affect its financial stability after the cryptocurrency exchange filed for bankruptcy on Friday. BlockFi did not specify exact amounts of its exposure to FTX, but it said that it expects a delay in recovering the assets that Alameda owes it.
Even so, the company said, "the rumors that a majority of BlockFi assets are custodied at FTX are false."
BlockFi previously announced on Friday that it had paused its customers' ability to make withdrawals from their accounts. Another crypto lender, Celsius, took a similar measure to attempt to preserve liquidity when various cryptocurrencies crashed over the summer, but it ultimately filed for bankruptcy in July. BlockFi said it has "the necessary liquidity to explore all options" but believed it was in its best interest to suspend customer withdrawals.
"We determined late last week that in the current environment we could no longer operate our business as usual," BlockFi said in its statement on Monday. "Given that FTX and its affiliates are now in bankruptcy, the most prudent decision for us, in the interest of all clients, is to continue to pause many of our platform activities for now."
Bankman-Fried's trading firm Alameda Research, which is closely tied to FTX, invests in more than 100 crypto companies, according to PitchBook. A crypto investor told Insider that Alameda Research requires several of those portfolio companies to hold assets with FTX. Alameda Research is not a BlockFi investor, but the firms are closely tied because of BlockFi's loan with FTX.
In fact, at least one other company that has received funding from Alameda has also had to make adjustments to its operations. The CEO of Nestcoin, an African Web3 company, announced on Monday via Twitter that the company held some of its assets with FTX and would conduct layoffs as a result of its exposure.
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