Wed. Oct 4th, 2023

BlockFiamid the contagion of illiquidity by FTX, as a result of previous transactions between the two platforms, is now in danger of filing for bankruptcy.

FTX starts bankruptcy proceedings, BlockFi does the same

The FTX exchange recently entered the bankruptcy process of the Chapter 11, the bankruptcy was caused by the platform’s liquidity crisis after weaknesses in its hedges were brought to light. Prior to these events, FTX had come to BlockFi’s rescue with a $250 million loan, saving it. Doubts about the ability to continue operating they also surround Meanwhile, following an investigation by the Securities and Exchange Commission, BlockFi was charged $100 million and FTX, with the complicity of some executives, heavily relied on the platform by banning the transfer of some of the funds shortly before to go bankrupt to save what could be saved. As a result of this news, Bitcoin is back below $17,000. BlockFi had been bailed out by FTX in June of this year and nothing would have suggested how events later turned out. The platform notified its clients last week that it was blocking inbound and outbound trading with the ultimate goal of preserving the platform from market contagion and protecting its users in the best possible way. To replenish its finances, BlockFi has been laying off 20% of its employees in the last month and has taken out a loan of more than $400 million. It looks like the credit card business could be spun off, and the deal is tempting for Curve, a decentralized exchange that has shown interest recently and has been in negotiations since Saturday, November 12, to acquire the branch that houses up to 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 clients and investors on its website and later on Twitter, the company went into detail about future moves. The risk of bankruptcy is there, but the potions are still many and there are more than just this. To handle the delicate situation, the company has relied on Haynes and Boone, who was already an adviser to BlockFi and will act as external adviser, while the role of financial adviser will be given to BRG in a new assignment.

“Reports that most of BlockFi’s assets are in FTX are false. That said, we have significant exposure to FTX and associated corporate entities that includes obligations owed to us by Alameda, assets held at, and undrawn amounts of our FTX.US credit facility. While we will continue to work to recover all obligations owed to BlockFi, we anticipate that the recovery of the obligations owed to us by FTX will be delayed as FTX progresses through the judgment process.”

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 movements and save the company. In the event of bankruptcy following the steps of FTX, BlockFi will incur a corporate restructuring and not a total bankruptcy as in the case of companies that opt ​​for Chapter 13. Once the procedure is initiated, the creditors’ actions are frozen. When 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 the reorganization and not the liquidation of the company so that the company recovers and once it is out of this phase it can return to business, this time with its accounts in order.

Despite dark times for exchanges, some are going against the grain

Due to a domino that is triggering between various exchanges like 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 Dash 2 Trade case announced by the eponymous company on Twitter gives hope to the industry. The second phase of the D2T pre-sale ended on November 7 and we are already in the third and last act, the current one. The D2T price is currently 0.0513 USDT and the ERC-20 token will be launched on the Ethereum network. The platform is repurposed not only to serve as an exchange market for cryptocurrencies and crypto products in general, but also to provide financial education through the dissemination of all news, charts, analysis, etc. of the world of cryptocurrencies. As a company policy, the exchange will never charge transaction fees, which will also always be zero in the future.

“We believe that the barrier to getting in and out of the Dash 2 Trade ecosystem should not be an imposed cost, so our community will never be taxed.”

Another breath of fresh air comes from the CEO of Binance, Changpeng Zhaowho, as the world’s leading trader, advocates the establishment of a fund intended to extend a hand to all companies in liquidity difficulties. The fund will be a boon to any future liquidity crunch from other exchanges which will not be a panacea but will provide some relief.

Rate this news!

0 / 5 Number of votes: 1 Your vote on this news:

By Farwa Raza

Farwa Raza is a writer who specializes in news articles. She has been writing on for over one years, and during that time she has written over 100+ articles on various topics ranging from politics to entertainment. Her goal as an author is to provide readers with the latest news stories while also providing her own opinion on them.