BlockFi pauses client withdrawals – the details

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on Nov 11, 2022
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  • BlockFi's move to pause withdrawals comes as crypto exchange FTX implodes.
  • The crypto lender had a credit facility agreement with FTX, agreed in July this year.
  • BlockFi is expected to be just the first platform to report problems stemming from FTX's implosion.

Crypto news this week has had one major headline: FTX.

And under that could be numerous subplots – one of which is BlockFi, a crypto lender with ties to the collapsing crypto exchange FTX and which is also in the deep itself. What are the details?

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Well, BlockFi has announced that it’s pausing customer withdrawals amid a scale down of other platform activities. According to the BlockFi team, the drastic and unfortunate move is a result of the catastrophe that’s just unfolded around FTX, FTX US and Alameda Research.

FTX contagion hits BlockFi

A statement the crypto lender shared early Friday said that events around the crumbling Sam Bankman-Fried ‘Empire’ mean BlockFi cannot “operate business as usual.” Pointing to the timeline of events, the BlockFi tweeted:

“We are shocked and dismayed by the news regarding FTX and Alameda. We, like the rest of the world, found out about this situation through Twitter.”

BlockFi, as highlighted, agreed to a $400 revolving credit facility from FTX in July 2022. The definitive agreement that was subject to BlockFi shareholders’ approval also included an option to have FTX US acquire the lender at a value of upto $240 million. The signs were there even then, and it happened as crypto winter and the cataclysm that was Luna and Three Arrows Capital sucked in Celsius, Voyager Digital and other crypto lenders.

On what has transpired since, BlockFi said in their tweeted statement:

“Until there is further clarity, we are limiting platform activity, including pausing client withdrawals as allowed under our Terms. We will share more specifics as soon as possible. We request that clients not deposit to BlockFi Wallet or Interest Accounts at this time.”

The crypto community expects the contagion from FTX to hit hard and many analysts and industry experts say investors would be safer if they took their money off many of these centralised exchanges.

Bitcoin and crypto investor Lark Davis tweeted after the BlockFi news surfaced:

Will Clemente, the co-founder of Reflexivity Research, thinks this should be the case until the dust settles.