The collapse of Sam Bankman-Fried-led crypto exchange FTX continues to send ripples through the fintech world. With FTX struggling to identify its possibly millions of lenders in the wake of its downfall, other crypto-forward companies are fighting to stay afloat in a newly destabilized industry.
The latest prominent example of this phenomenon — characterized by BlockFi Advisor Mark Renzi as a “death spiral” cutting a swath of destruction across the crypto sector — is major crypto lender BlockFi, which filed for bankruptcy protection in a New Jersey court on November 28. Renzi indicated that FTX’s collapse fed into BlockFi’s bankruptcy, though its financial difficulties have been widely known since earlier this year. He was also quick to assure creditors and investors that BlockFi does not suffer from the same remarkable corporate failures that brought an end to FTX.
“Although the debtors' exposure to FTX is a major cause of this bankruptcy filing, the debtors do not face the myriad issues apparently facing FTX," Renzi said in a statement. "Quite the opposite.” He went on to explain that BlockFi had between $1 billion and $10 billion locked into inaccessible FTX accounts, prompting a liquidity crisis that hastened its financial problems.