BlockFi Prepares to File for Chapter 11 Bankruptcy - Crypto lender BlockFi is preparing to file for Chapter 11 bankruptcy protection, The Wall Street Journal reported.

    Two days ago, BlockFi said it would keep customer withdrawals paused due to significant exposure to FTX. The crash of FTX left the crypto industry reeling, many investors have lost their life savings while users’ money was still trapped on the platform.

    BlockFi is one of the hardest hit crypto lenders by the FTX collapse as it signed agreements with FTX US for a $400 million revolving credit facility and the option to buy the company for up to $240 million earlier this year. Since FTX fell, BlockFi  has suspended withdrawals and is struggling to overcome difficulties.

    Flori Marquez – Founder and CEO of BlockFi on Monday still stated that all the company’s products are fully operational and customer withdrawals are being processed. However, California’s Department of Financial Protection and Innovation has issued a notice to suspend BlockFi Lending LLC California Financing Law lender license for 30 days as the regulator investigates the crypto lender. In preparation for its chapter 11 filing, BlockFi is now planning to lay off some of its workers, according to The Wall Street Journey.

    BlockFi is one of the few major US crypto lenders still sticking around today. Two other big players, Celsius and Voyager, both went bankrupt after mid-year liquidity crisis. BlockFi, due to exposure to Three Arrows Capital, had to borrow $400 million from FTX to maintain operations.

    Fears of the crypto market are growing after FTX reported a severe liquidity crunch in its bankruptcy filings and said it could have more than 1 million creditors. FTX founder Sam Bankman-Fried reportedly spent the past weekend calling investors to raise capital for a shortfall of up to $8 billion, but so far has not been successful. With BlockFi now preparing to file for bankruptcy, the consequences could be even more severe.

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