- BlockFi has paused withdrawals from its platform following the FTX collapse
- The lending platform cited a need to “protect” users as their reason for doing so
- FTX lent BlockFi $250 million earlier this year
BlockFi’s torrid 2022 continued this morning when it announced that it was halting withdrawals “until there is further clarity” over the FTX situation. BlockFi put the decision down to a desire to “protect our clients and their customers”, but the move has led to many assuming the worst – that BlockFi is caught up in the FTX mess and is now unable to pay out withdrawal requests. BlockFi borrowed $250 million from FTX in June to stay solvent after being hit with a $100 million fine by U.S. regulators, but it seems that its connection to the company goes deeper.
BlockFi “Not Able to Operate Business As Usual”
BlockFi announced its decision on Twitter, adding that it only found out the details on social media like everyone else:
— BlockFi (@BlockFi) November 11, 2022
The statement that “we are not able to operate the business as usual” will deeply concern those with funds on the platform, as will the fact that BlockFi has taken that most terrifying of all steps and halted withdrawals.
BlockFi borrowed the $250 million from FTX after it agreed to pay $100 million to settle its case against the SEC and other regulators in June, which was augmented by a near $1 million fine by the State of Iowa shortly afterwards.
Users Not Fooled
BlockFi users were not to fooled into thinking that this was being done for their own protection, with many seeing past the facade:
> protecting our clients by not allowing them to withdraw
— dappdavid (@dappdavid99) November 11, 2022
“We are halting all withdrawals”
“We are protecting customers”
— CryptoVinco (@CryptoVinco) November 11, 2022
Given the scale of FTX’s involvement in the lending and borrowing aspects of the crypto space, it’s clear that BlockFi will not be the last fish to get caught in its net. The Terra, Celsius and Three Arrows Capital collapses will have pushed many of these companies to the limit, with the FTX collapse potentially sending them over the edge.