BlockFi, a cryptocurrency lending platform, has temporarily suspended withdrawals because of issues with the FTX token. In July, FTX provided the New Jersey-based lender with a financial bailout.
Following the tragic demise of Sam Bankman-crypto Fried’s business, cryptocurrency lender BlockFi Inc. said it would be stopping withdrawals and restricting platform activities.
BlockFi tweeted Thursday Evening on its Twitter feed, “We are startled and disturbed by the news involving FTX and Alameda,” referring to the cryptocurrency exchange FTX and an allied trading business, Alameda Research, run by Mr. Bankman-Fried.
BlockFi said, “given the lack of data regarding the state of FTX.com, FTX US, and Alameda, we aren’t able to run the business as normal.”
After a liquidity crisis seized several lenders this past summer due to the sharp fall in cryptocurrency prices, BlockFi, situated in Jersey City, N.J., received a financial rescue from FTX. The arrangement between FTX and BlockFi included a $400 million revolving credit line and an option for the exchange to acquire the lender. This week, FTX was hit with its issue as the exchange was inundated with customer withdrawal demands over the weekend. According to The Wall Street Journal, the exchange had borrowed millions of dollars in client funds to support reckless trading wagers by Alameda, which ultimately led to the collapse of the exchange.
On Tuesday, Flori Marquez, founder and COO of BlockFi tweeted that the company’s services were “100 percent live” and that withdrawal requests were being processed.
In addition, Ms. Marquez clarified that BlockFi will continue to function as a separate organization until next July and that FTX we, and not FTX.com provided the lender’s line of credit. By local law, FTX does not provide its services to customers in the United States. They make do with the fewer options available on FTX’s U.S. market.
The lender’s recent statement begs customers not to fund BlockFi accounts or wallets while promising more info soon.
Mr. Bankman-Fried has informed investors that he urgently needs up to $8 billion in additional financing to meet withdrawal demands made in recent days. According to him, Sunday’s withdrawals of almost $5 billion from FTX were the largest by a long shot.
Sources of the situation reveal that Alameda had utilized FTX’s FTT tokens to get loans from cryptocurrency lenders like BlockFi. The value of FTT tokens has dropped significantly this week.
Mr. Bankman-Fried announced the end of trading on Alameda in a tweet series earlier on Thursday. After competitor Binance backed out of a deal to acquire his exchange, he informed staff that FTX was actively seeking funding. He added that this funding might be in the shape of an injection for both FTX and FTX US.
Other crypto players have run into trouble due to the exchange’s abrupt troubles. On Wednesday, the cryptocurrency exchange Crypto.com temporarily halted trading in two stablecoins on the Solana blockchain, USDC and USDT. Because FTX was a significant trading venue for stablecoins built on that blockchain, its CEO Kris Marszalek tweeted that the exchange has blocked them to reduce risk.