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BlockFi declares bankruptcy. The domino effect after the bankruptcy of FTX continues

BlockFi declares bankruptcy. The domino effect after the bankruptcy of FTX continues

created Michał SielskiNovember 29 2022

If anyone didn't believe that collapse of the FTX cryptocurrency exchange may cause a domino effect on the market, it must apologize to reality. The first domino block is about to fall over. the blockf currently has $256 million in cash and at least $1 billion in debt. In total, liabilities may reach up to USD 10 billion.

Everything, of course, coincided with the collapse of the FTX cryptocurrency exchange. Its insolvency meant that the owners of BlockFi are unable to recover the funds deposited there, which they have just informed their investors and creditors. The liabilities are so large that the company has decided to go into bankruptcy proceedings.

Of course, there are many round words, assurances and empty phrases in connection with the fall, judge for yourself:

“Chapter 11 conduct will help stabilize the business and ensure maximum protection for the company's customers,” said Mark Renzi, BlockFi's financial advisor. – From the very beginning, BlockFi has worked to positively shape the cryptocurrency industry and develop the sector. BlockFi expects a transparent process that will ensure the best results for all customers and other stakeholders – emphasizes Mark Renzi.

40 times more debt than cash

However, the facts are that customers have no hope of getting their money back. Perhaps they will get some of them, but even if they do, certainly not all of them.

Bitcoin Magazine calculated that BlockFi has approximately USD 256 million in cash. A lot of? Only if you don't know that the debt is - if you count carefully - USD 1 billion. However, some sources estimate the liability as high as USD 10 billion.

Savings at BlockFi, but salaries on time?

Interestingly, the company's representatives apparently want to make a good face for a bad game until the very end. They have just informed their employees that they do not have to worry about their salaries because they will receive them on time.

They also want to "significantly" cut expenses in the company, which is expected to be smaller in the future. At the same time, however, they ask key employees not to look for new jobs, because there will be plenty of room for them.

But can these assurances be trusted? Just a few days ago, representatives of BlocFi officially emphasized that they did not store most of their assets on the FTX exchange. However, when it was necessary to face specific numbers, it turned out that these were "significant" assets, and if the numbers provided by experts are true, it may turn out that virtually all funds were invested in a stock exchange that practically no longer exists.

The BlockFi investigation is coming soon

This undoubtedly calls into question all previous assurances, which, to put it mildly, were far from the truth. Certainly, the collapse will not be spectacular and the company will not disappear overnight, but its representatives can expect not only bankruptcy, but also an investigation. And it will certainly not be easy for the company's management.

What's worse, this is the first major collapse related to the insolvency of the FTX cryptocurrency exchange, but it is very likely that it will not be the last. The events of recent weeks clearly indicate that many entities in the blockchain industry are related by capital.

Investing in your own tokens was a good strategy when the prices of virtually all of them were rising. However, when their prices began to fall, and some by more than 90 percent, it turned out that financial security almost exclusively in cryptocurrencies, de facto does not constitute any security.

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About the Author
Michał Sielski
Professional journalist for over 20 years. He worked, among others, in Gazeta Wyborcza, recently associated with the largest regional portal - He has been present on the financial market for 18 years, he started on the Warsaw Stock Exchange when the shares of PKN Orlen and TP SA were just being introduced to the market. Recently, his investment focus has been exclusively on the Forex market. Privately, he is a parachutist, a lover of Polish mountains and a Polish karate champion.