Crypto lender BlockFi pauses client withdrawals due to 'lack of clarity' over FTX
BlockFi, the cryptocurrency lender, said it's not able to operate business as usual due to the "lack of clarity" on the status of Sam Bankman-Fried's FTX.com, FTX.US, and Alameda Research.
That means the company is limiting activity on its platform, including pausing client withdrawals, the company said via tweet. It also requested that clients not deposit to BlockFi Wallet or Interest Accounts "at this time."
The developments at BlockFi increase concern about how much further FTX's liquidity crisis will spread throughout the crypto sector. Bloomberg, citing a person familiar with the matter, reported that BlockFi had been in the process of moving its assets to FTX for custody. A majority of BlockFi's assets, though hadn't yet been moved, the person said.
The crypto lender had provided loans to Alameda, the person told Bloomberg, but didn't specify an amount. Those loans are over-collateralized with liquid assets, including Robinhood (HOOD) shares, but BlockFi is unsure about where the funding for its credit line with FTX.US and the collateral for the Alameda loans came from, the person added.
In June, FTX offered a lifeline to BlockFi in the form of a $250M credit line, giving the crypto lender capital to bolster its balance sheet and platform strength, BlockFi said at the time. As part of that transaction, the two companies agreed to collaborate "as we work to accelerate prosperity worldwide through crypto financial services."
On Thursday, the Wall Street Journal reported that FTX used more than half of its customer assets to fund risky wagers. Later that day, FTX.US said it may halt trading in a few days.