The implosion of the FTX exchange has made it difficult for companies in the criptocurrency industry to survive.
The collapse of several influential firms sent the market into a panic and caused the value of Cryptocurrencies to plunge. In June, FTX agreed to provide the company with a $400 million credit line, which the CEO said would provide access to capital that further bolsters our balance sheet. FTX was given the option to purchase BlockFi.
BlockFi's stability was thrown into doubt this month after a series of revelations about suspicious management at FTX, as well as the fact that BlockFi was financially entwined with FTX. BlockFi suspended withdrawals a few days after the exchange collapsed because it had a lot of exposure to FTX, including undrawn amounts from the credit line.
In a terrible year for the industry, BlockFi is not the first lender to go under. Two other lenders, Celsius Network and Voyager Digital, filed for Chapter 11 after the spring crash.
More than 450,000 retail clients were able to get loans in minutes, without credit checks, as of last year, thanks to BlockFi. According to The New York Times in September, BlockFi is just at the beginning of the story. Regulators have been scrutinizing its business.
The Securities and Exchange Commission reached a $100 million settlement with BlockFi's lending arm over registration failures, the first since the regulator warned that it would take action against firms offering loans that failed to register them as securities. BlockFi made false and misleading statements about the level of risk in its loan portfolio.
A path to register with the S.E.C. was intended to be given by the settlement. Cryptocurrencies advocates said that the deal supported their claim that regulation had put consumers at risk by pushing companies like FTX offshore.
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