BlockFi suspends payouts, retains bankruptcy advisors

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(Kitco News) – Crypto lender BlockFi announced Thursday night that they were forced to halt withdrawals on the platform amid the chaos of the FTX collapse.

“We are shocked and dismayed by the news regarding FTX and Alameda,” they wrote in a Twitter post. “Given the ambiguity surrounding the status of, FTX US and Alameda, we are unable to continue our business as usual.”

BlockFi appeared to cast shadows on FTX, saying, “We found out about this situation via Twitter, as did the rest of the world.” This is surprising considering FTX had recently played the role of their savior and the embattled lender in the July granted a $400 million credit facility to stave off the bankruptcy of rivals Celsius and Voyager.

In the end, this bailout may have weakened FTX further, plunging both companies into crisis just months later. The terms of the relationship between the two firms are likely to be taken apart by investigators as there are claims that virtually all of BlockFi’s customer deposits were held on FTX.

BlockFi now appears poised to follow FTX into bankruptcy, as reports surfaced later Thursday night that they hired a bankruptcy advisor.

“Our priority has always been protecting our customers and their interests,” BlockFi wrote. “We intend to communicate as frequently as possible going forward, but anticipate that this will be less frequently than our customers and other stakeholders are used to.”

The company also urged customers not to make any deposits into BlockFi wallet or interest accounts until further notice.

The speed of developments at BlockFi shocked market participants as it was just 12 hours before activity on the platform halted assure their customers that “BlockFi on 11.11. remains fully operational and all crypto transactions, including withdrawals, will continue as normal.”

However, some customers were suspicious when the platform announced that wire transfers, ACH deposits and loan processing would be delayed until Monday November 14, ostensibly due to the Veterans Day holiday affecting Silvergate, its US-based processor.

It looks like BlockFi and its partners will be busy today after all.

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