Bankrupt BlockFi sues Bankrupt FTX Exchange — Another earthquake has been felt in the cryptocurrency market as emerging FTX creator Sam Bankman-business, Fried’s Emergent Fidelity Technologies, is allegedly being sued by cryptocurrency lender BlockFi for how it exploited its shares in investment software Robinhood.
The Financial Times stated on Monday that the corporation committed to using the Robinhood shares it owned as security for the BlockFi loan, citing loan agreements. The news was released on the same day that BlockFi declared bankruptcy.
Since FTX’s massive collapse last month, which tarnished the sector, cryptocurrencies—and particularly lenders and exchanges—have been under attack.
Prior to declaring bankruptcy on November 11 as a result of rumors of a liquidity issue that led to clients stopping withdrawals, FTX had a market value of $32 billion. Competitor exchange Binance reneged on a non-binding agreement to acquire the business, adding to the pressure.
Investigations conducted after the collapse have since revealed egregious negligence in the management of FTX.
The Financial Times reported that Bankman-Fried was still looking to sell his Robinhood shares in order to raise cash prior to FTX’s demise.
According to the publication, BlockFi and Emergent Fidelity Technologies entered into a contract on November 9 to ensure that an unknown borrower would make payments and to pledge an undisclosed stock as security.
The FT cited legal sources when it claimed that the borrower was an additional Alameda Research business owned by Bankman-Fried.
According to PitchBook, BlockFi was most recently valued at around $4.8 billion (€4.6 billion). The firm stated in its bankruptcy petition that it had more than 100,000 creditors and that its assets and liabilities ranged from $1 billion (just under €1 billion) to $10 billion.
BlockFi also noted a $275 million (€265 million) outstanding loan to FTX US, the company’s US subsidiary.
“We do have significant exposure to FTX and associated corporate entities that encompasses obligations owed to us by Alameda, assets held at FTX.com, and undrawn amounts from our credit line with FTX.US,”
BlockFi said.
BlockFi began speaking with restructuring experts in the days following FTX’s bankruptcy filing, according to CNBC, which cited people with knowledge of the situation.