Losing the coin toss – The fall of Sam Bankman-Fried’s FTX empire continues to drag crypto players into crisis. Already weakened, the crypto company BlockFi was forced to suspend customer withdrawals as early as November 11. It turns out that a good part of its recent worries would come from a $250 million loan, contracted in FTT from FTX.
BLOCKFI WILL ONLY HAVE HAD ONE WHIFF BEFORE IT PLUMMETS
As we recently reported, the statements of John Ray – the new CEO managing the bankruptcy of FTX – have allowed several revelations (not to say scandals) about the platform of Sam Bankman-Fried (SBF).
But it turns out that these revelations also tell us something about the companies around the FTX group. In the court document filed this November 17 in Delaware bankruptcy court, the case of the unlucky BlockFi is mentioned.
The crypto lending company had been heavily impacted by the UST stall and the collapse of Terra (LUNA) in May 2022. So much so that in June/July, BlockFi needed outside intervention to have any hope of recovering. Its competitor Nexo and the crypto exchange FTX stepped up to the plate as volunteers. BlockFi then lost the coin toss, choosing FTX.
FTT’S THAT ARE WORTH ALMOST NOTHING
In John Ray’s statement, we discover that West Realm Shires Inc – a group majority owned by Sam Bankman-Fried (and including FTX US) – has thus lent $250 million to BlockFi.
This amount, valued as such on September 30, 2022 according to the document, would have been given to BlockFi in FTT tokens – the token created and issued by the FTX platform. With an FTT close to $25 at that time, and a (very theoretical) value of $1.5 today, one can understand the extent of the discomfort for BlockFi.
If these FTTs have not been used/converted, they would now be worth only $15 million. So there is a good chance that BlockFi is back to where it was last May/June (or worse), and bitterly regrets not having tried Nexo’s offer, rather than FTX and SBF’s.
The events of the past week and the bankruptcy of FTX are a reminder that we must remain cautious in this still young ecosystem. Make it a habit to exercise a healthy amount of distrust. To buy your cryptocurrencies, sign up now on Bitget and start learning about the exciting world of blockchain technology (commercial link).