BlockFi representative blames Alameda default for bankruptcy filing.
A BlockFi representative laid the blame for the crypto lender’s bankruptcy filing Monday squarely on FTX Trading, whose Alameda Research affiliate defaulted on $680 million of collateralized loans to the digital financing platform.
An affidavit by Mark A. Renzi of Berkeley Research Group, the propsed financial adviser to BlockFi in its bankruptcy case, revealed what the company’s communications earlier in the day hinted at: that financial exposure to the collapsed FTX conglomerate was the proximate cause of Monday’s petition for protection from creditors.
FTX had engineered a bailout of BlockFi over the summer, as the collapse of the luna and terraUSD cryptocurrencies set off a cascade of liquidity events in the digital assets market. The deal had included a credit line of $400 million that BlockFi could tap. The company borrowed about $275 million, the affidavit indicated, and then sought $125 million more on November 8. FTX did not provide the additional funds, and it filed its own Chapter 11 case three days later.
After the BlockFi’s credit request was denied, Alameda defaulted on $680 million of collateralized loan obligations, “the recovery on which is unknown,” according to the affidavit.
BlockFi limited platform activity on November 10, including pausing customer withdrawals.
The lender also has cryptocurrencies held on the FTX exchange that “became trapped” because of that company’s bankruptcy filing, according to the affidavit.
