In a court filing, New Jersey-based BlockFi said it owed money to more than 100,000 creditors. It cited cryptocurrency exchange FTX as the second largest lender, with $275 million owed on a loan it made earlier this year.
MARTHA REYES-HULME, RESEARCH MANAGER, BEQUANT, LONDON
“The failure of BlockFi is a sad chapter in the short history of our industry that has forced participants to pay more attention to risk management, counterparty risk and governance. Our clients have always used diversification to minimize the currency risk, but we are now seeing many of them pull back in the short term and look for better solutions, particularly around custody, to protect their assets. We are working closely with them. It will be better for everyone in the end.” We are still seeing interest on board, even in these challenging times, which is reassuring, as is the interest from mainstream institutions who attended our conference last week.”
MONSUR HUSSAIN, SENIOR DIRECTOR, FITCH RATINGS, LONDON
“BlockFi’s Chapter 11 restructuring underscores the significant asset contagion risks associated with the crypto ecosystem and, potentially, deficient risk management processes. Only closer to getting paid eight years after the deal failed.
MARK CONNORS, 3iQ DIGITAL ASSET MANAGEMENT, TORONTO
“During a period of liquidation and consolidation, which we are, leveraged strategies are riskier. We’re trying to separate the wheat from the chaff here, and I don’t think many people were surprised by BlockFi’s filing…BlockFi has received a $250 million loan in the second quarter from FTX, likely in its own interest to help keep overleveraged Alameda afloat.
“Institutional investing is at a standstill right now in the wake of this. The first assessment will be: what went wrong? We think it’s the unregulated centralized entities. So the institutions will go back and wonder if they invested the wrong way people in the venture capital stage I think it will be a big yes It means that bitcoin and ethereum the two major protocols that account for about 60% of the digital asset space, are flawed No institutional investor can say these protocols have failed or no promising com ‘were before FTX went bankrupt, so there are institutions that remain interested, but regulators need to define the state of play for institutions to follow.’
“There are (crypto)lending models that make sense. Decentralized finance models have used adequate collateralization and are intact. Some centralized models have not. I think you see weak-lunged models fail first. gives an 18% return, you better know very well where that return is coming from.”
“FTX US, I think is BlockFi’s second largest creditor. But the question is whether it was denominated in FTT token or cash. In other bankruptcies you would have physical assets or US dollars… we don’t know if they have (FTT) BlockFi ready but We ask these questions for good reason.”
CONOR RYDER, RESEARCH ANALYST, KAIKO, DUBLIN
“BlockFi’s filing is the latest in a series of contagion events following FTX and likely the continued Celsius/Three Arrows Capital fallout last summer. It was yet another example of risk management being overlooked when prices were surging, as the cryptocurrency winter hits them those who have assumed the greatest counterparty risk are exposed”.
“From a customer perspective, this is yet another reminder to be skeptical of all cryptocurrency products on offer, especially those that seem too good to be true. This should be the biggest red flag now that a business is is taking additional risks with your resources.”