BlockFi Stops Withdrawals, Hinting FTX Mess Can Only Get Worse

BlockFi has been swept up in the widespread crypto reckoning, admitting it can’t function properly due to the ongoing FTX crisis


BlockFi co-founders Flori Marquez and Zac Prince


BlockFi, the crypto lender bailed out by FTX earlier this year, has suspended withdrawals only two days after assuring users that it was fully operational.

In a tweet late Thursday, BlockFi said it cannot operate suitably due to uncertainty surrounding, FTX US and Alameda Research. Co-founder Flori Marquez had earlier tweeted the firm remained an independent entity despite its bailout deal with FTX — implying that it was mostly unaffected by the exchange’s implosion.

But events quickly turned. The Hoboken, New Jersey-based firm has now warned against depositing into BlockFi wallets or interest accounts, which are still advertised to offer up to 10% annual percentage yield on deposits.

“We are shocked and dismayed by the news regarding FTX and Alameda. We, like the rest of the world, found out about this situation through Twitter,” BlockFi tweeted.

BlockFi’s cracks are closely related to the lifeline it received in July, when FTX agreed to support the lender with a $400 million credit facility as rival lenders Celsius and Voyager were entering bankruptcy. 

The bailout, now seen as part of a string of bad FTX deals, came with strings attached: Bankman-Fried could acquire the firm for as little as $240 million next year, if it so desired.

It isn’t clear whether the struggling lender actually received the FTX credit facility. BlockFi didn’t return Blockworks’ request for comment by press time.

Loading Tweet..

Blockworks recently spoke to company insiders who detailed a slew of problems at the lender, including a mentality focused on expanding customer deposits that ultimately double as liabilities. 

As those deposits were withdrawn following SEC lawsuits and diminished trust in light of Celsius and Voyager’s demise, BlockFi revenues and balance sheets suffered. Company documents obtained showed monthly revenue fell 70% from $48 million at the start of the year to roughly $15 million by July and August.

When BlockFi failed to find much-needed funding elsewhere, Bankman-Fried played the role of crypto rescuer. The fallen crypto mogul had said his firm sought responsible players with sustainable business models that could use short-term liquidity. 

Jack Saracco, co-founder of digital bank Ping, said the interconnectedness of the industry means the broader effects of FTX’s collapse are yet to be worked out.

“There’s so much exposure across the industry to FTX that we just don’t know about, in addition to the exposure that we do know about,” he told Blockworks, adding that BlockFi’s reliance on an FTX bailout that likely won’t happen is part of it.

Saracco noted that broader crypto adoption that has now been set back and expressed frustration that “we don’t know who owns what in this insolvency mess.”

BlockFi not the only company meant to be saved by FTX

Sequoia, Multicoin Capital, Temasek and Paradigm are among venture capital firms that stand to lose millions from their investment in FTX. Other investors should brace for more turbulence ahead.

But Voyager, another crypto lender, was also relying on FTX to save face. In September, FTX.US won an auction to buy assets of bankrupt crypto lender Voyager for $1.4 billion. That deal was set to make Voyager’s customers whole, but the bankrupt firm’s unsecured creditors committee on Thursday confirmed the transaction never went through.

Alameda Research, the trading firm founded by Bankman-Fried, in June pledged to lend $500 million to Voyager. At the time, many in the industry saw the string of bailouts as a positive move.

Fast forward to November and FTX is facing a shortfall worth $8 billion, a figure which apparently includes swathes of user funds. FTX is now critically stuck and is unlikely to help others, especially considering it can’t save itself. The Bahamas Securities regulator on Thursday froze the assets of Bankman-Fried’s Bahamian subsidiary and moved to appoint a liquidator for the entity.

A message by FTX’s American affiliate, which Bankman-Fried had claimed would be unaffected by the mess, now says trading may be halted on the platform in a few days. “Please close down any positions you want to close down. Withdrawals are and will remain open,” it said in a statement.

Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.


Upcoming Events

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

Screen Shot 2024-05-16 at 14.53.45.png


Loss-versus-rebalancing (LVR) is arguably Ethereum DeFi’s biggest problem, and thus reducing LVR is fundamental to the success of Ethereum. This report dives into the world of LVR. We uncover its importance for AMM designers, discuss the two major mechanism design categories and various projects developing solutions, and offer a higher level perspective on the importance of AMMs in general.


Yesterday saw Congress’ upper chamber side with the House on a measure aimed at overturning SAB 121


Oklahoma’s new crypto bill will go into effect in November of this year


The deposits hit a $20 million cap in just 45 minutes


Twelve Democratic Senators voted in favor to pass the resolution Thursday

article-image is “aware” that bonding curve contracts on were exploited, and has since paused trading


Some investment pros are mulling crypto allocations between 1% and 10% and seeking ex-BTC exposure for interested clients