BlockFi blames FTX for bankruptcy but lets bitcoin mining debt slide
Crypto lender BlockFi is blaming its recent bankruptcy on now-infamous Bahama’s-based exchange FTX, citing an unpaid and uncollateralized debt of $275 million.
However, despite the money owed from Sam Bankman-Fried’s imploding empire, BlockFi also lists more than $1 billion in additional uncollateralized debt to other borrowers and massive amounts of supposedly collateralized debt.
Among this collateralized debt is $54 million from troubled bitcoin mining titan Core Scientific. In its latest Securities and Exchange Commission (SEC) filing, Core claims that, because it’s not paying its loans (the company currently holds only 24 bitcoin and around $26.6 million in cash), its creditors can assume their guarantees and collateral.
BlockFi faces heavy losses from its loan to Core Scientific
Despite this, BlockFi has so far made no move to re-possess any of Core’s mining equipment.
Core Scientific, which is based in Austin, Texas, until recently mined around 47 bitcoin every day. However, this rate has slowed considerably and the company is now being sued by a number of its investors for lying about its electricity costs.
With bitcoin’s price now below $20,000, many miners, Core included, have been hit by skyrocketing energy prices and have been forced to sell off much of their mined crypto.
An indicator by Capriole Investments showed that last month, bitcoin miners carried out some of the most aggressive selling in history. Core has warned that there’s a very real it could run out of cash by the end of the year and will most probably have to shut down operations.
As a result, BlockFi would have to navigate and wait out multiple-court cases if it were to repossess any collateral.
According to its bankruptcy filing, BlockFi expects to revive its fortunes and pay all its customers as soon as its borrowers pay back their loans and has no other alternative for its bankruptcy recovery plan.
The company has even sued FTX to expedite the process of getting its money back. However, with FTX also in bankruptcy mode, the prospect of BlockFi receiving anywhere near the required $275 million is less than likely. Particularly since clients are always paid first in bankruptcy proceedings.
Read more: Bitcoin miners forced to dump holdings to stay afloat amid market crash
According to a leaked document, FTX currently owes around $8.5 billion in crypto to its clients but has just $1 billion in crypto and liquid cash or equivalents. Other FTX assets that may have some value include its Robinhood shares (valued at $472 million) and some investments which are deemed illiquid, notably $43 million worth of Twitter shares.
Protos has reached out to BlockFi for comment and will update this story as and when we hear back.
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