As BlockFi files for bankruptcy, how contagious will FTX’s downfall become?

Crypto lending platform BlockFi filed for Chapter 11 bankruptcy on Monday, just a few weeks after once-major crypto exchange FTX did the same. While BlockFi has been struggling to stay afloat for months now (and was even potentially going to be acquired by FTX), this latest filing signals that the bankruptcy contagion may run deeper than what the crypto industry sees at the surface.

“It is another example that the crypto winter is not over, and with the FTX debacle, it’s going to persist longer than previously expected,” Ric Edelman, founder of Digital Assets Council of Financial Professionals (DACFP) and author of “The Truth About Crypto,” said to TechCrunch.

“There is clearly a large amount of self-dealing and excessive leverage in the system, and until most of that is washed out through business failures, M&A and regulatory actions, the crypto winter will persist.” Ric Edelman, founder of Digital Assets Council of Financial Professionals

With BlockFi now in the midst of bankruptcy proceedings alongside FTX, Celsius, Three Arrows Capital and Voyager, others in the crypto space are wondering if and when the next crypto firm will find itself on the chopping block.

“The level of intercompany investment within the blockchain and crypto community is unusually high, so the level of contagion is likely to be much higher than what we saw within the traditional financial community in 2008-2009,” Sam Dibble, partner at Baker Botts, said to TechCrunch.

“Unfortunately, the complexity of these intercompany investments is not fully known at this point and so the companies themselves probably don’t know how badly they will be impacted,” Dibble added. “My guess is that the entire industry will be impacted somewhat by the FTX and BlockFi bankruptcies, with a significant number of severe casualties.”

As BlockFi files for bankruptcy, how contagious will FTX’s downfall become? by Jacquelyn Melinek originally published on TechCrunch



from TechCrunch https://ift.tt/9rtc2HC

Comments

Post a Comment

Popular posts from this blog

Zombie startups

Image
Welcome to Startups Weekly, a fresh human-first take on this week’s startup news and trends. To get this in your inbox, subscribe here. People leave jobs for all kinds of reasons, but when it’s a CFO departing a richly valued company as the company itself conducts layoffs, the exodus can be a sign of a larger issue. This was one of the takeaways I had when chatting with Continuum CEO and co-founder Nolan Church about a recent spree of CFO resignations, including but not limited to OpenSea, Noom and Brex. The founder reiterated that we don’t know the exact reasons that people are leaving, but he also noted that it’s a red flag from a recruitment perspective. He also introduced me to the idea of zombie companies, which I appreciated as it is officially spooky season and we love a festive framework. Zombie companies are basically companies that raised a ton of money over the boom cycle but aren’t producing nearly enough revenue to justify the valuation. The late-stage market is full o...
Read more

Guilherme Rambo, who has published scoops about unreleased Apple products by examining beta software, says Apple locked his dev account with no stated reason (Buster Hein/Cult of Mac)

Image
Buster Hein / Cult of Mac : Guilherme Rambo, who has published scoops about unreleased Apple products by examining beta software, says Apple locked his dev account with no stated reason   —  Guilherme Rambo, one of the top Apple secret-spillers, says Apple locked him out of his developer account, preventing … from Techmeme https://ift.tt/37pX6fR
Read more

Minneapolis Mayor Jacob Frey wins tough reelection fight over a slew of challengers

Image
In this Feb. 17, 2021 file photo, Minneapolis Mayor Jacob Frey addresses the media in Minneapolis. Richard Tsong-Taatarii/Star Tribune via AP, Pool File What's at stake: Minneapolis' first-term Mayor Jacob Frey won reelection against numerous challengers in the city's ranked-choice election, where all candidates ran on the same ballot. The main Democratic Farmer-Laborer challengers to Frey were former state lawmaker Kate Knuth, community organizer Sheila Nehzad, Cedar-Riverside Community Council leader AJ Awed, and attorney Clint Conner . A smattering of Republican, independent, and third-party candidates also ran. Frey has faced local and national scrutiny for his handling of crime and policing issues in the city following the murder of George Floyd at the hands of Minneapolis police officer Derek Chauvin and the ensuing months of protests and civil unrest that Floyd's murder sparked around the country. The spotlight on that shooting made police and publ...
Read more