[Breaking] Crypto Lender BlockFi Filing for Bankruptcy

[Husires]

Story Summary:

• BlockFi will file for Chapter 11 bankruptcy protection later today, a source at the company tells Decrypt
• The crypto lender is also laying off a large portion of its staff, the source said

BlockFi halted withdrawals for the first time on November 11, the same day FTX filed for bankruptcy, as the platform announced on Twitter:

We are shocked and dismayed by the news regarding FTX and Alameda.

Source:
1) https://decrypt.co/115744/crypto-lender-blockfi-files-bankruptcy-ftx-contagion-claims-another
2) https://blockfi.com/November28-ClientUpdate

Chapter 11 - Bankruptcy Basics

A case filed under chapter 11 of the United States Bankruptcy Code is frequently referred to as a "reorganization" bankruptcy. Usually, the debtor remains “in possession,” has the powers and duties of a trustee, may continue to operate its business, and may, with court approval, borrow new money. A plan of reorganization is proposed, creditors whose rights are affected may vote on the plan, and the plan may be confirmed by the court if it gets the required votes and satisfies certain legal requirements.

Source:  https://www.uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/chapter-11-bankruptcy-basics


The coming weeks will witness more bankruptcies of the platforms exposed to FTX

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[stompix]

You can update the thing with the "source" it's official:
https://blockfi.com/November28-ClientUpdate
Interesting they chosen the same agent , Kroll,  as FTX:
https://restructuring.ra.kroll.com/blockfi/
https://restructuring.ra.kroll.com/blockfi/Home-DownloadPDF?id1=MTM1MjMyOQ==&id2=-1

And just three weeks ago they were promoting stuff like this:

It’s almost time.
Certain US clients—verified as accredited investors—will soon be able to earn interest on their digital assets with BlockFi Yield.

Pretty sure every program they've launched was a desperate cash grab to keep the operations flowing, but their FTX exposure was just too great, I wonder what losses we're looking at again, they claim 200 million in cash and somewhere between 1 to 10 billion (quite the range)  in assets and liabilities so god knows how many times one is bigger than the other. Or better question, who's next as this shitshow doesn't seem to stop anytime soon!

[Husires]

You can update the thing with the "source" it's official:
https://blockfi.com/November28-ClientUpdate

The chaos started after June, when the price fell sharply. It began when FTX approved a $400 million loan to BlockFi, and then $275 million, which they apparently still have because they filed for bankruptcy.

here is more details https://www.bloomberg.com/news/articles/2022-07-01/ftx-us-signs-option-to-acquire-blockfi-for-up-to-240-million?sref=zVYYYI5e

The iceberg has begun to melt, as it owes everything to:

• S.E.C. $30 million
• About $1 million, to Ankura Trust
• $275 million to West Realm Shares, the parent company of FTX in the US

https://www.nytimes.com/2022/11/28/business/blockfi-bankruptcy-cryptocurrency-ftx.html
  

[o_e_l_e_o]

I'm shocked! Shocked, I tell you!

The writing has been on the wall for a long time. I've been warning people about BlockFi on these forums for years. Their business model (and indeed their Terms of Use) was almost identical to that of Celsius. When Celsius collapsed, if you didn't pull everything you owned out of every centralized platform then you weren't paying attention. If you still have coins on any centralized platform today then you are an idiot. Nowhere is safe. Nobody is too big to fail.

Don't forget of course that BlockFi can also be added to the growing list of "Platforms which made statements/tweets assuring everyone that everything was fine days before they collapsed".

Or better question, who's next as this shitshow doesn't seem to stop anytime soon!

Who knows!? Genesis? Tether? Crypto.com? Binance? All possibilities!

Stop trusting third parties and you won't lose your coins. It's literally the first two sentences of the whitepaper.

A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution. Digital signatures provide part of the solution, but the main benefits are lost if a trusted third party is still required to prevent double-spending.

[batang_bitcoin]

We're seeing a pattern that those that has the "lending" feature might have the same fate in the future. It was just a few moments ago when I'm browsing on social media and saw a guy asking that he's still got his btc on blockfi and asked if he can still withdraw it.
Well, an outright answer comes out that discouraged him. There's really no safe company when it's with these financial institutions or crypto companies and only tells us one thing as a lesson, don't trust them with your money - never keep it there.

[Bitcoin_Arena]

And just three weeks ago they were promoting stuff like this:

It’s almost time.
Certain US clients—verified as accredited investors—will soon be able to earn interest on their digital assets with BlockFi Yield.

Celsius Network had this to say a couple of weeks before the implosion 

Stop trusting third parties and you won't lose your coins. It's literally the first two sentences of the whitepaper.

A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution. Digital signatures provide part of the solution, but the main benefits are lost if a trusted third party is still required to prevent double-spending.

I don't know if it's greed or being very stupid, but I always wonder why people keep falling for those centralized Ponzi schemes dubbed as DeFi's. How can someone be so stupid to risk thousands of their dollars just for 10% APY, yet they could simply buy Bitcoin and wait. 10% is a piece of pie when it comes to Bitcoin price volatility.

[dkbit98]

RIP BlockFi.
Nobody is really surprised hearing this news, and I am just wondering what platform will go down next.
Does anyone have a list of all websites and platforms that work in similar way like BLockFi and Celsius, with ponzi scheme earning APY?
And isn't Binance exchange also offering some kind of interest rates if using their shitcoins?

Even so called ''decentralized'' platforms are going to face the same destiny for obvious reasons, so better withdraw all your coins and swap them to Bitcoin.
Someone recently said that wETH token is in big trouble, so everything on that is based on that shitty blockchain could be affected, including fake bitcoin token on eth blockchain.

[o_e_l_e_o]

I don't know if it's greed or being very stupid, but I always wonder why people keep falling for those centralized Ponzi schemes dubbed as DeFi's.

But, but, but, it says "decentralized" right there in the name! These scammers wouldn't lie, surely!?

Does anyone have a list of all websites and platforms that work in similar way like BLockFi and Celsius, with ponzi scheme earning APY?

Here it is: All centralized exchanges.

I doesn't really make a difference if the exchange is offering unsustainable interest rates to their customers, or if they are just pocketing 100% of the profit for themselves. The fact is that every centralized platforms is/was taking part in this shady and often illegal practice of just handing out customers' deposits to random third parties.

[stompix]

RIP BlockFi.
Nobody is really surprised hearing this news, and I am just wondering what platform will go down next.
Does anyone have a list of all websites and platforms that work in similar way like BLockFi and Celsius, with ponzi scheme earning APY?

A ton of them, but only a few really big players on the CeFi loan and earn business.
There was holdnaut that went down, Ledn that said it had no exposure on FTX or others but has started cutting jobs and probably the biggest left is Nexo, also claiming no exposure and no loss, but we all know how to take these statements.
Nothing I can find on Yield App, but they were offering 7.5% annually on BTC now just down to 5%, and of course Bybit, which has done a weird thing about that proof of reserves lately showing what they have but not a word on the liabilities.

Of all of them I'm worried about nexo, I know a few who had funds there and a few users on this forum have played with it for a while, so I hope they got out with the recent events.

[dkbit98]

I doesn't really make a difference if the exchange is offering unsustainable interest rates to their customers, or if they are just pocketing 100% of the profit for themselves. The fact is that every centralized platforms is/was taking part in this shady and often illegal practice of just handing out customers' deposits to random third parties.

They are not that stupid to take 100% of profit.
One of the purposes for existing centralized exchanges like FTX is money laundering, and I am sure others are doing exactly the same thing.
When their job is finished they will self-collapse, and some mysterious hacker will than conveniently show up to ''steal'' the money.
Some people actually believe in the official story, but not me.  

A ton of them, but only a few really big players on the CeFi loan and earn business.

Yeah but I wanted to see a list with most of them, something like CoinMarketCap or CoinGecko is doing but for lending and interest earning platforms.
That is why I tried searching something like this on both websites and I found lending and borrowing pages on both websites.
If you look carefully you will find a bunch of crap tokens like Aave, Maker, Compund, etc and Celsius token is still shown on top.

We should check this list to find the next Titanic project:
https://coinmarketcap.com/view/lending-borowing/
https://www.coingecko.com/en/categories/lending-borrowing

[stompix]

Yeah but I wanted to see a list with most of them, something like CoinMarketCap or CoinGecko is doing but for lending and interest earning platforms.
That is why I tried searching something like this on both websites and I found lending and borrowing pages on both websites.
If you look carefully you will find a bunch of crap tokens like Aave, Maker, Compund, etc and Celsius token is still shown on top.

We should check this list to find the next Titanic project:
https://coinmarketcap.com/view/lending-borowing/
https://www.coingecko.com/en/categories/lending-borrowing

I avoided those for a reason when mentioning them, most of these tokens work just like any other token, celsius coin, for example, was not a real Defi token, it was used mainly for rewards and benefits, attracting customers and making people take loans on it on the platform for better rates. In theory, assuming no problems with liquidity or irresponsible printing those tokens shouldn't be affected at all differently than shiba inu, but again it's theory.

The others, like Bybit or Yield App or Nexo are simple centralized platforms, they can go down tomorrow without a warning, just somebody flipping a switch and that's it and there is no list whatsoever on the hundreds of platforms that offer investment plans, not even counting the thousands of fraudulent ones.

Just as an example, on both lists they have wirex token listed as normal token for a centralized exchange, wirex itself is seen as a CEX, but they do offer (or did) some insane APY on lending and they also offer blowing plans.



Same with nexo, it's tagged "Services and Payments" not lending as the token itself doesn't do that but the platform is.
I'm fairly confident that the next one to crash won't be one with a smart contract lending pool but a CeFi exchange.
 

[dkbit98]

The others, like Bybit or Yield App or Nexo are simple centralized platforms, they can go down tomorrow without a warning, just somebody flipping a switch and that's it and there is no list whatsoever on the hundreds of platforms that offer investment plans, not even counting the thousands of fraudulent ones.

Do you know what is happening with Nexo platfrom? Did they have any connection with FTX/Alameda and BlockFi or not?
I heard they are going down soon also, and I recently started receiving unrelated spam emails in one of my temp email addresses I used for testing related with Uphold.
It's possible that emails got leaked either from Uphold or from Nexo, and I didn't hear anyone talking about this yet.
 

[stompix]

Do you know what is happening with Nexo platfrom? Did they have any connection with FTX/Alameda and BlockFi or not?

I just know what others know, that they deny having any major exposure to FTX and others but there are a few problems with the narrative:
After their complete denial of having funds involved with FTX, seems like they had 200 million there:
https://twitter.com/ASvanevik/status/1589972490549612544
which "miraculously" they've withdrawn two days before the bankruptcy filing.

So do we trust what they are saying that all of their assets are fully collateralized and they have no exposure and no shady deals? They might be telling the truth, they might have a really good risk management team and a lot of information on everything that moves in the crypto world, or they could be just the next one to crash.

Also, even if everything is fine with nexo internally, even in their tweets they did say this:
https://twitter.com/Nexo/status/1597268229084225537

All these activities – exchange services, crypto-backed loans, collateral liquidations, staking, etc. are revenue generators that require Nexo to hold on and move balances across a number of exchanges & DeFi protocols as part of standard operations. 13/33

So at any point, they can end up with frozen or lost coins because of a third party, the risk is there and they know it!