BlockFi Pauses the Option for Withdrawal After FTX Collapse

The collapse of the FTX crypto exchange is reverberating from coast to coast, as state regulators in California have announced an investigation into the exchange.

In addition, BlockFi, the crypto exchange based in New Jersey, also notified customers that platform activity would be limited.

FTX bailed out BlockFi back in June when it had been facing problems due to the downturn in the crypto market.

The announcement

Late on Thursday, BlockFi published a post on Twitter that it also learned about the situation of FTX just like everybody through social media.

It said that it was shocked and dismayed over the news coming in about the crypto exchange as well as Alameda Research.

The exchange said that since there was not much clarity available about the situation with FTX, Alameda, and FTX US, they could not carry out their operations as usual.

Therefore, it said that it would limit platform activity, which also includes withdrawals. In addition, it discouraged people from putting deposits into interest accounts and hosted wallets.

The company also promised that it would continue communicating as frequently as possible, but also added that the communication would be less frequent than what customers and stakeholders are acclimated with.

The problems

Back in June, BlockFi had slashed its workforce by 20% and in order to reduce headcount further, it offered employees buyouts in July.

These buyouts had come weeks after it had finalized a deal with FTX, which included a loan of $400 million as well as terms of the acquisition.

At the time, BlockFi had stated that its balance sheet was quite strong and it also said that it was well-positioned to ensure stability in the long term.

The company had said at the time that the credit facility agreement it had struck with FTX would provide them with access to capital that would strengthen its balance sheet further

Investigations

The announcement from BlockFi came only hours after the financial protection agency in California announced that it would open a probe into the FTX crypto exchange.

This made it the latest in a series of other regulatory bodies to open investigations, which include the Securities and Exchange Commission (SEC), as well as agencies in New Jersey and Texas.

The Department of Financial Protection and Innovation (DFPI) in California said that people need to be aware of the risks associated with an investment in volatile crypto assets.

It said that people should understand that these are high-risk investments and they cannot get reimbursed for the losses they suffer.

The agency also issued a warning that a lot of crypto asset providers, including FTX, may not fully disclose the risks involved and this is something else to keep in mind when making deposits.

It added that the crypto market is not governed by the same rules that are applicable in other cases, so people cannot expect to have the same level of protection.

BlockFi had gained immense popularity in its heyday for offering high yield rates to those looking to generate a passive income.

By Brandon Craig
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