BlockFi goes Bankrupt as SMSF suffer heavy losses
Just as the broader Crypto market looks to begin to bottom out and stabalise things have taken another turn for the worse with another centralised exchange freezing accounts and going under.
BlockFi has filed for a Chapter 11 Bankruptcy owing between $US1 Billion and $US10 Billion to 100,000 creditors across the globe. BlockFi was already facing challenges over a week ago when the platform commenced suffering from Liquidity issues and limited trading on its platforms globally.
BlockFi's Bankruptcy extends to it's entity in Bermuda which is also suffering from severe liquidity issues indicating a broader issue amongst the centralised exchange.
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Currently BlockFi holds $US256 Million cash on hand which the company plans on using to provide liquidity to limited trading pairs to facilitate a restructure and reboot the trading platform. It is still yet to be confirmed what services and trading pairs will be on offer but the platform intends on continuing to trade under a new structure.
BlockFi's fate was already sealed when earlier this year it took a rescue package from FTX of around $US400 Million in funding with the provision that FTX would buy out BlockFi in June 2023. However with the collapse of FTX this deal had fallen through and has left BlockFi holding the bag.
Alamada had approx $US680 Million worth of loans from BlockFi which the trading platform was unable to call in and liquidate and added to it's financial instability. This has been mentioned on the Chapter 11 Bankruptcy as the reason for claiming Bankruptcy.
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Self Managed Super Funds Take a Hit
Sharon and Alan Saul are a part of a growing cohort of people that had large amounts of personal funds derived from their superannuation accounts invested in a self managed Super Fund where they decided to invest their retirement funds into Crypto currency with the promise of high returns that were paying better than traditional financial institutions, only to see their retirement funds disappear.
The brokerage company the pair used was Digital Surge which held a trading account with FTX and was managing a large cohort of peoples funds for them. The financial losses are currently estimated to be around $1.4 Billion.
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The boom in Crypto can be attuned to the sudden promotion of the sector by Celebrities and positive mainstream news promoting from rubbles to riches investors which drove the market to all time highs in 2021.
However, instead of participating and investing in their own managed way many mum and dad investors lacked the basic tech skills to invest and participate so trusted their money to private centralised entities which, being an unregulated market could then go on and utilise those funds in anyway they deemed.
While there are currently strong calls for regulation in the industry it isn't just regulation that will be needed but a topic I have regularly advocated for since being involved in Crypto is ease of use and ease of access.
Without a straight forward easy way to participate that is accessibly to all then the door is open for those who want to farm those without the required level of skills and peoples money will always be at risk.
image sources provided supplemented by canva pro subscription. This is not financial advice and readers are advised to undertake their own research or seek professional financial services
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Thanks for the details on this developing story...
These "problems" are coming to the surface more frequently. It is troubling and they may be falling like dominoes due to the intertwined losses of one impacting another. I have less than ten thousand on exchanges, the ones that have been operating for eight years or more, and I may be pulling funds from them this week.
It is impossible for me to sell large chunks of my holdings because they are in cold storage but I will be hunkering down for the long run. What little I can sell will be going into USDT or HBD, the latter being safest in my opinion.
Truer now than ever!
Correct more and more people are not keeping money on exchanges in fear of losing all their assets. Yes the intertwined nature of these centralised exchanges is a troubling one and will continue to wreck havoc
Not your keys, not your crypto. It's not safe on any exchange. From what I see, I think Blockfi investors are screwed out of their money. I think they have like 250million and a lot of that is going to go away in legal fees. The assets are worth 1 billion but we can probably expect nothing from it because those assets were probably linked to FTX/Alameda and the liabilities is between 1 billion to 10 billion.
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Yup, it is a shame and a key reason why many people are leaving the sector at the moment.
Oh man I don't know if I should sell my bitcoin to buy back lower expecting more price losses to come or if I should withdraw the little bit I've got into my hardware wallet. Decisions! Lol
It is a hard call at the moment I am just chugging along and seeing how it all goes. Hopefully things turn around but it could be a good year or two until it does.
I am on hold right now! Will it get better?
On BlockFi? I am not sure. They will continue trading but who knows what they do with the lost assets.
On all my cryptos, hahaha!
I think it will take a year or two to get better with a focus on Ethereum and Bitcoin though. Who knows what else outside of that will do well.
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