Crypto Firms in Bankruptcy Proceedings
End of an Era
The Balance Sheet
Assets $256 million. Liabilities $1 to $10 billion.
Fun Fact
The SEC has a $30 million unsecured claim on BlockFi.
Inverse Cramer Strategy Yet Again
The Wall Street Journal reports BlockFi Files for Bankruptcy as Latest Crypto Casualty
BlockFi, based in Jersey City, N.J., is only beginning to answer how its hundreds of thousands of customers will fare in an insolvency. The company’s top 10 creditors alone are owed close to $1.2 billion, according to its filings with the U.S. Bankruptcy Court in Trenton, N.J, with the total amount of liabilities likely to be much larger.
The firm, founded in 2017 by Zac Prince and Flori Marquez and backed by Thiel Capital spinout Valar Ventures, lends money to customers using their cryptocurrency assets as collateral. Bain Capital, Tiger Global Management and a fund operated by the Winklevoss twins are also included among BlockFi’s equity investors, according to PitchBook Data Inc.
FTX, the largest crypto company to file for bankruptcy to date, has said in court papers that its 50 largest creditors are owed more than $3 billion, and its new managers are still assessing its total obligations to customers. Celsius Network LLC, a crypto lender that filed bankruptcy in July, listed $5.5 billion in total liabilities when it entered court protection, including more than $4.7 billion owed to its users.
As of 2021, BlockFi had between $14 billion and $20 billion in customer deposits and had lent out $7.5 billion.
What Happened?
Q: How did this happen?
A: Lure customers with a promise 10% or more interest on pledged crypto, backed by nothing, then borrow against your own coin using inflated values of your coin as collateral.
Interest is paid not in US dollars but in worthless tokens backed by nothing.
The above Q&A is a general statement, not just BlockFi.
Scroll to Continue
Hoot of the Day
Here’s the hoot of the day and it typifies crypto in general: Bankrupt BlockFi said it will focus its attention on getting assets from bankrupt FTX.
That will drain the final $256 million in customer deposits. Somehow I expect the SEC will be first in line if anything remains.
Was the Crypto Bubble the Worst of Its Kind?
A Bloomberg writer attempts to make that case. I strongly disagree and take the other side of the debate.
For discussion, please see Was the Crypto Bubble the Worst of Its Kind?
Final Question
What are Ethereum, Bitcoin, and US dollars backed by?
This post originated at MishTalk.Com.
Thanks for Tuning In!
Please Subscribe to MishTalk Email Alerts.
Subscribers get an email alert of each post as they happen. Read the ones you like and you can unsubscribe at any time.
If you have subscribed and do not get email alerts, please check your spam folder.
Mish
Source link
Author Mish
