Cryptocurrencies

BlockFi Latest Crypto Platform to Halt Withdrawals

With cryptocurrency exchange FTX filing for bankruptcy (after an acquisition deal with rival Binance fell through), the company’s fall is impacting other crypto FinTechs as well. That now includes BlockFi.

Last night, BlockFi announced that it was pausing withdrawals for customers and also requested that users not deposit funds at this time. In a statement posted to their Twitter account, BlockFi noted that the move was necessary due to news surrounding FTX and Alameda — with the company stating they found out about the situation via Twitter. The statement went on to say, “Given the lack of clarity on the status of FTX.com, FTX US, and Alameda, we are not able to operate business as usual,” adding, “Our priority has been and will continue to be to protect our clients and their interests.”

As the Wall Street Journal reports, BlockFi struck a deal with FTX for a $400 million credit facility. That arrangement also included an option for FTX to purchase the company.

In February of this year, the firm agreed to pay a $100 million fine to settle a lawsuit with the Securities and Exchange Commission (SEC) that charged them with failing to register its crypto lending product, as well as violating registration provisions as outlined in the Investment Company Act of 1940. As a result of that settlement, United States customers were no longer able to open or add funds to a BlockFi Interest Account, although existing users were able to retain their account and balance.

Another somewhat complicating factor is BlockFi’s rewards credit card. Launched last year, that card offers 1.5% back in crypto when customers make purchases. Notably, the BlockFi Rewards Visa cards are issued by Evolve Bank & Trust rather than BlockFi themselves. As a result, a cardholder who may not feel inclined to pay off their balances while unable to withdraw funds from their crypto accounts should keep in mind that failure to make on-time payments could impact their credit scores.

Although the term “crypto winter” had already been commonly used to describe the current state of the sector, the rapid decline of FTX has taken the situation to a new level. Unfortunately, it seems that this will potentially lead to lost funds for not only FTX customers but also those with accounts at BlockFi and other firms. It will also be interesting to see how partners Visa and Evolve deal with the fallout from BlockFi Rewards credit card customers. With this quickly-developing story still unfolding, it likely won’t be too long before the dust settles and the damages are assessed.

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