FTX creditors likely to exceed 1 million… Coin lender “Blockfi” prepares for bankruptcy

Concern about the domino crisis in the cryptocurrency market

mostly unsecured subordinated creditors
Possibility of not receiving money in the rehabilitation process

BlockFi once supported by FTX
Suspension of withdrawal of funds and limitation of platform activity
Bitcoin near $16,000 for 5 days

The number of creditors of FTX, the world’s third largest virtual asset (cryptocurrency) exchange, which is on the verge of bankruptcy, has been reported to reach 1 million, far more than the 100,000 initially reported. Furthermore, as BlockFi, a lender of virtual assets, is known to be preparing to file for bankruptcy protection in the aftermath of the FTX crisis, there are worried rumors that a domino crisis has begun in the cryptocurrency market.

According to Reuters and others on the 15th (local time), FTX lawyers said in a Delaware court filing the day before that “there may be more than 1 million creditors.” FTX, which filed for bankruptcy protection under Section 11 (Chapter 11) of the Bankruptcy Act due to a liquidity crisis on the 11th, announced that there were more than 100,000 creditors at the time and three days later, the number of creditors increased tenfold. FTX’s attorneys expect to file a list of 50 creditors by the 18th. However, with the exception of major creditors, most of them are unsecured junior creditors, so there is a high possibility that they will not get their money back during the rehabilitation process.

Chapter 11, required by FTX, is a system that seeks rehabilitation through restructuring proceedings under the supervision of a bankruptcy court, similar to receivership. FTX is also raising funds, but it is unknown if it will be able to recover. According to the Wall Street Journal and others, FTX founder Sam Bankmanfried, along with the rest of his employees, went looking for investors last weekend to hedge up to $8 billion (about 10.5 trillion won) of missing funds, but he is known to have still not been able to find them.

In the midst of all of this, the sense of crisis seems to be amplified when news broke that BlockFi, a cryptocurrency lender that once received funding from FTX, is preparing to file for bankruptcy protection due to a liquidity crisis. BlockFi, which has already suspended customer withdrawals and limited platform activity, received an approximately $400 million revolving loan from FTX after cryptocurrency prices plummeted this summer.

After the FTX crash on the 7th of this month, the price of FTT, a coin issued by FTX itself, has plummeted by 94% to date, and the price of Bitcoin has also dropped by 23%. The total market capitalization of the cryptocurrency market has also decreased by more than 20% compared to the beginning of this month. JP Morgan has predicted, “The total cryptocurrency market cap, $800 billion, could be reduced to $500 billion, and Bitcoin could also drop to $13,000.” Bitcoin failed to break out of the $16,000 range for five days.

Meanwhile, on this day, the Financial Intelligence Unit (FIU) under the Financial Services Commission announced in a meeting with representatives of virtual asset operators: “We will advocate for the issues necessary for user protection to be discussed during the review of the bill by the National Assembly. Korbit, a top 5 exchange, decided to disclose the daily amount of cryptocurrencies traded on the company and a list of wallet addresses that can be audited as investor anxiety grew due to this incident.

Journalist Min Na-ri