BlockFi Is Bankrupt and Suing SBF
Centralized lending platform BlockFi filed for bankruptcy yesterday. The firm also plans to sue Sam Bankman-Fried for his Robinhood shares.
Centralized lending platform BlockFi filed for Chapter 11 bankruptcy protection yesterday. The firm also announced its plans to sue Sam Bankman-Fried (SBF) for his Robinhood shares.
BlockFi locked comments on its subreddit and announced its bankruptcy on its website. Investors shouldn't be surprised to see BlockFi die. It paused withdrawals a few weeks ago and famously went broke over the summer following the Terra/LUNA collapse and the Three Arrows Capital contagion.
Actually, No One Survived the Terra/LUNA Collapse
It's sad to see BlockFi go. In 2021, it was one of America's fastest-growing fintech firms, and in March 2022 BlockFi had over 250k depositors. Just like SBF, BlockFi claimed everything was fine until it paused withdrawals. Then BlockFi claimed everything would eventually be fine before filing for bankruptcy. After pausing withdrawals, BlockFi still required its users to put in more money to keep their positions from getting margin called. Classy.
After the Three Arrows Capital collapse, it seemed like BlockFi was going to die quietly along with the other over-leveraged CeFi firms. BlockFi eventually took a $250M loan from FTX to stay afloat, which lasted until FTX was revealed to be insolvent and filed its own Chapter 11.
BlockFi Still Wants Its Robinhood Shares
BlockFi is now suing SBF's Emergent Fidelity Technologies firm, which holds his Robinhood shares. Apparently, SBF promised his Robinhood shares as collateral to BlockFi earlier this month while he was scrambling to raise money to save FTX.
According to BlockFi, SBF didn't produce the shares because he also offered those shares as collateral for other loans. Can you believe the guy who used FTX depositors' funds to shore up his hedge fund also allegedly re-used his Robinhood shares as collateral?