Attorney Joshua Sussberg revealed to a US bankruptcy court on Tuesday that crypto lender BlockFi has around $355 million in bitcoins frozen on cryptocurrency exchange FTX.
FTX gave BlockFi a $400 million credit line earlier this year.
FTX Holds $355M in Crypto Owned by BlockFi
The $355 million is in addition to the $671 million that FTX’s sister company, Alameda Research, has already borrowed. Alameda has also failed to pay back the loan.
Monday, BlockFi filed for bankruptcy protection in the U.S. Bankruptcy Court for the District of New Jersey. This came after weeks of rumours about the company’s solvency after it stopped withdrawals in November. The lender had been relying on a $400 million line of credit from the cryptocurrency exchange FTX. However, FTX filed for bankruptcy earlier this month after a CoinDesk report showed that Alameda held a lot of FTX’s exchange token, FTT. This led to questions about FTX’s own solvency.
BlockFi said in its first-day filing that it had between $1 billion and $10 billion in total assets and between $1 billion and $10 billion in total debts. The lender has more than 100,000 people who owe money to it, and it has about $257 million in cash on hand, some of which came from selling its crypto holdings.
Sussberg, a partner at the law firm Kirkland & Ellis, said that BlockFi does want to let people who have their own assets in the BlockFi Wallet product take out their money.
“As we said in the pleadings, Your Honor, we plan to quickly file a motion to let customers withdraw as much money as they want from their personal wallets, because we don’t think that’s part of the estate,” he said.
He said that this plan depends on a group of creditors being put together.
Sussberg told Judge Michael Kaplan that he thinks the process of getting BlockFi’s money back from FTX will take “a long time.”a
Whether or not those funds can be retrieved is a different question.
Sussberg told the judge that FTX has more than a million creditors and that it was hacked on Nov. 11, the day it filed for bankruptcy, causing hundreds of millions of dollars worth of cryptocurrency to be taken out of wallets controlled by FTX.
Even though both BlockFi and FTX filed for bankruptcy protection during the market downturn, BlockFi’s lawyers stressed that that was the only thing they had in common.
Sussberg said of BlockFi’s liquidity crisis, “This is the opposite of FTX.” “This is a completely different story from the last one.”
Sussberg mentioned that FTX’s current CEO, John Jay Ray III, said he had never seen “such a complete failure” of executive leadership in his entire career, which included cleaning up after Enron went bankrupt.
Sussberg told the court that BlockFi’s co-founders, Zac Prince and Flori Marquez, were the opposite of Bankman-Fried.
Sussberg said, “These are self-made people who built the company with their own hands.” “This business was going like a rocket.”
During the first hearing, both Prince and Marquez were there.