On Monday, the cryptocurrency trading platform BlockFi filed for Chapter 11 bankruptcy. This further increases uncertainty for customers who have been unable to access deposits for several weeks. BlockFi is now the latest victim of the collapse FTX , the cryptocurrency exchange that crashed in November after reports claimed that customers had placed their funds […]
On Monday, the cryptocurrency trading platform BlockFi filed for Chapter 11 bankruptcy. This further increases uncertainty for customers who have been unable to access deposits for several weeks.
BlockFi is now the latest victim of the collapse FTX , the cryptocurrency exchange that crashed in November after reports claimed that customers had placed their funds on high-risk bets.
Both firms were intertwined. FTX bought BlockFi in April as the crypto bear market took root. BlockFi stopped withdrawing funds as FTX spiraled, citing financial problems. Customers could now face new obstacles to getting their money back.
What can BlockFi customers accomplish?
BlockFi advises customers to contact its claims agent if they need information on assets stored on the platform. This representative is hired to assist creditors in large bankruptcy cases.
BlockFi filed documents in court estimating that the company owes between $1 billion to $10 billion to more then 100,000 creditors.
BlockFi posted a message on its website to assure clients that it would work to pay off the company’s outstanding debts. Chapter 11 bankruptcy is typically used to reorganize rather than completely liquidate a company.
. According to the company’s legal filing, it boasts assets in excess of $1 billion.
The message stated that these Chapter 11 cases would allow BlockFi to stabilize its business and give BlockFi the chance to execute a reorganization plan to maximize value for all parties, including our clients.
Customers who believed funds stored on BlockFi’s platform had been safe prior to the sudden collapse may not find this comforting. There are things you can immediately do to begin the claims process.
It is possible to record what you have on BlockFi and how much it is worth. You might want to compare the information that BlockFi provides with any records you have.
Some customers might wait a while before they find out what they can get back, if any.
The continuing ripples from the FTX financial crises have highlighted potential vulnerabilities in crypto, particularly among centralized exchanges that enable users to convert cash into cryptocurrency.
Even if you do not use BlockFi or FTX it is a good idea to think about whether you would like to keep crypto on these services. Crypto businesses are not covered by the Securities Investor Protection Corp. and the Federal Deposit Insurance Corp., which is what traditional banks and brokerages do in traditional finance.
A centralized service can be a good option for crypto storage. They offer easy access to the crypto market for users who don’t have the time or skills to manage personal crypto wallets.
But, the flip side of this coin is that your assets may be lost if an exchange crashes while you are holding crypto.
Some crypto exchanges are now making public additional information about the reserves they have to support customer deposits in response to recent events. These data can help you make informed decisions about where to store or buy your crypto.
You can learn how to obtain a crypto wallet if you are still uncomfortable with using an exchange to store crypto. But wallets have their risks. If you lose your login information, it could be hard to access your crypto.
Unlike exchanges, your wallet stores vital information about your crypto. This means that even if your wallet maker goes bankrupt, you can still spend and transfer your funds.