The collapse of FTX creates a domino effect in the crypto exchange world.
(Photo: AP)
New York, Frankfurt The crypto market does not rest. Anyone attempting to trade on crypto exchange Bitfront’s website on Tuesday was alerted to important news. The headline of the message consisted of just three words: “Bitfront will close”.
After the spectacular collapse of the FTX exchange and the lender Blockfi, the wave of bankruptcies in the crypto industry is claiming another victim. From now on, no more new customers will be accepted and credit card payments will no longer be processed, according to the Bitfront website. In a few months, the business is to be completely discontinued.
Bitfront justified the closure by saying that despite all attempts to “overcome the challenges in the rapidly developing industry”, the business is no longer worthwhile for the parent company. The company belongs to the Japanese social media group Line. The decision has nothing to do with the “incidents at certain competitors who are accused of misconduct”.
Bitfront is alluding to the collapse of the world’s third largest crypto exchange FTX in mid-November. Founder Sam Bankman-Fried is accused of stealing billions of dollars in customer funds. He is said to have partly plugged holes in his hedge fund Alameda and partly enriched himself.
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Lawyers and restructuring specialists are currently trying to unravel the complex structures of the company network. They are looking for assets to at least partially compensate the millions of creditors.
>> Read here: The bankruptcy of FTX and its consequences for the crypto world
Crypto lender Blockfi also slipped into bankruptcy on Monday. The start-up, based in Jersey City not far from New York, allowed users to deposit digital currencies such as Bitcoin as collateral and borrow other cryptocurrencies in return.
Blockfi was rescued by FTX last June. FTX CEO Bankman-Fried granted the crypto lender a $400 million line of credit and an option to later take over the startup entirely. But the bankruptcy of FTX now also means the end for Blockfi.
The crypto company’s investors also include Valor Ventures, a venture capital fund co-founded by German-born tech investor Peter Thiel. Valor Ventures owns 19 percent of Blockfi, court documents show. Thiel co-founded the PayPal payment service and invested in Facebook early on. Well-known investors Bain Capital and Tiger Global are also among Blockfi’s financiers.
Other crypto lenders such as Celsius and Voyager have also filed for bankruptcy this year. Industry experts assume that there will be further domino effects triggered by the FTX bankruptcy. At the beginning of November, Blockfi had already forbidden users to withdraw their money. Also, some of the funds are stuck on the FTX platform, where all withdrawals are also blocked.
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