BlockFi's over $300 million stuck in FTX! Lawyer: SEC likely to be compensated first, retail investors last

The cryptocurrency lending platform BlockFi filed for bankruptcy protection yesterday, with $355 million in assets reportedly stuck at FTX, according to court documents. Among over 100,000 creditors, the SEC is likely to be the first to recover debts, leaving general users with slim chances of retrieving their funds.

BlockFi Has Over $300 Million Frozen on FTX

According to The Block, BlockFi has stated in court that over $1 billion in assets are facing liquidity issues due to FTX and its subsidiary Alameda.

"Specifically, BlockFi has $671 million in outstanding loans to Alameda, and $355 million in assets frozen on FTX," said BlockFi's lawyer Joshua Sussberg.

BlockFi suffered an $80 million loss in bankruptcy mid-year, relying on a $400 million credit line from FTX US to resume operations. Now, affected by FTX's bankruptcy, BlockFi has officially filed for bankruptcy as of yesterday.

SEC Likely to Be First Creditor to Recover Debt, Slim Chance for Users to Retrieve Funds

According to a report by CoinDesk, Sasha Hodder, a lawyer at Hodder Law Firm specializing in cryptocurrency regulations, stated that the U.S. Securities and Exchange Commission (SEC) is likely to be the first to recover debt in BlockFi's creditor list.

Based on the documents filed for bankruptcy reorganization by BlockFi, it has over 100,000 creditors, with the SEC being the fourth largest. In February of this year, BlockFi was fined for providing and selling unregistered crypto lending products, with $30 million still outstanding.

Furthermore, in an interview video with CoinDesk, when asked if users have a chance to retrieve their funds, Sasha Hodder mentioned:

"Unless a miracle happens or relief is provided, the company can only repay user debts. Users are really at the bottom of the list of creditors."