☀️☕️ BlockFi bankruptcy – the latest to get FTXed

29 November 2022

Happy Tuesday!

US large-cap S&P 500 closed 1.54% DOWN 🔻🔻 Tech-heavy Nasdaq Composite closed 1.58% DOWN 🔻🔻 Pan European STOXX Europe 600 closed 0.58% DOWN 🔻 HK’s Hang Seng Index closed 1.57% DOWN 🔻🔻 Japan’s Nikkei 225 closed 0.42% DOWN 🔻 


China protests, Apple again, FTX/Alameda in Dubai?


BlockFi bankruptcy – the latest to get FTXed’You want chips with that… Jaguar? 

📖   MoneyFitt EXPLAINS

🎓 Chapter 11 Bankruptcy


Global stocks and oil prices fell on Monday on the protests spreading across China against the government’s Covid-19 lockdowns. Investor concern is rising about the effect of ongoing lockdowns on the economy and global supply chains as well as about how Beijing may respond to the protests themselves, which are taking place in at least 10 major cities, including Shanghai, Beijing, Wuhan and Chengdu. Many young people are reportedly involved (with youth unemployment in China at almost 20%.) It was only earlier in the month that China’s reopening was a bullish investor theme.

China hit a record 40,052 daily cases on Monday, with epidemiologists and public health experts saying case numbers will increase in a winter surge “if stringent measures are not sustainable.” This suggests that zero-Covid policies may continue for the foreseeable future until vaccination rates are improved, particularly among the elderly. The current wave is more transmissible but less lethal strains, and all seven deaths so far have been octogenarians with comorbidities.

After dropping 2% on Friday, Apple dropped 2.6% on Monday on continued concern that the Covid lockdowns and related protests in China would affect the production and shipment of its flagship iPhone 14s. The vast majority of iPhones are made on a contract basis by Taiwan-based Hon Hai (under the name Foxconn) in China.

Meanwhile, Caroline Ellison, the former CEO of crypto trading firm Alameda and FTX’s Sam Bankman-Fried’s polyamorous ex-girlfriend, has reportedly fled HK for Dubai, which has no extradition treaty with the US. Dubai is reportedly also where the founders of insolvent crypto hedge fund Three Arrows Capital, Su Zhu and Kyle Davies, are now located. Purely by coincidence.

Which brings us to…


BlockFi bankruptcy – the latest to get FTXed

Crypto lender BlockFi has filed for Chapter 11 bankruptcy protection, the latest “casualty” of the collapse of FTX only a couple of weeks ago.

An eternity ago, back in July, BlockFi was bailed out by FTX boss Sam Bankman-Fried (SBF) after it suffered massive losses on loans to Three Arrows Capital, the bust Singapore-based crypto hedge fund, on top of other losses in the “Crypto Winter” including bad debt from competing lender Celsius, which had just gone bust. All this after a US$100 million penalty it had to pay the SEC in February. That period was believed at the time to be about as bad as things would get. Wrong.

So SBF provided a $400mn loan from FTX US, as well as an option for FTX to buy out BlockFi in what was seen as a rescue of one respected crypto player by another. SBF would expand his empire, and the industry would be saved. But when FTX itself collapsed, BlockFi paused all lending and customer withdrawals. According to bankruptcy filings, it appears that BlockFi had assets and liabilities of US$1 billion to US$10 billion, with more than 100,000 creditors. As a largely unregulated entity, depositors in BlockFi have little to no protection.

BlockFi is a cryptocurrency wallet and lending app that let users trade, store and earn interest on crypto deposits. Users could also use their crypto as collateral for USD loans. It was valued at over US$4 billion in a fundraising round last summer. It is 19% owned by a venture capital company backed by Peter Thiel (a PayPal co-founder and an early investor in Facebook) and has raised over US$50 million in venture capital including from the “smart money” such as Galaxy Digital, SoFi, Winklevoss Ventures, Tiger Global, Bain Capital and Coinbase Ventures.

‘You want chips with that… Jaguar?

Jaguar Land Rover (JLR) is cutting the output of some models at its factories in the UK because of ongoing problems getting enough computer chips for its vehicles. As a result, it will ​​prioritise making higher-margin models such as the Range Rover over the Jaguar F-Pace and Land Rover Discovery Sport.

Most new cars rely heavily on computer chips to control a wide variety of systems, ranging from anti-lock braking, emissions controls and proximity sensors to satellite navigation and in-car entertainment and displays. Carmakers have had to compete with other industries for available chips amid a supply chain crunch.

Jaguar Land Rover is owned by Tata Motors, the largest automobile manufacturer in India and part of a giant conglomerate. Land Rover and Jaguar Cars were bought by Tata Motors from Ford in 2008 and merged under Tata Motors to become Jaguar Land Rover Limited in 2013, with production and branding kept in the UK. Tata Motors makes passenger cars, trucks, vans, coaches, buses, construction equipment and military vehicles and is the world’s 17th-largest motor vehicle manufacturer by volume. With a market capitalisation (share price times the number of shares) of US$20 billion, it is the 18th most valuable globally, smaller than Honda, Ferrari and Hyundai but bigger than Nissan, Volvo (also ex-Ford) and Renault.

Thank you for spending a few minutes of your time with us. Remember to take time for yourself and be thankful for what you have.

📖 MoneyFitt EXPLAINS:

🎓 Chapter 11 Bankruptcy

When a distressed company, usually one with far too much debt, “files under Chapter 11” of the United States Bankruptcy Code, it means its assets are “protected” from creditors in the sense that the company is allowed to maintain control over its business or property while it reorganises its finances so it can repay its debts over time. Operations are heavily restricted and the company may have to sell some of its assets.This way, it can help save jobs and avoid liquidation, though in some cases it may just be a matter of time before it happens anyway. (In a liquidation, or Chapter 7, the company is wound up and ceases to exist, with all remaining assets after expenses and taxes divided fairly among creditors. Only what is left over, if anything, would go to the shareholders.)The company or person owing money is called the “debtor” and the companies or people who are owed money are called the “creditors.” Creditors include the taxman (always the taxman), any banks that lent money, suppliers and employees, but not shareholders.Any reorganization plan must be in the best interest of the creditors (not the shareholders) and may involve a court-appointed change of management to do so.

Please do your own research – we create educational and entertaining content so you can start the day understanding the financial and business worlds a little better. However, this is NOT financial advice.

MoneyFitt (Spendolater Pte Ltd) is not responsible for any errors or omissions, or for the results obtained from the use of this information. All information is provided “as is”, with no guarantee of completeness, accuracy, timeliness or of the results obtained from the use of this information. The information contained is not intended to be a source of advice or credit analysis with respect to the material presented. Any ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial, tax or legal professional and independently researching and verifying information. Content is intended to be used and must be used for informational purposes only.

MoneyFit Morning Archive (to 07-Nov-22)

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