Crypto firm BlockFi filed for bankruptcy Monday, the latest cryptocurrency domino to fall after the collapse of FTX two weeks ago threatened to destabilize companies in the broader crypto ecosystem. BlockFi offers a cryptocurrency trading exchange and interest-bearing custodial service for cryptocurrencies. The distressed company — which had said it had “significant exposure” to FTX — said Monday it has more than 100,000 creditors, with liabilities and assets ranging from $1 billion to $10 billion. The ongoing FTX fallout — and bankruptcies earlier this year for lenders Celsius Network and Voyager Digital — is teaching crypto investors a hard lesson about their protections relative to more traditional asset classes. The fate of their money now lies in legal proceedings that will likely take years to play out. Cryptocurrencies such as bitcoin, Ethereum and others in the digital-asset realm exist in a gray area of federal regulation, according to legal experts. That means they largely escape the same oversight as holdings such as stocks and bonds. Further, federal money isn’t available to backstop customers in the same way it would be for those with holdings at a failed brokerage firm or bank.
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