BlockFi Files for Bankruptcy
The decision comes just two weeks after BlockFi's suspension of user withdrawals.
Key Takeaways
- BlockFi has filed for Chapter 11 bankruptcy protection and will attempt to restructure its operations.
- The firm owes money to more than 100,000 creditors and has liabilities between $1 billion and $10 billion.
- BlockFi initially suspended user withdrawals on November 11 in response to FTX's collapse.
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Crypto lending firm BlockFi has filed for Chapter 11 bankruptcy after suspending user payouts earlier this month.
BlockFi Files for Bankruptcy
BlockFi is filing for bankruptcy.
In an announcement on Monday, BlockFi said it has filed for bankruptcy protection and reorganization under Chapter 11 of the U.S. Bankruptcy Code, adding that it will pursue restructuring and reorganization.
The company noted that its decision to file for bankruptcy follows the “shocking events surrounding FTX,” which collapsed during the second week of November. It also acknowledged its “difficult but necessary decision” to pause withdrawals on November 11.
BlockFi said it will now focus on recovering obligations, specifically those owed by FTX and its related companies. BlockFi has significant exposure to those companies, including obligations from Alameda Research, deposits at FTX, and an undrawn credit line from FTX.US. The firm noted that FTX’s ongoing bankruptcy process means that it will likely be delayed in recovering those funds.
Mark Renzi of Berkeley Research Group, which acts as BlockFi’s financial advisor, said that the company “immediately took action” to protect itself and its clients after FTX’s collapse. He added that the company “looks forward to a transparent process that achieves the best outcome for all clients and other stakeholders.”
BlockFi says it has $256.9 million of cash on hand to support business operations even as user activity remains paused. The firm will continue to pay employees but reportedly plans to lay off two-thirds of its workforce.
According to Reuters, BlockFi’s bankruptcy filing lists over 100,000 creditors. The filing also shows that the firm has liabilities ranging between $1 billion and $10 billion.
BlockFi’s bankruptcy filing indicates it owes $275 million to FTX, making FTX the company’s second-largest creditor. Its largest creditor is Ankura Trust, a corporate trust company to which it owes $729 million.
The U.S. Securities and Exchange Commission (SEC) is also among BlockFi’s creditors, as the company still owes the regulator roughly $30 million as part of a February settlement.
Disclosure: At the time of writing, the author of this piece owned BTC, ETH, and other digital assets.
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