BlockFi files for bankruptcy as FTX fallout spreads

The BlockFi logo displayed on a phone screen and representation of cryptocurrencies are seen in this illustration photo taken in Krakow, Poland, November 14, 2022.

Jakub Porzycki | Nurphoto | Getty Images

Distressed crypto firm BlockFi has filed for Chapter 11 bankruptcy protection with the United States Bankruptcy Court for the District of New Jersey following the implosion of putative acquirer FTX.

In the filing, the company said it had more than 100,000 creditors, with liabilities and assets ranging from $1 billion to $10 billion.

In the filing, the company listed an outstanding $275 million loan to FTX US, the US arm of Sam Bankman-Fried’s now bankrupt empire.

Like FTX, BlockFi also has a Bahamian subsidiary. This subsidiary filed for bankruptcy in the Bahamas at the same time as the American filing.

BlockFi’s bankruptcy filing shows that the company’s largest disclosed client has a balance of nearly $28 million.

“BlockFi looks forward to a transparent process that achieves the best outcome for all customers and other stakeholders,” said Mark Renzi of Berkeley Research Group. said in a press release. BRG is BlockFi’s financial advisor.

The crypto company, which offers an interest-bearing trading exchange and custody service for cryptocurrencies, was one of many companies to face serious cash flow problems after the implosion of Three Arrows Capital.

The Jersey City, N.J.-based company had previously halted customer deposit withdrawals and admitted it had “significant exposure” to the now bankrupt crypto exchange FTX and its sister trading firm. , AlamedaResearch.

“We have significant exposure to FTX and associated legal entities which includes obligations owed to us by Alameda, assets held on FTX.com and amounts not drawn on our line of credit with FTX.US,” BlockFi previously said.

The company began talking to restructuring professionals in the days after FTX filed for bankruptcy, according to people familiar with the matter.

A BlockFi representative did not immediately respond to requests for comment.

BlockFi – which was last valued at $4.8 billion, according to PitchBook – is among many crypto firms feeling the pressure from FTX’s collapse. In July, FTX stepped in to help BlockFi avoid bankruptcy by extend $400 million revolving credit facility and offering to potentially buy out the embattled lender.

Sam Bankman-Fried’s FTX Cryptocurrency Exchange Filed For Chapter 11 bankruptcy protection in the United States on November 11, and the contagion effect in the crypto sector was rapid.

About 130 additional affiliates are part of the proceedings, including Alameda Research, Bankman-Fried’s crypto trading firm, and FTX.us, the company’s US subsidiary. FTX’s new CEO, John Ray said in a file with the Delaware Bankruptcy Court that “in his 40 years of legal and restructuring experience” he had never seen “such a complete failure of corporate controls and such a complete absence of financial information reliable than what happened here”.

Ray was previously CEO of Enron after the energy titan’s implosion.

In a few daysFTX went from a $32 billion valuation to bankruptcy as liquidity dried up, customers demanded withdrawals and rival exchange Binance tore its stock non-binding agreement to buy the business. Gross negligence has since been revealed. Ray added that a “substantial portion” of the assets held by FTX may be “missing or stolen.”

FTX may have over a million creditors, update says bankruptcy filingsalluding to the huge impact of its collapse on crypto traders and other counterparties tied to Bankman-Fried’s empire.

This is a developing story.

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