BlockFi has officially filed for chapter 11 bankruptcy amid the contagion precipitated by the FTX implosion.
Cryptocurrency lender and prominent exchange platform BlockFi has just filed for Chapter 11 bankruptcy as the contagion from the FTX collapse spreads further. Information from the bankruptcy proceedings reveals that the crypto lender decides to restructure its operational business units to maximize what is salvageable for clients and stakeholders.
The bankruptcy filing, which was made at a United States Bankruptcy Court for the District of New Jersey, revealed that BlockFi has liabilities that range from $1 billion to $10 billion, according to an official press release today from the crypto lender.
The media release further revealed that the crypto lender would seek to recover all obligations owed by external entities, including the recently-imploded FTX and affiliated firms. Notwithstanding, BlockFi has acknowledged that it expects such recovery from FTX to be significantly delayed due to the crypto exchange’s current bankruptcy proceedings. FTX’s first bankruptcy hearing was held last Tuesday.
BlockFi disclosed that the recent FTX collapse triggered its liquidity predicament. On November 14, the firm revealed a significant exposure to FTX and affiliated entities, one week after FTX filed for bankruptcy. BlockFi, whose predicaments began even before the FTX saga, announced in July that it had signed a deal with FTX, which would result in a $400M credit facility from FTX with an option to acquire the crypto lender for $240M. CEO Zac Prince had in June quelled insolvency concerns due to the 3AC collapse.
“From inception, BlockFi has worked to shape the cryptocurrency industry and advance the sector positively. BlockFi looks forward to a transparent process that achieves the best outcome for all clients and other stakeholders.” BlockFi’s financial advisor Mark Renzi remarked, speaking on the development.
The crypto lender is seeking approval to continue operations as the bankruptcy proceedings carry on, as revealed in customary motions filed. This is meant to ensure a seamless transition to chapter 11 bankruptcy. One filed motion demands that workers’ remunerations be paid without disruptions. BlockFi also wishes to minimize running costs.
Information from the press release reveals that the firm currently holds about $256 million as cash on hand. The cash will fund its operational cost as the bankruptcy proceedings progress.
Recall that BlockFi, on November 11, made the difficult decision of limiting activities on its platform, which affected customer withdrawals, as the lender noted that withdrawals would be suspended. The platform cited a lack of clarity on the situation surrounding FTX following the platform’s collapse.