Home World BlockFi files for bankruptcy as FTX fallout spreads

BlockFi files for bankruptcy as FTX fallout spreads

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The BlockFi logo displayed on a phone screen and a display of cryptocurrencies can be seen in this illustration taken in Krakow, Poland, on November 14, 2022.

Yakub Pazhytsky | Nurphoto | Getty Images

Troubled crypto firm BlockFi has filed for Chapter 11 bankruptcy protection in the US Bankruptcy Court for the District of New Jersey following the collapse of prospective buyer FTX.

The company said in a statement that it has more than 100,000 creditors with liabilities and assets between $1 billion and $10 billion.

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

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

BlockFi’s bankruptcy filing shows the balance of the company’s largest disclosed customer is nearly $28 million.

“BlockFi is committed to a transparent process that will deliver the best outcome for all customers and other stakeholders.” — Mark Renzi of Berkeley Research Group said in a press statement. BRG is acting as financial advisor to BlockFi.

A crypto company that offers a trading exchange and interest-bearing cryptocurrency custody services, was one of many firms that faced serious liquidity problems after the collapse of Three Arrows Capital.

The Jersey City, New Jersey-based company has already stopped withdrawing customer deposits and admitted it had “significant influence” on the now-bankrupt crypto exchange FTX and its subsidiary trading house Alameda Research.

“We have significant exposure to FTX and its related corporate entities, which includes Alameda’s obligations to us, assets held at FTX.com and unused amounts from our line of credit at FTX.US,” BlockFi previously said.

The company began talks with restructuring specialists days after FTX filed for bankruptcy, according to people familiar with the matter.

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

BlockFi, last valued at $4.8 billion according to PitchBook, is one of many crypto firms feeling the pressure of the FTX collapse. In July, FTX stepped in to help BlockFi avoid bankruptcy a $400 million extension of the revolving credit facility and offering to potentially buy the beleaguered lender.

Sam Bankman-Fried’s FTX cryptocurrency exchange has applied Chapter 11 Bankruptcy Protection in the US on November 11, and the contagion effect in the crypto sector was swift.

About 130 additional affiliates are involved in the process, including Alameda Research, Bankman-Fried’s crypto trading firm, and FTX.us, the company’s US subsidiary. FTX’s new CEO is John Ray – the statement says with the Delaware bankruptcy court that “in 40 years of legal practice and restructuring experience” he had never seen “such a complete failure of corporate control and such a complete lack of reliable financial information as occurred here.”

Ray previously served as CEO of Enron after the collapse of the energy titan.

In a matter of daysFTX went from a $32 billion valuation to bankruptcy as liquidity dried up, customers demanded withdrawals, and rival exchange Binance broke up its optional agreement buy a company. Gross negligence was exposed. Ray added that a “significant portion” of the assets held by FTX could be “missing or stolen.”

According to updated data, FTX may have more than 1 million lenders bankruptcy filingshinting at the huge impact of its collapse on crypto traders and other counterparties linked to the Bankman-Fried empire.

This is a developing story.

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