BlockFi goes bankrupt in aftermath of FTX
BlockFi Inc filed for bankruptcy, the latest crypto firm to collapse in the wake of crypto exchange FTX’s rapid downfall.
BlockFi said in a statement that it will use the Chapter 11 process to “focus on recovering all obligations owed to BlockFi by its counterparties, including FTX and associated corporate entities,” adding that recoveries are likely to be delayed by FTX’s own bankruptcy. Chapter 11 bankruptcy allows a company to continue operating while working out a plan to repay creditors.
The petition, filed in New Jersey, lists BlockFi’s assets and liabilities at between $US1 billion ($1.5 billion) and $US10 billion each. The company said in the statement that it had around $US257 million of cash on hand, and is starting an “internal plan to considerably reduce expenses, including labor costs.”
Citing “a lack of clarity” over the status of bankrupt FTX and Alameda Research, the New Jersey-based company earlier halted withdrawals and said it was exploring “all options” with outside advisers.
Following investigations into FTX by the US Securities Exchange Commission and Commodity Futures Trading Commission over potential misuse of customer funds, it became unclear to BlockFi where funding for a credit line from FTX US and collateral on loans to Alameda, which included Robinhood stock, came from, Bloomberg News reported earlier this month. BlockFi had also been in the process of shifting over its assets over to FTX for custody, but the majority of the assets had not been moved prior to FTX’s collapse.
FTX US is listed in the company’s petition as one of its top unsecured creditors, with a $US275 million loan.
The company’s largest unsecured creditor, Ankura Trust Company, is owed about $US729 million, according to the petition. Ankura acts as a trustee for BlockFi’s interest-bearing crypto accounts, according to its website.
BlockFi was founded in 2017 by Zac Prince and Flori Marquez and in its early days had backing from influential Wall Street investors like Mike Novogratz and, later on, Valar Ventures, a Peter Thiel-backed venture fund as well as Winklevoss Capital, among others. It made waves in 2019 when it began providing interest-bearing accounts with returns paid in Bitcoin and Ether, with its program attracting millions of dollars in deposits right away.