BlockFi, a lender in the troubled cryptocurrency universe, announced Monday it had filed for bankruptcy protection in the latest ripple effect from the FTX collapse.
The Chapter 11 filing in a US Bankruptcy Court in New Jersey will allow BlockFi and eight affiliates to “stabilize its business and provide the company with the opportunity to consummate a comprehensive restructuring transaction that maximizes value for all clients and other stakeholders.”
BlockFi, founded in 2017, had been in trouble early in 2022 amid a steep pullback in cryptocurrency values that led to client withdrawals and its liquidation of holdings of Singapore-based Three Arrows Capital, which ran into trouble.
Over the summer, FTX provided $400 million in credit to BlockFi, enabling the lending firm to avoid bankruptcy.
But FTX itself filed for bankruptcy protection on November 11.
Chapter 11 is a US mechanism allowing a company to restructure its debts under court supervision while continuing to operate.
BlockFi said it was focused on recovering obligations from counterparties, including FTX.
“Due to the recent collapse of FTX and its ensuing bankruptcy process, which remains ongoing, the company expects that recoveries from FTX will be delayed,” BlockFi said.
BlockFi said it has $256.9 million in available cash, which “is expected to provide sufficient liquidity” throughout the reorganization.
The filing is the latest reverberation from the FTX crisis.
Once worth as much as $32 billion, FTX has been in crisis mode in November following an apparent liquidity shortfall as investors pulled money from the cryptocurrency trading platform.
In a November 17 bankruptcy filing, newly-installed FTX Chief Executive John J. Ray lambasted failures of oversight, incomplete records, missing and unreliable financial statements and “potentially compromised” leadership at FTX, which had a tight financial relationship with Alameda Research, a trading house also owned by former FTX Chief Sam Bankman-Fried. (AFP)