Crypto Lender BlockFi Finally Files for Bankruptcy Amid FTX Contagion

Popular crypto lender BlockFi is the latest victim to the contagion spread through the collapse of crypto exchange FTX earlier this month. On Monday, November 28, BlockFi filed for Chapter 11 bankruptcy protection to help stabilize its business”.

 

BlockFi and eight of its affiliates filed under the Chapter 11 bankruptcy Code in the US Bankruptcy Court for the District of New Jersey. The company said that it would provide them the opportunity to consummate a comprehensive restructuring transaction that maximizes value for all clients and other stakeholders”.

 

Speaking on this development further, Mark Renzi of Berkeley Research Group, BlockFi's financial advisor further added: With the collapse of FTX, the BlockFi management team and board of directors immediately took action to protect clients and the Company. From inception, BlockFi has worked to positively shape the cryptocurrency industry and advance the sector. BlockFi looks forward to a transparent process that achieves the best outcome for all clients and other stakeholders”.

 

Just as crypto exchange FTX filed for bankruptcy on November 11, crypto exchange BlockFi immediately announced the halting of deposits and withdrawals on the platform. “We are shocked and dismayed by the news regarding FTX and Alameda,” it said. Earlier in June 2022, BlockFi had also offered a $250 million line of revolving credit line to crypto exchange FTX.

 

Since then, BlockFi continued to face major pressure to continue its operations with millions of dollars of its funds stuck on crypto exchange FTX. The troubles for BlockFi started earlier this year with the fall of Three Arrows Capital. Reportedly, BlockFi had lend massive funds to the troubled crypto exchange.

 

Some sources familiar with the matter said that BlockFi is also working to cut down on its staff. To ensure a smooth transition with its bankruptcy filings, BlockFi will conduct a series of customary motions to allow the company to continue and operate its business.

 

However, the platform activity remains paused for the time being. BlockFi further added that it has US$256.9 million in cash on hand. The crypto lender believes that this would be sufficient to support certain operations during the restructuring process.

 

In another development, crypto lender BlockFi has also decided to sue FTX CEO Sam Bankman-Fried to get the shares of Robinhood that he pledged to the company earlier this month.

 

BlockFi has alleged that SBF’s investment vehicle Emergent Fidelity Technologies has custody of the collateral that belongs to BlockFi.”