Blockfi, a Cryptocurrency Startup, Declares Bankruptcy as the Repercussions From FTX Grows

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Last Updated on November 29, 2022 by Bitfinsider

Following the downfall of putative buyer FTX, distressed crypto business BlockFi has filed for Chapter 11 bankruptcy protection in the United States Bankruptcy Court for the District of New Jersey.

According to the statement, the corporation has over 100,000 creditors, with obligations and assets ranging from $1 billion to $10 billion.

BlockFi, like FTX, has a Bahamian subsidiary. Concurrent with the American case, the subsidiary filed for bankruptcy in the Bahamas.

According to BlockFi’s bankruptcy petition, the company’s largest revealed client has a balance of over $28 million.

“BlockFi looks forward to a transparent process that provides the greatest conclusion for all clients and other stakeholders,” stated Mark Renzi of Berkeley Research Group in a news release. BlockFi’s financial advisor is BRG.

After the implosion of Three Arrows Capital, the crypto business, which provides a trading exchange and interest-bearing custodial service for cryptocurrencies, was one of several that faced major liquidity concerns.

The Jersey City, New Jersey-based firm had previously blocked client deposit withdrawals and acknowledged to having “substantial exposure” to the now-bankrupt crypto exchange FTX and its sister trading house, Alameda Research.

“We do have considerable exposure to FTX and affiliated corporate entities,” BlockFi previously stated. “This includes liabilities owing to us by Alameda, assets stored at, and undrawn sums from our credit line with FTX.US.”

According to persons familiar with the situation, the corporation began consulting with restructuring specialists in the days following FTX’s bankruptcy declaration.

A BlockFi spokesman did not immediately reply to queries for comment.

BlockFi, which was recently valued at $4.8 billion by PitchBook, is one of several crypto businesses experiencing the effects of FTX’s demise. FTX stepped in to assist BlockFi avoid bankruptcy in July, extending a $400 million revolving credit facility and proposing to acquire the troubled lender.

On November 11, Sam Bankman-Fried’s cryptocurrency exchange FTX filed for Chapter 11 bankruptcy protection in the United States, and the ripple effect has been quick across the crypto business.

Around 130 other linked firms are involved in the proceedings, including Alameda Research, SBF’s trading firm, and, the company’s US subsidiary. In a petition with the Delaware Bankruptcy Court, FTX’s new CEO, John Ray, stated that “in his 40 years of legal and restructuring expertise,” he had never seen “such a catastrophic collapse of corporate controls and such a complete absence of trustworthy financial information as transpired here.”

Ray was formerly the CEO of Enron following the company’s demise.

FTX went from a $32 billion value to bankruptcy in a matter of days as liquidity dried up, users sought withdrawals, and rival exchange Binance pulled up its nonbinding agreement to purchase the business. Since then, gross carelessness has been shown. Ray went on to say that a “significant amount” of the funds owned by FTX might be “lost or stolen.”

According to new bankruptcy papers, FTX may have more than one million creditors, implying that its collapse may have a massive impact on crypto traders and other counterparties with links to Bankman-Fried’s enterprise.

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