From FTX to BlockFi, Domino’s Endless Crypto Bankruptcy

Crypto Lending Platform BlockFi Declares Bankruptcy He cited the adverse effects brought about by FTX as the latest in the industry. After being affected by the FTX trading bankruptcy

Reuters – Lending platform BlockFi Currency It filed for Chapter 11 bankruptcy protection, it said on Monday. It is the latest in a series of losses in the industry after the company was devastated in the face of the collapse of the FTX exchange earlier this month.

The New Jersey court filing comes as crypto prices plummet, and the price of bitcoin, currently the most popular cryptocurrency, is down more than 70% from its 2021 peak.

Most recently, Monsur Hussain, senior director of Fitch Ratings, said: “BlockFi’s Chapter 11 restructuring highlights the risk of adverse effects on assets associated with the crypto ecosystem.”

BlockFi was founded by fintech-turned-crypto executive Zac Prince. which is located in the state of New Jersey He said in his bankruptcy filing that As a result of the FTX corruption that has occurred that affects many related crypto platforms. This caused a liquidity crisis (FTX, founded by Sam Bankman-Fried. It filed for protection in the United States this month. (After traders withdrew $6 billion from the platform in three days and the bailout agreement was canceled from the rival exchanges Binance.)

“Although the debtor’s FTX disclosure is the main reason for this bankruptcy filing, But debtors are not facing many of the problems that FTX is clearly facing. “ Mark Renzi, managing director of Berkeley Research Group, a proposed bankruptcy financial advisor, said that while BlockFi was “Opposite and different.”

BlockFi said that the liquidity crisis was caused by FTX by lending to Alameda, a crypto trading company associated with FTX, as well as cryptocurrencies held on the FTX platform, stuck in That, BlockFi lists assets and liabilities between $1 billion and $10 billion.

Also on Monday, BlockFi filed a lawsuit against its holding company. Bankman-Fried to reclaim shares in Robinhood Markets Inc (HOOD.O) that it pledged as collateral three weeks ago, before BlockFi and FTX filed for bankruptcy protection.

Renzi said BlockFi sold some of its crypto assets in early November to raise money from the bankruptcy. Those sales raised $238.6 million in cash, and BlockFi now has $256.5 million in cash on hand.

In a court filing Monday, BlockFi listed FTX as its second-largest creditor, worth $275 million in loans extended earlier this year. and owes more than 100,000 of its creditors The company also said in a separate filing that it plans to lay off two-thirds of its 292 employees.

Under the agreement signed with FTX in July, BlockFi will receive a $400 million revolving credit facility, while FTX has an option to purchase up to $240 million.

BlockFi’s bankruptcy filing comes after two of BlockFi’s biggest competitors, Celsius Network and Voyager Digital, filed for bankruptcy in July. citing extreme market conditions that resulted in losses for both companies.

Crypto lenders, the de facto banks of the crypto world, have thrived during the coronavirus pandemic. by attracting retail clients with double-digit yields in exchange for a deposit in the form of Crypto lenders do not need to hold funds or liquidity buffers like traditional lenders. And some find themselves exposed when collateral shortages force them and their clients to suffer heavy losses.

BlockFi’s first bankruptcy hearing is scheduled for Tuesday, while FTX has either ignored or responded to requests for comment on the situation.

BlockFi Creditor List

BlockFi’s largest creditor is Ankura Trust, which represents creditors in stressed situations and in debt of $729 million. Valar Ventures, a venture capital fund associated with Peter Thiel, holds 19% of BlockFi’s stock.
At the same time, BlockFi also listed the US Securities and Exchange Commission, or SEC, as one of its largest creditors. Claiming $30 million, in February the BlockFi subsidiary agreed to pay $100 million to the SEC and 32 other states to settle charges related to its retail crypto lending product. The company offers nearly to 600,000 investors.

In addition, Bain Capital Ventures and Tiger Global co-led BlockFi’s March 2021 funding round, BlockFi said in a press release issued at the time. Neither company immediately responded to a request for comment.

In a blog post, BlockFi said the Chapter 11 case will help the company maintain business stability and increase value for all stakeholders.

“Acting in the best interests of our customers is our main priority. and continues to be our way forward.” BlockFi says

In its bankruptcy filing, BlockFi said it had hired Kirkland & Ellis and Haynes & Boone as bankruptcy advisers.

BlockFi has delayed withdrawals from the previous platform.

In the filing, Renzi said Blockfi plans to seek authority to comply with customer withdrawal requests from customer wallet accounts. The crypto assets are kept, however, the company has not disclosed its plan on how it will handle withdrawal requests. while other products include interest bearing accounts. “BlockFi clients may end up getting a huge return on their investment.” Renzi said in the filing.

BlockFi’s Founding History

BlockFi was founded in 2017 by Prince, who is now the company’s CEO, and Flori Marquez. While headquartered in Jersey City, BlockFi also has offices in New York, Singapore, Poland and Argentina. as detailed on the website