Cryptocurrency lender BlockFi Inc. and eight of its affiliates have filed for Chapter 11 bankruptcy reorganization in the U.S. District of New Jersey, the company announced early Tuesday morning in Asia time.
See related article: Crypto lender BlockFi faces possible failure amid FTX collapse, WSJ says
- With the filing, BlockFi says it will focus on recovering obligations it is owed by its counterparties. The company is also filing with the court a series of motions to allow the company to continue operations, maintain employee benefits and pay wages.
- BlockFi reportedly stated in a separate filing that it is planning to lay off two-thirds of its 292 employees.
- According to the bankruptcy filing, the crypto lender owes more than US$1 billion to its three biggest creditors, the largest being Ankura Trust Company, followed by FTX US, and an undisclosed company.
- On Nov. 11, BlockFi halted user withdrawals, saying it was unable to operate as normal due to the “lack of clarity” around the status of FTX.com and its brokerage trading arm Alameda Research. While platform activity is still paused, BlockFi has US$256.9 million in cash on hand, according to the announcement.
- In an email to customers earlier this month, BlockFi acknowledged that it had “significant exposure to FTX and associated corporate entities that encompass obligations owed to us by Alameda, assets held at FTX.com, and undrawn amounts from our credit line with FTX US.”
- FTX founder Sam Bankman-Fried agreed to help bail out BlockFi with a US$250 million revolving credit facility in June amid the contagion from the Terra-Luna stablecoin collapse.
- “It is unfortunate for BlockFi that the white knight that had offered them a lifeline back in June, hasn’t managed to stay solvent themselves, in part because of the massive losses accumulated at Alameda Research stemming from the same event – the collapse of Terra Luna and Three Arrow Capital,” Bradley Duke, founder and co-chief executive officer at crypto platform ETC Group, said in an email statement.