Crypto Lender BlockFi Files For Chapter 11 Bankruptcy

Cryptocurrency lender BlockFi has filed for Chapter 11 bankruptcy protection, in a New Jersey court on Monday.

New Jersey-based BlockFi in its filing said it had been hurt by exposure to the spectacular collapse of the FTX exchange earlier this month.

The collapse of FTX, which is under ‘active’ investigation in Bahamas where it is headquartered, has resulted in regulators seizing nearly a half-billion dollars in assets from the firm.

FTX blamed

FTX’s collapse also triggered a further crash of crypto prices as well.

For example the price of Bitcoin, the most popular digital currency by far, is down more than 70 percent from a 2021 peak, Reuters noted.

BlockFi reportedly said its liquidity crisis was due to its exposure to FTX via loans to Alameda, a crypto trading firm affiliated with FTX, as well as cryptocurrencies held on FTX’s platform that became trapped there.

BlockFi listed its assets and liabilities as being between $1 billion and $10 billion.

“With the collapse of FTX, the BlockFi management team and board of directors immediately took action to protect clients and the Company,” said Mark Renzi of Berkeley Research Group, the Company’s financial advisor.

“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,” said Renzi.

Stabilising move?

In a blog post, BlockFi said it had voluntarily filed petitions for Chapter 11 reorganisation, which will enable the company to stabilise its business and maximise value for all stakeholders.

“This action follows the shocking events surrounding FTX and associated corporate entities (“FTX”) and the difficult but necessary decision we made as a result to pause most activities on our platform,” it said.

Since the pause, our team has explored every strategic option and alternative available to us, and has remained laser-focused on our primary objective of doing the best we can for our clients, the firm stated.

Rest assured, we will continue to work on recovering all obligations owed to BlockFi as promptly as practicable, it added.

BlockFi’s bankruptcy filing also comes after two of BlockFi’s largest competitors, Celsius Network and Voyager Digital, filed for bankruptcy in July, citing extreme market conditions that had led to losses at both companies.