Crypto lender BlockFi declares bankruptcy as FTX contagion spreads
Cryptocurrency lender BlockFi has filed for Chapter 11 bankruptcy as fallout from the collapse of crypto exchange FTX infects other companies in the industry.
BlockFi claimed more than 100,000 creditors with liabilities ranging from $1 billion to $10 billion in a bankruptcy filing submitted Monday in New Jersey, where the company is based. BlockFi, which was founded in 2017, said bankruptcy protection will allow it to stabilize the company and restructure.
Today, BlockFi filed voluntary cases under Chapter 11 of the U.S. Bankruptcy Code.https://t.co/adaAx6me4r
— BlockFi (@BlockFi) November 28, 2022
"With the collapse of FTX, the BlockFi management team and board of directors immediately took action to protect clients and the Company," BlockFi's financial advisor, Mark Renzi of Berkeley Research Group, said in a statement Monday. "From inception, BlockFi has worked to positively shape the cryptocurrency industry and advance the sector."
The restructuring will include an attempt to recover all obligations that BlockFi is owed by its counterparties, including FTX and associated corporate entities. BlockFi, which was bailed out by Sam Bankman-Fried's FTX early last summer, said it anticipates recoveries from FTX will be delayed.
BlockFi marks the fourth crypto-focused company to seek bankruptcy protection this year, following FTX, Voyager Digital and Celsius Network. After FTX filed for bankruptcy earlier this month, BlockFi announced on Twitter that it was pausing client withdrawals as a result of FTX's implosion. The FTX meltdown has also impacted some crypto prices and the nonfungible token market.
Tech entrepreneurs Zac Prince and Flori Marquez founded BlockFi in 2017 with financial backing from Akuna Capital and Coinbase Ventures among other firms. BlockFi started to struggle financially in July and received a $400 million bailout from FTX.
Days after FTX declared bankruptcy, BlockFi said it had significant exposure to FTX and its other corporate entities. BlockFi held some of its crypto assets in custodial accounts with FTX, adding a level of complication to the bankruptcy proceedings.
BlockFi has $256.9 million in cash on hand, which it expects will provide enough cushion to support some operations during the restructuring.