Crypto lender BlockFi filed for bankruptcy protection on Monday, days after suspending withdrawals amid the ongoing fallout from exchange FTX's bankruptcy filing.
This comes as the latest industry casualty after the firm was hurt by exposure to the spectacular collapse of the FTX exchange earlier this month.
The filing in a New Jersey court comes as crypto prices have plummeted. The price of Bitcoin, the most popular digital currency by far, is down more than 70% from a 2021 peak.
The Company's Restructuring Plans
According to the company, it filed for Chapter 11 bankruptcy protection with the hope of restructuring and continuing operations. According to a press release, BlockFi has about $257 million in cash. A Bermuda-based affiliate is also filing for liquidation, a similar process.
BlockFi's Chapter 11 restructuring also underscores significant asset contagion risks associated with the crypto ecosystem.
New Jersey-based BlockFi cites in a bankruptcy filing that its substantial exposure to FTX created a liquidity crisis.
FTX filed for protection in the United States this month after traders pulled $6 billion from the platform in three days and rival exchange Binance abandoned a rescue deal.
BlockFi, suspending withdrawals a few weeks ago, citing the ongoing confusion about FTX's assets, has had a rocky year.
The company liquidated a large client earlier this year, and I need a line of credit from FTX to survive earlier this year. In announcing the suspension of withdrawals, was a warning by BlockFi to its clients not to deposit any funds to its wallet or interest accounts.
Creditor's List
According to the company's petition, BlockFi's executives estimate the company has more than 100,000 creditors and checked off the ranges. Executives estimate that the company has between $1 billion and $10 billion in assets and liabilities.
The company's largest creditors include West Realm Shires Inc., the legal name for FTX US, which has a $275 million unsecured claim, and the Securities and Exchange Commission (SEC), which has a $30 million unsecured claim. The majority of the other top 50 creditors' names were not shared.
BlockFi's largest creditor is Ankura Trust Company, which the lender appears to have hired in February and now has a $730 million unsecured claim.
The Continued Reviving Attempts
The lender was set to raise funding at a $1 billion down round valuation in June after raising $350 million at a $3 billion valuation in March 2021. As recently as last July, the company was looking to go public within the next year and a half, with a potential $500 million fundraise coming soon.
However, the company had to pay $100 million in February as part of a settlement with the SEC, and several state regulators over allegations its high-yield crypto lending product violated state and federal securities laws. BlockFi also had to register its BlockFi Yield product with the SEC as part of the settlement.
Additionally, the company cut around a fifth of its workforce in June as the decline of the cryptocurrency market became inevitable. Consequently, market capitalization, one measure of the overall market value, fell from over $3 trillion a year ago to $1 trillion by June.
BlockFi intends to seek authority to honor client withdrawal requests from its customer wallet accounts, in which crypto assets are held in custody. However, the company did not disclose plans for treating withdrawal requests from its other products, including interest-bearing accounts.
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