BlockFi Files For Bankruptcy Following FTX Collapse
BlockFi has initiated bankruptcy proceedings in a New Jersey federal court. The company has over 100,000 creditors and liabilities of $10 billion. This makes BlockFi the latest high-profile crypto firm to come crashing down after the collapse of industry heavyweight, FTX.
An Eventful Few Months
In July of this year, BlockFi experienced losses on loans to Three Arrows Capital, a crypto hedge fund that failed. FTX stepped in to bail out the lender with a $400 million revolving credit facility, but after collapsing this month, BlockFi was forced to halt lending activities and user withdrawals.
Court documents show that BlockFi has assets of $1 billion vs liabilities of $10 billion. The crypto lender has $257 million in available cash, which it will use to continue operations during bankruptcy proceedings.
The firm was backed by a string of high-profile investors, including Coinbase, Tiger Global, Bain Capital, plus Thiel’s Valar Ventures. FTX US was its second-biggest creditor, with BlockFi owing the US branch of FTX $275 million.
BlockFi also owed $30 million to the US Securities and Exchange Commission (SEC). This was part of a $100 million settlement deal that was agreed in February of this year. The lender found itself in the regulator’s crosshairs for providing interest-bearing accounts without registering them as securities.
In a statement issued on Monday, BlockFi commented: “This action follows the shocking events surrounding FTX and associated corporate entities and the difficult but necessary decision we made as a result to pause most activities on our platform.”
The crypto lender added that the bankruptcy filings would help facilitate a “reorganization plan that maximizes value for all stakeholders, including our valued clients”.
BlockFi was led by CEO, Zac Prince, and was valued at $4 billion in a 2021 fundraising round. The company was launched in 2017 and grew its user base to over 450,000 in the following years.
BlockFi primarily provided loans backed by borrowers’ crypto assets. The company had lent more than $10 billion to its customers. Users could also buy, sell and hold crypto tokens and stablecoins, including big names like Bitcoin, Ethereum and Tether.
The firm’s user-friendly mobile app had proven popular with investors, allowing clients to manage their crypto holdings on the go. The $0 minimum deposit requirement also made it attractive to beginners.
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