The famous New Jersey, Jersey-based cryptocurrency lender, BlockFi, has filed for Chapter 11 bankruptcy protection in the United States of America Bankruptcy Court for the District of New Jersey.
The crypto firm has been sailing in troubled waters since the announcement of FTX, one of the industry’s biggest cryptocurrency exchange companies also filed for bankruptcy earlier in November. BlockFi had expressed its impending doom by declaring that the company had high exposure to Sam Bankman-Fried’s FTX company along with its other affiliates, Alameda Research.
The entire crypto industry has been in a wild uproar since filing FTX’s bankruptcy, as many companies and firms in relationship with the Bahamas-based crypto exchange were all hit hard. This costs thousands of investors and traders millions of dollars invested in FTX and its native coin, FTT.
BlockFi is one of the unlucky firms trapped in the tragic chain reactions that sprouted from FTX’s controversy as the company regrettably published its press release, now stating its decision to file for bankruptcy.
BlockFi and eight of its affiliates filed for bankruptcy, citing that it had over 100,000 creditors, assets, and liabilities between $1 to $10 billion. The crypto lender announced that although it had filed for bankruptcy, it planned to restructure and continue with operations for now. To do this, BlockFi mentioned that it currently had $257 million in cash, which it hoped would provide enough liquidity to support specific operations as it restructures.
In the press release, the New Jersey crypto firm added, “As part of its restructuring efforts, the company will focus on recovering all obligations owed to BlockFi by its counterparties, including FTX,” however, the company expects that this payment from FTX will be delayed due to its ongoing bankruptcy filing.
Shortly after the unexpected fall of the once excellent cryptocurrency exchange in the industry, BlockFi halted all withdrawals and deposits to its firm, alerting its customers not to deposit funds into it or any of its affiliate company accounts, citing that it had “significant exposure” to FTX following its $400 million credit line which the latter company agreed to provide it back in June.
However, this deal meant that FTX could acquire the Jersey City crypto lender anytime. BlockFi’s bankruptcy filing results from being financially tangled with FTX and its affiliates.
The Bermudan company, though, states in its press release that because of its Chapter 11 filing, it had been given customary motions which would permit the company to resume its business operations, and these motions would encompass requests to pay workers’ wages, maintain employee benefits without interruption and create a Key Employee Retention Plan to secure the company’s trained internal resources for vital business functions during the bankruptcy filing.
“From inception, BlockFi has worked to shape the cryptocurrency industry and advance the sector positively. BlockFi looks forward to a transparent process that achieves the best outcome for all clients and other stakeholders,” Mark Renzi of Berkeley Research Group said, the firm’s financial advisor.
BlockFi, which had last been valued, according to PitchBook, to be at $4.8 billion, has a $275 million unsecured claim to FTXUS, the US branch of the crypto exchange, FTX. The company’s biggest creditor is Ankura Trust Company (which BlockFi had hired earlier this year in February), with an unsecured claim of $730 million.
Undoubtedly, BlockFi has had a largely unpleasant year. It had liquidated a vast client—which people presume to be Three Arrows Capital, the now-bankrupt hedge fund—further setting it to become financially entangled with FTX because the company had come to its rescue.
The famous crypto lender had desirable plans for its growth. However, it was set back by SEC (Securities and Exchange Commission) by paying a $100 million settlement for failing to adhere to federal and state securities laws. Part of this settlement price included BlockFi registering BlockFi Yield product with the SEC.
After filing for bankruptcy, the company had stated that it would also initiate an internal action to “considerably” lower expenses, including labor costs. It is a sad year for the crypto industry as traders, enthusiasts, and investors are consistently being hit from all corners with extreme events that cause a loss in savings and anxiety about the crypto market.
BlockFi is the latest crypto firm caught in the web of FTX’s wrongdoing as the company has filed for Chapter 11 bankruptcy protection from the New Jersey Court. The crypto lender, which once had a bright future, no longer knows what lies ahead of its bleak path since the fall of FTX.