Digital asset lending company BlockFi, in turn, went bankrupt after the collapse of FTX.
Digital asset lender BlockFi just filed for bankruptcy. This comes two weeks after the company suspended all activity on its platform, including withdrawals, following the crash of the FTX exchange.
Digital asset lending company BlockFi, in turn, went bankrupt
“BlockFi’s bankruptcy will allow BlockFi to stabilize its operations and provide an opportunity for BlockFi to reorganize to maximize its value to all shareholders,”the company said in a statement. “The court-supervised restructuring process is transparent and promotes dialogue among all shareholders.”
Like many others, BlockFi has faced a very uncertain future since last spring. FTX has offered to back BlockFi with a $400 million credit line. This agreement also gave FTX a purchase option for up to $240 million. This meant that the two companies were very financially connected and the fall of FTX had a devastating effect on BlockFi.
“Due to the collapse of FTX, BlockFi leadership and management have taken immediate action to protect customers and business,” BlockFi financial advisor Mark Renzi of Berkeley Research Group said in a statement. “BlockFi is working to positively change the crypto industry and move the industry forward. BlockFi looks forward to the results of this transparent process, which will bring the best results for all customers and shareholders.”
after the collapse of FTX
As part of its restructuring, the company “will assume responsibility for reimbursing all liabilities incurred in relation to BlockFi, including from FTX and its affiliates.”However, recovering the cash from FTX will certainly take time, given that the company has filed for bankruptcy. In addition, BlockFi explains that it has $256.9 million in cash, which represents “enough liquidity to support certain operations in the restructuring process,” such as employee salaries.
In its court filing, BlockFi estimates it has over 100,000 creditors totaling between $1 billion and $10 billion. Creditors include FTX (to which it owes $275 million) and the Securities and Exchange Commission, to which it owes $30 million.
A few months ago, BlockFi pledged to pay $100 million in a deal with the SEC and 32 states. The Securities and Exchange Commission said that BlockFi offers interest-bearing accounts without reporting them to the Securities Act. The agency also found that the company was making “false and misleading”statements about the risk of its lending business.
Filing for Chapter 11 bankruptcy protection does not necessarily mean the business will disappear. This process allows the struggling company to continue operating while it restructures and looks for ways to pay off its creditors. That said, recovering from bankruptcy is difficult, and BlockFi will be just the latest in a long line of unreliable crypto industries.