Embattled cryptocurrency lender BlockFi and eight of its affiliate entities have filed for Chapter 11 bankruptcy protection under the United States Bankruptcy Code. An announcement made earlier this week details the struggles of the lender and reaffirms its focus is on restructuring to provide value for clients and stakeholders.
The news comes as crypto winter deepens, with extremely volatile market conditions and major companies like FTX, Celsius and Three Arrows all suffering collapses in 2022.
BlockFi is now focusing on recovering all obligations owed to it, including from FTX, who brokered a deal with an option to buy BlockFi for USD240 million in July this year. Far removed from any potential deal, BlockFi now expects that any recovery from FTX will be delayed.
In the press release, posted by Businesswire, BlockFi said:
Due to the recent collapse of FTX and its ensuing bankruptcy process, which remains ongoing, the Company [BlockFi] expects that recoveries from FTX will be delayed.
According to a court filing, BlockFi has over 100,000 creditors with between USD1 billion to 10 billion worth of assets and liabilities each. The SEC is listed on the bankruptcy filing as BlockFi’s fourth-largest creditor, with $30 million owed to the agency in relation to a $100 million settlement which BlockFi struck with the regulator last year in relation to its yield offerings.
While platform activities are still paused at the time of writing, BlockFi has USD256.9 million in cash reserves which is expected to provide liquidity to support operations during the restructuring.
There has been no mention of how BlockFi plans to pay its creditors, or how the restructuring of the business will take shape, but the company is filing a series of customary motions to continue the operation of its business, pay employee wages and continue employee benefits without disruption.
BlockFi International Ltd, a company incorporated in Bermuda, has filed a petition with the Supreme Court of Bermuda for the appointment of joint provisional liquidators. Clients' claims will be addressed through the Chapter 11 process.
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