Days after halting withdrawals in the wake of the repercussions from the bankruptcy filing of cryptocurrency exchange FTX, cryptocurrency financier BlockFi filed for bankruptcy protection on Monday.
By announcing its Chapter 11 bankruptcy file, the corporation indicated its intention to reorganize while maintaining business operations. A recent press release said BlockFi had approximately $257 million in liquid assets. A subsidiary in Bermuda has also initiated liquidation.
BlockFi’s petition claims that the organization has more than 100,000 creditors, which falls within the ranges officials estimated. Management believes the company’s assets and liability values are around $1 billion and $10 billion.
West Realm Shires Inc., the formal name for FTX US, has a $275,000,000 unsecured claim against the corporation, and the Securities and Exchange Commission (SEC) has a $30,000,000 unsecured claim against the company. There was a lack of transparency regarding the identities of the bulk of the top 50 creditors.
Ankura Trust Company, whom BlockFi claims to have recruited in February, is its largest client and has an unpaid claim of $730 million.
It’s been a rough year for BlockFi, which temporarily halted withdrawals due to the continued uncertainty around FTX’s assets. Early this year, the company had to liquidate a major client and rely on a credit line from FTX just to stay afloat. Instead, BlockFi cautioned its customers not to add any more money to their wallets or interest accounts when it announced the withdrawal freeze.
After bringing in $350 million at a $3 billion valuation in March of 2021, the lender planned a $1 billion down-level valuation this coming June. As recently as July of this past year, the company had plans to go mainstream over the next year and a half. Also, a fund-raising event for up to 500 million dollars was perhaps on the horizon.
However, in February, the business paid $100 million to settle charges that its high-yield cryptocurrency financing program breached local and federal regulations. As a result, BlockFi’s BlockFi Yield service had to be registered with the SEC as a part of the agreement.
Since the general bitcoin market dropped in June, the company had to lay off almost a fourth of its workers. One indicator of the market’s worth, market cap, dropped from more than $3 trillion a year earlier to less than $1 trillion by June.
BlockFi CEO Zac Prince stated that the business had to liquidate a big account following the demise of Three Arrows Capital, albeit he did not specify whether or not the client in question was Three Arrows. Soon after, the cryptocurrency exchange FTX provided the lender with a $250 million credit line, which expanded to $400 million and allowed FTX US to buy the lender.
A competitor to BlockFi in the cryptocurrency banking industry, Celcius dissolved and became bankrupt amidst the confusion. The cryptocurrency markets and lending corporates were on the brink of collapse when Bankman-Fried consented to a $400 million agreement to save BlockFi.
But after days of uncertainty about its financial stability, FTX went bankrupt in the 2nd week of November. The controversy began after CoinDesk published an article showing that many of Alameda’s assets were made up of FTX’s exchange token, FTT. This led Binance CEO Changpeng “CZ” Zhao to declare that he will sell off all of Binance’s FTT holdings. BlockFi temporarily halted the ability to withdraw funds from FTX later on.
Amid the chaos, BlockFi declared that it would temporarily halt withdrawals, citing that it had placed assets on FTX and was currently owed a portion of the loan FTX had granted.