Crypto lender BlockFi files for bankruptcy in the wake of FTX collapse
BlockFi's Chapter 11 bankruptcy filing revealed that the crypto lender is indebted to more than 100,000 creditors, including the US Securities Exchange Commission.
Crypto lender and its eight subsidiaries on Monday filed for Chapter 11 bankruptcy in a New Jersey district court, becoming the latest casualty of the sudden collapse of earlier this month. It, however, indicated that it will continue operations in the meantime.
The development comes after several days of speculation on the company’s financial health.
The crypto lender is also downsizing its workforce. Its Chapter 11 bankruptcy filing revealed that BlockFi is indebted to more than 100,000 creditors. In the filing, the firm listed the US Securities and Exchange Commission (SEC) as one of its creditors, with a $30 million claim.
BlockFi did not respond to a request for comment.
BlockFi was launched in 2017 by crypto entrepreneur Zac Prince and Flori Marquez with an aim to bridge the gap between traditional finance (TradFi) and cryptocurrency.
It was backed by marquee venture capitalists including Bain Capital Ventures, Tiger Global, and US-based VC fund Valar Ventures—founded by Andrew McCormack, James Fitzgerald, and Peter Thiel—which owns 19% of BlockFi's equity shares.
Recent developments
In the wake of the FTX collapse, the value of most cryptocurrencies has been fluctuating in the markets, with Bitcoin down 21% and Ethereum down 25% over the past 30 days, as per CoinMarketCap data. This year alone, many crypto firms have run out of business, including Celsius Network and Voyager.
Weeks after Three Arrows Capital (3AC) went bankrupt, BlockFi was also struggling with its finances. In June, it received a $400 million emergency line of credit from FTX .
However, on November 8, referring to the same deal, BlockFi Founder and COO Flori Marquez stated that despite receiving the credit in line from FTX, BlockFi remained an independent entity and stated that its products are fully operational.
However, post that announcement, on November 11, BlockFi suspended client withdrawals, citing the lack of clarity around the collapse of FTX.
According to its statement on November 28, BlockFi said it had $256.9 million in cash on hand, and had also filed a series of customary motions in the court to allow the firm to continue to operate its business.
Edited by Kanishk Singh