BlockFi Files Chapter 11 Bankruptcy as FTX Crumble Affects Many

| Updated
by Ibukun Ogundare · 3 min read
BlockFi Files Chapter 11 Bankruptcy as FTX Crumble Affects Many
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BlockFi’s current situation is the latest example of a rocky season in the crypto space as many companies conduct major layoffs. 

FTX has set the pace for filing bankruptcy after major layoffs, and crypto lender BlockFi has picked up the mantle. On the 28th of November, BlockFi filed Chapter 11 bankruptcy protection due to its financial ties with embattled FTX. BlockFi is known for offering crypto-backed loans to investors without credit checks. The company also paid high interest on crypto deposits and climbed to over 450,000 retail clients in 2021. However, its relationship with FTX has affected its operations, resulting in the Chapter 11 protection filed in New Jersey.

BlockFi Files Chapter 11 Bankruptcy

Ahead of BlockFi, Celsius Network and Voyager Digital drowned within one week of each other as they struggled to float in the flood of crypto declines. Major cryptocurrencies, including Bitcoin and Ethereum, plummeted, affecting many crypto firms. At writing, BTC has lost more than 70% from its 2021 peak. While its rival had collapsed, BlockFi tried to handle the situation by inking a deal with FTX in June. Considering the exchange’s dominance in the industry, coupled with its credibility, BlockFi saw it as a safe haven. The agreement was for the crumbled crypto firm to provide the crypto lender with a $250 million revolving credit facility. BlockFi CEO Zac Prince said the credit would give the company “access to capital that further bolsters” its balance sheet. Subsequently, BlockFi borrowed $275 million from a subsidiary of FTX, which caused its struggle after FTX’s unfortunate incident due to its “significant exposure” to the embattled company.

BlockFi revealed that it has about $257 million in cash on hand to help itself through the bankruptcy. It boasted of more than 100,000 creditors in its court filings, adding that it has $10 billion in assets and liabilities. At the same time, the firm hopes to significantly reduce labor costs and other expenses. As of last year, BlockFi hired 850 people to join its workforce. The bankruptcy filing further showed that BlockFi owes $30 million to the SEC and $275 million to West Realm Shires. Its top creditor is Ankura Trust Company, and it owes the loan manager $729 million. Furthermore, the bankruptcy documents revealed that Valar Ventures owns 19% of BlockFi. A financial adviser to Valar Ventures, Mark Renzi of Berkeley Research Group, stated:

“From inception, BlockFi has worked to positively shape the cryptocurrency industry and advance the sector. BlockFi looks forward to a transparent process that achieves the best outcome for all clients and all other stakeholders.”

BlockFi’s current situation is the latest example of a rocky season in the crypto space as many companies conduct major layoffs.

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Ibukun Ogundare

Ibukun is a crypto/finance writer interested in passing relevant information, using non-complex words to reach all kinds of audience. Apart from writing, she likes to see movies, cook, and explore restaurants in the city of Lagos, where she resides.

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