Crypto Lender BlockFi Files for Bankrupty Protection in the US

BlockFi, a cryptocurrency lending firm founded
in 2017, on Monday filed for Chapter 11 bankruptcy protection in New Jersey,
United States. The proceeding also includes eight of the firm’s
affiliates, BlockFi said in a statement issued on Monday, adding that its
Bermuda subsidiary has also filed a petition before the Supreme Court of
Bermuda for the appointment of joint provisional liquidators.<blockquote class=”twitter-tweet”>Today, BlockFi filed voluntary cases under Chapter 11 of the U.S. Bankruptcy Code.<a href=”https://t.co/adaAx6me4r”>https://t.co/adaAx6me4r</a>— BlockFi (@BlockFi) <a href=”https://twitter.com/BlockFi/status/1597253469374910466?ref_src=twsrc%5Etfw”>November 28, 2022</a></blockquote>A Chapter 11 bankruptcy proceeding under the
United States Bankruptcy Code enables a troubled business to reorganize its
affairs, debts, and assets. Under its filing, the crypto lender noted that
it wants to stabilize its business and undergo “a comprehensive restructuring
transaction” to give maximum value to its clients and stakeholders.The bankruptcy filing comes weeks after reports
emerged that the crypto lender was <a href=”https://www.financemagnates.com/cryptocurrency/blockfi-on-the-brink-of-bankruptcy-another-victim-of-ftx-collapse/”>preparing to
go bankrupt</a> following the lending firm’s <a href=”https://www.financemagnates.com/cryptocurrency/blockfi-halts-withdrawals-citing-lack-of-clarity-on-ftx-situation/” target=”_blank”>suspension of withdrawals</a> on its platform. BlockFi cited a “lack of clarity” on the situation with crypto exchange FTX which was
<a href=”https://www.financemagnates.com/cryptocurrency/ftx-the-rise-the-fall-and-the-reaction/” target=”_blank”>undergoing a liquidity crisis</a> at the time. FTX later <a href=”https://www.financemagnates.com/cryptocurrency/troubled-ftx-files-for-bankruptcy-as-ceo-bankman-fried-resigns/”>filed for
bankruptcy</a> protection in the
United States on the same day.“As part of its restructuring efforts, the
Company [BlockFi] will focus on recovering all obligations owed to BlockFi by
its counterparties, including FTX and associated corporate entities (‘FTX’).
Due to the recent collapse of FTX and its ensuing bankruptcy process, which
remains ongoing, the Company expects that recoveries from FTX will be delayed,”
BlockFi explained in the statement.Top CreditorsIn its <a href=”https://pacer-documents.s3.amazonaws.com/109/1094078/118164199368.pdf”>court petition</a>, BlockFi checked the
range that says its assets and liabilities stand between $1 and $10
billion. The crypto lender also indicated that it has over 100,000 creditors. West Realm Shires Inc., the corporate entity
behind FTX.US, is one of its largest creditors to which it owes $275 million in
unsecured claims. The creditor is one of the “approximately 130 additional
affiliated companies” included in FTX’s ongoing bankruptcy proceedings in the
US.However, the biggest of the 50 largest outsider
creditors is Ankura Trust Company, a trust company that specializes in stressed
and distressed situations, and to which BlockFi owes $729 million in unsecured
claims. The company also owes the United States Securities and Exchange
Commission to the tune of $30 million. The remaining 47 creditors were not
named in the petition.Furthermore, BlockFi in the Monday statement noted
that it has US$256.9 million in cash on hand. The firm expects that this will
“provide sufficient liquidity to support certain operations during the
restructuring process.”Meanwhile, FTX’s collapse has been widely attributed to its <a href=”https://www.financemagnates.com/cryptocurrency/binance-pulls-out-of-ftx-acquisition-crypto-chaos-ensues/?utm_source=FMnewsletter&utm_medium=email&utm_campaign=10.11.22%2F”>misuse of
customers’ funds</a>
which resulted in <a href=”https://www.financemagnates.com/cryptocurrency/ftx-the-rise-the-fall-and-the-reaction/”>a liquidity
crisis</a> that pushed it into
bankruptcy.