Cryptocurrency lender BlockFi is filing for Chapter 11 bankruptcy protection as the fallout from the collapse of crypto exchange FTX spreads outward.
In a Monday filing for bankruptcy protection in New Jersey, where it is based, BlockFi claimed more than 100,000 creditors and liabilities ranging from $1 billion to $10 billion.
“Chapter 11 is a transparent process and we will continue to communicate with our clients to ensure they hear directly from us,” BlockFi said in a tweet.
Cryptocurrencies were in retreat Monday in what has already been a disastrous year. Bitcoin, among the most widely traded cryptocurrencies, has plunged almost 70% in 2022 to below $16,000 apiece.
BlockFi Inc., which was founded in 2017, said bankruptcy protection will allow it to stabilize the company and restructure. That restructuring will include an attempt to recover all obligations that it is owed by its counterparties, including FTX. BlockFi, which was bailed out by Sam Bankman-Fried’s FTX early last summer, said it anticipates recoveries from FTX will be delayed.
FTX filed for bankruptcy protection earlier this month. BlockFi said that because of the FTX collapse, it was no longer able to do business as usual and was pausing client withdrawals.
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Text, in yellow, announcing cryptocurrency lender BlockFi’s bankruptcy filing appears on the company website on a smart phone on Monday, Nov. 28, 2022, in New York. BlockFi said that it was filing for bankruptcy protection to stabilize its business and give it the chance to perform a restructuring. Credit: AP Photo/Peter Morgan
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Binance CEO Changpeng Zhao answers a question during a Zoom meeting interview with The Associated Press on Nov. 16, 2021. Cryptocurrency exchange giant Binance is proposing the creation of a rescue fund that would save otherwise healthy crypto companies from failure, aiming to stave off the cascading effects of last week’s implosion of the third-largest crypto exchange FTX. Zhao posted on Twitter Monday, Nov. 14, 2022 that his company would create “an industry recovery fund, to help projects who are otherwise strong, but in a liquidity crisis.” Credit: AP Photo, File
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Chairwoman Maxine Waters, D-Calif., right, and Ranking Member Patrick McHenry, R-N.C., left, listen to testimony from banking leaders as they appear before a House Committee on Financial Services Committee hearing on Capitol Hill in Washington, Sept. 21, 2022. Lawmakers plan to investigate the failure of FTX, the large crypto exchange that collapsed last week and filed for bankruptcy protection, leaving investors and customers staring at losses that could total in the billions of dollars. Credit: AP Photo/Andrew Harnik, File
“With the collapse of FTX, the BlockFi management team and board of directors immediately took action to protect clients and the company,” Mark Renzi of Berkeley Research Group, BlockFi’s financial advisor, said in a prepared statement Monday.
The implosion of FTX is still being sorted out and it is unknown how much collateral damage it could inflict.
There are already comparisons to the collapse of the storied Wall Street bank Lehman Brothers in 2008, at least within the confines of cryptocurrency. The bank trafficked heavily in subprime mortgages that lost almost all of their recognized worth and shook the U.S. and global economy.
BlockFi has $256.9 million in cash on hand, which it expects will provide enough cushion to support some operations during the restructuring.
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BlockFi seeks protection as FTX collapse rattles crypto (2022, November 28)
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