BlockFi, the financially troubled cryptocurrency company, has applied for protection under Chapter 11 of the bankruptcy code in the United States Bankruptcy Court for the District of New Jersey.
This follows the collapse of potential buyer FTX.
Bankruptcy Declaration
Based on CNBC's report, the statement revealed that the corporation has over 100,000 creditors and between $1 and $10 billion in assets and liabilities. It detailed a $275 million loan to FTX US, the American branch of Sam Bankman-Fried's insolvent firm.
BlockFi, like FTX, has a subsidiary in the Bahamas. The bankruptcy petition for that subsidiary was filed in the Bahamas at the same time as the US petition.
According to BlockFi's Chapter 11 filing, the company's biggest revealed customer owes the firm roughly $28 million.
Mark Renzi, from Berkeley Research Group (BRG), released a statement saying, "BlockFi looks forward to a transparent process that achieves the best outcome for all clients and other stakeholders." The crypto firm relies on BRG as its go-to banking partner.
After the demise of Three Arrows Capital, many businesses had severe liquidity problems. These include BlockFi, which operates an exchange and a custodial service that pays interest on cryptocurrency holdings.
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Link with FTX
After admitting "significant exposure" to the defunct cryptocurrency exchange FTX and its sibling trading firm Alameda Research, the New Jersey-based corporation suspended client withdrawals.
BlockFi has said in the past, "We do have significant exposure to FTX and associated corporate entities that [encompass] obligations owed to us by Alameda, assets held at FTX.com, and undrawn amounts from our credit line with FTX US," as CNBC reported.
Sources familiar with the case say that within the days after FTX's bankruptcy filing, BlockFi began discussions with restructuring specialists.
Many crypto companies, like BlockFi, are experiencing the effects of FTX's demise.
In July, FTX jumped in to save troubled lender BlockFi from going out of business by proposing to purchase it and granting a $400 million revolving credit line.
On Nov. 11, cryptocurrency exchange FTX, founded by Bankman-Fried, filed for Chapter 11 bankruptcy in the US, sparking widespread panic.
Alameda Research, Bankman-Fried's crypto trading business, and FTX US, the company's US subsidiary, are only two of the over 130 linked entities involved in the proceedings.
FTX Meltdown
The new CEO of FTX, John Ray, filed a statement with the Delaware Bankruptcy Court claiming he had never seen such a total collapse of corporate controls and a lack of trustworthy financial information in his 40 years of legal and restructuring expertise.
When liquidity dried up, users requested withdrawals, and competing exchange Binance pulled up its nonbinding agreement to acquire FTX; the business fell insolvent in a matter of days from a $32 billion valuation. This turned out to be a gross oversight.
According to revised bankruptcy documents, FTX may have more than 1 million creditors, suggesting that the collapse of FTX will have a massive effect on crypto traders and other counterparties connected to Bankman-Fried's enterprise.
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Written by Trisha Kae Andrada
