Business

BlockFi files for bankruptcy as crypto fallout spreads beyond FTX

More than 36,400 Texans had invested in the cryptocurrency platform based on an earlier enforcement action against the company.

BlockFi has become the latest crypto firm to collapse in the wake of crypto exchange FTX’s rapid downfall.

BlockFi said in a statement that it will use the Chapter 11 bankruptcy process to “focus on recovering all obligations owed to BlockFi by its counterparties, including FTX and associated corporate entities,” adding that recoveries are likely to be delayed by FTX’s own bankruptcy. Chapter 11 bankruptcy allows a company to continue operating while working out a plan to repay creditors.

The petition, filed in New Jersey, lists BlockFi’s assets and liabilities at between $1 billion and $10 billion each. The company said in the statement that it had around $257 million of cash on hand, and is starting an “internal plan to considerably reduce expenses, including labor costs.”

Citing “a lack of clarity” over the status of bankrupt FTX and Alameda Research, the Jersey City, N.J.-based company earlier halted withdrawals and said it was exploring “all options” with outside advisers.

Earlier this year, BlockFi agreed to pay $100 million to the Securities and Exchange Commission and states for failing to register the offers and sales of its retail crypto lending product. Texas has already acted and received $943,396, according to the Texas State Securities Board. More than 36,400 Texans had invested over $688 million in BlockFi at the end of 2021.

In BlockFi’s bankruptcy filing, FTX US is listed as one of its top unsecured creditors, with a $275 million loan. The company’s largest unsecured creditor, Ankura Trust Company, is owed about $729 million, according to the petition. Ankura acts as a trustee for BlockFi’s interest-bearing crypto accounts, according to its website.

BlockFi in July received a capital injection from a now-collapsed FTX US and had also collateralized loans to Sam Bankman-Fried’s trading firm Alameda Research.

The company is the latest crypto firm to seek bankruptcy amid a prolonged slump in digital asset prices. Lenders Celsius Network and Voyager Digital Holdings also filed for court protection this year.

Kevin Simauchi and Hannah Miller, Bloomberg

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