The FTX downturn is gradually spreading to more cryptocurrency firms as BlockFi is the next firm to file for bankruptcy.
BlockFi said Nov. 28 that it filed for Chapter 11 bankruptcy protection in the US Bankruptcy Court for the District of New Jersey and would seek to recover all obligations owed to BlockFi by its counterparties, including 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 said
In addition, BlockFi reported having $256.9 million in cash on hand, which should provide sufficient liquidity during the “restructuring.”
As of the recent bankruptcy filing by BlockFi CEO Zachary Prince, BlockFi has 100,000+ creditors, $1-10 billion in liabilities, and $1-10 billion in assets.
While activity on the platform remains paused, the company said it aims to stabilize its business with the bankruptcy filing and aims to complete a restructuring transaction that maximizes value for all clients and other stakeholders.
$1-10bln in liabilities
$1-10bln in assetshttps://t.co/3hBTUHfyQ0 pic.twitter.com/FkEHo056iz
— db (@tier10k) November 28, 2022
The filing also revealed that the Securities and the Exchange Commission (SEC) is one of the creditors with $30 million. According to a source, the crypto lender is also laying off a significant portion of its staff.
BlockFi on the brink of possible bankruptcy for the last few weeks
The crypto lender faced difficulties after the popular crypto exchange FTX collapsed, and BlockFi paused client withdrawals on Nov. 11. That time, however, BlockFi stood its ground, clarifying that there was a lack of clarity regarding the FTX issue.
Prior to that, BlockFi COO Flori Marquez informed investors that all deposits, withdrawals, trading, and lending protocols are active
However, the Crypto firm announced on November 14 that it had “significant exposure” to FTX. At that time, BlockFi confirmed that it had adequate liquidity to explore all options and engaged outside advisors like Haynes and Boone to assist with its next moves.