Cryptocurrency lending platform BlockFi has filed for Chapter 11 bankruptcy in the United States Bankruptcy Court for the District of New Jersey in the wake of the crypto exchange FTX collapse.
This comes a few weeks after the lender suspended customer withdrawals on its platform, citing a “lack of clarity” over the status of FTX and its sister Alameda Research.
“With the collapse of FTX, the BlockFi management team and board of directors immediately took action to protect clients and the Company. BlockFi looks forward to a transparent process that achieves the best outcome for all clients and other stakeholders,” Mark Renzi of Berkeley Research Group, the Company’s financial advisor, said.
BlockFi Files for Chapter 11
In a Monday press release, BlockFi noted that Chapter 11 will help the company stabilize its business and provide it with the opportunity to “consummate a comprehensive restructuring transaction that maximizes value for all clients and other stakeholders.”
BlockFi added that Chapter 11 would help the company focus on recovering all obligations owed to it by its counterparties, including the now-bankrupt FTX. However, BlockFi said it expects recovery from FTX to be delayed due to the latter’s bankruptcy process.
The lending firm says it has approximately $257.9 million in cash on hand, which will be used to provide sufficient liquidity to continue certain business operations during the restructuring process. According to a court filing, BlockFi has more than 100,000 creditors with liabilities and assets ranging from $1 billion to $10 billion.
BlockFi Falls Victim to FTX Debacle
Meanwhile, BlockFi’s bankruptcy filing comes a few weeks after one-time savior FTX filed for bankruptcy protection in the United States after facing a liquidity crisis connected to its own token.
BlockFi had entered a deal with the crypto exchange in July, which included FTX giving a $400 million credit facility to the lending platform with an option to buy it for up to $240 million. However, BlockFi returned to square one after FTX’s downfall this month.
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