New Jersey-based BlockFi, affiliated with crypto exchange FTX, filed for bankruptcy protection in early November.
Major crypto lender BlockFi has filed for Chapter 11 bankruptcy protection along with eight affiliates, the latest crypto crash to follow the spectacular collapse of the FTX exchange earlier in the day. this month.
Monday’s filing in a New Jersey court comes as crypto prices plummet, with Bitcoin down more than 70% from its 2021 peak.
New Jersey-based BlockFi is affiliated with FTX, filed for defense in the US earlier this month after traders withdrew $6 billion from the platform in three days and rival exchanges Binance abandons rescue deal.
In a court filing on Monday, BlockFi listed FTX as its second-largest creditor, with $275 million in debt renewed earlier this year. It said it owes money to more than 100,000 creditors.
Under the agreement signed with FTX in July, BlockFi will receive $400 million worth of revolving credit while FTX has the option to purchase it for up to $240 million.
BlockFi’s bankruptcy filing also comes after two of BlockFi’s biggest competitors, Celsius Network and Voyager Digital, filed for bankruptcy in July citing extreme market conditions resulting in losses. in both companies.
Cryptocurrency lenders, the de facto bank of the crypto world, have boomed during the pandemic, attracting retail customers with double-digit interest rates in exchange for their crypto deposits. surname. On the other hand, institutional investors such as hedge funds looking to bet with leverage paid higher interest rates to borrow money from lenders, who profited from the spread.
Cryptocurrency lenders are not required to hold capital or a liquidity buffer like traditional lenders, and some find themselves impacted when a lack of collateral forces them — and their customers — suffer huge losses.
list of creditors
BlockFi’s largest creditor is Ankura Trust, a company that represents creditors in stressful situations and is owed $729 million. Valar Ventures, a venture capital fund affiliated with billionaire businessman Peter Thiel, owns 19% of BlockFi.
BlockFi also lists the United States Securities and Exchange Commission (SEC) as one of its largest creditors, with a $30 million claim. In February, a BlockFi subsidiary agreed to pay $100 million to the SEC and 32 states to settle fees related to a retail crypto lending product the company has provided to nearly 600,000 investors.
In a blog postBlockFi says Chapter 11 cases will allow the company to stabilize its business and maximize value for all stakeholders.
“Acting in the best interest of our customers is our top priority and continues to guide our way forward,” BlockFi said.
BlockFi previously halted withdrawals from its platform and admitted that it has “substantial exposure” to FTX and its related entities, including “the obligations that Alameda owes us to us.” [FTX’s trading firm]assets held at FTX.com and undrawn funds from our line of credit with FTX.US.”
In its bankruptcy filing, BlockFi said it hired Kirkland & Ellis and Haynes & Boone as bankruptcy advisors and Berkeley Research Group as financial advisors.
At the end of June, a third of BlockFi’s $1.8 billion outstanding balance was unsecured, according to the company.