Cryptocurrency lender BlockFi has filed for Chapter 11 bankruptcy protection, the company said on Monday, the latest damage in the industry after it was exposed to a spectacular collapse. of the FTX exchange earlier this month.
The filing with the New Jersey court comes as cryptocurrency prices have plummeted. Price of bitcoinThe most popular digital currency to date, is down more than 70% from its 2021 peak.
“BlockFi The restructuring under Chapter 11 highlights the significant asset contagion risks associated with the crypto ecosystem, said Monsur Hussain, senior director at Fitch Ratings.
New Jersey-based BlockFi, founded by Zac Prince, a crypto entrepreneur turned fintech executive, said in a bankruptcy filing that it has significant exposure to FTX created a liquidity crisis. FTX, founded by Sam Bankman-Fried, filed for protection in the US this month after traders withdrew $6 billion (approximately Rs 49,020) from the platform in three days and the exchange competitor exchanges abandon a rescue agreement.
“Although the debtor’s exposure to FTX was the primary cause of this bankruptcy filing, the debtor is not,” said Mark Renzi, chief executive officer of Berkeley Research Group, recommended financial advisor. faces the myriad of problems that FTX faces.” BlockFi. “Completely opposite.”
BlockFi said the liquidity crisis was due to its exposure to FTX through loans to Alameda, a crypto exchange company affiliated with FTX, as well as cryptocurrencies held on FTX’s platform. stuck there. BlockFi has listed its assets and liabilities as ranging from $1 billion (approximately Rs 8,170) to $10 billion (approximately Rs 81,700).
BlockFi on Monday also sued a holding company for Bankman-friedis seeking to recover shares of Robinhood Markets Inc that were pledged as collateral three weeks ago, before BlockFi and FTX filed for bankruptcy protection.
Renzi said BlockFi sold part of its crypto assets in early November to fund the bankruptcy. That sale raised $238.6 million (approximately Rs. cash, and BlockFi now has $256.5 million (approximately Rs 2,100 crore) in cash) on hand.
In a court filing on Monday, BlockFi listed FTX as its second-largest creditor, with a $275 million loan extended earlier this year. It said it owes money to more than 100,000 creditors. The company also said in a separate filing that it plans to lay off two-thirds of its 292 employees.
Under an agreement signed with FTX in July, BlockFi will receive a revolving credit of $400 million (Rs 3,270) while FTX has the option to purchase it for up to $240 million (approximately 1,960 crore). rupees).
BlockFi’s bankruptcy filing also comes after two of BlockFi’s biggest competitors, Celsius Network and Voyager Digital, filed for bankruptcy in July, citing the extreme market conditions that led to it. 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.
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.
BlockFi’s first bankruptcy hearing is scheduled for Tuesday. FTX did not respond to a request for comment.
list of creditors
BlockFi’s largest creditor is the Ankura Trust, which represents creditors in stressful situations and is owed $729 million (approximately Rs 5,600). Valar Ventures, a venture capital fund affiliated with Peter Thiel, owns 19% of BlockFi.
BlockFi also lists the US Securities and Exchange Commission as one of its largest creditors, with a claim of $30 million (about Rs 245 crore). In February, a BlockFi subsidiary agreed to pay $100 million (approximately Rs 820 crore) to the SEC and 32 states to settle fees related to a retail crypto lending product that the company claims. provided to nearly 600,000 investors.
Bain Capital Ventures and Tiger Global co-led BlockFi’s March 2021 funding round, BlockFi said in a press release issued at the time. Both companies did not immediately respond to requests for comment.
In a blog post, BlockFi said 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.
In its bankruptcy filing, BlockFi said it hired Kirkland & Ellis and Haynes & Boone as bankruptcy advisors.
BlockFi previously halted withdrawals from its platform.
In a filing, Renzi said Blockfi intends to seek authority to honor customer withdrawal requests from customer wallet accounts in which crypto assets are held. However, the company has not revealed plans for how it might handle withdrawal requests from its other products, including interest-bearing accounts.
“BlockFi customers are ultimately able to recoup a substantial portion of their investment,” Renzi said in the filing.
source
BlockFi was founded in 2017 by Prince, now the company’s chief executive officer, and Flori Marquez. Although headquartered in Jersey City, BlockFi also has offices in New York, Singapore, Poland and Argentina, according to its website.
In July, Prince tweeted that “it’s time to stop putting BlockFi in the same bucket/sentence as Voyager and Celsius.”
“Two months ago we looked ‘the same.’ They closed down and hurt their customers,” he said.
According to a BlockFi profile published by Inc. earlier this year, Prince grew up in San Antonio, Texas and financed his college education at the University of Oklahoma and Texas State University with winnings from tournaments. online poker game. Before starting BlockFi with Marquez, he worked at Orchard Platform, a brokerage agency, and at Zibby, a rental-to-own company now called Katapult.
Marquez previously worked at Bond Street, a small business lending institution that was merged into Goldman Sachs in 2017, according to Inc.
© Thomson Reuters 2022
