New Jersey-based BlockFi had ties to cryptocurrency exchange FTX, which filed for bankruptcy in early November.
Major cryptocurrency lender BlockFi has filed for Chapter 11 bankruptcy protection along with eight affiliates, it said, the latest crypto victim following the spectacular collapse of the FTX exchange earlier this month.
The filing in a New Jersey court on Monday comes as cryptocurrency prices plummet, with Bitcoin falling more than 70 percent from a 2021 high.
New Jersey-based BlockFi had ties to FTX, which requested protection in the United States earlier this month after traders withdrew $6 billion from the platform in three days, and rival exchange Binance abandoned a bailout agreement.
In a court filing Monday, BlockFi listed FTX as its second-largest creditor, with $275 million owed on a loan made earlier this year. He said he owes money to more than 100,000 creditors.
Under an agreement signed with FTX in July, BlockFi would receive a $400 million revolving credit facility, while FTX had the option to buy 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 that had resulted in losses for both companies.
Cryptocurrency lenders, the de facto banks of the cryptocurrency world, grew during the pandemic, luring retail customers with double-digit rates for their cryptocurrency deposits. On the other hand, institutional investors, such as hedge funds looking to make leveraged bets, paid higher rates to borrow the funds from lenders, who profited from the difference.
Crypto lenders are not required to maintain capital or liquidity buffers like traditional lenders, and some found themselves exposed when collateral shortages forced them, and their clients, to take heavy 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 linked to billionaire businessman Peter Thiel, owns 19 percent of BlockFi’s equity shares.
BlockFi also listed the US Securities and Exchange Commission (SEC) as one of its largest creditors, with a claim of $30 million. In February, a BlockFi subsidiary agreed to pay $100 million to the SEC and 32 states to settle charges related to a retail crypto-lending product the company offered to nearly 600,000 investors.
in a blog postBlockFi said its Chapter 11 cases will allow the company to stabilize its business and maximize value for all stakeholders.
“Acting in the best interest of our clients is our top priority and continues to guide our path forward,” BlockFi said.
BlockFi had previously paused withdrawals from its platform and acknowledged that it had “significant exposure” to FTX and its associated entities, including “obligations Alameda owes us.” [FTX’s trading firm]assets held at FTX.com and unused amounts of our line of credit with FTX.US.”
In its bankruptcy filing, BlockFi said it had retained Kirkland & Ellis and Haynes & Boone as bankruptcy attorneys and Berkeley Research Group as financial advisor.
As of the end of June, a third of BlockFi’s $1.8 billion outstanding loans were unsecured, according to the company.