Crypto Lender BlockFi files for bankruptcy in New Jersey

Nov. 28 (Reuters) – Major cryptocurrency lender BlockFi has filed for Chapter 11 bankruptcy protection along with eight of its subsidiaries, it said Monday, in the latest cryptocurrency casualty in the wake of FTX’s spectacular collapse earlier this month. from this month.

The New Jersey court filing comes as cryptocurrency prices plunge, with bitcoin down more than 70% from its 2021 peak.

New Jersey-based BlockFi had ties to FTX, which filed for protection in the US earlier in November after traders withdrew $6 billion from the platform in three days and rival exchange Binance abandoned a bailout deal.

In Monday’s lawsuit, BlockFi listed FTX as its second-largest creditor, with $275 million owed on a loan extended earlier this year. It said it owed money to more than 100,000 creditors.

Under a deal signed with FTX in July, BlockFi was to receive a $400 million revolving credit facility while FTX had an option to buy it for $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 due to harsh market conditions that led to losses for both companies.

Cryptocurrency lenders, the de facto banks of the crypto world, have thrived during the pandemic, attracting retail customers with double-digit rates for their cryptocurrency deposits. On the flip side, institutional investors, such as hedge funds looking for leveraged bets, paid higher rates to borrow money from lenders, who cashed in on the difference.

Cryptocurrency lenders are not required to hold capital or liquidity in reserve like traditional lenders and some found themselves exposed when a lack of collateral forced them – and their clients – to take large losses.

List of delegates

BlockFi’s largest creditor is the Ankura Trust, a firm that represents creditors in distress, with $729 million in debt. Valar Ventures, the venture capital fund associated with Peter Thiel, owns 19% of the shares in BlockFi.

BlockFi also listed the US Securities and Exchange Commission as one of its largest creditors, with a claim of $30 million. In February, a subsidiary of BlockFi agreed to pay $100 million to the SEC and 32 states to settle charges related to a cryptocurrency retail lending product that the company offered to nearly 600,000 investors.

in a blog postBlockFi said the Chapter 11 cases will enable the company to stabilize its business and maximize value for all stakeholders.

“Working in the interest of our customers is our top priority and we will continue to steer our path forward,” said BlockFi.

BlockFi had previously halted withdrawals from its platform and acknowledged that it had “significant exposure” to FTX and its related entities, including “liabilities owed to us by Alameda, assets held at FTX.com, and unwithdrawn amounts from a private credit line.” Us with FTX.US.” Read more

In its bankruptcy filing, BlockFi said it hired Kirkland & Ellis, Haynes & Boone as bankruptcy advisor and Berkeley Research Group as financial advisor.

At the end of June, a third of BlockFi’s $1.8 billion in outstanding loans were unsecured, according to the company.

(Reporting by Hannah Lang in Washington, Nikette Nishant and Mania Saini in Bengaluru and Elizabeth Howcroft in London; Additional reporting by Dietrich Knuth; Editing by Megan Davies, Chingini Ganguly and Connor Humphreys

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