Cryptocurrency lender BlockFi goes to court over threat of bankruptcy
The blockchain platform BlockFi and eight related companies have initiated protection proceedings against creditors under Chapter 11 of the U.S. Bankruptcy Code. The application followed the crash of the FTX Exchange, which also has filed for bankruptcy
Cryprocreditor BlockFi has applied to court for Chapter 11 of the U.S. Bankruptcy Code, the business says in a news release. The procedure allows for protection from creditors during business reorganizations and debt restructurings. Along with BlockFI, eight other affiliated companies have filed.
BlockFi's lending platform, founded in 2017, provided loans in Stablecoin against cryptocurrency collateral and offered deposit yields. As of the end of 2021, BlockFi held $14 billion to $20 billion in customer deposits and $7.5 billion in outstanding loans. The company's investors include major industry players such as Galaxy Digital and Akuna Capital, and it has also been developed by Fidelity, Morgan Creek and Coinbase.
BlockFi said in court documents that it has more than 100,000 creditors. Its assets as well as liabilities can be estimated between $1 billion and $10 billion. Ankura Trust is listed as the biggest creditor with outstanding debt of $729 million. The second was the exchange FTX US, BlockFi owes it $275 million in loans.
On November 11, the platform announced the suspension of withdrawal of funds for clients. This decision was due to the unclear situation with FTX, FTX US and Alameda. In its announcement, BlockFi said that due to the lack of clarity regarding the status of FTX and Alameda, it could not conduct business as usual, so it was forced to limit activity on the platform.
On the same day, cryptocurrency exchange FTX Trading Ltd., Alameda Research and 130 other affiliates began voluntary proceedings under Chapter 11 of the U.S. Bankruptcy Code because of the liquidity crisis facing one of the largest cryptocurrency platforms.
Exchange founder Sam Bankman-Fried secretly covered his company's losses with funds from FTX customers. He used at least $4 billion of the exchange's funds to do so. On the day the lawsuit was filed, Bankman-Fried stepped down as CEO of the platform, and bankruptcy specialist John Ray III, who previously conducted the procedure at energy company Enron, was appointed as the new CEO.
Earlier, it was previously reported that BlockFi was preparing to file for bankruptcy. At the same time, it was alleged that the company provided millions of dollars in loans to the Alameda Researh Foundation, partially secured by tokens from cryptocurrency exchange FTX (FTT).