BlockFi, situated in New Jersey, claimed in a bankruptcy petition that a liquidity issue was brought on by its significant exposure to FTX.
BlockFi, a cryptocurrency lender, said on Monday that it has filed for Chapter 11 bankruptcy protection, becoming the latest company to fail in the market after being exposed to the stunning collapse of the FTX exchange earlier this month.
The court petition in New Jersey comes as cryptocurrency values have fallen sharply. According to Monsur Hussain, senior director at Fitch Ratings, “BlockFi’s Chapter 11 reorganization shows considerable asset contagion risks connected with the crypto ecosystem.”
BlockFi, a New Jersey-based business controlled by cryptocurrency entrepreneur and former finance professional Zac Prince, alleged in a bankruptcy filing that a liquidity problem was caused by its substantial exposure to FTX. After investors withdrew $6 billion from the exchange in only three days and Binance, a rival exchange, abandoned a rescue plan, Sam Bankman-Fried, the creator of FTX, filed for protection in the US this month.
According to the bankruptcy filing by Mark Renzi, managing director of Berkeley Research Group, the proposed financial advisor for BlockFi, “Although the debtors’ exposure to FTX is a primary reason of this bankruptcy petition, the debtors do not suffer the many concerns reportedly confronting FTX.” “Quite the contrary,” According to BlockFi, the liquidity problem was brought on by both coins.
BlockFi launched a lawsuit against a holding company on Monday in an effort to collect shares of Robinhood Markets Inc. that were promised as collateral three weeks earlier, before BlockFi and FTX submitted their documents.
Renzi said that earlier in November, BlockFi had liquidated a portion of its cryptocurrency holdings to pay for its bankruptcy. BlockFi currently has $256.5 million in cash on hand thanks to the $238.6 million in cash earned from those deals. BlockFi cited FTX as its second-largest creditor in a court statement on Monday, with $275 million owing on a loan made earlier this year. It claimed to owe more than 100,000 debtors money. Additionally, the business revealed in a separate filing that it intends to fire two-thirds of its 292 staff members.
BlockFi was to get a $400 million revolving credit facility as part of a contract inked with FTX in July, and FTX was given the option to purchase it for up to $240 million. BlockFi’s bankruptcy filing also follows those of Celsius Network and Voyager Digital, two of BlockFi’s biggest rivals, which both declared bankruptcy in July claiming adverse market circumstances that had caused losses at their respective businesses.
