Crypto lending platform BlockFi is officially filing for bankruptcy after weeks of rumors surrounding the firm’s connections to FTX.
Today, BlockFi announced its voluntary Chapter 11 filing, naming the collapse of FTX as the primary cause.
“Today, BlockFi filed voluntary cases under Chapter 11 of the U.S. Bankruptcy Code…
Maximizing value for all clients and other stakeholders is our priority. This process will help BlockFi to stabilize our business and provide us with the opportunity to work towards consummating a comprehensive restructuring transaction to maximize value…
As part of our restructuring efforts, we will focus on recovering all obligations owed to BlockFi by counterparties, including FTX…
Acting in the best interest of our clients is our top focus and continues to guide our path forward. Chapter 11 is a transparent process and we will continue to communicate with our clients to ensure they hear directly from us…”
Per the blog post, the bankruptcy filing stems from the fallout of FTX.
“This action follows the shocking events surrounding FTX and associated corporate entities (‘FTX’) and the difficult but necessary decision we made as a result to pause most activities on our platform.”
Back in July, FTX’s US arm, FTX.US, was closing in on a $240 million deal to buy the lending platform.
At the time, BlockFi CEO Zac Prince cited the Celsius and Three Arrows Capital (3AC) collapses as the motive for the deal.
“Crypto market volatility, particularly market events related to Celsius and 3AC had a negative impact on BlockFi. The Celsius news on June 12th started an uptick in client withdrawals from BlockFi’s platform despite us having no exposure to them.
In the same week, 3AC news spread further fear in the market. While we were one of the first to fully accelerate our overcollateralized loan to 3AC, as well as liquidate and hedge all collateral, we did experience ~$80 million in losses, which is a fraction of losses reported by others.”
At time of writing, the details of the deal between FTX and BlockFi are unclear, but earlier this month, BlockFi announced a withdrawal freeze, blaming FTX and Alameda Research’s lack of clarity.
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Source: https://dailyhodl.com/2022/11/28/crypto-lending-firm-blockfi-files-for-chapter-11-bankruptcy-citing-ftx-collapse/