After the FTX collapse, the most recent collapse of the crypto firm was BlockFi. The crypto lender filed for Chapter 11 bankruptcy on November 28, 2022. The firm blamed for its bankruptcy filing on the current market downtown in the price of cryptocurrencies, along with the major fallout of FTX.
BlockFi’s Chapter-11 Bankruptcy Filing
BlockFi has filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the District of New Jersey to stabilize its business.
While, as part of its restructuring efforts, BlockFi will focus on recovering all obligations owed to BlockFi by its counterparties, including FTX and the associated corporate entities (FTX.) However, BlockFi expects recoveries from FTX will be delayed due to its recent collapse.
To continue its business operation, BlockFi is filing with the Court a series of customary motions, where these “first day” motions include the requests to pay employee wages and continue employee benefits without any disruption.
However, BlockFi already initiated an internal plan to considerably minimize expenses, including labor costs. It must be noted that the platform has paused its activity.
The crypto firm has US$256.9 Million in cash on hand, which is expected to provide sufficient liquidity to support certain operations during the restructuring process.
The Financial Advisor’s Statements
The Financial Advisor of BlockFi, Mark Renzi of Berkeley Research Group, stated “With the collapse of FTX, the BlockFi management team and board of directors immediately took action to protect clients and the Company.”
“From inception, BlockFi has worked to positively shape the cryptocurrency industry and advance the sector. BlockFi looks forward to a transparent process that achieves the best outcome for all clients and other stakeholders,” he added.
Pablo Bonjour, Managing Partner at Restructuring Firm MACCO, who has worked with several crypto firms going through the bankruptcy process stated that “They ran a very aggressive lending model and it finally, unfortunately, caught up with them.”
“We’re normally discounting 50%, 60%, 80% … You’ll see a lot of negotiation off of the original amount,” Bonjour said. “You’ll see a lot of these companies survive for a little bit longer, maybe with a little bit less pressure. But ultimately, it’s bad for the industry.”
According to BlockFi’s tweet, its First Day Chapter-11 Hearing was held on November 29, 2022. A final hearing on certain of the First Day Motions will be held on January 09, 2023 at 10:00 a.m. (ET.)
The Court agreed to, on an interim basis, allow BlockFi to redact the names, addresses and contact information of individuals and clients from the list of its fifty largest creditors, which the firm will submit to the Court.
As per the Tweet, BlockFi requested for approval from the Court to restore withdrawals activities for its Wallets accounts.