New Jersey-based crypto lender BlockFi on Monday filed for Chapter 11 bankruptcy protection. The crypto lender is the latest crypto industry casualty to fall due to exposure to the collapsed cryptocurrency exchange FTX.
An official report from BlockFi stated that BlockFi and eight of its affiliates were filing for Chapter 11 bankruptcy protection in a bid to salvage their businesses through court proceedings. The decision comes two weeks after the crypto lender paused withdrawals.
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BlockFi woes
In its bankruptcy filing, BlockFi said its exposure to the recently collapsed crypto exchange FTX created a liquidity crisis. The FTX exchange filed for bankruptcy in the US a few weeks ago after witnessing over $6 billion worth of withdrawals in three days as Binance pulled out of FTX’s rescue plan.
BlockFi had loaned Alameda, a sister company to FTX, and also had cryptocurrencies held on the FTX platform. The crypto held on FTX became held up in the exchange once it paused withdrawals.
BlockFi has listed its assets and liabilities as being between $1 billion and $10 billion.
Commenting on BlockFi bankruptcy filing, the senior director at Fitch Ratings said:
“BlockFi’s Chapter 11 restructuring underscores significant asset contagion risks associated with the crypto ecosystem.”
Mark Renzi, the managing director at Berkeley Research Group and the proposed financial advisor for BlockFi said that BlocFi had sold part of its crypto assets in early November raising $238.9 million to fund its bankruptcy. And that BlockFi now has about $256.5 million in cash at hand.
BlockFi also sues Bankman-Fried’s holding company
Besides filing for bankruptcy, BlockFi also sued FTX founder Sam Bankman-Fried’s holding company, Emergent Fidelity Technologies Ltd, seeking to recover shares in Robinhood Markets Inc. (NASDAQ:HOOD). BlockcFi had pledged the shares as collateral three weeks ago.
In the complaint, BlockFi accuses Emergent Fidelity Technologies Ltd of defaulting on its obligations under a pledge agreement entered on November 6 this year. According to court documents, Emergent Fidelity Technologies had promised to repay the obligations of Alameda Research Ltd.
According to Eikon data, the holding company holds a 7.42% share of Robinhood.
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