FTX collapse keeps triggering the domino effect in the crypto industry. BlockFi, which addressed FTX for a $400 million credit earlier this year, has filed for bankruptcy
BlockFi filed for Chapter 11 to “stabilise” its business and manage debts. Source: flickr.com
Crypto lender BlockFi has filed for Chapter 11 bankruptcy restructuring, deeply affected by the recent FTX collapse. The move had been anticipated since the firm paused activity, including withdrawals, on its platform earlier this month.
In July this year, BlockFi turned to FTX for the $400 million line of credit. The deal also gave Sam Bankman-Fried’s now-bankrupt business the option to buy BlockFi.
In the filing, the crypto lender indicated it had over 100,000 creditors, with liabilities and assets ranging from $1 billion to $10 billion. BlockFi will now focus on recovering all obligations owed to it, including by FTX. However, as we have previously reported, insolvency lawyers warn investors that it could take “decades” to get their funds back from the now-bankrupt crypto exchange.
Nevertheless, BlockFi claims it still has $256.9 million in cash on hand. It “is expected to provide sufficient liquidity to support certain operations during the restructuring process”. Namely, the firm requested the Court to pay employee wages and continue employee benefits without disruption.
It also aims to establish a Key Employee Retention Plan to retain trained internal resources for business-critical functions during the Chapter 11 process. Additionally, BlockFi initiated an internal plan to considerably reduce expenses, including labour costs.
Besides, BlockFi has filed a lawsuit against Sam Bankman-Fried’s holding company Emergent Fidelity Technologies to receive its shares in Robinhood as collateral it agreed to pay as part of a pledge agreement.
The news hasn’t affected the crypto market cap or major cryptocurrencies so far.
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