Crypto firm BlockFi files for bankruptcy as FTX fallout spreads

BlockFi logo displayed on a phone screen and representation of cryptocurrencies are seen in this illustration photo taken in Krakow, Poland on November 14, 2022.

The United States Bankruptcy Court for the District of New Jersey has granted Chapter 11 protection to BlockFi.

The company's assets ranged from $1 billion to $10 billion according to the filing.

The company listed an outstanding loan to FTX US in the filing.

Blockfi has a subsidiary in the Bahamas. The subsidiary filed for Chapter 11 in the Bahamas.

The company's largest disclosed client has a balance of almost $30 million.

Mark Renzi of Berkeley Research Group said in a press statement that BlockFi looks forward to a transparent process that gets the best outcome for all. The financial advisor is BRG.

The company that offers a trading exchange and interest bearing custodial service for cryptocurrencies was one of the firms that faced serious issues after Three Arrows Capital collapsed.

The company halted withdrawals of customer deposits and admitted that it had significant exposure to the now-bankrupt FTX and its sister trading house, Alameda Research.

"We have significant exposure to FTX and associated corporate entities that encompass obligations owed to us by Alameda, assets held at FTX.com, and undrawn amounts from our credit line with FTX. US."

People familiar with the matter say that the company began talking with restructuring professionals in the days after FTX filed.

There was no response from a representative from BlockFi.

The pressure of FTX's collapse is taking a toll on many firms. FTX extended a $400 million revolving credit facility and offered to potentially buy the struggling lender in order to stave off a Chapter 11 filing.

The impact of Sam Bankman-Fried's FTX filing for Chapter 11 in the US has been swift.

Alameda Research and FTX.us are two companies that are part of the proceedings. In his 40 years of legal and restructuring experience, John Ray has never seen a complete failure of corporate controls or a complete lack of trustworthy financial information.

After the collapse of the energy giant, Ray was the CEO.

FTX went from a $32 billion valuation to bankruptcy in a matter of days as customers demanded withdrawals and rival exchange ripped up its nonbinding agreement to buy the company. There has been gross negligent behavior. A lot of assets may be missing or stolen.

The impact of FTX's collapse on counterparties with ties to Bankman-Fried's empire is said to be more than one million.

The story is evolving.