After pausing withdrawals on November 10th, BlockFi filed for Chapter 11 reorganization a couple of weeks later. There is a lack of clarity around the circumstances of FTX, the collapsed firm going through its own bankruptcy process despite accusations of fraud and shoddy record-keeping. In a press release posted on Monday, BlockFi said it would be filing for Chapter 11 reorganization.
Ankura Trust Company is listed as the largest creditor with a total of $729 million, followed by FTX US at $275 million. The SEC is fourth on the list and owes $30 million due to penalties.
BlockFi has $256 million in cash on hand, which is expected to provide enough cash to keep the company up and running. Although it expects this process to be delayed due to FTX's collapse, the firm is going to focus on "recovered all obligations" owed to BlockFi by its counterparties.
A large portion of the company's workers are expected to be laid off. The press release states that BlockFi is looking to reduce expenses and that labor costs are one of them.
Users of the platform were able to trade and lend the digital currency in the hopes of getting interest. The company laid off around 20 percent of its workers in June, blaming the downturn in thecryptocurrencies market, and agreed to pay $100 million in penalties to the SEC and other regulators.
BlockFi said it had significant exposure to the exchange and its associated corporate entities, as FTX had given the company a $400 million credit facility and had the option to buy it. According to a report from The Wall Street Journal, BlockFi used most of the money after telling CNBC that it hadn't touched it.
The founder of FTX is said to have used customer funds to prop up his other business. Estimates of Bankman- Fried's personal assets went from $26 billion to zero in a few days.
An exchange as large as FTX folding was bound to have knock-on effects for the industry as a whole and could lead to even more regulation. It was promised that it had the necessary funds to explore all options.
All Rights Reserved © 2024
