Crypto lender BlockFi files for bankruptcy after FTX collapse

BlockFi announces Chapter 11 bankruptcy filing in US as fall of FTX continues to reverberate across industry

The crypto lender BlockFi has become the sector’s latest big operator to declare bankruptcy, as the fallout of the collapse of offshore cryptocurrency exchange FTX continues to spread.

BlockFi, which operates in a similar fashion to a conventional bank, paying interest on savings and using customer deposits to fund lending, says it has $256.9m cash in hand. According to court documents, its creditors include FTX itself, to which it owes $275m, and the US Securities and Exchange Commission (SEC), to which it owes $30m.

In a statement announcing its Chapter 11 bankruptcy filing, BlockFi said: “This action follows the shocking events surrounding FTX and associated corporate entities and the difficult but necessary decision we made as a result to pause most activities on our platform.

“Since the pause, our team has explored every strategic option and alternative available to us, and has remained laser-focused on our primary objective of doing the best we can for our clients.

“These Chapter 11 cases will enable BlockFi to stabilise the business and provide BlockFi with the opportunity to consummate a reorganisation plan that maximises value for all stakeholders, including our valued clients.”

The SEC levied a $100m fine on the company in February for violating securities laws, arguing that the investment products the company offered qualified as unregistered securities. The outstanding $30m debt is apparently the unpaid portion of that fine.

BlockFi has already stumbled close to bankruptcy once already this year, in the wake of spring’s crypto crash.

After chief executive Zac Prince said the company needed an injection of capital to stave off a liquidity crisis, it signed a deal with none other than FTX, which gave the company access to $400m in loans. The price of the deal was an option from FTX to buy the lender for about $240m, a sharp decline from a peak valuation of $3bn.

That option was never exercised, and the collapse of the cryptocurrency exchange sparked a bank run at BlockFi, seen by customers as dangerously entangled with Sam Bankman-Fried’s company, that proved terminal. Without the ability to draw on the credit line, nor access its own funds stored on the FTX platform, BlockFi was forced to file for Chapter 11 bankruptcy.

Contributor

Alex Hern UK technology editor

The GuardianTramp

Related Content

Article image
What do we know so far about collapse of crypto exchange FTX?
How did Sam Bankman-Fried’s FTX fail and what does the firm’s fate tell us about cryptocurrencies?

Alex Hern and Dan Milmo

18, Nov, 2022 @6:33 PM

Article image
Cryptocurrency exchange FTX files for bankruptcy protection in US
Founder Sam Bankman-Fried resigns as CEO and tells of shock ‘to see things unravel the way they did’

Dan Milmo and Alex Hern

11, Nov, 2022 @5:00 PM

Article image
FTX’s former CEO claims crypto exchange is still solvent
Sam Bankman-Fried makes statement even as new boss begins formal bankruptcy process

Alex Hern UK technology editor

16, Nov, 2022 @2:01 PM

Article image
Binance to buy FTX in major cryptocurrency exchange merger
Public squabble between the two largest offshore exchanges’ bosses led to run on FTX and forced sale

Alex Hern

08, Nov, 2022 @6:13 PM

Article image
Crypto lender Genesis files for Chapter 11 bankruptcy in US
Firm is latest casualty in sector as cryptocurrencies contagion spreads after FTX collapse

Dan Milmo and agency

20, Jan, 2023 @12:24 PM

Article image
Crypto exchange FTX expects to have more than 1m creditors
Bankruptcy filing says ‘questions arose’ about founder Sam Bankman-Fried’s leadership

Alex Hern UK technology editor

15, Nov, 2022 @9:52 AM

Article image
Founder of failed crypto exchange FTX apologises to ex-employees
Sam Bankman-Fried continues to say firm’s downfall can be solely explained by misplaced $8bn

Alex Hern UK technology editor

23, Nov, 2022 @11:52 AM

Article image
TechScape: Inside the $8bn FTX crypto scandal – and its real-world impact
Sam Bankman-Fried was what everyone wanted a crypto billionaire to be – until things began to go very, very wrong

Alex Hern

15, Nov, 2022 @11:55 AM

Article image
US lawsuit launched against FTX founder and celebrity backers
Crypto exchange promoters such as Larry David, Naomi Osaka, Gisele Bündchen and Shaquille O’Neal also named as defendants

Alex Hern

16, Nov, 2022 @4:30 PM

Article image
Failure of FTX crypto exchange will have huge implications, MPs hear
‘Hard to imagine sector bouncing back quickly from this ordeal,’ committee is told

Alex Hern UK technology editor

14, Nov, 2022 @8:05 PM