Cryptocurrency lender BlockFi files for bankruptcy, cites FTX collapse – The Ticker
Cryptocurrency lender BlockFi Inc. It filed for bankruptcy on November 28, which contributed to the collapse of the cryptocurrency industry following the collapse of financial FTX.
BlockFi CEO Zach Prince blamed the company’s situation on “significant” exposure to FTX, in addition to the rocky climate of the cryptocurrency market. At the time of FTX’s collapse, the two companies were engaged in a $275 million credit line bond.
In the year Founded in 2017, BlockFi has offered small investors a number of financial products such as cryptocurrency-backed low-interest loans and accounts that pay high interest on cryptocurrency deposits. BlockFi reported more than 450,000 retail customers last year.
BlockFi has filed for Chapter 11 protection in New Jersey, where it is headquartered. The lender’s financial woes underscored the fragility of the cryptocurrency industry, with FTX’s fall serving as the first domino to trigger a chain of related losses.
Voyager Digital and Celsius Network, the blockchain rivals, collapsed within a week. In the spring, both firms were surprised by the market shock that caused cryptocurrency prices to drop. Bitcoin, one of the most popular digital currencies, fell 20% in one week.
To stem the fate of its competitors, Blockchain struck a deal with FTX in June. FTX has agreed to extend a $400 million credit line to the lender, which will essentially serve as a loan that BlockFi can access as needed.
The deal also gave FTX the option to buy Blockchain. Prince He tweeted. The line of credit will give the company “access to capital that will further strengthen the strength of our balance sheet and platform.”
BlockFi subsequently borrowed $275 million from a subsidiary of FTX. The company has more than 100,000 creditors, as well as $10 billion in assets and liabilities.
The cryptocurrency lender reports that it has nearly $257 million in cash on hand. To extend business operations, the company has launched “day one” initiatives such as cost reduction plans that reduce labor costs and increase employee benefits.
BlockFi still owes $30 million to the Securities and Exchange Commission and $275 million to West Real Estate Services Inc. According to BlockFi, the fourth largest lender, the SEC found evidence that the cryptocurrency lender made false and misleading statements about the level of risk in its loan portfolio as early as February.
“From the beginning, BlockFi has worked to positively shape the cryptocurrency industry and advance the sector,” said Mark Renzi, managing director of the lender’s financial advisor, Berkley Research Group in a statement. “BlockFi maintains a transparent process that achieves the best results for all customers and other stakeholders.”
BlockFi’s next bankruptcy hearing. Scheduled It will be held on January 9, 2023.
