BlockFi has filed for bankruptcy under Chapter 11 in the US courts.
The news has been widely rumored in the last few weeks as BlockFi’s destiny had been tied to the future of FTX, a crypto firm that filed for bankruptcy earlier this month.
In a statement on its website, BlockFi distributed the news of its decision to allow the courts decide its future.
BlockFi today voluntarily filed petitions for Chapter 11 reorganization. You will be able to find the official announcement here.
This action follows the shocking events surrounding FTX and associated corporate entities (“FTX”) 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 stabilize the business and provide BlockFi with the opportunity to consummate a reorganization plan that maximizes value for all stakeholders, including our valued clients.
Rest assured, we will continue to work on recovering all obligations owed to BlockFi as promptly as practicable.
Separately, BlockFi published a press release echoing the above news adding that it had filed in the “US Bankruptcy Court for the District of New Jersey to stabilize its business and provide the Company with the opportunity to consummate a comprehensive restructuring transaction that maximizes value for all clients and other stakeholders.”
BlockFi stated that its platform activity continues to be paused at this time adding that it has $256.9 million in cash on hand, which is expected to be sufficient to support certain operations during the restructuring process.
At the same time, the company stated that BlockFi International Ltd., a Bermuda-incorporated company, has filed a petition with the Supreme Court of Bermuda for the appointment of joint provisional liquidators.
BlockFi said it was acting in the best interest of its clients and will work to provide regular updates on the proceedings.
The initial filing with the court included a list of creditors with the 50 largest unsecured claims who were not insiders. Individual clients were not listed by name.
The single largest unsecured creditor is Ankura Trust Company, with over $729 million outstanding. The Securities and Exchange Commission (SEC) was on the list for $30 million, an amount that was most likely tied to a settlement with the SEC from earlier this year. The settlement was for $100 million, involving its crypto lending service and claims by the SEC that it had failed to register the offering. While the settlement was made without admission to the allegations, it was certainly the first nail in the virtual coffin.
Mark Renzi, BlockFi’s financial advisor from Berkeley Research Group, commented on the company’s filing:
“With the collapse of FTX, the BlockFi management team and board of directors immediately took action to protect clients and the Company. From [its] inception, BlockFi has worked to positively shape the cryptocurrency industry and advance the sector. BlockFi looks forward to a transparent process that achieves the best outcome for all clients and other stakeholders.”
This past summer, BlockFi was hammered by the implosion of Celsius, 3AC, Voyager Digital, and the affiliated blast zone. BlockFi reported that it had been hit by the 3AC failure to the tune of $80 million. As market participants worried about contagion, BlockFi also saw an increase in withdrawals impacting platform operations.
As BlockFi struggled to remain afloat, FTX stepped in as its savior, which ended up being a temporary respite from market volatility and declining asset values.
BlockFi was once valued at $3 billion in a funding round when the firm raised $350 million in the spring of 2021.