The Next Domino Falls - BlockFi Files For Chapter 11 Bankruptcy

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1 year ago

BlockFi officially announced this morning that it has filed for Chapter 11 bankruptcy protection. Activity on its platform have been paused, as the proceedings play out. The company's filing states that they have over 100,000 creditors with assets between $1 billion and $10 billion and liabilities matching that, also between $1 billion and $10 billion. 

The largest amount owed is to Ankura Trust Company, a claim of $729 million that BlockFi owes.

The second largest amount is owed to FTX US, an amount of $275 million.

BlockFi also notably owes the SEC $30 million for a settlement dating back to February 2022, when the company agreed to pay a total of $100 million to settle charges of " failing to register the offers and sales of its retail crypto lending product" and violating the registration provisions of the Investment Company Act of 1940. 

“With the collapse of FTX, the BlockFi management team and board of directors immediately took action to protect clients and the Company,” said Mark Renzi of Berkeley Research Group, the Company’s financial advisor. “From 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.”

According to BlockFi, they retain $256.9 million worth of cash which should support what the company calls "certain operations" during the restructuring process. It is unclear exactly what these "certain operations" include. As you may expect, they plan to reduce expenses and have already made references to layoffs. 

Some of BlockFi's investors include:

  • Coinbase

  • Tiger Global

  • Social Finance

  • Winklevoss Capital

  • Hashkey Digital Asset Group

  • Bain Capital

  • Valar Ventures

And so here is yet another reason not to keep any of your tokens stored on an exchange. It's pretty ironic that BlockFi owes the US subsidiary of FTX $275 million, after it was reported in August that FTX was attempting to buy BlockFi. Two thirds of BlockFi's staff is said to possibly be laid off, according to Bloomberg. According to the Wall Street Journal, Peter Thiel's Valar Ventures had a 19% stake in the company.

What's next in the 2022 crypto apocalypse? Is Genesis out of the woods yet? Will Grayscale's Bitcoin Trust unravel? Stay tuned!

Resources

  1. https://www.businesswire.com/news/home/20221128005451/en/BlockFi-Commences-Restructuring-Proceeding-to-Stabilize-Business-and-Maximize-Value-for-all-Clients-and-Stakeholders

  2. https://blockfi.com/November28-ClientUpdate

  3. https://restructuring.ra.kroll.com/blockfi

  4. https://www.sec.gov/news/press-release/2022-26

  5. https://blockfi.com/investors/

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