BlockFi, a crypto lending company, was forced to declare bankruptcy due to its affiliation with cryptocurrency exchange FTX.
On Monday, the company filed for Chapter 11 bankruptcy protection in New Jersey after weeks of questions surrounding where BlockFi would land now that the company which bailed them out had also filed for bankruptcy. In July, as BlockFi began to struggle financially, FTX provided $400 million revolving credit to save the company. The lifeline was much needed after BlockFi was ordered to pay $100 million in February to the SEC and multiple states for failing to register its retail crypto lending product, BlockFi Interest Accounts. Now, with FTX going downhill, BlockFi has fallen along with it, unlikely to recover this time around.
On November 10th, BlockFi froze customer withdrawals, the first sign that there was trouble on the horizon for the firm. Four days later, the company shared that they’d hired Berkeley Research Group to help them restructure following “significant exposure to FTX and associated corporate entities.” The reorganization will attempt to recover all assets and obligations owed by FTX and related counterparts, though BlockFi expects delays as investor lawsuits roll in.
Founded in 2017 by Zac Prince and Flori Marquez, BlockFi was one of the first firms to lend to customers and use cryptocurrencies as collateral.
BlockFi shared news of its bankruptcy on Twitter, calling the filing an opportunity to “stabilize the business.” BlockFi currently has $256.9 million in cash, which it anticipates will be sufficient to cover some activities during the reorganization.