Crypto lender BlockFi filed for bankruptcy Monday, becoming the newest casualty of the monetary contagion unleashed by the collapse of Sam Bankman-Fried’s empire.
BlockFi announced earlier this month that it had halted withdrawals, citing “significant exposure” to Bankman-Fried’s FTX exchange, as nicely as its sister hedge fund Alameda. FTX, Alameda and dozens of affiliates filed for bankruptcy on November 11.
“Since the pause, our group has explored every single strategic alternative and option obtainable to us, and has remained laser-focused on our principal objective of performing the ideal we can for our consumers,” the organization stated in a statement.
Shortly following filing for Chapter 11, BlockFi filed a lawsuit against Bankman-Fried’s Emergent Fidelity Technologies automobile, demanding he turn more than collateral that BlockFi claims it is owed. That collateral, according to the Monetary Instances, is Bankman-Fried’s 7.six% stake in on-line trading app Robinhood.
The privately held firm, founded in 2017 by Zac Prince and Flori Marquez, produced loans to buyers applying crypto assets as collateral.
In its bankruptcy filing, BlockFi stated it owed dollars to far more than one hundred,000 creditors. The biggest creditor listed is Ankura Trust, a organization that represents creditors in stressed circumstances, which is owed $729 million. FTX, BlockFi’s second-biggest creditor, is owed $275 million.
BlockFi has about $257 million in money on hand, and the organization expects that will present adequate liquidity to help it for the duration of restructuring. The organization estimates it has among $1 billion and $ten billion in assets and liabilities, according to the filing.
Aspect of that restructuring will include things like layoffs. It wasn’t quickly clear how lots of personnel would be let go, but the organization stated it had “initiated an internal strategy to significantly lower expenditures, like labor charges.” A representative from BlockFi didn’t quickly respond to requests for comment about staffing.
The New Jersey-primarily based organization was one particular of many that received monetary help from Bankman-Fried more than the summer season, as falling crypto costs threatened to take down important players in the digital asset ecosystem. In July, BlockFi secured a $400 million monetary lifeline from FTX.
The fallout from FTX’s decline is ricocheting all through the crypto sector.
“BlockFi’s Chapter 11 restructuring underscores considerable asset contagion dangers linked with the crypto ecosystem,” stated Monsur Hussain, senior director at Fitch Ratings. “Restructuring processes can be notoriously lengthy,” he added, noting that creditors involved in Mt. Gox — a bitcoin exchange that went bankrupt in 2014 — “are only receiving closer to getting paid eight years following the operation failed.”
Quickly following FTX’s collapse, the lending arm of crypto brokerage Genesis suspended redemptions and new loan originations following an “abnormal” quantity of withdrawal requests that exceeded its present liquidity, citing market place turmoil from the failure of FTX.
“In the crypto globe, the minute you see a organization or firm announce ‘we’re temporarily halting withdrawals’ — yikes,” stated Daniel Roberts, editor-in-chief of Decrypt Media, a crypto-focused news outlet. “You place them on death watch now.”
A single of Genesis’ partners, Gemini — the crypto firm founded by Tyler and Cameron Winklevoss — quickly followed, warning buyers that redemptions beneath its Earn system would be delayed. Gemini stated at the time that it was operating with Genesis to assistance buyers redeem funds from the system, which permitted buyers to earn interest on crypto holdings. No other Gemini items or solutions have been impacted, the organization stated.
FTX started unraveling in early November, when inquiries about its connection with Alameda spurred panic amongst investors. A surge of withdrawals plunged FTX into a liquidity crisis that in the end triggered it to flame out. Due to the fact then, bankruptcy proceedings have revealed beautiful proof of corporate mismanagement — a “complete failure of corporate controls,” according to FTX’s new CEO, that eclipses even that of Enron.