This past year has been hectic for the crypto lending platform BlockFi and today is no different as the company shared an announcement that it filed for voluntary Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the District of New Jersey.
On November 10 the crypto platform shared in a tweet that it paused activity, including withdraws, and stated on Monday that “activity continues to be paused at this time.”
The bankruptcy was commenced to “stabilize its business and provide the company with the opportunity to consummate a comprehensive restructuring transaction” for all its clients and other stakeholders.
BlockFi says it has $256.9 million in cash, which will be used to provide “sufficient liquidity to support certain operations during the restructuring process.” However, BlockFi owes a list of creditors unsecured claims up to $729 million, court documents show. One of BlockFi’s creditors was FTX, which has its second largest unsecured claim at $275 million.
The company said it will focus on recovering all obligations owed to BlockFi and counterparties like FTX.
In July, FTX signed a deal with the option to buy BlockFi for up to $240 million, the CEO of BlockFi Zac Prince tweeted. Since then, things have tumbled as FTX collapsed and also filed for Chapter 11 bankruptcy, weeks before BlockFi. With that said, “the company expects that recoveries from FTX will be delayed.”
The company stated that it has a consolidated amount of over 100,000 creditors across a massive range of $1 billion to $10 billion in liabilities and assets, according to a court filing.
This news follows a number of crypto-focused companies, like Voyager and Celsius, which are also currently going through bankruptcy proceedings.
In March 2021, BlockFi closed a $350 million Series D funding round, valuing the company at $3 billion at the time. Bain Capital Ventures, partners of DST Global, Pomp Investments and Tiger Global co-led the round with participation from a number of other firms.
Earlier this year, the U.S. Securities and Exchange Commission (SEC) charged BlockFi for failing to register its retail crypto lending product and violating the registration provisions of the Investment Company Act of 1940, according to a press release in February.
To settle the charges, BlockFi agreed to pay a $50 million penalty to the SEC and an additional $50 million in fines to 32 U.S. states to settle similar charges. According to a filing on Monday, BlockFi owes the SEC $30 million.