BlockFi Files for Bankruptcy Following FTX Collapse

Troubled crypto lender BlockFi has become the latest company to file for Chapter 11 bankruptcy protection following the collapse of the FTX exchange, the company revealed in a press release on 28 November.

According to the announcement, BlockFi and eight of its affiliates filed for Chapter 11 in the U.S. Bankruptcy Court for the District of New Jersey, while BlockFi International made a similar filing to the Supreme Court of Bermuda. The company also revealed that it has $257 million in cash on hand — which will be used to support certain operations during the restructuring process — over 100,000 creditors, and between $1 billion and $10 billion in both assets and liabilities.

BlockFi’s Chapter 11 petition disclosed only a few of its major creditors, amongst which were West Realm Shires — the legal name for FTX.US — with a $275 million unsecured claim, and the Securities and Exchange Commission (SEC) with a $30 million claim. Earlier this year the company reached a settlement with the SEC for $100 million over its interest-generating accounts.

BlockFi’s troubles started back in June when it had to liquidate a large client, and while it did not reveal which client it was, Three Arrows Capital (3AC) had recently failed to reach margin calls from BlockFi. The company later received a $250 million line of credit from FTX.US, which later morphed into a $400 million credit facility that gave the exchange the ability to acquire the lender.

FTX.US, and more than 100 companies connected to the FTX exchange, filed for bankruptcy earlier this month however, which affected a number of industry players. Court documents late revealed that the company could have more than 1 million creditors, the top 50 of which had a combined claim of around $3 billion.