Wednesday, December 21, 2022

Cryptocurrency firm BlockFi files for bankruptcy amid FTX fallout

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BlockFi said in a statement that the filing was filed with the U.S. Bankruptcy Court for the District of New Jersey, adding that activity on its platform remained on hold.

Nov 28 (News) — Cryptocurrency firm BlockFi has filed for Chapter 11 bankruptcy protection as the fallout from FTX’s implosion continues.

“We apologize that communication with our customers has not been as frequent as you would expect from us,” the company said in a statement to its users on its website.

“We look forward to transparency through our reorganization and will work to update clients and stakeholders on progress.”

In court documents obtained by News, BlockFi said the company has more than 100,000 creditors with liabilities ranging from $1 billion to $10 billion.

The company said in the court documents that its liabilities include a $275 million loan to FTX and a $30 million settlement with the US Securities and Exchange Commission.

BlockFi has $256.9 million in cash that is expected to provide sufficient liquidity to support certain operations during the restructuring process,” the company said in its statement.

BlockFi has retained law firm Haynes and Boone for $750,000, as well as law firms Kirkland & Ellis LLP and Cole Schotz PC, court documents show.

“Following the collapse of FTX, BlockFi’s management team and board took immediate action to protect customers and the company,” said Mark Renzi of Berkeley Research Group, the company’s financial advisor, in a statement.

“From the beginning, BlockFi has worked to positively shape the cryptocurrency industry and move the sector forward. BlockFi looks forward to a transparent process that achieves the best outcome for all customers and other stakeholders.”

The company added that BlockFi International, a Bermuda-incorporated subsidiary, has filed a petition in the country’s Supreme Court to appoint joint provisional liquidators in parallel with the Chapter 11 cases in the United States.

John J. Ray III, FTX’s new CEO, said in court documents earlier this month that it was the worst case of corporate failure he had ever seen. The company, which filed for bankruptcy on Nov. 11, was founded by former crypto mogul Sam Bankman-Fried.

Prior to the filing, Bankman-Fried was targeting a takeover by competitor Binance, which pulled out after discovering “mishandled customer funds and alleged US agency investigations.”

“I have directed the FTX Debtors team to prioritize preserving franchise value as best they can in these trying circumstances,” said Ray, Enron’s CEO, who oversaw the company’s liquidation.

“I respectfully ask all of our employees, suppliers, customers, regulators and government officials to be patient with us as we make the arrangements that we were unable to make prior to filing our Chapter 11 cases due to corporate governance failures at FTX .”

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