BlockFi Bankrupt - Court Documents
Crypto lender BlockFi, which offered unsecured crypto loans to retail investors, filed for Chapter 11 bankruptcy late Monday. There had been indications that the FTX scandal could render crypto lender BlockFi bankrupt due to its exposure to the fallen exchange. It is now official.
BlockFi had suspended withdrawals soon after the collapse of FTX, citing significant exposure to the Bahamas-based exchange. The role of FTX's failure in making BlockFi bankrupt is becoming more evident by the day.
BlockFi says it owes $275m to FTX US in the bankruptcy filings before a New Jersey court. This amount was part of a $400m lifeline FTX offered BlockFi in June when it began experiencing a liquidity crunch following the collapse of crypto lenders Voyager and Celsius. There was also an option for FTX to buy BlockFi. These facts are only becoming public as the scope of the FTX scandal widens.
BlockFi's bankruptcy filing indicates that the firm had $10 billion in assets and liabilities. While the company said in its bankruptcy filing that it was working to recover obligations owed by several counterparties, it adds that any recovery efforts risked delays from FTX's bankruptcy proceedings.
BlockFi bankrupt: What next?
BlockFi had been in trouble with the US Securities and Exchange Commission (SEC) over its lending activities. It had been fined $100m by the SEC for not registering its crypto lending products as securities. In declaring BlockFi bankrupt, the filing said it still owes the regulator $30m, among other sums owed to more than 100,000 creditors.
The extent of BlockFi's entanglement with FTX continues to unravel. Bankruptcy filings reveal BlockFi made nearly $680 million in collateralized crypto loans to former FTX CEO Sam Bankman-Fried's Alameda Research hedge fund, even as it got a financial reprieve from the FTX exchange.
Initial reports indicate that billions of dollars in the FTX balance sheet are unaccounted for. Where FTX got the funds, it used to bail out BlockFi in June is now a subject of speculation. Answers may come in the weeks ahead.
Author: Eno Eteng
Eno is a certified financial technician and member of the UK Society of Technical Analysts. He loves to trade and write about cryptos, FX and CFDs. Since 2009, he has been a consultant for several companies in the financial market space. His work can be seen on several forex and crypto-related blogs and trading educational websites.