BlockFi acquired a $400 million line of credit from the now-defunct FTX exchange earlier this year, which is still outstanding.
Cryptocurrency lender BlockFi sought bankruptcy protection on Monday after restricting withdrawals amid the ongoing repercussions of exchange FTX’s bankruptcy filing.
The business announced that it was seeking Chapter 11 bankruptcy protection, indicating that it wanted to restructure while carrying on with business in the interim. BlockFi has around $257 million in cash in hand, claims a press statement. A Bermuda-based affiliate is likewise submitting a similar form for liquidation.
BlockFi’s executives estimated the company has more than 100,000 creditors, and they marked off the ranges in the petition for the company. According to executives, the company’s assets and liabilities range from $1 billion to $10 billion.
The Securities and Exchange Commission (SEC), which has a $30 million unsecured claim, and West Realm Shires Inc., the corporate name of FTX US, which has a $275 million unsecured claim, are the major debtors of the corporation. The names of the majority of the remaining top 50 creditors were not disclosed.
Ankura Trust Company, which the lender seems to have recruited in February and which currently has a $730 million unsecured claim, is BlockFi’s biggest creditor.
BlockFi has had a difficult year; withdrawals were banned a few weeks ago due to the continued uncertainty around FTX’s assets. The company had to liquidate a sizable client early this year, and to stay afloat, it required a line of credit from FTX. BlockFi issued a warning to customers not to make any deposits to its wallet or interest accounts in the wake of the suspension of withdrawals.
The lender planned to raise money in June at a $1 billion down round valuation after raising $350 million in March 2021 at a $3 billion valuation. The business was planning to go public within the next 18 months, with a potential $500 million fundraise happening soon, as recently as last July.
However, as part of a settlement with the SEC and numerous state authorities over claims that its high-yield cryptocurrency loan product broke state and federal securities laws, the business was forced to pay $100 million in February. BlockFi was required to register its BlockFi Yield product with the SEC as part of the settlement.
The business slashed almost a fifth of its personnel as the overall crypto market shrank in June. Shortly after, cryptocurrency exchange FTX provided the lender with a $250 million credit facility. This facility later changed into a $400 million credit facility that also allowed FTX US to purchase the lender.
Following several days of rumors on whether it was fully liquid, FTX itself declared bankruptcy during the second week of November. BlockFi declared it would halt withdrawals among the confusion, claiming it had a number of assets deposited on FTX and was still owed some of the credit FTX had extended.