BlockFi Files for Bankruptcy After the Fall of FTX
Crypto lending platform BlockFi has officially filed for bankruptcy after weeks of rumors related to the firm's ties to FTX.
Yesterday, BlockFi announced its voluntary Chapter 11 filing, citing FTX’s fall as the primary reason.
“Maximizing value for all customers and other stakeholders is our priority. This process will help BlockFi stabilize its business and provide an opportunity for us to work toward a comprehensive restructuring transaction to maximize value…
As part of our restructuring efforts, we will focus on recovering all liabilities owed to BlockFi by counterparties, including FTX…
Acting in the best interest of our clients is our primary focus and continues to guide our path forward. Chapter 11 is a transparent process and we will continue to communicate with our clients to ensure they hear directly from us…”
According to the blog post, the bankruptcy filing stems from the collapse of FTX. The firm mentions that this action comes in the wake of the “shocking events surrounding FTX and its related corporate entities” and “the difficult but necessary decision” BlockFi made as a result, referencing the suspension of most activity on the platform.
Back in July, FTX’s U.S. division, FTX.US, was closing a deal to purchase the lending platform for $240 million.
At the time, BlockFi CEO Zach Prince cited the collapses of Celsius and Three Arrows Capital (3AC) as a motive for the deal.
“The volatility of the crypto market, especially the market events related to Celsius and 3AC, had a negative impact on BlockFi. The Celsius news on June 12 sparked massive withdrawals of funds by BlockFi clients, even though we had no exposure to them.
In the same week, news about 3AC spread more fear in the market. Despite being one of the first to fully overcollateralize our loan to 3AC, as well as liquidate and hedge all collateral, we suffered ~$80 million in losses, a fraction of the losses reported by others.”
At the time of writing, the details of the FTX-BlockFi deal are unclear, but earlier this month BlockFi announced a freeze of withdrawals, accusing FTX and Alameda Research of a lack of clarity.