Web Desk
ISLAMABAD: BlockFi, a lender for cryptocurrencies, said on Monday that it has filed for Chapter 11 bankruptcy protection. It became the latest crypto casualty after the company incurred losses due to its exposure to the catastrophic collapse of the FTX exchange earlier this month, according to Reuters.
A firm that files for Chapter 11 bankruptcy protection is on the verge of having to shut down. However, it still has hopes of turning things around with the right opportunities to restructure its debts, assets, and business operations.
The court petition in New Jersey comes as cryptocurrency values have fallen sharply. The most widely used digital currency, Bitcoin, has decreased by more than 70% from its high in 2021.
BlockFi claims bankruptcy
BlockFi, a company in New Jersey owned by former finance executive turned cryptocurrency entrepreneur Zac Prince, claimed in a bankruptcy petition that a liquidity issue was brought on by its significant exposure to FTX. Sam Bankman-Fried, the founder of FTX, filed for protection in the US earlier in November after investors withdrew $6 billion from the exchange in just three days and a competing exchange, Binance, abandoned a rescue deal.
BlockFi said that the liquidity situation was caused by its exposure to FTX through loans to Alameda, a cryptocurrency trading company connected to FTX. Cryptocurrencies kept on FTX’s platform became stuck there. BlockFi said its assets and liabilities ranged from $1 billion to $10 billion.
BlockFi lists FTX as its second-largest creditor
BlockFi listed FTX as its second-largest creditor in a court statement on Monday, with $275 million owing on loan made earlier this year. It claimed to owe more than 100,000 creditors money. Additionally, the business revealed in a separate filing that it intends to terminate two-thirds of its 292 staff members.
BlockFi was to get a $400 million revolving credit facility as part of a contract inked with FTX in July, and FTX was given the option to purchase it for up to $240 million.
BlockFi also filed for bankruptcy after two of its biggest rivals, Celsius Network and Voyager Digital, did so in July, claiming adverse market conditions that had caused losses at both businesses.
