Analysis

Crypto Lending Firm BlockFi Files for Chapter 11 Bankruptcy, Citing FTX Collapse

Crypto lending platform BlockFi is formally submitting for chapter after weeks of rumors surrounding the agency’s connections to FTX.

At this time, BlockFi announced its voluntary Chapter 11 submitting, naming the collapse of FTX as the first trigger.

“At this time, BlockFi filed voluntary circumstances below Chapter 11 of the U.S. Chapter Code…

Maximizing worth for all purchasers and different stakeholders is our precedence. This course of will assist BlockFi to stabilize our enterprise and supply us with the chance to work in the direction of consummating a complete restructuring transaction to maximise worth…

As a part of our restructuring efforts, we’ll give attention to recovering all obligations owed to BlockFi by counterparties, together with FTX…

Appearing in one of the best curiosity of our purchasers is our prime focus and continues to information our path ahead. Chapter 11 is a clear course of and we’ll proceed to speak with our purchasers to make sure they hear instantly from us…”

Per the blog post, the chapter submitting stems from the fallout of FTX.

“This motion follows the stunning occasions surrounding FTX and related company entities (‘FTX’) and the troublesome however obligatory choice we made in consequence to pause most actions on our platform.”

Again in July, FTX’s US arm, FTX.US, was closing in on a $240 million deal to purchase the lending platform.

On the time, BlockFi CEO Zac Prince cited the Celsius and Three Arrows Capital (3AC) collapses because the motive for the deal.

“Crypto market volatility, significantly market occasions associated to Celsius and 3AC had a unfavorable affect on BlockFi. The Celsius information on June twelfth began an uptick in shopper withdrawals from BlockFi’s platform regardless of us having no publicity to them.

In the identical week, 3AC information unfold additional worry out there. Whereas we have been one of many first to completely speed up our overcollateralized mortgage to 3AC, in addition to liquidate and hedge all collateral, we did expertise ~$80 million in losses, which is a fraction of losses reported by others.”

At time of writing, the main points of the deal between FTX and BlockFi are unclear, however earlier this month, BlockFi introduced a withdrawal freeze, blaming FTX and Alameda Analysis’s lack of readability.

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