Crypto Firm BlockFi Files For Bankruptcy In Wake Of FTX Collapse

 Crypto firm BlockFi filed for Chapter 11 bankruptcy protection in a New Jersey bankruptcy court following the collapse of crypto giant FTX, CNBC reported Monday.

The company indicated in its filing that it has over 100,000 creditors with a range of $1 billion to $10 billion in liabilities and assets, according to CNBC. BlockFi also reportedly listed a $275 million loan to FTX US, the American branch of former crypto billionaire Sam Bankman-Fried’s fallen empire.

Bankman-Fried’s crypto exchange FTX filed for bankruptcy after it collapsed following a report by crypto site CoinDesk about the company allegedly transferring customer funds to backstop affiliated crypto trading firm Alameda Research. BlockFi previously disclosed “significant exposure” to FTX and associated entities, Reuters reported.

The company had a deal with FTX for BlockFi to be purchased at a maximum price of $240 million if FTX exercised the option, CNBC reported in July. BlockFi had set up a $400 million revolving credit facility with FTX after it suffered $80 million in losses, according to the outlet.

BlockFi was last valued at $4.8 billion, CNBC reported, citing financial database PitchBook. The company offered customers a crypto trading exchange and crypto-backed loans, among other products, according to its website. Before filing for bankruptcy, BlockFi had halted withdrawals of customer deposits, according to Decrypt.

BlockFi owes $30 million to the Securities and Exchange Commission (SEC), the firm’s fourth-largest creditor, Bloomberg reported. The regulator charged BlockFi $100 million for not registering the offers and sales of its crypto lending product, the SEC announced in a February press release. 

“BlockFi looks forward to a transparent process that achieves the best outcome for all clients and other stakeholders,” the company’s financial adviser, Mark Renzi of Berkeley Research Group, said in a press release Monday. The company will “focus on recovering all obligations owed to BlockFi by its counterparties, including FTX and associated corporate entities,” and anticipates recoveries from FTX will be delayed because of the latter’s collapse.

The company assured clients in a separate blog post it is “laser-focused on our primary objective of doing the best we can for our clients.” BlockFi will “work to keep clients and stakeholders informed as we make progress” on the bankruptcy proceedings.

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