Crypto lender BlockFi has been reported to be the latest victim of FTX’s collapse. The crypto firm has filed for bankruptcy, and is laying off a large part of their workforce.
BlockFi is filing a Chapter 11 bankruptcy protection, according to a source from the endangered crypto company.
In an official announcement posted on Business Wire, BlockFi Inc. (alongside eight of its affiliates) intend for the filing process to help stabilise business, and to undergo a company restructuring process.
The official announcement from the New Jersey-based company highlights that it will be focused on “recovering all obligations owed to BlockFi by its counterparties, including FTX and associated corporate entities (“FTX”). BlockFi expects that recoveries from FTX will be delayed due to FTX s ongoing bankruptcy filing.
Activity on the BlockFi platform remains paused, but will continue activities that will support certain operations during the company restructuring process hereon.
Currently, BlockFi has US$256.9 million on hand, which they anticipate will provide sufficient liquidity for the upcoming weeks.
The BlockFi management team and board of directors immediately took action to protect its clients and the firm, said Mark Renzi of Berkeley Research Group, the Company’s financial advisor.
“From inception, BlockFi has worked to positively shape the cryptocurrency industry and advance the sector. BlockFi looks forward to a transparent process that achieves the best outcome for all clients and other stakeholders.”
Meanwhile, sources from BlockFi note that the lender is unfortunately laying off a larger number of their staff – presumably in an act to cut costs.
Founded in 2017, BlockFi was once known as a platform that offered one of the highest yield rates – up to 9.3% APY (annual percentage yield) on selected coins and tokens – gaining popularity with users looking for another source of passive income.
How did BlockFi get involved with FTX?
BlockFi first paused withdrawal activity on November 11, right after FTX filed for bankruptcy. “We, like the rest of the world, found out about this situation through Twitter,” BlockFi wrote at that time. “We are shocked and dismayed by the news regarding FTX and Alameda.”
Due to BlockFi’s huge exposure to FTX, FTX US, and Alameda – all companies under Sam Bankman-Fried’s wing at the time, the firm stated due to lack of clarity on FTX’s status, they were “not able to operate business as usual.”
Back in June, BlockFi had cut down 20% of its staff after being endangered by the harshest point of this crypto winter. BlockFi then finalised a $400 million loan from FTX, which also includes a deal for potential acquisition.
A month later, BlockFi offered a “voluntary separation program” for its employees (otherwise known as a buyout) in order to further downsize due to harsh market conditions.
Yesterday we signed definitive agreements, subject to shareholder approval, with FTX US for:
1. A $400M revolving credit facility which is subordinate to all client funds, and
2. An option to acquire BlockFi at a variable price of up to $240M based on performance triggers.
— Zac Prince (@BlockFiZac) July 1, 2022
BlockFi is one of many beneficiaries of SBF’s “philanthropy” over the past year.
SBF, under FTX, bailed out the Liquid Group in August 2021 after the exchange suffered a detrimental hack. FTX later acquired Liquid in May 2022, which soon led to its platform suspension on November 15.
In June, Crypto broker Voyager Digital was given a $500 million credit line by Alameda Research – FTX’s sister firm. Voyager then filed for bankruptcy on July 6.