BlockFi files for bankruptcy: FTX debacle not over yet

Another big name has filed for bankruptcy. This time it’s the crypto lending platform BlockFi that throws in the towel. The company has a so-called chapter 11 bankruptcy requested which can also be seen as a request for deferment of payment.

Crypto platform BlockFi has 100,000 creditors

The collapse of BlockFi is a direct result of FTX going down earlier. FTX offered the platform $250 million in aid last summer. That amount was later increased to $400 million. This life buoy has now fallen away for BlockFi.

So it had been in the air for a while. Earlier this month, crypto news reported that the platform has paused recordings. According to an announcement, BlockFi has over 100,000 creditors, one of which is FTX.US with $275 million in claims. Next comes the Securities and Exchange Commission (SEC) with $30 million in claims. The regulator imposed a huge fine on the platform at the beginning of this year, of which $30 million is still outstanding.

The largest creditor is Ankura Trust Company. That company has a claim of no less than $730 million. BlockFi itself still has $257 million in cash.

Problems already started with Terra (LUNA)

BlockFi’s problems have been going on for a long time. When Terra (LUNA) collapsed earlier this year, investment fund Three Arrows Capital (3AC) went down with it. At the time, BlockFi’s CEO, Zac Prince, announced that it had to liquidate a major client. That was probably about 3AC at the time.

This leaves BlockFi with a huge shortage. FTX provided a lifeline with a loan. But as you could read earlier, this plan also fell apart. Whether there is anything left for BlockFi customers remains to be seen. A chapter 11 bankruptcy means that the company will restructure with the aim of meeting all creditors:

“As part of its restructuring efforts, the company will focus on collecting all obligations to BlockFi from its counterparties, including FTX and related corporate entities (“FTX”).”

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