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As The Fallout From FTX Continues, Cryptocurrency Startup BlockFi Has Filed For Bankruptcy

FTX

Following the failure of potential buyer FTX, the financially troubled cryptocurrency company BlockFi has submitted a petition for protection under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of New Jersey.

The company disclosed in the petition that it had more than 100,000 creditors and that the difference between its assets and liabilities spanned the range of $1 billion to $10 billion. Additionally, the corporation listed an outstanding loan of $275 million to FTX US, which was the American arm of the now-defunct enterprise of Sam Bankman-Fried.

BlockFi has stated in the past that their company has “substantial exposure to FTX and affiliated corporate entities.” This “major exposure” includes “obligations owing to us by Alameda,” “assets held at FTX.com,” and “undrawn monies from our credit line with FTX.US.”

According to persons who are familiar with the situation, the corporation started having conversations with restructuring professionals in the days following FTX filed for bankruptcy.

Requests for a reaction from the media were not met with a quick response from a BlockFi spokesperson.

BlockFi, which according to PitchBook, had a valuation of $4.8 billion at its most recent iteration, is one of the numerous crypto businesses experiencing the strain of FTX’s implosion. In July, FTX stepped in to assist BlockFi in avoiding bankruptcy by extending a $400 million revolving credit facility and making an offer to perhaps buy the struggling lender outright.

On November 11, 2018, cryptocurrency exchange FTX, owned by Sam Bankman-Fried, submitted a petition to reorganise its debts under the provisions of Chapter 11 of the United States Bankruptcy Code. The ripple impact of this event has spread quickly throughout the cryptocurrency industry.

There are approximately 130 additional linked firms that are participating in the proceedings. These companies include Alameda Research, which is Bankman-crypto Fried’s trading firm, and FTX.us, which is the company’s U.S. subsidiary. John Ray, the new CEO of FTX, stated in a filing with the Delaware Bankruptcy Court that he had never seen “such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here.” Ray has over 40 years of experience in the fields of law and corporate restructuring.

A bankruptcy petition was also submitted for a BlockFi subsidiary in Bermuda at the same time that the petition was submitted in the United States.

Similar to the Bahamas, Bermuda is embracing cryptocurrency as the future of financial transactions. Both have built structures to deal exclusively with digital currency and crypto assets. Both the Bahamas and Bermuda, with the recent failure of FTX and now BlockFi, are facing the first big judicial challenges of their respective cryptocurrency legislation.

The company’s largest revealed account has a balance of over $28 million, as shown by the bankruptcy case that BlockFi has submitted.

In a press statement, Mark Renzi of Berkeley Research Group noted that BlockFi is anticipating a transparent process that will result in the best possible resolution for all clients and other stakeholders. BlockFi is advised in all financial matters by BRG.

After the failure of Three Arrows Capital, a number of businesses, including this cryptocurrency company that operates a trading exchange and a custodial service that pays interest on cryptocurrency holdings, were forced to contend with significant liquidity concerns.

The company, which had its headquarters in Jersey City, New Jersey, had previously put a stop to the withdrawal of customer deposits and admitted that it had “significant exposure” to the cryptocurrency exchange that has since gone out of business, FTX, as well as to Alameda Research, which was the exchange’s sister trading house.

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