BlockFi’s Bankruptcy Filing Reveals It Owes The SEC $30M
By Benzinga
The U.S. Securities and Exchange Commission (SEC) is one of the biggest creditors of crypto lending company BlockFi, which after a string of failures in the digital-assets market, filed for bankruptcy.
According to a filing made on Monday, the regulator has a $30 million unsecured claim against the cryptocurrency lender.
The SEC currently ranks behind Ankura Trust Company, which is owed more than $729 million; West Realm Shires Inc., which runs FTX US and is owed $275 million and an unidentified customer who is owed more than $48 million as BlockFi's fourth-largest creditor.
According to BlockFi's website, Ankura served as a trustee for interest-bearing crypto accounts.
The recent collapse of cryptocurrency exchange FTX, a number of significant projects and businesses that went under earlier in the year, as well as a decline in the price of digital assets, have contributed to BlockFi's bankruptcy.
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In a statement, BlockFi stated it would utilize the Chapter 11 procedure to “focus on recovering all obligations owed to BlockFi by its counterparties, including FTX and associated corporate entities.”
BlockFi added the recoveries are likely to be delayed by FTX's own bankruptcy.
A company filing for Chapter 11 bankruptcy is still able to operate while formulating a repayment strategy for its creditors.
Zac Prince and Flori Marquez established BlockFi in 2017.
In the company's beginning, among the influential Wall Street investors supporting the company included Mike Novogratz; Valar Ventures, a venture capital firm sponsored by Peter Thiel; and Winklevoss Capital.
When BlockFi started offering interest-bearing accounts with returns paid in Bitcoin (CRYPTO: BTC) and Ethereum (CRYPTO: ETH) in 2019, it caused a stir.
Millions of dollars worth of deposits were made as soon as the program went live.
Regulators were concerned customers would not be aware of the level of risk they were taking on by investing in cryptocurrency lending ventures.
A lawsuit against BlockFi was filed in July 2021 by securities regulators from Alabama, Texas, New Jersey, Kentucky and Vermont on the grounds that the company was marketing unregistered securities.
In response to claims it had marketed a service that paid clients high-interest rates to lend out their digital tokens unlawfully, BlockFi agreed in February to pay the SEC and state regulators $100 million.
