The collapse of the world’s third largest cryptocurrency exchange FTX has claimed another victim, with crypto lender BlockFi filing for Chapter 11 bankruptcy protection in the United States Bankruptcy Court for the District of New Jersey on Monday.
In its bankruptcy filing, the company stated that it had liabilities and assets ranging from $1 billion to $10 billion and over 100,000 creditors.
On Nov. 11, the same day FTX filed for bankruptcy, BlockFi, which allowed users to receive yields for depositing dormant cryptocurrency on the platform, stopped allowing withdrawals.
“With the collapse of FTX, the BlockFi management team and board of directors immediately took action to protect clients and the Company,” said Mark Renzi of Berkeley Research Group, the Company’s financial advisor in a press statement.
“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," he added.
Sam Bankman-Fried's now bankrupt exchange, FTX US, owes $275 million to BlockFi, according to the filing.
According to BlockFi's bankruptcy filing, its biggest disclosed client has a balance of almost $28 million.
BlockFi, in its email to customers on Nov. 14, denied “rumors” that most of its assets were tied to FTX.
The company conceded that it had “significant exposure to FTX and associated corporate entities that encompass obligations owed to us by Alameda, assets held at FTX.com, and undrawn amounts from our credit line with FTX US.”
When several cryptocurrencies fell throughout the summer, another crypto lender, Celsius, tried to maintain liquidity similarly by halting customer withdrawals, but it ultimately declared bankruptcy in July.
According to PitchBook, Bankman-Fried's trading company Alameda Research, which is closely associated with FTX, invests in more than 100 crypto businesses and was last valued at $4.8 billion.
Although Alameda Research did not invest in BlockFi, the two companies are intimately related because of BlockFi's loan to FTX.
A total of 130 further linked companies are involved in the proceedings, including FTX.us, the corporation's U.S. subsidiary, and Alameda Research, Bankman-cryptocurrency Fried's trading company.
In a document submitted to the Delaware Bankruptcy Court, FTX's new CEO John Ray claimed that in his 40 years of legal and restructuring experience, he had never witnessed "such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here."
Photo courtesy of BlockFi.