Crypto lender BlockFi files for Chapter 11 bankruptcy
BlockFi has filed for Chapter 11 bankruptcy, making the crypto lender backed by Peter Thiel’s venture capital firm the latest casualty of the fallout from the collapse of Sam Bankman-Fried’s FTX exchange.
The filing marks an unravelling several months in the making for New Jersey-based BlockFi, led by chief executive Zac Prince, which was valued at $4bn in a fundraising round last year. In July, it suffered losses on loans to the collapsed crypto hedge fund Three Arrows Capital, leading to a bailout this summer from Bankman-Fried. But FTX itself collapsed earlier this month, prompting BlockFi to pause lending and customer withdrawals.
Now the lender is the latest once high-flying crypto company to come crashing to earth as the collapse of Bankman-Fried’s crypto empire sends ripples through the digital assets industry.
“This action follows the shocking events surrounding FTX and associated corporate entities and the difficult but necessary decision we made as a result to pause most activities on our platform,” BlockFi said on Monday.
It added that it had “significant” exposure to FTX and expects any recoveries of funds from the exchange to be “delayed”.
BlockFi had assets and liabilities of $1bn to $10bn, with more than 100,000 creditors, according to bankruptcy filings in New Jersey federal court on Monday.
The lender is backed by a roster of prominent investors, including Bain Capital, Tiger Global, Coinbase, the Winklevoss twins’ venture capital firm, and Thiel’s Valar Ventures, which holds a 19 per cent stake, according to the filings.
Several of BlockFi’s investors had also backed now-defunct FTX, including billionaire Mike Novogratz’s Galaxy Digital and San Francisco-based crypto venture capital firm Paradigm.
After suffering losses in the crypto crash this spring, BlockFi struck a deal with FTX that included a $400mn revolving credit facility from FTX US and an option for the exchange to buy BlockFi at a “variable price . . . based on performance triggers”.
This month, BlockFi said it had “significant exposure to FTX and associated corporate entities that encompasses obligations owed to us by Alameda, assets held at FTX.com, and undrawn amounts from our credit line with FTX US”.
BlockFi listed FTX US as its second largest creditor in bankruptcy filings, owing the American arm of Bankman-Fried’s company $275mn.
Its largest creditor is Ankura Trust, a New Hampshire-based trustee that represents creditors owed $729mn. BlockFi also owes $30mn to the US Securities and Exchange Commission as part of a $100mn settlement agreed with the regulator in February in which the lender was charged for offering interest-bearing accounts without registering them as securities.
BlockFi said it had $257mn cash on hand, which it would use to continue certain operations during the bankruptcy process.