The crypto exchange BlockFi Inc and eight of its affiliates have filed for bankruptcy under Section 11 of the United States Bankruptcy Code in New Jersey, the company has said. Through the bankruptcy, the company has sought protection to restructure, settle its debts and recover money from investors. BlockFi has more than 1,00,000 creditors with liabilities and assets ranging from $1 billion to $10 billion.
Notably, FTX-US, which is a US-based subsidiary of the now embattled FTX, is the second-largest creditor of BlockFi and has extended a loan worth $275 million to the company. The development comes at the heels of the dramatic collapse of the world’s second-largest crypto exchange FTX, which filed for bankruptcy earlier this month following discrepancies in its finances. FTX owes about $3.1 billion to 50 of its largest creditors. Before the collapse, around 1.2 million registered users were using the FTX platform to buy Bitcoin and other cryptos. Its former CEO Sam Bankman-Fried, who is also touted as the “crypto king”, and nine others, including an Indian-origin techie Nishad Singh, are under SEC's scrutiny for the financial discrepancy that led to its collapse.
The Bermuda-based BlockFi earlier this month said that it has significant exposure to FTX and associated corporate entities including Bankman-Fried’s hedge fund Alameda, FTX.com and FTX.US. The company said it expects the recoveries from FTX to be delayed owing to the bankruptcy process.
Mark Renzi of Berkeley Research Group, the company’s financial advisor, said, “With the collapse of FTX, the BlockFi management team and board of directors immediately took action to protect clients and the company. From its 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.”
The company has paused all activities on its platform and has cash worth $256.9 million in hand. Haynes and Boone LLP, Kirkland & Ellis LLP, and Cole Schotz P.C. are serving as legal counsel for the crypto exchange, Moelis & Company is serving as an investment banker, and Berkeley Research Group is serving as financial advisor to the company. C Street Advisory Group, LLC is serving as strategic restructuring and communications advisor to the crypto exchange.
Meanwhile, another crypto exchange, Japan-based Bitfront has decided to shut shop in the next few months, owing to huge competition in the rapidly-growing crypto industry. It has suspended new signups and credit card payments. Beginning December 12, the company will suspend additional deposits interest payments of LN/LN interest products due to the end of LN/LN interest product operations. The company plans to wind down its operations by March 31 next year.
“BITFRONT was established to enable users to safely store and freely trade their digital assets. And, from the beginning, we have done our best to be a leader in the blockchain industry. However, despite our efforts to overcome the challenges in this rapidly-evolving industry, we have regretfully determined that we need to shut down BITFRONT in order to continue growing the LINE blockchain ecosystem and LINK token economy,” the crypto firm said in a statement.