Crypto lender BlockFi files bankruptcy after FTX collapse; debt tops $1 billion

By Sarah Lizee

Olympia, Wash., Nov. 28 – BlockFi Inc. and eight of its affiliates filed Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the District of New Jersey on Monday to stabilize its business and provide for a comprehensive restructuring transaction, according to a press release.

Due to the recent collapse of FTX and its ensuing bankruptcy process, which remains ongoing, BlockFi said it expects that recoveries from FTX will be delayed.

In July, FTX provided a $400 million revolving credit facility to BlockFi that included an option to buy the platform outright for up to $240 million.

“With the collapse of FTX, the BlockFi management team and board of directors immediately took action to protect clients and the company,” Mark Renzi of Berkeley Research Group, BlockFi’s financial adviser, said in the release.

“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.”

BlockFi is filing with the court a series of customary motions so it can continue to operate its business.

These first-day motions include requests to pay employee wages and continue employee benefits without disruption, as well as to establish a key employee retention plan.

The company said it also initiated an internal plan to considerably reduce expenses, including labor costs.

Platform activity continues to be paused at this time.

BlockFi has $256.9 million in cash on hand, which is expected to provide enough liquidity to support operations during the restructuring process.

In parallel with the Chapter 11 cases, BlockFi International Ltd., a Bermuda incorporated company, filed a petition with the Supreme Court of Bermuda for the appointment of joint provisional liquidators in the near term.

BlockFi currently anticipates that client claims will be addressed through the Chapter 11 process.

In its petition, the company listed $1 billion to $10 billion in assets and $1 billion to $10 billion in liabilities. The company estimates more than 100,000 creditors.

Its largest unsecured creditors are Ankura Trust Co., LLC, based om Fairfield, Conn., with a $729.04 million indenture claim, West Realm Shires Inc. (FTX US), based in Dover, Del., with a $275 million loan claim, and the Securities and Exchange Commission, based in New York, with a $30 million settlement claim.

Several other unsecured creditors with client claims ranging from $999,650 to $48.56 million were listed in the petition as well.

Haynes and Boone LLP, Kirkland & Ellis LLP and Cole Schotz P.C. are serving as legal counsel, Moelis & Co. is serving as investment banker, and Berkeley Research Group is serving as financial adviser to the company.

C Street Advisory Group, LLC is serving as strategic restructuring and communications adviser to the company.

Based in Jersey City, N.J., BlockFi is a crypto financial services company. The Chapter 11 case number is 22-19361.

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