The U.S. District of New Jersey has received a Chapter 11 bankruptcy reorganization filing from cryptocurrency lender BlockFi Inc. and eight of its affiliates, the business stated early on Tuesday morning, Asia time.
BlockFi claims that it will use the filing to concentrate on collecting debts due to it by its counterparties. In addition, the company is submitting a number of applications to the court asking for permission to carry on with business as usual, keep employee benefits, and pay wages.
According to a separate document, BlockFi claimed that company intended to fire two-thirds of its 292 employees.
Ankura Trust Company, FTX US, and an unidentified company are the crypto lender’s three largest debtors, each of whom is due more than US$1 billion, according to the bankruptcy declaration.
The position of FTX.com and its brokerage trading arm Alameda Research has been a source of “lack of clarity” for BlockFi, which on November 11 stopped accepting withdrawals from users. According to the announcement, BlockFi has US$256.9 million in cash on hand even if platform activity is still on hold.
BlockFi confirmed that it had substantial exposure to FTX and associated corporate entities that encompass debts owed to us by Alameda, assets stored at FTX.com, and undrawn amounts from our credit line with FTX US in an email sent to clients earlier this month.
Sam Bankman-Fried, the founder of FTX, consented to provide BlockFi with a US$250 million revolving credit line in June, in response to the ripple effects of the Terra-Luna stablecoin crash.
“It is unfortunate for BlockFi that the white knight that had offered them a lifeline back in June, hasn’t managed to stay solvent themselves, in part because of the massive losses accumulated at Alameda Research stemming from the same event – the collapse of Terra Luna and Three Arrow Capital,” Bradley Duke, founder and co-chief executive officer at crypto platform ETC Group, said in an email statement.