BlockFi Follows FTX Into Bankruptcy

The company announced that it was filing for Chapter 11 bankruptcy protection, indicating that it hoped to restructure while continuing operations. BlockFi, according to a press release, has approximately $257 million in cash on hand. A Bermuda-based subsidiary has also filed for liquidation, which is a similar procedure.

BlockFi's executives estimate the company has more than 100,000 creditors and checked off the ranges in the petition. According to executives, the company's assets and liabilities total between $1 billion and $10 billion.

West Realm Shires Inc., the legal name for FTX US, has a $275 million unsecured claim against the company, and the Securities and Exchange Commission (SEC) has a $30 million unsecured claim. Most of the names of its main creditors were withheld. Ankura Trust Company is BlockFi's largest creditor, which the lender appears to have hired in February and now has a $730 million unsecured claim.

BlockFi has had a difficult year, having suspended withdrawals a few weeks ago due to the ongoing uncertainty surrounding FTX's assets. Earlier this year, the company liquidated a large client and required a line of credit from FTX to survive. Following the demise of Three Arrows Capital, BlockFi CEO Zac Prince announced that the company had to liquidate a large client, though he did not specify whether or not it was Three Arrows. After CEO Zac Prince stated that the company needed capital to avoid a liquidity crisis, it signed a deal with none other than FTX, which gave the company access to $400 million in loans. The price of the transaction was an option from FTX to buy the lender for around approximately $240 million, a significant decrease from a peak valuation of $3 billion. Nevertheless, that option was never taken, and the collapse of the cryptocurrency exchange triggered a bank run at BlockFi, which customers saw as dangerously entangled with FTX.

In the midst of the confusion, BlockFi announced a suspension of withdrawals, claiming that it had some assets deposited on FTX and was still owed some of the credit extended by FTX. BlockFi warned clients not to deposit funds into its wallet or interest accounts after suspending withdrawals.

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