The collapse of the FTX cryptocurrency exchange has not finished making ink flow. Following the bankruptcy of Sam Bankman-Fried’s company, another platform, BlockFi, is placed under Chapter 11 of the bankruptcy law in the United States.
BlockFi specializes in lending. And its bankruptcy, after the collapse of FTX, was quite predictable.
Why BlockFi is going bankrupt? What links with FTX?
Right after the collapse of FTX, BlockFi had warned that it had significant exposure to the crypto exchange, but also to Alameda, Sam Bankman Fried’s other company. Moreover, in a sign that things were going badly, BlockFi had suspended withdrawals.
In a new statement, BlockFi explains that it has explored all options, with the main objective of doing “the best for customers”.
Under Chapter 11, BlockFi intends to “stabilize the business”, and “implement a reorganization plan that maximizes value for all stakeholders”, including customers.
The company has $257 million in cash, which will allow it to operate during its restructuring. BlockFi intends to reduce its costs, including those of personnel.
What becomes of the platform?
For the moment, BlockFi customers are in the dark, although the company is trying to reassure them: “Acting in the best interests of our customers is our top priority and continues to guide our path forward. We will continue to communicate with our customers throughout the process to ensure they hear directly from us”, can we read in an FAQ. At this time, withdrawals remain suspended.
And the situation will also depend on the evolution of FTX, to which BlockFi admits to having significant “exposure”.
According to the lending platform, it is working on the recovery of the obligations owed to it. Regarding the obligations that are due to BlockFi by FTX, it admits that this will be delayed. Indeed, for its part, FTX must also manage its bankruptcy.
As part of our restructuring efforts, we will focus on recovering all obligations owed to BlockFi by counterparties, including FTX.
—BlockFi (@BlockFi) November 28, 2022
BlockFi vs. Emerging Fidelity Technologies
According to a Financial Times article, after filing for bankruptcy, BlockFi filed a lawsuit against Emergent Fidelity Technologies, a holding company of Sam Bankman Fried. The aim is said to be to seize the FTX founder’s shares at Robinhood which were allegedly used as collateral. SBF would be a 7.6% shareholder in Robinhood.