BlockFi files for bankruptcy

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Key points:

• BlockFi has filed for Chapter 11 bankruptcy protection in a U.S. bankruptcy court following the collapse of FTX. 
• It has more than 100,000 creditors, with liabilities and assets ranging from $1 billion to $10 billion.
• The company began conversations with restructuring experts within days of FTX filing for bankruptcy, according to people familiar with the matter.

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Troubled cryptocurrency firm BlockFi has filed for Chapter 11 bankruptcy protection in a U.S. bankruptcy court in the state of New Jersey following the collapse of alleged acquirer FTX.

In filings, the company said it has more than 100,000 creditors, with liabilities and assets ranging from $1 billion to $10 billion.

The crypto firm, which offers cryptocurrency trading and interest-bearing custodial services, is one of many firms facing severe liquidity problems following the implosion of Three Arrows Capital.

The Jersey City, New Jersey-based firm has stopped withdrawing customer deposits and acknowledged it had "significant exposure" to now-defunct cryptocurrency exchange FTX and its sister trading firm Alameda Research.

“We have significant exposures to FTX and its affiliates, including obligations owed to us by Alameda, assets held by FTX.com, and undrawn amounts on our credit line with FTX.US,” BlockFi previously said.

The company began conversations with restructuring experts within days of FTX filing for bankruptcy, according to people familiar with the matter.

BlockFi representatives did not immediately respond to a request for comment.

BlockFi, recently valued at $4.8 billion according to PitchBook, is one of many crypto firms feeling the pinch of FTX’s collapse. In July, FTX collapsed, helping BlockFi avoid bankruptcy by providing a $400 million revolving credit facility and offering to potentially buy the struggling lender.

Sam Bankman-Fried’s cryptocurrency exchange FTX filed for Chapter 11 bankruptcy protection in the United States on Nov. 11, and it quickly spread throughout the crypto industry.

The case involves about 130 other affiliates, including Bankman-Fried’s crypto trading firm Alameda Research and the firm’s U.S. subsidiary, FTX.us. FTX's new chief executive, John Ray, said in a filing in Delaware bankruptcy court that "in his 40 years of legal and restructuring experience", he had never encountered "such a thorough failure of corporate controls and such a complete lack of reliable financial information." 

Wray served as CEO of Enron after the energy giant collapsed.

Within days, FTX went bankrupt from a $32 billion valuation as liquidity dried up, customers demanded withdrawals, and rival exchange Binance reneged on its non-binding acquisition agreement. In the days since serious oversights have been discovered. Ray added that a “substantial portion” of assets held by FTX could be “lost or stolen.”

According to the latest bankruptcy filing, FTX may have more than 1 million creditors, suggesting that its collapse will have a huge impact on crypto traders and other counterparties connected to the Bankman-Fried empire.