Cryptocurrency lender BlockFi has filed for Chapter 11 bankruptcy protection, it said on Monday, the latest crypto casualty after the firm was hurt by exposure to the spectacular collapse of the FTX exchange earlier this month.
Bitcoin down over 70% from 2021 peak
New Jersey-based BlockFi, founded by fintech executive-turned-crypto entrepreneur Zac Prince, said in a bankruptcy filing that its substantial exposure to FTX created a liquidity crisis. FTX, founded by Sam Bankman-Fried, filed for protection in the United States earlier in November after traders pulled $6 billion from the platform in three days and rival exchange Binance abandoned a rescue deal.
Renzi said that BlockFi had sold a portion of its crypto assets earlier in November to fund its bankruptcy. Those sales raised $238.6 million in cash, and BlockFi now has $256.5 million in cash on hand. Crypto lenders, the de facto banks of the crypto world, boomed during the pandemic, attracting retail customers with double-digit rates in return for their cryptocurrency deposits.
BlockFi also listed the U.S. Securities and Exchange Commission as one of its largest creditors, with a $30 million claim. In February, a subsidiary of BlockFi agreed to pay $100 million to the SEC and 32 states to settle charges in connection with a retail crypto lending product the company offered to nearly 600,000 investors.
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