On Monday (28 November 2022), troubled crypto lender BlockFi announced that it had filed for Chapter 11 bankruptcy protection.
According to the press release, BlockFi Inc. and eight of its affiliates today “commenced voluntary cases under Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court for the District of New Jersey… to stabilize its business and provide the Company with the opportunity to consummate a comprehensive restructuring transaction that maximizes value for all clients and other stakeholders.”
Investopedia says that “Chapter 11 is a form of bankruptcy that involves a reorganization of a debtor’s business affairs, debts, and assets, and for that reason is known as ‘reorganization’bankruptcy.”
The press release went on to say:
“As part of its restructuring efforts, the Company will focus on recovering all obligations owed to BlockFi by its counterparties, including FTX and associated corporate entities (‘FTX’). Due to the recent collapse of FTX and its ensuing bankruptcy process, which remains ongoing, the Company expects that recoveries from FTX will be delayed.“
Mark Renzi of Berkeley Research Group, the Company’s financial advisor, stated:
“With the collapse of FTX, the BlockFi management team and board of directors immediately took action to protect clients and the Company. From inception, BlockFi has worked to positively shape the cryptocurrency industry and advance the sector. BlockFi looks forward to a transparent process that achieves the best outcome for all clients and other stakeholders.“
BlockFi also mentioned that “to ensure a smooth transition into Chapter 11, BlockFi is filing with the Court a series of customary motions to allow the Company to continue to operate its business” and that “platform activity continues to be paused at this time.”
BlockFi has around US$256.9 million in cash on hand, which it expects will “provide sufficient liquidity to support certain operations during the restructuring process.”
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