BlockFi has filed for Chapter 11 bankruptcy, making the crypto lender backed by Peter Thiel’s venture firm the latest casualty of the fallout from the collapse of Sam Bankman-Fried’s FTX exchange.
BlockFi was bailed out this summer by Bankman-Fried after it suffered losses on loans to the collapsed hedge fund Three Arrows Capital. In the wake of FTX’s collapse, BlockFi paused lending and customer withdrawals, fuelling speculation over whether it could survive.
The lender had assets and liabilities of $1bn to $10bn, with more than 100,000 creditors, according to bankruptcy filings in New Jersey federal court on Monday.
BlockFi is the latest once high-flying crypto company to come crashing to earth as the collapse of Bankman-Fried’s crypto empire, which includes his trading firm Alameda Research, continues to send shockwaves through the digital assets industry.
“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,” BlockFi said on Monday.
The New Jersey-based company, led by chief executive Zac Prince, was valued at $4bn in a fundraising round last summer. The company is 19 per cent owned by Valar Ventures, a New York-based venture capital firm backed by Thiel, according to the filings.
After suffering losses in the crypto crash this spring, BlockFi in July struck a deal with FTX that included a $400mn revolving credit facility from FTX US, as well as an option for the exchange to buy BlockFi at a “variable price . . . based on performance triggers”.
BlockFi is one of the largest crypto players left teetering after FTX filed for insolvency earlier this month. FTX and Alameda Research had loans with many of the crypto market’s biggest firms, and held assets for clients who traded on the platform, stoking fears of further contagion in the industry.
Earlier this month, BlockFi said it had “significant exposure to FTX and associated corporate entities that encompasses obligations owed to us by Alameda, assets held at FTX.com, and undrawn amounts from our credit line with FTX.US”.
BlockFi listed FTX US as its second largest creditor in bankruptcy filings, owing the American arm of Bankman-Fried’s company $275mn.
Its largest creditor is Ankara Trust, a New Hampshire-based trustee, which administered an indenture on behalf of BlockFi. The lender owes those creditors $729mn.
BlockFi also owes $30mn to the US Securities and Exchange Commission as part of a $100mn settlement agreed with the regulator in February in which the lender was charged for offering interest-bearing accounts without registering them as securities.
BlockFi said it has $257mn cash on hand which it would use to continue certain operations during the bankruptcy process.