BlockFi files for bankruptcy as FTX contagion spreads
Prominent cryptocurrency lending platform BlockFi filed for bankruptcy on Monday as the contagion effect from FTX’s collapse spreads through the sector, company officials said.
The company’s bankruptcy filing stated it has more than 100,000 creditors, along with estimated assets and liabilities of between $1 billion and $10 billion. BlockFi confirmed bankruptcy proceedings were underway and warned that it “expects that recoveries from FTX will be delayed” due to the platform’s meltdown.
“With the collapse of FTX, the BlockFi management team and board of directors immediately took action to protect clients and the company,” said Mark Renzi of Berkeley Research Group, BlockFi’s financial adviser.
“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,” Renzi added.
BlockFi said it expects to receive court approval on motions “to pay employee wages and continue employee benefits without disruption” as it aims to maintain operations during the proceedings. The company it would also seek to retain “business critical” employees.
Aside from filing for bankruptcy, BlockFI said it has “initiated an internal plan to considerably reduce expenses, including labor costs.” Cryptocurrency news outlet Decrypt had earlier reported BlockFi was laying off a significant portion of its staff.
A BlockFi representative did not immediately return a request for comment on how many workers will be affected.
BlockFi enacted a “pause” in customer withdrawals earlier this month when FTX’s troubles first surfaced. The company said the suspension remains in effect.
“BlockFi has US$256.9 million in cash on hand, which is expected to provide sufficient liquidity to support certain operations during the restructuring process,” the company said in its release.
The platform’s filing marked the latest turn in a months-long saga that saw BlockFi’s fortunes closely tied to those of FTX.
In July, disgraced FTX founder Sam Bankman-Fried sought to bail out BlockFi in a deal that included a $400 million revolving credit facility and a $240 million option to buy the platform outright. The short-lived deal allowed BlockFi to stave off bankruptcy until FTX imploded.
FTX’s meltdown has sparked fears of a broader collapse in confidence across the cryptocurrency sector – with potentially disastrous consequences for the price of bitcoin and other digital currencies.
Earlier Monday, Mobius Capital Partners co-founder Mark Mobius predicted bitcoin will plummet below $10,000 after hitting a high of more than $68,000 less than a year ago. The price of bitcoin was hovering near $16,150 as of Monday morning.
“It’s too dangerous,” Mobius told Bloomberg Television of his decision to stay away from the highly volatile digital assets. He added he refuses to invest his or his clients’ money in any kind of cryptocurrency.
Despite his reservations, Mobius said he believes crypto “is here to stay … there are several investors who still have faith it.”
Still, Mobius doesn’t believe that will keep the price of bitcoin from falling to pre-pandemic levels before the digital asset’s multi-year bull run.
All cryptocurrencies have been suffering in recent months: Bloomberg reports that the top 100 digital currencies have dropped more than 65% this year.
Mobius, who clocked in three decades at global investment firm Franklin Templeton Investments, launched his own hedge fund in 2018 and now manages close to $140 million, according to recent filings.
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