BlockFi Inc. is a cryptocurrency lending firm. It has been financially intertwined with FTX and filed for bankruptcy on Monday. Since the FTX, it has been the latest major digital-assets firm to go.
Focusing on collecting all BlockFi-related obligations from counterparties, including FTX and related entities, is now BlockFi’s primary focus. According to Monday’s statement, they indicated that recoveries are likely to be challenging due to FTX’s own bankruptcy. Chapter 11 bankruptcy allows a corporation to function while developing a debt repayment strategy.
BlockFi’s assets and liabilities ranging from $1 billion to $10 billion in the petition filed in New Jersey. According to the company, it has around $257 million in cash and is embarking on an internal strategy to reduce expenditures, particularly personnel costs, significantly.
New Jersey-based firm previously pulled withdrawals and announced it was reviewing “all options” outside consultants citing a lack of clarity over the status of FTX and Alameda Research.
The value of BlockFi’s customer deposits is likely to diminish this year. It has between $14 billion and $20 billion in deposits as of 2021 and has lent out $7.5 billion. The firm has been exposed to all three: FTX, Alameda Research, and credit line FTX U.S. BlockFi have not once offered FTX to purchase it.
FTX has rescued several struggling crypto businesses in the last months, including BlockFi. But FTX suffers through its financial issues and federal and state probes into its operations; the deal has not gone as anticipated. BlockFi also has assets on FTX.com and is partially insured by FTX’s FTT tokens. It also made loans to the crypto trading firm Alameda.
BlockFi filed for bankruptcy in the emerging series of digital-asset failures. The US Securities and Exchange Commission is one of its largest creditors.
According to a Monday filing, the regulator has a $30 million unsecured claim against the crypto lending company. This makes it a fourth major creditor of the firm. In the case of Ankura Trust Company, the sum is more than $729 million. In the case of West Realm Shires Inc., operating FTX US – $275 million.
Regulators are concerned that consumers do not comprehend how much risk they take when engaging in cryptocurrency-lending initiatives. Alabama, Texas, New Jersey, Kentucky, and Vermont securities authorities filed actions against BlockFi in July 2021. They accused the firm of offering unregistered securities. BlockFi promised to pay $100 million to US authorities in February. This happened after the accusation of illegally offering a service that pays users high-interest rates to loan out their digital coins.
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