Digital asset lender BlockFi says it will seek bankruptcy protection, the latest casualty of the multi-billion-dollar collapse of cryptocurrency platform FTX.
The company announced the move on its blog Monday (Nov. 28), saying it follows its decision to pause activity on its site.
“Since the pause, our team has explored every strategic option and alternative available to us, and has remained laser-focused on our primary objective of doing the best we can for our clients,” the post said. “These Chapter 11 cases will enable BlockFi to stabilize the business and provide BlockFi with the opportunity to consummate a reorganization plan that maximizes value for all stakeholders, including our valued clients.”
In a news release announcing the bankruptcy, BlockFi said it will focus on recovering all obligations owed to it, including those owed by FTX. Because of FTX’s own ongoing bankruptcy, BlockFi says it “expects that recoveries from FTX will be delayed.”
Reports that BlockFi could declare bankruptcy first surfaced two weeks ago, along with the news that the company might also cut jobs.
While Monday’s announcement doesn’t specifically mention layoffs, the company does say it has launched “an internal plan to considerably reduce expenses, including labor costs.”
BlockFi suffered a solvency crisis during the summer after crypto prices plummeted, shaking digital asset markets.
In need of rescue, BlockFi accepted a lifeline from FTX in the form of a $400 million revolving credit facility. The deal also gave FTX an option to buy BlockFi for $240 million, depending on certain performance triggers. BlockFi reportedly used most of the credit facility to right its balance sheet, and also extended millions of dollars in loans that used FTX’s now nearly worthless FTT tokens as collateral.
As PYMNTS Karen Webster wrote earlier this month, crypto experts have speculated that FTX’s bailout of BlockFi — and crypto company Voyager — in July was designed to stave off a run on FTT tokens. That, wrote Webster, makes it clear that FTX founder Sam Bankman-Fried should have had some indication of the threat facing his company.
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