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BlockFi Follows the FTX incident’s ripple effect and filed for Bankruptcy

BlockFi Follows the FTX incident's ripple effect and filed for Bankruptcy

The ongoing FTX collapse in the crypto market has given rise to not only a lot of speculation regarding the DeFi and the CeFi sector but also raised the requirement of the various exchanges’ Proof of Reserves documents. The latest incident that has followed the FTX effect is BlockFi filling for Chapter 11 Bankruptcy protection. The crypto lender BlockFi filed for bankruptcy protection on Monday; few days after suspending withdrawals amid the ongoing fallout from exchange FTX’s bankruptcy filing.

The press release from BlockFi said that the company is filing for bankruptcy as a part of its restructuring efforts, but their operations will be continued in the meantime. As per the press release, BlockFi has about $257 million in cash on hand. According to the company petition, BlockFi’s executives have concluded an estimated amount that they think the company as. According to them, the company has more than 100,000 creditors and checked off the ranges. Executives estimate the company has between $1 billion and $10 billion in both assets and liabilities.
Check the petition here.

Earlier last week, BlockFi acknowledged a “significant exposure” in the form of obligations that is owed to BlockFi by Alameda, assets on the FTX platform, and an undrawn credit line from FTX. As a result of the ongoing confusion about FTX’s assets, BlockFi suspended withdrawals a few weeks ago, and has had a rocky year. Back in February of this year, BlockFi announced that they will register their high-yield crypto lending product with the U.S. Securities and Exchange Commission, better known as the SEC, as part of a $100 million settlement over the controversial offering; as pointed out by the crypto community as it was not in line with several state and federal securities laws. As a part of this settlement, BlockFi also had to register its BlockFi Yield product with the SEC.

The situation went a little out of hand when after multiple credits from FTX, which started with a $250 million but later morphed into a $400 million credit facility; FTX itself filed for bankruptcy in the second week of November. Amid the confusion, BlockFi announced that they would suspend withdrawals, acknowledging that they will not be able to conduct business as usual as they had some number of assets deposited on FTX and were still owed some of the credit that FTX had extended.

Source: CoinDesk

Read more: A quick timeline of the FTX collapse and how it unfolded.

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