Crypto lender BlockFi is the latest heavily funded company in the cryptocurrency space to file for bankruptcy.
Earlier today, the Jersey City, New Jersey-based company announced that it has filed under Chapter 11 of the U.S. Bankruptcy Code. BlockFi said it plans to put together a restructuring plan with the intent “to stabilize its business” in a manner “that maximizes value for all clients and other stakeholders.”
As part of its restructuring efforts, BlockFi said it will focus on recovering obligations owed by counterparties, including FTX and associated entities. Due to the recent collapse of FTX, the expectation is that recoveries will be delayed.
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Founded in 2017 by finance industry pros Zac Prince and Flori Marquez, BlockFi secured over $900 million in equity backing over the years. Its lead investors include Tiger Global, DST Global, Bain Capital Ventures, Rose Park Advisors and Valar Ventures. The company also raised $400 million in debt financing in June, backed by FTX US, in a deal that also offered FTX the option to buy BlockFi, reportedly for as little as $25 million. (At its peak, around August, 2021, BlockFi had a valuation around $4.5 billion.)
The FTX contagion
In mid-November, after FTX’s collapse, BlockFi said it was pausing withdrawals and asking clients not to submit deposits. The company said “rumors that a majority of BlockFi assets are custodied at FTX are false,” but acknowledged that it did have “significant exposure to FTX and associated corporate entities.”
BlockFi is one of a number of well-funded players in the crypto space with significant ties to FTX. As we’ve previously reported, FTX’s tentacles reached nearly everywhere in the crypto industry. It invested in nearly 50 companies through its venture arm, FTX Ventures. It also made another 180 investments through Sam Bankman-Fried’s other trading firm Alameda Research.
FTX also had a deep reach into the crypto lending space, which had taken off in recent years as prices soared and lenders could bring in new customers with the promise of high yields on their deposits.
Illustration: Dom Guzman
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