BlockFi, the crypto lender that was earlier "rescued" by FTX following the collapse of the LUNA stablecoin, filed for Chapter 11 bankruptcy protection and seeks to collect all liabilities due by its counterparties, including FTX. The FTX contagion has just affected another crypto firm.
Later today, BlockFi will apply for Chapter 11 bankruptcy protection. The New Jersey-based firm stated in an official notice that it "will focus on recovering all obligations owing to BlockFi," but that "recoveries from FTX will be delayed" due to the current bankruptcy procedures at the defunct cryptocurrency exchange. While activity on the platform remains halted, the firm stated that the bankruptcy filing is intended to stabilize its business and complete a restructuring deal that optimizes value for its clients and other stakeholders.
Although activity on the platform remains suspended, the company explained that the bankruptcy filing is to complete a restructuring that will stabilize the business and optimize value for customers and other stakeholders. BlockFi has $256.9 million on hand, according to a statement. It has filed motions "to pay employee wages and provide employee benefits indefinitely." It also intends to "create a key employee retention plan to ensure the company's success" and has devised an internal cost-cutting strategy. According to the announcement, BlockFi International has also filed for bankruptcy with the Supreme Court of Bermuda.
The relationship between BlockFi and FTX
BlockFi announced a revolving $250 million line of credit with FTX in June, only a week after the crypto lender fired 20% of its personnel. It stated that it was cutting its workforce owing to "the significant shift in global macroeconomic conditions."
Today, @BlockFi signed a term sheet with @FTX Official to establish a $250 million revolving credit facility, giving us access to money that will help us strengthen our balance sheet and platform.
June 21, 2022, Zac Prince, @BlockFiZac
There was even talk of an outright takeover in July, but Zac Prince BlockFi's CEO refuted this.
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