BlockFi, a cryptocurrency lender, announced on Monday that it would be filing for Chapter 11 bankruptcy protection. The company was harmed earlier this month when it was exposed to the spectacular collapse of the FTX exchange. The court filing in New Jersey comes as crypto prices have dropped dramatically. The price of Bitcoin, the most widely used digital currency, has dropped by more than 70% since its peak in 2021.
About BlockFi:
BlockFi is an entire ecosystem for advanced cryptocurrency traders. It has more than one million verified users and assets worth more than $10 billion. BlockFi’s customers may appreciate the variety of products it offers. BlockFi is a crypto exchange that also offers low-interest loans, an interest-bearing account with an APY of up to 8% and a crypto rewards credit card. It was established in 2017 and has its headquarters in Jersey City, New Jersey. Reimagining and expanding access to banking resources in communities that traditional banking services had not served is this company’s primary mission. BlockFi has grown into a global company with over 800 employees since its inception. BlockFi provides a number of useful products in addition to 13 digital assets that can be purchased. In general, it can be a good choice for experienced cryptocurrency traders.
Factors leading towards BlockFi Bankruptcy:
BlockFi had links with FTX, which petitioned for security in the US recently after brokers pulled $6bn from the platform in the time span of three days, and opponent trade Binance deserted a rescue deal. BlockFi listed FTX as its second-largest creditor in a court filing on Monday, with $275 million owed on a loan extended earlier this year. It stated that more than 100,000 creditors owe it money.
BlockFi was to receive a $400 million revolving credit facility as part of a July agreement with FTX, and FTX had the option to purchase it for up to $240 million. In addition, BlockFi’s bankruptcy filing comes after Celsius Network and Voyager Digital, two of BlockFi’s largest rivals, filed for bankruptcy in July citing extreme market conditions that had caused losses at both businesses.
During the pandemic, crypto lenders, the de facto banks of the cryptocurrency industry, flourished by offering retail customers interest rates in the double digits in exchange for cryptocurrency deposits.On the other hand, institutional investors who wanted to make leveraged bets, like hedge funds, paid higher interest rates to borrow the money from the lenders, who made money from the difference. BlockFi claimed in its bankruptcy filing that it had appointed Berkeley Research Group as a financial advisor and Haynes & Boone and Kirkland & Ellis as bankruptcy counsel. According to them, a third of BlockFi’s $1.8 billion in outstanding loans were unsecured at the end of June.
