BlockFi, one of the world’s largest platforms offering lending and interest-paying services in the crypto market, has applied for bankruptcy protection.
More than two weeks after suspending payments, BlockFi, one of the largest platforms offering lending and interest-bearing services in the crypto market, has officially filed for bankruptcy protection.
BlockFi reported the news on its own website, according to which the company is applying for bankruptcy protection and reorganization under the American Bankruptcy Code. The company also clearly indicates the reason, but it was already known that the collapse of the FTX crypto exchange and its hedge fund, Alameda Research, seriously affected several sector financial providers, including BlockFi.
According to the filing, the New Jersey company owes money to more than 100,000 customers, with Ankura Trust being the largest creditor, stuck with BlockFi with $729 million.
BloockFi has already stopped distributions citing that the collapse of FTX and its hedge fund, Alameda Research, caused significant liquidity problems. However, in July, FTX wanted to help BlockFi, they provided a $400 million credit line and a $240 million purchase option, as the company was hit hard by this year’s crypto winter and suffered significant losses.
The FTX case
- FTX, one of the world’s largest centralized crypto exchanges, admitted at the beginning of November that they have liquidity problems. In response to the announcement, traders withdrew $6 billion from the platform in three days.
- Its rival, Binance, first indicated that it would acquire FTX, then backed out of the transaction, bringing the crypto exchange to the brink of a complete collapse.
- The company filed for bankruptcy protection a few days later. In addition to the American parent company, the Alameda crypto hedge fund, the bankruptcy proceedings also affected more than a hundred affiliated companies. Founder Sam Bankman-Fried then resigned as CEO of FTX and sought court supervision to try to settle his debts.
- A tsunami of panic swept through the crypto market, triggering an overall stock market crash.
- At the beginning of this year, FTX’s market value was still 32 billion dollars, but it was revealed at Tuesday’s hearing: Bankman-Fried withheld key information from the company’s management, thus lacking basic financial control.
- After the collapse, estimates were that the one million creditors suffered a total of billions of dollars in losses.