For the crypto community, another negative news has come forward as the BlockFi filed for bankruptcy protection. The company officially informed its users of the filing for Bankruptcy protection on 28 November through a press release. According to the press release the company has filed for Chapter 11 bankruptcy protection.
The possibility of this happening was already in the crypto market when the FTX exchange announced bankruptcy and BlockFi disabled its withdrawal processes.
BlockFi also filed for bankruptcy after two of its biggest rivals, Celsius Network and Voyager Digital, did so in July, citing adverse market conditions that had caused losses at both businesses.
According to the press release the company BlockFi isn’t the only one to be filing for Bankruptcy the eight affiliates of the company will be included. BlockFi cleared that it was seeking court protection so that it could restructure, pay off its debts, and recoup investor funds.
According to the cryptocurrency corporation, the plan is to "stabilize its operations and give the company the opportunity to finalize a comprehensive restructuring transaction that optimizes value for all clients and other stakeholders."
Why BlockFi Filed for Bankruptcy Protection?
On November 10 it was noted that the BlockFi exchange has stopped the withdrawal services and described the situation that the falling of the FTX exchange is creating pressure on them. Earlier it was assumed that FTX is taking over the BlockFi where the company’s CEO talked about the “option to acquire” the crypto lender.
According to Mark Renzi, the business's financial advisor, "With the collapse of FTX, the Blockfi management team and board of directors swiftly took steps to protect consumers and the company."
"Since its beginning, Blockfi has sought to promote and improve the bitcoin industry. The optimal solution for all clients and other stakeholders is what Blockfi looks forward to in a transparent approach.
Although the exposure of the debtors to FTX is a major factor in this bankruptcy filing, the debtors do not experience the numerous problems that FTX appears to be experiencing. "Mark Renzi, managing director at Berkeley Research Group, the prospective financial adviser for BlockFi, stated this in his bankruptcy filing. "The exact opposite.
BlockFi Has Filed A Legal Lawsuit
According to BlockFi, the liquidity problem was brought on by both coins locked on FTX and their exposure to FTX through loans to Alameda. According to BlockFi, its assets and liabilities range between $1 billion to $10 billion.
In a separate lawsuit filed on Monday, BlockFi sought to reclaim shares of Robinhood Markets Inc (HOOD.O). It had been pledged as collateral three weeks earlier before BlockFi and FTX sought bankruptcy protection.
Renzi said that earlier in November, BlockFi had liquidated a portion of its cryptocurrency holdings to pay for its bankruptcy. BlockFi now has $256.5 million in cash on hand thanks to the $238.6 million in cash earned from those sales.
BlockFi cited FTX as its second-largest creditor in a court statement on Monday, with $275 million owing on a loan made earlier this year. It claimed to owe more than 100,000 debtors money. Additionally, the business revealed in a separate filing that it intends to fire two-thirds of its 292 staff members.
BlockFi was to receive a $400 million revolving credit facility as part of a contract inked with FTX in July. And with that FTX was given the option to purchase it for up to $240 million.
During the pandemic, crypto lenders—the de facto banks of the cryptocurrency world—exploded, luring ordinary clients with double-digit rates in exchange for their cryptocurrency deposits.
Prince, who works as the business's chief executive officer, and Flori Marquez founded BlockFi in 2017. According to its website, BlockFi has offices not only in Jersey City but also in New York, Singapore, Poland, and Argentina.
Big-name tech investors have invested hundreds of millions in it recently, including Bain Capital Ventures and Tiger Global. It claimed to manage more than $15 billion in assets last year as cryptocurrency values rose.
The announcement of BlockFi filed for bankruptcy protection came after the FTX bankruptcy and has caused more panic among users. This situation is leading to a lot of questions pointing to the cryptocurrency industry and taking it down. At the same time, the company said that this bankruptcy filing to restructure, pay off its debts, and recoup investor funds.
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