Representations of cryptocurrencies plunge into water in this illustration taken, May 23, 2022. REUTERS/Dado Ruvic/Illustration/File Photo Filing follows weeks after FTX collapse
FTX listed as BlockFi’s No.2 creditor
Bitcoin down over 70% from 2021 peak
Nov 28 (Reuters) – Cryptocurrency lender BlockFi has filed for Chapter 11 bankruptcy protection, it said on Monday, the latest crypto casualty following the spectacular collapse of the FTX exchange earlier this month.
The filing in a New Jersey court comes as crypto prices plummet. The price of bitcoin , the largest digital currency by far, is down more than 70% from a 2021 peak.
“BlockFi’s Chapter 11 restructuring underscores significant asset contagion risks associated with the crypto ecosystem,” said Monsur Hussain, senior director at Fitch Ratings. New Jersey-based BlockFi, founded by Zac Prince, said in a bankruptcy filing that its substantial exposure to FTX created a liquidity crisis. FTX filed for protection in the United States earlier in November after traders pulled $6 billion from the platform in three days and rival exchange Binance abandoned a rescue deal.
In a court filing on Monday, BlockFi listed FTX as its second-largest creditor, with $275 million owed on a loan extended earlier this year. It said it owes money to more than 100,000 creditors. The company also said in a separate filing it plans to lay off two-thirds of its 292 employees.
Under a deal signed with FTX in July BlockFi was to receive a $400 million revolving credit facility while FTX got an option to buy it for up to $240 million.
BlockFi’s bankruptcy filing also comes after two of BlockFi’s largest competitors, Celsius Network and Voyager Digital , filed for bankruptcy in July citing extreme market conditions that had resulted in losses at both companies.Crypto lenders, the de facto banks of the crypto world, boomed during the pandemic, attracting retail customers with double-digit rates in return for their cryptocurrency deposits. On the flip side, institutional investors such as hedge funds looking to make leveraged bets paid higher rates to borrow the funds from the lenders, who profited from the difference.Crypto lenders are not required to hold capital or […]
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