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Crypto lender BlockFi files for bankruptcy

blockfi chapter 11

BlockFi, the crypto lender bailed out by FTX in June, has filed for Chapter 11 bankruptcy following the collapse of FTX. The lender paused withdrawals and lending on November 11. The company says it currently has $257 million in cash on hand.

The May crypto crash following the collapse of Luna/Terra severely impacted BlockFi. It avoided bankruptcy after FTX agreed to grant a $250 million revolving credit facility in early June. The facility came with an option to buy most of BlockFi’s equity at a knockdown price.

As of June 30, the company held $3.9 billion in digital assets, of which $1.3 billion was loan collateral and the balance in deposits. At one point, the lender had $15 billion in assets, which had declined to just over $10 billion by February of this year.

After the collapse of FTX, BlockFi responded to circulating rumors that it held the majority of its assets on the FTX exchange. It denied the rumors, although some assets were held on the exchange. The bigger issue is it lent money to Alameda, reportedly secured by FTX’s token FTT, which is no longer useful as collateral. Additionally, BlockFi has undrawn amounts owing to it from the FTX.US credit line.

In February, BlockFi entered into a $100 million settlement with the SEC, agreeing to offer its BlockFi Yield as a regulated security in the United States. It was the first crypto lender to enter into such a deal.

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