BlockFi recovery from Terra’s Stablecoin turned short-lived as the crypto lender joined the rescuer – FTX, in filing for bankruptcy.
BlockFi’s statement on November 28 indicated that the crypto lender sought Chapter 11 bankruptcy filing. The announcement revealed that BlockFi, alongside eight affiliates, applied for bankruptcy before the New Jersey Court. The decision affirmed the speculations questioning the crypto lender’s financing health following the FTX Group crash.
The detailed statement captured BlockFi liquidity as $256 million. Further, it pointed out BlockFi’s motion to settle employee wages without disrupting their existing benefit packages.
In a rare gesture for a company engulfed in a liquidity crunch, the lender promised to establish a retention plan for the key staff. Such intentions harbor the company’s desire to retain key staff contingent tasked with business-critical functions.
Restructure to Recover Obligations Owed
Elsewhere, BlockFi International replicated the voluntary bankruptcy filing in the Bermuda Supreme Court. The decision conveyed via BlockFi Twitter emphasized prioritizing bankruptcy filing triggered by the lender’s desire to optimize stakeholders’ and clients’ value.
Besides, the company considered the process would provide a window to stabilize the BlockFi business. Also, it allows the lender to consummate a comprehensive restructure viable to maximize stakeholders’ value. Although uncertain of the completion date, BlockFi assured of a restructuring to recover obligations owed by counterparties.
BlockFi’s statement on Twitter admitted client-focus in the Chapter 11 process it considered transparent. Nevertheless, the lender projected navigating the path forward would feature regular and direct communication with its clients. Also, it assured disclosure of additional details via its official blog.
BlockFi Liquidity Crisis
BlockFi woes traced to the $400 million credit extended to FTX US in June. Therefore, the exposure in the crashed FTX Group eventually translated into a liquidity crisis. The discovery of the liquidity crunch prompted BlockFi to halt outbound transactions on November 11.
The lender’s update on its website admitted to exploring strategic alternatives that would guarantee the best results for its clients.
BlockFi annexes 50 creditors to documents submitted in the court filing. It identifies unsecured claims of $275 million to the FTX US alongside the $30 million owed to US SEC. Further, it acknowledges 100000 creditors with liabilities ranging from $1 to $10 billion.
Although it has denied assets are majorly within the FTX, it admitted significant exposure in affiliate entities. Nevertheless, the recovery of encompassing obligations it claims from Alameda, the undrawn amount at FTX.US, and assets within FTX.com is doubtful.
