BlockFi and eight affiliate companies filed for bankruptcy in the New Jersey district bankruptcy court, the crypto lender announced Monday.
The Chapter 11 filing comes as BlockFi looks to stabilize its business and “consummate a comprehensive restructuring transaction that maximizes value for all clients and other stakeholders.”
BlockFi will now focus on recovering all obligations owed, including from FTX and its sister companies. Obligations owed to BlockFi by FTX are expected to be delayed because of that company’s recent bankruptcy, which has prompted a cascade of developments in the crypto sphere since its announcement Nov. 11.
BlockFi’s bankruptcy preparations were first reported Nov. 15, as several crypto exchanges had halted transactions due to their own exposure to FTX.
“With the collapse of FTX, the BlockFi management team and board of directors immediately took action to protect clients and the Company,” said Mark Renzi, a Berkeley Research Group managing director who is serving as BlockFi’s financial adviser. “From inception, BlockFi has worked to positively shape the cryptocurrency industry and advance the sector. BlockFi looks forward to a transparent process that achieves the best outcome for all clients and other stakeholders.”
BlockFi has $256.9 million in cash on hand and expects the funds to provide sufficient liquidity to “support certain operations during the restructuring process,” the company said Monday.
BlockFi is filing a series of “first day” motions in bankruptcy court, including requests to continue paying and providing benefits to employees without disruption, and requests to establish a key employee retention plan to allow the company to retain internal resources for business-critical functions during its bankruptcy process, the company said in its announcement.
It has also initiated a cost-cutting plan that includes a focus on reducing the cost of labor. The company is planning to conduct “major layoffs,” Decrypt reported.
Activity on the platform remains paused. BlockFi halted most platform activity Nov. 10 amid uncertainty about the fate of FTX, which filed for bankruptcy the following day after rival Binance deserted its plan to acquire FTX.
The “most prudent decision for us … is to continue to pause many of our platform activities for now,” BlockFi tweeted at the time.
BlockFi agreed to pay $100 million to the Securities and Exchange Commission (SEC) and 32 states in a February settlement. Under the deal, the company agreed to stop selling its interest-bearing account product in the U.S. and sell a new one tailored to the Securities Act of 1933.